TaxTMI 
TaxTMI 
2019 (6) TMI 661
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....s objection are common in nature, the same are taken up together and disposed off by this common order for the sake of convenience. 2. Let us take up the assessee appeal for Asst Year 2012-13 in ITA No. 2755/Chny/2017 first . The first issue involved in this appeal is as to whether the ld CITA was justified in upholding the disallowance of Sales Promotion, Advertisement and Publicity Expenses in the facts and circumstances of the case. The inter connected issue involved therein is as to whether the said disallowances would correspondingly increase the claim of deduction u/s 80IC of the Act in the facts and circumstances of the case. 2.1. The brief facts of the appeal are that the ld AO disallowed sales promotion expenses of Rs. 27,05,841/- and advertisement and publicity expenses of Rs. 16,56,638/- totaling to Rs. 43,62,479 as expenditure not allowable u/s.37. The ld AO disallowed the expenditure for the reason that the said expenditures were incurred for marketing the products and that the same is not incidental to the manufacturing activity. In addition to that, the ld AO in respect of the sale promotion expenses had stated that the said expenditure incurred by the assessee is ....
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....is marketing the assessee's products and hence the said expenditure would not be covered by Circular No.5 / 2012 of the CBDT. d) The ld AR by placing reliance on the co-ordinate bench decision of Mumbai Tribunal in the case of Solvay Pharma India Ltd V. PCIT reported in 169 ITD 13 , submitted that the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations, 2002 is applicable only to the medical practitioners and not to the Pharma companies and further that the CBDT cannot enlarge the scope and applicability of "Indian Medical Council Regulation 2002" by making it applicable to the pharmaceutical companies. e) The ld AR in support of Additional Ground No.13 raised by the assessee claimed that the expenditure disallowed by the Assessing Officer goes to increase the gross profit of the assessee and that the same is eligible for deduction u/s.80IC. In support of this proposition, he placed reliance on the decision of Hon'ble Bombay High Court in CIT V. Gem Plus Jewellery India Ltd reported in 330 ITR 175 (Bom). He also placed placed reliance on the CBDT Circular No.37 / 2016 dated 02.11.2016 where it has been stated as follows:- "3. In view of the above,....
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....ly point out this ratio. We therefore hold that the expenditure incurred by the assessee towards sales promotion, advertisement and publicity is an allowable expenditure. 2.5. It is not in dispute that the assessee had only distributed the DVD players, silver coins, calenders and diaries to Tablets India Ltd which was marketing the products of the assessee. There was absolutely no distribution of gifts made by assessee to any medical practitioners and hence the applicability of CBDT Circular No. 5/2012 itself deserves to be rejected. Reliance in this regard had been rightly placed on the co-ordinate bench decision of Mumbai Tribunal in Solvay Pharma India Ltd V. PCIT 169 ITD 13 wherein it was held as follows:- "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 p....
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....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 applied prospectively only. Here in this case the CBDT has enlarged the scope of 'Indian Medical Council Regulation, 2002' and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect....................." 2.6. We hold that the Circular issued by the CBDT cannot enlarge the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to the assessee. 2.7. We further hold that Circular No.5 / 2012 is effective only from 01.08.2012 (i.e from Asst Year 2013-14 onwards) as held by the Mumbai Tribunal in Macleods Pharma....
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....evenue's appeal and the additional ground in assessee's appeal to be decided is as to whether the ld CITA was justified in restricting the amount of disallowance u/s 14A of the Act in the sum of Rs. 9,89,496/- under normal provisions of the Act in the facts and circumstances of the case. The inter connected issue involved thereon is determination of amount of disallowance u/s 14A of the Act vis a vis the computation of book profits u/s 115JB of the Act. 4.1. We have heard the rival submissions. We find that the assessee had earned exempt income in the form of dividend to the tune of Rs. 12,73,586/- and had suo moto disallowed a sum of Rs. 9,89,496/- in the return of income. The ld AO ignored the same and resorted to make disallowance by applying second and third limbs of Rule 8D(2) of the Income Tax Rules ( in short the 'Rules') to the tune of Rs. 16,09,980/-. We find that the assessee had raised an additional ground no. 14 pleading that the disallowance u/s 14A of the Act be restricted to the exempt income in order to put quietus to the entire dispute. We find that this ratio has been already approved by the Hon'ble Supreme Court in the case of Maxopp Investments reported in 402 ....