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TMI Blog2019 (11) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. 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 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. Thus we are inclined not to disturb the finding of the lower authorities. Accordingly, we dismiss the ground of appeal of the assessee. - ITA No. 362/Ahd/2018 (Assessment Year : 2014-15) - - - Dated:- 17-10-2019 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER Appellant by: Ms. Urvashi Sodhan, A.R. Respondent by: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee shall not be entitled to deduction of payments of Employee s Contribution to ESIC account if it is paid to the concerned account after the due date as specified u/s 36(1)(va), though he deposits the same before the due date prescribed under section 43B i.e., prior to filing of return u/s 139(1) of the Act which according to us is just and proper, without any infirmity. Hence, we find no merit in this ground of appeal preferred by the assessee. The same is thus, dismissed. 3. The second ground relates to disallowance of expenditure amounting to ₹ 19,45,443/-, which was incurred for the purpose of distributing gifts, providing hospitality to the doctors and/or medical practitioners; out of which ₹ 14,45,443/- was incurred towards the purchase of laptop, mobile, watches, AC Machines, treadmill machines etc in the nature of gifts for doctors and practitioners and the remaining balance of ₹ 5,00,000/- has been disallowed on ad hoc basis on account of having been incurred on the lodging, boarding and travelling of the doctors, medical practitioners upon invocation of section 37 of the I. T. Act, 1961 and the amended provision of Indian Medic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the Assessing Officer made the disallowance of ₹ 18,16,120/- and added to the total income of the assessee. 6. The aggrieved assessee preferred an appeal to the Ld.CIT(A). The assessee before the Ld. CIT(A) submitted that the Circular issued by the CBDT dated 01/08/2012 which is prospective in nature. Therefore, there cannot be any disallowance of the expenses before the date of the issue of the Circular. 6.1. The necessary details were furnished to AO on account of sales promotion expenses. But the Assessing Officer without pointing out any specific defect has made the ad-hoc 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it was held as under: Shri Vishal Mohan, Advocate, on behalf of the petitioner contends that the circular goes beyond the section itself. We are not in agreement with this submission. The explanation to Section 37(1) makes it clear that any expenditure incurred by an assessee for any purpose which is prohibited by law 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 regulations framed by the medical council then it may legitimately claim a deduction, but it is for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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