TaxTMI 
TaxTMI 
2019 (8) TMI 1444
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....eric Drugs. The assessee had claimed expenditure on account of marketing and sales promotion. The details of the expenses incurred by the assessee are given on page 17 of the asst. order. The learned A.O. has disallowed the expenditure incurred by the assessee company on print and promotion items amounting to Rs. 73,11,537/- and on sales promotion amounting to Rs. 1,17,82,480/-. Thus, he has disallowed total expenditure of Rs. 1,90,94,018/-. According to the learned A.O., such expenditure is not allowable u/s 37(1). He has stated that the circular issued by Medical Council of India is applicable to a pharmaceutical company. He further refers to the CBDT Circular No. 5 / 2012 dated 01.08.2012 which states that the claim of such expenditure constitutes violation of the circular issued by Medical Council of India. Accordingly, the disallowance has been made by the learned A.O. 1.2] The learned CIT(A) has confirmed the said disallowance. He has discussed this issue in paras 4 to 4.4 of his order. He has relied upon the order passed by him in assessee's own case for A.Y. 2010 - 11. 1.3] The assessee submits that similar disallowance own case for A.Y. 2010 - 11. was mad....
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.... Pharma Pvt. Ltd. of the Tribunal. "6. On a plain reading of the aforesaid notification, which has been heavily relied upon by the department, it is quite apparent that the code of conduct enshrined therein is meant to be followed and adhered by medical practitioners/doctors alone. It illustrates the various kinds of conduct or activities which a medical practitioner should avoid while dealing with pharmaceutical companies and allied health sector industry. It provides guidelines to the medical practitioners of their ethical codes and moral csouncdhu cat. rNeogwuhlaetrieo nt hoer rceogduela toifo nc oonrd uthcet wnoiltli ficcoavteiro np hmaernmtiaocnesu ttihcaatl companies or health care sector in any manner. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner........ The aforesaid provision applies to an assessee who is claiming deduction of expenditure while computing his business income. The Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibite....
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....d from record that the assessee is engaged in the manufacturing of pharmaceutical products. In the course of its business it has incurred expenditure on advertisement and publicity. While framing the assessment, AO has called for the detail of expenditure so incurred and examined the nature of expenditure and thereafter only AO has allowed the expenditure as having been incurred for the purpose of business. We had also carefully gone through the notification dated 11/03/2002 notifying the regulations issued by the Medical Council of India (MCI). The code of conduct laid down in the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('MCI Regulations') issued with effect from 10th December 2009 applies only to doctors and not to Pharmaceutical and Medical device companies. Accordingly, MCI Regulations are not applicable to assessee, the question of assessee incurring expenditure in alleged violation of the regulations does not arise. 18. On the plain and simple reading of the provision of the Indian Medical Council Act, 1956, it is apparent that the ambit of statutory provisions relating to professional conduct of registered medical pr....
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....gulations and applicability of Circular no. 5 of 2012 for disallowance of the expenditure. 22. The department has not brought anything on record to show that the aforesaid regulation issued by Medical Council of India is meant for pharmaceutical companies in any manner. On the contrary, the assessee has brought to the notice of the bench the judgment of the Delhi High Court in the case of Max Hospital v. MCI in [WPC 1334 of 2013, dated 10-1- 2014], wherein the Medical Council of India admitted that the Indian Medical Council Regulation of 2002 has jurisdiction to take action only against the medical practitioners and not to health sector industry. From the aforesaid decision, it is ostensibly clear that the Medical Council of India has no jurisdiction to pass any order or regulation against any hospital or any health care sector under its 2002 regulation. So once the Indian Medical Council Regulation does not have any jurisdiction nor has any authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does no....
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....r by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporanea expositio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving 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 retrospecti....
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....ssessee. Following the parity of reasoning, the said issue is decided in favour of the assessee. Thus, the relevant grounds on this issue are allowed. 9. Regarding the second issue i.e. claim of credit for foreign TDS of Rs. 73,72,181/-, ld. Counsel for the assessee filed a written note and the same is extracted hereunder :- "2.1] The assessee company had advanced unsecured loan to its subsidiary company Emcure Pharmaceuticals, USA [now known as Heritage Pharma Labs, Inc.] The assessee company had offered interest income of Rs. 4,91,47,872/- in respect of the said unsecured loan on accrual basis even though, no interest was received by the assesse in the year under consideration. Now, in F.Y. 2014 - 15, Emcure USA paid the full amount of accrued interest which was booked as income by the assessee company for the FY 2007-08 to FY 2014-15 relevant to AY 2008-09 to AY 2015- 16 and also deducted TDS as per US Tax laws. The copy of the TDS certificate is given on page 6 of the paper book. It is to be noted that the interest was paid for A.Ys. 2008 - 09 to 2015 - 16 and the TDS thereon for the said asst, years amounting to USD 8,13,873 was deducted by Emcure USA. The assessee....
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.... 2.5] The assessee would also like to state that from 01.04.2017, Rule 128 has been inserted which gives the procedure for allowing foreign tax credit. As per the said rule, the credit for the foreign tax paid is to be allowed in the year in which the corresponding income has been offered to tax. The proviso to Rule 128(1) clearly states that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India. Hence, as per the said rules also, the credit is to be allowed in the year in which the said income has been offered to tax. 2.6] The assessee would further like to state that even as per the provision of section 199 r.w. Rule 37BA(3)(i), the credit for the TDS is to be allowed in the year in which the corresponding income is offered to tax. Further as per Rule 37BA(3)(ii), where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same p....
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....C. In view of the above facts and the legal position explained, the assessee submits that the learned CIT(A) is not justified in denying the claim of foreign tax credit. Accordingly, the same may kindly be allowed." 10. The ld. Counsel for the assessee placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of JCIT vs. Petroleum India International, 26 SOT 105 and submitted that identical issue came before the Tribunal and the Tribunal decided the same in favour of the assessee. The contents of para 12 of the said decision of the Tribunal (supra) are relevant in this regard. 11. The ld. Counsel further placed reliance on the judgement of the Jurisdictional High Court in the case of CIT vs. Petroleum India International, 351 ITR 295 and submitted that the Hon'ble High Court in the said judgment held that the object of section 91(1) is to give relief from taxation in India to extent taxes have been paid abroad for relevant previous year and this relief is not dependent upon payment also being made in previous year. 12. On the other hand, ld. DR for the Revenue relied heavily on the orders of the revenue authorities. 13. After hearing both the sides....