TaxTMI 
TaxTMI 
2018 (12) TMI 1876
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....as not applied his mind and has allowed the claim of expenses viz. Medical Conference Expenses amounting to Rs. 31.18 crores, which were prohibited by Medical Council of India (MCI) vide notification dated 10th December, 2009. That these Medical Conference Expenses paid to the doctors clearly fall within the classification of medical freebies and are not allowable in view of Explanation 1 to Section 37 of the I.T. Act. That the A.O., therefore, has wrongly allowed Medical Conference Expenses claimed by the assessee company. 4. The ld. CIT further observed that it is settled proposition in law that failure of the Assessing Officer to carry out relevant and meaningful enquiries as warranted by the facts and circumstances of the case renders the assessment order erroneous and prejudicial to the interest of revenue. That by allowing prohibited 'Medical Conference Expenses', A.O. has passed an erroneous order which is prejudicial to the Revenue. That the case of the assessee is also covered by deeming provision of Explanation 2(a) and (b) of section 263(1) of the Act. Accordingly, a show-cause notice dated 06.03.2017 was issued u/s. 263 of the Act to the assessee to grant the....
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....#39;medical freebies' given to doctors by the assessee. There is also no dispute that MCI is a regulatory authority for regulating these medical freebies to the doctors. The Notification by MCI was passed with the approval of the Central Government. The question whether the said Notification has the approval of the President of India or not is inconsequential. It is true that the MCI regulates the professional conduct ethics and etiquette of the medical professionals and not the assessee. However, when the medical professionals are barred from receiving medical freebies, it is incumbent upon the assessee not to indulge in such prohibited expenses. Even if the assessee chose to ignore the MCI guidelines to boost his business, the same cannot be allowed as a business expenditure u/s. 37 of the Act, more so when the Explanation to the said section clearly disallows such expenses. Moreover, MCI has barred these expenses so that the medical professionals are not swayed by the freebies of the pharmaceutical companies while treating patients. It has an ethical connotation. As per the assessee's own submission, these expenses are in the nature of (i) Registration fees for the docto....
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....issued by Indian Medical Council in exercise of its executive power is in the nature of instruction/notification and is not new. The MCI notification has no statutory force. Even if there is violation of the notification issued by Medical Council, the violation cannot be termed as 'offence' or 'prohibited by law'. ii. The assessee has furnished the details of expenditure incurred on medical conference expenses, produced the bills/invoices in support of the expenses claimed and the AO after verification has accepted the same. iii. Such expenses have also been examined in the earlier years and have been allowed all through including the year under consideration. iv. The expenditure incurred is in the nature of sales promotion and is, thus, allowable u/s. 37 of the I.T. Act and has accordingly been allowed from year to year. 9. He further noted the following case laws referred by the assessee: 1. Commissioner of Income-tax v. Green World Corporation, 314 ITR 81 (SC) 2. 2009 (4) PLJR Page 417 (Pat) - Commissioner of Income-tax Vs. Mukul Kumar 3. 203 ITR 108 (Bom) - Commissioner of Income-tax vs. Gabriel India Limited 4. 270 ITR 157 (MP) 5. 276....
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....e expenses were genuine, still these were liable to disallowance in view of the provisions of Explanation 1 to section 37 of the Act. The Assessing Officer has not considered this aspect of law also. iii. The assessee has contended that such expenses were allowed in earlier years. In this regard, it is observed that each assessment year is separate and the allowance of expenditure is dependent on the facts of the case and applicable law. The CBDT vide its Circular No. 5/2012 clarified that the claim of any expense incurred in providing freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income-tax Act being an expense prohibited by law. The aforesaid circular being issued by the CBDT, in exercise of powers conferred on it under the provisions of the Income-tax Act, was binding on the Assessing Officer. Therefore, the allowance of such expenditure which is prohibited under the aforesaid notification of Medical council of India was not in accordance with law. Moreover, it is observed from records that in subsequent assessment year i.e. AY 2014-15, suc....
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....e expenses were disallowed being freebees to doctors for AY 2014-15. However, for AY 2013-14, neither the assessee produced ledger copy nor details like bills/vouchers etc were produced by the assessee (as claimed) nor the Assessing Officer called it or examined. Certainly, there was failure on the part of the Assessing Officer as details were neither called nor verified/examined before allowing such expenses. 7. As per clause (a) to Explanation to Section 263 (amended by Finance Act, 2015 with effect from 01.06.2015), an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, the order is passed without making enquiries or verification which should have been made. In the instant case, as mentioned in the preceding paragraph, it is found that the A.O. passed the assessment order without making inquiries and verification which were required in facts and circumstances of the case. This non-verification which was required in the facts and circumstances of the case and allowance of the aforesaid amount of Rs. 23,18,11,343/- and consequent lo....
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....sessing Officer may take into consideration the subsequent binding judicial decisions on the aforesaid issue which may become available at the time of passing of the fresh assessment order. The Assessing Officer may take into consideration the subsequent binding judicial decisions on the aforesaid issue which may become available at the time of passing of the fresh assessment order. 12. Against the above order, the assessee is in appeal before us. 13. We have heard the counsel and perused the records. The learned counsel of the assessee submitted that the A.O. in these cases has examined the issues and has duly applied his mind. He submitted that as a result of this application of mind, the A.O. has disallowed the sales promotion articles, which were found to be covered under freebies to doctors, prohibited under MCI guidelines and CBDT Circular. He submitted that the expenditure on medical conferences has been examined and found to be for the business of the assessee and the assessing officer has rightly allowed the same. In this regard, the ld. Counsel of the assessee placed reliance upon following case laws: 1. M/s. Aristo Pharmaceuticals Pvt. Ltd. (in ITA No. 6680/M/01....
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.... that the A.O. has not followed these MCA Guideline and CBDT Circular is totally misplaced. As regards the examination of conference expense is concerned, the ld. CIT has held that the same were not examined by the A.O. by holding that the concerned ledger accounts were not available in assessment record. This, in our considered opinion, is not at all sustainable in view. There is no rule that the A.O. is supposed to obtain and keep in the assessment records, the copy of all the ledger account which he has examined. Furthermore, the ld. CIT is fully aware of the case law cited by the assessee before him wherein similar expenses were allowed by the ITAT. He has not followed the same holding that it has been appealed against in High Court. Just because the ITAT order has been appealed before High Court, it will not cease to have binding effect on the ld. CIT. It will always be considered to be a permissible view. Hence, if the A.O. adopts a legally permissible view the same cannot be the subject to revision u/s. 263 of the Act. 17. Furthermore while concluding, the ld. CIT has observed that the A.O. shall take into account the binding judicial precedence which may become available....