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TMI Blog2023 (4) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... RATORIES PVT. LTD [ 2022 (2) TMI 1114 - SUPREME COURT] - Hence, we hold that the payments made by the assessee have been rightly disallowed by the Revenue. The appeal of the assessee on this ground is dismissed. Disallowance on account of Depreciation - mandation of ownership of such machines in name of the assessee - assessee has claimed depreciation on fixed assets lying with various hospitals/ distributors - disallowance of claim assessee is not the actual user of the machinery - HELD THAT:- The said equipment in question is the property of the assessee is not meant for sale and is being issued for regular follow up of pacemakers and post implant programming support. Thus, the first condition i.e. the ownership of such machines in name of the assessee is clearly established and is in fact also not disputed by the tax department. As regards the second condition, it is clearly evident that these machines are used solely for the purposes of business of the assessee for providing pre-sales and postsales activities i.e. servicing/ follow-up monitoring/ feasibility evaluation etc. in relation to its products i.e. pacemakers and stents. A cursory reading of definition Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th principle and by including companies not comparable to Appellant s functions performed, assets employed and risks assumed. 4. On the facts and circumstances of the case 8c in law, the Ld. AO/ TPO/ DRP grossly erred in enhancing Appellant s income by INR 3,33,740 towards recovery of expenses without providing any opportunity of being heard as otherwise mandated under the first proviso to section 920(3) of the Act and without application of transfer pricing methods provided under section 92C r.w. Rule 10B of the Income-tax Rules, 1962. Grounds relating to corporate tax disallowances: 5. On the facts and circumstances of the case 8c in law, the Ld. AO/ DRP grossly erred in disallowing expenditure of INR 3,27,74,708 incurred in relation to doctors under Explanation 1 to section 37(1) of the Act read with CBDT circular no. 5/2012 despite being otherwise and specifically permissible under MCI Regulations 2002. 6. On the facts and circumstances of the case 8c in law, the Ld. AO/ DRP grossly erred in disallowing clinical trial expenses of INR 1,04,72,741 under section 37(1) of the Act despite it having been incurred wholly and exclusively for the business purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. 1 5.28% 7. Killick Agencies Mktg. Ltd. 16.34% 8. EDCIL (India) Ltd. 20.75% 9. Just Dial Ltd. 29.26% 10.. Info Edge (India) Ltd. 30.49% 11. Kitco Ltd. 30.20% 12. Interactive Manpower Solutions Pvt. Ltd. 3 5.54% 35th Percentile 8.31% Median 15.81% 65th Percentile 29.26% 6. Based on the above companies selected as comparables, the TPO passed a final order u/s 92CA(3) of the Act and computed the TP adjustment as under: Particulars Amount (INR) Operating Cost 224,271,316 Arm s Length Operating Margin (OP/TC) as computed by Ld. TPO 15.81% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to the excluded Government Owned Company Functionally Different Diverse Engaged in engineering consultancy services 73% of revenue from engineering consulting services and for rest of operations, no segment segmental information is available. 8. The AO is directed to re-compute ALP taking into consideration the comparable excluded by the Tribunal. Transfer Pricing Adjustment: Recovery of Expenses: 9. During the relevant year under consideration, the assessee procured certain assets amounting to Rs.22,22,933/- lying with third parties for re-export to Associated Enterprises (AEs) on a cost-to-cost basis. The ld. DRP determined a 15% mark-up on the amount of such recovery treating the same to be support services rendered by the assessee to its AEs and computed an adjustment of Rs.3,33,740/-. 10. The ld. AR submitted that the assets were procured by it on behalf of its AEs purely for administrative convenience and that entire cost of such assets was recovered by it from its AEs. Accordingly, it was submitted that there was no service element involved in such recovery of expenses. 11. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the aforesaid order of ITAT reproduced as under: 3... The Id. Counsel for the assessee submitted that the assessee had raised objections against the order of Id. DRP and stated that CBDT Circular No. 5/2012 does not apply. It was further submitted that the expenditure incurred was not prohibited by MCI Regulations and therefore, the claim made, did not fall within the purview of CBDT Circular No. 5/2012. It was further submitted that the MCI Guidelines are applicable only to medical practitioners and not to Pharma Companies It was also stated that the issue under consideration is covered by the decision of the ITAT Mumbai Bench in the case of DCTT-8(2), Mumbai Vs PHL Pharma (P.) Ltd. reported at 163ITD10. 5. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that the assessee incurred expenses of Rs.12.14.Ft48/- for conducting a seminar/conference of the Doctors and provided the travelling facilities to the participant Doctor's in the seminar. The AO disallowed the expenses for the reasons that the expenditure incurred on consultant Doctors was covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned senior counsel. Shri Mistry brought to our notice the judgment of Hon'ble Delhi High Court in the case of Max Hospital v. MCI (WPC1224/2012. dated 10-1-2014I. 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. From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass an 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 regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is inapplicable upon Pharma companies like assessee then, where is the violation of any of law /regulation? Under which provision there is any offence or violation in incurring of such kind of expenditure. The relevant provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts of the assessee and the new developments taking place in the area of medicine and providing correct diagnosis and treatment of the patients. The said activities by the assessee are to make the doctors aware of its products and research work carried out bu it for bringing the medicine in the market and its results are based on several levels of tests and approvals. Unless the pharmaceutical companies make aware of such kind of products to key doctors or medical practitioners, then only it can successfully launch its products/medicines. This kind of expenditure is definitely in the nature of sales and business promotion, which has to be allowed. Coming to the gift articles and free samples of medicines, it is seen that the assessee gives various kind of articles like, diaries, pen sets, calendars, paper weights, injection boxes etc. embossed with bold logo of its brand name and the product name so that the doctors remembers the brand of the assessee and also the name of the medicine. All the gift articles, as pointed out by the assessee before the authorities below and also before us are very cheap and low cast articles which bears the name of assessee and it is purely for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the facts and in view of the aforesaid discussion, delete the addition of Rs.13,14,548/- being a reimbursement of expenses incurred by the assessee on travelling, lodging and registration fees on behalf of the Doctors. 17. It was argued that the assessee being a promoter of medical education had incurred these expenses to train Doctors/ medical practitioners for providing best medical available care to the patient and better quality medical services. Hence, the disallowance made by the AO was directed to be deleted by the Hon ble Bench in assessee s own case for AY 2011-12. It was argued that such expenses on travelling, lodging, conveyance and registration fees of behalf of doctors are not prohibited by law while appreciating that these cannot be considered as freebies to doctors. 18. It was further argued that given the complex and advanced nature of the medical products in which the assessee trades and the clinical needs that such products are intended to meet, the assessee treats doctors training and education as a major priority for its business. For this purpose, during AY 2016-17, the assessee had entered into a consultancy arrangement with several doctors (ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he normal course of its business and represent genuine business expenditure of the assessee. Thus, the same should be allowable as deductible business expenditure in accordance with the provisions of section 37(1) of the Act. 20. On the other hand, the ld. DR supported the order of the authorities below and argued that owing to the agreement entered by the assessee there is change of facts as well as legal proposition. The Ld. DR argued and relying on the judgment of Hon ble Supreme Court in the case of M/s Apex Laboratories P. Ltd. Vs DCIT in SLP (Civil) No. 23207 of 2019 vide order dated 22.02.2022. 21. Heard the arguments of both the parties and perused the material available on record. 22. We have examined the Invoice-Cum-Report of various Doctors which are addressed to the sales Manager of the assessee intimating performance of rotablation technique and to release the honorarium for the said services. We have gone through the supplementary synopsis of the assessee for the relevant grounds. The consulting expenses paid, travelling, boarding lodging expenses, reimbursement to doctors are indirect way of gifting the doctors to promote the products. We have gone thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of Apex. 4. The reason for only a partial allowance by the authorities below was that an amendment6 to the Medical Council Act, 1956 (now repealed) through the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (hereinafter, 2002 Regulations ), published in the Official Gazette on 14.12.2009, disallowed medical practitioners from accepting emoluments in the form of inter alia gifts, travel facilities, hospitality, cash or monetary grants. Acceptance of such freebies could result in a range of sanctions against the medical practitioners, from censure for incentives received up to Rs.5,000/-, to removal from the Indian Medical Register or State Medical Register for periods ranging from three months to one year. Therefore, only the expenses incurred till 14.12.2009 were eligible for the benefit of Section 37(1), and not for the entirety of the Assessment Year 2010-2011, as claimed by Apex. Contentions of Apex 5. It was argued by the counsel for Apex, Mr. S. Ganesh, Senior Advocate, that the amended 2002 Regulations were not applicable to Apex, i.e., pharmaceutical companies were not bound by them. While medical prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Berger Paints Ltd. v Commissioner of Income Tax, (2004) 12 SCC 42 and South India Bank Ltd. v Commissioner of Income Tax, Civil Appeal No. 9606 of 2011 / 2021 SCC Online SC 692, dated 09.09.2021. (2007) 2 SCC 759. In our opinion, the High Court has adopted an emotional and moral approach rather than a legal approach. We fully agree with the High Court that the assessee was committing a highly immoral act in illegally manufacturing and selling heroin. However, cases are to be decided by the court on legal principles and not on one's own moral views. Law is different from morality, as the positivist jurists Bentham and Austin pointed out. 8. It was argued that similarly, in Commissioner of Income Tax v. M/s Khemchand Motilal Jain, a Division Bench of the Madhya Pradesh High Court allowed ransom money paid to the kidnappers of an employee of the respondent company on a business trip as business expenditure under Section 37(1), holding that: The aforesaid section provides that kidnapping a person for ransom is an offence and any person doing so or compelling to pay is liable for the punishment as provided in the Section, but nowhere it is provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought into effect, it could be done so only prospectively , and not retrospectively , i.e., from the date of publication of the CBDT circular on 01.08.2012, and not the date of publication of the 2002 Regulations on 14.12.2009. Reliance was placed on various decisions of this Court to show that beneficial circulars had to be applied retrospectively, however oppressive circulars could only be applied prospectively.15 Contentions of Revenue Authorities. 11. Mr. Sanjay Jain, Additional Solicitor General appearing for the respondent revenue authorities, submitted that while the act of pharmaceutical companies gifting freebies to medical practitioners for promotion of their products may not be classified as an offence under any statue, it was squarely covered within the scope of Explanation 1 to Section 37(1) by use of the words prohibited by law , as it was specifically prohibited by the amended 2002 Regulations. While Apex could not be punished , it should not be allowed to benefit by claiming a tax exemption on the freebies distributed. See for e.g., Director of Income-tax v. S.R.M.B Dairy Farming (P.) Ltd. (2018) 13 SCC 239. 12. Further, the ASG submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such commission was bad, paying it was equally bad. Both were privies to a wrong. Therefore, such commission paid to private doctors was opposed to public policy and should be discouraged. The payment of commission by the assessee for referring patients to it cannot by any stretch of imagination be accepted to be legal or as per public policy. Undoubtedly, it is not a fair practice and has to be termed as against the public policy. *** Further, the High Court referred to Section 23 of the Contract Act, 1872 (hereinafter, Contract Act ) to hold the consideration or object of the agreement between the assessee and private doctors as unlawful, and the agreement therefore void, as it was opposed to public policy. 15. A Division Bench of the Himachal Pradesh High Court decided along similar lines in Confederation of Indian Pharmaceutical Industry (SSI) v. Central Board of Direct Taxes19( hereinafter, Confederation ), holding: This regulation is a very salutary regulation which is in the interest of the patients and the public. This court is not oblivious to the increasing complaints that the medical practitioners do not prescribe generic medicines and prescribe brand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng expenditure of the nature described in Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . [Explanation 1]. For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.] (emphasis supplied) Section 37 is a residuary provision. Any business or professional expenditure which does not ordinarily fall under Sections 30-36, and which are not in the nature of capital expenditure or personal expenses, can claim the benefit of this exemption. But the same is not absolute. Explanation 1, which was inserted in 1998 with retrospective effect from 01.04.1962, restricts the application of such exemption for any purpose which is an offence or which is prohibited by law . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al companies is clearly an offence on part of the medical practitioner, punishable with varying consequences. 19. The CBDT circular dated 01.08.2012 is set out below: 1. It has been brought to the notice of the Board that some pharmaceutical and allied health sector Industries are providing freebees (freebies) to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India (the 'Council') which is a regulatory body constituted under the Medical Council Act, 1956. 2. The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10-12-2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries. 3. Section 37(1) of Income Tax Act provides for deduction of any revenue expenditure (other than those failing under sections 30 to 36) from the business Income if such expense is laid out/expended wholly or exclusively for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an enlargement of scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provisions either under the provisions of Income Tax Law or by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporanea expositio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letely misconceived nature of such an interpretation was dealt with in a similar interpretation of the provisions of PC Act, by a Constitution Bench of this Court in P.V. Narasimha Rao v. State (CBI/SPE). Prior to the 2018 amendment22, the PC Act only punished the bribe- (1998) 4 SCC 626. Subs. Section 8, Act 16 of 2018, w.e.f. 26.07.2018. taker who was a public servant, and not the bribe-giver. Reliance was placed on this to acquit the appellant bribe-giver. Rejecting such an interpretation, this Court held: 145. Mr. Rao submitted that since, by reason of the provisions of Article 105(2), the alleged bribe-takers had committed no offence, the alleged bribe-givers had also committed no offence. Article 105(2) does not provide that what is otherwise an offence is not an offence when it is committed by a Member of Parliament and has a connection with his speech or vote therein. What is provided thereby is that a Member of Parliament shall not be answerable in a court of law for something that has a nexus to his speech or vote in Parliament. If a Member of Parliament has, by his speech or vote in Parliament, committed an offence, he enjoys, by reason of Article 105(2), im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parent provision for the regulations), what is discernible is that the statutory regime requiring that a thing be done in a certain manner, also implies (even in the absence of any express terms), that the other forms of doing it are impermissible. 26. In this regard the decision of this Court in Jamal Uddin Ahmad v. Abu Saleh Najmuddin Anr is of some relevance. There, the scope of Section 81 of the Representation of the People Act, 1951 was examined in the light of powers of the High Court to administer election petitions by invoking the rule of implied prohibition. The Court observed that: Dealing with Statutes conferring power; implied conditions, judicial review , Justice G.P. Singh states in the Principles of Statutory Interpretation (Eight Edition 2001, at pp. 333, 334) that a power conferred by a statute often contains express conditions for its exercise and in the absence of or in addition to the express conditions there are also implied conditions for exercise of the power. An affirmative statute introductive of a new law directing a thing to be done in a certain way mandates, even if there be no negative words, that the thing shall not be done in any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e who decide . 27. It is also a settled principle of law that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self- defeating. Doctors and pharmacists being complementary and supplementary to each other in the medical profession, a comprehensive view must be adopted to regulate their conduct in view of the contemporary statutory regimes and regulations. Therefore, denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. 28. This Court also notices that medical practitioners have a quasifiduciary relationship with their patients. A doctor s prescription is considered the final word on the medication to be availed by the patient, even if the cost of such (2002) 6 SCC 16. medication is unaffordable or barely within the economic reach of the patient such is the level of trust r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy and Effectiveness), dated 04.08.2010. of Multiple Source Brand Drugs in Medicare Part D (dated 23.07.2018).27 The report noticed inter alia, that an empirical study conducted in respect of 20 odd (out of the 600 drugs which were the subject matter of the research paper) brand medications dispensed for a particular period, were capable of generic substitution and would have resulted in substantial benefit to the patients: Beneficiaries could have saved over $600 million in out of pocket payments had they been dispensed generic equivalent drugs. A significant amount of this spending occurred among the top 20 multiple source brands. Substituting these drugs for generic competitors at their median prices would have saved the program and beneficiaries $1.8 billion. Likewise, in a previous study by ProPublica (an independent, non-profit newsroom that does investigative journalism) titled Dollars for Doctors: Now Extracted from https://aspe.hhs.gov/reports/data-point-savings-available-under-fullgeneric-substitution - multiple-source-brand-drugs-medicare accessed at 16:37 on 13.02.2022. The report states, inter alia, that: More 600 brand name drugs were dispensed and paid for by Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranges from 117% (Namenda) to 1,476% (Lamictal) indicating significant per-drug savings are available for beneficiaries. In three cases (Abilify, Lovenox, and Tricor), beneficiary out-of-pocket costs are marginally higher for the generic than the brand drug. We believe this is due to the interaction of total drug costs and plan coverage in the coverage gap for generics (42% in 2016), meaning patients paid 58% coinsurance for generics that year. This compares to 25% plan coverage and a 50% statutory manufacturer discount for brand drugs in 2016. There s Proof: Docs who Get Company Cash Tend to Prescribe More Brand- Name Meds (dated 17.03.2016)28 stated that: doctors who receive payments from the medical industry do indeed tend to prescribe drugs differently than their colleagues who don t. And the more money they receive, on average, the more brand-name medications they prescribe. Data is now available publicly, in the United States, by reason of the Physician Payment Sunshine Act, 2010 i.e., Section 6002 of the Affordable Care Act, 2010. This law compels manufacturers of drugs, devices, biologics, and medical supplies covered by Medicare, Medicaid, or the Children ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phasis supplied) 31. It is crucial to note that the agreement between the pharmaceutical companies and the medical practitioners in gifting freebies for boosting sales of prescription drugs is also violative of Section 23 of the Contract Act, 1872 (as also noted by the Punjab and Haryana High Court in Kap Scan (supra)). The provision is as follows: 23. What considerations and objects are lawful, and what not. The consideration or object of an agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void. (emphasis supplied) 32. Before us, Apex has continually stressed on the need to divorce interpretation of tax provisions from a perceived immorality / violation of public policy. Apex repeatedly relied on T.A. Quereshi (supra), M/s K.M. Jain (supra) and CIT v. Pt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and not allowed to be claimed as a deduction under Section 37(1). Doing so would wholly undermine public policy. The well-established principle of interpretation of taxing statutes that they need to be interpreted strictly cannot sustain when it results in an absurdity contrary to the intentions of the Parliament. A Bench of this Court in C.W.S. (India) Ltd. v. CIT32 held as follows: While a literary construction may be the general rule in construing taxing enactments, it does not mean that it should be adopted even if it leads to a discriminatory or incongruous result. Interpretation of statutes cannot be a mechanical exercise. Object of all the rules of interpretation is to give effect to the object of the enactment having regard to the language used . Justice Oliver Wendell Holmes had once said: A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used. 33 Holmes thus summed up the elusive nature of words, which lies at the heart of the many issues concerning interpretation of statutes. 34. Interpretation of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract Act. Such an agreement is declared by Section 23 to be unlawful and void. The question is whether such an unlawful or void partnership can be treated as a genuine partnership within the meaning of Section 185(1) and whether registration can be granted to such a partnership under the provisions of the Income Tax Act and the Rules made thereunder. We think not. When the law prohibits the entering into a particular partnership agreement, there can be in law no partnership agreement of that nature. The question of such an agreement being genuine cannot, therefore, arise. It is also a known principle that what cannot be done directly, cannot be achieved indirectly. As was said in Fox v. Bishop of Chester35 that it is a: Well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance And that: (1995) Supp (5) SCR 285. (1824) 2 B C 635, quoted and applied in Jagir Singh v. Ranbir Singh Ors. 1979 (2) SCR 282. To carry out effectually the object of a Statute, it must be construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the Rules with reference to certain objective criteria were to enter into bargains of this nature, it will undoubtedly make the law a hanging (sic laughing) stock. 2022 SCC Online SC 60. 36. In the present case too, the incentives (or freebies ) given by Apex, to the doctors, had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their practice of medicine. Those sanctions are mandated by law, as they are embodied in the code of conduct and ethics, which are normative, and have legally binding effect. The conceded participation of the assessee- i.e., the provider or donor- was plainly prohibited, as far as their receipt by the medical practitioners was concerned. That medical practitioners were forbidden from accepting such gifts, or freebies was no less a prohibition on the part of their giver, or donor, i.e., Apex. 37. In view of the foregoing discussion, the impugned judgment cannot be faulted with. The appeal is dismissed without order on costs. Pending application(s), if any, also stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the pacemaker is required to be monitored over its useful life, which is done by using these programmers. Accordingly, across various hospitals pan India, these programmers are frequently required to monitor the performance of the pacemaker during follow-up visit of the patients. These programmers are owned by the assessee and lies with the distributors who are located across various locations. These distributors provide the programmers on request basis for servicing/ monitoring the functioning of pacemakers which is supplied by the assessee and implanted in patients. Further, such programmers are also used to analyze any additional requirements in patient due to implantation of such pacemakers. We wish to mention that providing such services is essential to the business of the assessee as its pacemakers will not be purchased by anyone if prompt service is not provided by the assessee. Since it is not possible for the assessee to itself provide such services to all patients across India, it provides the same through its dealer network and accordingly, these programmers are placed with the dealers to provide such follow-up/ monitoring services. Rotablator machines/ I-Lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship At all times during the term of this Placement Agreement, You shall maintain such policies of insurance as are adequate to fully insure against damage to or loss of the Equipment. 31. The said equipment in question is the property of the assessee is not meant for sale and is being issued for regular follow up of pacemakers and post implant programming support. Thus, the first condition i.e. the ownership of such machines in name of the assessee is clearly established and is in fact also not disputed by the tax department. 32. As regards the second condition, it is clearly evident that these machines are used solely for the purposes of business of the assessee for providing pre-sales and postsales activities i.e. servicing/ follow-up monitoring/ feasibility evaluation etc. in relation to its products i.e. pacemakers and stents. 33. Reliance is being placed on the following judicial precedents wherein it has been held that actual owner of asset has the right to claim the depreciation and such claim is not based upon the user of the asset: ICDS Ltd vs. CIT [2013] 29 taxmann.com 129 (Supreme Court) ACIT vs. National Stock Exchange of India Ltd. [2011] 14 taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d performance of the Taxus Element (appellant s product) against XIENCE Prime (competitor s product) coronary stent system for treatment of coronary lesion in diabetic patients in India. 75,30,011 2 The Madras Medical Mission (Madras Medical) Address: No. 4A, Dr. J Jayalalitha Nagar,Mogappair, Chennai,Tamil Nadu - 600037 This is an investigator initiated study to examine the safety and performance of the Promus Element Stent System (again being appellant s product) in the treatment of coronary lesion in Indian population. 29,42,730 Total (in INR) 1,04,72,741 37. The AO disallowed the aforesaid expenses holding that the clinical trials are studies undertaken by the hospitals over the period of time to see the impact of different products including the products being dealt with by the assessee. It was held that the trials are not solely exclusively to see the impact of products dealt by the assessee or clinical research to see the efficacy of the products dealt by the assessee company and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imary objective of the Promus Element India Registry was to evaluate the safety and effectiveness of the Promus Element Coronary Stent System in a population of all consecutive and new comers. 2.7 CONCLUSION In this prospective, multi-center registry, Everolimus- Coronary Stent System (Promus Element system) demonstrated to be safe and effective for coronary revascularization in Indian population... The device success and the procedural success was reported in 100% and 99.7% of the patients over the period of 2 years, respectively... Appellant s contention based on above extracts Appellant s contentions based on above extracts: a) the name of clinical trial study -TUXEDO-India is per-se an abbreviation derived from appellant s product TAXUS Element Coronary Stent (letters T and IT in TUXEDO being derived from TAXUS stent of appellant), as also explained in the Title section below Summary in Para 4 of above relevant extract; b) the objective of the study was to compare the safety and performance of Appellant s TAXUS Element stent with that of a competitor (i.e. Xience Prime stent) as also menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set: Clinical trials are studies undertaken by the hospitals over the period of time to see the impact of different products including the products being dealt with by the assessee. The trials are not solely exclusively to see the impact of products dealt by the assessee or clinical research to see the efficacy of the products dealt by the assessee company. b) Para 7.4, Page 43 of appeal set: The Company has claimed the expenses against study for effect of stunts (stents) used in cardiac surgery. Without going into the product details or productivity it is relevant to mention here that such products are being used by the hospitals from different companies as per their requirement on various basis. c) Para 7.5, Page 43 of appeal set: The aid paid by the assessee company to carry out clinic trials is nothing but an alibi to promote the interest of the company by procuring and recommending the products of the company. The assessee company in guise of aid to these institutions for carrying out clinical trials have advanced huge sum to promote its interest. The reason for this payment is to circumvent the CBDT Circular No. 3/ 2012 dated 1-08-2012 sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the approval of Ethical Committee of the Institute before initiation of this study. The results of such clinical trials have been submitted by the Institutes to ICMR clinical registry at www.ctri.in. The annual status of on each clinical trial, i.e. ongoing, completed and terminated, has to be submitted to DGHS. (iv) Thus, even in a case where the CBDT Circular No. 5/2012 dated 1-08-2012 is to be applied to the instant case, the appellant is in clear compliance of clause 6.8.1(e) of the MCI regulation dated 10 December 2009 (refer P.B. Vol-1293) as all conditions prescribed therein (eg. taking requisite approvals from concerned competent authorities, Ethical committees etc.) have been fulfilled in the instant case and therefore there is no offence or prohibition of law done by the appellant. d) Para 7.6, Page 43 of appeal set: Moreover it is not the case of assessee that research is being undertaken for development of a new product or to examine the efficacy of a product dealt by it... ...The benefit of the trials so undertaken are not solely and exclusively for the business of Para 7, Page 70 of appeal set (DRP directions): Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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