CIPLA LTD, MUMBAI V. DCIT CC-1(2), MUMBAI

ITA 1219/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4534 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR DR SHRI SANJAY SETHI
• Assessee Lawyers: J D MISTRY
• Keywords: Reopening of assessment; Bogus purchase; Gift; Business income; Business expenditure; Opportunity of being heard; Principle of natural justice; Retrospective amendment; Retraction; Revised return; Revenue expenditure; Reassessment proceedings; Capital expenditure; Set aside
• Section: 143(3); 142(1); 133A; 37(1); 10B; 250; 64; 43; 13; 22; 147; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1219/MUM/2018 (A.Y: 2010-11) CIPLA LTD., CIPLA HOUSE, PENINSULA BUSINESS PARK, GK MARK, LOWER PAREL, MUMBAI 400 013 VS. DCIT CC - 1(12) 9 TH FLOOR, OLD CGO BLDG, MK ROAD, MUMBAI 400020. PAN/GIR NO. : AAACC1450B APPELLANT .. RESPONDENT APPELLANT BY : SHRI . J . D . MISTRY. AR RESPONDENT BY : SHRI . V. SREEKAR. DR SHRI. SANJAY SETHI. DR DATE OF HEARING 25 .0 6 .2021 DATE OF PRONOUNCEMENT 20 .0 9 .2021 / O R D E R PER PAVAN KUMAR GADALE, JM: THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -47, MUMBAI, ORDER PASSED U/S 148 R.W.S 147 AND 250 OF T HE ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. MERGER OF ORDER U/S 143(3) INTO ORDER U/S 147 FOR I SSUES WHICH WERE ALREADY A PART OF ORDER U/S 143(3) OF TH E ACT WHERE THERE IS A FRESH MATERIAL ON SAME ISSUE. THE CIT(A) ERRED IN HOLDING THAT THE AO HAS POWER T O ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 2 - ASSESS OR REASSESS INCOME THAT HAS ESCAPED ASSESSME NT INVOLVING MATTERS WHICH ARE THE SUBJECT MATERS OF PROCEEDINGS REFERRED TO IN THE THIRD PROVISO TO SEC . 147 IF ANY FRESH MATERIALS HAVE EMERGED IN THE COURSE OF T HE PROCEEDINGS INITIATED U/S 147. 2. WITHOUT PREJUDICE, INDIVIDUAL ISSUES ON MATERIAL WH ICH WERE ALREADY A SUBJECT MATTER OF ORDER U/S 143(3) O F THE ACT AND AGAIN ADDED BACK IN THE ORDER U/S 147 OF TH E ACT, WERE NOT REQUIRED TO BE DISMISSED. THE LD. CIT(A) ERRED IN DISMISSING THE INDIVIDUAL I SSUES ON MERITS WHICH WERE SUBJECT MATTER OF PROCEEDINGS REF ERRED TO IN THE THIRD PROVISO TO SEC. 147. 3. CLAIM IN RESPECT OF PROFITS DERIVED FROM THE BUSINE SS OF PART OF THE MANUFACTURING ACTIVITY CARRIED OUT BY OUTSID E PARTIES ON JOB WORK BASIS. WITHOUT PREJUDICE, THE LD. CIT(A) HAS ERRED IN DISM ISSING THE GROUND OF APPEAL DESPITE CONCLUDING THAT THE LD . AO HAS NOT BROUGHT ANY FRESH MATERIAL IN RELATION TO L LM ISSUE AND HENCE THE AO IS LEGALLY BARRED FROM MAKING ADDI TION IN THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 OF T HE ACT. 4. DISALLOWANCE OF RS. 8,68,24,374/- BY RELYING ON CBD T CIRCULAR NO. 5/2012 R.W. EXPLANATION 1 TO SEC. 37(1 ) (A) THE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF R S. 8,68,24,374/- BY RELYING ON CIRCULAR NO. 5/2012 R.W . EXPLANATION 1 TO SEC. 37(1) OF THE ACT TOWARDS AMOU NTS INCURRED BY COMPANY FOR BUSINESS EXPENDITURE ON MARKETING & PROMOTIONAL ACTIVITY. (B) THE CIT(A) HAS ERRED IN UPHOLDING THAT THE REGULATI ONS ISSUED BY MEDICAL COUNCIL OF INDIA ARE ALSO APPLICA BLE TO PHARMACEUTICAL COMPANIES APART FROM DOCTORS / MEDIC AL PRACTITIONERS. THE CIT(A) OUGHT TO HAVE APPRECIATE D THAT MCI REGULATION DOES NOT HAVE ANY JURISDICTION UPON PHARMACEUTICAL COMPANIES AND HENCE THERE CANNOT BE ANY QUESTION OF ANY VIOLATION OF LAW / REGULATION F OR THE SAME. (C) WITHOUT PREJUDICE TO ABOVE, THE CIT(A) HAS ERRED IN ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 3 - UPHOLDING THE DISALLOWANCE WITHOUT APPRECIATING THA T THE CBDT CIRCULAR NO. 5 OF 2012 DATED 01.08.2012 CANNOT BE APPLIED IN A RETROSPECTIVE MANNER FOR THE YEAR UNDER CONSIDERATION. (D) WITHOUT PREJUDICE TO ABOVE, THE CIT(A) HAS ERRED IN STATING THAT THE APPELLANT HAS NOT BEEN ABLE TO PRO DUCE RELEVANT DOCUMENTARY EVIDENCE TO SUBSTANTIATE THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS WITHOUT ALLOWING AN OPPORTUNITY TO THE APPELLANT TO PRODUCE THE RELATED EVIDENCE. 5. SHORT CREDIT OF TAXES PAID THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONCLUD ING ON THE GROUND AS DISMISSED EVEN THOUGH HE HAS GIVEN DIRECTION TO AO TO ALLOW APPROPRIATE CREDIT FOR TAX ES PAID AFTER VERIFICATION. AT THE TIME OF HEARING, THE LD.AR OF THE ASSESSEE, SUBMITTED THAT THE GROUNDS OF APPEAL NO 1,2 & 3 AR E NOT PRESSED. ACCORDINGLY, THESE GROUNDS OF APPEAL ARE TREATED AS WITHDRAWN AND ARE DISMISSED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN MANUFACTURING AND SALE OF BUL K DRUGS AND PHARMACEUTICAL PRODUCTS NAMELY FORMULATIONS, TABLETS & CAPSULES, AEROSOLS, INJECTI ONS / STERILE SOLUTIONS ETC. THE ASSESSEE COMPANY HAS FI LED THE RETURN OF INCOME ELECTRONICALLY ON 15.10.2010 FOR T HE A.Y 2009-10 DECLARING A TOTAL INCOME OF RS. 611,84,99,6 09/. FURTHER, THE ASSESSEE HAS FILED THE REVISED RETURN OF ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 4 - INCOME ON 09.12.2011 AND THE ASSESSING OFFICER HAS COMPLETED ASSESSEEMENT U/SEC143(3) OF THE ACT ASSESSING THE TOTAL INCOME OF RS 1027,15,13,280/- A ND PASSED ORDER DATED 27/02/2012. SUBSEQUENTLY, THERE WAS SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEE COMPANY ON 06.03.2014. THE A.O FOUND THAT THE ASSESSEE COMPANY HAS CLAIMED EXPENSES INCURRED BY WAY OF GIFTS, FREEBIES, TRAVEL ALLOWANCE, MONETARY GRANTS OR ADVANTAGE IN KIND FROM PHARMACEUTICAL COMPANIES IN CONTRAVENTION OF MCI GUIDELINES IN 2009 AMOUNTING T O RS.8,68,24,374/-. HENCE THE A.O. HAS ISSUED NOTI CE U/S 148 OF THE ACT. IN COMPLIANCE THE ASSESSEE HAS FILED A LETTER DATED 15.04.2015, TO TREAT THE RETURN OF I NCOME FILED ON 09.12.2011 AS DUE COMPLIANCE. THE ASSESSEE HAS FURTHER REQUESTED FOR COPY OF THE REASONS RECO RDED FOR THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT AND WAS PROVIDED TO THE ASSESSEE. THE A.O. HAS ISSUED N OTICE U/SEC143(2) AND 142(1) OF THE ACT ALONG WITH THE QUESTIONNAIRE. THE LD.AR OF THE ASSESSEE APPEARED F ROM TIME TO TIME AND SUBMITTED THE DETAILS AND THE CASE WAS DISCUSSED. THE A.O. ON PERUSAL OF PROFIT &LOSS ACCO UNT FOUND THAT THE ASSESSEE HAS CLAIMED IN SELLING AND MARKETING EXPENSES TOWARDS GIFTS/PRESENTATION ARTIC LES AND SPONSORED FOREIGN TRIPS /HOTEL STAY. THE A.O. R ELIED ON THE CIRCULAR ISSUED BY CBDT IN AUGUST 2012 AND ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 5 - GUIDELINES ISSUED BY THE MEDICAL COUNCIL OF INDIA ( MCI) IN DECEMBER 2009. THE A.O. DEALT ON FACTS OF SELLIN G &DISTRIBUTION EXPENSES FOR 5 FINANCIAL YEARS. IN TH E COURSE OF SURVEY PROCEEDINGS, THE STATEMENT OF FINA NCE DIRECTOR WAS RECORDED REFERRED AT PARA 12.1 OF THE ORDER. THE A.O. REQUIRED THE DETAILS OF GIFTS/ PRESENTATIO N ARTICLES, SPONSORED FOREIGN TRIPS/HOTEL STAY FOR VA RIOUS MEDICAL PRACTITIONERS/DOCTORS UNDER FREEBEES AS PE R PARA 6.8.1 OF MEDICAL COUNCIL OF INDIA (MCI) NOTIFI CATION ON PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS REGULATION 2002.THE A.O. HAS REFERRED TO CBDT CIRCU LAR NO. 5/2012 DATED 1.08.2012 AT PAGE 53 PARA 12.2 OF THE ORDER. THE A.O. AT PARA 12.3 OF THE ORDER DEALT ON PROVISIONS OF SEC37(1) OF THE ACT AND EXPLANATIONS . FURTHER THE A.O. DEALT ON QUESTION NO. Q.53 RECORDE D IN STATEMENT U/SEC131 OF THE ACT IN RESPECT OF EXPENSE S. SUBSEQUENTLY THE ASSESSEE WITH THE LEGAL OPINION, H AS FILED A LETTER DATED 21-4-2014 MENTIONING THAT THE CBDT CIRCULAR IS EFFECTIVE FROM THE DATE ON WHICH THE CI RCULAR WAS ISSUED AND NOT BY THE DATE ON WHICH MCI GUIDELI NES WERE AMENDED. THE ASSESSEE ALSO FILED LETTER DATED 27- 03-2015 WITH THE JURISTIC OPINION ON THE CLAIMS. TH E A.O. DEALT ON THE RETRACTION STATEMENT OF THE ASSESSEE O N ALLOWABILITY OF CLAIM OF EXPENSES AND THE APPLICABI LITY OF CBDT CIRCULAR DATED 1.08.2012 AND AMENDMENT IN MCI ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 6 - GUIDELINES IN THE YEAR 2009 AND JUDICIAL DECISIONS AND THE A.O. HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND FINALLY OBSERVED AT PAGE 70 PARA 14.9 OF THE ORDER AS UNDER;- THE SUBMISSIONS OF THE ASSESSEE IS CONSIDERED BUT CANNOT BE ACCEPTED, AS THE EXPENSES ON DOCTORS BY W AY OF FREEBEES AND GIFTS WERE ALLOWED EXPENSES U/S 37( 1) BEING A BUSINESS EXPENSES TILL THE CIRCULAR WAS ISS UED. HOWEVER, CBDT ISSUED A CIRCULAR NO. 5/2012 IN AUG 2012 CLARIFYING THAT THE SAID EXPENSES WILL NOT BE ALLOWED U/S 37(1). THE CBDT HAS ISSUED THE CIRCULA R IN THE BACKGROUND OF AMENDMENT IN MCI GUIDELINES. THE MCI GUIDELINES WHICH WAS THERE SINCE 2002 WAS AMEND ED IN 2009.THE MEDICAL PROFESSIONALS AND THEIR PROFESS IONAL ASSOCIATIONS WERE BARRED FROM TAKING ANY GIFTS, FRE EBEES, TRAVEL ALLOWANCE, MONEY GRANTS OR ANY ADVANTAGE IN KIND FROM PHARMACEUTICAL COMPANIES BY THE FRESH AMENDMEN T ISSUED IN DEC. 2009. SO, ANY EXPENSES INCURRED BY THE WAY OF GIFTS, FREEBEES, TRAVEL ALLOWANCE, MONETARY GRANTS OR ANY ADVANTAGE IN KIND FROM PHARMACEUTICAL COMPANIES ARE IN CONTRAVENTION TO BE MCI GUIDELINES IN 2009 AND SO THESE EXPENSES ARE HIT BY EXPLANATION O F SEC 37 AND BECAME NON ALLOWABLE EXPENSES. TO FURTHER CLARIFY THE SAME HONBLE CBDT ISSUED A CIRCULAR. S O, THE CIRCULAR ISSUED BY THE HONBLE CBDT IS CLARIFICATOR Y IN ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 7 - NATURE AND WHICH CLARIFIED THAT THE EXPENSES INCURR ED ON DOCTORS WILL NOT BE ALLOWED IN THE HANDS OF PHARMACEUTICAL COMPANIES. AS THE MCI GUIDELINES AR E AMENDED FROM DEC. 2009, SO THE CIRCULAR IS EFFECTIV E FROM DEC. 2009. ACCORDINGLY THE EXPENSES CLAIMED B Y THE ASSESSEE COMPANY IN DIFFERENT YEARS AT RS. 269,57,57,193/- IN RESPECT OF FREEBIES GIVEN TO THE DOCTORS IS NOT ALLOWABLE AS DEDUCTION IN THE RESPEC TIVE YEARS. THE SAID EXPENSES IN RELATION TO CURRENT YE AR AMOUNTS TO RS. 86,824,374/- AND THE SAME IS DISALLO WED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. FINALLY THE ASSESSING OFFICER MADE DISALLOWANCE S (I) WEIGHTED DEDUCTION U/SEC 35(2AB) RS.69,49,01,450/- (II)REDUCTION IN CLAIM U/SEC 10B RS.31,20,36,983/-( III) REDUCTION IN CLAIM U/SEC 80IB/80IC/80IE OF RS 2,85,06,07,040/-(IV) FOREIGN TRAVEL EXPENSES OF RS 88,54,314/- (V) BALANCE IN DUTY DRAW BACK PASS BOOK OF RS.28,44,74,457/-(VI) BOGUS PURCHASES OF RS.21,39,414/- AND (VII) DEDUCTION U/SEC37(1) R.W. CIRCULAR 5/2012 AND ASSESSED THE TOTAL INCOME OF R S. 1035,83,37,650/- AND PASSED U/S 143(3) AND 147 OF T HE ACT ON 22.06.2015. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 8 - 4. AGGRIEVED BY THE ORDER OF THE A.O, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) CONSI DERED THE GROUNDS OF APPEAL, FINDINGS OF THE A.O AND SUBMISSIONS OF THE ASSESSEE. THE CIT(A) ON THE DIS PUTED ISSUE OF CLAIM OF MARKETING & PROMOTIONAL ACTIVITY UNDER THE SELLING AND DISTRIBUTION EXPENSES U/SEC. 37(1) HAS CONFIRMED THE ADDITION BY THE ASSESSING OFFICER AND GRANTED RELIEF IN OTHER GROUNDS OF APPEAL AND PART LY ALLOWED THE ASSESSEE APPEAL. AGGRIEVED BY THE ORDER THE CIT(A), THE ASSESSEE HAS FILED AN APPEAL WITH THE HONBLE TRIBUNAL.. 5. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS ERRED IN CONFIRMATION OF DISALLOWANCE OF MARKETING & PROMOTI ONAL EXPENSES INVOLVED IN THE PRESENT APPEAL. FURTHER, T HE LD.AR SUBSTANTIATED THE SUBMISSIONS WITH VOLUMINOUS PAPER BOOK AND THE JUDICIAL DECISIONS AS UNDER : 1. MAX HOSPITAL PITAMPURA VS. MCI (DELHI HC). 2. SYNOCOM FORMULATIONS LTD VS. DCIT IN ITA NO. 64 29 & 6428/MUM/2012. 3. UCB IND PVT LTD. VS. ITO (ITA NO. 6681/M/2013). 4. DCIT VS. PHL PHARMA LTD. IN ITA NO. 4605/MUM/20 14. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 9 - 5. DR. REDDYS LABORATORIES VS. ACIT (ITA NO. 294/HYD/2014 & 458/HYD/2015) 6. SOLVAY PHARMA INDIA LTD., VS. PCIT IN ITA NO. 3585/M/2016. 7. INDIA MEDTRONICS PVT LTD., DCIT (ITA NO. 1600/M/16) . 8. ARISTO PHARMACEUTICALS PVT LTD., ACIT (ITA NO. 5553 & 6129/M/2014) 9. ACIT VS NOVARTIS HEALTHCARE PVT LTD., (ITA NO. 2590/M/2016 & CO. 2786/M/16). 10. LIVA HEALTHCARE LTD. VS. ACIT IN ITA NO. 4791/ M/14. 11. ARISTO PHARMACEUTICALS PVT LTD. VS. ACIT IN IT A NO. 1104/M/2018 & OTHERS. 12. DCIT VS. BAYER PHARMACEUTICALS PVT LTD, ITA NO . 6222/M/2018. 6. CONTRA, THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIE S AND PERUSED THE MATERIAL ON RECORD. AT THE TIME OF HEARING THE LD. AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND OF APPEAL NOS. 1 TO 3, THEREFORE THE SAID GR OUNDS OF APPEAL ARE DISMISSED AS NOT PRESSED. THE SOLE C RUX OF THE DISPUTED ISSUE IS WITH REGARD TO DISALLOWANCE O F RS. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 10 - 8,68,24,374/- BY RELYING ON CBDT CIRCULAR NO. 5/201 2 R.W EXPLANATION 1 TO SEC. 37(1) OF THE ACT. WE OBS ERVED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDI NATE BENCH OF THE HONBLE TRIBUNAL IN FAVOUR OF THE ASSE SSEE IN THE CASE OF M/S. ARISTO PHARMACEUTICALS PVT LTD VS. ACIT IN ITA NO.5807/MUM/2017, DATED 28.06.2019 HAS OBSERVED AT PARA 8 OF THE HONBLE TRIBUNAL ORDER WH ICH IS READ AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE INVOLVED IN THE PRESENT APPEAL, I. E. WHETHER FREEBIES DISTRIBUTED TO MEDICAL PROFESSIONALS BY A PHARMACEUTICAL COMPANY IS ALLOWABLE U/S 37(1) OF TH E ACT OR NOT IN LIGHT OF CIRCULAR ISSUED BY MCI WAS SUBJECT MATTER OF DELIBERATIONS BY THE CO-ORDINATE BENCH OF ITAT, MUM BAI BENCH A IN ASSESSEES OWN CASE FOR AY 2011-12. THE CO-O RDINATE BENCH, AFTER CONSIDERING VARIOUS ASPECTS INCLUDING THE CIRCULAR ISSUED BY MCI AND ALSO CIRCULAR OF CBDT VIDE CIRCUL AR NO.5 OF 2012 HELD THAT THE ASSESSEE WAS ENTITLED FOR CLAIM OF SALES PROMOTION EXPENSES INCURRED ON DISTRIBUTION OF ARTI CLES TO THE STOCKISTS, DISTRIBUTORS, DEALERS AND DOCTORS. THE R ELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 21. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UND ER CONSIDERATION AND AFTER PERUSING THE REGULATIONS IS SUED BY THE MEDICAL COUNCIL OF INDIA, FIND THAT THE SAME LAYS D OWN THE CODE OF CONDUCT IN RESPECT OF THE DOCTORS AND OTHER MEDICAL PROFESSIONALS REGISTERED WITH IT, AND ARE NOT APPLI CABLE TO THE PHARMACEUTICALS OR ALLIED HEALTH SECTOR INDUSTRIES. RATHER, A PERUSAL OF THE PROVISIONS OF THE INDIAN MEDICAL COU NCIL ACT, 1956, REVEALS THAT THE SCOPE AND AMBIT OF STATUTORY PROVISIONS RELATING TO PROFESSIONAL CONDUCT OF REGISTERED MEDI CAL PRACTITIONERS UNDER THE INDIAN MEDICAL COUNCIL ACT, 1956 IS RESTRICTED ONLY TO THE PERSONS REGISTERED AS MEDICA L ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 11 - PRACTITIONERS WITH THE STATE MEDICAL COUNCIL AND WH OSE NAME ARE ENTERED IN THE INDIAN MEDICAL REGISTER MAINTAIN ED UNDER SEC. 21 OF THE SAID ACT. WE ARE OF THE CONSIDERED V IEW THAT THE SCHEME OF THE INDIAN MEDICAL COUNCIL ACT, 1956 NEIT HER DEALS WITH NOR PROVIDES FOR ANY CONDUCT OF ANY ASSOCIATIO N/SOCIETY AND DEALS ONLY WITH THE CONDUCT OF INDIVIDUAL REGIS TERED MEDICAL PRACTITIONERS. IN THE BACKDROP OF THE AFORE SAID FACTS, IT EMERGES THAT THE APPLICABILITY OF THE MCI REGULATIO NS WOULD ONLY COVER INDIVIDUAL MEDICAL PRACTITIONERS AND NOT THE PHARMACEUTICAL COMPANIES OR ALLIED HEALTH SECTOR IN DUSTRIES. INTERESTINGLY, THE SCOPE OF THE APPLICABILITY OF TH E MCI REGULATIONS WAS LOOKED INTO BY THE HONBLE HIGH COU RT OF DELHI IN THE CASE OF MAX HOSPITAL, PITAMPURA VS. MEDICAL COUNCIL OF INDIA (CWP NO. 1334/2013, DATED 10.01.2014). IN THE AFOREMENTIONED CASE THE MCI HAD FILED AN AFFIDAVIT BEFORE THE HIGH COURT, WHEREIN IT WAS DEPOSED BY THE COUNCIL T HAT ITS JURISDICTION IS LIMITED ONLY TO TAKE ACTION AGAINST THE REGISTERED MEDICAL PROFESSIONALS UNDER THE INDIAN M EDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS ) REGULATIONS, 2002, AND IT HAS NO JURISDICTION TO PA SS ANY ORDER AFFECTING THE RIGHTS/INTEREST OF THE PETITIONER HOS PITAL. WE ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF THE AFO RESAID DEPOSITION OF MCI THAT ITS JURISDICTION STANDS REST RICTED TO THE REGISTERED MEDICAL PROFESSIONALS, IT CAN SAFELY BE CONCLUDED THAT THE MCI REGULATIONS WOULD IN NO WAY IMPINGE ON THE FUNCTIONING OF THE ASSESSEE COMPANY WHICH IS ENGAGE D IN THE BUSINESS OF MANUFACTURING AND SALE OF PHARMACEUTICA L AND ALLIED PRODUCTS. WE THUS, IN THE BACKDROP OF OUR AF ORESAID DELIBERATIONS ARE OF THE CONSIDERED VIEW THAT THE C ODE OF CONDUCT ENSHRINED IN THE MCI REGULATIONS ARE SOLELY MEANT TO BE FOLLOWED AND ADHERED BY MEDICAL PRACTITIONERS/DO CTORS, AND SUCH A REGULATION OR CODE OF CONDUCT WOULD NOT COVER THE PHARMACEUTICAL COMPANY OR HEALTHCARE SECTOR IN ANY MANNER. WE ARE FURTHER OF THE VIEW THAT IN 9 ARISTO PHARMAC EUTICALS P LTD THE BACKDROP OF OUR AFORESAID OBSERVATIONS, AS THE MEDICAL COUNCIL OF INDIA DOES NOT HAVE ANY JURISDICTION UND ER LAW TO PASS ANY ORDER OR REGULATION AGAINST ANY HOSPITAL, PHARMACEUTICAL COMPANY OR ANY HEALTHCARE SECTOR, TH EN ANY ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 12 - SUCH REGULATION ISSUED BY IT CANNOT HAVE ANY PROHIB ITORY EFFECT ON THE MANNER IN WHICH THE PHARMACEUTICAL COMPANY L IKE THE ASSESSEE CONDUCTS ITS BUSINESS. ON THE BASIS OF OUR AFORESAID OBSERVATIONS, WE ARE UNABLE TO COMPREHEND THAT NOW WHEN THE MCI HAS NO JURISDICTION UPON THE PHARMACEUTICAL COM PANIES, THEN WHERE COULD THERE BE AN OCCASION FOR CONCLUDIN G THAT THE ASSESSEE COMPANY HAD VIOLATED ANY REGULATION ISSUED BY MCI. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT EVEN IF THE ASSESSEE HAD INCUR RED EXPENDITURE ON DISTRIBUTION OF FREEBIES TO DOCTOR S AND MEDICAL PRACTITIONERS, THE SAME THOUGH MAY NOT BE I N CONFORMITY WITH THE INDIAN MEDICAL COUNCIL (PROFESS IONAL CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002 (A S AMENDED ON 10.12.2009), HOWEVER, AS THE SAME ONLY REGULATES THE CODE OF CONDUCT OF THE MEDICAL PRACTITIONERS/DOCTORS, TH EREFORE, IN THE ABSENCE OF ANY PROHIBITION ON THE PHARMACEUTICA L COMPANIES IN INCURRING OF SUCH SALES PROMOTION EXPE NSES, THE LATTER CANNOT BE HELD TO HAVE INCURRED AN EXPENDITU RE FOR A PURPOSE WHICH IS AN OFFENCE OR IS PROHIBITED BY LAW . IN THIS REGARD WE ARE REMINDED OF THE MAXIM EXPRESSIO UNIU S EST EXCLUSIO ALTERIUS, WHICH PROVIDES THAT IF A PARTIC ULAR EXPRESSION IN THE STATUTE IS EXPRESSLY STATED FOR A PARTICULAR CLASS OF ASSESSEE, THEN BY IMPLICATION WHAT HAS NOT BEEN STATED OR EXPRESSED IN THE STATUTE HAS TO BE EXCLUD ED FOR OTHER CLASS OF ASSESSES. THUS, NOW WHEN THE MCI REGULATIO NS ARE APPLICABLE TO MEDICAL PRACTITIONERS REGISTERED WITH THE MCI, THEN THE SAME CANNOT BE MADE APPLICABLE TO PHARMACE UTICAL COMPANIES OR OTHER ALLIED HEALTHCARE COMPANIES. 22. WE SHALL NOW ADVERT TO THE CBDT CIRCULAR NO. 5/ 2012, DATED 01.08.2012. WE FIND THAT THE AFORESAID CBDT C IRCULAR READS AS UNDER:- INADMISSIBILITY OF EXPENSES INCURRED IN PROVIDING FREEBEES TO MEDICAL PRACTITIONER BY PHARMACEUTICAL AND ALLIED H EALTH SECTOR INDUSTRY CIRCULAR NO. 5/2012 [F.NO. 225/142/ 2012- ITA.II], DATED 1-8-2012 ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 13 - IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THAT SOME PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES ARE PROVIDING FREEBESS (FREEBIES) TO MEDICAL PRACTITION ER AND THEIR PROFESSIONAL ASSOCIATIONS IN VIOLATION OF THE REGUL ATIONS ISSUED BY MEDICAL COUNCIL OF INDIA (THE COUNCIL) WHICH I S A REGULATORY BODY CONSTITUTED UNDER THE MEDICAL COUNC IL ACT, 1956 2. THE COUNCIL IN EXERCISE OF ITS STATUTORY POWERS AMENDED THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQU ETTE AND ETHICS) REGULATIONS, 2002 (THE REGULATIONS) ON 10-1 2-2009 IMPOSING A PROHIBITION ON THE MEDICAL PRACTITIONER AND THEIR PROFESSIONAL ASSOCIATIONS FROM TAKING ANY GIFT, TRA VEL FACILITY, HOSPITALITY, CASH OR MONETARY GRANT FROM THE PHARMA CEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES. 3. SECTION 37(1) OF INCOME TAX ACT PROVIDES FOR DED UCTION OF ANY REVENUE EXPENDITURE (OTHER THAN THOSE FAILING U NDER SECTIONS 30 TO 36) FROM THE BUSINESS INCOME IF SUCH EXPENSE IS LAID OUT/EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PUR POSE OF BUSINESS OR PROFESSION. HOWEVER, THE EXPLANATION AP PENDED TO THIS SUB-SECTION DENIES CLAIM OF ANY SUCH EXPENSES, IF THE SAME HAS BEEN INCURRED FOR A PURPOSE WHICH IS EITHE R AN OFFENCE OR PROHIBITED BY LAW. THUS, THE CLAIM OF ANY EXPENSE INCURRED IN PROVIDIN G ABOVE MENTIONED OR SIMILAR FREEBEES IN VIOLATION OF THE P ROVISIONS OF INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQU ETTE AND ETHICS) REGULATIONS, 2002 SHALL BE INADMISSIBLE UND ER SECTION 37(1) OF THE INCOME TAX ACT BEING AN EXPENSE PROHIB ITED BY THE LAW. THIS DISALLOWANCE SHALL BE MADE IN THE HANDS O F SUCH PHARMACEUTICAL OR ALLIED HEALTH SECTOR INDUSTRIES O R OTHER ASSESSEE WHICH HAS PROVIDED AFORESAID FREEBEES AND CLAIMED IT AS A DEDUCTIBLE EXPENSE IN ITS ACCOUNTS AGAINST INCOME. 4. IT IS ALSO CLARIFIED THAT THE SUM EQUIVALENT TO VALUE OF FREEBEES ENJOYED BY THE AFORESAID MEDICAL PRACTITIO NER OR PROFESSIONAL ASSOCIATIONS IS ALSO TAXABLE AS BUSINE SS INCOME ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 14 - OR INCOME FROM OTHER SOURCES AS THE CASE MAY BE DEP ENDING ON THE FACTS OF EACH CASE. THE ASSESSING OFFICERS OF S UCH MEDICAL PRACTITIONER OR PROFESSIONAL ASSOCIATIONS SHOULD EX AMINE THE SAME AND TAKE AN APPROPRIATE ACTION. THIS MAY BE BROUGHT TO THE NOTICE OF ALL THE OFFICE RS OF THE CHARGE FOR NECESSARY ACTION. WE MAY HEREIN OBSERVE THAT A PERUSAL OF THE AFORESA ID CBDT CIRCULAR REVEALS THAT THE FREEBIES PROVIDED BY TH E PHARMACEUTICAL COMPANIES OR ALLIED HEALTH SECTOR IN DUSTRIES TO MEDICAL PRACTITIONERS OR THEIR PROFESSIONAL ASSOCIA TIONS IN VIOLATION OF THE PROVISIONS OF INDIAN MEDICAL COUNC IL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULA TIONS, 2002 SHALL BE INADMISSIBLE UNDER SEC. 37(1) OF THE INCOM E TAX ACT, 1961, AS THE SAME WOULD BE AN EXPENSE PROHIBITED BY THE LAW. WE ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY U S HEREINABOVE, THE CODE OF CONDUCT ENSHRINED IN THE N OTIFICATIONS ISSUED BY MCI THOUGH IS TO BE STRICTLY FOLLOWED AND ADHERED BY MEDICAL PRACTITIONERS/DOCTORS REGISTERED WITH THE M CI, HOWEVER THE SAME CANNOT IMPINGE ON THE CONDUCT OF T HE PHARMACEUTICAL COMPANIES OR OTHER HEALTHCARE SECTOR IN ANY MANNER. WE FIND THAT NOTHING HAS BROUGHT ON RECORD WHICH COULD PERSUADE US TO CONCLUDE THAT THE REGULATIONS OR NOTIFICATIONS ISSUED BY MCI WOULD AS PER THE LAW AL SO BE BINDING ON THE PHARMACEUTICAL COMPANIES OR OTHER AL LIED HEALTHCARE SECTOR. RATHER, THE CONCESSION MADE BY T HE MCI BEFORE THE HONBLE HIGH COURT OF DELHI IN THE CASE OF MAX HOSPITAL VS. MCI (CWP NO. 1334/2013, DATED 10.01.20 14) FORTIFIES OUR AFORESAID VIEW THAT MCI HAS NO JURISD ICTION TO PASS ANY ORDER OR REGULATION AGAINST ANY HOSPITAL, PHARMACEUTICAL COMPANY OR ANY HEALTHCARE SECTOR. WE FURTHER FIND THAT MCI HAD BY ADDING PARA 6.8.1 TO ITS EARLI ER NOTIFICATION ISSUED AS INDIAN MEDICAL COUNCIL PROF ESSIONAL (CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002 HAD EVEN PROVIDED FOR ACTION WHICH SHALL BE TAKEN AGAINST ME DICAL PRACTITIONERS IN CASE THEY CONTRAVENE THE PROHIBITI ONS PLACED ON THEM. WE FIND FROM A PERUSAL OF PARA 6.8.1 THAT IN CASE OF ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 15 - RECEIVING OF ANY GIFT FROM ANY PHARMACEUTICAL OR AL LIED HEALTH CARE INDUSTRY AND THEIR SALES PEOPLE OR REPRESENTAT IVES, ACTION STANDS RESTRICTED TO THE MEMBERS WHO ARE REGISTERED WITH THE MCI. IN OTHER WORDS THE CENSURE/ACTION AS HAD BEEN SUGGESTED ON THE VIOLATION OF THE CODE OF CONDUCT IS ONLY FOR THE MEDICAL PRACTITIONERS AND NOT FOR THE PHARMACEUTICAL COMPAN IES OR ALLIED HEALTH SECTOR INDUSTRIES. WE 12 ARISTO PHARM ACEUTICALS P LTD ARE THUS OF THE CONSIDERED VIEW THAT THE REGU LATIONS ISSUED BY MCI ARE QUA THE DOCTORS/MEDICAL PRACTITIO NERS REGISTERED WITH MCI, AND THE SAME SHALL IN NO WAY I MPINGE UPON THE CONDUCT OF THE PHARMACEUTICAL COMPANIES. A S A LOGICAL COROLLARY TO IT, IF THERE IS ANY VIOLATION OR PROHIBITION AS PER MCI REGULATION IN TERMS OF EXPLANATION TO SEC. 37(1), THEN THE SAME WOULD DEBAR THE DOCTORS OR THE REGISTERED MEDICAL PRACTITIONERS AND NOT THE PHARMACEUTICAL COMPANIES AND THE ALLIED HEALTHCARE SECTOR FOR CLAIMING THE SAME AS A N EXPENDITURE. 23. WE FIND THAT THE CBDT AS PER ITS CIRCULAR NO. 5 /2012, DATED 01.08.2012 HAD ENLARGED THE SCOPE AND APPLICA BILITY OF INDIAN MEDICAL COUNCIL REGULATION, 2002, BY MAKING THE SAME APPLICABLE EVEN TO THE PHARMACEUTICAL COMPANIES OR ALLIED HEALTHCARE SECTOR INDUSTRIES. WE ARE OF THE CONSIDE RED VIEW THAT SUCH AN ENLARGEMENT OF THE SCOPE OF MCI REGULA TION TO THE PHARMACEUTICAL COMPANIES BY THE CBDT IS WITHOUT ANY ENABLING PROVISION EITHER UNDER THE INCOME TAX ACT OR UNDER THE INDIAN MEDICAL COUNCIL REGULATIONS. WE ARE OF A STRONG CONVICTION THAT THE CBDT CANNOT PROVIDE CASUS OMISS US TO A STATUTE OR NOTIFICATION OR ANY REGULATION WHICH HAS NOT BEEN EXPRESSLY PROVIDED THEREIN. STILL FURTHER, THOUGH T HE CBDT CAN TONE DOWN THE RIGOURS OF LAW IN ORDER TO ENSURE A F AIR ENFORCEMENT OF THE PROVISIONS BY ISSUING CIRCULARS FOR CLARIFYING THE STATUTORY PROVISIONS, HOWEVER, IT IS DIVESTED OF ITS POWER TO CREATE A NEW IMPAIRMENT ADVERSE TO AN ASSESSEE OR TO A CLASS OF ASSESSEE WITHOUT ANY SANCTION OR A UTHORITY OF LAW. WE ARE OF THE CONSIDERED VIEW THAT THE CIRCULA RS WHICH ARE ISSUED BY THE CBDT MUST CONFIRM TO THE TAX LAWS AND THOUGH ARE MEANT FOR THE PURPOSE OF GIVING ADMINIST RATIVE ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 16 - RELIEF OR FOR CLARIFYING THE PROVISIONS OF LAW, BUT THE SAME CANNOT IMPOSE A BURDEN ON THE ASSESSEE, LEAVE ALONE CREATING A NEW BURDEN BY ENLARGING THE SCOPE OF A REGULATION ISSUED UNDER A DIFFERENT ACT SO 13 ARISTO PHARMACEUTICALS P LTD AS TO IMPOSE ANY KIND OF HARDSHIP OR LIABILITY ON THE ASS ESSEE. WE THUS, ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE RIGOURS CONTEMPLATED IN THE CBDT CIRCULAR NO. 5/201 2, DATED 01.08.2012, WHICH WE WOULD NOT HESITATE TO OBSERVE, DESPITE ABSENCE OF ANYTHING PROVIDED BY THE MCI IN ITS REGU LATIONS ISSUED UNDER THE MEDICAL COUNCIL ACT, 1956, CONTEMP LATING THAT THE REGULATION OF CODE OF CONDUCT WOULD ALSO C OVER THE PHARMACEUTICAL COMPANIES AND HEALTHCARE SECTOR, HOW EVER PROVIDES THAT IN CASE A PHARMACEUTICAL OR ALLIED HE ALTH SECTOR INDUSTRY INCURS ANY EXPENDITURE IN PROVIDING ANY GI FT, TRAVEL FACILITY, CASH, MONETARY GRANT OR SIMILAR FREEBIES TO MEDICAL PRACTITIONERS OR THEIR PROFESSIONAL ASSOCIATIONS IN VIOLATION OF THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, E TIQUETTE AND ETHICS) REGULATIONS, 2002, THE EXPENDITURE INCU RRED ON THE SAME SHALL BE DISALLOWED IN THE HANDS OF SUCH PHARM ACEUTICAL OR ALLIED HEALTH SECTOR INDUSTRY. WE ARE OF THE CON SIDERED VIEW THAT THE BURDEN IMPOSED BY THE CBDT VIDE ITS AFORES AID CIRCULAR NO. 5/2012, DATED 01.08.2012 ON THE PHARMA CEUTICAL OR ALLIED HEALTH SECTOR INDUSTRIES, DESPITE ABSENCE OF ANY ENABLING PROVISION UNDER THE INCOME TAX LAW OR UNDE R THE INDIAN MEDICAL COUNCIL REGULATIONS, CLEARLY IMPINGE S ON THE CONDUCT OF THE PHARMACEUTICAL AND ALLIED HEALTH SEC TOR INDUSTRIES IN CARRYING OUT ITS BUSINESS. WE THUS, I N THE ABSENCE OF ANY SANCTION OR AUTHORITY OF LAW ON THE BASIS OF WHICH IT COULD SAFELY BE CONCLUDED THAT THE EXPENDI TURE INCURRED BY THE ASSESSEE COMPANY ON SALES PROMOTION EXPENSES BY WAY OF DISTRIBUTION OF ARTICLES TO THE STOCKISTS, DISTRIBUTORS, DEALERS, CUSTOMERS AND DOCTORS, IS IN THE NATURE OF AN EXPENDITURE WHICH HAD BEEN INCURRED FOR ANY P URPOSE WHICH IS EITHER AN OFFENCE OR PROHIBITED BY LAW, TH US CONCLUDE THAT THE SAME WOULD NOT BE HIT BY THE EXPLANATION T O SEC. 37(1) OF THE ACT. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 17 - 24. ALTERNATIVELY, WE ARE OF THE CONSIDERED VIEW TH AT IT IS A TRITE LAW THAT A CBDT CIRCULAR WHICH CREATES A BURD EN OR LIABILITY OR IMPOSES A NEW KIND OF IMPARITY, CANNOT BE RECKONED RETROSPECTIVELY. WE ARE OF THE CONSIDERED VIEW THAT THOUGH A BENEVOLENT CIRCULAR MAY APPLY RETROSPECTIV ELY, BUT A CIRCULAR IMPOSING A BURDEN HAS TO BE APPLY PROSPECT IVELY ONLY. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIRECTOR OF INCOME-TAX VS. S.R.M.B DAIRY FARMING PVT. LTD. (2018) 400 ITR 9 (S C). THE HONBLE APEX COURT IN ITS AFORESAID JUDGMENT HAS HE LD THAT BENEFICIAL CIRCULARS HAD TO BE APPLIED RETROSPECTIV ELY, WHILE OPPRESSIVE CIRCULARS HAD TO BE APPLIED PROSPECTIVEL Y, OBSERVING AS UNDER: 25. IT IS IN THIS CONTEXT, THE QUESTION ARISES, WH EN THE INSTRUCTION EXPRESSLY STATES THAT THE BENEFIT OF TH E SAID POLICY IS PROSPECTIVE, STILL CAN THE COURTS PLACE A CONSTR UCTION ON SUCH INSTRUCTION SO AS TO MAKE IT RETROSPECTIVE. IN THIS CONTEXT, THE APEX COURT IN THE CASE OF CCE V. MYSORE ELECTRICALS INDUSTRIES LTD. REPORTED IN [2006] 204 ELT 517 (SC) : [2007] 8 RC 1, DEALING WITH THE QUESTION HOW A BENEFICIAL CIRCULAR IS TO BE CONSTRUED, HAS APPROACHED THIS QUESTION IN THE FOLL OWING MANNER. AT PARAGRAPH 13 OF THE JUDGMENT, IT IS STAT ED THAT THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE CIRCULAR BEING OPPRESSIVE AND AGAINST THE RESPONDENT, HAS TO APPLY ONLY PROSPECTIVELY AND CANNOT BE APPLIED RETROSPECTIVELY . IN OTHER WORDS, A BENEFICIAL CIRCULAR HAS TO BE APPLIED PROS PECTIVELY. THUS, WHEN THE CIRCULAR IS AGAINST THE ASSESSEE THE Y HAVE A RIGHT TO CLAIM THE ENFORCEMENT OF THE SAME PROSPECT IVELY. IT IS FURTHER SUBMITTED THAT FOR THE PERIOD IN QUESTION, TRADE NOTICES HAD BEEN ISSUED CLASSIFYING THE CIRCUIT BREAKERS UN DER HEADING NO. 85.35 OR 85.36. WHEN THE APPROVED CLASS IFICATION WAS PROPOSED TO BE REVISED TO RECLASSIFY THE SINGLE PANEL CIRCUIT BREAKERS UNDER HEADING NO.85.37 OF THE TARI FF, SUCH RE- CLASSIFICATION CAN TAKE EFFECT ONLY PROSPECTIVELY F ROM THE DATE OF COMMUNICATION OF THE SHOW-CAUSE NOTICE PROPOSING RECLASSIFICATION. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 18 - WE FIND THAT THE AFORESAID CBDT CIRCULAR NO. 5/2012 , DATED 01.08.2012 HAD CAME UP FOR CONSIDERATION BEFORE A C OORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. PHL P HARMA (P) LTD. (2017) 49 CCH 124 (MUM), WHEREIN THE TRIBUNAL AFTER DELIBERATING AT LENGTH ON TWO ASPECTS VIZ. (I) VALI DITY OF THE CIRCULAR IN THE BACKDROP OF ENLARGEMENT OF SCOPE OF MCI REGULATION TO THE PHARMACEUTICAL COMPANIES BY THE C BDT, WITHOUT ANY ENABLING 15 ARISTO PHARMACEUTICALS P LT D PROVISIONS EITHER UNDER THE INCOME TAX LAW OR UNDER THE INDIAN MEDICAL COUNCIL REGULATIONS; AND (II). THE P ROSPECTIVE APPLICABILITY OF THE CIRCULAR, HAD OBSERVED AS UNDE R: 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS MADE B Y LD. CIT DR AS WELL AS LD. SR. COUNSEL, MR J.D. MISTRY, PERU SED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND M ATERIAL REFERRED TO BEFORE US. THE ENTIRE CONTROVERSY REVOL VES AROUND, WHETHER THE EXPENDITURES IN QUESTION INCURRED BY TH E ASSESSEE (A PHARMACEUTICAL COMPANY) IS HIT BY EXPLANATION 1 BELOW SECTION 37(1) IN VIEW OF CBDT CIRCULAR DATED 01.08. 2012, INTERPRETING THE AMENDMENT DATED 10.12.2009 BROUGHT IN INDIAN MEDICAL COUNCIL REGULATION 2002 OR NOT. THE BREAK-UP OF SALES PROMOTION EXPENSES, WHICH HAS BEEN DISALLO WED BY THE AO, ARE AS UNDER: SR.NO PARTICULARS OF EXPENSES AMOUNT (IN RS.) 1 CUSTOMER RELATIONSHIP MANAGEMENT EXPENSE S (CRM) 7,61,96,260 2 KEY ACCOUNT MANAGEMENT EXPENSES(KAM) 2,56,68,509 3 GIFT ARTICLES 9,20,22,518 4 COST OF S AMPLES 3,60,85,320 TOTAL 22,99,72,60 7/- THE NATURE OF AFORESAID EXPENSES HAS ALREADY BEEN E XPLAINED ABOVE. NOW WHETHER THE NATURE OF SUCH EXPENDITURE I NCURRED BY THE ASSESSEE IS TO BE DISALLOWED IN VIEW OF THE CBDT CIRCULAR DATED 01.08.2012. FOR THE SAKE OF READY RE FERENCE, THE SAID CBDT CIRCULAR NO.5/2012 IS REPRODUCED HERE UNDER: INADMISSIBILITY OF EXPENSES INCURRED IN PROVIDING FREEBEES TO MEDICAL PRACTITIONER BY PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY CIRCULAR NO. 5/2012 [F. NO. 225/142/2012-ITA.II], D ATED 1-8- 2012 ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 19 - IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THAT SOME PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES ARE PROVIDING FREEBEES (FREEBIES) TO MEDICAL PRACTITION ERS AND THEIR PROFESSIONAL ASSOCIATIONS IN VIOLATION OF THE REGUL ATIONS ISSUED BY MEDICAL COUNCIL OF INDIA (THE 'COUNCIL') WHICH I S A REGULATORY BODY CONSTITUTED UNDER THE MEDICAL COUNC IL ACT, 1956. 2. THE COUNCIL IN EXERCISE OF ITS STATUTORY POWERS AMENDED THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQU ETTE AND ETHICS) REGULATIONS, 2002 (THE REGULATIONS) ON 10-1 2-2009 IMPOSING A PROHIBITION ON THE MEDICAL PRACTITIONER AND THEIR PROFESSIONAL ASSOCIATIONS FROM TAKING ANY GIFT, TRA VEL FACILITY, 16 ARISTO PHARMACEUTICALS P LTD HOSPITALITY, CASH O R MONETARY GRANT FROM THE PHARMACEUTICAL AND ALLIED HEALTH SEC TOR INDUSTRIES. 3. SECTION 37(1) OF INCOME TAX ACT PROVIDES FOR DED UCTION OF ANY REVENUE EXPENDITURE (OTHER THAN THOSE FAILING U NDER SECTIONS 30 TO 36) FROM THE BUSINESS INCOME IF SUCH EXPENSE IS LAID OUT/EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PUR POSE OF BUSINESS OR PROFESSION. HOWEVER, THE EXPLANATION AP PENDED TO THIS SUB-SECTION DENIES CLAIM OF ANY SUCH EXPENSE, IF THE SAME HAS BEEN INCURRED FOR A PURPOSE WHICH IS EITHER AN OFFENCE OR PROHIBITED BY LAW. THUS, THE CLAIM OF ANY EXPENSE I NCURRED IN PROVIDING ABOVE MENTIONED OR SIMILAR FREEBEES IN VI OLATION OF THE PROVISIONS OF INDIAN MEDICAL COUNCIL (PROFESSIO NAL CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002 SH ALL BE INADMISSIBLE UNDER 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 PROVI DED AFORESAID FREEBEES AND CLAIMED IT AS A DEDUCTIBLE E XPENSE IN ITS ACCOUNTS AGAINST INCOME. 4. IT IS ALSO CLARIFIED THAT THE SUM EQUIVALENT TO VALUE OF FREEBEES ENJOYED BY THE AFORESAID MEDICAL PRACTITIO NER OR ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 20 - PROFESSIONAL ASSOCIATIONS IS ALSO TAXABLE AS BUSINE SS INCOME OR INCOME FROM OTHER SOURCES AS THE CASE MAY BE DEP ENDING ON THE FACTS OF EACH CASE. THE ASSESSING OFFICERS OF S UCH MEDICAL PRACTITIONER OR PROFESSIONAL ASSOCIATIONS SHOULD EX AMINE THE SAME AND TAKE AN APPROPRIATE ACTION. THIS MAY BE BR OUGHT TO THE NOTICE OF ALL THE OFFICERS OF THE CHARGE FOR NE CESSARY ACTION. FROM THE PERUSAL OF THE AFORESAID BOARD CIRCULAR, I T CAN BE SEEN THAT HEAVY RELIANCE HAS BEEN PLACED BY THE CBD T ON THE CIRCULARS ISSUED BY THE MEDICAL COUNCIL OF INDIA, W HICH IS THE REGULATORY BODY CONSTITUTED UNDER THE MEDICAL COUN CIL ACT, 1956. ONE SUCH REGULATION HAS BEEN ISSUED IS INDI AN MEDICAL COUNCIL PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002. THE SAID REGULATION DEALS WITH THE PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS FOR REGI STERED MEDICAL PRACTITIONERS ONLY. CHAPTER 6 OF THE SAID REGULATION/NOTIFICATION DEALS WITH UNETHICAL ACTS, WHEREBY A PHYSICIAN OR MEDICAL PRACTITIONERS SHALL NOT AID OR ABET OR COMMIT ANY OF THE ACTS ILLUSTRATED IN CLAUSE 6.1 TO 6.7 OF THE SAID REGULATION WHICH SHALL BE CONSTRUED AS UNETHIC AL. CLAUSE 6.8 HAS BEEN ADDED (BY WAY OF AMENDMENT DATED 10.12 .2009) IN TERMS OF NOTIFICATION PUBLISHED ON 14.12.2009 IN GAZETTE OF INDIA. THE SAID CLAUSE READS AS UNDER:- 6.8 CODE OF CONDUCT FOR DOCTORS AND PROFESSIONAL A SSOCIATION OF DOCTORS IN THEIR RELATIONSHIP WITH PHARMACEUTICA L AND ALLIED HEALTH SECTOR INDUSTRY. 6.8.1 IN DEALING WITH PHARMACEUTICAL AND ALLIED HEA LTH SECTOR INDUSTRY, A MEDICAL PRACTITIONER SHALL FOLLOW AND A DHERE TO THE STIPULATIONS GIVEN BELOW: A) GIFTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY GIFT FROM ANY PHARMACEUTICAL OR ALLIED HEALTH CARE INDUSTRY A ND THEIR SALES PEOPLE OR REPRESENTATIVES. B) TRAVEL FACILITIES: A MEDICAL PRACTITIONER SHALL NOT ACCEPT A ANY TRAVEL FACILITY INSIDE THE COUNTRY OR OUTSIDE, INCLUDING RAIL, ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 21 - AIR, SHIP, CRUISE TICKETS, PAID VACATIONS ETC. FROM ANY PHARMACEUTICAL OR ALLIED HEALTHCARE INDUSTRY OR THE IR 17 ARISTO PHARMACEUTICALS P LTD REPRESENTATIVES FOR SELF AND FAMILY MEMBERS FOR VACATION OR FOR ATTENDING CONFERENCES, SEMINARS, WORKSHOPS, CME PROGRAMME ETC AS A DELEGATE. C) HOSPITALITY: A MEDICAL PRACTITIONER SHALL NOT AC CEPT INDIVIDUALLY ANY HOSPITALITY LIKE HOTEL ACCOMMODATI ON FOR SELF AND FAMILY MEMBERS UNDER ANY PRETEXT. D) CASH OR MONETARY GRANTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY CASH OR MONETARY GRANTS FROM ANY PHARMA CEUTICAL AND ALLIED HEALTHCARE INDUSTRY FOR INDIVIDUAL PURPO SE IN INDIVIDUAL CAPACITY UNDER ANY PRETEXT. FUNDING FOR MEDICAL RESEARCH, STUDY ETC. CAN ONLY BE RECEIVED THROUGH A PPROVED INSTITUTIONS BY MODALITIES LAID DOWN BY LAW / RULES / GUIDELINES ADOPTED BY SUCH APPROVED INSTITUTIONS, I N A TRANSPARENT MANNER. IT SHALL ALWAYS BE FULLY DISCLO SED. E) MEDICAL RESEARCH: A MEDICAL PRACTITIONER MAY CAR RY OUT, PARTICIPATE IN WORK, IN RESEARCH PROJECTS FUNDED BY PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRIES. A MEDICAL PRACTITIONER IS OBLIGED TO KNOW THAT THE FULFILMENT OF THE FOLLOWING ITEMS: (I) TO (VII) WILL BE AN IMPERATIVE FOR UNDERTAKING ANY RESEARCH ASSIGNMENT / PROJECT FUNDED BY INDUSTRY FOR BEING P ROPER AND ETHICAL. THUS, IN ACCEPTING SUCH A POSITION A MEDIC AL PRACTITIONER SHALL:- (I) ENSURE THAT THE PARTICULAR RESEARCH PROPOSAL(S) HAS THE DUE PERMISSION FROM THE COMPETENT CONCERNED AUTHORITIES . (II) ENSURE THAT SUCH A RESEARCH PROJECT(S) HAS THE CLEARANCE OF NATIONAL/ STATE / INSTITUTIONAL ETHICS COMMITTEES / BODIES. (III) ENSURE THAT IT FULFILS ALL THE LEGAL REQUIREM ENTS PRESCRIBED FOR MEDICAL RESEARCH. (IV) ENSURE THAT THE SOURCE AND AMOUNT OF FUNDING I S PUBLICLY DISCLOSED AT THE BEGINNING ITSELF. (V) ENSURE THAT PROPER CARE AND FACILITIES ARE PROV IDED TO HUMAN VOLUNTEERS, IF THEY ARE NECESSARY FOR THE RES EARCH PROJECT(S). ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 22 - (VI) ENSURE THAT UNDUE ANIMAL EXPERIMENTATIONS ARE NOT DONE AND WHEN THESE ARE NECESSARY THEY ARE DONE IN A SCI ENTIFIC AND A HUMANE WAY. (VII) ENSURE THAT WHILE ACCEPTING SUCH AN ASSIGNMEN T A MEDICAL PRACTITIONER SHALL HAVE THE FREEDOM TO PUBL ISH THE RESULTS OF THE RESEARCH IN THE GREATER INTEREST OF THE SOCIETY BY INSERTING SUCH A CLAUSE IN THE MOU OR ANY OTHER DOC UMENT / AGREEMENT FOR ANY SUCH ASSIGNMENT. F) MAINTAINING PROFESSIONAL AUTONOMY: IN DEALING WI TH PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRY A MED ICAL PRACTITIONER SHALL ALWAYS ENSURE THAT THERE SHALL N EVER BE ANY COMPROMISE EITHER WITH HIS / HER OWN PROFESSIONAL A UTONOMY AND / OR WITH THE AUTONOMY AND FREEDOM OF THE MEDIC AL INSTITUTION. G) AFFILIATION: A MEDICAL PRACTITIONER MAY WORK FOR PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRIES IN ADVISORY CAPACITIES, AS CONSULTANTS, AS RESEARCHERS, AS TREA TING DOCTORS OR IN ANY OTHER PROFESSIONAL CAPACITY. IN DOING SO, A MEDICAL PRACTITIONER SHALL ALWAYS: (I) ENSURE THAT HIS PROF ESSIONAL INTEGRITY AND FREEDOM ARE MAINTAINED. (II) ENSURE T HAT PATIENTS INTERESTS ARE NOT COMPROMISED IN ANY WAY. (III) ENSURE THAT SUCH AFFILIATIONS ARE WITHIN THE LAW. ( IV) ENSURE THAT SUCH AFFILIATIONS / EMPLOYMENTS ARE FULLY TRAN SPARENT AND DISCLOSED. 18 ARISTO PHARMACEUTICALS P LTD H) ENDOR SEMENT: A MEDICAL PRACTITIONER SHALL NOT ENDORSE ANY DRUG OR PRODUCT OF THE INDUSTRY PUBLICALLY. ANY STUDY CONDUCTED ON THE EFFICACY OR OTHERWISE OF SUCH PRODUCTS SHALL BE PRESENTED TO AND / OR THROUGH APPROPRIATE SCIENTIFIC BODIES OR PUBLISHED IN APPROPRIATE SCIENTIFIC JOURNALS IN A PROPER WAY. 6. ON A PLAIN READING OF THE AFORESAID NOTIFICATION , WHICH HAS BEEN HEAVILY RELIED UPON BY THE DEPARTMENT, IT IS Q UITE 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 DEA LING WITH PHARMACEUTICAL COMPANIES AND ALLIED HEALTH SECTOR I NDUSTRY. IT ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 23 - PROVIDES GUIDELINES TO THE MEDICAL PRACTITIONERS OF THEIR ETHICAL CODES AND MORAL CONDUCT. NOWHERE THE REGULATION OR THE NOTIFICATION MENTIONS THAT SUCH A REGULATION OR COD E OF CONDUCT WILL COVER PHARMACEUTICAL 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 COMPAN IES IN ANY MANNER. ON THE CONTRARY, BEFORE US THE LEARNED SENI OR COUNSEL, SHRI MISTRY BROUGHT TO OUR NOTICE THE JUDGMENT OF H ONBLE DELHI HIGH COURT IN THE CASE OF MAX HOSPITAL VS. MCI IN W PC 1334/2013 JUDGMENT DATED 10.01.2014, WHEREIN THE ME DICAL COUNCIL OF INDIA ADMITTED THAT THE INDIAN MEDICAL C OUNCIL REGULATION OF 2002 HAS JURISDICTION TO TAKE ACTION ONLY AGAINST THE MEDICAL PRACTITIONERS AND NOT TO HEALTH SECTOR INDUSTRY. RELEVANT PORTION OF THE SAID JUDGMENT READS AS UNDE R: 6. THE PETITIONER'S GRIEVANCE IS TWOFOLD. FIRSTLY, THAT SINCE THE MEDICAL COUNCIL OF INDIA (PROFESSIONAL CONDUCT, ETI QUETTE AND ETHICS) REGULATIONS, 2002 (THE REGULATIONS) HAVE BE EN FRAMED IN EXERCISE OF THE POWER CONFERRED UNDER SECTION 20 -A READ WITH SECTION 33 (M) OF THE INDIAN MEDICAL COUNCIL A CT, 1956, THESE REGULATIONS DO NOT GOVERN OR HAVE ANY CONCERN WITH THE FACILITIES, INFRASTRUCTURE OR RUNNING OF THE HOSPIT ALS AND SECONDLY, THAT THE ETHICS COMMITTEE OF THE MCI ACTI NG UNDER THE REGULATIONS HAD NO JURISDICTION TO PASS ANY DIR ECTION OR JUDGMENT ON THE INFRASTRUCTURE OF ANY HOSPITAL WHIC H POWER RESTS SOLELY WITH THE CONCERNED STATE GOVT. THE CAS E OF THE PETITIONER IS THAT THE PETITIONER HOSPITAL IS GOVER NED BY THE DELHI NURSING HOMES REGISTRATION ACT, 1953. IT IS U RGED THAT IN FACT, AN INSPECTION WAS ALSO CARRIED OUT ON 22.07.2 011 BY DR. R.N. DASS, MEDICAL SUPERINTENDENT (NURSING HOME) UN DER THE DIRECTORATE OF HEALTH SERVICES, GOVT. OF NCT OF DEL HI AND THE NECESSARY EQUIPMENTS AND FACILITIES WERE FOUND TO B E IN ORDER WHICH NEGATES THE OBSERVATIONS DATED 27.10.2012 OF THE ETHICS COMMITTEE OF THE MCI. IT IS ALSO THE PLEA OF THE PETITIONER HOSPITAL THAT THE PETITIONER WAS NOT PRO VIDED AN OPPORTUNITY OF BEING HEARD AND THUS THE PRINCIPLES OF NATURAL JUSTICE WERE VIOLATED. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 24 - 7. IN THE COUNTER AFFIDAVIT FILED BY THE RESPONDENT S, IT IS NOT DISPUTED THAT THE MCI UNDER THE 2002 REGULATIONS HA S JURISDICTION LIMITED TO TAKING ACTION ONLY AGAINST THE REGISTERED MEDICAL PRACTITIONERS. ITS PLEA HOWEVER, IS THAT IT HAS NOT PASSED ANY ORDER AGAINST THE PETITIONER HOSPITAL TH EREFORE; THE PETITIONER CANNOT HAVE ANY GRIEVANCE AGAINST THE IM PUGNED ORDER. 8. IT IS CLEARLY ADMITTED BY THE RESPONDENT THAT IT HAS NO JURISDICTION TO PASS ANY ORDER AGAINST THE PETITION ER HOSPITAL UNDER THE 2002 REGULATIONS. IN FACT, IT IS STATED T HAT IT HAS NOT PASSED ANY ORDER AGAINST THE PETITIONER HOSPITAL. THUS, I NEED NOT GO INTO THE QUESTION WHETHER THE A DEQUATE INFRASTRUCTURE FACILITIES FOR APPROPRIATE POST-OPER ATIVE CARE WERE IN FACT IN EXISTENCE OR NOT IN THE PETITIONER HOSPITAL AND WHETHER THE PRINCIPLES OF NATURAL JUSTICE HAD BEEN FOLLOWED OR NOT WHILE PASSING THE IMPUGNED ORDER. SUFFICE IT TO SAY THAT THE OBSERVATIONS DATED 27.10.2012 MADE BY THE ETHIC S COMMITTEE DO REFLECT UPON THE INFRASTRUCTURE FACILI TIES AVAILABLE IN THE PETITIONER HOSPITAL AND SINCE IT H AD NO JURISDICTION TO GO INTO THE SAME, THE OBSERVATIONS WERE UNCALLED FOR AND CANNOT BE SUSTAINED. [EMPHASIS A DDED IS OURS] 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 HEA LTH CARE SECTOR UNDER ITS 2002 REGULATION. SO ONCE THE INDIA N MEDICAL COUNCIL REGULATION DOES NOT HAVE ANY JURISDICTION N OR HAS ANY AUTHORITY UNDER LAW UPON THE PHARMACEUTICAL COMPANY OR ANY ALLIED HEALTH SECTOR INDUSTRY, THEN SUCH A REGULATI ON CANNOT HAVE ANY PROHIBITORY EFFECT ON THE PHARMACEUTICAL C OMPANY LIKE THE ASSESSEE. IF MEDICAL COUNCIL REGULATION DO ES NOT HAVE ANY JURISDICTION UPON PHARMACEUTICAL COMPANIES AND IT IS INAPPLICABLE UPON PHARMA COMPANIES LIKE ASSESSEE TH EN, WHERE IS THE VIOLATION OF ANY OF LAW/REGULATION? UN DER WHICH PROVISION THERE IS ANY OFFENCE OR VIOLATION IN INCU RRING OF SUCH KIND OF EXPENDITURE. THE RELEVANT PROVISION OF SECT ION 37(1) READS AS UNDER: (1) ANY EXPENDITURE (NOT BEING EXP ENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT B EING IN THE ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 25 - NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALL OWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEADS PR OFITS AND GAINS OF BUSINESS OR PROFESSION EXPLANATION 1 FO R THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT ANY E XPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED T O HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFES SION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. THE AFORESAID PROVISION APPLIES TO AN ASSESSEE WHO IS CLAIMING DEDUCTION OF EXPENDITURE WHILE COMP UTING HIS BUSINESS INCOME. THE EXPLANATION PROVIDES AN EMBARG O UPON ALLOWING ANY EXPENDITURE INCURRED BY THE ASSESSEE F OR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. THIS MEANS THAT THERE SHOULD BE AN OFFENCE BY AN AS SESSEE WHO IS CLAIMING THE EXPENDITURE OR THERE IS ANY KIN D OF PROHIBITION BY LAW WHICH IS APPLICABLE TO THE ASSES SEE. HERE IN THIS CASE, NO SUCH OFFENCE OF LAW HAS BEEN BROUGHT ON RECORD, WHICH PROHIBITS THE PHARMACEUTICAL COMPANY NOT TO I NCUR ANY DEVELOPMENT OR SALES PROMOTION EXPENSES. A LAW WHIC H IS APPLICABLE TO DIFFERENT CLASS OF PERSONS OR PARTICU LAR 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 M EDICAL PRACTITIONERS ONLY AND NOT FOR PHARMACEUTICAL COMPA NIES. 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 T HEN BY IMPLICATION WHAT HAS NOT BEEN STATED OR EXPRESSED I N THE STATUTE HAS TO BE EXCLUDED FOR OTHER CLASS OF ASSES SEE. IF THE MEDICAL COUNCIL REGULATION IS APPLICABLE TO MEDICAL PRACTITIONERS THEN IT CANNOT BE MADE APPLICABLE TO PHARMA OR ALLIED HEALTH CARE COMPANIES. IF SECTION 37(1) IS A PPLICABLE TO AN ASSESSEE CLAIMING THE EXPENSE THEN BY IMPLICATIO N, ANY IMPAIRMENT CAUSED BY EXPLANATION1 WILL APPLY TO THA T ASSESSEE ONLY. ANY IMPAIRMENT OR PROHIBITION BY ANY LAW/REGULATION ON A 7. BEFORE US THE LEARNED CIT DR STRONGLY ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 26 - RELIED UPON THE FACT THAT CBDT CIRCULAR, WHILE CLAR IFYING THE APPLICABILITY OF EXPLANATION 1 TO SECTION 37(1) ON MEDICAL PRACTITIONERS AND PHARMACEUTICAL COMPANIES HAVE INT ERPRETED THAT INDIAN MEDICAL COUNCIL REGULATION IS APPLICABL E FOR PHARMACEUTICAL COMPANIES ALSO. HE ALSO BROUGHT TO O UR NOTICE THAT ANOTHER NOTIFICATION WAS ISSUED BY INDIAN MEDI CAL COUNCIL WHICH WAS PUBLISHED ON 01.12.2016 WHICH FURTHER PRO HIBITS SUCH KIND OF EMBARGO ON MEDICAL PRACTITIONERS AND H AVE ADDED PARA 6.8.1 AND ALSO GIVEN INSTANCES OF ACTION WHICH SHALL BE TAKEN UPON MEDICAL PRACTITIONERS. THE RELE VANT CLAUSE OF THE SAID NOTIFICATION AS RELIED UPON BY HIM IS R EPRODUCED HEREUNDER: 6.8. CODE OF CONDUCT FOR DOCTORS IN THEIR RELATIONS HIP WITH PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY THE SECTION 68.1(B) SHALL BE SUBSTITUTED IN TERMS O F NOTIFICATION PUBLISHED ON 01.02.2016 IN GAZETTE OF INDIA, AS UNDER: (B) TRAVEL FACILITIES: A MEDICAL PRACTITIONER SHALL NOT ACCEPT ANY TRAVEL FACILITY INSIDE THE COUNTRY OR OUTSIDE, INCL UDING RAIL, ROAD, AIR, SHIP, CRUISE TICKETS, PAID VACATION, ETC ., FROM ANY PHARMACEUTICAL OR ALLIED HEALTHCARE INDUSTRY OR THE IR REPRESENTATIVES FOR SELF AND FAMILY MEMBERS FOR VAC ATION OR FOR ATTENDING CONFERENCES, SEMINARS, WORKSHOPS, CME PRO GRAMME ETC. AS A DELEGATE (III) ACTION TO BE TAKEN BY THE COUNCIL FOR VIOLATION OF SECTION 6.8 AS AMENDED VIDE NOTIFICATI ON DATED 10/12/2009, SHALL BE PRESCRIBED BY FURTHER AMENDING THE SECTION 6.8.1 AS UNDER:- SECTION ACTI ON 6.8.1 IN DEALING WITH PHARMACEUTICA L AND ALLIED HEALTH SECTOR INDUSTRY, A MEDICAL PRACTITION ER SHALL FOLLOW AND ADHERE TO THE STIPULATIONS GIVEN BELOW: - A)GIFTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY GIFT FRO M ANY PHARMACEUTICAL OR ALLIED HEALTH CARE INDUSTRY AND T HEIR SALES PEOPLE OR REPRESENTATIVES; GIFTS MORE THAN RS. 1,00 0/ - UPTO RS. 5,000/- : CENSURE GIFTS MORE THAN RS. 5,000/- U PTO RS. 10,000/- : REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 27 - MEDICAL REGISTER FOR 3 (THREE) MONTHS GIFTS MORE TH AN RS. 10,000/ - TO RS. 50,000/- : REMOVAL FROM INDIAN MED ICAL REGISTER OR STATE MEDICAL REGISTER FOR 6(SIX) MONTH S. 21 ARISTO PHARMACEUTICALS P LTD GIFTS MORE THAN RS. 50,000/- TO RS. 1,00,000/ - : REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 1 (ONE) YEAR. GIFTS MORE THAN RS. 1,00,000/ - : REMOVAL FOR A PERIOD OF MORE THAN 1 ( ONE) YEAR FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGIS TER B) TRAVEL FACILITIES: A MEDICAL PRACTITIONER SHALL NOT ACCEPT ANY TRAVEL FACILITY INSIDE THE COUNTRY OR OUTSIDE, INCL UDING RAIL, ROAD, AIR, SHIP, CRUISE TICKETS, PAID VACATIONS ETC . FROM ANY PHARMACEUTICAL OR ALLIED HEALTHCARE INDUSTRY OR THE IR REPRESENTATIVES FOR SELF AND FAMILY MEMBERS FOR VAC ATION OR FOR ATTENDING CONFERENCES, SEMINARS, WORKSHOPS, CME PRO GRAMME ETC. AS A DELEGATE. EXPENSES FOR TRAVEL FACILITIES MORE THAN RS. 1,000/ - UPTO RS. 5,000/ -: CENSURE EXPENSES FOR TR AVEL FACILITIES MORE THAN RS. 5,000/-UPTO RS. 10,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGIS TER FOR 3 (THREE) MONTHS. EXPENSES FOR TRAVEL FACILITIES MORE THAN RS.10,000/-TO RS. 50,000/-: REMOVAL FROM INDIAN MED ICAL REGISTER OR STATE MEDICAL REGISTER FOR 6 (SIX) MONT HS. EXPENSES FOR TRAVEL FACILITIES MORE THAN MORE THAN RS. 50,00 0/- TO RS. 1,00,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 1 (ONE) YEAR. EXPENSES FOR TRA VEL FACILITIES MORE THAN RS. 1,00,000/-: REMOVAL FOR A PERIOD OF M ORE THAN 1 (ONE) YEAR FROM INDIAN MEDICAL REGISTER OR STATE ME DICAL REGISTER 22 ARISTO PHARMACEUTICALS P LTD C) HOSPITA LITY: A MEDICAL PRACTITIONER SHALL NOTACCEPT INDIVIDUALLY A NY HOSPITALITY LIKE HOTEL ACCOMMODATION FOR SELF AND F AMILY MEMBERS UNDER ANY PRETEXT. EXPENSES FOR HOSPITALITY MORE THAN RS. 1,000/-UPTO RS. 5,000/-: CENSURE EXPENSES FOR HOSPITALITY MORE THAN RS. 5,000/-UPTO RS. 10,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGIS TER FOR 3 (THREE) MONTHS. EXPENSES FOR HOSPITALITY MORE THAN RS. 10,000/-TO RS. 50,000/-: REMOVAL FROM INDIAN MEDICA L REGISTER OR STATE MEDICAL REGISTER FOR 6 (SIX) MONT HS. EXPENSES FOR HOSPITALITY MORE THAN MORE THAN RS. 50,000/-TO RS. 1,00,000/: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 28 - MEDICAL REGISTER FOR 1 (ONE) YEAR. EXPENSES FOR HOS PITALITY MORE THAN RS. 1,00,000/-: REMOVAL FOR A PERIOD OF M ORE THAN 1 (ONE) YEAR FROM INDIAN MEDICAL REGISTER OR STATE ME DICAL REGISTER. D) CASH OR MONETARY GRANTS:- A MEDICAL PR ACTITIONER SHALL NOT RECEIVE ANY CASH OR MONETARY GRANTS FROM ANY PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRY FOR I NDIVIDUAL PURPOSE IN INDIVIDUAL CAPACITY UNDER ANY PRETEXT. F UNDING FOR MEDICAL RESEARCH, STUDY ETC. CAN ONLY BE RECEIVED T HROUGH APPROVED INSTITUTIONS BY MODALITIES LAID DOWN BY LA W / RULES / GUIDELINES ADOPTED BY SUCH APPROVED INSTITUTIONS, I N A TRANSPARENT MANNER. IT SHALL ALWAYS BE FULLY DISCLO SED CASH OR MONETARY GRANTS MORE THAN RS. 1,000/-UPTO RS. 5,000 /-: CENSURE. CASH OR MONETARY GRANTS MORE THAN RS. 5,00 0/-UPTO RS.10,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER O R STATE MEDICAL REGISTER FOR 3 (THREE) MONTHS. CASH OR MONE TARY GRANTS MORE THAN RS.10,000/-TO RS. 50,000/-: REMOVA L FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER F OR 6 (SIX) MONTHS. 23 ARISTO PHARMACEUTICALS P LTD CASH OR MON ETARY GRANTS MORE THAN MORE THAN RS. 50,000/-TO RS. 1,00, 000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDIC AL REGISTER FOR 1 (ONE) YEAR. CASH OR MONETARY GRANTS MORE THAN RS. 1,00,000/-: REMOVAL FOR A PERIOD OF MORE THAN 1 (ONE) YEAR FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGIS TER. FROM THE AFORESAID NOTIFICATION, LD. CIT DR SUBMITT ED THAT SO MANY VIOLATIONS AND CENSURES HAVE BEEN PRESCRIBED F OR ANY EXPENDITURES/ OR BENEFIT GIVEN TO DOCTORS, THUS, VI OLATION OF SUCH GUIDELINES FOR INCURRING SUCH KIND OF EXPENDIT URES CANNOT BE HELD TO BE ALLOWABLE EXPENDITURE. CBDT IS WELL W ITHIN ITS POWER TO CLARIFY AND INTERPRET THE LAW AND PROHIBIT ALLOWANCE OF ANY EXPENDITURE WHICH VIOLATES ANY STATUTE OR IS IN NATURE OF OFFENCE. 8. FROM A PERUSAL OF ABOVE AMENDMENT/NOTIFICATION I N THE MCI REGULATION, IT IS QUITE CLEAR AGAIN THAT SAME IS AP PLICABLE FOR MEDICAL PRACTITIONERS ONLY AND THE CENSURE/ACTION W HICH HAS BEEN SUGGESTED BY IT IS ONLY ON MEDICAL PRACTITIONE RS AND NOT FOR PHARMACEUTICAL COMPANIES OR ALLIED HEALTH SECTO R INDUSTRIES. THE VIOLATION OF THE AFORESAID REGULATI ON WOULD NOT ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 29 - ONLY ENSURE A REMOVAL OF A DOCTOR FROM THE INDIAN M EDICAL REGISTER OR STATE MEDICAL REGISTER FOR A CERTAIN PE RIOD OF TIME AND IT DOES NOT IMPINGE UPON THE CONDUCT OF PHARMAC EUTICAL COMPANIES. THIS IMPORTANT DISTINCTION HAS TO BE KEP T IN MIND THAT REGULATION ISSUED BY MEDICAL COUNCIL OF INDIA IS QUA THE DOCTORS/MEDICAL PRACTITIONERS AND NOT FOR THE PHARM ACEUTICAL COMPANIES. AS A LOGICAL COROLLARY TO IT, IF THERE I S ANY VIOLATION OR PROHIBITION AS PER MCI REGULATION IN TERMS OF SE CTION 37(1) R.W.EXPLANATION1, THEN IT IS ONLY MEANT FOR MEDICAL PRACTITIONERS AND NOT FOR PHARMACEUTICAL COMPANY (A SSESSEE COMPANY) FOR CLAIMING THE EXPENDITURE. 9. ADVERTING TO THE CONTENTION OF THE LD. CIT DR TH AT CBDT IS WELL EMPOWERED TO ISSUE SUCH CLARIFICATION, IT IS S EEN THAT THE CBDT CIRCULAR DATED 01.08.2012 (SUPRA) IN ITS CLARI FICATION HAS ENLARGED THE SCOPE AND APPLICABILITY OF INDIAN MEDICAL COUNCIL REGULATION 2002 BY MAKING IT APPLICABLE TO THE PHARMACEUTICAL COMPANIES OR ALLIED HEALTH CARE SECT OR INDUSTRIES. SUCH AN ENLARGEMENT OF SCOPE OF MCI REG ULATION 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 C OUNCIL 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 STATUTOR Y PROVISIONS. CBDT CIRCULARS ACT LIKE CONTEMPORANEA EXPOSITIO I N INTERPRETING THE STATUTORY PROVISIONS AND TO ASCERT AIN THE TRUE MEANING ENUNCIATED AT THE TIME WHEN STATUTE WAS ENA CTED. 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 24 ARISTO PHARMACEUTIC ALS P LTD 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 ENLA RGING THE SCOPE OF A DIFFERENT REGULATION ISSUED UNDER A DIFF ERENT ACT SO AS TO IMPOSE ANY KIND OF HARDSHIP OR LIABILITY TO T HE ASSESSEE. ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 30 - 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 HAS TO BE APPLIED PROSPECTIVELY O NLY. HERE IN THIS CASE THE CBDT HAS ENLARGED THE SCOPE OF IN DIAN MEDICAL COUNCIL REGULATION, 2002 AND MADE IT APPLI CABLE FOR THE PHARMACEUTICAL COMPANIES. THEREFORE, SUCH A CBD T CIRCULAR CANNOT BE RECKONED TO HAVE RETROSPECTIVE E FFECT. THE SAME CBDT CIRCULAR HAD COME UP FOR CONSIDERATION BE FORE THE CO-ORDINATE BENCH OF THE ITAT, MUMBAI BENCH IN THE CASE OF SYNCOM FORMULATIONS (I) LTD. (IN ITA NOS. 6429 & 6428/MUM/2012 FOR A.YS. 2010-11 AND 2011-12, VIDE O RDER DATED 23.12.2015), WHEREIN TRIBUNAL HELD THAT CBDT CIRCULAR WOULD NOT BE NOT BE APPLICABLE IN THE A.YS. 2010-11 AND 2011- 12 AS IT WAS INTRODUCED W.E.F. 1.8.2012. 10. FROM THE PERUSAL OF THE NATURE OF EXPENDITURE I NCURRED BY THE ASSESSEE, IT IS SEEN THAT UNDER THE HEAD CUSTO MER RELATIONSHIP MANAGEMENT, THE ASSESSEE ARRANGES NAT IONAL LEVEL SEMINAR AND DISCUSSION PANELS OF EMINENT DOCT ORS AND INVITING OF OTHER DOCTORS TO PARTICIPATE IN THE SEM INARS ON A TOPIC RELATED TO THERAPEUTIC AREA. IT ARRANGES LECT URES AND SPONSORS KNOWLEDGE UPGRADE COURSE WHICH HELPS PHARMACEUTICAL COMPANIES TO MAKE AWARE OF THE PRODU CTS AND MEDICINES MANUFACTURED AND LAUNCHED BY IT. UNDER KE Y ACCOUNT MANAGEMENT, THE ASSESSEE MAKES ENDEAVOUR TO CREATE AWARENESS AMONGST CERTAIN CLASS OF KEY DOCTORS ABOU T THE PRODUCTS OF THE ASSESSEE AND THE NEW DEVELOPMENTS T AKING PLACE IN THE AREA OF MEDICINE AND PROVIDING CORRECT DIAGNOSIS AND TREATMENT OF THE PATIENTS. THE SAID ACTIVITIES BY THE ASSESSEE ARE TO MAKE THE DOCTORS AWARE OF ITS PRODU CTS AND RESEARCH WORK CARRIED OUT BY IT FOR BRINGING THE ME DICINE IN THE MARKET AND ITS RESULTS ARE BASED ON SEVERAL LEVELS OF TESTS AND APPROVALS. UNLESS THE PHARMACEUTICAL COMPANIES MAKE AWARE OF SUCH KIND OF PRODUCTS TO KEY DOCTORS OR MEDICAL PRACTITIONERS, THEN ONLY IT CAN SUCCESSFULLY LAUNCH ITS PRODUCTS/MEDICINES. THIS KIND OF EXPENDITURE IS DEF INITELY IN ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 31 - THE NATURE OF SALES AND BUSINESS PROMOTION, WHICH H AS TO BE ALLOWED. COMING TO THE GIFT ARTICLES AND FREE SAMPLES OF MED ICINES, IT IS SEEN THAT THE ASSESSEE GIVES VARIOUS KIND OF ARTICL ES LIKE, DIARIES, PEN SETS, CALENDARS, PAPER WEIGHTS, INJECT ION BOXES ETC. EMBOSSED WITH BOLD LOGO OF ITS BRAND NAME AND THE PRODUCT NAME SO THAT THE DOCTORS REMEMBERS THE BRAN D OF THE ASSESSEE AND ALSO THE NAME OF THE MEDICINE. ALL THE GIFT ARTICLES, AS POINTED OUT BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND ALSO BEFORE US ARE VERY CHEAP AND LOW CAS T ARTICLES WHICH BEARS THE NAME OF ASSESSEE AND IT IS PURELY F OR THE PROMOTION OF ITS PRODUCT, BRAND REMINDER, ETC. THES E ARTICLES CANNOT BE RECKONED AS FREEBIES GIVEN TO THE DOCTORS . EVEN THE FREE SAMPLE OF MEDICINE IS ONLY TO PROVE THE EFFICA CY AND TO ESTABLISH THE TRUST OF THE DOCTORS ON THE QUALITY O F THE DRUGS. THIS AGAIN CANNOT BE RECKONED AS FREEBIES GIVEN TO THE DOCTORS BUT FOR PROMOTION OF ITS PRODUCTS. THE PHARMACEUTIC AL COMPANY, WHICH IS ENGAGED IN MANUFACTURING AND MARK ETING OF PHARMACEUTICAL PRODUCTS, CAN PROMOTE ITS SALE AN D BRAND ONLY BY ARRANGING SEMINARS, CONFERENCES AND THEREBY CREATING AWARENESS AMONGST DOCTORS ABOUT THE NEW RESEARCH IN THE MEDICAL FIELD AND THERAPEUTIC AREAS, ETC. EVERY DAY THERE ARE NEW DEVELOPMENTS TAKING PLACE AROUND THE WORLD IN T HE AREA OF MEDICINE AND THERAPEUTIC, HENCE IN ORDER TO PROV IDE CORRECT DIAGNOSIS AND TREATMENT OF THE 25 ARISTO PHARMACEUT ICALS P LTD PATIENTS, IT IS IMPERATIVE THAT THE DOCTORS SHO ULD KEEP THEMSELVES UPDATED WITH THE LATEST DEVELOPMENTS IN THE MEDICINE AND THE MAIN OBJECT OF SUCH CONFERENCES AN D SEMINARS IS TO UPDATE THE DOCTORS OF THE LATEST DEV ELOPMENTS, WHICH IS BENEFICIAL TO THE DOCTORS IN TREATING THE PATIENTS AS WELL AS THE PHARMACEUTICAL COMPANIES. FURTHER AS PO INTED OUT AND CONCLUDED BY THE LEARNED CIT(A) THERE IS NO VIO LATION BY THE ASSESSEE IN SO FAR AS GIVING ANY KIND OF FREEBI ES TO THE MEDICAL PRACTITIONERS. THUS, SUCH KIND OF EXPENDITU RES BY A PHARMACEUTICAL COMPANIES ARE PURELY FOR BUSINESS PU RPOSE WHICH HAS TO BE ALLOWED AS BUSINESS EXPENDITURE AND IS NOT IMPAIRED BY EXPLANATION 1 TO SECTION 37(1). ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 32 - 11. BEFORE US, THE LD. CIT DR HAS ALSO MUCH HARPED UPON THE DECISION OF THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CONFEDERATION OF INDIAN PHARMACEUTICAL INDU STRY (SS) VS. CBDT (SUPRA), IN SUPPORT OF THE ARGUMENT THAT C BDT CIRCULAR HAS BEEN APPROVED AND CONFIRMED BY THE HIG H COURT AND THEREFORE, IT HAS A HUGE BINDING PRECEDENCE. FR OM THE PERUSAL OF THE SAID JUDGMENT OF THE HONBLE HIGH CO URT, IT IS SEEN THAT IN THAT CASE THE VALIDITY OF CIRCULAR NO. 5/12 DATED 1.8.2012 WAS CHALLENGED. THE HONBLE HIGH COURT THO UGH UPHELD THE VALIDITY OF THE SAID CIRCULAR BUT WITH A RIDER THAT IF THE ASSESSEE SATISFIES THE ASSESSING AUTHORITY THAT THE EXPENDITURE IS NOT IN VIOLATION OF THE REGULATION F RAMED BY THE MEDICAL COUNCIL, THEN IT MAY LEGITIMATELY CLAIM THE DEDUCTION. THE ASSESSEE HAS TO SATISFY THE AO THAT THE EXPENDI TURE IS NOT IN VIOLATION OF THE MEDICAL COUNCIL REGULATION. THU S, IF THE ASSESSEE BRINGS OUT THAT THE MCI REGULATION IS NOT APPLICABLE TO THE ASSESSEE BEFORE THE AO, THE SAME CANNOT BE A PPLIED BLINDLY. 12. AT THE TIME OF HEARING, OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF TRIBUNAL OF OUR CO-ORDINATE BENCH IN TH E CASE OF LIVA HEALTHCARE LIMITED ITA NOS. 904 & 945/MUM/201 3, DECIDED VIDE ORDER DATED 12.09.2016. IN COUNTER, TO THIS DECISION THE LEARNED COUNSEL, SHRI JD MISTRY DISTIN GUISHED THE SAID JUDGMENT AND SUBMITTED THAT THE FACTS OF THE C ASE IN THE LIVA HEALTHCARE (SUPRA) WERE SUBSTANTIALLY DIFFEREN T FROM THE FACTS OF THE PRESENT CASE. IN THE CASE OF LIVA HEAL THCARE, THE HONBLE TRIBUNAL DISALLOWED SUCH EXPENSES U/S. 37(1 ) OF THE ACT ON THE GROUND THAT THEY WERE NOT INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AS THE SAME WERE INCURRED TO CREATE GOOD RELATIONS WITH THE DOCTORS IN LIEU OF EXPECTED FAVOURS FROM DOCTORS FOR RECOMMENDING TO T HE PATIENTS THE PHARMACEUTICAL PRODUCTS DEALT WITH BY THE COMPANY TO GENERATE MORE AND MORE BUSINESS AND PROF ITS FOR THE ASSESSEE COMPANY. THE TRIBUNAL ALSO RECORDED TH E FACT THAT THE SPOUSE OF THE DOCTORS ALSO ACCOMPANIED THE DOCTORS FOR OVERSEAS TRIPS TO ISTANBUL AND EXPENSES WERE IN CURRED FOR ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 33 - CRUISE TRAVELS TO ISLAND, GALA DINNER, COCKTAILS, G ALA ENTERTAINMENT ETC. OF SUCH DOCTORS. IN ASSESSEES C ASE IT IS AN ADMITTED FACT THAT EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE PERSONAL BENEFIT/ENJOYMENT OF THE DOCTORS O R THEIR SPOUSES. IN THE CASE OF LIVA, THE QUESTION AS TO WH ETHER SUCH IMC REGULATIONS CAN BE APPLICABLE TO PHARMA COMPANI ES WAS NOT ARGUED BEFORE THE HONBLE BENCH. HE REITERATED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF MAX HOSPITA L (SUPRA) AND THE JURISDICTIONAL TRIBUNAL IN THE CASE OF SYNC OM (SUPRA) HAVE HELD THAT SUCH IMC REGULATIONS APPLY ONLY TO M EDICAL PRACTITIONERS. HE FURTHER SUBMITTED THAT THE TRIBUN AL IN THE CASE OF ACIT VS. LIVA HEALTHCARE LTD. (ITA 847/MUM/ 2012) FOR A.Y. 2008-09, HAS DECIDED SIMILAR ISSUE IN FAVOUR O F THE ASSESSEE. HOWEVER, IN A.Y. 2009-10, HONBLE TRIBUNA L WHILE NOTING THE FACT THAT CONSISTENCY HAS TO BE ADOPTED, DISTINGUISHED THE ORDER OF A.Y. 2008-09 AS UNDER: THE ASSESSEE HAS CONTENDED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO. 388/MUM/2012 FOR ASSESSM ENT YEAR 2008-09. IN OUR CONSIDERED VIEW, PRINCIPLES OF RES JUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDING S ALTHOUGH WE ARE FULLY AGREEABLE THAT PRINCIPLES OF CONSISTEN CY IS TO BE MAINTAINED (HONBLE SUPREME COURT DECISION IN RADHA SOAMI SATSANG V. CIT (1992) 193 ITR 321 (SC) BUT IN THE I NSTANT ASSESSMENT YEAR, WE HAVE OBSERVED THAT THESE OVERSE AS TRIPS FOR DOCTORS AND THEIR SPOUSES WERE ORGANIZED BY THE ASSESSEE WHEREBY NO DETAILS OF THE CONTENTS OF SEMINAR, IF A NY CONDUCTED BY THE ASSESSEE OVERSEAS HAS BEEN BROUGHT ON RECORD AND ALSO EVEN THE SPOUSES ACCOMPANIED THE DO CTORS TO THE OVERSEAS TRIP WHICH INCLUDED CRUISE VISIT TO IS LAND, GALA DINNERS, COCKTAIL, GALA ENTERTAINMENT ETC. RATHER T HAN BEING DIRECTED TOWARDS SEMINAR FOR PRODUCT INFORMATION DISSEMINATION OR DIRECTED TOWARDS KNOWLEDGE ENHANCE MENT OR KNOWLEDGE SHARING ORIENTED AS NO DETAILS OF SEMINAR AND ITS COURSE CONTENT IS BROUGHT ON RECORD RATHER THE TRIP IS DIRECTED TOWARDS LEISURE AND ENTERTAINMENT OF DOCTORS AND TH EIR SPOUSES WHICH IN OUR VIEW APPEARS TO BE CLEARLY A ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 34 - DISTINGUISHABLE FEATURE IN THIS YEAR ENABLING US TO TAKE A DIVERGENT VIEW AND THE EXPENSES INCURRED BY THE ASS ESSEE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE U/S. 37 O F THE ACT AS IT IS CLEARLY HIT BY EXPLANATION TO SECTION 37 O F THE ACT BEING AGAINST PUBLIC POLICY AS UNETHICAL PROHIBITED BY LA W. IN VIEW OF THE ABOVE, HE POINTED OUT THAT IN THE ABOVE DECI SION FOR A.Y. 2009- 10 IN THE CASE OF LIVA HEALTHCARE, THERE WAS A SPECIFIC FINDING OF A FACT THAT NO DETAILS HAVE BEEN FILED W ITH RESPECT TO ANY SEMINAR HAS BEEN CONDUCTED FOR DOCTORS AND THAT THE TRIPS WERE DIRECTED TOWARDS LEISURE AND ENTERTAINMENT OF DOCTORS AND THEIR SPOUSES. THIS WAS A DISTINGUISHABLE FEATU RE FOR THE HONBLE TRIBUNAL TO TAKE A CONTRARY VIEW FROM A.Y. 2008-09. HE FURTHER SUBMITTED THAT THE HONBLE TRIBUNAL IN T HE CASE OF LIVA HEALTHCARE LTD. VS. ACIT (ITA NO. 4791/MUM/201 4) FOR A.Y. 2010-11 HAS FOLLOWED THE DECISION OF LIVA HEAL THCARE (SUPRA) FOR A.Y. 2008-09 AND HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. THIS, FURTHER BRINGS OUT THE FACT THAT THE HONBLE TRIBUNAL DISALLOWED THE EXPENSES U/S. 37(1) OF THE ACT IN THE CASE OF LIVA HEALTHCARE FOR A.Y. 2009-10 ONL Y ON THE GROUND THAT THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 13. APART FROM THE AFORESAID DISTINGUISHING FEATURE S AS HIGHLIGHTED BY THE LEARNED SENIOR COUNSEL, WE FIND THAT ON THE FACTS ITSELF IN THE CASE OF LIVA HEALTHCARE (2009-2 010) (SUPRA), THERE WAS A CLEAR CUT MATERIAL ON RECORD THAT THE D OCTORS ALONG WITH THEIR SPOUSES WERE TAKEN TO FOREIGN TOURS AND CRUISE TRAVEL ETC., IN LIEU OF EXPECTED FAVOURS FROM DOCTO RS. IN THE LIGHT OF THESE FACTS AND MATERIAL THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY NOT FOLLOWING THE EAR LIER YEAR PRECEDENCE AND SUBSEQUENT YEAR ORDERS OF THE SAME A SSESSEE. AS BROUGHT ON RECORD BEFORE US, WE FIND THAT SIMILA R ISSUE OF ALLOWANCE OF SUCH EXPENDITURE IN THE CASE OF PHARMA CEUTICAL COMPANIES HAS BEEN DECIDED IN FAVOUR OF THE ASSESSE E, IN THE CASE OF UCB INDIA PVT. LTD. V. ITO (ITA NO. 6681/MU M/2013 ORDER DATED 13.05.2016, WHEREIN IT WAS HELD THAT CB DT CIRCULAR CANNOT HAVE A RETROSPECTIVE EFFECT. THIS J UDGMENT WAS LOST SIGHT OF BY THE BENCH. IN ANY CASE ON CAREFUL PERUSAL OF ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 35 - THE TRIBUNAL ORDER IN THE CASE OF LIVA HEALTHCARE ( SUPRA) WE FIND THAT THE TRIBUNAL THOUGH HAS INCORPORATED THE RELEVANT PROVISIONS AND CLAUSES OF THE INDIAN MEDICAL COUNC IL REGULATION 2002, HOWEVER, HAS NOT ELABORATED OR DW ELL UPON AS TO HOW THIS MCI REGULATION WHICH IS STRICTLY MEA NT FOR MEDICAL PRACTITIONERS AND DOCTORS CAN BE MADE APPLI CABLE TO PHARMACEUTICAL COMPANIES. THERE HAS TO BE SOME ENAB LING PROVISION OR SPECIFIC CLAUSE IN THE SAID REGULATION WHEREBY THE PHARMACEUTICAL COMPANIES ARE BARRED FROM CONDUCTING SEMINARS OR CONFERENCES BY SPONSORING THE DOCTORS. THE ENTIRE CONDUCT RELATES TO DOCTORS AND MEDICAL PRACTITIONER S AND LISTS OUT THE CENSURES AND FINES IMPOSED UPON THEM. WHAT HAS NOT BEEN PROVIDED IN THE MCI REGULATION CANNOT BE SUPPL IED EITHER BY THE COURT OR BY THE CBDT. THERE HAS TO BE EXPRES S PROVISION UNDER THE LAW WHEREBY PHARMACEUTICAL COMPANIES ARE PROHIBITED TO CONDUCT CONFERENCES OR SEMINAR OR GIV E FREE SAMPLES. IN THE TRIBUNAL DECISION OF LIVA HEALTHCAR E, STRONG REFERENCE HAS BEEN MADE TO HONBLE HIMACHAL PRADESH HIGH COURT (SUPRA), THAT THE SAID CBDT CIRCULAR HAS BEEN UPHELD. ON THIS ASPECT WE HAVE ALREADY DISCUSSED IN DETAIL HEREIN ABOVE THAT, FIRSTLY, HIGH COURT ITSELF CARVES OUT A RIDER THAT ASSESSEE IS FREE TO DEMONSTRATE BEFORE THE AO THAT THIS CIRCULAR IS NOT APPLICABLE ON FACTS OF THE CASE; AN D SECONDLY, CBDT CIRCULAR WHICH CREATES NEW IMPAIRMENT AND IMPO SES DISALLOWBILITY NOT ENVISAGED IN ANY OF THE ACT OR R EGULATION CANNOT BE RECKONED TO BE RETROSPECTIVE. ANOTHER STR ONG REFERENCE HAS BEEN MADE TO THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. KAP SCAN AND DIAGNOSTIC CENTRE (P.) LTD. [2012] 25 TAXMANN.COM 9 2, WHEREIN COMMISSION WAS PAID TO THE PRIVATE DOCTORS FOR REFE RRING THE PATIENTS FOR DIAGNOSIS TO THE ASSESSEE COMPANY. IN BACKGROUND OF THESE FACTS AND ISSUES INVOLVED, THE HONBLE HIGH COURT HELD THAT SAID PAYMENT OF COMMISSION IS WRONG AND IS OPPOSED TO BE A PUBLIC POLICY. IT SHOULD BE DISCOURAGED AS IT IS NOT A FAIR PRACTICE. THE RATIO OF SAID DEC ISION CANNOT BE APPLIED ON THE FACTS OF THE PRESENT CASE BECAUSE TH ERE IS NO VIOLATION OF ANY LAW OR ANYTHING WHICH IS OPPOSED T O PUBLIC POLICY. SIMILARLY, THERE IS REFERENCE TO THE DECISI ON OF HON'BLE ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 36 - SUPREME COURT IN THE CASE OF ESKAYEF (NOW KNOWN AS SMITHKLINE BEECHAM) PHARMACEUTICALS (INDIA) LIMITED V. CIT (2000) 111 TAXMAN 561(SC), WHICH WAS GIVEN IN CONTE XT OF SECTION 37(3A) OF THE ACT. IN THE SAID CASE THE ASS ESSEE HAD CLAIMED EXPENDITURE ON DISTRIBUTION OF PHYSICIANS SAMPLES U/S. 37. IN THE BACKGROUND OF SUCH CLAIM THE HONBL E APEX COURT HELD THAT, IF THE EXPENDITURE FALLS WITHIN TH E BARE MINIMUM IT WILL NOT BE CAUGHT BY SUBSECTION (3A) OF SECTION 37. ON THE CONTRARY, THE HONBLE APEX COURT OBSERVED TH AT PHYSICIANS SAMPLES ARE NECESSARY TO ASCERTAIN THE E FFICACY OF MEDICINE AND INTRODUCE IT IN THE MARKET FOR CIRCULA TION AND IT IS ONLY BY THIS METHOD THE PURPOSE IS ACHIEVED. IN SUC H CASES GIVING A PHYSICIAN SAMPLES FOR REASONABLE PERIOD IS ESSENTIAL TO THE BUSINESS OF MANUFACTURE AND SALE OF MEDICINE . IT IS ONLY IF A PARTICULAR MEDICINE HAS BEEN INTRODUCED BY THE MARKET AND ITS USES ARE ESTABLISHED THEN GIVING OF FREE SA MPLES COULD ONLY BE THE MEASURE OF SALE/ PROMOTION AND DEVELOPM ENT WOULD THUS BE HIT BY SUBSECTION (3A). SAID DECISION NO WAY PROHIBITS THE NATURE OF EXPENDITURE WHICH HAS BEEN INCURRED IN THE CASE OF THE ASSESSEE. THEREFORE, SUCH A REFEREN CE TO A HONBLE APEX COURT DECISION IS NOT GERMANE TO THE I SSUE INVOLVED. THUS, IN OUR OPINION, THE AFORESAID DECIS ION OF THIS TRIBUNAL IS CLEARLY DISTINGUISHABLE AND CANNOT BE H ELD TO BE APPLICABLE AND ALSO WE HAVE ALREADY GIVEN OUR INDEP ENDENT FINDING AS TO ALLOWABILITY OF EXPENSES IN THE HANDS OF THE ASSESSEE AS BUSINESS EXPENDITURE. STILL FURTHER, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF INDIA MEDTRONIC PVT. LTD. VS. DCIT (2018) 52 CCH 43 (MUM), FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN THE CAS E OF PHL PHARMA PVT. LTD. (SUPRA), HAD CONCLUDED THAT THE MC I GUIDELINES ARE ONLY APPLICABLE TO THE DOCTORS AND T HE MEDICAL PROFESSIONALS REGISTERED WITH THE COUNCIL, AND CANN OT GOVERN THE OTHER TAX ENTITIES LIKE DRUG 28 ARISTO PHARMACE UTICALS P LTD MANUFACTURING COMPANIES OR INDIVIDUALS OTHER TH AN THE DOCTORS. IN THE BACKDROP OF THE AFORESAID OBSERVATI ONS, THE TRIBUNAL HAD OBSERVED THAT THE MCI GUIDELINES CANNO T DECIDE THE ALLOWABILITY OR OTHERWISE OF AN EXPENDITURE IN THE HANDS OF ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 37 - SUCH OTHER ENTITIES UNDER THE INCOME-TAX ACT, 1961. IT WAS FURTHER OBSERVED BY THE TRIBUNAL THAT THE INCOME TA X ACT IS AN INDEPENDENT CODE IN ITSELF AND THE BUSINESS INCOME OF AN ASSESSEE HAS TO BE ASSESSED AND TAXED AS ENVISAGED UNDER THE PROVISIONS OF THE ACT. ON THE BASIS OF THE LIMI TED SCOPE OF APPLICABILITY OF THE MCI GUIDELINES TO A PARTICULAR CLASS OF THE SOCIETY VIZ. DOCTORS OR MEDICAL PRACTITIONERS REGIS TERED WITH THE COUNCIL, THE TRIBUNAL HAD CONCLUDED THAT THE GUIDEL INES ISSUED BY MCI WOULD ONLY REGULATE THE CODE OF CONDUCT OF T HE DOCTORS AND THE MEDICAL PRACTITIONERS REGISTERED WITH IT AN D WOULD NOT BE APPLICABLE TO OTHER ENTITIES. 25. WE THUS, IN THE BACKDROP OF THE AFORESAID SETTL ED POSITION OF LAW AS REGARDS THE PROSPECTIVE APPLICABILITY OF AN OPPRESSIVE CIRCULAR, ARE OF THE CONSIDERED VIEW THA T AS THE CBDT AS PER ITS CIRCULAR NO. 5/2012, DATED 01.08.20 12 HAD ENLARGED THE SCOPE OF INDIAN MEDICAL COUNCIL REGULA TION, 2002, AND HAD MADE THE SAME APPLICABLE TO THE PHARMACEUTICAL COMPANIES, THUS THE SAME CANNOT BE R ECKONED TO HAVE A RETROSPECTIVE EFFECT. WE FIND THAT A COOR DINATE BENCH OF THE TRIBUNAL VIZ. ITAT, MUMBAI IN THE CASE OF SY NCOM FORMULATIONS (I) LTD. VS. DCIT-8(3), MUMBAI (ITA NO . 6428 & 6429/MUM/2012, DATED 23.12.2015) FOR A.YS 2010-11 A ND 2011-12 HAD CONCLUDED THAT THE AFORESAID CBDT CIRCU LAR NO. 5/2012, DATED 01.08.2012 WOULD NOT BE APPLICABLE TO THE A.YS 2010-11 AND 2011-12, AS THE SAME WAS INTRODUCED W.E .F. 01.08.2012. WE THUS, IN TERMS OF OUR AFORESAID OBSE RVATIONS ARE OF THE CONSIDERED VIEW THAT THE AFOREMENTIONED CBDT CIRCULAR NO. 5/2012, DATED 01.08.2012 WOULD NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE BEFORE US FO R A.Y. 2011- 12. 26. WE SHALL NOW ADVERT TO THE JUDICIAL PRONOUNCEME NTS WHICH HAD BEEN RELIED UPON BY THE LD. D.R BEFORE US : (I) DCIT, CIRCLE-13(1), NEW DELHI VS. OCHOA LABORAT ORIES LTD., NOIDA (ITA NO. 4114/DEL/2009, DATED 25.08.2017) ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 38 - THAT THE AFORESAID ORDER PASSED BY THE ITAT, DELHI PERTAINED TO THE ALLOWABILITY OF EXPENSES INCURRED BY THE ASS ESSEE IN RESPECT OF HOTEL BOOKINGS AT NEW DELHI, COCHIN OR K OCHI AGAINST DERMACON CONFERENCE AT HYDERABAD, PROVIDI NG FREE AIR TRAVEL, STAY AND FOOD IN HOTELS, LOCAL CAR CONV EYANCE ETC., WHICH WERE HELD BY THE TRIBUNAL AS BEING AKIN TO GI VING COMMISSIONS TO THE DOCTORS FOR PRESCRIBING MEDICINE S MANUFACTURED BY THE ASSESSEE COMPANY. THE FACTS INV OLVED IN THE SAID CASE BEING DISTINGUISHABLE AS AGAINST THAT OF THE PRESENT ASSESSEE BEFORE US, THUS WOULD NOT ASSIST T HE CASE OF THE REVENUE. (II) ACIT, CIRCLE-6(3), MUMBAI VS. LIVA HEALTHCARE LTD., MUMBAI (ITA NO. 904/MUM/2013, DATED 12.09.2016) IN THE AFO RESAID ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNA L, EXPENSES WERE INCURRED BY THE ASSESSEE FOR CREATING GOOD RELATIONS WITH THE DOCTORS IN LIEU OF EXPECTED FAVO URS FROM THEM FOR RECOMMENDING TO THE PATIENTS THE PHARMACEU TICALS PRODUCTS OF THE COMPANY. WE FIND THAT THE TRIBUNAL WHILE ADJUDICATING THE CASE OF DCIT-8(2), MUMBAI VS. PHL PHARMA (P.) LTD. HAD CONSIDERED THE AFORESAID ORDER OF THE TRIBUNAL. (III) CONFEDERATION OF INDIAN PHARMACEUTICAL INDUST RY (SSI) VS. THE CENTRAL BOARD OF DIRECT TAXES (CWP NO. 10793 OF 2012, DATED 26.12.2012)(HP): WE FIND THAT THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT OF HIMACHAL PRADESH WAS CONSIDERED BY THE ITAT, MUM BAI BENCH C, MUMBAI IN THE CASE OF DCIT-8(2), MUMBAI VS. PHL PHARMA (P.) LTD. 30 ARISTO PHARMACEUTICALS P LTD THE TRIBUNAL AFTER CONSIDERING THE AFORESAID JUDGME NT HAD OBSERVED THAT AS HELD BY THE HIGH COURT, IF THE ASS ESSEE WAS ABLE TO ESTABLISH THAT THE MCI REGULATION WAS NOT A PPLICABLE TO THE ASSESSEE, THEN THE SAME COULD NOT BE BLINDLY AP PLIED IN ITS CASE. (IV) CIT VS. KAP SCAN AND DIAGNOSTIC CENTRE (P.) LT D. (2012) 344 ITR 476 (P&H): ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 39 - WE FIND THAT THE JUDGMENT IN THE AFORESAID CASE WAS RENDERED IN CONTEXT OF THE COMMISSION PAID BY THE ASSESSEE C OMPANY WHICH WAS RUNNING A SCANNING AND A DIAGNOSTIC CENTR E TO THE PRIVATE DOCTORS FOR REFERRING PATIENTS FOR DIAGNOSI S/SCANNING. THUS, THE FACTS INVOLVED IN THE CASE BEFORE THE HIG H COURT ARE DISTINGUISHABLE AS AGAINST THOSE IN THE CASE OF THE ASSESSEE BEFORE US. STILL FURTHER, THE SAID JUDGMENT WAS ALS O CONSIDERED BY THE TRIBUNAL WHILE PASSING THE ORDER IN THE CASE OF DCIT- 8(2), MUMBAI VS. PHL PHARMA (P.) LTD. 27. WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS CONCLUDE THAT THE ASSESSEE WAS DULY ENTITLED FOR CLAIM OF SA LES PROMOTION EXPENSES OF RS. 9,70,82,317/- INCURRED ON THE DISTRIBUTION OF ARTICLES TO THE STOCKISTS, DISTRIBU TORS, DEALERS, CUSTOMERS AND DOCTORS. THUS, THE ORDER OF THE CIT(A ) SUSTAINING THE DISALLOWANCE OF THE SALES PROMOTION EXPENSES TO THE EXTENT OF RS. 66,49,685/- IS SET ASIDE. IN T ERMS OF OUR AFORESAID OBSERVATIONS THE ENTIRE DISALLOWANCE OF T HE SALES PROMOTION EXPENSES OF RS. 9,70,82,317/- MADE BY THE A.O IS DELETED. 28. THE APPEAL OF THE ASSESSEE VIZ. ITA NO. 5553/MU M/2014 IS ALLOWED AND THE APPEAL OF THE REVENUE VIZ. ITA N O. 6129/MUM/2014 IS DISMISSED. 8. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE S IMILAR AND IDENTICAL TO THE ABOVE DECISION IN RESPECT OF S ALES PROMOTIONAL EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. THE HONBLE TRIBUNAL IN THE ABOVE DECISIO N HAS CONSIDERED THE PROVISIONS OF LAW, FACTS AND CIRCUMSTANCES, CBDT CIRCULAR, MCI GUIDELINES AND GRANTED THE RELIEF TO THE ASSESSEE. ACCORDINGLY, W E FOLLOW THE JUDICIAL PRECEDENCE AND SET ASIDE THE ORDER OF THE ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 40 - CIT(A) TO THE EXTENT OF DISALLOWANCE OF SALE PROMOT ION EXPENSES INCURRED BY WAY OF GIFTS, FREEBIES, TRAVEL ALLOWANCE AND MONETARY GRANTS AND DIRECT THE ASSESS ING OFFICER TO DELETE THE ADDITION AND ALLOW THE GROUND OF THE APPEAL NO. 4 OF THE ASSESSEE. 9. IN RESPECT OF GROUND OF APPEAL NO.5 IN RESPECT O F SHORT CREDIT OF TAXES PAID, WE DIRECT THE ASSESSING OFFICER TO EXAMINE AND VERIFY THE AUTHENTICITY OF THE TAXES PAID AND ALLOW THE CREDIT. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.09.2021 SD/- SD/- ( S RIFAUR RAHMAN ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20.09.2021 KRK, PS ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 41 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. !!' , $ % , / DR, ITAT, MUMBAI 6. () * + / GUARD FILE. / BY ORDER, ! //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBA I ITA NO. 1219/MUM/2018 CIPLA LTD., MUMBAI - 42 - DATE INITIAL 1. DRAFT DICTATED ON 19.07.21 PS 2. DRAFT PLACED BEFORE AUTHOR 11.08.21 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER PS 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. PS 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DICTATION PAD IS ENCLOSED 2. OTHER MEMBER ON WHI