Tribunal allows appeals for 2007-08 & 2008-09 assessments, rejects Revenue appeal. Various deductions deleted or under review.

The Tribunal allowed the appeals for the assessment years 2007-08 and 2008-09 partly for statistical purposes and dismissed the Revenue's appeal. The decisions were pronounced on 31st March, 2017. The disallowances related to deduction for 'loaner' and 'demo' sets, advertisement and promotional expenses, selling commission, provision for doubtful debts, expenses for holding a sales conference, training doctors outside and in India, professional fees, and recruitment and training expenditure were either deleted or subject to verification.

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Issues Involved:
1. Disallowance of deduction for 'loaner' and 'demo' sets.
2. Disallowance of advertisement and promotional expenses.
3. Disallowance of selling commission treated as prior period expenses.
4. Disallowance of provision for doubtful debts.
5. Disallowance of expenses for holding a sales conference.
6. Disallowance of expenses for training doctors outside India under section 40(a)(i).
7. Disallowance of expenses for training doctors in India.
8. Disallowance of professional fees under section 40(a)(ia).
9. Disallowance of recruitment and training expenditure.

Detailed Analysis:

1. Disallowance of Deduction for 'Loaner' and 'Demo' Sets:
The assessee's claim for deduction of Rs. 50,33,418/- for 'loaner' and 'demo' sets was disallowed, treating them as capital assets instead of inventory. The Tribunal held that the principle of consistency should be applied, referencing the Supreme Court's judgment in CIT Vs. Excel Industries Ltd. The Tribunal found that the 'loaner' sets were part of inventory and not capital assets, as they facilitated the sale of implants. The disallowance was directed to be deleted.

2. Disallowance of Advertisement and Promotional Expenses:
The assessee's claim for Rs. 11,49,037/- out of Rs. 22,98,075/- was disallowed for lack of proper documentation. The Tribunal held that there was no basis for ad-hoc disallowance and that the genuineness of the expenditure was not disputed. The disallowance was deleted, citing that commercial expediency cannot be rejected on suspicion.

3. Disallowance of Selling Commission Treated as Prior Period Expenses:
The CIT-A directed the AO to verify the assessee's contention that the expenditure of Rs. 2,08,711/- was a mistake apparent from the record. The Tribunal upheld this decision, as it was subject to verification by the AO.

4. Disallowance of Provision for Doubtful Debts:
The CIT-A directed the AO to verify if the amount of Rs. 7,07,209/- was already added back by the assessee. The Tribunal upheld this decision, subject to verification by the AO.

5. Disallowance of Expenses for Holding a Sales Conference:
The assessee's claim for Rs. 15,88,440/- was disallowed for lack of evidence. The Tribunal restored the issue to the AO for examination of the evidence supporting the claim that the expenses were for business purposes. The issue was allowed for statistical purposes.

6. Disallowance of Expenses for Training Doctors Outside India under Section 40(a)(i):
The expenditure of Rs. 17,83,914/- was disallowed, treating it as fee for technical services. The Tribunal held that the payment to the Overseas Education Foundation was not for rendering managerial, technical, or consultancy services to the assessee. The disallowance was deleted, following the precedent set in Holcim Services South Asia Ltd. Vs. DCIT.

7. Disallowance of Expenses for Training Doctors in India:
The AO disallowed 25% of the expenses for lack of verification. The Tribunal restored the issue to the AO, directing the assessee to produce necessary evidence linking the expenses to specific business events. The issue was allowed for statistical purposes.

8. Disallowance of Professional Fees under Section 40(a)(ia):
The assessee's claim for Rs. 12,03,128/- paid to M/s SR Batliboi & Co. was disallowed. The Tribunal restored the issue to the AO for fresh adjudication, allowing the issue for statistical purposes.

9. Disallowance of Recruitment and Training Expenditure:
The AO treated the expenditure as deferred revenue expenditure. The CIT-A deleted the disallowance, holding that no asset was created, and the expenditure should be treated as revenue expenditure. The Tribunal upheld the CIT-A's decision, dismissing the Revenue's appeal.

Conclusion:
The Tribunal allowed the appeals for the assessment years 2007-08 and 2008-09 partly for statistical purposes and dismissed the Revenue's appeal. The decisions were pronounced on 31st March, 2017.

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