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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 ..... ed 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 Rs. 18,16,120/- was incurred for the purposes like distributing gifts, providing hospitality to the doctors/medical practitioners. The learned AO disallowed Rs. 18,16,120/- by reasoning that the amount of Rs. 13,16,120/- was incurred towards the purchase of laptop, mobile, watches, AC Machines, treadmill machines etc which is in the nature of gifts for doctors and practitioners, and an adhoc disallowance of Rs. 5,00,000/- is made on account of having incurred on the lodging, boarding and travelling of the doctors/medical practitioners Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractitioners. Accordingly, the Assessing Officer was of the 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he necessary details depicting the benefits in monetary/non-monetary benefit extended to the doctors/medical practitioners. The Assessing Officer also noted that there were not sufficient details furnished in support of traveling expenses to justify that the doctors and medical practitioners did not incur these expenses. In the absence of necessary evidence, the Assessing Officer made the disallowance of Rs. 5,00,000/- for benefit extended to the doctors/medical practitioners in contravention to the provisions of CBDT Circular/Medical Council of India as discussed above. Therefore, the Assessing Officer proposed to make a disallowance of Rs. 5,00,000/- which was agreed by the ld. representative of the assessee and Managing Director of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores 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 the materials available on record. In the instant case, the AO has made the addition to the total income of the assessee for two counts as discussed below. i. The expenses incurred on the purchase of laptops, wrist watches, mobile phones, and cameras, etc. Rs. 13,16,120/- was treated as gifts given to the doctors/medical practitioners by the AO, though the assessee claimed that these items were given to the dealers. But the AO disbelieved the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be deemed to have been incurred for the purpose of business or profession. The sum and substance of the circulars also the same. In case the assessing authorities are not properly understanding the circular then the remedy lies for each individual assessee to file appeals under the Income-tax Act but the circular which is totally in line with Section 37(1) cannot be said to be illegal. In fact paragraph 4 of the circular quoted 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also note that the assessee duly admitted the disallowance of Rs. 5 lacs made by the AO on an ad-hoc basis during the assessment proceedings. The AO made the addition by observing that the assessee failed to furnish the details of the actual recipient of these gift articles. The assessee has also incurred traveling expenses which were claimed by the assessee for the traveling of the medical representatives. But the assessee failed to file the requisite documents evidencing that there was no benefit extended to the doctors /medical practitioners out of such traveling expenses. Therefore the addition was made by the AO on an ad-hoc basis. In this regard, we also note that the Ld. Counsel for the assessee has also not produced any evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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