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TMI Blog2020 (12) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... utors, doctors and hospital staff and therefore in our opinion these expenses are clearly covered under the provision of section 37(1) of the Act as wholly and exclusively incurred for the purpose of business. The case of the assessee is squarely covered by the decisions of the co-ordinate bench of the Tribunal in the case of DCIT vs. PHL Pharma (P). Ltd. [ 2017 (1) TMI 771 - ITAT MUMBAI ] and Medley Pharmaceuticals Ltd. vs. DCIT [ 2020 (7) TMI 568 - ITAT MUMBAI ] We find that in these decisions the identical issue has been decided in favour of the assessee by holding that the MCA regulations are applicable to the doctors and not to the pharmaceutical companies who incur such expenses and therefore these expenses are purely business nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter referred to as the CIT(A)] relevant to assessment year 20114-15. 2. The issue raised in first ground of appeal is against the confirmation of disallowance of sales promotion expenses being gifts to doctors and hospitals amounting to ₹ 10,76,256/-. 3. The facts in brief are that the assessee filed the return of income on 07.11.2014 declaring a total income of ₹ 6,74,68,500/- which was processed under section 143(1) of the Act. Thereafter the case of the assessee was selected for scrutiny and statutory notices were duly issued and served upon the assessee. It is pertinent to state that assessee is engaged in the business of manufacturing of pharmaceuticals and sales thereof. During the course of assessment proceedings, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edical Council of India which is a regularity body constituted under Medical Council Act, 1956 and thus dismissed the ground raised by the assessee. 5. After hearing the Ld. D.R. and perusing the material on record, we note that the assessee is engaged in the business of manufacturing of pharmaceutical items and sales thereof. Since the assessee is in the business of pharmaceuticals, it is customary in the business of the assessee to incur sales promotion expenses on providing gifts, free samples to doctors, hospitals, medical association for arranging conferences and workshops for demonstrative purposes and also gifts given to customers, distributors, doctors and hospital staff and therefore in our opinion these expenses are clearly covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has huge interest free funds available with it and purchase was made out of own funds and not out of borrowed funds. However, the AO computed the disallowance at ₹ 22,160/- in para 6.4 and added the same to the income of the assessee. 8. In the appellate proceedings, the Ld. CIT(A) affirmed the order of AO on this issue without giving any clear cut finding on this issue. 9. After hearing the Ld. D.R. and perusing the material on record, we find that the assessee s own funds as on 31.03.2014 were ₹ 3,485.91 lakhs whereas the total investments including the flat was to the tune of ₹ 901.40 lakhs. Thus we find merit in the contentions of the assessee that where the assessee s own funds are more than the borrowed fun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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