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 the Ld. CIT(Appeals) based on the inconsistency with the Medical Council rules. Additionally, the Tribunal allowed the claim of foreign tax credit, disagreeing with the Ld. CIT(Appeals) and emphasizing the applicability of relevant legal provisions and precedents. The general issue raised in the appeal was deemed unnecessary for adjudication. The Tribunal's decision was pronounced on 17th December 2019.

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Issues: Disallowance of marketing & Sales promotion expenses, Disallowance of foreign tax credit, General issue

Disallowance 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.

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