2019 (12) TMI 906 - AT - Income Tax

Tribunal favors assessee on marketing expenses & foreign tax credit; cites legal provisions

The Tribunal allowed the appeal in favor of the assessee regarding the disallowance of marketing and sales promotion expenses, overturning the decision of ... Additions on account of expenditure made on gifts given to doctors and disallowing claim of deductions u/s.35AB(1) and u/s.35(1)(iv) - HELD THAT:- We observe that in assessee’s own case for assessment year 2011-12, the Tribunal had an opportunity to examine this issue and it was brought to the notice of the Tribunal that in assessee’s own case for assessment year 2010-11 [2018 (2) TMI 52 - ITAT PUNE] the matter was decided in favour of the assessee. Thereafter, the Tribunal while deciding this issue for assessment year 2011-12 (supra.) had held that considering rule of consistency, this issue of disallowance of marketing and sales promotion expenses should be allowed in favour of the assessee and that the Circular issued by the Medical Counsel of India read with Circular issued by the CBDT do not cover the Drug making companies like the present assessee. Claim of credit for foreign TDS - HELD THAT:- Decision of Mumbai Bench of the Tribunal in the case of JCIT Vs. Petroleum India International [2008 (9) TMI 398 - ITAT BOMBAY-E] and submitted that identical issue came before the Tribunal and the Tribunal decided the same in favour of the assessee. The Ld. Counsel further placed reliance on the judgment of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Petroleum India International [2013 (2) TMI 99 - BOMBAY HIGH COURT] wherein the Hon’ble High Court has held that the object of section 91(1) is to give relief from taxation in India to extent taxes have been paid abroad for relevant previous year and this relief is not dependent upon payment also being made in previous year. We find the said issue i.e. claim of credit for foreign TDS should be allowed in favour of the assessee. Issues: Disallowance of marketing & Sales promotion expenses, Disallowance of foreign tax credit, General issueDisallowance of Marketing & Sales Promotion Expenses:The appeal pertains to the disallowance of marketing & sales promotion expenses by the Assessing Officer, which was upheld by the Ld. CIT(Appeals). The disallowance was based on the disallowed expenditure of &8377; 1,96,67,623/- incurred by the company on gifts given to doctors, considered to be prohibited under the Indian Medical Council rules and CBDT Circular No.5/2012. The Ld. CIT(Appeals) upheld the disallowance based on the order for the assessment year 2010-11. However, the Tribunal, in its order for assessment year 2011-12, decided in favor of the assessee, stating that the Medical Council rules do not apply to pharmaceutical companies. The Tribunal, following the rule of consistency, allowed the appeal, setting aside the Ld. CIT(Appeals) order and allowing the grounds in favor of the assessee.Disallowance of Foreign Tax Credit:The issue relates to the disallowance of foreign tax credit claimed by the assessee u/s.90/91 withheld by a US-based company. The Ld. CIT(Appeals) rejected the claim, relying on the appellate order for the assessment year 2011-12. However, the Tribunal, in its order for assessment year 2011-12, discussed the issue and allowed the claim of credit for foreign TDS, citing relevant legal provisions and precedents. The Tribunal held that the relief under section 91(1) is not dependent on the payment being made in the previous year, and the assessee had proved the payment of taxes in subsequent periods. Following the rule of consistency, the Tribunal set aside the Ld. CIT(Appeals) order and allowed the grounds raised by the assessee regarding the foreign tax credit.General Issue:Ground No.3 raised in the appeal is of a general nature and does not require adjudication. The appeal of the assessee was allowed by the Tribunal, pronouncing the order on 17th December 2019.---