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TMI Blog2019 (2) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... hoc basis. In this regard, we also note that assessee has also not produced any evidence before us to prove that the doctors were not the actual recipient of these gift articles. Thus in the absence of necessary documentary evidence the AO had no alternative except to make the disallowance on an ad-hoc basis. - Decided against assessee. - ITA No. 637/Ahd/2017 - - - Dated:- 1-2-2019 - Shri Rajpal Yadav, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Appellant : Ms.Urvashi Shodhan, AR For the Respondent : Shri B.P. Srivastava, Sr.DR ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals) 2, Vadodara [CIT(A) in short] vide appeal no.CAB/(A)-2/278/15-16 dated 12/01/2017 arising in the assessment order passed under s. 143(3) of the Income Tax Act, 1961(here-in-after referred to as the Act ) dated 21/03/2016 relevant to Assessment Year (AY) 2013-14. 2. The assessee has raised the following grounds of appeal:- 1. The learned AO observed that the expenditure amounting to ₹ 18,16,120/- was incurred for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that such expenses are not allowable as a deduction to the assessee as per CBDT Circular No. 5/2012 dated 01/08/2012 and the Circular issued by the Medical Council of India bearing No.6.8.1 dated 10/12/2009. 5. On a question by Assessing Officer, the assessee submitted that it had not incurred any expenses in contravention to the notification issued by the CBDT and Medical Council of India. 5.1. The assessee further submitted that there is cut-throat competition among the pharmaceutical companies, therefore to increase the sales, it uses to provide some incentive to the chemists/medical stores. These incentives include pen, pad, paper-weight, flower pots, vouchers, annual calendars, etc. which were printed with the product of the company. 5.2. The assessee further submitted that it has 527 Medical Representatives (MRs). Each MR is supervising approximately 170 medical shops/chemist shops. Thus, in effect, there were around 90000 chemists/medical stores to whom the assessee was selling its products. As such, these incentives were provided to the chemists/medical stores without the involvement of any doctor/medical practitioner. Therefore, there cannot be any disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oc disallowance of ₹ 5,00,000/- which is not permissible under the law. 6.2. The Circulars are binding on the Income Tax Authorities, but the same cannot be used against the assessee. 6.3. However, the Ld. CIT(A) confirmed the disallowance made by the Assessing Officer by observing that similar kind of disallowances was made in the earlier assessment years. The Managing Director of the assessee duly admitted the ad-hoc disallowance of ₹ 5,00,000/- during the hearing. Thus, the Ld. CIT(A) confirmed the order of the Assessing Officer. 7. Being aggrieved by the order of Ld. CIT(A), the assessee is in appeal before us. 8. The Ld.AR before us filed a paper book running from pages 1 to 25 and submitted that there was no benefit extended to the doctors/medical practitioners. All these expenses on the gift items were incurred to provide the benefit to the medical stores and chemist shops. 9. On the other hand, The Ld.DR submitted that the disallowance made by the lower authorities represent less than 1% of the total sales promotion expenses. The Ld.DR vehemently supported the orders of the authorities below. 10. We have heard the rival contentions and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted hereinabove itself clarifies that the value of the freebies enjoyed by the medical practitioner is also taxable as business income or income from other sources depending on the facts of each case. Therefore, if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the assessing officer that the expense is not in violation of the Medical Council Regulations referred to above. 10.2. During the hearing the Ld. Counsel for the assessee has not agitated for the applicability of the circular issued by the CBDT as discussed above. Accordingly, there remains no confusion that any expense incurred by the assessee to extend the benefit to the doctors will not be allowed as a deduction by the explanation of section 37 of the Act as well as the circular issued by the CBDT the as discussed above. 10.3. The argument of the Ld. Counsel for the assessee is that these benefits were given to the medical store/chemist shops. As per the assessee, there were no benefits given by the assessee to the doctors/medical practitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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