EDWARDS LIFESCIENCES (INDIA) P.LTD, MUMBAI V. ASST CIT CIR 9(2)(2), MUMBAI

ITA 1189/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9098 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Gift; Business income; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 37(1); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI C.N. PRASAD , JM & SHRI M.BALAGANESH, AM ITA NO. 1189 /MUM/201 7 ( ASSESSMENT YEAR : 2012 - 13 ) ITA NO. 7198 /MUM/201 7 ( ASSESSMENT YEAR : 2013 - 14 ) M/S. EDWARDS LIFESCIENCES (INDIA) PRIVATE LIMITED TECHNIPLEX II, 7 TH FLOOR UNIT NO.1 & 2, OFF. S.V.ROAD GOREGAON (W), MUMBAI 400 062 VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 9(2)(2), MUMBAI PAN/GIR NO. AAACB4203F (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI NIRAJ SHETH R EVENUE BY SHRI SAURABH DESHPANDE DATE OF HEARING 12 / 04 /2019 DATE OF PRONOUNCEMENT 10 / 07 /2019 / O R D E R PER M. BALAGANESH (A.M) : ITA NO.1189/MUM/2017 & 7198/MUM/2017 TH E S E APPEAL S IN ITA NO. 1189/MUM/2017 & 7198/MUM/2017 FOR A.Y RS . 2012 - 13 & 2013 - 14 ARISE OUT OF THE ORDER BY THE LD. DISPUTE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 2 RESOLUTION PANEL - 1(WZ), MUMBAI (LD. DRP IN SHORT) IN DIRECTIONS DATED 02/11/2016. AS THE ISSUES ARE IDENTICAL , BOTH THE APPEALS ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST IDENTICAL ISSUE INVOLVED IN BOTH THE APPEALS IS WITH REGARD TO ARMS LENGTH PRICE (ALP) ADJUSTMENT MADE TOWARDS ADVERTIS ING , MARK ETI NG AND PROMOTION EXPENSES (AMP). THE ASSESSEE IS ENGAGED IN DISTRIBUTION OF CARDIOVASCULAR PRODUCTS, SUCH AS HEART VALVE THERAPY PRODUCTS, CARDIAC PULMONARY PRODUCTS & RMI PRODUCTS, CRITICAL CARE AND VASCULAR PRODUCT LINES ETC. THE COMPANY PREDOMINANTLY SELLS ITS PRODUCTS TO HOSPITALS AND OTHER MEDICAL INSTITUTIONS. IT IS A SUBSI DIARY OF EDWARDS LIFESCIENCES WORLD TRADE CORPORATION, USA. EDWARDS LIFESCIENCES WORLD TRADE CORPORATION, USA, IS A WHOLLY OWNED SUBSIDIARY OF EDWARDS LIFESCIENCES CORPORATION ('ELC'), USA. HENCE, ASSESSEE IS AN INDIRECT SUBSIDIARY OF EDWARDS LIFE SCIENCE CORPORATION (ELC, USA) (EDWARDS, USA). ELC IS A PUBLIC LIMITED COMPANY LISTED ON NA SDAQ STOCK EXCHANGE AND IS A GLOBAL LEADER IN DESIGNING, MANUFACTURING AND MARKETING COMPREHENSIVE LINE OF PRODUCTS AND SERVICES TO RENDER THE CARDIOVASCULAR PRODUCTS WHICH RESULTED IN IMPROVED THERAPEUTIC OUTCOME FOR THE PATIENTS. ELC FOCUSES ON THE FOLLOWING PRODUCT AREAS NAMELY HEART VALVE THERAPY, CARDIAC SURGERY SYSTEMS, CRITICAL CARE, VASCULAR SYSTEMS AND PERFUSION PRODUCTS AND SERVICES. 3 . THE FACTS OF THE A.Y.2012 - 13 ARE TAKEN UP FOR ADJUDICATION AND THE DECISION RENDERED THEREOF WOULD APPLY WITH EQUAL FORCE FOR A.Y.2013 - 14 ALSO EXCEPT VARIANCE IN FIGURES. 3.1 . THE ASSESSEE COMPANY FILED ITS RETURN FOR A.Y.2012 - 13 ON 27/11/2012 DECLARING TOTAL INCOME OF RS.2 , 73 , 54 , 5 40/ - . THE ASSESSEE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 3 COMPANY REPORTED THE FOLLOWING INTERNATIONAL TRANSACTIONS DURING THE YEAR: - SR. NO. INTERNATIONAL TRANSACTIONS AMOUNT (IN INR) MOST APPROPRIATE METHOD 1. IMPORT OF FINISHED GOODS 53 , 99 , 17,607 TRANSACTIO NAL NET MARGIN METH OD ( TNMM') 2. AID FROM FELLOW SUBSIDIARIES 8,75,17,611 3. PURCHASE OF FIXED ASSETS 24.20,302 4. REIMBURSEMENT OF EXPENSES 23 , 13 , 283 COMPARABLE UNCONTROLLED PRICE ('CUP') METHOD 5. RECOVERY OF EXPENSES 823,694 CUP 6. RECOVERY OF COST OF DEFECTIVE GOODS 10 , 22 , 028 TOTAL 63,40,14,525/ - 3. 1. DURING THE COURSE OF PROCEEDINGS, THE LD. TPO ASKED THE ASSESSEE TO SUBMIT THE DETAILS IN RELATION TO TRAVELLING, ADVERTISING, CONFERENCE, MARKETING AND PROMOT ION EXPENSES INCURRED BY THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION. THIS INFORMATION WAS SOUGHT IN ORDER TO UNDERSTAND IF ANY BRAND BUILDING ACTIVITIES WERE BEING CONDUCTED BY THE ASSESSEE AS A SERVICE TO ITS AES. THE ASSESSEE SUBMITTED THE RELEV ANT INFORMATION / DOCUMENTS IN RELATION TO ABOVE MENTIONED EXPENSES SUCH AS BACK TO BACK INVOICE S, MAIL CORRESPONDENCE BETWEEN D OCTORS AND THE ASSESSEE, SEMINAR REGISTRATION RECEIPT, TRAVEL TICKET, HOTEL RECEIPT ETC. . THE ASSESSEE EXPLAINED THE NATURE OF EACH OF THE AFORESAID EXPENDITURE IN DETAIL AS UNDER: - ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 4 TRAINING EXPENSES THESE EXPENSES ARE INCURRED IN RELATION TO THE ASSESSEES EMPLOYEES GROWTH LIKE SOFT SKILL TRAININGS, LEADERSHIP TRAINING, FINANCE RELATED TRAININGS ETC., CONFERENCE EXPENSES TH ESE EXPENSES HAVE BEEN INCURRED IN RELATION TO TRAVEL AND OTHER COSTS OF DOCTORS IN ORDER FOR THEM TO ATTEND CONFERENCES TO EDUCATE THEM ABOUT EDWARDS PRODUCTS OFFERINGS. MARKETING PROMOTION EXPENSES THESE EXPENSES ARE INCURRED IN RELATION TO PROMOTE / MARKET EDWARDS PRODUCTS OFFERED BY THE ASSESSEE. THESE EXPENSES ARE INCURRED BY SPONSORING CMES HELD IN DIFFERENT HOSPITALS TO CREATE AWARENESS OF MEDICAL DEVICES AVAILABLE IN THE MARKET, PRINTING BOOKS AND VIDEO SHOOTING EXPENSES FOR CONTINUING MEDICAL EDUCATION (CME PROGRAMME). ETC. ADVERTISEMENT EXPENSES: THESE EXPENSES ARE INCURRED FOR PLACING ADVERTISEMENTS IN INDIAN JOURNAL OF THORACIC AND CARDIOVASCULAR SURGERY. ALSO, SOME PORTION OF EXPENSES WERE INCURRED IN RELATION TO ADVERTISEMENT FOR STAFF RE C RUITMENTS. TRAVELLING EXPENSES: THE EXPENSES ARE INCURRED FOR EMPLOYEES TRAVELLING DOMESTICALLY AND TO FOREIGN COUNTRIES FOR BUSINESS PURPOSES. 3.2 . THE ASSESSEE ALSO FURNISHED THE EVIDENCES WITH REGARD TO THE AFORESAID EXPENSES BY WAY OF A SEPARATE ANN EXURE. THE ASSESSEE SPECIFICALLY PLEADED THAT THE ABOVE EXPENSES INCURRED BY THE ASSESSEE ARE IN RELATION TO ITS OWN BUSINESS AND IN RESPECT OF SELLING ITS PRODUCTS IN INDIA. AS SUCH, THE AE DOES NOT GARNER ANY BENEFIT FROM THE SAME. IT WAS SPECIFICALLY PO INTED OUT THAT EDWARDS IS AN ESTABLISHED BRAND AND THAT THE ASSESSEE DOES NOT SELL TO END CUSTOMER I.E., PATIENTS IN INDIA, THE ASSESSEE HAS NO REASON TO EXPEND ANY AMOUNT TO HELP OR DEVELOP THE BRAND OF THE AE. IT WAS SUBMITTED THAT ALTERNATIVELY, THE P URPOSE OF ASSESSEE INCURRING THE ABOVE EXPENDITURE IS TO TRAIN, EDUCATE AND MAKE AWARE , THE D OCTORS OF THE LATEST DEVELOPMENT IN THE FIELD OF MEDICINE, SO AS TO HELP, FAMILIARISE THE D OCTORS WHO WOULD NEED TO PERFORM THE PROCEDURES ON THE PATIENTS. ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 5 3.3 . THE ASSESSEE SUBMITTED THAT IT BEING THE LOW RISK DISTRIBUTOR, HAD INCURRED ADVERTISEMENT EXPENSES FOR DISTRIBUTING ITS PRODUCTS IN INDIAN MARKET. ACCORDINGLY, ALL THE RISK AND RETURNS IN RELATION TO THE SAME IS BORNE BY THE ASSESSEE AND NO BENEFIT IS PASS ED ON TO THE AE. FURTHER, IT WAS PLEADED THAT THE AMP EXPENSES WERE INCURRED FOR ADVERTISEMENT MAINLY IN THE NATURE OF SCIENTIFIC MEETINGS , MEDICAL ADVICE, AWARENESS CAMPAIGN, SCIENTIFIC SESSIONS ETC., IN THE DESIGNATED REITERATES WHEREIN THE PRODUCTS OF E DWARDS INDIA (I.E ASSESSEE) ARE SOLD. 3.4 . THE LD. TPO OBSERVED THAT ASSESSEE HAS INCURRED CONFERENCE EXPENDITURE TO THE TUNE OF RS.2,65,70,521/ - AND MARKETING AND PROMOTION EXPENSES TO THE TUNE OF RS.1,52,16,595/ - . THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS OF THE SAID EXPENDITURE. THE ASSESSEE SUBMITTED VIDE LETTER DATED 22/12/2015 THAT CONFERENCE EXPENDITURE PERTAINS TO THE EXPEN DITURE INCURRED IN SENDING THE D OCTORS WHO ALSO HAPPENED TO BE CLIENTS OF THE ASSESSEE TO TRAINING PROGRAMMES/ SEMINARS B OTH IN INDIA AND ABROAD. THE EXPENDITURE INCLUDE S AIR FAIR, LODGING AND BOARDING AND CONFERENCE FEES. IT WAS SUBM ITTED THAT DURING THE RELEVANT FINANCIAL YEAR 2011 - 12, 126 DOCTORS WERE SENT ON THE TRAINING PROGRAMME OUT OF WHICH 26 WERE SENT TO ABROAD. TH ESE EXPENSES WERE INCURRED BY SPONSORING CONTINUING MEDICAL EDUCATION PROGRAMMES (CMES) HELD IN DIFFERENT HOSPITALS TO CREATE AWARENESS OF MEDICAL DEVICES IN THE MARKET, PRINTING BOOKS AND VIDEO SHOOTING EXPENSES FOR CME PROGRAMME ETC. 3.5. THE LD. TPO O N PERUSAL OF THE FAR ANALYSIS OF THE ASSESSEE AND THE DISTRIBUTION AGREEMENT BETWEEN THE ASSESSEE AND THE AE, OBSERVED THAT ASSESSEE IS MERELY A L OW RISK DISTRIBUTOR FOR AES PRODUCTS WITHOUT ANY VALUE ADDITION. ACCORDINGLY, TPO CONCLUDED THAT SINCE T HE AS SESSEE BEING A LOW RISK DISTRIBUTOR, IT IS NOT SUPPOSED TO CARRYOUT THE AFORESAID ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 6 FUNCTIONS A ND IT WOULD LEAD TO SUBSEQUENT VALUE ADDITION TO PRODUCTS IN TERMS OF KNOWLEDGE (INTANGIBLE S ). THE LD. TPO ALSO REFERRED TO ANNUAL REPORT OF THE AE WHICH MENTIONS THAT AE IS SUPPOSED TO CONDUCT EDUCATIONAL SYMPOSIA AND PROVIDE TRAINING TO CUSTOMERS. THE TPO REFERRED TO THE PROVISIONS OF SECTION 92 B (1) OF THE ACT TOGETHER WITH ITS EXPLANATION THEREON AND CONCLUDE D THAT THE INCURRENCE OF THE AFORESAID AMP EXPENDITURE (AMP) WOULD HAVE TO BE CONSTRUED AS AN INTERNATIONAL TRANSACTION AND IN VIEW OF THE CLAUSE ( D ) OF E XPLANATION TO SECTION 92 B OF THE A CT WHICH READS AS UNDER: - EXPLANATION: FOR THE REMOVAL OF D OUBTS, IT IS HEREBY CLARIFIED THAT (I) THE EXPRESSION 'INTERNA TIONAL TRANSACTION' SHALL INCLUDE ( A ) ----------------------- ( B ) ----------------------- ( C ) ------------------------ (D) PROVISION OF SERVICES, INCLUDING PROVISION OF MARKET RESEARCH, MARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPA IRS, DESIGN, CONSULTATION, AGENCY, SCIENTIFIC RESEARCH, LEGAL OR ACCOUNTING SERVICE; 3.6 . ACCORDINGLY, THE LD. TPO CONCLUDED THAT ASSESSEE HAD INCURRED THE EXPENDITURE O N CONFERENCE EXPENSES, MARKETING AND PROMOTION EXPENSES ON BEHALF OF THE AE AND FOR T HE BENEFIT OF AE. THE ASSESSEE, HOWEVER, REPLIED TO THE SHOW - CAUSE NOTICE BY CONTENDIN G THAT BECAUSE OF INCURRING THESE EXPENDITURE S WHICH WERE PURELY IN RESPECT OF SELLING ITS PRODUCTS IN INDIA, THE ASSESSEE ENJOYED THE BENEFIT OF INCREASE IN SALES. THE A SSESSEE FURTHER PLEADED THAT IN THE TECHNOLOGY HUNGRY ERA IF IT DOES NOT CREATE AWARENESS AMONGST END USERS REGARDING TECHNOLOGY UPGRADATION, IT WILL LOSE ITS CUSTOMERS TO COMPETITORS. THE LD. TPO HOWEVER, CONSIDERED THE SAME AS MARKETING INTANGIBLES AND A CCORDINGLY RESORTED TO BENCHMARK THE SAME BY TREATING IT AS AN INTERNATIONAL TRANSACTION. THE LD. TPO CONCLUDED THAT THE ASSESSEE HAS PERFORMED THE AFORESAID TRANSACTIONS ON BEHALF OF THE AE WHICH CONSTITUTES RENDERING OF SERVICE TO THE AE FOR WHICH PURPOS E, THE ASSESSEE OUGHT TO HAVE CHARGED THE COST PLUS MARK UP ON THE SAME ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 7 FROM THE AE. THE LD. TPO ADOPTED THE FOLLOWING FIVE COMPARABLES WITH PLI OF OP/OC AND ARRIVED AT THE MEAN MARGIN THEREON AT 15.66%. SR.NO. NAME OF COMPARABLES OP/OC 1 APITCO LIMITED 2 4.45% 2 KILLICK AGENCIES AND MARKETING LTD. 9.04% 3 BVG INDIA LTD 24.22% 4 AXIS INTEGRATED SYSTEMS 10.27% 5 MARKETING CONSULTANT 10.32% MEAN 15.66% 3.7. THE LD. TPO APPLIED THIS MARGIN OF 15.66% O N TOTAL VALUE OF INTERNATIONAL TRANSACTION IN RESPEC T OF THE SUBJECT MENTIONED TRANSACTION TO THE TUNE OF RS.4,17,87,116/ - AND ARRIVED AT THE VALUE OF RS.65,43,862/ - THEREON. ACCORDINGLY, THE LD. TPO MADE AN UPWARD ADJUSTMENT OF RS.4,83,30,978/ - TOWARDS THIS TRANSACTION OF ADVERTISEMENT, MARKETING AND PROMO TION EXPENDITURE. THE LD. DRP UPHELD THE ACTION OF THE LD. TPO. 4. AGGRIEVED BY THE FINAL ASSESSMENT ORDER PASSED BY THE LD. AO U/S.143(3) R.W.S. 144C(13) OF THE ACT ON 13/01/2017, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSI ONS AND PERUSED THE ORDER OF THE LD. TPO, SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. TPO AND LD. DRP, OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE LD. DRP AND ARGUMENTS OF BOTH THE COUNSELS BEFORE US AND THE PAPER BOOK OF THE ASSESSEE TOGETHER WITH TH E JUDICIAL PRONOUNCEMENTS RELIED UPON TO WHICH OUR ATTENTION WAS DRAWN BY BOTH THE COUNSELS BEFORE US. FROM PERUSAL OF THE SAME, WE FIND THAT THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE WAS TO CREATE PRODUCE AWARENESS AMONG D OCTORS IN ORDER TO MAKE THEM AWARE ABOUT THE TECHNOLOGY AND PRODUCT BEN EFITS; TO EDUCATE AND MAKE THE D OCTORS AWARE ABOUT THE LATEST PRODUCTS AVAILABLE IN THE MARKET. WE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 8 FIND THAT THE EXPENDITURE INCURRED WERE IN THE NATURE OF SCIENTIFIC MEETINGS, MEDICAL ADVICE, AWARENESS CAMPAI GN, SCIENTIFIC SESSIONS, TRAINING ETC., THE VARIOUS ARGUMENTS BY THE LD. AR BY REFERRING TO VARIOUS DOCUMENTS IN THE PAPER BOOK AND THE APPEALS ARE SUMMARISED AS UNDER: - 3.1 THE ASSESSEES INDUSTRY IS HIGHLY COMPETITIVE, ANY NEW PRODUCT DEVELOPMENT AND T ECHNOLOGICAL CHANGE CHARACTERIZE THE AREAS IN WHICH THE ASSESSEE COMPETE. TO HELP BROADEN AWARENESS OF PRODUCTS AND TECHNOLOGIES, THE ASSESSEE CONDUCT EDUCATIONAL SYMPOSIA AND PROVIDE TRAINING TO PHYSICIAN, HOSPITAL EXECUTIVE, SERVICE LINE LEADERSHIP, AND CLINICAL - BASED CUSTOMERS. 3.2 THE NEED IN ASSESSEE S BUSINESS WHICH IS TECHNOLOGICALLY UPGRADING AT EVERY STEP IS TO CREATE AWARENESS AMONG THE DOCTORS ABOUT THE AVAILABILITY OF NEW TECHNOLOGY IN MEDICAL EQUIPMENT. ACCORDINGLY, IN ORDER TO EDUCATE ABO UT THE IMPROVED MEDICAL TECHNOLOGY PRODUCTS OFFERED BY THE ASSESSEE , THESE CONFERENCE AND MARKETING PROMOTION EXPENSES ARE EXPENDED WORTH INR 2.65 CRORES AND INR 1.52 CRORES RESPECTIVELY, LIKE ANY OTHER INDEPENDENT THIRD PARTY DISTRIBUTOR. 3.3 THE ASSE SSEE HAS INCURRED CONFERENCE AND MARKETING PROMOTIONAL EXPENSE IN ORDER TO CREATE AWARENESS OF ITS PRODUCTS IN THE INDIAN MARKET WHICH IS AMONGST THE DOCTORS IN ORDER TO MAKE THEM AWARE ABOUT THE TECHNOLOGY AND PRODUCT BENEFITS. THESE EXPENDITURE S HA VE BEE N INCURRED IN ORDER TO EDUCATE AND MAKE AWARE THE DOCTORS ABOUT THE LATEST PRODUCTS AVAILABLE IN THE MARKET WHICH IS IN THE NATURE OF SCIENTIFIC MEETINGS, MEDICAL DEVICE AWARENESS CAMPAIGN, SCIENTIFIC SESSIONS, ETC. 3.4 FURTHER, IT IS VIA MARKETING PROMOT ION, CONFERENCE SPONSORSHIP, DOCTOR'S PARTICIPATION IN MEDICAL CONFERENCES, ETC. THAT THE DOCTORS ARE BEING MADE AWARE ABOUT PATH - BREAKING MEDICINE AND ITS TECHNOLOGY IN THE WESTERN WORLD. THE TRAINING EXPENSES HAS BEEN INCURRED IN RELATION TO THE ASSESSEE 'S EMPLOYEE'S GROWTH LIKE SOFT SKILL TRAININGS, LEADERSHIP TRAINING, FINANCE RELATED TRAININGS, ETC. THE NATURE OF CONFERENCE EXPENSES IS TRAVEL AND OTHER COSTS OF DOCTORS IN ORDER FOR THEM TO ATTEND CONFERENCES TO EDUCATE THEM ABOUT EDWARD'S PRODUCTS OFFE RINGS. THE MARKETING PROMOTION EXPENSES ARE INCURRED IN RELATION TO PROMOTE/ MARKET EDWARD'S PRODUCTS OFFERED BY THE ASSESSEE IN INDIA. THESE EXPENSES ARE INCURRED BY SPONSORING SYMPOSIA AND EVENTS HELD IN DIFFERENT HOSPITALS TO CREATE AWARENESS OF MEDICAL DEVICES AVAILABLE IN THE INDIAN MARKET. THIS COULD BE IN THE NATURE OF PUBLICATIONS, BOOKS, ADVERTISEMENTS, TRAINING MODULES ETC. 3.5 SUCH EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE ASSESSEE S OWN BUSINESS, WHICH ARE PAID TO THIRD PARTIES I N INDIA THAT ARE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 9 NOT IN ANY WAY RELATED EITHER TO THE ASSESSEE OR ITS AES. THE ASSESSEE HAS THE SOLE DISCRETION OF DECIDING THE FORM, MANNER, CONTENT AND TIMING OF THE ADVERTISING. THE DIRECT BENEFIT IN TERMS OF INCREASED SALES, MARKET SHARE ETC. RESULTING FROM SUCH CONFERENCE AND MARKETING PROMOTION EXPENSES IS TO THE ASSESSEE 'S OWN ACCOUNT 5.1. WE FIND THE CRUCIAL ASPECT WHICH HAS BEEN IGNORED BY THE LOWER AUTHORITIES WHILE ADJUDICATING THE ISSUE IN DISPUTE BEFORE US WAS THAT THE AS SESSEE WAS IN RESPECT OF SUBVENTION INCOME FROM ITS AES. THIS WAS RECEIVED PURSUANT TO SUPPLEMENTARY DISTRIBUTION AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE AES WHEREIN THE ASSESSEE RECEIVED COMPENSATION FROM THE AES TO ENABLE IT TO MEET THE ARMS LENGTH BENCHMARK MARGIN AT NET LEVEL VIS - - VIS MARGIN EARNED BY THE COMPARABLE COMPANIES. BASED ON SUCH DISTRIBUTION AGREEMENT, THE AE AGREED TO COMPENSATE THE ASSESSEE IN CASE IT DOES NOT EARN THE ARMS LENGTH MARGIN ON ITS OWN. ACCORDINGLY, DURING THE YEAR, THE ASSESSEE HAD RE CEIVED THE SUBVENTION INCOME FROM ITS AES TO HELP IT ACHIEVING AN ARM'S LENGTH MARGIN IN INDIA, WHICH EFFECTIVELY TANTAMOUNT TO COMPENSATING THE ASSESSEE FOR ALL THE EXPENSES RELATING TO ITS DISTRIBUTION ACTIVITY. HENCE, EVEN FOR A MOMENT IF IT HAS TO BE A SSUMED THAT IN CURRENCE OF THE AFORESAID VARIOUS EXPENDITURE BY THE ASSESSEE WERE ON BEHALF OF THE AE AND WOULD CONSTITUTE SERVICES RENDERED BY THE ASSESSEE TO ITS AE WHICH IN TURN WOULD LEAD TO AN INTERNATIONAL TRANSACTION THEREOF IS TO BE ACCEPTED, STILL IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE HAD RECOVERED FROM ITS AE BY WAY OF SUBVENTION INCOME WHICH HAS BEEN DULY OFFERED TO TAX BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE SUBVENTION INCOME SO OFFERED IN THE SUM OF RS.8, 7 5,17,611/ - IS MUCH HIGHE R THAN EVEN THE ADJUSTMENT CONTEMPLATED BY THE LD. TPO IN THE SUM OF RS.4,83,30,978/ - WHICH INCLUDES THE MARK UP OF 15.66%. WE FIND THAT THE LD. AR HAD PLACED MAJOR RELIANCE ON THIS AS AN ALTERNATIVE ARGUMENT WHEREIN BY CONSIDERING THE SUBVENTION INCOME, T HE ASSESSEES OPERATING MARGIN IS HIGHER THAN ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 10 THE ARITHMETIC MEAN OPERATING MARGIN OF 4.92% EARNED BY INDEPENDENT DISTRIBUTORS AND HENCE ANY SORT OF CONFERENCE AND RELATED EXPENSES, IF AT ALL WERE TO BE CONSIDERED, ARE ALREADY INCLUDED / BENCHMARKED UNDER THE NET MARGIN BASED ANALYSIS AND ACCORDINGLY THERE CANNOT BE ANY ADJUSTMENT TO ALP THEREON . THE LD. DR RELIED ON THE FINDINGS OF THE LD. DRP WITH REGARD TO THE ASPECT OF SUBVENTION INCOME RECEIVED BY THE ASSESSEE AND MADE AN ELABORATE ARGUMENTS ONLY ON TH E ASPECT THAT ASSESSEE BEING A LOW RISK DISTRIBUTOR, NEED NOT HAVE INCURRED THE AFORESAID EXPENDITURE TO THE TUNE OF RS.4.17 CRORES AND THOSE EXPENDITURES WERE INCURRED ONLY FOR PROMOTION OF BRAND BUILDING OF THE AE IN INDIA AND HENCE, IT WOULD RESULT IN MARKETING INTANGIBLES AND ACCORDINGLY, WOULD CONSTITUTE RENDERING OF SERVICES BY THE ASSESSEE TO ITS AE WHICH ARE TO BE ADEQUATELY COMPENSATED BY THE AE TO THE ASSESSEE. HENCE, HE VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 5.2. WE ALSO FI ND THAT THE LD. AR MADE A SPECIFIC SUBMISSION THAT THE LD. DRP AND THE LD. TPO HAD MADE REFERENCE TO THE ANNUAL REPORT OF CERTAIN AE WHEREIN IT WAS STATED THAT THE AE IS SUPPOSED TO CONDUCT EDUCATIONAL SYMPOSIA AND PROVIDE TRAINING TO CUSTOMERS. IN THIS R EGARD, IT WAS PLEADED THAT SUCH REFERENCE DOES NOT PRECLUDE THE OPERATIONAL DISTRIBUTION SUBSIDIARIES FOR PERFORMING THEIR RESPECTIVE DISTRIBUTION FUNCTIONS. IT WAS ARGUED THAT THE ANNUAL REPORT TALKS ABOUT ENTIRE EDWARDS GROUP INCLUDING ALL SUBSIDIARIES A ND AFFILIATES AND IT DOES NOT SAY THAT THE OPERATIONAL SUBSIDIARIES ARE DEBARRED FROM / NOT REQUIRED TO UNDERTAKE SUCH FUNCTIONS OR THAT THE ENTIRE LIABILITY AT THE GROUP LEVEL. IT IS A GENERAL STATEMENT ABOUT THE GROUP S BUSINESS ACTIVITY AND ITS PROFILE. IT WAS ARGUED THAT THE LOWER AUTHORITIES HAVE PICKED UP SOME LINES FROM THE ANNUAL REPORT WHICH WAS NOT APPARENTLY SUBMITTED BY THE ASSESSEE BUT RATHER OBTAINED BY THE LD. TPO INDEPENDENTLY. IT WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 11 BENCH THAT THE ANNUAL REPORT RELIED UPON BY THE LOWER AUTHORITIES WAS NOT THAT OF THE AE WHICH HAD GIVEN SUBVENTION INCOME TO THE ASSESSEE HEREIN. THEREFORE, IT WAS SUBMITTED THAT THE REMARKS MADE IN ONE OF THE GROUP ENTITIES ANNUAL REPORT WHICH HAD NOT EVEN ENTERED INTO ANY INTERNATIONAL TRANSACTION WITH THE ASSESSEE CANNOT CONSTITUTE ANY AGREEMENT OR ARRANGEMENT WITH THE ASSESSEE AND HENCE, CANNOT BE RELIED UPON. THIS WAS NOT CONTROVERTED BY THE LD DR BEFORE US. WE FIND L OT OF FORCE IN THIS SPECIFIC ARGUMENT OF THE LD. AR. 5.3. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO GRANT RELIEF TO THE ASSESSEE ON THE GROUND THAT SUBVENTION INCOME RECEIVED BY THE ASSESSEE IS MUCH MORE THAN EVEN THE ENTIRE ALP ADJUSTMENT MADE BY T HE LD. TPO AND UPHELD BY THE LD. DRP TOWARDS ADVERTISING, MARKETING, SALES PROMOTION, CONFERENCE EXPENSES ETC., AND IN VIEW OF THIS DECISION, THE OTHER ARGUMENTS MADE BY THE LD. AR THAT THE INCURRENCE OF SAID EXPENDITURE WAS ONLY FOR ITS BENEFIT IN THE FOR M OF INCREASE IN TURN OVER AND THERE WAS NO BRAND BUILDING OF AE PURSUANT TO INCURRENCE OF SUCH EXPENDITURE AND THAT IT DOES NOT FALL WITHIN THE AMBIT OF AN INTERNATIONAL TRANSACTION U/S.92 B OF THE ACT, NEED NOT BE GONE INTO. THE GROUNDS RAISED BY THE ASSE SSEE IN THIS REGARD ARE DISPOSED OFF ACCORDINGLY. 5.4. THE ABOVE DECISION RENDERED FOR A.Y.2012 - 13 WOULD APPLY WITH EQUAL FORCE IN A.Y.2013 - 14 ALSO ON THE SAID ISSUE. HOWEVER, WE FIND THAT THE LD. TPO WHILE ADJUDICATING THE ISSUE ON SIMILAR GROUNDS HAD AD DITIONALLY APPLIED BRIGHT LINE TEST (BLT) TO JUSTIFY HIS ADJUSTMENT TO ALP WHICH IS REFLECTED IN PARA 17.3 OF HIS ORDER AS UNDER: - ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 12 PARTICULARS AMOUNT IN INR TOTAL SALES 835,287,811 ARM'S LENGTH LEVEL OF AMP EXP. (% OF SALE} 3.29% ARM'S LENGTH AM P 27,480,969 AMOUNT ACTUALLY SPENT ON AMP EXP. 38,147,558 AMOUNT SPENT IN EXCESS OF 'BRIGHT - LINE' AND ON CREATION OF MARKETING INTANGIBLE 10,666,589 MARK - UP 7. 09% 756.261 THE AMOUNT BY WHICH THE ASSESSEE COMPANY SHOULD HAVE BEEN REIMBURSED BY A.E, AND FOR WHICH THE ADJUSTMENT IS PROPOSED TO BE MADE 11,422,850 5.5. WE FIND THAT THE APPLICATIO N OF BRIGHT LINE TEST HAS BEEN NEGATIVE D BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MARUTI SUZUKI INDIA LTD., REPORTED IN 381 ITR 117 . H ENCE, THE A CTION OF THE LOWER AUTHORITIES WOULD NOT BE JUSTIFIED EVEN ON THAT COUNT. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESSEE FOR A.Y.2013 - 14 IS DISPOSED OFF IN LINE WITH THE A.Y.2012 - 13 SUPRA AND IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT SUPRA. 6. THE LAST ISSUE TO BE DECIDED IN THE APPEAL FOR A.Y.2013 - 14 IS WITH REGARD TO THE DISAL LOWANCE OF EXPENSES INCURRED ON SURGEONS / CONSULTANTS FORMING PART OF MARKETING PROMOTION EXPENSES IN THE SUM S OF RS.84,67,905/ - AND RS.23,39,510/ - BY APPLYING CBDT CIRCULAR NO.5/2012 DATED 01/08/2012 AND PROVISIONS OF EXPLANATION TO SECTION 37(1) OF THE ACT. 6. 1. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS ALREADY DECIDED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE ORDER OF THIS ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 13 TRIBUNAL IN A.Y .2010 - 11 IN ITA NO.1553/MUM/2016 DATED 20/11/2018 WHEREIN ON SIMILAR GROUNDS IT WAS HELD AS UNDER: - 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DISTRIBUTING THE HEART THERAPY PRODUCTS AND RELATED MEDICAL EQUIPMENTS MANUFACTURED BY ITS GROUP COMPANIES. THE ASSESSEE MAINLY SELLS PRODUCTS FALLING WITHIN THE CARDIAC CARE WHICH CONSIST OF HEART VALVE THERAPY PRODUCTS, CARDIAC PULMONARY PRODUCTS & RMI PRODUCTS, CRITICAL CARE AND VAS CULAR PRODUCT LINES. THE ASSESSEE SELLS THE PRODUCTS MAINLY TO HOSPITALS AND OTHER MEDICAL INSTITUTIONS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ('ROI') ON 4 OCTOBER 2010, DECLARING A TOTAL INCOME OF RS. 4,10,27,764. TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT VIDE NOTICE DATED 20/09/2011 ISSUED U/S.143(2) OF THE IT ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ('AO') CALLED VARIOUS INFORMATION/ DOCUMENTS, INCLUDING INFORMA TION & SUBMISSION IN CONNECTION WITH ALLOWABILITY OF ADVERTISING AND SALES PROMOTION EXPENDITURE OF RS. 5,10,93,756. AFTER CONSIDERING THE FACTUAL AND LEGAL SUBMISSION MADE BY THE ASSESSEE, THE AO COMPLETED THE ASSESSMENT PROCEEDINGS AND PASSED THE ASSESS MENT ORDER DATED 13 MARCH 2014 UNDER SECTION 143(3) OF THE IT ACT. IN THE SAID ORDER, THE AO WITHOUT ACCEPTING ASSESSEE'S CONTENTION MADE THE FOLLOWING DISALLOWANCES: (A) CONFERENCE EXPENSES OF RS. 1,65,51,331 - RS. 1,60,71,341 INCURRED FROM 14 DECEMBER 20 09 TO 31 MARCH 2010 - RS 4,79,990 DISALLOWED ON PRO RATA BASIS FOR THE PERIOD 10 DECEMBER 2010 TO 13 (B) ENTERTAINMENT EXPENSES OF RS, 1,08,885 INCURRED FROM 14 DECEMBER 2009 TO 31 MARCH 2010. 5. AGAINST THE ABOVE ORDER OF AO, ASSESSEE APPROACHED TO CIT( A). 6. BY THE IMPUGNED ORDER CIT(A) PARTLY CONFIRMED THE ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE OF RS.33,30,321/ - INCURRED TOWARDS APPOINTMENT OF FACULTY DOCTOR OR ASSESSEES CONSULTANT DOCTOR IN A MEDICAL CONFERENCE OUT OF CONFERENCE EXPENSES OF RS.1,65,51,331/ - . CIT(A) GIVEN RELIEF OF RS.31,98,259/ - AND RS.8,06,705/ - . THE CIT(A) HAS ALSO ALLOWED TO RELIEF IN RESPECT OF EXPENDITURE INCURRED ON LUNCH AND SNACKS OF OWN STAFF AMOUNTING TO RS.61,242/ - . FINALLY CIT(A) CONFIRMED THE DISALLOWANCE OF RS.1,21,14,020/ - INCURRED ON DOCTORS OR THEIR ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 14 PROFESSIONAL ASSOCIATION BY OBSERVING THAT SAME WAS PROHIBITED BY MCI REGULATIONS. 7. ASSESSEE IS IN FURTHER APPEAL BEFORE US. IT WAS ARGUED BY LEARNED AR MR. MADHUR AGARWAL THAT ASSESSEE HAD FILED A BREAKUP OF THE ADVERTISING AND SALES PROMOTION EXPENDITURE AND ALSO FILED DETAILED SUBMISSION ON ALLOWABILITY OF ADVERTISEMENT AND SALES PROMOTION EXPENDITURE VIDE LETTER DATED 20 FEBRUARY 2014. PURSUANT TO THIS, THE ASSESSEE ALSO SUBMITTED SAMPLE SUPPORTING DOCUMENTS IN RESPECT OF THE CONFERENCE EXPENDITURE VIDE ITS SUBMISSION DATED 28 FEBRUARY 2014. 8. OUR ATTENTION WAS ALSO INVITED BY MR. MADHUR AGARWAL TO THE INFORMATION CALLED BY THE AO FOR DETAILS REGARDING EXPENDITURE INCURRED POST THE NOTIFICATION OF THE GUIDELINES ISSUED BY MEDICAL COUNCIL OF INDIA ('MCI') AND ASKED THE ASSESSEE TO SUBMIT WHY THE CONFERENCE EXPENSE OF RS. 3,91,10,683 (FORMING PART OF THE ADVERTISEMENT AND SALES PROMOTION EXPENDITURE) SHOULD NOT BE DISALLOWED IN TERMS OF THE CIRCULAR NO. 5 ('CIRCULAR') DATED 1 ST AUGUST 2012 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES CCBDT). THE ASSESSEE VIDE LETTER DATED 11 MARCH 2014 FILED A DETAILED SUBMISSION CLAIMING THAT THE CONFERENCE EXPENSES INCURRED BY THE ASSESSEE ARE NOT HI T BY THE SAID CIRCULAR AND ACCORDINGLY, SHOULD NOT BE DISALLOWED. 9. AS PER LEARNED AR, THE EXPENDITURE SO INCURRED IS NOT AS PER THE CBDT CIRCULAR IN SO FAR AS THE SAME IS APPLICABLE ONLY TO THE EXPENDITURE INCURRED POST 14/12/2009 I.E., WHEN THE NOTIFIC ATION RELATING TO MCI GUIDELINES WAS PUBLISHED IN OFFICIAL GAZETTE OF INDIA AND ALSO PROVIDED THE BREAK UP OF THE EXPENSES PRIOR TO PUBLICATION OF MCI NOTIFICATION AND POST PUBLICATION. 10. LEARNED AR ALSO PLACED ON RECORD THE ORDER OF THE CO - ORDINATE BE NCH IN CASE OF SYNCOM FORMULATIONS (I) LTD., IN ITA NO.6429 & 6428/MUM/2012 DATED 23/12/2015 WHEREIN THE TRIBUNAL HAVE OBSERVED AS UNDER: - 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT RECEIVING OF GIFTS BY DOCTORS WAS PROHIBITED BY MCI GUIDELIN ES, GIVING OF THE SAME BY MANUFACTURER IS NOT PROHIBITED UNDER ANY LAW FOR THE TIME BEING IN FORCE. GIVING SMALL GIFTS BEARING COMPANY LOGO TO DOCTORS DOES NOT TANTAMOUNT TO GIVING GIFTS TO DOCTORS BUT IT IS REGARDED AS ADVERTISING EXPENSES. AS REGARDS SPO NSORING DOCTORS FOR CONFERENCES AND EXTENDING HOSPITALITY, PHARMACEUTICALS COMPANIES HAVE BEEN SPONSORING PRACTICING DOCTORS TO ATTEND PRESTIGIOUS CONFERENCES SO THAT THEY GATHER CONTEMPORARY KNOWLEDGE ABOUT MANAGEMENT OF CERTAIN ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 15 ILLNESS/DISEASE AND LEARN ABOUT NEWER THERAPIES. WE FOUND THAT THE DISALLOWANCE WAS MADE BY THE AO BY RELYING ON THE CBDT CIRCULAR DATED 01.08.2012 ONWARDS. HOWEVER, THE CIRCULAR WAS NOT APPLICABLE BECAUSE IT WAS INTRODUCED W.E.F.01.08.2012. I.E. ASSESSMENT YEAR 2013 - 2014, WHEREAS THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION IS 2010 - 2011 AND 2011 - 2012. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE DISALLOWANCE SO MADE BY THE AO IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 11. RELIANCE WAS ALSO PLACED BY LEARNED AR ON THE O RDER PASSED BY THE CO - ORDINATE BENCH ON SIMILAR FACTS IN THE CASE OF SOLVAY PHARMA INDIA LTD., 169 ITD 13. AS PER LEARNED AR, MCI GUIDELINES CANNOT BE APPLIED TO THE PHARMA COMPANY AND IT IS ONLY APPLICABLE TO THE PRACTICING DOCTORS. 12. LEARNED AR ALSO INVITED OUR ATTENTION TO THE EXPENDITURE SO INCURRED SO AS TO BRING TO OUR NOTICE THAT NEW EXPENDITURE IS INCURRED ON FREEBIES TO THE DOCTORS. LEARNED AR ALSO INVITED OUR ATTENTION TO THE DETAILED DOCUMENTARY PROOF WITH REGARD TO THE NATURE OF EXPENDITURE INCURRED WHICH WAS FILED BEFORE THE LOWER AUTHORITIES TO SUBSTANTIATE THE CLAIM OF EXPENDITURE SO INCURRED WAS FULLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS TO PROMOTE ITS PRODUCT. 13. ON THE OTHER HAND, LEARNED DR INVITED OUR ATTENTION TO THE FINDIN GS RECORDED BY LOWER AUTHORITIES TO THE FACT THAT EXPENDITURE WERE INCURRED IN CONTRAVENTION OF GUIDELINES LAID DOWN BY MCI AND THE JUDICIAL PRONOUNCEMENTS RELIED ON BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS. 14. WE HAVE CONSIDERED RIVAL CONTEN TIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR DURING THE COURSE OF HEARING BEFORE US IN T HE CONTEXT OF FACTUAL MATRIX OF THE CASE. 15. FROM THE RECORD WE FOUND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF DISTRIBUTING THE HEART THERAPY PRODUCTS AND RELATED MEDICAL EQUIPMENTS MANUFACTURED BY ITS GROUP COMPANIES. THE AO CALLED FOR DETAILS OF EX PENDITURE INCURRED ON ADVERTISEMENT AND SALES PROMOTION. THE ASSESSEE HAD FILED A BREAKUP OF THE ADVERTISING AND SALES PROMOTION EXPENDITURE AND ALSO FILED DETAILED SUBMISSION ON ALLOWABILITY OF ADVERTISEMENT AND SALES PROMOTION EXPENDITUR E VIDE LETTER DATED 20 FEBRUARY 2014. PURSUANT TO THIS, THE ASSESSEE ALSO SUBMITTED SAMPLE SUPPORTING DOCUMENTS IN RESPECT OF THE CONFERENCE EXPENDITURE VIDE ITS SUBMISSION DATED 28 FEBRUARY 2014. DURING THE ASSESSMENT ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 16 PROCEEDINGS, THE AO SOUGHT THE BREAK UP OF THE ADVERTISEMENT AND SALES PROMOTION EXPENDITURE INCURRED DURING THE YEAR. IN RESPONSE TO THIS, THE ASSESSEE VIDE SUBMISSION DATED 20 FEBRUARY 2014, SUBMITTED A DETAILED BREAKUP OF THE ADVERTISEMENT AND SALES PROMOTION EXPENDITURE AND ALSO MADE ITS SUBMISSION ON THE ALLOWABIIITY OF THE CONFERENCE EXPENDITURE (FORMING PART OF THE ADVERTISEMENT AND SALES PROMOTION EXPENDITURE) IN LIGHT OF THE CIRCULAR STATING THAT THE SAID CIRCULAR IS NOT APPLICABLE TO THE ASSESSEE. 16. FROM THE RECORD WE ALSO FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 11 MARCH 2014 SUBMITTED THE DETAILS OF CONFERENCE EXPENDITURE AND ENTERTAINMENT EXPENDITURE INCURRED POST 14 DECEMBER 2009 (I.E. FROM THE DATE WHEN THE NOTIFICATION WAS PUBLIS HED IN THE OFFICIAL GAZETTE OF INDIA). ALSO, THE ASSESSEE CONTENDED THAT THE EXPENSES INCURRED BY THE ASSESSEE WERE NOT HIT BY THE CIRCULAR AND ACCORDINGLY, THE ALLEGED EXPENDITURE OUGHT NOT TO BE DISALLOWED IN TERMS OF THE SAID CIRCULAR. 17. WE FOUND THA T THE CONFERENCE EXPENSES OF RS. 1,65,51,331 REPRESENT THE FOLLOWING: ( I ) EXPENSES INCURRED IN CONNECTION WITH ATTENDANCE OF FACULTY DOCTOR OR APPELLANT'S CONSULTANT DOCTOR IN A MEDICAL CONFERENCES - RS. 33,30,321 ( II ) EXPENSES INCURRED BY SALES STAFF DURING CONFERENCES - RS. 31,98,259 ( III ) EXPENSES INCURRED FOR PURCHASE/HIRING OF MATERIALS DURING CONFERENCES - RS.8,06,705 (IV EXPENSES INCURRED FOR PARTICIPATION/SPONSORSHIP OF CONFERENCES - RS. 87,36,056 (V)PRO RATA DISALLOWANCE OF CONFERENCE INCURRED FROM 10 DECEMBER 2009 TO 13 DECEMBER 2009 - RS. 4,79,990/ - 18. WE OBSERVE THAT THE NATURE OF THE EXPENSES .ITSELF DEMONSTRATES THAT THE EXPENSES INCURRED ARE OUTSIDE THE PURVIEW OF THE MCI GUIDELINES. IN RESPECT OF EXPENDITURE INCURRED ON THE SALES STAFF DURING CONFERENCE AMOUNTING TO RS.31,98,259/ - , WE FOUND THAT THESE EXPENSES REPRESENT TRAVEL EXPENSES, VISA CHARGES ETC OF THE EMPLOYEES OF THE ASSESSEE INCURRED FOR ATTENDING VARIOUS CONFERENCES, GROUP MEETINGS ETC. THESE EXPENSES ARE NOT INCURRED ON THE DOCTORS/MEDICAL PRACTITIONERS BUT ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 19. WITH REGARD TO THE EXPENDITURE ALLEGED TO BE INCURRED ON PURCHASE / HIRING MATERIALS DURING CONFERENCE AMOUNTING TO RS.8,06,705/ - WE FOUND THAT THESE EX PENSES REPRESENT PRINTING, STATIONERY, XEROX CHARGES, AND STALL DESIGNING CHARGES INCURRED BY THE ASSESSEE IN RELATION TO THE SPONSORING OF CONFERENCES LIKE ATLAS, CTCOMCON, IACTA ETC. THESE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 17 EXPENSES ARE ALSO NOT INCURRED ON THE DOCTORS/MEDICAL PRACTITIONE RS AND ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 20. WITH REGARD TO THE EXPENDITURE INCURRED FOR PARTICIPATION / SPONSORSHIP OF CONFERENCE AMOUNTING TO RS.87,36,056/ - WE FOUND THAT THESE EXPENSES REPRESENT THE SPONSORSHIP CHARGES OF THE CONFERENCES, SEMINARS LIKE CTCON, IACTA, CME'S ETC PAID BY THE ASSESSEE. THIS EXPENDITURE IS INCURRED BY THE ASSESSEE TO PROMOTE AND CREATE AWARENESS ABOUT ITS PRODUCT. THESE EXPENSES ARE ALSO NOT INCURRED ON THE DOCTORS/MEDICAL PRACTITIONERS AND AR E INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 21. FROM THE RECORD WE FOUND THAT AO HAS DISALLOWED THESE EXPENDITURE BY OBSERVING THAT THESE EXPENSES ARE INCURRED BY THE STAFF ON BEHALF OF DOCTORS AND ACCORDINGLY IS A FREEBIE WHICH IS NOT ALLOWABLE IN THE LIGHT OF CIRCULAR. AS PER OUR CONSIDERED VIEW THESE EXPENSES ARE NOT IN THE NATURE OF GIFTS, TRAVEL FACILITIES, HOSPITALITY, CASH OR MONETARY GRANTS TO DOCTORS. THE MCI GUIDELINES PROHIBITS ACCEPTING GIFTS, TRAVEL FACILITIES, HOSPITALITY, CASH OR MONETARY GRANTS ETC BY DOCTORS FROM PHARMACEUTICAL AND ALLIED HEALTH SECTOR COMPANIES. THESE EXPENSES HAVE BEEN INCURRED BY THE STAFF OF THE ASSESSEE OR THE ASSESSEE DURING THE CONFERENCES AND IN RELATION TO SPONSORSHIP OF CONFERENCES. IT IS ABUND ANTLY CLEAR THAT THEY ARE NOT INCURRED FOR THE DOCTORS NEITHER DO THEY PROVIDE ANY BENEFIT TO DOCTORS. FURTHER, THESE EXPENSES ARE INCURRED BY THE ASSESSEE IN DAY TO DAY COURSE OF ITS BUSINESS AND ARE NOT PROHIBITED BY THE MCI GUIDELINES. 22. IN RESPECT O F EXPENDITURE INCURRED IN CONNECTION WITH MEDICAL CONFERENCE ATTENDANCE OF FACULTY DOCTORS OR DOCTORS WHO ARE CONSULTANT OF ASSESSEE WE FOUND THAT THE BUSINESS EXIGENCIES DEMAND UPDATING OF KNOWLEDGE OF THE DOCTORS/SURGEONS TO IMPLANT/USE ASSESSEE'S PRODUC TS. TO ACHIEVE THIS OBJECTIVE, THE ASSESSEE HAS TO INCUR EXPENSES IN CONNECTION WITH FACILITATION OF DOCTORS / SURGEONS TO ATTEND MEDICAL CONFERENCES ORGANISED BY WELL KNOWN MEDICAL ORGANIZATIONS LIKE INDIAN ASSOCIATION OF CARDIO VASCULAR THORACIC ANESTHES IOLOGIST, INDIAN SOCIETY OF CRITICAL CARE MEDICINE, ETC. IN THIS REGARD, CLAUSE 6.8.1.(B) OF MCI GUIDELINES WHICH PROHIBIT DOCTORS FROM ACCEPTING TRAVEL FACILITIES FOR CONFERENCE WHERE THEY ARE 'DELEGATES'. THE MCI GUIDELINES DO NOT PROHIBIT THE DOCTOR S FROM ACCEPTING THE TRAVEL FACILITY FOR CONFERENCE WHERE THEY ARE FACULTY. ALSO, CLAUSE 6.8.I(G) OF THE MCI GUIDELINES ALLOWS A DOCTOR TO WORK FOR A PHARMACEUTICAL AND ALLIED HEALTH SECTOR COMPANIES IN ADVISORY CAPACITY, AS CONSULTANT, AS RESEARCHER, AS T REATING DOCTORS OR IN ANY OTHER PROFESSIONAL CAPACITY. ACCORDINGLY, THE ASSESSEE HAS APPOINTED CERTAIN DOCTORS AS CONSULTANT TO THE COMPANY. ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 18 23. FROM THE RECORD WE ALSO FOUND THAT THE ASSESSEE DOES NOT PROVIDE ANY PERSONAL GIFTS OR FREE HOLIDAY PACKAGES TO DOCTORS AND HENCE NO EXPENSE IS INCURRED FOR SUCH UNETHICAL PRACTICE. FURTHERMORE, THE PRODUCTS DEALT IN BY THE ASSESSEE ARE VERY DIFFERENT THAN THOSE DEALT IN BY PHARMACEUTICAL COMPANIES. THE ASSESSEE DEALS IN CARDIOVASCULAR PRODUCTS. WHILE THE PRODUCT S MANUFACTURED BY PHARMACEUTICAL COMPANIES ARE LOW PRICED PRODUCTS WITH A LONGER LIFE CYCLE, THE PRODUCTS OF ASSESSEE ARE HIGH END TECHNOLOGY PRODUCTS EITHER IMPLANTED INSIDE HUMAN BODY OR USED FOR MONITORING PATIENTS WHICH HAVE SHORT LIFE CYCLE DUE TO QUI CK TECHNOLOGICALLY UPGRADATION. 24. FROM THE RECORD WE ALSO OBSERVE THAT WHILE THE PRODUCTS OF PHARMACEUTICAL COMPANIES ARE SOLD AT THE COUNTER THROUGH PRESCRIPTION, A SSESSEE'S PRODUCTS ARE NOT SOLD AT COUNTER THROUGH PRESCRIPTIONS . ALSO, THE PATIENT IS NOT THE BUYER OF THE ASSESSEE'S PRODUCTS RATHER IT IS THE MEDICAL INSTITUTIONS, HOSPITALS TO WHOM THE ASSESSEE SELLS ITS PRODUCTS. 25. WE ALSO OBSERVE THAT ASSESSEE'S HIGH END TECHNOLOGICAL PRODUCTS AND TO CARRY OUT HEART VALVE SURG ERIES, WHICH ARE VERY COMPLEX IN NATURE, THE DOCTORS/SURGEONS ALSO NEED TRAINING. IN THE MEDICAL CONFERENCES, THE DOCTORS ARE ALSO PROVIDED SKILL SET TRAINING WHEREIN LIVE SURGERIES ARE PERFORMED SO AS TO EDUCATE THE DOCTORS ABOUT THE USE OF THE NEW TECHNO LOGICALLY ADVANCED PRODUCTS. CONSIDERING THE NEED, THE ASSESSEE NOMINATES FEW SELECTED DOCTORS/SURGEONS TO ATTEND THE TRAINING. THESE DOCTORS/SURGEONS FURTHER PROVIDE TRAINING TO OTHER DOCTORS SO AS TO ALSO MAKE THEM ALSO AWARE ABOUT THE USE OF ASSESSEE'S PRODUCT. IT WAS ALSO BROUGHT TO OUR NOTICE THAT THESE LIFE SAVING DEVICES NECESSARY FOR THE WELL - BEING OF THE SOCIETY AS A WHOLE AND IT IS IN THE INTEREST OF THE PATIENTS THAT THE DOCTORS ARE TRAINED. 26. AFTER GOING THROUGH THE DETAILS OF EXPENDITURE SO INCURRED, WE FOUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT IN VIOLATION OF THE PROVISIONS OF ANY STATUTE SO AS TO RENDER IT EXCESSIVE AND INADMISSIBLE. THE EXPENDITURE INCURRED BY THE ASSESSEE IS ON ACCOUNT OF BUSINESS EXIGENCIES AND NOT IN VI OLATION OF ANY STATUTE. 27. WITH REGARD TO THE DISALLOWANCE OF SIMILAR EXPENDITURE THE CO - ORDINATE BENCH HAS DEALT WITH THREADBARE IN THE CASE OF SOLVY PHARMA INDIA LTD., 169 ITD 13 AND OBSERVED AS UNDER: - 17. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CA REFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US AS WELL AS REFERRED BY CIT IN HIS ORDER PASSED U/S.263 OF THE IT ACT, IN THE ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 19 CONTEXT OF FACTUAL MATRIX OF THE CASE. IN THIS CASE, WE FOUND 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 N OTIFICATION 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 10 TH 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 REGULAT IONS 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 PRACTITIONERS UNDER THE INDIAN MEDICAL COUNCIL ACT, 1956 IS RESTRICTED ONLY TO PERSONS REGISTERED AS MEDICAL PRACTITIONERS WITH THE STATE MEDICAL COUNCIL AND WHOSE NAMES ARE ENTERED INTO THE INDIAN MEDICAL REGISTER MAINTAINED U/S 21 OF THE ACT. 'UNDER THE SCHEME OF THE ACT. 19. FURTHER MORE, THERE IS NO AMBIGUITY OF ANY KIND IN THE SCHEME OF THE INDIAN MEDICAL COUNCIL ACT, 1956 THAT IT NEITHER DEALS WITH NOR PROVIDES FOR ANY CONDUCT OF ANY ASSOCIATION / SOCIETY AND DEALS ONLY WITH THE CONDUCT OF INDIVIDUAL REGISTERED MEDICAL PRACTITIONER S. THERE IS NO OTHER INTERPRETATION, WHICH IS POSSIBLE UNDER THE ACT. 20. THE INTENT OF THE APPLICABILITY OF THE MCI REGULATIONS WAS ALWAYS TO COVER ONLY INDIVIDUAL MEDICAL PRACTITIONERS, AND NOT THE PHARMACEUTICAL AND MEDICAL DEVICE COMPANIES. WHETHER T HERE IS ANY CONTRAVENTION OF THE MCI REGULATIONS OR NOT IS A MATTER WHICH CAN BE DECIDED BY THE MCI ITSELF AND NOT BY THE INCOME - TAX DEPARTMENT. FURTHERMORE, THE MCI HAS ITSELF ADMITTED THAT IT HAS NO JURISDICTION WHATSOEVER OVER ANY ASSOCIATION/ SOCIETY E TC AND ITS JURISDICTION IS CONFINED ONLY TO THE CONDUCT OF THE REGISTERED MEDICAL PRACTITIONERS. FURTHERMORE, SINCE THE SAID MCI REGULATIONS 2002 CONTAINS PUNITIVE 'PROVISIONS, IT HAS TO BE READ STRICTLY AND CONSEQUENTLY ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 20 IT CAN APPLY ONLY TO MEDICAL PRACTI TIONERS AND PHYSICIANS AND NOT TO THE PHARMACEUTICAL COMPANIES. FURTHER, MCI ACT, 1956 DOES NOT APPLY PHARMACEUTICAL COMPANIES AND CONSEQUENTLY MCI REGULATIONS 2002 CANNOT APPLY TO SUCH COMPANIES. 21. CBDT CIRCULAR NO. 5 OF 2012 SEEKS TO DISALLOW EXPEND ITURE INCURRED BY PHARMACEUTICAL COMPANIES INTER - ALIA IN PROVIDING 'FREEBIES' TO DOCTORS IN VIOLATION OF THE MCI REGULATIONS. THE TERM 'FREEBIES' HAS NEITHER BEEN DEFINED IN THE INCOME - TAX ACT NOR IN THE MCI REGULATIONS'. HOWEVER, THE EXPENDITURE SO INCURR ED BY ASSESSEE DOES NOT AMOUNT TO PROVISION OF 'FREEBIES' TO MEDICAL PRACTITIONERS. THE EXPENDITURE INCURRED BY IT IS IN THE NORMAL COURSE OF ITS BUSINESS FOR THE PURPOSE OF MARKETING OF ITS PRODUCTS AND DISSEMINATION OF KNOWLEDGE ETC AND NOT WITH A VIEW T O GIVING SOMETHING FREE OF CHARGE TO THE DOCTORS. THE ACT OF GIVING SOMETHING FREE OF CHARGE IS INCIDENTAL TO THE MAIN OBJECTIVE OF PRODUCT AWARENESS. ACCORDINGLY, IT DOES NOT AMOUNT TO PROVISION OF FREEBIES. CONSEQUENTLY, THERE IS NO QUESTION OF CONTRAVEN TION OF THE MCI REGULATIONS 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 PHARM ACEUTICAL 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 ADM ITTED 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 COMP ANY 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 NOT HAVE ANY JURISDICTION UPON PHARMACEUTICAL COMPANIES AND IT IS INAPPL ICABLE UPON PHARMA COMPANIES LIKE ASSESSEE THEN, WHERE IS THE VIOLATION OF ANY OF LAW/REGULATION? UNDER WHICH PROVISION THERE IS ANY OFFENCE OR VIOLATION IN INCURRING OF SUCH KIND OF EXPENDITURE. ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 21 23. NOW COMING TO THE EXPLANATION TO SECTION 37(1) INVOKED BY THE CIT, THE EXPLANATION PROVIDES AN EMBARGO UPON ALLOWING ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. THIS MEANS THAT THERE SHOULD BE AN OFFENCE BY AN ASSESSEE WHO IS CLAIMING THE EXPENDIT URE OR THERE IS ANY KIND OF PROHIBITION BY LAW WHICH IS APPLICABLE TO THE ASSESSEE. HERE IN THIS CASE, NO SUCH OFFENCE OF LAW HAS BEEN BROUGHT ON RECORD, WHICH PROHIBITS THE PHARMACEUTICAL COMPANY NOT TO INCUR ANY DEVELOPMENT OR SALES PROMOTION EXPENSES. A LAW WHICH IS APPLICABLE TO DIFFERENT CLASS OF PERSONS OR PARTICULAR CATEGORY OF ASSESSEE, SAME CANNOT BE MADE APPLICABLE TO ALL. THE REGULATION OF 2002 ISSUED BY THE MEDICAL COUNCIL OF INDIA (SUPRA), PROVIDES LIMITATION/CURB/PROHIBITION FOR MEDICAL PRACTI TIONERS ONLY AND NOT FOR PHARMACEUTICAL COMPANIES. HERE THE MAXIM OF 'EXPRESSIO UNIUS EST EXCLUSIO ALTERIUS' IS CLEARLY APPLICABLE, THAT IS, IF A PARTICULAR EXPRESSION IN THE STATUTE IS EXPRESSLY STATED FOR PARTICULAR CLASS OF ASSESSEE THEN BY IMPLICATION WHAT HAS NOT BEEN STATED OR EXPRESSED IN THE STATUTE HAS TO BE EXCLUDED FOR OTHER CLASS OF ASSESSEE. IF THE MEDICAL COUNCIL REGULATION IS APPLICABLE TO MEDICAL PRACTITIONERS THEN IT CANNOT BE MADE APPLICABLE TO PHARMA OR ALLIED HEALTH CARE COMPANIES. IF SE CTION 37(1) IS APPLICABLE TO AN ASSESSEE CLAIMING THE EXPENSE THEN BY IMPLICATION, ANY IMPAIRMENT CAUSED BY EXPLANATION 1 WILL APPLY TO THAT ASSESSEE ONLY. ANY IMPAIRMENT OR PROHIBITION BY ANY LAW/REGULATION ON A DIFFERENT CLASS OF PERSON/ASSESSEE WILL NOT IMPINGE UPON THE ASSESSEE CLAIMING THE EXPENDITURE UNDER THIS SECTION. 24. WE OBSERVE THAT THE CBDT CIRCULAR DATED 1 - 8 - 2012 (SUPRA) IN ITS CLARIFICATION HAS ENLARGED THE SCOPE AND APPLICABILITY OF 'INDIAN MEDICAL COUNCIL REGULATION 2002' BY MAKING IT APP LICABLE TO THE PHARMACEUTICAL COMPANIES OR ALLIED HEALTH CARE SECTOR INDUSTRIES. SUCH AN ENLARGEMENT OF SCOPE OF MCI REGULATION TO THE PHARMACEUTICAL COMPANIES BY THE CBDT IS WITHOUT ANY ENABLING PROVISIONS EITHER UNDER THE PROVISIONS OF INCOME TAX LAW OR 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 ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 22 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 AS SESSEE. 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 RETROSPECTIVELY. THE BENEFICIAL CIRCULAR MAY APPLY RETROSPECTIVELY BUT A CIRCULAR IMPOSING A BURDEN H AS TO BE APPLIED PROSPECTIVELY ONLY. HERE IN THIS CASE THE CBDT HAS ENLARGED THE SCOPE OF 'INDIAN MEDICAL COUNCIL REGULATION, 2002' AND MADE IT APPLICABLE FOR THE PHARMACEUTICAL COMPANIES. THEREFORE, SUCH A CBDT CIRCULAR CANNOT BE RECKONED TO HAVE RETROSPE CTIVE EFFECT. THE FREE SAMPLE OF MEDICINE IS ONLY TO PROVE THE EFFICACY AND TO ESTABLISH THE TRUST OF THE DOCTORS ON THE QUALITY OF THE DRUGS. THIS AGAIN CANNOT BE RECKONED AS FREEBIES GIVEN TO THE DOCTORS BUT FOR PROMOTION OF ITS PRODUCTS. THE PHARMACEUTI CAL COMPANY, WHICH IS ENGAGED IN MANUFACTURING AND MARKETING OF PHARMACEUTICAL PRODUCTS, CAN PROMOTE ITS SALE AND BRAND ONLY BY ARRANGING SEMINARS, CONFERENCES AND THEREBY CREATING AWARENESS AMONGST DOCTORS ABOUT THE NEW RESEARCH IN THE MEDICAL FIELD AND T HERAPEUTIC AREAS, ETC. EVERY DAY THERE ARE NEW DEVELOPMENTS TAKING PLACE AROUND THE WORLD IN THE AREA OF MEDICINE AND THERAPEUTIC, HENCE IN ORDER TO PROVIDE CORRECT DIAGNOSIS AND TREATMENT OF THE PATIENTS, IT IS IMPERATIVE THAT THE DOCTORS SHOULD KEEP THEM SELVES UPDATED WITH THE LATEST DEVELOPMENTS IN THE MEDICINE AND THE MAIN OBJECT OF SUCH CONFERENCES AND SEMINARS IS TO UPDATE THE DOCTORS OF THE LATEST DEVELOPMENTS, WHICH IS BENEFICIAL TO THE DOCTORS IN TREATING THE PATIENTS AS WELL AS THE PHARMACEUTICAL COMPANIES. 28. CONSIDERING THE NATURE OF EXPENDITURE SO INCURRED WITH REFERENCE TO THE JUDICIAL PRONOUNCEMENTS REFERRED ABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF CIT(A) FOR UPHOLDING THE EXPENDITURE INCURRED BY ASSESSEE FULLY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS. 29. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 6. 2 . THE FACTS ADJUDICATED IN A.Y.2010 - 11 IN ASSESSEES OWN CASE AND THE DECISION RENDERED THEREON WOULD APPLY MUTATIS MUTANDIS TO THE ISSUE IN DISPUTE BEFORE US FOR A.Y.2013 - 14 ALSO IN VIEW OF IDENTICAL FACTS. ITA NO.1189/MUM/2017 M/S. EDWARDS LIFE SCIENCES (INDIA) PVT. LTD., 23 ACCORDINGLY, THE GROUND NOS.3 TO 5 RAISED BY THE ASSESSEE FOR A.Y.2013 - 14 ARE ALLOWED. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 / 07 / 201 9 SD/ - ( C.N. PRASAD ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 10 / 07 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPO NDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//