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TMI Blog2019 (5) TMI 1643X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Panel -1, (hereinafter referred to as the 'Hon'ble DRP') on the following grounds, each of which are without prejudice to one another: On the facts and in the circumstances of the case as well as in law, the learned AO/ Joint Commissioner of Income-tax (Transfer Pricing) - 2(3) (TPO')/ Hon'ble DRP has erred in fact and in law: Grounds 1. erred in assessing the total income of the Appellant at Rs. 86,47,57,590 as against Rs. 36,01,57,620 as computed by the Appellant; Transfer pricing grounds on Advertising, Marketing and Promotion CAMP') adjustment 2. erred in making transfer pricing adjustment of Rs. 23,58,61,099 on account of AMP expenses incurred by the Appellant; AMP is not an international transaction 3. erred in considering the function of AMP as a separate purported international transaction for the purpose of transfer pricing adjustment; 4. erred in ignoring that the alleged AMP expenses incurred by the Appellant represents only domestic transactions undertaken with third parties/ employees and are outside the purview of Section 92B of the Act and is thus in excess of his jurisdiction; 5. erred in not considering the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant for benchmarking import of trading goods from the AEs using TNMM analysis, erred in not accepting the same set of comparables for benchmarking the AMP expenses; 15. Without prejudice to the above, erred in cherry picking up of inappropriate comparable companies on an ad hoc basis and not having similar product/ brand profile as the Appellant and selected comparable companies of the preceding year without conducting a fresh search and thereby violated the principles of natural justice; Certain expenses are not in nature of AMP expenses 16. without prejudice to the above, even if impugned transaction is considered as international transaction and liable for transfer pricing provisions, there could not be any adjustment as entire alleged AMP expenses are in the nature of routine business expenses or selling expenses and thereby no transfer pricing adjustment on account of AMP expenses is justified; 17. without prejudice to the above, erred in including personnel cost, travelling and conveyance expenses and depreciation on equipment as part of AMP expenses; 18. erred in considering 80% of manpower expenses and travelling and conveyance costs as AMP expenses; 19. wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciating the fact that the MCI regulations were not applicable to the Appellant and accordingly, the question of making any disallowance under the CBDT circular did not arise; 28. Erred in not appreciating the fact that the MCI Regulations are binding and applicable only to medical practitioners and accordingly, the medical device companies are not bound by these regulations; 29. without prejudice to the above, erred in not appreciating the fact that as per the CBDT circular, only that expenditure which is incurred in contravention of the MCI regulations is to be disallowed and whether or not there is any contravention of the MCI regulations is a matter of fact which can be decided only by the MCI and not by the AO. Grants to medical associations 30. without prejudice to the above, erred in not appreciating the fact that out of the convention expenses of Rs. 27,11,48,553, grants of Rs. 15,60,02,015 are provided to medical associations and not to individual medical practitioners, accordingly, the same are outside the purview of MCI Regulations and CBDT circular; Printing and equipment hire charges 31. without prejudice to the above, erred in not appreciating the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Expenses for travel facilities 37. without prejudice to the above, erred in not appreciating the fact that out of the convention expenses of Rs. 27,11,48,553, expenses for travel facilities of Rs. 16,59,901 was incurred for various HCPs wholly and exclusively for the purpose of the business of the Assessee and accordingly, the same is outside the purview of the MCI Regulations and CBDT circular; 38. without prejudice to the above, erred in not appreciating the fact that the payment for travel facilities had been paid to travel agents/ independent third party service providers and not to medical practitioners and accordingly, the same is outside the purview of the MCI Regulations and CBDT circular; Registration charges 39. without prejudice to the above, erred in not appreciating the fact that out of the convention expenses of Rs. 27,11,48,553, registration charges of Rs. 2,51,93,087 was incurred by IMPL on behalf of the HCPs wholly and exclusively for the purpose of the business of the Assessee and accordingly, the same is outside the purview of the MCI Regulations and CBDT circular; Car hire charges 40. without prejudice to the above, erred in not appreciating the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not international transactions. The learned AR submitted before the Bench that the issue raised in these grounds is fully covered by the decision of Co-ordinate Bench, vide order dated 02.05.2018, in assessee's own case in ITA No. 1246/Mum/2016 for A.Y. 2011-12 and therefore the same the said issue should be decided following the order of the coordinate bench. The learned DR, on the other hand, relied on the order of the TPO and grounds of appeal. 5. We have heard the both the parties and have gone through the order of the Tribunal in assessee's own case in ITA No. 1246/Mum/2016 for A.Y. 2011-12. The operative part of the said order is reproduced below: 3. First effective ground of appeal (Gs.A O-2 to 9) is about AMP expenditure. It was brought to our notice that identical issue was adjudicated by the Tribunal, while deciding the appeal for the AY. 2010- 11 (I.T.A./1600/Mu/2015,dtd.17.01.2018). we are reproducing the relevant portion of the order and it reads as under : 3.First effective Ground of appeal (GOA 2-9) is about Transfer Pricing (TP) adjustment made on account of advertisement, marketing, promotion(AMP)expenses amounting to Rs. 18.36 crores. It was brought to our n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee were the IT.s, that it had created brand awareness in its territorial domain, that the ultimate benefit of the activity did not remain with the assessee only, that it passed it on to the parent company in the form of better brand value for its products. Finally,he determined the ALP of reimbursement for brand promotion and marketing intangibles at Rs. 38.72 crores. The AO in his draft order proposed for said addition. 3.2.Aggrieved by order of the TPO/AO, the assessee filed objections before the DRP. Vide its directions, dated 16/12/2014,the DRP confirmed the order of the TPO/AO relying upon the Special Bench decision delivered in the case of LG Electronics . 3.3.During the course of hearing before us, the Authorised Representative(AR)stated that AMP expenditure was not an IT., that there was no understanding or agreement between the assessee and the AE in that regard, that even if there was any arrangement with the AE for incurring expenses there must be an understanding/agreement with AE for spending 'excessively' towards marketing expenses for promoting the brand in India, that the TPO had applied the brightline method to compute adjustment on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, that in the agreements there is no condition about sharing of AMP, that the agreements talks of using best efforts to market and distribute the product or promote the products in a commercially reasonable manner. In our opinion, these terms do not give any indication that the AE and the assessee had to share AMP expenses. Secondly, if the AE was benefitted indirectly by the AMP expenditure incurred by the assessee, it cannot be held that it had entered into agreement for sharing AMP expenses. We are also of the opinion that Bright Line Method should not have been applied by the TPO. We would like to reproduce the relevant portion of the order of the Thomas Cook(supra),wherein the identical issue has been dealt in length, and it reads as under: "8.3.We have heard the rival submissions and perused the material before us. In the earlier part of our order, we have mentioned that we would like to deal with the issue of AMP expenses for both the years at one place, as there is no change in the facts except for the amounts involved and the non adjudication of the issue in the earlier year.The arguments of the assessee for both the years are identical. We find that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d back to the file of the TPO/ AO. Litigation has to be put to an end at some stage. Judicial time of every authority, including the TPO/DRP,is very precious and it should not be wasted for dealing with mere academic arguments. The recourse of remanding of matters/issue to the AO.s has to resorted rarely and selectively. In the case before us, no reasonable cause has been shown to justify the setting aside the issue. Here, we would also like to refer to the case of Bosch and Lomb (supra) wherein all the arguments raised by the TPO & FAA/DRP have been deliberated upon in length and the relevant portion of the order reads as under: "53.A reading of the heading of Chapter X['Computation of income from international transactions having regard to arm's length price"]and Section 92 (1) which states that any income arising from an international transaction shall be computed having regard to the ALP and Section 92C (1) which sets out the different methods of determining the ALP, makes it clear that the transfer pricing adjustment is made by substituting the ALP for the price of the transaction. To begin with there has to be an international transaction with a certain disclosed pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises, and (c) shall include a mutual agreement or arrangement between two or more AEs for allocation or apportionment or contribution to the any cost or expenses incurred or to be incurred in connection- with the - benefit, service or facility provided or to be provided to one or more of such enterprises. 57. Clauses (b) and (c) above cannot be read disjunctively. Even if resort is had to the residuary part of clause (b) to contend that the AMP spend of BLI is "any other transaction having a bearing" on its "profits, incomes or losses", for a 'transaction' there has to be two parties. Therefore for the purposes of the 'means' part of clause (b) and the 'includes' part. of clause (c), the Revenue has to show that there exists an 'agreement' or 'arrangement' or' 'understanding' between BLI -and B&L, USA whereby BLI is obliged to spend excessively on AMP in order to promote the brand of B&L, USA. As far as the legislative intent is concerned, it is seen that certain transactions listed in the Explanation under clauses (i) (a) to (e) to Section 92B are described as an 'International transaction'. This might be only an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose between two or more persons of substantial acquisition of shares etc. of the target company, For, de hors the element of the shared common Objective' or purpose the idea of "person acting in concert" is as meaningless as criminal conspiracy without any agreement to commit a criminal offence. The idea of "persons acting in concert" is not about a fortuitous relationship coming into existence by accident or chance. The relationship' can come into being only by design, by meeting of minds between two or more persons leading to the shared common objective or purpose of acquisition of substantial acquisition of shares etc. of the target company. It is another matter that the common objective or purpose may be in pursuance of an agreement' or an understanding, formal or informal; 'the acquisition of shares etc. may be direct or indirect or the persons acting in concert may cooperate in actual acquisition of shares etc. or they may agree to, cooperate in such acquisition. Nonetheless, the element of the shared common objective or purpose is the sine qua non for the relationship of "persons acting in concert" to come into being. " 60. The transfer pricing adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 92F (ii) which defines ALP to mean a price "which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions" ,Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly -in-light of the fact that -the-BLT has been expressly negatived by the Court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established de hors the BLT, 70. What is clear is that it. is the 'price' of an international transaction which is required to be adjusted: The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an adjustment had to be made. The -burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO in such an instance deploys the 'best judgment' assessment as a device to disallow what he considers to be an excessive expenditure. There is no corresponding 'machinery' provision in Chapter X which enables' an AO to determine what should be the fair 'compensation' an Indian entity would be entitled to if it is found' that there is an International transaction in that regard. In practical terms, absent a clear statutory guidance, this may encounter further difficulties. The strength of a brand, which could be product specific, may be "impacted by numerous other imponderables not limited to the nature of the industry, the geographical peculiarities, economic trends both international and domestic, the consumption patterns, market behaviour and so on. A simplistic approach using one of the modes similar to the ones contemplated by Section 92C may not only be legally impermissible but will lend itself to arbitrariness. What is then needed is a clear statutory scheme encapsulating the legislative policy and mandate which provides the necessary checks against arbitrariness while at the same time addressing the apprehension of tax avoidance." 64. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing similar, respectfully following the said order of the Co-ordinate Bench, we decide ground nos. 3 to 23 in favour of the assessee. 6. The issue raised in Ground no.24 is against the deletion of disallowance of Rs. 93,686/- on account of depreciation on building. Before us, learned AR brought to our notice that the issue is covered by the decision of Co-ordinate Bench, vide order dated 02.05.2018, in assessee's own case in ITA No. 1246/Mum/2016 for A.Y. 2011-12. The learned DR, on the other hand, relied on the order of the TPO and grounds of appeal. 7. We have heard the both the parties and have gone through the order of the Tribunal in assessee's own case for A.Y. 2011-12. The operative part of the said order is reproduced below: 4.GOA-10 is about disallowance of depreciation on plant and machinery and building amounting to Rs. 2.96 lakhs. It was brought to our notice, by the representatives of both the sides, that the issue stands covered by the earlier orders of the Tribunal (ITA/812/Ahd./2008(04-05)& 1245/ Ahd./2008(03-04);ITA/836/Ahd/2008(04-05) & 1181/Ahd/2008(03 04), dated-25/5/2017).We are reproducing the relevant portion of the order and it reads as follow: 11. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer to assets partly used during the year for business purposes. Accordingly, CIT(A) has allowed the depreciation claimed on plant and machinery during AY 2002-03. The Department has filed an appeal before the Hon'ble ITAT for AY 2007-08. However, the aforementioned issue was not taken in appeal by the Department before ITAT. In view of the above, based on a combined reading of all of the above, it is abundantly clear that depreciation is allowable on the plant and machinery, building, furniture and fixture and office equipment of INR 1,22,84,477 and the disallowance made by the AO was not justified. Thus, there is no merit for the disallowance so made. Respectfully, following the order of the Tribunal in assessee's own case, we delete the disallowance of depreciation so made by the AO. Respectfully, following the above order, ground no.10 is decided in favour of the assessee. Respectfully following the order of the Co-ordinate Bench of the Tribunal in assessee's own case in earlier year, we decide the issue in favour of the assessee. 8. The issue raised in Grounds of appeal nos. 25 to 42 is against the deletion of disallowance as made by the TPO in respect of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scan and Diagnostic Centre(344 ITR 476).After considering the available material, it held that expenditure of Rs. 5.93 crores was related to education grants to medical association for organising conference and seminars(Rs. 2.69 crores),printing and equipment hire charges (Rs. 16. 59lakhs) accomodation expenses(Rs. 1crores),expenses incurred for organizing medical-education meeting(Rs. 1.75 crores) and distribution of free product samples(9.03 lakhs).The DRP further held that a regulatory body like MCA would regulate only the conduct of individuals or organisa -tions only, that the payment made by the assessee were prohibited by MCI regulation, that the expenses were incurred by benefit of doctors and not associations, that the associations were not at liberty to spend money received by assessee, that association had to spend as per the desire and guidance of the assessee company, that the expenditure was incurred against public policy, that expenditure incurred on hospitality, travel facilities provided to medical practitioners for participa-tion in workshop were not allowable, that MCI guidelines had prohibited giving free samples. Finally, it upheld the order of the TPO/AO. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s any direction or judgment on the infrastructure of any hospital which power rests solely with the concerned State Govt. The case of the Petitioner is that the Petitioner hospital is governed by the Delhi Nursing Homes Registration Act, 1953. It is urged that in fact, an inspection was also carried out on 22.07.2011 by Dr. R.N. Dass, Medical Superintendent (Nursing Home) under the Directorate of Health Services, Govt. of NCT of Delhi and the necessary equipments and facilities were found to be in order which negates the observations dated 27.10.2012 of the Ethics Committee of the MCI. It is also the plea of the Petitioner hospital that the Petitioner was not provided an opportunity of being heard and thus the principles of natural justice were violated. 7. In the counter affidavit filed by the Respondents, it is not disputed that the MCI under the 2002 Regulations has jurisdiction limited to taking action only against the registered medical practitioners. It's plea however, is that it has not passed any order against the Petitioner hospital therefore; the Petitioner cannot have any grievance against the impugned order. At the same time, it is stated that only simple observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: 2.The brief facts of the case qua the issue raised in the grounds of appeal are that, the assessee is a pharmaceutical company engaged in the business of providing Pharma marketing consultancy and detailing services to develop mass market for Pharma products. .............On further perusal of the details appearing in the ledger account furnished by the assessee, he further noted that there are certain expenses which has been debited by the assessee like, 'Customer Relationship & Management expenses' (CRM) of Rs. 7,61,96,260/-; 'Key Account Management expenses' (KAM)of Rs. 2,56,68,509/-; gift articles of Rs. 9,20,22,518/-; and cost of samples of Rs. 3,60,85,320/-, which according to him are in the nature of freebies given to medical practitioners/doctors which are disallowable in terms of Explanation to section 37(1) as clarified by CBDT vide its Circular No.5/2012 dated 1.8.2012. In response to the show cause notice by the AO, firstly, as regard CRM expenses, assessee submitted that expenditure under this category includes activities like holding national level seminars on new medical researches and drugs for discussion panels of eminent doctors and inviting other doctors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de applicable in the assessment year 2010-11 as the Circular is dated 01.08.2012. As required by the AO, the assessee also segregated expenses incurred after 10.12.2009, i.e., the date of amendment brought in the Indian Medical Council Guidelines. After segregating the expenses, AO disallowed the expenditure aggregating to Rs. 22,99,72,607/- (post 10.12.2009) on the ground that, firstly, the guidelines issued by the Medical Council of India is binding because it is a statutory body having been set up under the Act of the Parliament; secondly, the amended notification dated 10.12.2009, which has been reproduced by him in the order, clearly forbids medical practitioners to receive any kind of gift, travel facilities, hospitality and any kind of cash or monetary grants from any pharmaceutical or health care industries. Thus, such an expenses, he held that, is disallowable in terms of Explanation to section 37(1). 5.We have considered the rival contentions made by ld. CIT DR as well as ld. Sr. Counsel, Mr J.D. Mistry, perused the relevant finding given in the impugned orders and material referred to before us. The entire controversy revolves around, whether the expenditures in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification mentions that such a regulation or code of conduct will cover pharmaceutical companies or health care sector in any manner. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner. On the contrary, before us the learned senior counsel, Shri Mistry brought to our notice the judgment of Hon'ble Delhi High Court in the case of Max Hospital vs. MCI in WPC 1334/2013 judgment dated 10.01.2014, wherein the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. Relevant portion of the said judgment reads as under: xxxxx From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Indian Medical Council Regulation is applicable for pharmaceutical companies also. He also brought to our notice that another notification was issued by Indian Medical Council which was published on 01.12.2016 which further prohibits such kind of embargo on medical practitioners and have added para 6.8.1 and also given instances of action which shall be taken upon medical practitioners. The relevant clause of the said notification as relied upon by him is reproduced hereunder: xxxxx From the aforesaid notification, ld. CIT DR submitted that so many violations and censures have been prescribed for any expenditures/ or benefit given to doctors, thus, violation of such guidelines for incurring such kind of expenditures cannot be held to be allowable expenditure. CBDT is well within its power to clarify and interpret the law and prohibit allowance of any expenditure which violates any statute or is in nature of offence. 8.From a perusal of above amendment/notification in the MCI regulation, it is quite clear again that same is applicable for medical practitioners only and the censure/action which has been suggested by it is only on medical practitioners and not for pharmaceuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of 'Indian Medical Council Regulation, 2002' and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. The same CBDT circular had come up for consideration before the co-ordinate Bench of the ITAT, Mumbai Bench in the case of Syncom Formulations (I) Ltd. (in ITA Nos. 6429 & 6428/Mum/2012 for A.Ys. 2010-11 and 2011-12, vide order dated 23.12.2015), wherein Tribunal held that CBDT circular would not be not be applicable in the A.Ys. 2010-11 and 2011-12 as it was introduced w.e.f. 1.8.2012. 10.From the perusal of the nature of expenditure incurred by the assessee, it is seen that under the head "Customer Relationship Management", the assessee arranges national level seminar and discussion panels of eminent doctors and inviting of other doctors to participate in the seminars on a topic related to therapeutic area. It arranges lectures and sponsors kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the main object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies. Further as pointed out and concluded by the learned CIT(A) there is no violation by the assessee in so far as giving any kind of freebies to the medical practitioners. Thus, such kind of expenditures by a pharmaceutical companies are purely for business purpose which has to be allowed as business expenditure and is not impaired by EXPLANATION 1 to section 37(1). 11.Before us, the Ld. CIT DR has also much harped upon the decision of the Hon'ble Himachal Pradesh High Court in the case of Confederation of Indian Pharmaceutical Industry (SS) vs. CBDT (supra), in support of the argument that CBDT Circular has been approved and confirmed by the High Court and therefore, it has a huge binding precedence. From the perusal of the said judgment of the Hon'ble High Court, it is seen that in that case the validity of Circular No.5/12 dated 1.8.2012 was challenged. The Hon'ble High Court though upheld the validity of the said circular but with a rider that if the assessee satisfies the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f A.Y. 2008-09 as under: "The assessee has contended that in the immediately preceding assessment year the Tribunal has decided the issue in favour of the assessee in ITA NO. 388/Mum/2012 for assessment year 2008-09. In our considered view, principles of Res judicata is not applicable to income tax proceedings although we are fully agreeable that principles of consistency is to be maintained (Hon'ble Supreme Court decision in Radha Soami Satsang v. CIT (1992) 193 ITR 321 (SC) but in the instant assessment year, we have observed that these overseas trips for Doctors and their spouses were organized by the assessee whereby no details of the contents of seminar, if any conducted by the assessee overseas has been brought on record and also even the spouses accompanied the Doctors to the overseas trip which included cruise visit to island, gala dinners, cocktail, gala entertainment etc. rather than being directed towards seminar for product information dissemination or directed towards knowledge enhancement or knowledge sharing oriented as no details of seminar and its course content is brought on record rather the trip is directed towards leisure and entertainment of Doctors and thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt provisions and clauses of the 'Indian Medical Council Regulation 2002', however, has not elaborated or dwell upon as to how this MCI regulation which is strictly meant for medical practitioners and doctors can be made applicable to pharmaceutical companies. There has to be some enabling provision or specific clause in the said regulation whereby the pharmaceutical companies are barred from conducting seminars or conferences by sponsoring the doctors. The entire conduct relates to doctors and medical practitioners and lists out the censures and fines imposed upon them. What has not been provided in the MCI regulation cannot be supplied either by the court or by the CBDT. There has to be express provision under the law whereby pharmaceutical companies are prohibited to conduct conferences or seminar or give free samples. In the Tribunal decision of Liva Healthcare, strong reference has been made to Hon'ble Himachal Pradesh High Court (supra), that the said CBDT circular has been upheld. On this aspect we have already discussed in detail herein above that, firstly, High Court itself carves out a rider that assessee is free to demonstrate before the AO that this circular is not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses in the hands of the assessee as business expenditure. 14.Accordingly, we uphold the order of the ld. CIT(A) deleting the disallowance aggregating to Rs. 22,99,72,607/-." 5.3.3..Lastly,we want to refer to the case of Syncom Formulations in ITA No. 6429 & 6428/ Mum/2012,dated 23.12.2015, the Tribunal has held that the CBDT Circular, dated 1.8.2012 is applicable w.e.f.1.8. 2012 relevant to AY.2013-14.While holding so,it was observed as under: "We have considered rival contentions and found that receiving of gifts by doctors was prohibited by MCI guidelines, giving of the same by manufacturer is not prohibited under any law for the time being in force. Giving small gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but it is regarded as advertising expenses. As regards sponsoring doctors for conferences and extending hospitality, pharmaceuticals companies have been sponsoring practicing doctors to attend prestigious conferences so that they gather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove and also squarely covered by ratio laid down by the Hon'ble Delhi and Rajasthan High Courts in WP ( C ) 1334/2013 and ITA No. 485/2008 respectively , we are therefore inclined to uphold the order of CIT(A) on this issue by allowing the ground nos 25 to 42 raised by the assessee. 11. The assessee has raised additional ground, which is in respect of consequential depreciation on non-compete fee of Rs. 4,73,00,000/- as it has been held to be capital in nature in A.Y. 2002-03. The facts in brief are that the assessee entered into exclusive distribution agreement with Medtech Devices Limited (MDL) on 1st May 1999 for distribution of assessee's products in India, which accounted for approximately 40% of the total revenue of the assessee in that year. However, during A.Y. 2002-03, the distribution agreement was terminated vide agreement dated 31st July 2001 on account of Medtech Devices Limited constraints in investing the required resources to expand its own business in line with assessee's expectations. The said termination agreement provided for certain stipulated conditions, which are as under: * MDL would cease distribution of Medtronics products in the territories assigned. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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