TaxTMI 
TaxTMI 
2022 (12) TMI 1276
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....sponse to the same notices furnished the details on ITBA portal. The AO completed the assessment u/s. 143(3) on 24.12.2019 determining the total loss at Rs.55,67,59,009/- wherein he made addition of Rs.17,10,283/- by making disallowance of certain expenses which were paid in violation of provisions of section 37(1) and disallowed an amount of Rs.94,07,535/- out of other business expenses of Rs.4,70,37,679/- by disallowing 20% of the expenses on adhoc basis on the ground that this amount is for launching for new products of the company and the expenses is capital in nature. 3. Subsequently, the ld.PCIT examined the record and noted that the AO vide show cause notice dated 15.12.2019 had specifically asked for the details related to sales promotion expenses of Rs.15,37,40,000/-. The assessee in response to the same had submitted the following details. Sr. No Particulars Amt (Rs.) 1 630760000 Sponsorship/ Marketing programs 7,49,87,461 2 630800000 Promotions expense 4,70,37,679 3 652000000 Meeting expense-Local/ In-House 1,89,94,398 4 630100000 Educational grants-external 52,31,477 5 631000000 Product samples 17,10,283 6 O....
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.... expenses of Rs.57,75,196/- is allowable u/s. 37(1) of the I.T.Act since the same is wholly and exclusively incurred for the purpose of business. Relying on various decisions, it was submitted that the Ld.PCIT is not justified in invoking the revisionary provision u/s. 263 of the I.T.Act. 6. However, the Ld.PCIT was not satisfied with the arguments advanced by the assessee. He observed that the assessee company has not made any submission to substantiate that it had submitted complete details pertaining to the expenses charged to the P&L account under the head "other advertisement and sales promotion expenses" of Rs.57,75,196/-. Since according to the ld.PCIT, the AO had failed to examine the issue of other advertisement and sales promotion expenses of Rs.57,75,196/- and passed the order, therefore, such order has become erroneous and prejudicial to the interest of the revenue. Rejecting the various explanations given by the assessee and relying on various decisions the ld.PCIT set aside the order passed by the AO with a direction to him to redo the assessment by allowing an opportunity of being heard to the assessee and pass the order in accordance with law after due verificati....
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.... of the Bench to page no.364 of the paper book where the annexure-A is given and drew the attention of the Bench to the note on advertisement and sales promotion expenditure, which is as under:- Sr. No Particulars Amt (Rs.) 1 630760000 Sponsorship/ Marketing programs 7,49,87,461 2 630800000 Promotions expense 4,70,37,679 3 652000000 Meeting expense-Local/ In- House 1,89,94,398 4 630100000 Educational grants-external 52,31,477 5 631000000 Product samples 17,10,283 6 Other advertisement and sales promotion expenses 57,75,196 Total 15,37,36,494 9. Referring to page no.476 of the paper book, the ld.counsel for the assessee drew the attention of the Bench to para 6.2 of the assessment order, which reads as under:- " 6.2 In response to the notice, the assessee submitted that an amount of Rs.15,37,40,000/- towards sales promotional and advertisement expenses was incurred under various heads of expenses. Free samples of Rs.17,10,283/- were distributed as a part of promotional activities whereby new drugs/medicine were given as free samples to create awareness, promote the new product and get feedback....
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....ggarwal vs. CIT reported in 88 ITR 323(SC) ii. Smt.Rampyari Devi Sargoi vs Cit reported in 67 ITR 84 (SC) iii. Gee Vee Enterpirses Ltd. vs ACIT reported in 99 ITR 375 (Delhi.HC) iv. Radiant Life Care Mumbai Pvt.Ltd vs. PCIT in ITA No.895 &896/Mum/2021, dated 31.02.2022(Mum.Trib) 13. We have heard the rival arguments made by both the sides, perused the orders of the AO and ld.PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case completed the assessment u/s. 143(3) on 24.12.2019 determining the total loss at Rs.55,67,59,009/- as against the returned loss of Rs.56,78,76,827/- wherein he disallowed an amount of Rs.17,10,283/- being payments in violation of provisions of section 37(1) and disallowed other business promotion expenses of Rs.94,07,535/- on adhoc basis being 20% of such expenses claimed at Rs.4,70,37,679/- on the ground that such expenses are incurred for launching of new products. We find the Ld.PCIT invoked jurisdiction u/s.263 of the I.T.Act on the ground that out of the total sales promotion expenses of Rs.15,37,40,000/-, the AO had not exa....
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....ery raised by the AO has given the following details of Rs.15,37,40,000/- copy of which is available at page no.361 to 365 of the paper book. 18th December, 2019 To The Assistant Commissioner of Income-tax - 7(2)(2), Aayakar Bhawan, Mumbai - 400 020. Dear Sir, Sub: Mylan Pharmaceuticals Private Limited ('Company' or 'Assessee' or 'Tax payer')-PAN: AABCM9323J Assessment Year (AY): 2016-17 Ref: 1) Notice dated 28 August 2017 under section 143(2) of Income Tax Act, 1961 ('the Act') 2) Our letter dated 24.08.2018 3) Notice under section 142(1) of the Income tax Act, 1961 dated 28.08.2018 4) Our letter dated 17.09.2018 5) Notice under section 142(1) of the Income tax Act, 1961 dated 30.08.2019 6) Our letter dated 20.09.2019 7) Our letter dated 12.12.2019 8) Show-cause Notice dated 15.12.2019 ---------------------------------------------------------------------------------------- We refer to the captioned show-cause notice issued by your goodself requesting the Company to show cause with respect t....
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....an Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 ('the IMC Regulations') and CBDT Circular NO*S/2012 dated August 1, 2012 ('CBDT Circular') does not apply. As can be seen from the below table that spent on Advertisement and sales promotion expenses resulted in generating higher product sales. Particulars FY20 11-12 FY20 12-13 FY20 13-14 FY20 14-15 FY20 15-16 FY20 16-17 FY20 17-18 FY20 18-19 Advertisement & Sales Promotional Expenses 6.24 37.59 78.36 142.15 153.74 208.15 460.56 619.53 Products Sales 17.63 44.83 229.03 656.66 157.69 2736.86 3232.19 3712.04 %of Advertisement & Sales promotion Expenses to Product sales 35.39% 83.85% 34.21% 21.65% 9.77% 7.61% 14.25% 16.69% 2. Foreign travelling expenses-Rs.10,39,25,523 The Company submits that foreign travelling expenses are incurred on the employees travelling abroad in the ordinary course of the business of the Company. * Details of the foreign travelling expenses incurred during the year is enclosed as 'Annexure K' * Sample cop....
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....sents expenses relating to contribution/sponsorship fee incurred towards Medical events/conferences on critical illness diseases (i.e., HIV, Cancer, Liver, etc.). Further, this also includes expense toward space bookings/stalls for showcasing the Company's product offerings. * Details are enclosed as Annexure B. * Copies of invoices on sample basis are enclosed as Annexure C. The Company submits that afore-mentioned expenditure are incurred in the ordinary course of the business of the Company and for the benefit of the business carried on by the Company. As an illustration, reference is drawn to the Annexure -1 of the agreement between the Company and Sorento Healthcare Communications Private Limited enclosed as a part of Annexure C above wherein it may be observed that the benefits from the sponsorship expenses incurred arises to the Company. 2. 630800000 Promotions expense: Tn this we record the following nature of expenses: a) Promotional material - Product related brochures; leaflets; other printing materials b) Diagnostic services c) Miscellaneous expenses for conducting and participating in the promo....
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....rtisement and sales promotion expenses of Rs.15,37,36,494/- before the AO, therefore, under these circumstances, we have to see as to whether the order passed by the AO has become erroneous as well as prejudicial to the interest of the revenue. 17. We find the Hon'ble A.P High Court in the case of Spectra Shares & Script (P) Ltd vs. CIT, reported in 354 ITR 35 (A.P) while deciding an identical issue has observed as under: "If there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders u/s 263 merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. An assessment order made by the Income Tax Officer cannot branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. There must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than was just, has been imposed. The power of the Commissioner u/s power of th....