DCIT 8(2), MUMBAI V. PHL PHARMA P.LTD, MUMBAI

ITA 4605/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8931 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M DAYASAGAR
• Assessee Lawyers: J D MISTRY NIMESH JAIN
• Keywords: Gift; Business income; Business expenditure; Principle of natural justice; Retrospective amendment; Revenue expenditure; Capital expenditure
• Section: 37(1); 37; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE S/SHRI AMIT SHUKLA, JM & MANOJ KUMAR AGGARWAL , AM ITA NO.4605/MUM/2014 ASSESSMENT YEAR: 2010-11 THE DY. CIT 8(2) MUMBAI VS. PHL PHARMA P LTD. 305 SEJAL CHS LTD. NEW LINK ROAD, MUMBAI- 400 058 PAN AACCN5346B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M DAYASAGAR RESPONDENT BY :S/SHRI J.D. MISTRY &NIMESH JAIN DATE OF HEARING :28.09.2016 DATE OF PRONOUNCEMENT :12 .01.2017 O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE A GAINST IMPUGNED ORDER DATED 21.04.2014, PASSED BY LD. CIT( APPEALS)-17, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S. 143( 3) FOR THE A.Y. 2010-11, ON THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING T HE DISALLOWANCE OF RS.22,99,72,607/- BEING FREEBIES GI VEN BY THE ASSESSEE TO DOCTORS, IGNORING THE FACT THAT SUCH PA YMENTS ARE SPECIFICALLY PROHIBITED W.E.F. 10.12.2009 BY THE ME DICAL COUNCIL OF INDIA (MCI), WHICH IS THE COMPETENT AUTH ORITY, AND THEREFORE, THE SAID EXPENSES ARE ILLEGAL AND CONSEQ UENTLY NOT ALLOWABLE AS PER THE EXPLANATION TO SECTION 37(1) O F THE INCOME-TAX ACT, 1961? ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 2 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING T HE DISALLOWANCE OF RS.22,99,72,607/- BEING FREEBIES GI VEN BY THE ASSESSEE TO DOCTORS OBSERVING THAT THE PROHIBITION BY IMA IS ON MEDICAL PRACTITIONERS AND NOT APPLICABLE TO PHARMA COMPANIES WITHOUT APPRECIATING THAT THE PROHIBITION OF IMA IS TO CURB THE MALPRACTICES IN THE MEDICAL PROFESSION AND EQUALLY BINDING ON BOTH MEDICAL PRACTITIONERS AND PHARMA COMPANIES? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE R ESTORED. 2. THE BRIEF FACTS OF THE CASE QUA THE ISSUE RAISED I N THE GROUNDS OF APPEAL ARE THAT, THE ASSESSEE IS A PHARMACEUTICAL COMP ANY ENGAGED IN THE BUSINESS OF PROVIDING PHARMA MARKETING CONSULTANCY AND DETAILING SERVICES TO DEVELOP MASS MARKET FOR PHARMA P RODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDING, ON PERUSA L OF THE DETAILS OF EXPENSES DEBITED BY THE ASSESSEE IN THE PROFIT & LO SS ACCOUNT, THE AO NOTED THAT THE ASSESSEE HAS DEBITED ADVERTISEMENT EXP ENSES OF RS.25,26,85,000/- AND SALES PROMOTION EXPENSES OF RS. 58,66,25,000/-, AGGREGATING TO RS.83,93,10,000/-. ON FURTHER PERUSAL OF THE DETAILS APPEARING IN THE LEDGER ACCOUNT FURNISH ED BY THE ASSESSEE, HE FURTHER NOTED THAT THERE ARE CERTAIN EXPENS ES WHICH HAS BEEN DEBITED BY THE ASSESSEE LIKE, CUSTOMER RELATIONS HIP & MANAGEMENT EXPENSES (CRM) OF RS.7,61,96,260/-; KE Y ACCOUNT MANAGEMENT EXPENSES (KAM)OF RS.2,56,68,509/-; GIFT A RTICLES OF RS.9,20,22,518/-; AND COST OF SAMPLES OF RS.3,60,85, 320/-, WHICH ACCORDING TO HIM ARE IN THE NATURE OF FREEBIES GIVEN TO MEDICAL ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 3 PRACTITIONERS/DOCTORS WHICH ARE DISALLOWABLE IN TERMS OF EXPLANATION TO SECTION 37(1) AS CLARIFIED BY CBDT VIDE ITS CIRCULAR NO.5/2012 DATED 1.8.2012. IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE AO, FIRSTLY, AS REGARD CRM EXPENSES, ASSESSEE SUBMITTED THA T EXPENDITURE UNDER THIS CATEGORY INCLUDES ACTIVITIES LIKE HOLDING NA TIONAL LEVEL SEMINARS ON NEW MEDICAL RESEARCHES AND DRUGS FOR DI SCUSSION PANELS OF EMINENT DOCTORS AND INVITING OTHER DOCTORS TO PARTICI PATE IN IT; ARRANGING LECTURES OR SPONSORING KNOWLEDGE UPGRADE C OURSE, WHEREIN EMINENT DOCTORS ARE INVITED TO SPEAK ON THE SELECTED TOPI C RELATED TO THE THERAPEUTIC AREA AND ALSO SHARE THEIR RESEARCH AND OTHER LATEST KNOWLEDGE UPDATES; SUBSCRIPTION OF COSTLY JOURNALS, I NFORMATION BOOKS ETC.; AND SPONSORING TRAVEL AND ACCOMMODATION EXPENSE S OF DOCTORS FOR SUCH IMPORTANT CONFERENCES. UNDER THE KAM SERVICE S, THE ASSESSEE PROMOTES ICCU RANGE OF PRODUCTS, WHICH NORMALLY FOCUS ES ON EITHER SINGLE BRAND OR A GROUP OF BRANDS IN ONE PARTICULAR THERAPY AREA. THIS IS DONE FOR CERTAIN KEY DOCTORS, WHO ARE OPINION LEAD ERS AND HAS LARGER POTENTIAL FOR SALE OF BRANDS. REGARDING GIFT ARTICLES, IT WAS STATED THAT THIS INCLUDES EXPENSES FOR SMALL VALUE ITEMS GIVEN A CROSS THE ENTIRE POOL OF DOCTORS IN INDIA SO AS TO MAINTAIN BRAND MEMO RY ON A CONTINUOUS BASIS. THESE SMALL ITEMS INCLUDE DIARIES, PEN SETS, INJECTION BOXES, CALENDARS, TABLE WEIGHTS, POSTCARD HO LDERS, STATIONERY ITEMS, ETC., WHEREIN LOGO OF THE ASSESSEE COMPANY AND THE NAME OF THE MEDICINE IS ADVERTISED. THIS IS IMPORTANT BECAUSE IN TH E SAME GENERIC ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 4 DRUG THERE ARE MORE THAN 40 TO 60 BRANDS, THEREFORE, B RAND PROMOTION IS DONE THROUGH SMALL VALUE ITEMS. LASTLY, FOR COST OF SAMPLES, IT WAS STATED THAT THESE SAMPLES ARE DISTRIBUTED THROUGH VARIOUS A GENTS TO DOCTORS TO PROVE THE EFFICACY OF THE DRUG AND TO ESTA BLISH THE TRUST OF THE DOCTORS ON QUALITY OF DRUGS. FREE SAMPLES ARE GIV EN OF SMALLER SIZE, WHEREIN IT IS MARKED AS PHYSICIAN SAMPLE NOT FOR SALE. VARIOUS OTHER EXPENDITURE UNDER THE AFORESAID HEAD, HAVE BEEN ELABO RATELY EXPLAINED AND ILLUSTRATED BY THE ASSESSEE IN ITS REPLY DATED, 27.12.2012 BEFORE AO. THE RELEVANT PORTION OF THE REPL Y HAS BEEN INCORPORATED BY THE AO FROM PAGES 3 TO 6 OF THE ASSESSM ENT ORDER. REGARDING THE APPLICABILITY OF CBDT CIRCULAR NO.5 OF 2012 (SUPRA), WHEREIN THE CBDT HAS REFERRED TO AMENDMENT TO THE INDIA N MEDICAL COUNCIL REGULATIONS, 2002, BROUGHT FROM 10.12.2009, IMPOSING PROHIBITION OF MEDICAL PRACTITIONER AND THEIR PROFESS IONAL ASSOCIATIONS FROM TAKING ANY GIFT, TRAVEL FACILITY, HOSPITALITY, CAS H OR MONETARY GRANT FROM THE PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTR IES, THE ASSESSEE SUBMITTED THAT FIRSTLY, COST OF FREE SAMPLES, KAM EXPENSES, CRM EXPENSES ARE NOT PROHIBITED UNDER ANY LAW AND, SECONDLY, THE CBDT CIRCULAR CANNOT HAVE RETROSPECTIVE EFFECT SO AS TO BE MADE APPLICABLE IN THE ASSESSMENT YEAR 2010-11 AS THE CIRCU LAR IS DATED 01.08.2012. AS REQUIRED BY THE AO, THE ASSESSEE ALS O SEGREGATED EXPENSES INCURRED AFTER 10.12.2009, I.E., THE DATE O F AMENDMENT BROUGHT IN THE INDIAN MEDICAL COUNCIL GUIDELINES. AFT ER SEGREGATING ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 5 THE EXPENSES, AO DISALLOWED THE EXPENDITURE AGGREGATIN G TO RS.22,99,72,607/- (POST 10.12.2009) ON THE GROUND THA T, FIRSTLY, THE GUIDELINES ISSUED BY THE MEDICAL COUNCIL OF INDIA IS BINDING BECAUSE IT IS A STATUTORY BODY HAVING BEEN SET UP UNDER THE ACT OF THE PARLIAMENT; SECONDLY, THE AMENDED NOTIFICATION DATED 10.12.2009, WHICH HAS BEEN REPRODUCED BY HIM IN THE ORDER, CLEAR LY FORBIDS MEDICAL PRACTITIONERS TO RECEIVE ANY KIND OF GIFT, TRAVE L FACILITIES, HOSPITALITY AND ANY KIND OF CASH OR MONETARY GRANTS FR OM ANY PHARMACEUTICAL OR HEALTH CARE INDUSTRIES. THUS, SUCH AN EXPENSES, HE HELD THAT, IS DISALLOWABLE IN TERMS OF EXPLANATION TO SECTION 37(1). 3. BEFORE THE LD. CIT (A) DETAILED SUBMISSIONS WERE M ADE BY THE ASSESSEE WHICH HAS BEEN DEALT AND INCORPORATED IN THE APPELLATE ORDER FROM PAGES 4 TO 6. SUM AND SUBSTANCES OF THE SUBMISSI ONS CAN BE SUMMARIZED ARE AS UNDER:- I) THE EXPENDITURE INCURRED BY THE ASSESSEE IS FOR THE PURPOSE OF ADVERTISING ITS PRODUCTS AND NOT FOR THE PURPOSE OF G RANTING ANY GIFT OR CAN BE SEEN AS ANY OTHER FORM OF INDUCEMENT. T HE GIFT ITEMS SUCH AS PENS, PAPER WEIGHTS, CALENDARS, PEN STAN DS, STATIONERY ITEMS, INJECTION BOXES, ETC., ARE OF VERY LO W COST, MUCH BELOW THE PERMISSIBLE LIMIT AND ARE PURELY FOR ADVERT ISING ITS PRODUCTS. A SAMPLE PEN AND INJECTION BOX DISTRIBUTED BY THE COMPANY WAS ALSO PRODUCED BEFORE THE LD. CIT(A) TO DE MONSTRATE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 6 THAT THE COMPANYS NAME AND THE PRODUCT NAME HAVE BEEN AFFIXED IN BOLD LETTER ON THE SAID ITEMS. SUCH TOKEN PR OMOTION ITEMS/ MATERIALS ARE MERELY FOR ADVERTISEMENT AND INCR EASING AWARENESS OF THE ASSESSEES NAME AND MARKETING ITS PRO DUCTS. II) GIVING A SMALL GIFT ITEMS BEARING COMPANY LOGO DO ES NOT TANTAMOUNT TO GIFT TO THE DOCTORS WHICH CAN BE SAID TO BE PROHIBITED UNDER THE GUIDELINES ISSUED BY MEDICAL C OUNCIL OF INDIA. RELIANCE WAS PLACED IN THE CASE OF INDIAN O XYGEN LTD V. CIT (210 ITR 274), WHEREIN THE DISTRIBUTION OF ARTICLE S EMBOSSED WITH THE NAME AND LOGO OF THE ASSESSEE COMPANY WAS HE LD TO BE ALLOWABLE. III) REGARDING THE CBDT CIRCULAR DATED 01.08.2012 AND ITS AFFIRMATION BY THE HONBLE HIMACHAL PRADESH HIGH COUR T IN THE CASE OF CONFEDERATION OF INDIAN PHARMACEUTICAL INDUSTRY (SS) VS. CBDT, IT WAS POINTED OUT THAT THE HONBLE HIGH COURT WHILE UPHOLDING THE VALIDITY OF SAID CIRCULAR HAS C LARIFIED THAT, IF THE ASSESSEE SATISFIES THE ASSESSING AUTHORITY THAT THE EXPENDITURE IS NOT IN VIOLATION OF THE REGULATIONS FRAM ED BY THE MEDICAL COUNCIL, THEN IT CAN LEGITIMATELY CLAIM A DEDU CTION. THUS, IT IS FOR THE ASSESSEE TO SATISFY THE AO THAT THE EXPENDITURE IS NOT IN VIOLATION OF MCI REGULATIONS, WH ICH ASSESSEE HAS DONE IN THE PRESENT CASE. ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 7 IV) MOST IMPORTANTLY, IT WAS POINTED OUT THAT MCI GUIDELINE S AND AMENDMENT THEREIN ARE MEANT ONLY FOR THE MEDICAL PRACTIT IONERS AND NOT TO PHARMACEUTICAL OR ALLIED HEALTH CARE COMPAN IES. THEREFORE, SUCH EXPENSES CANNOT BE REGARDED AS UNLAW FUL OR ILLEGAL AT LEAST IN THE HANDS OF THE ASSESSEE COMPANY. V) LASTLY, CBDT CIRCULAR CANNOT HAVE RETROSPECTIVE EFFE CT IN THE A.Y. 2010-11. 4. THE LEARNED CIT (A) AFTER ANALYSING THE SUBMISSIO NS OF THE ASSESSEE AS WELL AS THE REASONING GIVEN BY THE AO, CO MPLETELY AGREED WITH THE CONTENTION OF THE ASSESSEE AND HELD THAT THE EXPE NSES INCURRED BY THE ASSESSEE DOES NOT FALL WITHIN THE AMBIT OF GIFT, TRAVEL FACILITY, HOSPITALITY, CASH OR MONETARY GRANT WHICH CA N BE CLASSIFIED AS FREEBIES IN VIOLATION OF THE AMENDMENT BROUGHT IN IND IAN MEDICAL COUNCIL REGULATIONS, 2002 ON 10.12.2009. THE EXPEND ITURE IS IN CONNECTION WITH ADVERTISEMENT OF PRODUCT AND NOT FOR THE PURPOSE OF GRANTING GIFT OR ANY OTHER FORM OF INDUCEMENT TO THE DOCT ORS AND ALL THE DISTRIBUTED PRODUCTS BEARS THE NAME OF THE ASSESSEE COMPANY AND PRODUCT NAME AND THEREFORE, THESE ARE PURELY PROMOTIONA L MATERIALS WHICH ARE DISTRIBUTED TO THE DOCTORS FOR BRAND RECOGNITIO N. AFTER REFERRING TO VARIOUS DECISIONS AND ALSO THE JUDGMENT OF HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CONFEDERA TION OF INDIAN PHARMACEUTICAL INDUSTRY VS. CBDT (SUPRA), LEARNED CIT (A) CONCLUDED ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 8 THAT THE ASSESSEE HAS TO SATISFY THE AO THAT THE EXPENSES IS NOT IN VIOLATION OF MCI REGULATION, WHICH THE ASSESSEE IN THIS CASE HAS BEEN ABLE TO DO SO AND THERE IS NO PROHIBITION ON THE PHARMA COMPANIES UNDER ANY LAW TO DISTRIBUTE SUCH PROMOTIONAL MATERIALS AND, THEREFORE, EXPLANATION 1 TO SECTION 37(1) CANNOT BE SAID TO BE APPLICABLE TO THE COMPANY. ACCORDINGLY, HE ALLOWED TH E EXPENDITURE AGGREGATING TO RS.22,99,72,607/- U/S. 37(1) ON THE GRO UND THAT THE PAYMENTS MADE BY THE ASSESSEE IS NOT COVERED BY THE CBD T CIRCULAR NO. 05/2012 DATED 01.08.2012. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS MADE B Y LD. CIT DR AS WELL AS LD. SR. COUNSEL, MR J.D. MISTRY, PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND MATERIAL REFERRED TO BEFORE US. THE ENTIRE CONTROVERSY REVOLVES AROUND, WHETHER THE EXPENDI TURES IN QUESTION INCURRED BY THE ASSESSEE (A PHARMACEUTICAL CO MPANY) IS HIT BY EXPLANATION 1 BELOW SECTION 37(1) IN VIEW OF CBDT CIRCULAR DATED 01.08.2012, INTERPRETING THE AMENDMENT DATED 10.12.200 9 BROUGHT IN INDIAN MEDICAL COUNCIL REGULATION 2002 OR NOT. THE BR EAK-UP OF SALES PROMOTION EXPENSES, WHICH HAS BEEN DISALLOWED BY THE AO, ARE AS UNDER: SR.NO PARTICULARS OF EXPENSES AMOUNT (IN RS.) 1 CUSTOMER RELATIONSHIP MANAGEMENT EXPENSES (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 SAMPLES 3,60,85,320 TOTAL 22,99,72,607 ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 9 THE NATURE OF AFORESAID EXPENSES HAS ALREADY BEEN EX PLAINED ABOVE. NOW WHETHER THE NATURE OF SUCH EXPENDITURE INCURRED BY THE ASSESSEE IS TO BE DISALLOWED IN VIEW OF THE CBDT CIRCULAR DATED 01.08.2012. FOR THE SAKE OF READY REFERENCE, THE SAID CBDT CIRCUL AR NO.5/2012 IS REPRODUCED HEREUNDER: I NADMISSIBILITY OF EXPENSES INCURRED IN PROVIDING FR EEBEES TO M EDICAL P RACTITIONER BY PHARMACEUTICAL AND ALLIED HEALTH SECTOR I NDUSTRY CIRCULAR NO. 5/2012 [F. NO. 225/142/2012-ITA.II], D ATED 1-8- 2012 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 COUNCIL ACT, 195 6. 2. THE COUNCIL IN EXERCISE OF ITS STATUTORY POWERS AM ENDED 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 DEDUC TION OF ANY REVENUE EXPENDITURE (OTHER THAN THOSE FAILING U NDER ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 10 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 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 VA LUE OF FREEBEES ENJOYED BY THE AFORESAID MEDICAL PRACTITIO NER OR 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 BROUGHT TO THE NOTICE OF ALL THE OFFICE RS OF THE CHARGE FOR NECESSARY ACTION. FROM THE PERUSAL OF THE AFORESAID BOARD CIRCULAR, IT C AN BE SEEN THAT HEAVY RELIANCE HAS BEEN PLACED BY THE CBDT ON THE CIR CULARS ISSUED BY THE MEDICAL COUNCIL OF INDIA, WHICH IS THE REGULATO RY BODY ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 11 CONSTITUTED UNDER THE MEDICAL COUNCIL ACT, 1956. ONE SUCH REGULATION HAS BEEN ISSUED IS INDIAN MEDICAL COUNCIL PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002. THE SAID REGULATION DEALS WITH THE PROFESSIONAL CONDUCT, ETIQUETTE AND ETHIC S FOR REGISTERED MEDICAL PRACTITIONERS ONLY. CHAPTER 6 OF THE SAID REGULATION/NOTIFICATION DEALS WITH UNETHICAL ACTS, WHEREB Y A PHYSICIAN OR MEDICAL PRACTITIONERS SHALL NOT AID OR ABET OR COMMI T ANY OF THE ACTS ILLUSTRATED IN CLAUSE 6.1 TO 6.7 OF THE SAID REGULA TION WHICH SHALL BE CONSTRUED AS UNETHICAL. CLAUSE 6.8 HAS BEEN ADDED (BY WAY OF AMENDMENT DATED 10.12.2009) IN TERMS OF NOTIFICATION PU BLISHED ON 14.12.2009 IN GAZETTE OF INDIA. THE SAID CLAUSE READ S AS UNDER:- 6.8 CODE OF CONDUCT FOR DOCTORS AND PROFESSIONAL ASSOCIATION OF DOCTORS IN THEIR RELATIONSHIP WITH PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY. 6.8.1 IN DEALING WITH PHARMACEUTICAL AND ALLIED HEA LTH SECTOR INDUSTRY, A MEDICAL PRACTITIONER SHALL FOLLOW AND ADHERE TO THE STIPULATIONS GIVEN BELOW: A) GIFTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY GIFT FROM ANY PHARMACEUTICAL OR ALLIED HEALTH CARE INDUS TRY AND 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, 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. ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 12 C) HOSPITALITY: A MEDICAL PRACTITIONER SHALL NOT ACCEPT 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 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. E) MEDICAL RESEARCH: A MEDICAL PRACTITIONER MAY CARRY 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 INDUSTR Y FOR BEING PROPER AND ETHICAL. THUS, IN ACCEPTING SUCH A POSITION A MEDICAL 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.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 13 (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 PROFESSIONAL INTEGRITY AND FREE DOM ARE MAINTAINED. (II) ENSURE THAT PATIENTS INTERESTS ARE NOT COMPRO MISED IN ANY WAY. (III) ENSURE THAT SUCH AFFILIATIONS ARE WITHIN THE LAW. (IV) ENSURE THAT SUCH AFFILIATIONS / EMPLOYMENTS AR E FULLY TRANSPARENT AND DISCLOSED. H) ENDORSEMENT: A MEDICAL PRACTITIONER SHALL NOT ENDORSE ANY DRUG OR PRODUCT OF THE INDUSTRY PUBLICALLY. ANY STUDY CONDUCTED ON THE EFFICACY OR OTHERWISE OF SUCH PROD UCTS SHALL BE PRESENTED TO AND / OR THROUGH APPROPRIATE SCIENT IFIC BODIES OR PUBLISHED IN APPROPRIATE SCIENTIFIC JOURNALS IN A PROPER WAY. [EMPHASIS ADDED IS OURS] ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 14 6. ON A PLAIN READING OF THE AFORESAID NOTIFICATI ON, WHICH HAS BEEN HEAVILY RELIED UPON BY THE DEPARTMENT, IT IS QUITE APPA RENT THAT THE CODE OF CONDUCT ENSHRINED THEREIN IS MEANT TO BE FOLLOW ED AND ADHERED BY MEDICAL PRACTITIONERS/DOCTORS ALONE. IT ILL USTRATES THE VARIOUS KINDS OF CONDUCT OR ACTIVITIES WHICH A MEDIC AL PRACTITIONER SHOULD AVOID WHILE DEALING WITH PHARMACEUTICAL COMPAN IES AND ALLIED HEALTH SECTOR INDUSTRY. IT PROVIDES GUIDELINES TO THE MED ICAL PRACTITIONERS OF THEIR ETHICAL CODES AND MORAL CONDUCT. NOWHERE THE REGULATION OR THE NOTIFICATION MENTIONS THAT SUCH A REGULA TION OR CODE OF CONDUCT WILL COVER PHARMACEUTICAL COMPANIES OR HEA LTH 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 COMPANIES IN ANY MA NNER. ON THE CONTRARY, BEFORE US THE LEARNED SENIOR COUNSEL, SHRI MISTRY BROUGHT TO OUR NOTICE THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF MAX HOSPITAL VS. MCI IN WPC 1334/2013 JUDGMENT DATE D 10.01.2014, WHEREIN THE MEDICAL COUNCIL OF INDIA ADMITTED THAT THE INDIAN MEDICAL COUNCIL REGULATION OF 2002 HAS JURISD ICTION TO TAKE ACTION ONLY AGAINST THE MEDICAL PRACTITIONERS AND NOT TO HEALTH SECTOR INDUSTRY. RELEVANT PORTION OF THE SAID JUDGMENT READS A S UNDER: 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 ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 15 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 CASE 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 PROVIDED AN OP PORTUNITY OF BEING HEARD AND THUS THE PRINCIPLES OF NATURAL JUST ICE WERE VIOLATED. 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 THAT IT HAS NOT PASSED ANY ORDER AGAINST THE PETITIONER HOSPITAL. T HUS, I NEED NOT GO INTO THE QUESTION WHETHER THE ADEQUATE INFRA STRUCTURE FACILITIES FOR APPROPRIATE POST-OPERATIVE CARE WERE IN FACT IN EXISTENCE OR NOT IN THE PETITIONER HOSPITAL AND WHE THER 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 ETHICS CO MMITTEE DO REFLECT UPON THE INFRASTRUCTURE FACILITIES AVAIL ABLE IN THE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 16 PETITIONER HOSPITAL AND SINCE IT HAD NO JURISDICTIO N TO GO INTO THE SAME, THE OBSERVATIONS WERE UNCALLED FOR AND CA NNOT BE SUSTAINED. [ EMPHASIS ADDED IS OURS ] FROM THE AFORESAID DECISION, IT IS OSTENSIBLY CLEAR THA T THE MEDICAL COUNCIL OF INDIA HAS NO JURISDICTION TO PASS ANY ORDE R OR REGULATION AGAINST ANY HOSPITAL OR ANY HEALTH CARE SECTOR UNDER ITS 2002 REGULATION. SO ONCE THE INDIAN MEDICAL COUNCIL REGULA TION DOES NOT HAVE ANY JURISDICTION NOR HAS ANY AUTHORITY UNDER LA W UPON THE PHARMACEUTICAL COMPANY OR ANY ALLIED HEALTH SECTOR IND USTRY, THEN SUCH A REGULATION CANNOT HAVE ANY PROHIBITORY EFFECT O N THE PHARMACEUTICAL COMPANY LIKE THE ASSESSEE. IF MEDICAL COUNCIL REGULATION DOES NOT HAVE ANY JURISDICTION UPON PHARMAC EUTICAL COMPANIES AND IT IS INAPPLICABLE UPON PHARMA COMPANI ES LIKE ASSESSEE THEN, WHERE IS THE VIOLATION OF ANY OF LAW/R EGULATION? UNDER WHICH PROVISION THERE IS ANY OFFENCE OR VIOLATION I N INCURRING OF SUCH KIND OF EXPENDITURE. THE RELEVANT PROVISION OF SECTION 37(1) READS AS UNDER: (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASS ESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEADS PROFITS AND GAIN S OF BUSINESS OR PROFESSION ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 17 EXPLANATION 1 FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESS EE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBI TED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE P URPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANC E SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. THE AFORESAID PROVISION APPLIES TO AN ASSESSEE WHO I S CLAIMING DEDUCTION OF EXPENDITURE WHILE COMPUTING HIS BUSINES S INCOME. THE EXPLANATION PROVIDES AN EMBARGO UPON ALLOWING ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. THIS MEANS THAT THERE SHOULD BE A N OFFENCE BY AN ASSESSEE WHO IS CLAIMING THE EXPENDITURE OR THERE I S ANY KIND OF PROHIBITION BY LAW WHICH IS APPLICABLE TO THE ASSESSE E. HERE IN THIS CASE, NO SUCH OFFENCE OF LAW HAS BEEN BROUGHT ON REC ORD, WHICH PROHIBITS THE PHARMACEUTICAL COMPANY NOT TO INCUR ANY D EVELOPMENT OR SALES PROMOTION EXPENSES. A LAW WHICH IS APPLICAB LE TO DIFFERENT CLASS OF PERSONS OR PARTICULAR CATEGORY OF ASSESSEE, SAME CANNOT BE MADE APPLICABLE TO ALL. THE REGULATION OF 2002 ISSUED BY THE MEDICAL COUNCIL OF INDIA (SUPRA), PROVIDES LIMITATION/CURB/P ROHIBITION FOR MEDICAL PRACTITIONERS ONLY AND NOT FOR PHARMACEUTICAL COMPANIES. HERE THE MAXIM OF EXPRESSIO UNIUS EST EXCLUSIO ALTERIUS IS CLEARLY APPLICABLE, THAT IS, IF A PARTICULAR EXPRESSION IN THE STATUTE IS EXPRESSLY STATED FOR PARTICULAR CLASS OF ASSESSEE THEN BY IMPLICATION WHAT HAS NOT BEEN STATED OR EXPRESSED IN THE STATUTE HAS TO BE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 18 EXCLUDED FOR OTHER CLASS OF ASSESSEE. IF THE MEDICAL COUNCIL REGULATION IS APPLICABLE TO MEDICAL PRACTITIONERS THEN IT CANNOT BE MADE APPLICABLE TO PHARMA OR ALLIED HEALTH CARE COMPANIES. IF SECTION 37(1) IS APPLICABLE TO AN ASSESSEE CLAIMING THE EXPENSE THEN BY IMPLICATION, ANY IMPAIRMENT CAUSED BY EXPLANATION1 WILL APPLY TO THAT ASSESSEE ONLY. ANY IMPAIRMENT OR PROHIBITION BY ANY LAW/REGULA TION ON A DIFFERENT CLASS OF PERSON/ASSESSEE WILL NOT IMPINGE UPON THE ASSESSEE CLAIMING THE EXPENDITURE UNDER THIS SECTION. 7. BEFORE US THE LEARNED CIT DR STRONGLY RELIED UPON THE FACT THAT CBDT CIRCULAR, WHILE CLARIFYING THE APPLICABILITY OF EXPLANATION 1 TO SECTION 37(1) ON MEDICAL PRACTITIONERS AND PHARMACEUTIC AL COMPANIES HAVE INTERPRETED THAT INDIAN MEDICAL COUNCIL REGULATI ON IS APPLICABLE FOR PHARMACEUTICAL COMPANIES ALSO. HE ALSO BROUGHT TO OUR NOTICE THAT ANOTHER NOTIFICATION WAS ISSUED BY INDIAN MEDICAL CO UNCIL WHICH WAS PUBLISHED ON 01.12.2016 WHICH FURTHER PROHIBITS SUCH KIND OF EMBARGO ON MEDICAL PRACTITIONERS AND HAVE ADDED PARA 6.8.1 AND ALSO GIVEN INSTANCES OF ACTION WHICH SHALL BE TAKEN UPON ME DICAL PRACTITIONERS. THE RELEVANT CLAUSE OF THE SAID NOTIFICA TION AS RELIED UPON BY HIM IS REPRODUCED HEREUNDER: 6.8. CODE OF CONDUCT FOR DOCTORS IN THEIR RELATIONS HIP WITH PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 19 THE SECTION 68.1(B) SHALL BE SUBSTITUTED IN TERMS O F NOTIFICATION PUBLISHED ON 01.02.2016 IN GAZETTE OF INDIA, AS UND ER: (B) TRAVEL FACILITIES: A MEDICAL PRACTITIONER SHALL NOT ACCEPT ANY TRAVEL FACILITY INSIDE THE COUNTRY OR OUTSIDE, INCLUDING R AIL, ROAD, AIR, SHIP, CRUISE TICKETS, PAID VACATION, ETC., FROM ANY PHARM ACEUTICAL OR ALLIED HEALTHCARE INDUSTRY OR THEIR REPRESENTATIVES FOR SE LF AND FAMILY MEMBERS FOR VACATION OR FOR ATTENDING CONFERENCES, SEMINARS, WORKSHOPS, CME PROGRAMME ETC. AS A DELEGATE (III) ACTION TO BE TAKEN BY THE COUNCIL FOR VIOLATI ON OF SECTION 6.8 AS AMENDED VIDE NOTIFICATION DATED 10/12/2009, SHALL B E PRESCRIBED BY FURTHER AMENDING THE SECTION 6.8.1 AS UNDER:- SECTION ACTION 6.8.1 IN DEALING WITH PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY, A MEDICAL PRACTITIONER SHALL FOLLOW AND ADHERE TO THE STIPULATIONS GIVEN BELOW: - A)GIFTS: A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY GIFT FROM ANY PHARMACEUTICAL OR ALLIED HEALTH CARE INDUSTRY AND THEIR SALES PEOPLE OR REPRESENTATIVES; GIFTS MORE THAN RS. 1,000/ - UPTO RS. 5,000/- : CENSURE GIFTS MORE THAN RS. 5,000/- UPTO RS. 10,000/- : REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 3 (THREE) MONTHS GIFTS MORE THAN RS. 10,000/ - TO RS. 50,000/- : REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 6(SIX) MONTHS. GIFTS MORE THAN RS. 50,000/- TO RS. 1,00,000/ - : REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 1 ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 20 (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 REGISTER B) TRAVEL FACILITIES: A MEDICAL PRACTITIONER SHALL NOT ACCEPT ANY TRAVEL FACILITY INSIDE THE COUNTRY OR OUTSIDE, INCLUDING RAIL, ROAD, AIR, SHIP, CRUISE TICKETS, PAID VACATIONS ETC. FROM ANY PHARMACEUTICAL OR ALLIED HEALTHCARE INDUSTRY OR THEIR REPRESENTATIVES FOR SELF AND FAMILY MEMBERS FOR VACATION OR FOR ATTENDING CONFERENCES, SEMINARS, WORKSHOPS, CME PROGRAMME ETC. AS A DELEGATE. EXPENSES FOR TRAVEL FACILITIES MORE THAN RS. 1,000/ - UPTO RS. 5,000/ -: CENSURE EXPENSES FOR TRAVEL FACILITIES MORE THAN RS. 5,000/-UPTO RS. 10,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 3 (THREE) MONTHS. EXPENSES FOR TRAVEL FACILITIES MORE THAN RS.10,000/-TO RS. 50,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 6 (SIX) MONTHS. EXPENSES FOR TRAVEL FACILITIES MORE THAN MORE THAN RS. 50,000/- TO RS. 1,00,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 1 (ONE) YEAR. EXPENSES FOR TRAVEL FACILITIES MORE THAN RS. 1,00,000/-: REMOVAL FOR A PERIOD OF MORE THAN 1 (ONE) YEAR FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER C) HOSPITALITY: A MEDICAL PRACTITIONER SHALL NOTACCEPT INDIVIDUALLY ANY HOSPITALITY LIKE HOTEL ACCOMMODATION FOR SELF AND FAMILY 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. ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 21 10,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 3 (THREE) MONTHS. EXPENSES FOR HOSPITALITY MORE THAN RS. 10,000/-TO RS. 50,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 6 (SIX) MONTHS. EXPENSES FOR HOSPITALITY MORE THAN MORE THAN RS. 50,000/-TO RS. 1,00,000/: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 1 (ONE) YEAR. EXPENSES FOR HOSPITALITY MORE THAN RS. 1,00,000/-: REMOVAL FOR A PERIOD OF MORE THAN 1 (ONE) YEAR FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER. D) CASH OR MONETARY GRANTS:- A MEDICAL PRACTITIONER SHALL NOT RECEIVE ANY CASH OR MONETARY GRANTS FROM ANY PHARMACEUTICAL AND ALLIED HEALTHCARE INDUSTRY FOR INDIVIDUAL PURPOSE IN INDIVIDUAL CAPACITY UNDER ANY PRETEXT. FUNDING FOR MEDICAL RESEARCH, STUDY ETC. CAN ONLY BE RECEIVED THROUGH APPROVED INSTITUTIONS BY MODALITIES LAID DOWN BY LAW / RULES / GUIDELINES ADOPTED BY SUCH APPROVED INSTITUTIONS, IN A TRANSPARENT MANNER. IT SHALL ALWAYS BE FULLY DISCLOSED CASH OR MONETARY GRANTS MORE THAN RS. 1,000/-UPTO RS. 5,000/-: CENSURE CASH OR MONETARY GRANTS MORE THAN RS. 5,000/-UPTO RS. 10,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 3 (THREE) MONTHS. CASH OR MONETARY GRANTS MORE THAN RS.10,000/-TO RS. 50,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER FOR 6 (SIX) MONTHS. CASH OR MONETARY GRANTS MORE THAN MORE THAN RS. 50,000/-TO ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 22 RS. 1,00,000/-: REMOVAL FROM INDIAN MEDICAL REGISTER OR STATE MEDICAL 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 REGISTER. FROM THE AFORESAID NOTIFICATION, LD. CIT DR SUBMITTED THAT SO MANY VIOLATIONS AND CENSURES HAVE BEEN PRESCRIBED FOR ANY EXPENDITURES/ OR BENEFIT GIVEN TO DOCTORS, THUS, VIOLATION OF SUCH GU IDELINES FOR INCURRING SUCH KIND OF EXPENDITURES CANNOT BE HELD TO BE ALLOWABLE EXPENDITURE. CBDT IS WELL WITHIN ITS POWER TO CLARIFY A ND INTERPRET THE LAW AND PROHIBIT ALLOWANCE OF ANY EXPENDITURE WHICH V IOLATES ANY STATUTE OR IS IN NATURE OF OFFENCE. 8. FROM A PERUSAL OF ABOVE AMENDMENT/NOTIFICATION IN THE MCI REGULATION, IT IS QUITE CLEAR AGAIN THAT SAME IS APPLICA BLE FOR MEDICAL PRACTITIONERS ONLY AND THE CENSURE/ACTION WHICH HAS BEE N SUGGESTED BY IT IS ONLY ON MEDICAL PRACTITIONERS AND NOT FOR PHA RMACEUTICAL COMPANIES OR ALLIED HEALTH SECTOR INDUSTRIES. THE VIOL ATION OF THE AFORESAID REGULATION WOULD NOT ONLY ENSURE A REMOVAL OF A DOCTOR FROM THE INDIAN MEDICAL REGISTER OR STATE MEDICAL REGISTER F OR A CERTAIN PERIOD OF TIME AND IT DOES NOT IMPINGE UPON THE CONDUCT OF ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 23 PHARMACEUTICAL COMPANIES. THIS IMPORTANT DISTINCTION HA S TO BE KEPT IN MIND THAT REGULATION ISSUED BY MEDICAL COUNCIL OF I NDIA IS QUA THE DOCTORS/MEDICAL PRACTITIONERS AND NOT FOR THE PHARMACEU TICAL COMPANIES. AS A LOGICAL COROLLARY TO IT, IF THERE IS A NY VIOLATION OR PROHIBITION AS PER MCI REGULATION IN TERMS OF SECTION 37(1) R.W. EXPLANATION1, THEN IT IS ONLY MEANT FOR MEDICAL PRACTITIONERS AND NOT FOR PHARMACEUTICAL COMPANY (ASSESSEE COMPANY) FOR CLAIMING THE EXPENDITURE. 9. ADVERTING TO THE CONTENTION OF THE LD. CIT DR THAT CBDT IS WELL EMPOWERED TO ISSUE SUCH CLARIFICATION, IT IS SEEN THAT THE CBDT CIRCULAR DATED 01.08.2012 (SUPRA) IN ITS CLARIFICATIO N HAS ENLARGED THE SCOPE AND APPLICABILITY OF INDIAN MEDICAL COUNCIL REGULATION 2002 BY MAKING IT APPLICABLE TO THE PHARMACEUTICAL COMPANIES OR ALLIED HEALTH CARE SECTOR INDUSTRIES. SUCH AN ENLARGEMENT OF SCOPE O F MCI REGULATION TO THE PHARMACEUTICAL COMPANIES BY THE CBDT IS WITHOUT ANY ENABLING PROVISIONS EITHER UNDER THE PROVISIONS O F INCOME TAX LAW OR BY ANY PROVISIONS UNDER THE INDIAN MEDICAL CO UNCIL REGULATIONS. THE CBDT CANNOT PROVIDE CASUS OMISSUS TO A STATUTE OR NOTIFICATION OR ANY REGULATION WHICH HAS NOT BEEN EXP RESSLY PROVIDED THEREIN. THE CBDT CAN TONE DOWN THE RIGOURS OF LAW AND ENSURE A FAIR ENFORCEMENT OF THE PROVISIONS BY ISSUING CIRCULARS AN D BY CLARIFYING THE STATUTORY PROVISIONS. CBDT CIRCULARS ACT LIKE CONTEMPORANEA ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 24 EXPOSITIO IN INTERPRETING THE STATUTORY PROVISIONS AND TO ASCERTAIN THE TRUE MEANING ENUNCIATED AT THE TIME WHEN STATUTE WAS ENACTE D. HOWEVER THE CBDT IN ITS POWER CANNOT CREATE A NEW IMP AIRMENT ADVERSE TO AN ASSESSEE OR TO A CLASS OF ASSESSEE WITHO UT ANY SANCTION OF LAW. THE CIRCULAR ISSUED BY THE CBDT MUST CONFIRM TO TAX LAWS AND FOR PURPOSE OF GIVING ADMINISTRATIVE RELIEF OR FOR CL ARIFYING THE PROVISIONS OF LAW AND CANNOT IMPOSE A BURDEN ON THE A SSESSEE, LEAVE ALONE CREATING A NEW BURDEN BY ENLARGING THE SCOPE OF A DIFFERENT REGULATION ISSUED UNDER A DIFFERENT ACT SO AS TO IMPOSE ANY KIND OF HARDSHIP OR LIABILITY TO THE ASSESSEE. IN ANY CASE, I T IS TRITE LAW THAT THE CBDT CIRCULAR WHICH CREATES A BURDEN OR LIABILIT Y OR IMPOSES A NEW KIND OF IMPARITY, SAME CANNOT BE RECKONED RETROS PECTIVELY. THE BENEFICIAL CIRCULAR MAY APPLY RETROSPECTIVELY BUT A CI RCULAR IMPOSING A BURDEN HAS TO BE APPLIED PROSPECTIVELY ONLY. HERE IN THIS CASE THE CBDT HAS ENLARGED THE SCOPE OF INDIAN MEDICAL COUNC IL REGULATION, 2002 AND MADE IT APPLICABLE FOR THE PHARMACEUTICAL C OMPANIES. THEREFORE, SUCH A CBDT CIRCULAR CANNOT BE RECKONED TO HAVE RETROSPECTIVE EFFECT. THE SAME CBDT CIRCULAR HAD COME UP FOR CONSIDERATION BEFORE 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 ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 25 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 INCUR RED BY THE ASSESSEE, IT IS SEEN THAT UNDER THE HEAD CUSTOMER RELATI ONSHIP MANAGEMENT, THE ASSESSEE ARRANGES NATIONAL LEVEL SEMI NAR AND DISCUSSION PANELS OF EMINENT DOCTORS AND INVITING OF OTHER DOCTORS TO PARTICIPATE IN THE SEMINARS ON A TOPIC RELATED TO THERAPE UTIC AREA. IT ARRANGES LECTURES AND SPONSORS KNOWLEDGE UPGRADE COU RSE WHICH HELPS PHARMACEUTICAL COMPANIES TO MAKE AWARE OF THE PR ODUCTS AND MEDICINES MANUFACTURED AND LAUNCHED BY IT. UNDER KEY ACCOUNT MANAGEMENT, THE ASSESSEE MAKES ENDEAVOUR TO CREATE AWA RENESS AMONGST CERTAIN CLASS OF KEY DOCTORS ABOUT THE PRODUCTS OF THE ASSESSEE AND THE NEW DEVELOPMENTS TAKING PLACE IN THE A REA OF MEDICINE AND PROVIDING CORRECT DIAGNOSIS AND TREATMENT OF THE PATIENTS. THE SAID ACTIVITIES BY THE ASSESSEE ARE TO MAK E THE DOCTORS AWARE OF ITS PRODUCTS AND RESEARCH WORK CARRIED OUT BY IT FOR BRINGING THE MEDICINE IN THE MARKET AND ITS RESULTS ARE BASED ON SEVERAL LEVELS OF TESTS AND APPROVALS. UNLESS THE PHARMACEUTICAL COMP ANIES MAKE AWARE OF SUCH KIND OF PRODUCTS TO KEY DOCTORS OR MEDI CAL PRACTITIONERS, THEN ONLY IT CAN SUCCESSFULLY LAUNCH ITS PRODUCTS/MEDICINES. THIS KIND OF EXPENDITURE IS DEFIN ITELY IN THE NATURE OF SALES AND BUSINESS PROMOTION, WHICH HAS TO B E ALLOWED. ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 26 COMING TO THE GIFT ARTICLES AND FREE SAMPLES OF MEDICIN ES, IT IS SEEN THAT THE ASSESSEE GIVES VARIOUS KIND OF ARTICLES LIKE, DIARIES, PEN SETS, CALENDARS, PAPER WEIGHTS, INJECTION BOXES ETC. EMBOSSE D WITH BOLD LOGO OF ITS BRAND NAME AND THE PRODUCT NAME SO THAT THE DOCTORS REMEMBERS THE BRAND OF THE ASSESSEE AND ALSO THE NAME OF THE MEDICINE. ALL THE GIFT ARTICLES, AS POINTED OUT BY THE AS SESSEE BEFORE THE AUTHORITIES BELOW AND ALSO BEFORE US ARE VERY CHE AP AND LOW CAST ARTICLES WHICH BEARS THE NAME OF ASSESSEE AND IT IS PU RELY FOR THE PROMOTION OF ITS PRODUCT, BRAND REMINDER, ETC. THESE A RTICLES CANNOT BE RECKONED AS FREEBIES GIVEN TO THE DOCTORS. EVEN THE FREE SAMPLE OF MEDICINE IS ONLY TO PROVE THE EFFICACY AND TO ESTABLISH THE TRUST OF THE DOCTORS ON THE QUALITY OF THE DRUGS. THIS AGAIN CANNO T BE RECKONED AS FREEBIES GIVEN TO THE DOCTORS BUT FOR PROMOTION OF ITS P RODUCTS. THE PHARMACEUTICAL COMPANY, WHICH IS ENGAGED IN MANUFACTU RING AND MARKETING OF PHARMACEUTICAL PRODUCTS, CAN PROMOTE ITS SA LE AND BRAND ONLY BY ARRANGING SEMINARS, CONFERENCES AND TH EREBY CREATING AWARENESS AMONGST DOCTORS ABOUT THE NEW RESEARCH IN THE MEDICAL FIELD AND THERAPEUTIC AREAS, ETC. EVERY DAY THERE ARE N EW DEVELOPMENTS TAKING PLACE AROUND THE WORLD IN THE ARE A OF MEDICINE AND THERAPEUTIC, HENCE IN ORDER TO PROVIDE CORRECT DIAG NOSIS AND TREATMENT OF THE PATIENTS, IT IS IMPERATIVE THAT THE DOCTORS S HOULD KEEP THEMSELVES UPDATED WITH THE LATEST DEVELOPMENTS IN THE MEDICINE AND THE MAIN OBJECT OF SUCH CONFERENCES AND SEMINARS IS TO UPDATE THE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 27 DOCTORS OF THE LATEST DEVELOPMENTS, WHICH IS BENEFICIA L TO THE DOCTORS IN TREATING THE PATIENTS AS WELL AS THE PHARMACEUTICAL CO MPANIES. FURTHER AS POINTED OUT AND CONCLUDED BY THE LEARNED CIT (A) THERE IS NO VIOLATION BY THE ASSESSEE IN SO FAR AS GIVING AN Y KIND OF FREEBIES TO THE MEDICAL PRACTITIONERS. THUS, SUCH KIND OF EXPENDIT URES BY A PHARMACEUTICAL COMPANIES ARE PURELY FOR BUSINESS PUR POSE WHICH HAS TO BE ALLOWED AS BUSINESS EXPENDITURE AND IS NOT IMPA IRED BY EXPLANATION 1 TO SECTION 37(1). 11. BEFORE US, THE LD. CIT DR HAS ALSO MUCH HAR PED UPON THE DECISION OF THE HONBLE HIMACHAL PRADESH HIGH COURT I N THE CASE OF CONFEDERATION OF INDIAN PHARMACEUTICAL INDUSTRY (SS) VS. CBDT (SUPRA), IN SUPPORT OF THE ARGUMENT THAT CBDT CIRCULAR H AS BEEN APPROVED AND CONFIRMED BY THE HIGH COURT AND THEREFORE , IT HAS A HUGE BINDING PRECEDENCE. FROM THE PERUSAL OF THE SAID JUDGMENT OF THE HONBLE HIGH COURT, IT IS SEEN THAT IN THAT CASE THE VALIDITY OF CIRCULAR NO.5/12 DATED 1.8.2012 WAS CHALLENGED. THE HONBLE HIGH COURT THOUGH UPHELD THE VALIDITY OF THE SAID CIRCULAR B UT WITH A RIDER THAT IF THE ASSESSEE SATISFIES THE ASSESSING AUTHORITY THAT THE EXPENDITURE IS NOT IN VIOLATION OF THE REGULATION FRAMED BY THE MEDICAL COUNCIL, THEN IT MAY LEGITIMATELY CLAIM THE DEDUCTION. T HE ASSESSEE HAS TO SATISFY THE AO THAT THE EXPENDITURE IS NOT IN V IOLATION OF THE MEDICAL COUNCIL REGULATION. THUS, IF THE ASSESSEE BR INGS OUT THAT THE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 28 MCI REGULATION IS NOT APPLICABLE TO THE ASSESSEE BEFORE THE AO, THE SAME CANNOT BE APPLIED BLINDLY. 12. AT THE TIME OF HEARING, OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF TRIBUNAL OF OUR CO-ORDINATE BENCH IN THE CASE OF LIVA HEALTHCARE LIMITED ITA NOS. 904 & 945/MUM/2013 , DECIDED VIDE ORDER DATED 12.09.2016. IN COUNTER, TO THIS DECISION T HE LEARNED COUNSEL, SHRI JD MISTRY DISTINGUISHED THE SAID JUDGME NT AND SUBMITTED THAT THE FACTS OF THE CASE IN THE LIVA HEALTHCARE (SUPRA) WERE SUBSTANTIALLY DIFFERENT FROM THE FACTS OF THE PRESEN T CASE. IN THE CASE OF LIVA HEALTHCARE, THE HONBLE TRIBUNAL DISALLO WED SUCH EXPENSES U/S. 37(1) OF THE ACT ON THE GROUND THAT THEY WE RE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF B USINESS AS THE SAME WERE INCURRED TO CREATE GOOD RELATIONS WITH THE DO CTORS IN LIEU OF EXPECTED FAVOURS FROM DOCTORS FOR RECOMMENDING TO TH E PATIENTS THE PHARMACEUTICAL PRODUCTS DEALT WITH BY THE COMPANY TO GEN ERATE MORE AND MORE BUSINESS AND PROFITS FOR THE ASSESSEE COMPAN Y. THE TRIBUNAL ALSO RECORDED THE FACT THAT THE SPOUSE OF THE DO CTORS ALSO ACCOMPANIED THE DOCTORS FOR OVERSEAS TRIPS TO ISTANBUL AND EXPENSES WERE INCURRED FOR CRUISE TRAVELS TO ISLAND, GALA DIN NER, COCKTAILS, GALA ENTERTAINMENT ETC. OF SUCH DOCTORS. IN ASSESSEES CASE IT IS AN ADMITTED FACT THAT EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE PERSONAL BENEFIT/ENJOYMENT OF THE DOCTORS OR THEIR SPO USES. IN THE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 29 CASE OF LIVA, THE QUESTION AS TO WHETHER SUCH IMC REGU LATIONS CAN BE APPLICABLE TO PHARMA COMPANIES WAS NOT ARGUED BEFORE THE HONBLE BENCH. HE REITERATED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF MAX HOSPITAL (SUPRA) AND THE JURISDICTIONAL TRIBUNAL I N THE CASE OF SYNCOM (SUPRA) HAVE HELD THAT SUCH IMC REGULATIONS AP PLY ONLY TO MEDICAL PRACTITIONERS. HE FURTHER SUBMITTED THAT THE TRIBUN AL IN THE CASE OF ACIT VS. LIVA HEALTHCARE LTD. (ITA 847/MUM/20 12) FOR A.Y. 2008-09, HAS DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. HOWEVER, IN A.Y. 2009-10, HONBLE TRIBUNAL WHILE NO TING 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 ASSESSMENT YEAR 2008-09. IN OUR CONSIDERED VIE W, PRINCIPLES OF RES JUDICATA IS NOT APPLICABLE TO INC OME TAX PROCEEDINGS ALTHOUGH WE ARE FULLY AGREEABLE THAT PR INCIPLES OF CONSISTENCY IS TO BE MAINTAINED (HONBLE SUPREME COURT DECISION IN RADHA SOAMI SATSANG V. CIT (1992) 193 I TR 321 (SC) BUT IN THE INSTANT ASSESSMENT YEAR, WE HAVE OB SERVED THAT THESE OVERSEAS TRIPS FOR DOCTORS AND THEIR SPO USES WERE ORGANIZED BY THE ASSESSEE WHEREBY NO DETAILS OF THE CONTENTS OF SEMINAR, IF ANY CONDUCTED BY THE ASSESSEE OVERSE AS HAS BEEN BROUGHT ON RECORD AND ALSO EVEN THE SPOUSES ACCOMPANIED THE DOCTORS TO THE OVERSEAS TRIP WHICH INCLUDED CRUISE VISIT TO ISLAND, GALA DINNERS, COCKTAIL, GAL A ENTERTAINMENT ETC. RATHER THAN BEING DIRECTED TOWAR DS SEMINAR FOR PRODUCT INFORMATION DISSEMINATION OR DI RECTED TOWARDS KNOWLEDGE ENHANCEMENT OR KNOWLEDGE SHARING ORIENTED AS NO DETAILS OF SEMINAR AND ITS COURSE CO NTENT IS ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 30 BROUGHT ON RECORD RATHER THE TRIP IS DIRECTED TOWAR DS LEISURE AND ENTERTAINMENT OF DOCTORS AND THEIR SPOUSES WHIC H IN OUR VIEW APPEARS TO BE CLEARLY A DISTINGUISHABLE FEATUR E IN THIS YEAR ENABLING US TO TAKE A DIVERGENT VIEW AND THE E XPENSES INCURRED BY THE ASSESSEE CANNOT BE ALLOWED AS BUSIN ESS EXPENDITURE U/S. 37 OF THE ACT AS IT IS CLEARLY HIT BY EXPLANATION TO SECTION 37 OF THE ACT BEING AGAINST PUBLIC POLICY AS UNETHICAL PROHIBITED BY LAW. IN VIEW OF THE ABOVE, HE POINTED OUT THAT IN THE ABOVE DECISION 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 WITH R ESPECT TO ANY SEMINAR HAS BEEN CONDUCTED FOR DOCTORS AND THAT THE TR IPS WERE DIRECTED TOWARDS LEISURE AND ENTERTAINMENT OF DOCTORS A ND THEIR SPOUSES. THIS WAS A DISTINGUISHABLE FEATURE FOR THE HO NBLE TRIBUNAL TO TAKE A CONTRARY VIEW FROM A.Y. 2008-09. HE FURTHER SUBMITTED THAT THE HONBLE TRIBUNAL IN THE CASE OF LIVA HEALTHCARE LTD. VS. ACIT (ITA NO. 4791/MUM/2014) FOR A.Y. 2010-11 HAS FOLLOWED THE DECISION OF LIVA HEALTHCARE (SUPRA) FOR A.Y. 2008-09 AND HAS DECIDED THIS ISSUE IN FAVOUR O F THE ASSESSEE. THIS, FURTHER BRINGS OUT THE FACT THAT THE HONB LE TRIBUNAL DISALLOWED THE EXPENSES U/S. 37(1) OF THE A CT IN THE CASE OF LIVA HEALTHCARE FOR A.Y. 2009-10 ONLY ON THE GROU ND THAT THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 31 13. APART FROM THE AFORESAID DISTINGUISHING FEATURES AS HIGHLIGHTED BY THE LEARNED SENIOR COUNSEL, WE FIND THAT ON THE FACT S ITSELF IN THE CASE OF LIVA HEALTHCARE (2009-2010) (SUPRA), THERE WA S A CLEAR CUT MATERIAL ON RECORD THAT THE DOCTORS ALONG WITH THEIR SP OUSES WERE TAKEN TO FOREIGN TOURS AND CRUISE TRAVEL ETC., IN LIEU OF EXPECTED FAVOURS FROM DOCTORS. IN THE LIGHT OF THESE FACTS AND MATERIAL THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY NOT FOLLOWING THE EARLIER YEAR PRECEDENCE AND SUBSEQUENT YEAR ORDER S OF THE SAME ASSESSEE. AS BROUGHT ON RECORD BEFORE US, WE FIND THA T SIMILAR ISSUE OF ALLOWANCE OF SUCH EXPENDITURE IN THE CASE OF PHARMACE UTICAL COMPANIES HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE , IN THE CASE OF UCB INDIA PVT. LTD. V. ITO (ITA NO. 6681/MUM/2013 OR DER DATED 13.05.2016, WHEREIN IT WAS HELD THAT CBDT CIRCULAR CAN NOT HAVE A RETROSPECTIVE EFFECT. THIS JUDGMENT WAS LOST SIGHT OF BY THE BENCH. IN ANY CASE ON CAREFUL PERUSAL OF 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 MED ICAL COUNCIL REGULATION 2002, HOWEVER, HAS NOT ELABORATED OR DW ELL UPON AS TO HOW THIS MCI REGULATION WHICH IS STRICTLY MEANT FOR MEDI CAL PRACTITIONERS AND DOCTORS CAN BE MADE APPLICABLE TO PH ARMACEUTICAL COMPANIES. THERE HAS TO BE SOME ENABLING PROVISION OR SPECIFIC CLAUSE IN THE SAID REGULATION WHEREBY THE PHARMACEUTICAL COMPA NIES ARE BARRED FROM CONDUCTING SEMINARS OR CONFERENCES BY S PONSORING THE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 32 DOCTORS. THE ENTIRE CONDUCT RELATES TO DOCTORS AND MED ICAL PRACTITIONERS AND LISTS OUT THE CENSURES AND FINES IMPOS ED UPON THEM. WHAT HAS NOT BEEN PROVIDED IN THE MCI REGULATION CANNOT BE SUPPLIED EITHER BY THE COURT OR BY THE CBDT. THERE HAS TO BE EXPR ESS PROVISION UNDER THE LAW WHEREBY PHARMACEUTICAL COMPANIES ARE PR OHIBITED TO CONDUCT CONFERENCES OR SEMINAR OR GIVE FREE SAMPLES. IN THE TRIBUNAL DECISION OF LIVA HEALTHCARE, STRONG REFERENCE HAS BEE N MADE TO HONBLE HIMACHAL PRADESH HIGH COURT (SUPRA), THAT THE S AID CBDT CIRCULAR HAS BEEN UPHELD. ON THIS ASPECT WE HAVE ALRE ADY 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; AND SECONDLY, CBD T CIRCULAR WHICH CREATES NEW IMPAIRMENT AND IMPOSES DISALLOWBIL ITY NOT ENVISAGED IN ANY OF THE ACT OR REGULATION CANNOT BE REC KONED TO BE RETROSPECTIVE. ANOTHER STRONG REFERENCE HAS BEEN MADE TO THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C IT VS. KAP SCAN AND DIAGNOSTIC CENTRE (P.) LTD. [2012] 25 TAXMANN.COM 92, WHEREIN COMMISSION WAS PAID TO THE PRIVATE DOCTORS FO R REFERRING THE PATIENTS FOR DIAGNOSIS TO THE ASSESSEE COMPANY. IN BACKGROUND OF THESE FACTS AND ISSUES INVOLVED, THE HONBLE HIGH COUR T 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 DECISION CANNOT BE APPLIED ON THE FACTS OF THE PRESENT CASE BECAUSE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 33 THERE IS NO VIOLATION OF ANY LAW OR ANYTHING WHICH IS OPPOSED TO PUBLIC POLICY. SIMILARLY, THERE IS REFERENCE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ESKAYEF (NOW KNOWN AS SM ITHKLINE BEECHAM) PHARMACEUTICALS (INDIA) LIMITED V. CIT (20 00) 111 TAXMAN 561(SC), WHICH WAS GIVEN IN CONTEXT OF SECTION 37(3A) OF THE ACT. IN THE SAID CASE THE ASSESSEE HAD CLAIMED EXPEND ITURE ON DISTRIBUTION OF PHYSICIANS SAMPLES U/S. 37. IN THE B ACKGROUND OF SUCH CLAIM THE HONBLE APEX COURT HELD THAT, IF THE EXP ENDITURE FALLS WITHIN THE BARE MINIMUM IT WILL NOT BE CAUGHT BY SUBSEC TION (3A) OF SECTION 37. ON THE CONTRARY, THE HONBLE APEX COURT OBSE RVED THAT PHYSICIANS SAMPLES ARE NECESSARY TO ASCERTAIN THE EFFI CACY OF MEDICINE AND INTRODUCE IT IN THE MARKET FOR CIRCULATION AND IT IS ONLY BY THIS METHOD THE PURPOSE IS ACHIEVED. IN SUCH CASES GIVING A PHYSICIAN SAMPLES FOR REASONABLE PERIOD IS ESSENTIAL TO THE BUSI NESS OF MANUFACTURE AND SALE OF MEDICINE. IT IS ONLY IF A P ARTICULAR MEDICINE HAS BEEN INTRODUCED BY THE MARKET AND ITS USES ARE ESTAB LISHED THEN GIVING OF FREE SAMPLES COULD ONLY BE THE MEASURE OF SALE/ PROMOTION AND DEVELOPMENT WOULD THUS BE HIT BY SUBSECTION (3A). S AID DECISION NO WAY PROHIBITS THE NATURE OF EXPENDITURE WHICH HAS BEEN INCURRED IN THE CASE OF THE ASSESSEE. THEREFORE, SUCH A REFER ENCE TO A HONBLE APEX COURT DECISION IS NOT GERMANE TO THE ISSUE INVOLV ED. THUS, IN OUR OPINION, THE AFORESAID DECISION OF THIS TRIBUNAL IS C LEARLY DISTINGUISHABLE AND CANNOT BE HELD TO BE APPLICABLE AND ALSO WE HAVE ITA NO.4605/MUM/2014 M/S. PHL PHARMA PVT. LTD. 34 ALREADY GIVEN OUR INDEPENDENT FINDING AS TO ALLOWABIL ITY OF EXPENSES IN THE HANDS OF THE ASSESSEE AS BUSINESS EXPENDITURE. 14. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT( A) DELETING THE DISALLOWANCE AGGREGATING TO RS.22,99,72,607/-. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JANUARY 2017 SD/- SD/- (MANOJ KUMAR AGGARWAL) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 12 TH JANUARY, 2017. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANTREGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI