Sunflower Pharmacy, Ahmedabad V. The Income Tax Officer, Ward-6(2), Ahmedabad

ITA 2546/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8259 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 01-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR ANUPAMA SINGALA
• Keywords: Gift; Maximum Marginal Rate; Additional evidence
• Section: 37(1)

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2546/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) SUNFLOWER PHARMACY G-5, RUDRA ARCADE OPP. TRAFFIC HELMET CIRCLE DRIVE-IN-ROAD, MEMNAGAR AHMEDABAD 380 052 / VS. THE ITO WARD-6(2) AHMEDABAD $ ./ ./ PAN/GIR NO. : ABQPF 1821 A ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : MS.URVASHI SHODHAN, AR ($'*) / RESPONDENT BY : DR.ANUPAMA SINGALA, SR.DR +,*- / DATE OF HEARING 07/11/2017 ./0*- / DATE OF PRONOUNCEMENT 10 / 11 /2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL FILED AT THE INSTANCE OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS )-3, AHMEDABAD [CIT(A) IN SHORT] DATED 12/06/2015 IN THE MATTER OF ASSESSMENT ORDER UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED TO AS 'THE ACT') DATED 26/02/2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. ITA NO. 2546/AH D/2015 SUNFLOWER PHARMACY VS. ITO ASST.YEAR 2011-12 - 2 - 2. THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS.41,39,131/- TOWARDS COMMISSION EXPENSES IN THE CAPTIONED APPEA L. 3. THE ASSESSEE HAS ALSO MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL WHEREBY IT SEEKS TO CHA LLENGE THE ORDER OF THE REVENUE AUTHORITIES ON THE PURPORTED LEGAL GROUND T HAT THE RECIPIENT OF THE COMMISSION INCOME HAVE PAID TAXES IN THEIR HANDS AT MAXIMUM MARGINAL RATES AND THEREFORE THERE IS NO LOSS TO REVENUE. A T THIS STAGE ITSELF, WE DO NOT FIND MERIT IN THE ADDITIONAL GROUNDS OF APPEAL SO RAISED. THE ADJUDICATION OF AFORESAID ADDITIONAL GROUND DEPEN DS UPON THE FACTS IN THE FORM OF RETURN OF INCOME OF THE BENEFICIARIES O F RETURN OF INCOME. THE RESPECTIVE RETURNS OF INCOME OF THE RECIPIENT W ERE NOT PLACED ON RECORD BEFORE THE LOWER AUTHORITIES. THEREFORE, TH E AFORESAID ADDITIONAL GROUND DOES NOT EMANATE FROM THE FACTS ON RECORD. THE ADDITIONAL GROUND OF APPEAL IS THEREFORE DISMISSED. 4. THE ASSESSEE HAS ALSO MOVED APPLICATION FOR ADMI SSION OF ADDITIONAL EVIDENCE. THE ADDITIONAL EVIDENCE SOUGH T TO BE PLACED ON RECORD ARE RETURN OF INCOME OF THE RECIPIENT OF THE COMMISSION INCOME. WE DO NOT FIND ANY REASONS IN THE PETITION FOR ADMI SSION OF ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF THE I.T.A.T. RULES, 1963. RULE 29 OF THE ITAT RULES PROVIDES FOR STRINGENT STIPULATIONS FOR ADMISSION OF ADDITIONAL EVIDENCE. THE ASSESSEE HAS NOT GIVEN A NY COGENT REASON FOR ITA NO. 2546/AH D/2015 SUNFLOWER PHARMACY VS. ITO ASST.YEAR 2011-12 - 3 - FAILING TO ADDUCE THE ADDITIONAL EVIDENCE SOUGHT TO BE ADMITTED AT THIS BELATED STAGE. THEREFORE, WE DECLINE TO ENTERTAIN THE ADDITIONAL EVIDENCE. 5. WE SHALL NOW TURN TO THE SUBSTANTIVE APPEAL OF T HE ASSESSEE. FROM THE PERUSAL OF THE RECORD, WE FIND THAT THE AO HAS DISALLOWED COMMISSION PAID AGGREGATING TO RS.41,39,131/- TO DOCTORS. FOR THIS PURPOSE, THE ASSESSING OFFICER (AO) HAS RELIED UPON THE CBDT CI RCULAR NO.5/2012 DATED 01/08/2012 ISSUED BY BDT AND OBSERVED THAT TH E PAYMENT MADE TO THE DOCTORS CONTRAVENES SECTION 37(1) OF THE ACT I N VIEW OF THE EXPLANATION APPENDED TO THIS SUB-SECTION. WE FIND THAT THE ISSUE IS NO LONGER RES INTEGRA AND HAS BEEN EXAMINED BY THE COORDINATE BENCH OF TRIBUNAL IN SYNCOM FORMULATIONS (I) LTD. VS. DCIT I N ITA NOS.6429 & 6428/MUM/2012 ORDER DATED 23/12/2015. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE COORDINATE BENCH IS REPRODUCED HER EUNDER:- 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT RECEIVING OF GIFTS BY DOCTORS WAS PROHIBITED BY MCI GUIDELINES, GIVING OF THE SAME BY MANUFACTURER IS NOT PROHIBITED UNDER ANY LAW FOR TH E TIME BEING IN FORCE. GIVING SMALL GIFTS BEARING COMPANY LOGO TO D OCTORS DOES NOT TANTAMOUNT TO GIVING GIFTS TO DOCTORS BUT IT IS REG ARDED AS ADVERTISING EXPENSES. AS REGARDS SPONSORING DOCTORS FOR CONFERE NCES AND EXTENDING HOSPITALITY, PHARMACEUTICALS COMPANIES HAVE BEEN SP ONSORING PRACTICING DOCTORS TO ATTEND PRESTIGIOUS CONFERENCE S SO THAT THEY GATHER CONTEMPORARY KNOWLEDGE ABOUT MANAGEMENT OF CERTAIN ILLNESS/DISEASE AND LEARN ABOUT NEWER THERAPIES. WE FOUND THAT THE DISALLOWANCE WAS MADE BY THE AO BY RELYING ON THE CBDT CIRCULAR DATE D 01.08.2012 ITA NO. 2546/AH D/2015 SUNFLOWER PHARMACY VS. ITO ASST.YEAR 2011-12 - 4 - ONWARDS. HOWEVER, THE CIRCULAR WAS NOT APPLICABLE B ECAUSE IT WAS INTRODUCED W.E.F.01.08.2012. I.E. ASSESSMENT YEAR 2 013-2014, 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 UNDE R CONSIDERATION. 6. IN PARITY WITH THE REASONING GIVEN BY THE COORDI NATE BENCH, WE FIND THAT THE DISALLOWANCE MADE BY THE AO IS NOT JU STIFIED. ACCORDINGLY, THE SUBSTANTIVE CLAIM OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10 / 11 /2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 10/ 11 /2017 4..+,.+../ T.C. NAIR, SR. PS ITA NO. 2546/AH D/2015 SUNFLOWER PHARMACY VS. ITO ASST.YEAR 2011-12 - 5 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-3, AHMEDABAD 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 7.11.17 (DICTATION-PAD 7-P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 7.11.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.10.11.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 10.11.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER