M/S. MEDLEY PHARMACEUTICALS LTD., MUMBAI V. DY COMM. OF INCOME TAX-10(2)(2), MUMBAI

ITA 290/MUM/2023

AI Insights

The case involves multiple appeals by M/s. Medley Pharmaceuticals Ltd against various orders of the Income Tax Department concerning disallowances made under sections 14A, 35(2AB), and 80IB of the Income Tax Act. The primary issues revolved around the disallowance of sales promotion expenses, the applicability of MCI guidelines on gifts to doctors, and the treatment of certain royalty and capital expenditure. The Tribunal examined the nature of the expenses, the legal provisions, and relevant judicial precedents to arrive at its decision, which included a detailed analysis of the Supreme Court's ruling in Apex Laboratories Ltd vs. DCIT (LTU) regarding incentives or gifts to doctors.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302594 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 07-06-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 30-01-2023
• Other Referred Cases: Apex Laboratories Ltd vs. DCIT (LTU) [2022] 135 taxmann.com 286 (SC), Claris Life Science Ltd vs. CIT [326 ITR 251], Sadan Vikas India Ltd vs. CIT [335 ITR 117], CIT vs. Shoori Vallabhdas & Co [46 ITR 144]
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Retrospective amendment; Royalty expenses; Capital expenditure; Set aside
• Section: 246; 154; 143(3); 14A; 37(1); 143(1); 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, „D„ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.289/Mum/2023 (Assessment Year :2015-16) ITA No.290/Mum/2023 (Assessment Year :2013-14) ITA No.291/Mum/2023 (Assessment Year :2016-17) ITA No.293/Mum/2023 (Assessment Year :2014-15) M/s. Medley Pharmaceuticals Ltd. D-2, Medley Houses 16 th Road, MIDC Area Andheri (E) Mumbai – 400 093 Vs. Dy. Commissioner of IncomeTax-10(2)(2) Mumbai PAN/GIR No.AAACM2764J (Appellant) .. (Respondent) ITA No.306/Mum/2023 (Assessment Year :2018-19) ITA No.305/Mum/2023 (Assessment Year :2013-14) Asst.Commissioner of Income Tax- 2(2)(1) Mumbai Vs. M/s.Medley Pharmaceuticals Ltd. D-2, Medley Houses 16 th Road, MIDC Area Andheri (E) Mumbai – 400 093 PAN/GIR No.AAACM2764J (Appellant) .. (Respondent) ITA No.289/Mum/2023 and other appeals M/s. Medley Pharmaceuticals Ltd 2 ITA No.292/Mum/2023 (Assessment Year :2018-19) M/s. Medley Pharmaceuticals Ltd. D-2, Medley Houses 16 th Road, MIDC Area Andheri (E) Mumbai – 400 093 Vs. National Faceless Assessment Centre Delhi PAN/GIR No.AAACM2764J (Appellant) .. (Respondent) Assessee by Shri Prakash Jotwani Revenue by Smt. Riddhi Mishra Date of Hearing 08/06/2023 Date of Pronouncement 28/06/2023 आदेश / O R D E R PER BENCH: In all the aforesaid appeals, one of the common grounds raised is disallowance of sales promotion expenses and apart from that, there are disallowance made u/s 14A and disallowance of claim u/s. 35(2AB) of the Income Tax Act. Since most of the issues are common arising out of identical set of facts and finding given therein, therefore, same were heard together and are being disposed of by this consolidated order. 2. We first take up the cross appeal for A.Y.2013-14. ITA No.289/Mum/2023 and other appeals M/s. Medley Pharmaceuticals Ltd 3 The brief facts are that Assessee Company is in the business of manufacturing and selling of pharmaceutical products. The assessee had manufacturing facilities at five locations namely Daman Unit I, Daman Unit II, Daman Unit III, Daman Unit IV and Jammu, in respect of which assessee was eligible to claim exemption of profits at the rate of 30% u/s.80IB of the Act. 3. Ground No.1 in assessee’s appeal relates to disallowance of sales promotion expenses of Rs.9,67,49,900/-. During the year relevant for A.Y.2013-14, assessee has incurred sales promotion expenses of Rs.22,72,39,633/- out of which ld. AO had disallowed Rs.15,15,23,628/- after allowing the expenses aggregating to Rs.7,57,16,006/-. These expenses include payment of small gifts made to non-doctors, payment made to doctors for less than Rs.1000/- and payment made to the doctors excess of Rs.1000/-. The details of which are as under:- i) Paid to non-doctors = Rs. 4,67,67,944/- (ii) Paid to doctors/non-doctors (amount