TaxTMI 
TaxTMI 
2018 (2) TMI 52
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....e return of income declaring income of Rs. 1,78,74,660/-. Assessee is covered under the provisions of section 80IB(4) of the Act. During the assessment proceedings, AO noticed that the assessee claimed 'Advertisement Sales Promotion' expenses of Rs. 2,07,99,694/-. While providing the breakup of the same, assessee submitted that Rs. 50,70,963/- relates to the expenditure on account of Print and Promotion items and the balance of Rs. 1,57,28,731/- on account of Sales Promotion expenses. AO brought to the notice of the assessee regarding the applicability of the Circular of Medical Council of India dated 09-12-2009. According to the same, the Medical practitioners and their professional associations are prohibited from taking any Gift, Travel Facility, Hospitality etc., from the Health and Pharmaceutical sector industries. Further, there is a reference to the CBDT Circular No.5/2012, dated 01-08-2012, which stipulates that the claim of such expenditure constitutes the violation of the circular issued by the said Medical Council of India. Therefore, such claim of expenditure is not allowable u/s.37(1) of the Act both in the hands of the donor as well as donee of the gifts. The Circular....
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....ainable as the same does not emanate from the said circular of Medical Council of India dated 11-03-2002 as well as the Modification of the Notification published on 14-12-2009. It is the creation of the CBDT and it does not have the backing of the circulars of the Medical Council of India. 6. Further, Ld. AR for the assessee submitted that there are various decisions in favour of excluding the Pharmaceutical companies outside the scope of said Medical Council of India Notification despite the CBDT -circular that roped in the Pharmaceutical companies like the present assessee. In this regard, he relied heavily on the orders of the Tribunal in the case of DCIT Vs. PHL Pharma Pvt. Ltd. 49 CCH 0124 and Mumbai Tribunal decision in the case of M/s.Solvay Pharma India Ltd. Vs. CIT - ITA No.3585/Mum/2016 for A.Y. 2011-12, order dated 11-01-2018. Further, he also submitted that this circular of the CBDT does not apply to the assessment year under consideration and was actually applicable to the A.Y. 2013-14 onwards. This is the argument of the Ld. AR for the assessee before us without prejudice to the earlier one. 7. On the other hand, Ld. DR for the Revenue submitted that the giver ....
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....an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to different class of persons or particular category of assessee, same cannot be made applicable to all. The regulation of 2002 issued by the Medical Council of India (supra), provides limitation/curb/prohibition for medical practitioners only and not for pharmaceutical companies........... 10. From the perusal of the nature of expenditure incurred by the assessee, it is seen that under the head "Customer Relationship Management", the assessee arranges national level seminar and discussion panels of eminent doctors and inviting of other doctors to participate in the seminars on a topic related to therapeutic area. It arranges lectures and sponsors knowledge upgrade course which helps pharmaceutical companies to make aware of the products and medicines manufactured and lau....
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....of registered medical practitioners under the Indian Medical Council Act, 1956 is restricted only to persons registered as medical practitioners with the State Medical Council and whose names are entered into the Indian Medical Register maintained u/s 21 of the Act. 'Under the scheme of the Act. 19. Furthermore, there is no ambiguity of any kind in the scheme of the Indian Medical Council Act, 1956 that it neither deals with nor provides for any conduct of any association / society and deals only with the conduct of individual registered medical practitioners. There is no other interpretation, which is possible under the Act. 20. The intent of the applicability of the MCI Regulations was always to cover only individual medical practitioners, and not the pharmaceutical and medical device companies. Whether there is any contravention of the MCI Regulations or not is a matter which can be decided by the MCI itself and not by the Income-tax Department. Furthermore, the MCI has itself admitted that it has no jurisdiction whatsoever over any association/ society etc and its jurisdiction is confined only to the conduct of the registered medical practitioners. Further....
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....ncil regulation does not have any jurisdiction upon pharmaceutical companies and it is inapplicable upon Pharma companies like assessee then, where is the violation of any of law/regulation? Under which provision there is any offence or violation in incurring of such kind of expenditure. 23. Now coming to the Explanation to Section 37(1) invoked by the CIT, the Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to different class of persons or particular category of assessee, same cannot be made applicable to all. The regulation of 2002 issued by the Medical Council of India (supra), provides limitation/curb/prohibition for medical practitioners only and not for pharmaceutical companies. Here the maxim of 'E....