TaxTMI 
TaxTMI 
2017 (12) TMI 996
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.... 01.08.2012 as retrospectively applicable and erred in confirming the application of the same for the subjected assessment year. The application of the said CBDT circular be held prospectively, not applicable in the subjected assessment year and accordingly the disallowance based thereupon, kindly be deleted in full. 3. Rs. 71,97585/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the adhoc disallowances totaling to Rs. 45,75,552/- out of the total expenditure Rs. 71,97,585/- incurred by the assessee on account of advertisement, publicity, sales promotion, travelling and other business expenditure incurred wholly and exclusively for business purposes fully in accordance with the law of land and without any contravention and violation thereof. The details of the impugned disallowance made and confirmed are as under: S.No. AO AO CIT(A) Disallowance mad Amount 3.1 60% of Rs. 40,87,254/- Rs. 24,52,352 Confirmed 3.2 Out of Rs. 7,77,292/- Rs. 7,23,377/- C onfirmed 3.3 60% of Rs. 79,410/- Rs. 47,646/- Confirmed 3.4 60% of Rs. 22,47,930/- Rs. 13,48,758/- Conf....
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....ar as medical companies incurring the expenditure like assessee are concerned and therefore, it does not prohibit the pharmaceutical companies for incurring such expenditure for the purpose of their business. Hence, the ld. AR has argued that the MCI Regulations is not applicable on the pharmaceutical companies and consequential CBDT circular cannot be applied blindly. The authorities below have proceeded on misconception and purported confusion by understanding the MCI Regulations to be restriction put on pharmaceutical companies and not on the doctors. Such interpretation is completely contrary to the very contents of the regulations issued by MCI as it has been clearly put some restrictions and prohibitions on the medical practitioners who fall within the jurisdiction of the MCI and not on the pharmaceutical companies. As per the MCI Regulations only medical practitioners were prohibited to receive gifts and other freebies facilities from the medical companies/ individuals etc. and therefore, it was not a prohibition put on the medical companies/ individuals dealing with the manufacturing and sales of the medicine to the public. The ld. AR has further contended that even otherwi....
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....ractitioners was not allowable business expenditure u/s 37(1) of the Income Tax Act. The ld. DR has submitted that the assessee in the said case claimed that the provisions of MCI Regulations, 2002 applied to Directors only. The ld. DR has also relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. KAP Scan and Diagnostic Center (P.) Ltd. TS-5878-HC-2010 (Punjab & Haryana). Thus the ld. DR has submitted that the Hon'ble High Court has held Commission paid by the diagnostic center to private doctors for referring patients for diagnosis could not be allowed as a business expenditure. He has also relied upon the decision of Mumabi Benches of the Tribunal in the case of ACT v. Liva Healthcare Ltd. [TS-6132-ITAT (Mumbai)-O] wherein the Tribunal held that expenses incurred by taxpayer pharmaceutical company on overseas tours of doctors to increase their sales and profitability was not an allowable expenditure as overseas trip were directed towards leisure and entertainment of doctors and their spouses rather than being directed towards seminar for product information. Further, expenses incurred towards free samples distributed to physicians will be allowabl....
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....penditure. In this background it may be noted that as per the regulations issued by MCI, Notified on 14.12.2009 which is a statutory body of Govt. of India certain payments/expenditure incurred on account of gifts/travel facilities/hospitality and cash and monitory grants to the medical practitioners by any pharmaceutical companies or any individual dealing in health care for pharmaceutical sectors was prohibited and accordingly as per explanation to Sec. 37(1), such claim of expenditure under the income tax act was not to be allowed. There is no dispute on the fact that such prohibition came into effect w.e.f. 14.12.2009 as also that the assessee is a pharmaceutical company and covered under such regulation issued by MCI. The only dispute of the assessee is that the Circular issued by the CBDT w.e.f. 01.08.2012 subsequent to such regulation issued by MCI on 14.12.2009 should be effective from 01.08.2012 i.e. from A.Y. 2013-14. However, such contention is devoid of any merit in as much as the prohibition of law in respect of such expenditure was introduced by the MCI w.e.f. 14.12.2009 and not by the CBDT by way of Circular dated 01.08.2012. In fact the Circular issued by the CBDT i....
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....r cannot have any grievance against the impugned order. At the same time, it is stated that only simple observations were made by the ethics committee of the MCI about the state of affairs in the petitioner hospital and the same did not harm any legal right or interest of the petitioner. It will be apposite to extract the relevant paragraphs of the counter affidavit filed by the MCI as under:- 4. Preliminary objections: (i) That the instant writ petition is not maintainable under Article 226 of the Constitution of India as there is not cause of action for filing of this instant petition. The MCI has not passed any order against the petitioner in the impugned minutes of meeting dated 27.10.2012, therefore, there is no cause of action for filing the instant writ petition. (ii) That the MCI has not passed any order against the petitioner and nor does the impugned minutes of meeting dated 27.10.2012 affect any legal right or interest of the petitioner which the petitioner seeks to enforce by filing this writ petition and thus the same is not maintainable. (iii) That the jurisdiction of MCI is limited only to take action against the registered medical....
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....nd in view of the decision of Punjab & Haryana High Court in case of Commissioner of income Tax vs. Kap Scan and Diagnostic Centre P. Ltd. reported in (2012) 344 ITR 476 and also the decision of Supreme Court in case of M/s Maddi Venkataraman and CO. (P) Ltd. vs. Commissioner of Income Tax reported in (1998 299 ITR 534 wherein para 24 and 25 it has been had as under:- 24. In the instant case the assessee had indulged in transactions in violation of the provisions of Foreign Exchange ( Regulation) Act. The assessee's plea is that unless it entered into such a transaction, it would have been unable to dispose of the unsold stock of inferior quality of tobacco. In other words, the assessee would have incurred a loss. Spur of loss cannot be a justification for contravention of law. The assessee was engaged in tobacco business, the assessee was expected to carry on the business in accordance with law. If the assessee contravenes the provision of FERA to cut down its losses or to make larger profits while carrying on he business, it was only to be expected what proceedings will be taken against the assessee for violation of the Act. The expenditure incurred for evading the provi....