MITOCH PHARMA P. LTD, MUMBAI V. IDCIT RG 10(3), MUMBAI

ITA 6986/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0691 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 14-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase; Gift; Business expenditure; Retrospective amendment
• Section: 69C; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.6986/M/2014 ASSESSMENT YEAR: 2010-11 M/S. MITOCH PHARMA PVT. LTD., C-330, ANTOPHILL WAREHOUSING CO. LTD., VIDYALANKAR COLLEGE ROAD, WADALA EAST, MUMBAI - 37 PAN: AAACM3981F VS. INCOME TAX OFFICER 9(2)(3), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : DR. K. SHIVARAM, SR. A.R. SHRI RAHUL K. HAKANI, A.R. REVENUE BY : SHRI T.A. KHAN, D.R. DATE OF HEARING : 04.12.2017 DATE OF PRONOUNCEMENT : 12.01.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 06.08.2014 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER (HEREINAFTER REFERRED TO AS THE AO) HAS OBSERVED TH AT ASSESSEE HAS ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 2 SHOWN AN AMOUNT OF RS.43,18,348/- UNDER THE HEAD PU BLIC RELATION EXPENSES WHEREIN AN AMOUNT OF RS.15,35,891/- IS ALS O DEBITED AS BUSINESS EXPENSES. THE DETAILS SUBMITTED BY THE ASS ESSEE SHOWS THAT SUCH AMOUNT OF EXPENDITURE IS CLAIMED TO HAVE BEEN FOR GIVING GIFTS TO THE PROFESSIONALS. DURING THE COURSE OF ASSESSME NT PROCEEDINGS ASSESSEE WAS ASKED TO EXPLAIN AS TO HOW SUCH EXPEND ITURE OF GIFT IS ALLOWABLE. IN RESPONSE TO THE QUERY, ASSESSEE HAS S UBMITTED A LETTER DT. 07.02.2012. THE EXPLANATION OF THE ASSESSEE HAS NOT ACCEPTED BY THE AO. FURTHER, REPLY GIVEN BY THE ASSESSEE DT 22.02.2013 HAS NOT BEEN ACCEPTED BECAUSE ACCORDING TO THE AO SUCH GIFT EXPENDITURE IS NOT AT ALL BUSINESS EXPENDITURE. THE CBDT CIRCULAR NO.05/2012 VIDE F.NO. 225/142/ 2012 ITA-11 DT. 01.08.2012 DOES NOT PERMIT SUCH EXPENDITURE TO BE ALLOWED. FURTHER, THE ONLY MEDICA L COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULA TIONS 2002 DT. 10.12.2009 IMPOSES PROHIBITION ON THE MEDICAL PRACT ITIONER FROM TAKING ANY SUCH GIFT, TRAVEL FACILITY, HOSPITALITY OR ANY SORT OF BENEFITS FROM THE CLIENT OR SUCH ASSESSES. ACCORDING TO THE AO, SUCH BUSINESS PROMOTION EXPENSES IS NOT AT ALL RELATED TO THE INC OME EARNED UNDER THE HEAD 'BUSINESS' HENCE, HE HAS DISALLOWED THE EX PENDITURE U/S 37 OF THE INCOME TAX ACT. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THIS ISSUE. 4. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMI TTED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN IT A ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 3 NO.4605/M/2014 AND THE TRIBUNAL CONSIDERING THE CBD T CIRCULAR HAS ALLOWED SUCH CLAIM, THEREFORE, THIS CLAIM SHOUL D BE ALLOWED. 5. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES AND FOUND THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRI BUNAL IN ITA NO.4605/M/2014 WHEREIN THE LD. CIT(A) HAS ALLOWED T HE CLAIM OF SUCH EXPENDITURE AND THE TRIBUNAL HAS CONFIRMED THE DECISION RELYING UPON THE CBDT CIRCULAR AND TRIBUNAL HAS HELD THAT T HIS ASSESSMENT YEAR IS OF A.Y. 2010-11 AND CBDT HAS INTRODUCED THE CIRCULAR W.E.F. 01.08.2012, THEREFORE, DISCUSSING THE ISSUE IN DETA IL, TRIBUNAL HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 10. FROM THE PERUSAL OF THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE, IT IS SEEN THAT UNDER THE HEAD 'CUSTOMER RELATIONSHIP MAN AGEMENT', THE ASSESSEE ARRANGES NATIONAL LEVEL SEMINAR AND DISCUSSION PANE LS OF EMINENT DOCTORS AND INVITING OF OTHER DOCTORS TO PARTICIPATE IN THE SEM INARS ON A TOPIC RELATED TO THERAPEUTIC AREA. IT ARRANGES LECTURES AND SPONSORS KNOWLEDGE UPGRADE COURSE WHICH HELPS PHARMACEUTICAL COMPANIES TO MAKE AWARE OF THE PRODUCTS AND MEDICINES MANUFACTURED AND LAUNCHED BY IT. UNDER KE Y ACCOUNT MANAGEMENT, THE ASSESSEE MAKES ENDEAVOUR TO CREATE AWARENESS AMONGS T CERTAIN CLASS OF KEY DOCTORS ABOUT THE PRODUCTS OF THE ASSESSEE AND THE NEW DEVELOPMENTS TAKING PLACE IN THE AREA OF MEDICINE AND PROVIDING CORRECT DIAGN OSIS AND TREATMENT OF THE PATIENTS. THE SAID ACTIVITIES BY THE ASSESSEE ARE T O MAKE THE DOCTORS AWARE OF ITS PRODUCTS AND RESEARCH WORK CARRIED OUT BY IT FOR BR INGING THE MEDICINE IN THE MARKET AND ITS RESULTS ARE BASED ON SEVERAL LEVELS OF TESTS AND APPROVALS. UNLESS THE PHARMACEUTICAL COMPANIES MAKE AWARE OF SUCH KIND OF PRODUCTS TO KEY DOCTORS OR MEDICAL PRACTITIONERS, THEN ONLY IT CAN SUCCESSFULL Y LAUNCH ITS PRODUCTS/MEDICINES. THIS KIND OF EXPENDITURE IS DEFINITELY IN THE NATUR E OF SALES AND BUSINESS PROMOTION, WHICH HAS TO BE ALLOWED. COMING TO THE GIFT ARTICLE S AND FREE SAMPLES OF MEDICINES, IT IS SEEN THAT THE ASSESSEE GIVES VARIOUS KIND OF ARTICLES LIKE, DIARIES, PEN SETS, CALENDARS, PAPER WEIGHTS, INJECTION BOXES ETC. EMBO SSED WITH BOLD LOGO OF ITS BRAND NAME AND THE PRODUCT NAME SO THAT THE DOCTORS REMEM BERS THE BRAND OF THE ASSESSEE AND ALSO THE NAME OF THE MEDICINE. ALL THE GIFT ARTICLES, AS POINTED OUT BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND ALSO BEFORE US ARE VERY CHEAP AND LOW CAST ARTICLES WHICH BEARS THE NAME OF ASSESSEE AND IT IS PURELY FOR THE ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 4 PROMOTION OF ITS PRODUCT, BRAND REMINDER, ETC. THES E ARTICLES 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 CANNOT BE RECKONED AS FREEBIES GIVEN TO THE D OCTORS BUT FOR PROMOTION OF ITS PRODUCTS. THE PHARMACEUTICAL COMPANY, WHICH IS ENGA GED IN MANUFACTURING AND MARKETING OF PHARMACEUTICAL PRODUCTS, CAN PROMOTE I TS SALE AND BRAND ONLY BY ARRANGING SEMINARS, CONFERENCES AND THEREBY CREATIN G AWARENESS AMONGST DOCTORS ABOUT THE NEW RESEARCH IN THE MEDICAL FIELD AND THE RAPEUTIC AREAS, ETC. EVERY DAY THERE ARE NEW DEVELOPMENTS TAKING PLACE AROUND THE WORLD IN THE AREA OF MEDICINE AND THERAPEUTIC, HENCE IN ORDER TO PROVIDE CORRECT DIAGNOSIS AND TREATMENT OF THE PATIENTS, IT IS IMPERATIVE THAT THE DOCTORS SHOULD KEEP THEMSELVES UPDATED WITH THE LATEST DEVELOPMENTS IN THE MEDICINE AND THE MAIN OB JECT OF SUCH CONFERENCES AND SEMINARS IS TO UPDATE THE DOCTORS OF THE LATEST DEV ELOPMENTS, WHICH IS BENEFICIAL TO THE DOCTORS IN TREATING THE PATIENTS AS WELL AS THE PHARMACEUTICAL COMPANIES. FURTHER AS POINTED OUT AND CONCLUDED BY THE LEARNED CIT(A) THERE IS NO VIOLATION BY THE ASSESSEE IN SO FAR AS GIVING ANY KIND OF FREEBI ES TO THE MEDICAL PRACTITIONERS. THUS, SUCH KIND OF EXPENDITURES BY A PHARMACEUTICAL COMPANIES ARE PURELY FOR BUSINESS PURPOSE WHICH HAS TO BE ALLOWED AS BUSINES S EXPENDITURE AND IS NOT IMPAIRED BY EXPLANATION 1 TO SECTION 37(1) . 11. BEFORE US, THE LD. CIT DR HAS ALSO MUCH HARPED UPON THE DECISION OF THE HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CONFEDER ATION OF INDIAN PHARMACEUTICAL INDUSTRY (SS) VS. CBDT (SUPRA), IN SUPPORT OF THE A RGUMENT THAT CBDT CIRCULAR HAS BEEN APPROVED AND CONFIRMED BY THE HIGH COURT AND T HEREFORE, IT HAS A HUGE BINDING PRECEDENCE. FROM THE PERUSAL OF THE SAID JU DGMENT OF THE HON'BLE HIGH COURT, IT IS SEEN THAT IN THAT CASE THE VALIDITY OF CIRCULAR NO.5/12 DATED 1.8.2012 WAS CHALLENGED. THE HON'BLE HIGH COURT THOUGH UPHELD TH E VALIDITY OF THE SAID CIRCULAR BUT WITH A RIDER THAT IF THE ASSESSEE SATISFIES THE ASSESSING AUTHORITY THAT THE EXPENDITURE IS NOT IN VIOLATION OF THE REGULATION F RAMED BY THE MEDICAL COUNCIL, THEN IT MAY LEGITIMATELY CLAIM THE DEDUCTION. THE ASSESS EE HAS TO SATISFY THE AO THAT THE EXPENDITURE IS NOT IN VIOLATION OF THE MEDICAL COUN CIL REGULATION. THUS, IF THE ASSESSEE BRINGS OUT THAT THE 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 HEALT HCARE LIMITED ITA NOS. 904 & 945/MUM/2013', DECIDED VIDE ORDER DATED 12.09.2016. IN COUNTER, TO THIS DECISION THE LEARNED COUNSEL, SHRI JD MISTRY DISTINGUISHED T HE SAID JUDGMENT AND SUBMITTED THAT THE FACTS OF THE CASE IN THE LIVA HEALTHCARE ( SUPRA) WERE SUBSTANTIALLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. IN THE CASE OF LIVA HEALTHCARE, THE HON'BLE TRIBUNAL DISALLOWED SUCH EXPENSES U/S. 37(1) OF THE ACT ON THE GROUND THAT THEY WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS AS THE SAME WERE INCURRED TO CREATE GOOD RELATIONS WITH THE DOC TORS IN LIEU OF EXPECTED FAVOURS FROM DOCTORS FOR RECOMMENDING TO THE PATIENTS THE P HARMACEUTICAL PRODUCTS DEALT WITH BY THE COMPANY TO GENERATE MORE AND MORE BUSIN ESS AND PROFITS FOR THE ASSESSEE COMPANY. THE TRIBUNAL ALSO RECORDED THE FA CT THAT THE SPOUSE OF THE DOCTORS ALSO ACCOMPANIED THE DOCTORS FOR OVERSEAS T RIPS TO ISTANBUL AND EXPENSES WERE INCURRED FOR CRUISE TRAVELS TO ISLAND, GALA DI NNER, COCKTAILS, GALA ENTERTAINMENT ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 5 ETC. OF SUCH DOCTORS. IN ASSESSEE'S CASE IT IS AN A DMITTED FACT THAT EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSE PERSONAL BENEFIT/ENJO YMENT OF THE DOCTORS OR THEIR SPOUSES. IN THE CASE OF LIVA, THE QUESTION AS TO WH ETHER SUCH IMC REGULATIONS CAN BE APPLICABLE TO PHARMA COMPANIES WAS NOT ARGUED BE FORE THE HON'BLE BENCH. HE REITERATED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAX HOSPITAL (SUPRA) AND THE JURISDICTIONAL TRIBUNAL IN THE CASE OF SYNCOM ( SUPRA) HAVE HELD THAT SUCH IMC REGULATIONS APPLY ONLY TO MEDICAL PRACTITIONERS. HE FURTHER SUBMITTED THAT THE TRIBUNAL IN THE CASE OF ACIT VS. LIVA HEALTHCARE LT D. (ITA 847/MUM/2012) FOR A.Y. 2008-09, HAS DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. HOWEVER, IN A.Y. 2009- 10, HON'BLE TRIBUNAL WHILE NOTING THE FACT THAT CON SISTENCY 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 O F THE ASSESSEE IN ITA NO. 388/MUM/2012 FOR ASSESSMENT YEAR 2008-09. IN OUR CO NSIDERED VIEW, PRINCIPLES OF RES JUDICATA IS NOT APPLICABLE TO INC OME TAX PROCEEDINGS ALTHOUGH WE ARE FULLY AGREEABLE THAT PRINCIPLES OF CONSISTENCY IS TO BE MAINTAINED (HON'BLE SUPREME COURT DECISION IN RADHA SOAMI SATSANG V. CIT (1992) 193 ITR 321 (SC) BUT IN THE INSTANT ASSESSME NT YEAR, WE HAVE OBSERVED THAT THESE OVERSEAS TRIPS FOR DOCTORS AND THEIR SPOUSES WERE ORGANIZED BY THE ASSESSEE WHEREBY NO DETAILS OF THE CONTENTS OF SEMINAR, IF ANY CONDUCTED BY THE ASSESSEE OVERSEAS HAS BEEN BRO UGHT ON RECORD AND ALSO EVEN THE SPOUSES ACCOMPANIED THE DOCTORS TO TH E OVERSEAS TRIP WHICH INCLUDED CRUISE VISIT TO ISLAND, GALA DINNERS, COCK TAIL, GALA ENTERTAINMENT ETC. RATHER THAN BEING DIRECTED TOWARDS SEMINAR FOR PROD UCT INFORMATION DISSEMINATION OR DIRECTED TOWARDS KNOWLEDGE ENHANCE MENT OR KNOWLEDGE SHARING ORIENTED AS NO DETAILS OF SEMINAR AND ITS C OURSE CONTENT IS BROUGHT ON RECORD RATHER THE TRIP IS DIRECTED TOWARDS LEISU RE AND ENTERTAINMENT OF DOCTORS AND THEIR SPOUSES WHICH IN OUR VIEW APPEARS TO BE CLEARLY A DISTINGUISHABLE FEATURE IN THIS YEAR ENABLING US TO TAKE A DIVERGENT VIEW AND THE EXPENSES INCURRED BY THE ASSESSEE CANNOT BE ALL OWED AS BUSINESS 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 DECI SION FOR A.Y. 2009-10 IN THE CASE OF LIVA HEALTHCARE, THERE WAS A SPECIFIC F INDING OF A FACT THAT NO DETAILS HAVE BEEN FILED WITH RESPECT TO ANY SEMINAR HAS BEEN CONDUCTED FOR DOCTORS AND THAT THE TRIPS WERE DIRECTED TOWARDS LE ISURE AND ENTERTAINMENT OF DOCTORS AND THEIR SPOUSES. THIS WAS A DISTINGUIS HABLE FEATURE FOR THE HON'BLE TRIBUNAL TO TAKE A CONTRARY VIEW FROM A.Y. 2008-09. HE FURTHER SUBMITTED THAT THE HON'BLE TRIBUNAL IN THE CASE OF LIVA HEALTHCARE LTD. VS. ACIT (ITA NO. 4791/MUM/2014) FOR A.Y. 2010-11 HAS F OLLOWED THE DECISION OF LIVA HEALTHCARE (SUPRA) FOR A.Y. 2008-09 AND HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. THIS, FURTHER BRINGS OUT TH E FACT THAT THE HON'BLE TRIBUNAL DISALLOWED THE EXPENSES U/S. 37(1) OF THE ACT IN THE CASE OF LIVA HEALTHCARE FOR A.Y. 2009-10 ONLY ON THE GROUND THAT THE SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 6 13. APART FROM THE AFORESAID DISTINGUISHING FEATURE S AS HIGHLIGHTED BY THE LEARNED SENIOR COUNSEL, WE FIND THAT ON THE FACTS ITSELF IN THE CASE OF LIVA HEALTHCARE (2009- 2010) (SUPRA), THERE WAS A CLEAR CUT MATERIAL ON RE CORD THAT THE DOCTORS ALONG WITH THEIR SPOUSES WERE TAKEN TO FOREIGN TOURS AND CRUIS E TRAVEL ETC., IN LIEU OF EXPECTED FAVOURS FROM DOCTORS. IN THE LIGHT OF THESE FACTS A ND MATERIAL THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY NOT FOLLO WING THE EARLIER YEAR PRECEDENCE AND SUBSEQUENT YEAR ORDERS OF THE SAME ASSESSEE. AS BROUGHT ON RECORD BEFORE US, WE FIND THAT SIMILAR ISSUE OF ALLOWANCE OF SUCH EXP ENDITURE IN THE CASE OF PHARMACEUTICAL COMPANIES HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, IN THE CASE OF UCB INDIA PVT. LTD. V. ITO (ITA NO. 6681/MUM/201 3 ORDER DATED 13.05.2016, WHEREIN IT WAS HELD THAT CBDT CIRCULAR CANNOT HAVE A RETROSPECTIVE EFFECT. THIS JUDGMENT WAS LOST SIGHT OF BY THE BENCH. IN ANY CAS E ON CAREFUL PERUSAL OF THE TRIBUNAL ORDER IN THE CASE OF LIVA HEALTHCARE (SUPR A) WE FIND THAT THE TRIBUNAL THOUGH HAS INCORPORATED THE RELEVANT PROVISIONS AND CLAUSES OF THE 'INDIAN MEDICAL COUNCIL REGULATION 2002', HOWEVER, HAS NOT ELABORAT ED OR DWELL UPON AS TO HOW THIS MCI REGULATION WHICH IS STRICTLY MEANT FOR MEDICAL PRACTITIONERS AND DOCTORS CAN BE MADE APPLICABLE TO PHARMACEUTICAL COMPANIES. THERE HAS TO BE SOME ENABLING PROVISION OR SPECIFIC CLAUSE IN THE SAID REGULATION WHEREBY THE PHARMACEUTICAL COMPANIES ARE BARRED FROM CONDUCTING SEMINARS OR CO NFERENCES BY SPONSORING THEDOCTORS. THE ENTIRE CONDUCT RELATES TO DOCTORS A ND MEDICAL PRACTITIONERS AND LISTS OUT THE CENSURES AND FINES IMPOSED 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 EXPRESS PROVISION UNDER THE LAW WHEREBY P HARMACEUTICAL COMPANIES ARE PROHIBITED TO CONDUCT CONFERENCES OR SEMINAR OR GIV E FREE SAMPLES. IN THE TRIBUNAL DECISION OF LIVA HEALTHCARE, STRONG REFERENCE HAS B EEN MADE TO HON'BLE HIMACHAL PRADESH HIGH COURT (SUPRA), THAT THE SAID CBDT CIRC ULAR HAS BEEN UPHELD. ON THIS ASPECT WE HAVE ALREADY DISCUSSED IN DETAIL HEREIN A BOVE 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; AN D SECONDLY, CBDT CIRCULAR WHICH CREATES NEW IMPAIRMENT AND IMPOSES DISALLOWBILITY N OT ENVISAGED IN ANY OF THE ACT OR REGULATION CANNOT BE RECKONED TO BE RETROSPECTIV E. ANOTHER STRONG REFERENCE HAS BEEN MADE TO THE DECISION OF HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. KAP SCAN AND DIAGNOSTIC CENTRE (P .) LTD. [2012] 25 TAXMANN.COM 92, WHEREIN COMMISSION WAS PAID TO THE PRIVATE DOCTORS FOR REFE RRING THE PATIENTS FOR DIAGNOSIS TO THE ASSESSEE COMPANY. IN BACKGROUND OF THESE FAC TS AND ISSUES INVOLVED, THE HON'BLE HIGH COURT HELD THAT SAID PAYMENT OF COMMIS SION 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 BECAUSETHERE IS NO VIOLATION OF ANY LAW OR ANYTHING WHICH IS OPPOSED T O PUBLIC POLICY. SIMILARLY, THERE IS REFERENCE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ESKAYEF (NOW KNOWN AS SMITHKLINE BEECHAM) PHARMACEUTICALS (INDIA) LIMITED V. CIT (2000) 111 TAXMAN 561(SC), WHICH WAS GIVEN IN CONTEXT OF SECTION 37(3A) OF THE ACT. IN THE SAID CASE THE ASSESSEE HAD CLAIMED EXPENDITURE ON DISTRI BUTION OF PHYSICIAN'S SAMPLES U/S. 37. IN THE BACKGROUND OF SUCH CLAIM THE HON'BL E APEX COURT HELD THAT, IF THE EXPENDITURE FALLS WITHIN THE BARE MINIMUM IT WILL N OT BE CAUGHT BY SUBSECTION (3A) OF SECTION 37 . ON THE CONTRARY, THE HON'BLE APEX COURT OBSERVED THAT PHYSICIANS SAMPLES ARE NECESSARY TO ASCERTAIN THE EFFICACY OF MEDICINE AND INTRODUCE IT IN THE MARKET FOR CIRCULATION AND IT IS ONLY BY THIS METHO D THE PURPOSE IS ACHIEVED. IN SUCH ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 7 CASES GIVING A PHYSICIAN SAMPLES FOR REASONABLE PER IOD IS ESSENTIAL TO THE BUSINESS OF MANUFACTURE AND SALE OF MEDICINE. IT IS ONLY IF A PARTICULAR MEDICINE HAS BEEN INTRODUCED BY THE MARKET AND ITS USES ARE ESTABLISH ED THEN GIVING OF FREE SAMPLES COULD ONLY BE THE MEASURE OF SALE/ PROMOTION AND DE VELOPMENT WOULD THUS BE HIT BY SUBSECTION (3A). SAID DECISION NO WAY PROHIBITS THE NATURE OF EXPENDITURE WHICH HAS BEEN INCURRED IN THE CASE OF THE ASSESSEE. THER EFORE, SUCH A REFERENCE TO A HON'BLE APEX COURT DECISION IS NOT GERMANE TO THE I SSUE INVOLVED. THUS, IN OUR OPINION, THE AFORESAID DECISION OF THIS TRIBUNAL IS CLEARLY DISTINGUISHABLE AND CANNOT BE HELD TO BE APPLICABLE AND ALSO WE HAVE ALREADY G IVEN OUR INDEPENDENT FINDING AS TO ALLOWABILITY OF EXPENSES IN THE HANDS OF THE ASS ESSEE 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 DISMISSED. 7. RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL, WE ALLOW THE CLAIM OF THE ASSESSEE. 8. THE NEXT ISSUE RELATES TO ADDITION OF RS.23,620/ - AS THE BOGUS PURCHASES U/S 69C FROM M/S. SIDDHIVINAYAK CORPORATI ON. THE AO HELD THAT AO HAD RECEIVED THE INFORMATION FROM SALE S TAX DEPARTMENT THAT M/S. SIDDHIVINAYAK CORPORATION IS A HAWALA DEALER. ASSESSEE HAS MADE PURCHASES FROM M/S. SIDDHIVINAYAK CORPORATION OF RS.23,620/- PERTAINS TO PURCHASE OF CLIP CLOCK F OR THE PURPOSE OF LICKY DRAWS CONDUCTED BY THE COMPANY AND ARE INCLUD ED IN LEDGER OF PUBLIC RELATION EXPENSES. ASSESSEE HAS NOT MADE ANY PURCHASE FROM M/S. SIDDHIVINAYAK CORPORATION IN EARLIER YEAR S. THEREFORE, AO DISALLOWED THE SAME. 9. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL. ITA NO.6986/M/2014 M/S. MITOCH PHARMA PVT. LTD. 8 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSEE HAS ALREADY DECLARED THE GP. HENCE, AO IS DIRECTED TO ALLOW THE CREDIT OF GP DECLARED BY THE ASSESSEE AND DEDUCT THE SAME FROM 12.5% AND ESTIMATE THE GP @ 6% OF TOTAL BOGUS PURCHASES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.01.2018. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.01.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.