TaxTMI 
TaxTMI 
2018 (1) TMI 797
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....her called for the books of accounts nor called for any evidence such as invoices, vouchers etc. The assessee was neither asked to file by the AO nor suo-motto filed any corroborative details in respect to Publicity and Propaganda Expenses amounting to Rs. 15,94,99,360/-. As per CIT it is a case of lack of proper enquiry and decision. If any expenditure is incurred U/s 37 of the Act, especially those expenditure which the business entities incur on items, which may broadly be classified as 'Advertisement, Marketing and Business Promotion7 in short AMP, the possibility of incurring expenditure on prohibited items as per explanation below section 37(1) of the Act exists which must be ruled out by some examination of corroborative evidence called for and produced before the AO. But the AO did not make any inquiry in this matter. CIT also rejected assessee's contention that MCI regulations are not applicable to pharma companies but only to medical practitioners. CIT also rejected assessee's contention that expenditure so incurred are not in the nature of freebies to the doctors. In these circumstances, the assessment order dated 08.03.2015 was held by CIT to be erroneous and prejudicia....
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....ion was also invited to the detailed submission filed before the AO which is placed on page 20-28 of the paper book and also to the foot note where it was clearly mentioned that these expenses were in compliance to the CBDT Circular. It was further submitted that perusal of amendment/notification in the MCI regulation, it is quite clear that same is applicable for medical practitioners only and the censure/action which has been suggested by it is only on medical practitioners and not for pharmaceutical companies or allied health sector industries. The violation of the aforesaid regulation would not only ensure a removal of a doctor from the Indian Medical Register or State Medical Register for a certain period of time and it does not impinge upon the conduct of pharmaceutical companies. This important distinction has to be kept in mind that regulation issued by Medical Council of India is qua the doctors/medical practitioners and not for the pharmaceutical companies. As a logical corollary to it, if there is any violation or prohibition as per MCI regulation in terms of section 37(1) read with Explanation-1, then it is only meant for medical practitioners and not for pharmaceutical....
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....ors in treating the patients as well as the pharmaceutical companies. 12. It was also argued that MCA guidelines do not apply for invoking explanation to Section 37(1). The said regulation deals with the professional conduct, etiquette and ethics for registered medical practitioners only. Chapter 6 of the said regulation/notification deals with unethical acts, whereby a physician or medical practitioners shall not aid or abet or commit any of the acts illustrated in clauses 6.1 to 6.7 of the said regulation which shall be construed as unethical. Clause 6.8 has been added (by way of amendment dated 10/12/2009) in terms of notification published on 14/12/2009 in Gazette of India laying down the code of conduct for doctors and professional association of doctors in their relationship with pharmaceutical and allied health sector industry. It was further contended that the code of conduct enshrined therein is meant to be followed and adhered by medical practitioners/doctors alone. It illustrates the various kinds of conduct or activities which a medical practitioner should avoid while dealing with pharmaceutical companies and allied health sector industry. It provides guidelines to the....
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....e, we found from record that the assessee is engaged in the manufacturing of pharmaceutical products. In the course of its business it has incurred expenditure on advertisement and publicity. While framing the assessment, AO has called for the detail of expenditure so incurred and examined the nature of expenditure and thereafter only AO has allowed the expenditure as having been incurred for the purpose of business. We had also carefully gone through the notification dated 11/03/2002 notifying the regulations issued by the Medical Council of India (MCI). The code of conduct laid down in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('MCI Regulations') issued with effect from 10th December 2009 applies only to doctors and not to Pharmaceutical and Medical device companies. Accordingly, MCI Regulations are not applicable to assessee, the question of assessee incurring expenditure in alleged violation of the regulations does not arise. 18. On the plain and simple reading of the provision of the Indian Medical Council Act, 1956, it is apparent that the ambit of statutory provisions relating to professional conduct of registered medical prac....
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....for disallowance of the expenditure. 22. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner. On the contrary, the assessee has brought to the notice of the bench the judgment of the Delhi High Court in the case of Max Hospital v. MCI in [WPC 1334 of 2013, dated 10-1-2014], wherein the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is....
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....asus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporanea expositio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to the assessee. In any case, it is trite law that the CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be ....