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TMI Blog2019 (1) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) ought to have taken note of Board's Circular No.5/2012 while considering the appeal of the assessee on above grounds. (5) The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 50,00,000/- made by rejecting the assessee's claim of deduction u/s 54EC of the Act 2. Ground no. 1 is relating to deleting the disallowance of Rs. 14244447/- (being 70% of Rs. 20349211/-) made by the A.O. on account of Physician Samples distributed free of cost. 3. In this case, ld. A.O. disallowed the amount of Rs. 14244447/- being purchases of Physician's Sample (not for sale) distributed to the Physicians free of cost treating it as non-business expenditure. Ld. A.O. made the disallowance on account of that assessee is unable to produce the detail the difficult its claim for liability of the alleged expenses. 4. In appeal, assessee contention was accepted by the ld. CIT(A) holding that an identical addition is being made in the appellant case since assessment year 2008-09 and ITAT, Mumbai Bench in appellant's own case for assessment year 2008-09 has decided the issue in favour of assessee in ITA No. 843/Mum/2012 dated 31.03.2015. 5. Apart from the above said, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of material on records. Even the Assessing Officer allowed part of the expenditure, thereby indicating that he would not averse to the expenditure in the nature of free samples being related to assessee's business. He only disputed the quantification. When Commissioner of Income Tax (Appeals) concurrently found sufficient reason to accept the assessee's claim, we do not see any question of law arising. 4. Tax Appeal is therefore dismissed. 6. Respectfully following the ITAT Mumbai Bench decision and Hon'ble Gujarat High Court order in assessee's own case, we dismiss this ground of appeal of the revenue. 7. Now we come to ground relating to disallowance of Rs. 1,17,53,365/- on account of Sponsorship of Doctor's Overseas Tours. 8. Ld. A.O. has discussed the issue at page no. 4 to 10 and made the disallowance on the ground that in view of the CBDT Circular No. 5/2012 that any medical practitioner or their professional associates is prohibited from accepting any gift, travel facility, hospitality, cash or monetary grant from any pharmaceutical and allied health sector Industries as per the Medical Council regulations and such expenses are not allowable u/s 37(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The relevant paras of the ITAT is reproduced: 5. Now, coming to the appeal filed by the assessee being ITA No. 388/Mum/2012, the sole ground taken by the assessee is in relation to the disallowance of Rs. 42,53,924/- on account of claim of expenditure incurred by the assessee on oversea travel of doctors for attending seminar etc. and to encourage product awareness and sales promotion of the products manufactured by the assessee. 6. Admittedly, the assessee is engaged in the manufacturing of drugs and pharmaceuticals. The A.O. noted that the assessee had debited a sum of Rs. 42,53,924/- for sponsoring doctors for overseas tour. On being asked to explain in this aspect, the assessee submitted the required details. The A.O. did not doubt the genuineness of the transactions, however, held that sponsoring overseas trip of the doctors was not an activity relating to the business of the assessee. In appeal, the ld. CIT(A) also upheld the findings of the A.O. The assessee has thus come in appeal before us. 7. The Id. Counsel for the assessee while inviting our attention to the impugned order, has submitted before us that the detailed reply was submitted to the lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This assessee is being manufacturing drugs and pharmaceuticals. It distributed samples free of cost to physicians under the pretext of its business requirements. It pleaded in the course of scrutiny that its marketing staff visits various doctors to update them about product as well as healthcare information. The said field marketing staff was claimed to have given free physicians samples to the doctors. The Assessing Officer framed the impugned assessment on 04.01.2013 to disallow 70% of the expenditure in question of Rs. 1 crore; coming to Rs. 70,00,000/- on the ground that there was no evidence indicating business expediency in giving such -free samples to physicians. He thereafter adopted his reasoning as in preceding assessment year 2009- 10. 3. The CIT(A) reverses Assessing Officer's findings as under:- "1.1 Briefly stated, material facts of the issue in dispute as revealing from the impugned order are that the A.O. observed that the appellant used to claim huge expenses on account of free samples distributed to Physicians every year under the pretext that it is the business requirement of the appellant. According to the A.O., similar type of expenses were disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 15.11.2011 in the appellants case for A.Y. 2008-09 is reproduced hereunder: "5. The 1st ground of appeal is regarding an adhoc disallowance of 70% expenses incurred on physicians sample as claimed. 5.1 During the course of assessment proceeding, the A.O. had noticed that the appellant has claimed a huge expense against free samples distributed to physicians. It was stated by the appellant that this is a business requirement. ... [page 2 & 3] 5.2 ...[page4&5] 5.3 ... [pages 6, 7 & 8] 5.4 ... [page 9] Under the circumstances, 1 find as the appellant has been able to prove the genuineness of expense, proper recording in its books of accounts of the expenses, and the relationship of the expense with the business of the appellant, I find there is no need to make the said disallowance simply because in some other case, a disallowance made had been upheld. The case laws relied by the appellant also helps its case. The addition made is, therefore, deleted and the ground of appeal allowed." Moreover, the Id.CIT(A) has followed her decision taken in the appellate order for A.Y. 2008-09 in the appellants case for A.Y. 2009-10 vide order dated 08.11.2012. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal articles to doctors; and (ii) Rs. 21,91,953/- on dermatology books to doctors. After a detailed discussion in his order, the AO held that this amount had not been incurred wholly and exclusively for the purpose of business and was hence not allowable u/s. 37 of the LT. Act. He accordingly disallowed the same. The appellant submitted that the expenditure incurred on sales promotion was integral to the business and was incurred out of commercial expediency. 6.2.1 As regards the disallowance of Rs. 21,91,953/- incurred on dermatology books to doctors, a perusal of the submission made by the appellant shows that the books that have been distributed to doctors are medical notebooks which provide coverage of latest medication and procedures in respect of dermatology. The same are related to the business of the appellant and the expenditure incurred is not in the nature of cash or gifts given to medical practitioners which is covered by Circular No.5/2012 relied upon by the AO. It is seen from the details filed that the expenditure is purely for the purpose of education and guidance to the medical fraternity. Further, an identical disallowance on sales promotion expenses incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant was entitled to deduction u/s. 37(1) and the disallowances of Rs. 26,04,229/-and Rs. 13,32,615/- are accordingly deleted. 16. Now we come to ground relating to Rs. 50,00,000/- by rejecting the assessee's claim of deduction u/s. 54EC. 17. Ld. A.O. had discussed the issue at page no. 18 to 20 and Para no.6 & 7 and held that exemptions u/s. 54EC against deemed Short Term Capital gain is not allowable. 18. In appeal before the ld.CIT(A) who allowed the claim of the assessee and he granted the relief to the assessee. 19. Before us, ld. A.R. Mukesh M. Patel cited an order of Jurisdictional High Court in the matter of CIT vs. Aditya Medisales [2013] 38 taxmann.com 244 (Guj.). "Section 54EC, read with section 50, of the Income-tax Act, 1961 - Capital gains - Not to be charged on investment in certain bonds [Section 54EC v. Section 50] - Assessee-company sold automatic electric monitoring system - It invested gain amount in rural electrification bonds and claimed exemption under section 54EC - Assessing Officer found that short term capital gain was offered by assessee under section 50 and disallowed exemption under section 54EC claimed by assessee on ground that sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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