TaxTMI 
TaxTMI 
2023 (3) TMI 1223
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....us expenses incurred by the assessee on account of sales promotion and business promotion debited in the P&L a/c." The Appellant craves the right to amend alter or add to any of the grounds of appeal given below." 3. The fact as culled out from the records is that the assessee company M/s Curosis Healthcare Pvt. Ltd. filed its return of income for the year under consideration declaring total income of Rs. 49,81,330/- on 29.09.2013. Further, the case was selected for scrutiny assessment and accordingly, assessment order u/s 143(3) of the IT Act, 1961 was passed on 22.01.2016. The assessee is mainly engaged in the business of pharmaceuticals goods and sells the same through the dealer distribution network and the stockiest at the ground level. The case was re-opened after recording the reasons and taking administrative approval from competent authority and accordingly, notice u/s 148 of the Act had been issued on 26.03.2018 and duly served upon the assessee. In response, the assessee filed submission on 03.05.2018 stating that the assessee filed return of income against the notice u/s 148 of the Act declaring total income of Rs. 49,81,330/- on 24.04.2018 and requested to ....
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....as detailed in para no. 2.1 supra of this Appeal Order. These grounds are now adjudicated as under 5.1.1 The Ld. AO discussed the related addition in Para 7 of the impugned order dated 12.12.2018. The discussion is as under: 7. It has been noticed that the assessee claimed various expenditure out of sales promotion expenses and took plea that such expenditure was incurred towards medical dealers. The detailed discussion is made in forthcoming paras. Hotel Stay:- On examination of other details of sales promotion expense, it has been noticed that the assessee debited expenses of Hotel Stay of Rs. 1,17.1477 in P&L account. But, the assessee completely failed to produce Ledger account, bills/vouchers of the expenditure. The assessee only took plea that the expenditure of hotel stay was incurred for the purpose of business. But the assessee did not furnish the details of guests, details of hotels, purpose of stay and why the assessee had incurred such expenditure. Further, it is quite possible to incurred such expenditure towards Doctors or touts for soliciting admission in Nursing Home or Hospital and the same is not allowable as per CBDT's Circ....
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....o. 2378 dated 10.09.2012, the assessee purchased jewellery amounting to Rs. 2,04,5677-weighted quantity 69.450 Gms. The assessee purchased jewellery from M/s Sharda Ornaments, the details of such bills are hereunder.. 1. Vide Invoice No. 2379 dated 20.10.2012, the assessee purchased SET KDM amounting to Rs. 1,99,5007-weighted quantity 65.00 Gms. ii. Vide Invoice No. 2355 dated 15.10.2012, the assessee purchased "CHAIN" amounting to Rs. 1,98,5007-weighted quantity 65.110 Gms. DEPA iii. Vide Invoice No. 2374 dated 19.10.2012, the assessee purchased KADE-2 KDM amounting to Rs. 1,979,5007- weighted quantity 64.270 Gms. iv. Vide Invoice No. 1683 dated 17.05.2012, the assessee purchased CHUDI 4 SET1 916 amounting to Rs. 4,80,0007-weighted quantity 173.290 Gms. v. Vide Invoice No. 3087 dated 23.03.2013, the assessee purchased 1 SET 916 amounting to Rs. 1,99,3807-weighted quantity 67.760 Gms. The assessee purchased jewellery from M/s Gomati Ornaments, the details of such bill are hereunder: - 1. Vide Invoice No. 002 dated 23.01.2013, the assessee purchased Gold Ornaments amounting to Rs. 4,95,994/- weight quantity 157.....
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....hted quantity 94.00 Gms. ii. Vide Invoice No. 499 dated 04.06.2012, the assessee purchased Gold Jewellery amounting to Rs. 1,53,0007-weighted quantity 63.00 Gms. iii. Vide Invoice No. 516 dated 28.09.2012, the assessee purchased Gold Jewellery amounting to Rs. 1,98,7007-weighted quantity 68.00 Gms. iv. Vide Invoice No. - dated, the assessee purchased Gold and Silver Ornament amounting to Rs. 2,98,2507-weighted quantity 55.500 Gms. v. Vide Invoice No.- dated, the assessee purchased Gold Jewellery amounting to Rs. 3,96,0007- weighted quantity 130.50 Gms: vi. Vide Invoice No. dated, the assessee purchased Silver Jewellery amounting to Rs. 88,5007- weighted quantity 1500.00 Gms. vi. Vide Invoice No.-dated, the assessee purchased Gold Omaments amounting to Rs 2,37.0007- weighted quantity 80.00 Gms. Further, it is pertinent to mention here that various bills/vouchers have been produced by the assessee which are discussed supra and on examination of the same, it has been noticed that the produced bills/vouchers belong to purchases of Chain, Kada & various Jewellery Items whereas the assessee provided the list of Gold coin. Bot....
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....furnished inaccurate rf income, therefore, the Penalty proceedings u/s 271(1)(c) of the Act is by separately initiated for furnishing inaccurate particulars of income. [(B)- Addition of Rs. 1,27.08.275/-] ............. Product Promotion: - 7.3 On examination of other details of sales promotion expense, it has been noticed that the assessee debited expenses of Product Promotion of Rs. 65,392/- in P&L account. But, the assessee completely failed to produce Ledger account, bills/vouchers of the expenditure. The assessee only took plea that the expenditure of hotel stay was incurred for the purpose of business. But the assessee did not furnish the details of products of promotion and why the assessee had incurred such expenditure. Further, it is quite possible to incurred such expenditure towards Doctors or touts for soliciting admission in Nursing Home or Hospital and the same is not allowable as per CBDT's Circular No. 0572012 dated 01.08.2012 & as per provisions of section 37 of the Act. Since, the primary onus lies only over the assessee for proving the genuineness and correctness of the expenditure towards product promotion and incurred expe....
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....onference: 7.5 The assessee claimed expenditure toward "Conference" of Rs. 28,500/-. But, the assessee could not produce any bills/voucher of expenditure of conference andcould also not state that which types of conference was made and where the conference was made and made for which purpose. The assessee could not explain that which types of expenditure was incurred in conference. The assessee could not produce any authorized letter or any documentary for organizing the conference. Thus, it is quite possible to incurred such expenditure towards Doctors or towards touts for soliciting admission in Nursing Home or Hospital and the same is not allowable as per CBDT's Circular No. 05/2012 dated 01.08.2012 & as per provisions of section 37 of the Act. Since, the primary onus lies only over the assessee for proving the genuineness and correctness of the expenditure towards "Conference" has not been discharged by the assessee, therefore, in view of the above CBDT's Circular No. 05/2012 dated 01.08.2012 & as per provisions of section 37 the Act, the expenditure claimed towards "Shirts/Pants for field staff and Retailers" of Rs. 28,500/- is disallowed and added back to tot....
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....hased by the assessee. The details of such expenses are hereunder:- i. Purchases black berry mobile set amounting to Rs. 11,2067-on 20.10.2012: ii. Purchased Movie ticket on 21.10.2012 iii. Cash Paid to GKB Optical for contact lens of Rs. 6.D007-; iv. Amount paid to Kanishka Jewellers on 11.11.2012. v. Purchased Apron of Rs. 33,7907- on 29.11.2012; vi. Purchased Blanket of Rs. 77.2257- on 22.12.2012; vi. Purchased Sweater of Rs. 2,3997-on 27.12.2012. vii Amount of Rs. 4.2957- paid to Priyanka Fashion for designer suit on 03.02.2013, ix Purchased mobile for gift on 20.02.2013. x Amount paid to Pradal Resorts paid for doctors; xi. Amount paid to Spice Hotspot of Rs. 19,5007-ori 08.11.2012; xii. Cash paid to Reliance Fresh of Rs. 16,030 and Rs. 15,0007- for gift on26.08.2012 and on 27.08.2012 respectively. In absence of details of expenditure, bills/vouchers of "Gift to Retailers" expenditure, the expenses so debited in P&L towards "Gift to Retailers" of Rs. 17,56,661/- is not allowable to debit such expenditure: n P&L account. Thus, it is quite possible to incurred suc....
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.... appellant did not furnish name of persons and their PAN to whom the items were claimed to have been distributed. 5. That, the Ld. AO disallowed the expenditure on the basis that there should have been TDS on giving of such gift but he found that no such TDS was made. 6. That, in the opinion of the Ld. AO the appellant had gifted gold jewellery to various doctors stouts etc. to solicit new customers/ patients and not to dealers and stockists 7. That, the appellant and/or its Ld. A/R had inadvertently submitted the fact of distribution of gold coins whereas in fact gold jewellery was given away. The fact of incurring of expenditure was not denied by the Ld. AO. 8. That, the Ld. AO had not disputed the vouchers of purchase of gold jewellery given to various dealers. The Ld. AO had no material on record to hold that the gold jewellery was given to doctors or touts. 9. That, the expenditure had been disallowed purely on assumption and presumption. In the facts and circumstances of the case the CBDT circular no. 05/2012 dated 01.08.2012 were not at all attracted. The expenditure had been disallowed wrongly. If the appellant had failed to prov....
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....ble to have incurred such expenditure towards doctors or touts for soliciting admission in nursing home or hospital. Accordingly, expenditure was disallowed in view of CBDT Circular no. 05/2012 dated 01.08.2012. Apparently, the expenditure had been disallowed purely on assumption. The Ld. AO had no material in his possession to establish that the expenditure was incurred towards doctors and touts. In fact, the expenditure was incurred towards hospital camp. But the appellant could not produce the supporting vouchers as the same were not traceable. 14. That, expenses in relation to Rs. 17,56,661 given as Gift to retailers: The Ld. AO had disallowed the expenditure stating that it was quite possible to have incurred such expenditure towards doctors or touts for soliciting admission in nursing home or hospital. Accordingly, expenditure was disallowed in view of CBDT Circular no. 05/2012 dated 01.08.2012 Apparently, the expenditure had been disallowed purely on assumption. The Ld. AO had no material in his possession to establish that the expenditure was incurred towards doctors and touts. In fact, the expenditure was incurred towards gift to retailers. 15. That, in t....
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....appearing on behalf of the assessee has placed their written submission which is extracted in below; "The assessee is a private limited company and is engaged in the business of pharmaceuticals goods and sells the same through the dealer distribution network and the stockiest at the ground level. Return of income for the year under consideration declaring total income of Rs. 49,81,330/- was filed on 29.09.2013. The case was selected for scrutiny and accordingly, assessment order u/s 143(3) of the IT Act, 1961 was passed on 22.01.2016 accepting the returned income. Subsequently proceedings u/s 147/148 were initiated on the basis of wrong audit para and the Learned Assessing Officer completed the assessment u/s 147/143(3) of the Income Tax Act, 1961 on 12.12.2018 determining income of Rs. 2,01,97,020/- inter-alia making the following additions: - (i) Addition of Rs. 53,742/- by disallowing the Computer Gift Expenses of Rs. 24,900/- and Others gift expenses of Rs. 28,842 under the head sales promotion expenses with reference to provisions of section 69C. (ii) Addition of Rs. 1,51,61,950/- by disallowing the expenses incurred by the assessee on account of sal....
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.... TDS. Therefore, the learned AO has himself accepted that these items of gold were given to the business partners and he accepted the genuineness of the transactions and incurring of expenditure but since the TDS was not deducted, therefore he disallowed this expenditure. The expenditure incurred by the assessee are not for gift or in the nature of gift. The learned AO further mentioned on page 9 of the assessment order that the assessee gifted the gold items to various doctor or touts for soliciting admission in nursing home or hospital which are completely prohibited as per CBDT circular no. 5/2012 dated 01.08.2012 and also as per provisions of section 37 of the Act. This was sales promotion expenses which was given to various distributors and dealers for achieving the sales target on which TDS provisions are not applicable. The issue that the expenses wholly and exclusively incurred by a pharmaceutical company in the normal course of its business towards gifts, travel facility, conference expenses or similar freebies to medical practitioners or their professional associations would not be hit by the „Explanation 1‟ to Sec. 37 of the Act, is....
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....here is no specific finding even though the details of the payee submitted and it is also admitted in the status report of the AO submitted before the bench. None of the payee or beneficiaries are in the list of parties to whom the freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 is provided or proved by the assessing officer. Thus, since there is no violation of board circular and no finding is recorded in the status report the claim of the assessee is fully supported by bills and vouchers and nothing adverse has been found by the lower authorities and thus, the claim of the assessee squarely covered under section 37(1) of the Income Tax Act. Thus, both the grounds raised by the revenue has no merits and are required to be dismissed. 7. The ld DR is heard who has relied on the findings of the assessing officer and has also submitted the comments of the ld. AO as submitted vide his letter dated 09.01.2023. The content of the report of the ld. AO is reproduced here in below ; "Sub- Appellate proceedings before Hon'ble ITAT Bench, Jaipur in 351/JPR/2022 in the case of M/s Curosis Healthcar....
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....24/-in P&L account. The assessee did not provide details of person to whom these items of shirts/pant were gifted. assessee could also not establish the purpose of gift items. E. Conference: As per assessment order. The assessee has debited expenditure toward "Conference" of Rs. 28.500/- But, the assessee could not produce any bills/voucher of expenditure related to conference. The assessee could not furnish any other detail such as place of conference, purpose of conference etc. Further the assessee could not produce any authorized letter or any documentary evidence for organizing the conference. F. Hospital Camp As per assessment order. The assessee has debited expenditure toward "Hospital camp" of Rs. 24.451/-. But the assessee could not produce any bills/voucher of expenditure related to hospital camp and could also not state that which types of camp was made in hospital and for what purpose. The assessee could not even state in which hospital the camp was organized. No authorized letter of hospital for organizing the camp was provided during assessment proceedings. G. Gift to retailers - As per assessment order. The assessee has debited expenditure t....
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....mary of sales promotion Amount (In Rs.) 1. Bags for field staff 16,825/- 2. New Year Calendars 75,000/- 3. Computer Gift 24,900/- 4. Conference 28,500/- 5. Gift to field Staff 52,109/- 6. Hospital Camp 24,451/- 7. Hotel Stay 1,17,147/- 8. Gold 1,27,08,275/- 9. Others 28,842/- 10. Pens 45,360/- 11. Printed Materials 4,48,268/- 12. Product promotion 65,392/- 13. Gift to retailers 17,56,661/- 14. Shirts/Panta for field staff and Retailers 4,61,524/- Total 1,58,53,254/- 9.1 As it is evident that out of total expenditure as listed here in above for an amount of Rs. 1,58,53,254/-, ld. AO made an addition of Rs. 1,52,15,692/- and thus, a sum of Rs. 6,37,562/- considered as allowable. The list of the expenditure allowed by the ld. AO in the assessment proceedings are thus separately listed here in below: Sr. No. Summary of sales promotion Amount (In Rs.) 1. Bags for field staff 16,825/- 2. New Year Calendars 75,000/- 3. Gift to field Staff 52,109/- 4. Pen 45,360/- 5. Print Materials 4,48,268....
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....nder section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductable expense in its accounts against income. 4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action. This may be brought to the notice of all the officers of the charge for necessary action. 9.3 Upon careful consideration of the above circular and the rival submission placed before us and the finding of the ld. CIT(A) while allowing the claim of the assessee, we are of the considered view that the ld. CIT(A) has not erred in law and on facts while considering the claim of the assessee. The bench further noted from the report of the AO before us also while commen....
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.... should have been TDS on giving of such gift but he found that no such TDS was made. 6. That, in the opinion of the Ld. AO the appellant had gifted gold jewellery to various doctors stouts etc. to solicit new customers/ patients and not to dealers and stockists 7. That, the appellant and/or its Ld. A/R had inadvertently submitted the fact of distribution of gold coins whereas in fact gold jewellery was given away. The fact of incurring of expenditure was not denied by the Ld. AO. 8. That, the Ld. AO had not disputed the vouchers of purchase of gold jewellery given to various dealers. The Ld. AO had no material on record to hold that the gold jewellery was given to doctors or touts. 9. That, the expenditure had been disallowed purely on assumption and presumption. In the facts and circumstances of the case the CBDT circular no. 05/2012 dated 01.08.2012 were not at all attracted. The expenditure had been disallowed wrongly. If the appellant had failed to provide details of persons to whom gold jewellery was distributed even then it was established that expenditure was incurred. In the circumstances the Ld. AO erred in disallowing the entire expendi....
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.... dated 01.08.2012. Apparently, the expenditure had been disallowed purely on assumption. The Ld. AO had no material in his possession to establish that the expenditure was incurred towards doctors and touts. In fact, the expenditure was incurred towards hospital camp. But the appellant could not produce the supporting vouchers as the same were not traceable. 14. That, expenses in relation to Rs. 17,56,661 given as Gift to retailers: The Ld. AO had disallowed the expenditure stating that it was quite possible to have incurred such expenditure towards doctors or touts for soliciting admission in nursing home or hospital. Accordingly, expenditure was disallowed in view of CBDT Circular no. 05/2012 dated 01.08.2012 Apparently, the expenditure had been disallowed purely on assumption. The Ld. AO had no material in his possession to establish that the expenditure was incurred towards doctors and touts. In fact, the expenditure was incurred towards gift to retailers. 15. That, in the assessment order the Ld. AO himself had mentioned that appellant had purchased various items such a blackberry mobile sets, movie tickets, aprons, blankets sweaters, designer suits etc. etc.....
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....acts of the case we are of the considered view that the primary condition to make the addition is not fulfilled, as here in this case the assessee has incurred the expenditure and has offered the explanation about the source of such expenditure the reasoning given by the ld. AO is against the provision of law. As in this case the ld. AO has not doubted the source of the expenditure the applicability of section 69C is not in accordance with the law. The ld. CIT(A) after considering the board circular and provision of law taken a considered view that the ld. AO has not placed no material on record to hold that the expenditure was not incurred and the source of the said expenditure is not explained by the assessee. The finding of the ld. CIT(A) on this issue is reiterated here in below:- "5.2.3 All the facts and circumstances related to the impugned addition of Rs. 53,742 are duly considered. The appellant had failed to provide details of persons to whom computer was gifted/other similar details in relation to expenditure of Rs. 28,842 debited to P&L account as, "Others" but it was argued that even then it was established that expenditure was incurred. In the circumstances, t....