2016 (11) TMI 363

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.... 3. Rival contentions have been heard on record and perused. Facts in brief are that the assessee is engaged in the business of manufacturing & dealing in pharmaceutical products, namely tablets, capsules, liquids, injectibles etc. The assessee company has manufacturing plant at Palghar, Daman Phase-I(3 Units), Daman Phase-II, Kabra, Dhanlaxmi, Sarigam, and Baddi. The assessee company also has one R&D unit at Mumbai. During the assessment year 2010-2011, the assessee has shown Gross Profit and Net Profit has been shown @47.86% and @15.55% respectively. Separate Balance Sheets and Profits & Loss Accounts for each plant and R&D unit have been obtained, examined and placed on record. From the record, we found that during the assessment proce....

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....expenditure cannot be allowed as per Explanation to Section 37(1). By applying the said Circular, the AO disallowed part of the these sales promotional expenses. 5. By the impugned the CIT(A) confirmed the action of AO in both the years under consideration, against which, assessee is in further appeal before us. 6. Ld. AR appearing on behalf of the assessee filed copy of the decision of the coordinate bench in the case of Sycom Formulations India Ltd., ITA No.6429/M/2012, order dated 23-12-2015 and contended that issue under consideration is squarely covered by this order of co-ordinate bench. It was submitted that this decision of coordinate bench supports the proposition that CBDT Circular dated 1-8-2012 is prospective, therefore, a....

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.... ITA No.6429/Mum/2013(AY : 2010-2011) 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in manufacturing of various pharmaceuticals products and having sales within and outside India. During the year under consideration, the assessee had debited an amount of Rs. 4,32,11,406/- under the head 'sales promotion expenses'. Accordingly the details were called for and noticed that an amount of Rs. 22,45,000/- was relating to freebies given to medical practitioners. The AO disallowed Rs. 22,45,000/- by invoking Explanation to Section 37(1) and CBDT Circular dated 1-8-2012. 4. By the impugned order the CIT(A) confirmed the disallowance. 5. We have considered rival contentions and foun....

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....re duly indicating the nature of expenditure and business necessity for incurring these expenditure by pharmaceutical industries. The AO observed that expenditures debited on account of sales promotion are covered by Explanation to Section 37(1). By applying CBDT Circular dated 1-8-2012, the AO disallowed part of the expenses holding that Explanation to Section 37(1) will be applicable. 9. We had carefully gone through the details of expenditure so incurred under the head "sales promotion" expenses and found that expenditure so incurred was wholly and exclusively for the purpose of assessee's business. The relevant assessment years under consideration are A.Ys.2010-2011 & 2011-2012 during which there was no CBDT Circular as referred by A....