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TMI Blog2023 (3) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, remain updated of development of related fields, and enables the assessee to innovate and improve products line, however, we find that the Hon ble Supreme Court in the case of Apex Laboratories [ 2022 (2) TMI 1114 - SUPREME COURT] has also considered the expenses on conference as disallowable in the form of freebies given to the healthcare practitioner/medical practitioners. In the instant case, the assessee has not supplied any name and address of the healthcare personnel, to whom the conference or travel expenses have been reimbursed. The section 4 of the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992, strictly prohibit offer of inducement of any other kind for the purpose of promoting the use or sale of the infant milk substitutes or infant foods for taking part in promoting of the infant milk substitutes, feeding bottles and infant foods. Therefore, though the assessee is claiming that the expenses on conference and seminars were for his business, however, same falls under prohibited activity and therefore, expenses incurred thereon have been validly disallowed of the Assessing Officer and confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its jurisdiction under the IT Act and has rendered a 'conclusive and a sweeping finding that the Appellant Company is in violation of all related laws pertaining to sales and marketing of infant and child nutrition food traded by the Appellant, including the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (IC Regulations') and the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act (in short 'IMS Act'): 3. That, the Ld. CIT (A) ought to have exercised jurisdiction and confined the scope of its enquiry limited to its powers conferred upon it under the IT Act. In the present case, the Ld. CIT (A) has illegally assumed jurisdiction under the IMC Regulations and IMS Act and has illegally rendered erroneous finding that the Appellant company is in violation of all related laws including the IMC Regulations and IMS Act, which are ex-facie without jurisdiction and uncalled for; 4. That, the Ld. CIT (A) ought to have confined its enquiry and findings limited only to as to whether the order dated 15.03.2016 passed by the Ld. Assistant Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order without jurisdiction and a nullity; 10. That the finding of the Ld. CIT (A) that the Appellant company had violated all related laws pertaining to sales and marketing of infant and child nutrition food traded by it including the IMC Regulations and IMS Act is erroneous, based on wrongful interpretation of the provisions of the IMC Regulations and IMS Act by the Ld. CIT (A) in its own subject wisdom; 2. Briefly stated, facts of the case are that the assessee company is engaged in the business of trading of infant children nutrition food . For the year under consideration, the assessee filed return of income on 30.11.2012 declaring total income of Rs.3,67,59,810/- under section 139(1) of the Income-tax Act, 1961 (in short the Act ). The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. In the scrutiny assessment completed u/s 143(3) of the Act, the Assessing Officer made disallowance of expenses on account of free samples amounting to Rs.1,66,083/- and disallowance of conference seminar expenses of Rs.44,66,926/-. On further appeal, the Ld. CIT(A) also upheld the disallowance vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard. 6.4.Therefore, in the case of the appellant authenticity or genuineness ofthe claim was put in question by the AO. In conclusion, what remained unproven or dubious is reliability of expenses incurred, not its legitimacy. In this way, in absence of any verifiable data regarding expenditure incurred on distribution of free samples, estimated addition made by the AO appears to be justified. This ground of appeal is thus, decided against the appellant. 6.5.Before departing from this issue, it is pertinent to refer that referenceto the case of PHL (Pharma) (P) Ltd. will not come to the rescue of the appellant, as this decision no longer holds good after the decisions in the cases of Apex Laboratories (P.) Ltd., [2022] 135 taxmann.com 286 (SC) and Peerless Hospitex Hospital and Research Center Ltd., [2022] 137 taxmann.com 359 (Calcutta). discussed herein below. Therefore, on both counts addition made by the AO is upheld. 5.1 Before us, also no such list of recipients of free samples has been provided by the assessee. Further, on perusal of section 4 of the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 taxmann.com 359 (Calcutta). The Ld. CIT(A) also found the activity of the assessee in violation of provisions of Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992. The relevant observations are reproduced as under: 8. As the appellant company has argued that being a trader of infant and child nutrition products it is not covered under allied healthcare , let me briefly discuss the Infant Milk Substitutes, Feeding Bottles, and Infant Foods (IMS) Act. In 1992, India adopted the Infant Milk Substitutes, Feeding Bottles, and InfantFoods (IMS) Act. It was further amended in 2003 to strengthen certain provisions and close any loopholes infant formula companies had found. The IMS Act comprehensively bans all forms of promotion of foods marketed to children up to two years of age. It also bans sponsorship to health care professionals and health organizations by these infant formula companies. Violation of the IMS act is a criminal offense and may result in fines and imprisonment. 8.1 Thus, IMS Act prohibits: 1. Advertising and promotion of infant milk substitutes, feeding bottles, or infant foods. 2. Unauthorized labelling of products, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the relevant laws, the assessee s action invites for penalty/prosecution. The relevant observation of the Ld. CIT(A) is reproduced as under: 9. The appellant company conclusively had violated all related laws pertaining to sales and marketing of infant and child nutrition food traded by it. Whether it is violation of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('IMC Regulations') or the Infant Milk Substitutes, Feeding Bottles, and Infant Foods (IMS) Act, the appellant's action calls for penalty /or prosecution 9.1.This once again brings us to the judgment in the case of Peerless Hospitex Hospital and Research Center Ltd., [2022] 137 taxmann.com 359 (Calcutta), wherein the Hon'ble High court, after going through a plethora of case laws, including that of Apex Laboratories (P.) Ltd. (supra), held, 26 ...In my considered opinion petitioner being a participant in an act which is an offence and is prohibited by law is not entitled for any deduction under section 37(1) of the Income-tax Act, 1961 . Similar views were expressed by the Hon'ble Supreme Court while dealing with the case of Apex Laboratories ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 SC 2375] that assessee should not be condemned unheard. As far as the grievance of the assessee regarding the comment the Ld. CIT(A) in para 9 of the impugned order is concerned, we are of the opinion that the said comments without providing opportunity of being heard are not justified. To levy penalty or filing prosecution for violation of provisions of the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992, is within the domain of the relevant authority under said Act, following due procedure of law and Ld CIT(A) was not required to express his conclusion in said matters, that too without providing any opportunity of being heard. However, we also note the recognized principle of Criminal Jurisprudence that anyone can set or put the criminal law into motion except where the statue enacting or creating offence indicate to the contrary. We accordingly restore this matter back to ld CIT (A) for considering evidence on record and after providing due opportunity of being heard, express his opinion, if so, required in the matter. The relevant grounds of the appeal of the assessee are accordingly allowed for statisti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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