INGA LABORATORIES P.LTD, MUMBAI V. DCIT (OSD) 8(2), MUMBAI

ITA 5153/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2511 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 11-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gift; Business income; Principle of natural justice; Revenue expenditure
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI . . , , ! ' #$, % , & BEFORE SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, J M / I.T.A. NO.5153/M/14 ( % ' !(' / ASSESSMENT YEAR: 2011-12) M/S. INGA LABORATORIES PVT. LTD. INGA HOUSE, MAHAKALI CAVES ROAD, ANDHERI (E) MUMBAI - 400093 / VS. THE DY. COMMISSIONER OF INCOME TAX (OSD) 8 (2) AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACI1737K ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 25.02.2016 !' /DATE OF PRONOUNCEMENT: 20.07.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER DATED 19.06.2014 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 17, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A) ] RELEVANT TO THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- ASSESSEE BY: NONE DEPARTMENT BY: SHRI O.P.MEENA ITA NO.5153/M/14 A.Y. 2011-12 2 '1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-17, MUMBAI, HAS ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE INCURRED ON SALES PROMOTION TO MEDICAL PRACTITIONER RS.5,16,336/- AND THEREBY NOT APPRECIATING THE FACTS OF THE CASE AND THE NATURE OF EXPENSES INCURRED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D ITS RETURN OF INCOME FOR THE A.Y.2011-12 ON 29.09.2011 DECLARING TOTAL INCOME TO THE TUNE OF RS.1,53,42,184/-. THE SAID RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961( IN SHORT T HE ACT) ACCEPTING ITS RETURN INCOME. THE CASE WAS SELECTED FOR SCRUT INY AND NOTICE U/S.143(2) DATED 14.09.2012 WAS ISSUED AND DULY SER VED UPON THE ASSESSEE ON 20.09.2012. SUBSEQUENTLY NOTICE U/S. 1 42(1) OF THE ACT DATED 03.01.2013 & 07.08.2013 ALONGWITH DETAILED QU ESTIONNAIRE WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE CLAIMED SALES PROMOTION EXPENSES TO THE TUNE OF RS.27,36,868/-. THE ASSESSING OFFICER IN VIEW OF THE CIRCULAR NO.5 OF 2012 DATED 01.08.2012 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, NEW DELHI AND NOTIFICATION DATED 10.12.2009 ISSUED BY THE MEDICAL COUNSEL OF I NDIA (MCI) REGULATIONS, GIFT ITEMS WHICH WAS GIVEN TO THE MEDI CAL PRACTITIONERS AMOUNTING TO RS.5,16,339/- WAS DISALLOWED AND THERE AFTER THE SAID FINDING WAS CONFIRMED BY THE LEARNED CIT(A) THEREFO RE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D CAREFULLY. THE ITA NO.5153/M/14 A.Y. 2011-12 3 SOLE POINT WHICH HAS BEEN RAISED BY THE ASSESSEE IS THAT THE GIFT ARTICLES AMOUNTING TO RS.5,16,339/- GIVEN TO THE MEDICAL PRA CTITIONERS HAS BEEN WRONGLY DISALLOWED BY THE ASSESSING OFFICER AN D WRONGLY CONFIRMED BY THE LEARNED CIT(A) BECAUSE THE APPELLA NT HAS DISTRIBUTED ONLY LOW VALUE ITEMS SUCH AS DESK CLEANER, DESK TOP S, FREE SAMPLES OF MEDICINES ETC. FOR PROMOTING THE PRODUCT OF THE COM PANY INGA LABORATORIES PVT. LTD.. THEREFORE, THESE ARTICLES ARE NOT FREEBEES, THEREFORE, THE SAID EXPENDITURE IS LIABLE TO BE ALL OWED IN THE INTEREST OF NATURAL JUSTICE. BEFORE DISCUSSING THE FURTHER, IT IS NECESSARY TO ADVERT THE LIST OF ARTICLES DISALLOWED BY THE ASSESSING OF FICER ON RECORD:- A. TIES FOR MEDICAL REPRESENTATIVES B. MOBILE HANDSET FOR STOCKIST C. OPTICAL FOR FOREIGN CUSTOMERS D. BALL PENS WITH COMPANY LOGO E. CARD HOLDER WITH COMPANY LOGO F. EARWICK WITH PRODUCT LOGO G. HAND SANITIZER WITH PRODUCT LOGO H. ROOM FRESHENER WITH COMPANY LOGO I. NEW YEAR DIARIES WITH COMPANY NAME & LOGO WHILE CONFIRMING THE SAID DISALLOWANCE THE LEARNED CIT(A) PLACED RELIANCE ON THE CIRCULAR NO. 05 OF 2012 DATED 01.08 .2012 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES WHICH CLARIFIED T HAT THE COUNCIL IN EXERCISE OF ITS STATUTORY POWER AMENDED THE INDIAN MEDICAL COUNCIL ITA NO.5153/M/14 A.Y. 2011-12 4 (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULA TIONS, 2002 (THE REGULATIONS) ON 10.12.2009 IMPOSING A PROHIBITION O N THE MEDICAL PRACTITIONER AND THEIR PROFESSIONAL ASSOCIATIONS FR OM TAKING ANY GIFT, TRAVEL FACILITY, HOSPITALITY, CASH OR MONETARY GRAN T FROM THE PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES. LEARNED CIT(A) ALSO CLARIFIED THAT SECTION 37(1) OF THE ACT PROVID ES FOR DEDUCTION OF ANY REVENUE EXPENDITURE (OTHER THAN THOSE FALLING U NDER SECTIONS 30 TO 36) FROM THE BUSINESS INCOME IF SUCH EXPENSE IS LAI D OUT / EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS O R PROFESSION. HOWEVER, THE EXPLANATION APPENDED TO THIS SUB-SECTI ON DENIES CLAIM OF ANY SUCH EXPENSE, IF THE SAME HAS BEEN INCURRED FOR A PURPOSE WHICH IS EITHER AN OFFENCE OR PROHIBITED BY LAW. ACCOR DINGLY, THE LEARNED CIT(A) WAS OF THE VIEW THAT THE CLAIM OF THE ASSESS EE IS NOT PERMISSIBLE U/S.36(1) OF THE ACT AS THERE EXPENSES HAVE BEEN PROHIBITED BY THE LAW. THE PROVISION UNDER INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULA TIONS, 2002 IMPOSED CERTAIN A PROHIBITION ON THE MEDICAL PRACTI TIONER 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. THESE PROVISIONS ARE IN THE INTEREST OF PATIENT AND PUBLIC. IT IS NOT AN ISSUE WHETHER THE GIFT IS SMALLER OR THE BIG BUT THESE EXPENSES INCURRED BY THE APPELLANT ARE NOT A SALE PROMOTION EXPENSES BUT ARE IN NATURE OF EXPENSES WHICH QUALIF IES FOR THE PERSONAL USE BY THE DOCTORS AND THEIR CLINIC. THESE EXPENSE S CANNOT BE SAID TO ITA NO.5153/M/14 A.Y. 2011-12 5 BE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE APPELLANT. THESE GIFTS ARE CLEARLY VIOLATION OF THE PROVISION OF THE ABOVE MENTIONED CIRCULAR THEREFORE IN THE SAID CIRCUMSTAN CES THE LEARNED CIT(A) HAS RIGHTLY DECIDED THIS ISSUE IN FAVOUR OF THE REVENUE. FINDING NO MATERIAL CONTRARY TO THE DISCUSSION MADE BY THE LEARNED CIT(A), WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH DOES NOT REQU IRE TO INTERFERE WITH AT THIS APPELLATE STAGE. 5. ACCORDINGLY, APPEAL OF THE ASSESSEE IS HEREBY DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY, 2016 SD/- SD/- (G.S.PANNU) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 20 TH JULY, 2016 MP MP MP MP * + ,%'#- .-(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. * / BY ORDER, - & //TRUE COPY// //$ (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI