Business expenditure disallowance for doctor-related promotional es was deleted; CBDT Circular 05/2012 was held prospective.

Disallowance of doctors' honorarium, travel and hospitality, books, exhibition sponsorship and related promotional expenses for assessment year 2011-12 was held unsustainable where the assessee substantiated that the were incurred wholly and exclusively for business purposes and the assessment was not based on proper verification of the accounts or the specific nature of the expenditure. The medical regulations relied on by the Revenue were not applied as suggested to the controversy, and CBDT Circular No. 05/2012 on freebies to medical practitioners was treated as prospective and not applicable to the relevant year. The addition was therefore deleted in favour of the assessee.

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Issues: Whether disallowance of expenditure incurred on doctors' honorarium, travel and hospitality, books, exhibition sponsorship and allied promotional expenses was sustainable for assessment year 2011-12 in the light of the Indian Medical Council regulations and CBDT Circular No. 05/2012.

Analysis: The assessee furnished details and explanations showing that the impugned expenses were incurred wholly and exclusively for business purposes. The assessment order proceeded largely on general legal and policy considerations without proper verification of the accounts or the specific nature of the expenditure. The amended medical regulations relied upon by the Revenue were held not to govern the controversy in the manner suggested, and the CBDT circular dealing with inadmissibility of freebies to medical practitioners was held to be prospective and not applicable to the relevant assessment year.

Conclusion: The disallowance was not sustainable and the addition was deleted in favour of the assessee.

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