TaxTMI 
TaxTMI 
2019 (9) TMI 1034
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....rd analogously and are being disposed of by a common order. 2. Appeal Being ITA No.2380/Ahd/2015 is taken as a lead case. ITA No.2380/Ahd/2015 for A.Y. 2011-12: 3. The short point involved in this particular matter is this as to whether the processional fees paid to the Doctors as Medical Advisors/ Sr. Consultant/ Scientific Consultant can be allowed as business expenditure within the provision of section 37(1) of the Act. The assessee company engaged in the business of trading of Pharmaceutical Products, filed its return of income on 31.08.2011 declaring total income at Rs. 3,73,28,340/- which was duly processed u/s 143(1) of the Act for A.Y. 2011-12. During the course of assessment proceeding, it was found that the assessee has claimed professional fees paid to the Doctors amounting to Rs. 2,29,16,147/- whereupon the assessee was asked to submit the details of the same along with the documentary evidence. The Assessing Officer further called for information u/s 133(6) of the Act upon which the details of services provided by the Doctors to the assessee were submitted including the agreements entered into by and between the assessee company and the Doctors which, however, acc....
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....llant had explained that the expenditure was covered by clause (g) 'Affiliation' whereby a medical practitioner may work for pharmaceutical and healthcare industry in advisory capacity, as consultant, researcher, or in any other professional capacity and they shall ensure their professional integrity and freedom are maintained, the patients' interest is not compromised, the affiliations are within law and the affiliation is transparent and disclosed. The Assessing Officer has not accepted this explanation stating that no documentary evidences are submitted to support the claim that the Doctors have worked as Consultants/in Advisory Capacity. It is stated by him that the Appellant's explanation that payments are made through cheques and TDS is also deducted is no proof of genuineness of transaction. (vii) Reference is made by the Assessing Officer to Circular No. 5 of 2012 of CBDT and judgment of Himachal Pradesh High Court and also MCI Guidelines and stated that any medical practitioner or professional associates is prohibited from accepting gifts, travel facility, hospitality or monetary grant from any pharmaceutical company and such expenses are to be disallowed....
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....gh Court and also the guidelines framed by the Medical Council of India. Those professionals are prohibited from accepting any gift, travel facility, hospitality, cash or monetary grant from any pharmaceutical and allied health sector Industries as per the Medical Council of India's regulation and such expenses are not allowable u/s 37(1) of the Act. The case of the assessee is this that it is in the business of products in the field of nephrology which is used for in the various kidney diseases. The appellant-company is always in the process of product development, dissemination of information about the new products and evolving mechanism of receiving feedback from hospitals, healthcare professionals, etc. The company has launched various programmes of field force detailing and sampling, Continuing Medical Education (CME) including disease awareness programmes, professional journal references. In this way it could ensure that healthcare professional and the public have access to the information they need, that patients have access to the health care products they need and that the products are prescribed and used in a manner that provides the maximum healthcare benefit to patien....
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....ant of documentary evidence for the services as stated in the confirmation provided by the Doctors. The Assessing Officer has also relied on the Medical Council's Guidelines and the Circular No. 5 of CBDT. On the other hand, the Appellant has submitted the details of services rendered by Doctors who are not in any way related to the Appellant Company or its Directors and are reputed Doctors stationed at various places in India. The appellant has submitted the various documentary evidences in support of its claim that payment to them are genuine business expenditure which mainly includes agreements executed with doctors, confirmations of such doctors wherein details of services' rendered are clearly mentioned, ledger accounts correspondence with doctors. The appellant has also submitted supporting evidences in the form of copy of scientific brochures, training manuals, research papers published by eminent doctors in the respect of products developed by it. It is noted that appellant has made payment through proper banking channels which prove that payment is genuine business expenditure and incurred as per business expediency. The tax" has also been deducted at source. It ....
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....le Gujarat High court in the case of CIT V/s Mundra Ports & SEZ Limited 223 Taxman 150 wherein it has been held that "Where payment had been made through banking channels and tax was deducted at source and party was a/so nof found fo be related to assessee, Assessing Officer could not treat expense as bogus expense." The appellant has also rightly placed reliance on ratio of decision of Hon'ble Delhi High court in the case of CIT V/s Siddartha Trade Links (P.) Ltd 206 Taxman 92 wherein the court has held as under: "II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee-company effected sales through sales representatives/agents - Commission or brokerage was being paid to agents - Assessing Officer disallowed commission payment on ground that addresses of some of recipients were same though persons/individuals were different - In assessment order it was also mentioned that in some cases PAN or addresses were not finished -On appeal. Tribunal highlighted that out of 16 parties, PAN of 14 parties were submitted to Assessing Officer - Moreover, assessee had; also .deducted TDS at rate of 5 per cent and-IDS returns was filed- Tribunal, th....
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.... by submitting names, addresses and PAN of the contractor before the A.O. as well as before Ld. CIT(A). With the details made available by the assessee to the A.O., he has also not summoned any of the sub- contractor to verify the genuineness of contracts. In view of these facts, we are of the view that no ^interference is called for in the order of Ld. CIT(A) and thus, this ground of the revenue is dismissed." The above decision is also upheld by Hon'ble Gujarat High Court in 222 Taxman 24. The decisions referred supra clearly suggest that appellant has discharged its onus to prove genuineness of the expenditure and same is allowable business expenditure u/s 37(1) of the Act. The AO has also observed that appellant has not submitted details of patients on which clinical studies were conducted. In this connection, it is noted that that appellant has not made any payment to various doctors for carrying out any clinical studies on patients but doctors have provided systematic data base/forms of clinical study based upon their experience and on the basis of feedback from various patients and in turn clinical studies are conducted on the products of appellant company for contin....
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....vt.) Ltd. reported in [2012] 206 Taxman 92 (Delhi). While holding that the assessee had duly established that sufficient services were rendered for payment of professional fees the judgment of the Hon'ble Delhi High Court in the case of DCIT-vs-Jaspreet Kaur in deciding the issue of burden of the assessee for establishing the genuineness and business expediency of the expenses were rightly considered and applied. Once the payment of professional fees were made in terms of the agreement which has not been prescribed by the CBDT Circular No.5/2012 for rendering professional services or either permissible as per para 6.8(g) MCI guidelines, the same cannot be questioned by the tax authorities and hence the order passed by the Learned CIT(A) is according to us, just and proper and without any ambiguity. So far as the judgment passed by the Hon'ble Himachal Pradesh High Court in the case of Indian Pharmaceutical Industry (SSI)-vs-CBDT is concerned, we find that the ratio laid down by the Hon'ble Court to this effect that if the expenditure is not in violation of regulation framed by the Medical Council then it may not be taxable expenditure. Since we have already held that the medical p....
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....introduction of the relevant product in market after establishing end use; is hit by Section 37(1) explanation. He however refers to another coordinate bench decision in Macleods Pharmaceuticals Ltd. v. Addl. CIT [2016] 161 ITD 291/74 taxmann.com 250 (Mum. - Trib.) holding that the above Board's circular dated 01.08.2012 would not have any retrospective effect since not operating in assessment years 2010-11. He further quotes another co-ordinate bench decision in Dy. CIT v. PHL Pharma (P.) Ltd. [2017] 163 ITD 10/78 taxmann.com 36 (Mum. - Trib.) distinguishing the above case law in Revenue's favour whilst deleting an identical disallowance on the ground that such business promotion expenses are allowable as business expenditure not hit u/s. 37(1) explanation. We afforded ample rebuttal opportunity to the Revenue. Learned Departmental Representative fails to indicate any distinguishing features therein. We find that the above latter co-ordinate bench has elaborately discussed all case laws, IMC regulations as well as Board's circular in deciding the issue. We therefore adopt the very reasoning herein as well to delete the impugned disallowance. The assessee succeeds in ....