TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 1429
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....In the course of assessment proceedings, the Assessing Officer noticed that the assessee had debited an amount of ` 2,26,34,864, to the Profit & Loss account towards gift / sales promotion expenses. On calling for and verifying the details furnished by the assessee, he found that the expenditure incurred was for providing gift to Doctors / Medical Practitioners. Therefore, being of the view that as per CBDT circular no.5/2012, dated 1st August 2012, Medical Practitioners are prohibited from accepting gift, travel facility, hospitality, cash or monetary grant from pharmaceutical companies as per Indian Medical Council Regulation dated 10th December 2009, called upon the assessee to justify the claim. In response, it was submitted by the assessee that the expenditure was incurred for distributing gift items bearing the logo and name of the assessee company and they were distributed to customers, Doctors, delegates at conferences both in India and abroad. Therefore, it was submitted, it is allowable as sales promotion expenses. The Assessing Officer, however, did not find merit in the submissions of the assessee. From the details furnished, he found that out of the total expenditure ....
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....are only for sales promotion. The aforesaid factual position has not been controverted by the Assessing Officer. The only reason for making an ad-hoc disallowance of 40% is, CBDT Circular no.5/2012, dated 1st August 2012, wherein, the prohibition imposed by Indian Medical Council with regard to acceptance of gift by medical practitioner / doctor was imposed w.e.f. 10th December 2009. Thus, as could be seen, the prohibition imposed by Indian Medical Council against acceptance of gift is on the medical practitioner and doctor and not on the pharmaceutical companies. The applicability of the aforesaid CBDT Circular as well as prohibition imposed by Indian Council on Pharmaceutical companies came up for judicial scrutiny before the Tribunal in DCIT v/s PHL Pharma Pvt. Ltd. (supra). The Co-ordinate Bench after examining the regulation issued by the Medical Council of India as well as the CBDT Circular referred to above, ultimately concluded that the prohibition imposed by the Indian Medical Council Regulation are not applicable to pharmaceutical companies. Further, the said view was again reiterated by the Co- ordinate Bench in Solvay Pharma India Ltd. (supra). The Co-ordinate Bench has....
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....ed Departmental Representative relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals). 14. We have considered rival submissions and perused material on record. No doubt, the provisions of rule 8D are applicable to the impugned assessment year. However, on a perusal of the Balance Sheet of the company as at 31st March 2009, it is noticed that as against interest free funds of ` 52205.45 lakh available with the assessee, the investments made by the assessee stood at ` 4559.44 lakh. Thus, from the aforesaid facts, it is evident that the assessee had sufficient interest free funds available with it to take care of the investments. That being the case, disallowance of interest expenditure under rule 8D(2)(ii) cannot be made. However, to keep track of its investments and manage the funds, the assessee must be incurring certain administrative expenditure. Therefore, reasonable disallowance under section 14A r/w rule 8D(2)(iii) has to be made. Accordingly, we direct the Assessing Officer to compute the disallowance of administrative expenditure under rule 8D(2)(iii) after excluding from the average value of investment, the investments which have not y....
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....g of international transaction, however, there are many decisions which have held that it comes within the definition of international transaction as provided under Article 92B of the Act. In fact, in many of the cases, the assessees have accepted provision of corporate guarantee as international transaction under section 92B of the Act. In one of such cases viz. Everest Kanto Cylinders Ltd., [2015] 58 taxmann.com 254 (Bom.), the Hon'ble Jurisdictional High Court has upheld the decision of the Tribunal in computing the arm's length price of corporate guarantee fee @ 0.5%. Following the aforesaid decision of the Hon'ble Jurisdictional High Court, we direct the Assessing Officer to determine the arm's length price of corporate guarantee fee by applying the rate of 0.5%. This ground is partly allowed. 21. Ground no.4, the assessee has sought relief with regard to deduction claimed under section 10B of the Act on the turnover of scrap sales. 22. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction under section 80IB as well as 10B of the Act in respect of scrap sales of ` 3,92,091 and ` 51.51.738 re....