DCIT 9(2)(2), MUMBAI V. M/S. EDWARD LIFESCIENCES (INDIA)P. LTD., MUMBAI

ITA 1525/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4171 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 17-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENONLD
• Section: 37(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI VIKAS AWASTHY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO. 1525 /MUM/20 20 ( / ASSESSMENT YEAR : 2014 - 15) DCIT 9(2)(2 ) R. NO. 655A , 6 TH FLOOR AAYKAR BHAVAN M. K. ROAD , M UMBAI - 20 / VS. M/S EDWARD LIFESCIENCES (I ) PVT. LTD. 7 TH FLOOR, UNIT 1 & 2 TECHNIPLEX - II OFF S. V. ROAD, GOREGAON (WEST) MUMBAI - 400 062 ./ ./ PAN/GIR NO . A AAC B - 4203 - F ( / APPELLANT ) : ( / RESPONDENT ) REVENUE BY : SHRI VIJAY KUMAR MENON LD. SR. DR ASSESSEE BY : NONE / DATE OF HEARING : 28 /09 /2021 / DATE OF PRONOUNCEMENT : 04/10/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2014 - 15 CONTEST THE ORDER OF LD. COM MISSIONER OF INCOME - TAX ( APPEALS ) - 16 , MUMBAI [ CIT(A)] D ATED 20/12 /2019 ON THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S. 37(1)OF RS.1,6 2,71,223/ - WITHOUT APPRECIATING THE FACT THAT EXPENSES INCURRED FOR PROVIDING TRAVEL FACILITY AND HOSPITALITY TO ITS CONSULTANTS/SURGEONS, FALL OUTSIDE THE AMBIT OF THE IMC REGULATIONS 2002? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DI SALLOWANCE MADE U/S. 37(1) OF RS. 1,62,71,223/ - WITHOUT APPRECIATING THE FACT THAT THE CBDT VIDE CIRCULAR NO 5/2012 DATED 2 01.08.2012 HAS CLARIFIED THAT THE CLAIM OF ANY EXPENSES INCURRED IN VIOLATION OF THE PR OVISIONS OF THE IMC REGULATION, 2002 SHALL BE INADMISSIBLE U/S. 37(1) OF THE ACT?. 2. DURING HEARING, NONE APPEARED FOR ASSESSEE. HOWEVER, UPON PERUSAL OF IMPUGNED ORDER, IT APPEARS THAT THE CASE IS COVERED IN ASSESSEES FAVOR BY THE EARLIER DECISIONS. THE LD. SR. DR PLEADED FOR RESTORATION OF DISALLOWANCE AS MADE BY LD. AO. 3. 1 THE MATERIAL FACTS OF THE CASE ARE THAT ASSESSEE BEING RESIDENT CORPORATE ASSESSEE IS STATED TO BE ENGAGED IN DISTRIBUTION OF HEART THERAPY PRODUCTS AND RELATED MEDICAL EQUIPMENTS . THE ASSESSEE SE LLS PRODUCTS OF CARDIAC CARE MAINLY TO HOSPITALS AND OTHER MEDICAL INSTITUTIONS. THE ASSESSEE INCURRED EXPENDITURE OF RS.162.71 LACS IN TRAVELLING AND HOSPITALITY OF CONSULTANTS / SURGEONS WHICH WERE DISALLOWED BY LD. AO IN THE LIGHT OF EX PLANATION TO SEC.37 AND THE INDIAN MEDICAL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002 AND CBDT CIRCULAR NO.5 OF 2012. 3.2 THESE EXPENSES WERE INCURRED ON SURGEONS WHO WERE EMPLOYED AS CONSULTANTS WITH THE ASSESSEE. THE ASSESSEE IS STAT ED TO HAVE RIGOROUS SCREENING PROCESS WHEREIN SURGEONS SPECIALIZING THE PRACTICE AREAS WHERE THE COMPANYS PRODUCTS ARE SOLD, ARE HAND - PICKED BASED ON THEIR EXPERTISE, YEARS OF EXPERIENCE, INTEGRITY ETC. AND ARE APPOINTED AS CONSULTANTS FOR PROVIDING SERVI CES TO THE COMPANY. THESE CONSULTANTS WOULD CREATE BRAND AWARENESS AMONGST FELLOW SURGEONS / MEDICAL INSTITUTES / HOSPITALS ABOUT THE LATEST DEVELOPMENTS. T HE CONSULTANTS WOULD EDUCATE THE FELLOW SURGEONS/MEDICAL INSTITUTES/ HOSPITALS ABOUT THE UTILITY/APP LICABILITY OF THE COMPANY'S PRODUCTS IN VARIOUS TYPES OF PATIENTS/PATIENT CONDITIONS. IN ORDER TO ENABLE THESE CONSULTANTS TO GAIN KNOWLEDGE ABOUT THE LATEST DEVELOPMENTS / TECHNIQUES / PRODUCTS IN THE 3 AREA OF OPERATIONS OF THE COMPANY, THE COMPANY PROVIDE S TRAVEL FACILITIES SO THAT THE CONSULTANTS CAN ATTEND VARIOUS MEDICAL CONFERENCES. THESE MEDICAL CONFERENCES ARE SPECIFIC TO THE AREAS OF OPERATIONS OF THE COMPANY I.E . HEART VALVES AND ACT AS A FORUM WHERE COMPANIES AND SURGEONS COME TOGETHER AND DISCUSS /SPREAD AWARENESS ABOUT THE LATEST DEVELOPMENTS WITH RESPECT TO HEART VALVES. SINCE THE COMPANY OPERATES IN AN HIGHLY SENSITIVE SEGMENT WHEREIN ANY LAPSE CAN LEAD TO LOSS OF LIFE, IT IS IMPERATIVE FROM THE COMPANY'S PERSPECTIVE THAT ADEQUATE KNOWLEDGE/SKIL L/AWARENESS IS CREATED AMONGST ITS CONSULTANTS (AND THROUGH CONSULTANTS) SURGEON FRATERNITY ABOUT THE LATEST LIFE - SAVING PRODUCTS AND TECHNIQUES SO AS TO ENSURE THE COMPANY IS SAFEGUARDED FROM ANY REPUTATIONAL RISK ARISING OUT OF LAPSE OF THE PART OF THE S URGEONS. 3.3 DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE MCI REGULATIONS AS WELL AS CBDT CIRCULAR WOULD NOT BE APPLICABLE TO THE EXPENDITURE INCURRED BY THE ASSESSEE SINCE NO EXPENSES WERE INCURRED FOR ANY UNETHICAL PRACTICES. HOWEVER, R EJECTING THE SAME LD. AO DISALLOWED THE EXPENDITURE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. THE LD. CIT(A), IN PARA 4.1.3 OF THE ORDER, NOTED THAT SIMILAR ISSUE STOOD COVERED IN ASSESSEES FAVOR BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CA SE FOR AYS 2010 - 11 (ITA NO.155 3/MUM/2016 20/11/2018) AS WELL AS FOR AY 2013 - 14 (ITA NO.7198/MUM/2017 10/07/2019 . THE RELEVANT FINDINGS OF THE TRIBUNAL HAVE BEEN EXTRACTED IN THE IMPUGNED ORDER. ACCORDINGLY, THE ADDITIONS WERE DELETED AGAINST WHICH THE REVE NUE IS IN FURTHER APPEAL BEFORE US. 5. AFTER GOING THROUGH THE IMPUGNED ORDER, WE FIND THAT THE SIMILAR ISSUE STOOD COVERED IN ASSESSEES OWN CASE BY THE DECISION OF TRIBUNAL 4 FOR AYS 2010 - 11 & 2013 - 14. NO CHANGE IN FACTS COULD BE DEMONSTRATED BEFORE US. TH EREFORE, NO INFIRMITY COULD BE FOUND IN THE IMPUGNED ORDER. 6. THE APPEAL STAND DISMISSED. ORDER PRONOUNCED ON 4 TH OCTOBER, 2021. SD/ - SD/ - ( VIKAS AWASTHY ) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04/10/2021 SR.PS, DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMB AI.