Tribunal Partially Upholds Appeal, Cites Jurisdictional Issue, Remands for Fair Hearing

The Tribunal partially allowed the appeal, emphasizing that the Ld. CIT(A) exceeded its jurisdiction by delving into laws beyond the IT Act. Disallowances of expenses on free samples and conferences were upheld due to violations of the IMS Act and legal precedents. Comments on violations without a fair hearing were deemed unjust and required reconsideration. The matter was remanded to the Ld. CIT(A) for proper procedure adherence and the opportunity for the assessee to present evidence and arguments.

---

---

Issues Involved:
1. Legality and jurisdiction of the Impugned Order by the Ld. CIT(A).
2. Disallowance of expenses on free samples.
3. Disallowance of expenses on conferences and seminars.
4. Comments made by the Ld. CIT(A) regarding violations of related laws without providing an opportunity to be heard.

Issue-wise
Detailed Analysis:

1. Legality and Jurisdiction of the Impugned Order by the Ld. CIT(A):
The assessee challenged the order dated 30.08.2022 by the Ld. CIT(A) on grounds of illegality, arbitrariness, and violation of principles of natural justice. The assessee argued that the Ld. CIT(A) exceeded its jurisdiction by making findings related to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (IMC Regulations) and the Infant Milk Substitutes, Feeding Bottles, and Infant Foods (Regulation of Production, Supply and Distribution) Act (IMS Act). The Ld. CIT(A) should have confined its inquiry to the provisions of the Income Tax Act (IT Act) and not ventured into other laws, as this was beyond its statutory authority.

2. Disallowance of Expenses on Free Samples:
The Ld. CIT(A) upheld the disallowance of expenses on free samples amounting to Rs.1,66,083/-. The disallowance was based on the assessee's failure to provide a list of names and addresses of the recipients of the free samples. The Ld. CIT(A) noted that without verifiable data, the authenticity of the claim remained dubious. Furthermore, Section 4 of the IMS Act prohibits the distribution of samples of infant milk substitutes, feeding bottles, and infant foods. The Ld. CIT(A) concluded that the expenditure was not for business purposes as it violated the IMS Act, thus justifying the disallowance.

3. Disallowance of Expenses on Conferences and Seminars:
The Ld. CIT(A) also upheld the disallowance of Rs.42,66,926/- incurred on organizing conferences and seminars for doctors and healthcare professionals. The assessee argued that these expenses were for business purposes, enabling healthcare professionals to gather technical knowledge. However, the Ld. CIT(A) found that these activities violated the IMS Act, which bans sponsorships and financial benefits to healthcare providers. The Ld. CIT(A) referred to the Supreme Court's decision in Apex Laboratories (P.) Ltd. and the Calcutta High Court's decision in Peerless Hospitex Hospital and Research Center Ltd., which held that such expenses are disallowable under Section 37(1) of the IT Act.

4. Comments Made by the Ld. CIT(A) Regarding Violations of Related Laws Without Providing an Opportunity to be Heard:
The Ld. CIT(A) made a conclusive finding that the assessee had violated all related laws pertaining to the sales and marketing of infant and child nutrition food, calling for penalty and/or prosecution. The assessee contended that these comments were beyond the jurisdiction of the Ld. CIT(A) and were made without providing an opportunity to be heard, thus violating the principles of natural justice. The Tribunal agreed with the assessee, stating that such comments should not have been made without following due procedure and providing an opportunity to be heard. The matter was restored back to the Ld. CIT(A) for reconsideration, allowing the assessee to present evidence and be heard.

Conclusion:
The Tribunal partially allowed the appeal for statistical purposes, emphasizing that the Ld. CIT(A) should have confined its inquiry to the provisions of the IT Act and not ventured into other laws. The disallowances of expenses on free samples and conferences were upheld based on violations of the IMS Act and relevant judicial precedents. However, the comments regarding violations of related laws without providing an opportunity to be heard were deemed unjustified and were sent back for reconsideration.

---