TaxTMI 
TaxTMI 
2019 (5) TMI 27
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....s a resident Company and filed return of income declaring income of Rs. 2,48,070/-. The assessee-company was engaged in the business of Trading/Marketing of medicines during the year. During the year under consideration, the assessee company has claimed expenditure of Rs. 54,27,412/- on account of business promotion expenses. The assessee company was asked to furnish the details of expenditure claimed as business promotion expenses. The assessee company explained that it is engaged in the business of trading/marketing of medicines and in the era of acute competition of present times and to survive and run its business viably among the national/multinational brands like Cipla, Ranbaxy etc., the assessee company has to incur massive expenditu....
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....nviting of other doctors to participate in seminars on a topic related to therapeutic area and blood donation camps and the assessee makes an endeavour to create awareness amongst certain class of key doctors about the product of the assessee company and its new developments in the area of medicine in order to provide correct diagnosis and treatment of the patients. The said activities by the assessee company are to make aware of the products of the assessee company to the knowledge of the Doctors and to bring its medicines to the market. Since the pharmaceutical companies make aware of such kind of products/medicines to the notice of the Doctors by conducting seminars as mentioned hereinabove by incurring certain expenditure, the said expe....
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....ssessee and submitted that Board Circular is in line with Section 37(1) of the I.T. Act, 1961. The A.O. relied upon Judgment of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Kap Scan and Diagnostic Centre (P.) Ltd., [2012] 344 ITR 476 (P & H) in which it was held that "commission paid to Doctors for referring patients is not an allowable deduction." The A.O. also noted that the assessee's act of incurring expenditure or providing freebies is an offence. The A.O, therefore, following the Board Circular above, rejected the claim of assessee and disallowed the business promotion expenses of Rs. 54,27,412/- under section 37 of the I.T. Act, 1961. 3. The assessee challenged the addition before the Ld. CIT(A). The Ld. CIT(A) on....
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....licable to Pharma Companies. He has submitted that the said Circular have been considered by the ITAT, Mumbai Bench in the case of DCIT-8(2), Mumbai vs. PHL Pharma (P.) Ltd., (supra), in which the assessee company was a Pharmaceutical Company engaged in business of providing Pharma Marketing, Consultancy and Detailing services to develop mass market for pharma products. In this case, the assessee claimed advertisement and sales promotion expenses and customer related management expenses, key accounting management expenses, gift articles and cost on sample. The Tribunal, in this case noted that Medical Council of India has no jurisdiction to pass any Order or Regulation against any Hospital or any Health Care Centre in the aforesaid Circular....
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.... are distinguishable on facts. He has, therefore, submitted that addition may be deleted. 5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below. 6. We have considered the rival submissions and perused the material available on record. The authorities below have rejected the claim of assessee of claiming expenses on account of business promotion. The assessee is admittedly engaged in the business of trading and marketing of medicines. During the year under consideration, the assessee claimed that due to competition in the Pharma Industry, the assessee company shall have to incur expenditure on business promotion which includes constant meetings/seminars/knowledge dissemination with doctors/ medical practitioner....
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.... the persons connected with business of the assessee company, aware of its product and research work carried out by the company for bringing the medicine in the market and its results are based on several efforts made by the assessee company. Since the assessee company make aware of such kind of product to the key persons in the market, then only it can successfully launch its product/ medicine. Thus, these expenditure were purely incurred for business promotion of the assessee company. The authorities below, rejected the claim of assessee company considering that assessee company has provided freebies to the Medical Practitioners and referred to the provisions contained under Indian Medical Council (Professional Conduct Etiquette and Ethic....