Arvind Kumar Sharma, Hyderabad, Hyderabad V. ITO, Ward-5(3), Hyderabad, Hyderabad

ITA 841/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2979 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-05-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B VISHNU PRIYA
• Keywords: Gift; Business income; Business expenditure
• Section: 142(1); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 841/HYD/2017 ASSESSMENT YEAR: 2013-14 ARVIND KUMAR SHARMA, HYDERABAD PAN ALNPS 6702 P VS. INCOME-TAX OFFICER, WARD 5(3), HYDERABAD. (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI BHUPESH KUMAR DAND REVENUE BY : SMT. B. VISHNU PRIYA DATE OF HEARING 15/05/2018 DATE OF PRONOUNCEMENT 23/05/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 26/12/2016 OF CIT(A) 10, HYDERABAD FOR AY 2 013-14. 2. BRIEF FACTS OF THE CASE ARE, ASSESSEE IS IN THE BUSINESS OF DISTRIBUTION OF PHARMACEUTICALS AND IS A PROPRIETOR OF TWO CONCERNS, NAMELY, I) PHARMA CENTRE AND SAIN MARKETING. ASSES SEE FILED HIS RETURN OF INCOME FOR THE AY 2013-14 ON 27/09/2013 A DMITTING INCOME OF RS. 5,84,240/-. THE RETURN WAS PROCESSED U/S 143 (1) AND SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS. NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVE D ON THE ASSESSEE. 2.1 DURING ASSESSMENT PROCEEDINGS, AO NOTED THAT AS SESSEE HAS DEBITED RS. 29,21,364/- IN PHARMA CENTRE AND RS. 13,23,223/- IN 2 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. SAIN MARKETING UNDER THE HEAD SALES PROMOTION EX PENSES. THE TOTAL SALES PROMOTION EXPENSES COMES TO RS. 42,44,587/-. ON EXAMINATION, THE BREAK-UP OF THE EXPENSES ARE GIVEN BELOW: PHARMA CENTRE I) GIFTS AND COMPLIMENTS RS. 39,222 II) GIFTS PAUL RS. 1,45,049 III) SALES PROMOTION ORISSA RS. 9,000 IV) SSP SALES PROMOTION PAUL RS.27,28,093 RS.29,21,364 -========== SAIN MARKETING I) GIFTS & COMPLIMENTS RS. 1,08,250 II) SSPS SALES PROMOTION RS. 12,14,973 TOTAL RS. 13,23,223 =========== 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE PRODUCED BILLS/VOUCHERS FOR AN AMOUNT OF RS. 2,83,5 21/- AND FOR THE BALANCE, ASSESSEE STATED THAT THERE ARE NO BILLS/VO UCHERS. HOWEVER, ASSESSEE SUBMITTED THAT ALL THE PAYMENTS WERE MADE THROUGH BANK ACCOUNT ONLY AND THE SIGNATURES OF PERSON, WHO WAS IN RECEIPT OF THE SAID COMMISSION WAS NOT AVAILABLE. IN RESPONSE TO T HE SHOW CAUSE LETTER DATED 22/01/2016, THE ASSESSEE FILED HIS EXP LANATION ON 15/02/2016, WHICH IS AS UNDER: ALL THE EXPENSES THAT IS DEBITED TO SALES PROMOTION EXPENSES IS NOT TOWARDS MEDICAL PROFESSIONALS. AS SEEN FROM ABO VE, GIFTS AND COMPLIMENTS EXPENSES INCURRED BY ME, IS FOR STA FF, CLIENTS AND OTHER CREDITORS WITH WHOM WE DO DAY TO DAY WORK . THE EXPENSES INCLUDES SMALL ITEMS SUCH AS PENS, CALENDA RS, KEY CHAINS, BISCUITS, LUNCH TO CLIENTS ETC. FOR PROMOTI NG THE PRODUCTS. HENCE, RS.3,0L,521 (RS.184271 +RS.9000 + RS.L08250) DO NOT FORM PART OF EXPENSE INCURRED TOWARDS FREEBIES TO D OCTORS. AS PER CIRCULAR NO.5;2012(F.NO.225/142/2012-ITA.II) DATED OL.08.2012 ANY FREEBIES TO DOCTORS IS NOT ALLOWABLE AS DEDUCTIBLE EXPENDITURE. AS THE CIRCULAR IS APPLICAB LE FROM 01.08.2012, EXPENSES INCURRED BEFORE THIS DATE CAN BE ALLOWED AS DEDUCTIBLE EXPENDITURE. HENCE, IN PHARMA CENTRE RS. 8,27, 857 AND IN THE CASE OF SAIN MARKETING RS.3,86,413, THE 3 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. EXPENSES WERE INCURRED BEFORE THE CIRCULAR CAME INT O EFFECT, AS SUCH RS.12,14,270 CAN BE ALLOWED AS DEDUCTIBLE EXPE NDITURE. THE BALANCE EXPENDITURE OF RS.27,28,796 WAS INCURRE D TOWARDS SALES PROMOTION AND PAID TO DOCTORS. THE NATURE OF THE BUSINESS DEMANDS THAT THE SUCH EXPENSES MUST BE INCURRED OTH ERWISE THE IT IS VERY DIFFICULT TO DISPOSE OFF THE PRODUCT ; MEDICINE TRADING IS A CONSUMER ORIENTED INDUSTRY HAVING VAST BASE OF THE CONSUMER. IT HAS A LOT OF COMPETITION IN THE MARKET AND WITHOUT PUBLISHLI7G MATERIAL AND MAKLI7G THE DOCTORS AWARE OF ABOUT THE MEDICINE, WE WILL NOT BE ABLE TO SELL THE PRODUCT. I AM NOT A RETAILER WHO SELL'S DIRECTLY TO CONSUMERS. THIS IS THE MAJOR ROAD BLOCK FOR OUR FIRM AS SUCH WE HAVE TO INCUR EXPENDI TURE TOWARDS PROMOTING OUR PRODUCTS, WHICH IS THE ONLY WAY TO GE NERATE AND INCREASE THE TURNOVER. WHEN ANY PRODUCT IS LAUNCHED, THERE ARE LOTS OF CON FERENCE HAS TO BE ARRANGED AND FOR ARRANGING THE CONFERENCE WE HAVE TO INCUR THE TRAVELLING EXPENSES AND OTHER RELATED EXP ENSES. FURTHER MANY A TIMES, DOCTORS CONDUCT FREE MEDICAL CAMPS WITH VARIOUS PHILANTHROPIC ORGANIZATION IN WHICH WE SUPP LY MEDICINES FREE OF COST, ALL SUCH EXPENSES ARE DEBITED TO SALE S PROMOTION. THE SALES PROMOTION EXPENDITURE HAS BEEN INCURRED F OR THE PURPOSE OF THE BUSINESS ONLY AND ARE NOT THE CAPITA L EXPENDITURE OR THE PERSONAL EXPENSES OF OURSELVES O R DOCTORS. THEREFORE, REQUESTING YOU TO KINDLY ALLOW THE SALES PROMOTION EXPENSES AS BUSINESS EXPENSES AND COMPLETE THE ASSE SSMENT. IN THE EXPLANATION SUBMITTED BY THE ASSESSEE, ASSES SEE SUBMITTED THREEFOLD ARGUMENT; FIRST BEING SALES PROMOTION EXP ENSES INCLUDES SMALL ITEMS, SUCH AS, PENS, CALENDARS, ETC. TO THE EXTENT OF RS. 3,01,521/-, WHICH DO NOT FORM PART OF EXPENSES INCU RRED TOWARDS FREEBEES TO DOCTORS. SECOND ARGUMENT IS, CBDT CIRCU LAR NO. 5/12, DATED 01/08/2012, ISSUED IS APPLICABLE WITH EFFECT FROM 01/08/12, ASSESSEE HAS INCURRED RS. 12,14,270/- PRIOR TO THE ISSUE OF CIRCULAR, HENCE, THIS EXPENDITURE SHOULD BE ALLOWED AS THE CI RCULAR IS APPLICABLE PROSPECTIVELY. THE THIRD CONTENTION IS, THE BALANCE OF EXPENDITURE WAS INCURRED TOWARD SALES PROMOTION, AC CORDINGLY, PAID TO DOCTORS. IN THIS LINE OF BUSINESS, ASSESSEE HAS IN CURRED CERTAIN EXPENDITURES LIKE ARRANGEMENT OF CONFERENCE, TRAVEL LING EXPENSES TO THE CONFERENCE, ETC., WHENEVER ANY PROJECT IS LAUNC HED. THE SALES PROMOTION EXPENDITURE WAS INCURRED ONLY FOR THE PUR POSE OF BUSINESS AND IT IS NOT CAPITAL IN NATURE OR ANY PERSONAL EXP ENSES ARE INVOLVED. 4 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. 2.3 THE AO REJECTED THE ABOVE SUBMISSIONS OF THE AS SESSEE BY HOLDING THAT INVOICES PRODUCED BY THE ASSESSEE ARE IN THE NAME OF SAI NURSING HOME AND ANOTHER IS IN THE NAME OF DOCT OR BRIZ BHUSHAN. THESE INVOICES ARE NOT RELATING TO THE ASSESSEE, AC CORDINGLY, FIRST CONTENTION OF THE ASSESSEE WAS DISMISSED. WITH REGA RD TO SECOND AND THIRD CONTENTION, THE AO REJECTED THE SAME BY OBSER VING AS UNDER: B) THE SECOND CONTENTION OF THE ASSESSEE THAT THE C IRCULAR NO.5/2012 ISSUED BY THE CBDT IS APPLICABLE W.EF.01. 08.2012. HENCE, EXPENDITURE INCURRED PRIOR TO 01.08.2012 OF RS.8,27,857 IS ALLOWABLE IS DEVOID OF ANY MERIT FOR THE FOLLOWI NG REASONS: AS PER THE EXPLANATION TO SECTION 37(1) OF THE I.T. ACT, ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR P ROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESP ECT OF SUCH EXPENDITURE. THIS PROVISION IS IN THE STATUTE W.E.F . 01.04.1962. THE CBOT CIRCULAR CITED SUPRA BRINGS TO THE NOTICE OF ALL CONCERNED THAT EXPENDITURE INCURRED TOWARDS FREEBIE S TO DOCTORS BY THE PHARMA AGENCIES IS DISALLOWABLE U/S.37( 1) O F THE I.T.ACT AS THE MEDICAL COUNCIL OF INDIA (STATUTORY BODY) IM POSED PROHIBITION ON MEDICAL PRACTITIONERS INTER ALIA ACC EPTING GIFTS ETC. FROM PHARMA AGENCIES ON 10.12.2009. HENCE, ANY EXPE NDITURE INCURRED W.E.F.L0.12.2009 TOWARDS FREEBIES. TO DOCT ORS IS DISALLOWABLE UJS.37(1) OF THE I.T.ACT. THE CBDT CIR CULAR ONLY HIGHLIGHTS THE SAME. HENCE THE EXPLANATION IS APPLI CABLE FOR THE ENTIRE FINANCIAL YEAR UNDER CONSIDERATION. C) THE OTHER ARGUMENTS OF THE ASSESSEE THAT THE BUS INESS OF THE ASSESSEE WARRANTS INCURRING OF SUCH EXPENDITURE IS NOT ACCEPTABLE AS THE STATUTE PROVIDES FOR DISALLOWANCE OF SUCH EXPENDITURE. D) ATTENTION IS INVITED TO THE HON'BLE PUNJAB & HAR YANA HIGH COURT DECISION IN THE CASE OF CIT 'IS KAP SCAN AND DIAGNOSTIC CENTRE (P) LIMITED (2012) REPORTED IN 344 ITR 476 W HEREIN ADMISSIBILITY OF COMMISSION PAID TO DOCTORS FOR REF ERRING PATIENTS FOR DIAGNOSIS WAS DEALT. THE HIGH COURT CONSIDERED THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS) REGULATIONS 2002 AND CONCLUDED THEREFROM THAT SUCH PAYMENT OF COMMISSION WAS OPPOSED TO PUBLIC POLICY AND CONS EQUENTLY DISALLOWED THE EXPENDITURE. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A). 5 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND RELYING ON THE DECISION IN THE CASE OF DR. REDDYS LABORATO RIES LTD. VS. ADDL. CIT, 30 ITR 393, THE CIT(A) OBSERVED THAT THE ASSES SEE DID NOT PRODUCE ANY BILLS OR VOUCHERS FOR AN AMOUNT OF RS. 39,43,076/-, ADMITTEDLY THEY ARE NOT AVAILABLE AND THE MAIN CONT ENTION WAS THAT THE AMOUNT PAID THROUGH BANK AND MERELY CONTENDING THAT IT IS SALES PROMOTION AND NO OTHER DETAILS ARE AVAILABLE ON REC ORD. ACCORDINGLY, HE SUPPORTED THE VIEWS OF THE AO. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST LAW, HEIGHT OF EVIDENCE AND PR OBABILITIES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS,42,44,587/- (RS.2 9,21,364 + RS.13,23,223) MADE BY THE ASSESSING OFFICER U/S.37( 1) OF THE I.T ACT TREATING THE SAID AMOUNT AS REPRESENTING EX PENDITURE TOWARDS FREEBIES TO MEDICAL PROFESSIONALS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT A PORTION OF THE IMPUGNED EXPENDITU RE TO THE EXTENT OF RS.3,01,521/- WAS INCURRED ON SALES PROMO TION WHICH DOES NOT REPRESENT EXPENDITURE ON PROVISION OF FREE BIES TO MEDICAL PROFESSIONALS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF THE BALANCE AMOUNT OF RS.39,43,066/- DISREGARDING THE EXPLANATION OFFERED BY THE ASSESSEE BEFORE THE A.O AS WELL AS BEFORE THE C.I.T (APPEALS) AND THE CASE LAW RELIED UPON BY THE ASSESSEE. 5. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THA T MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS T HAT THE APPEAL BE ALLOWED. THE APPELLANT CRAVES LEAVE TO ADD TO, A MEND OR MODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECES SARY. 6. LD. AR MADE SIMILAR ARGUMENTS AS MADE BEFORE THE CIT(A) AND AO. IN THE PAPER BOOK, ASSESSEE HAS FILED COPIES OF THE BILLS AND VOUCHERS IN SUPPORT OF GIFTS AND ARTICLES PURCHASED FOR THE PURPOSE OF SALES PROMOTION. HE SUBMITTED THAT THESE ARE OF SMA LL ITEMS PURCHASED FOR THE PURPOSE OF GIFTS AND PROMOTION OF THE BUSINESS AND 6 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. INCENTIVES TO CERTAIN EMPLOYEES, THEREFORE, THIS EX PENDITURE IS ALLOWABLE U/S 37(1) OF THE ACT. WITH REGARD TO OTHE R EXPENDITURE, FOR WHICH PAYMENTS WERE MADE THROUGH BANKING CHANNEL, L D. AR SUBMITTED SIMILAR ARGUMENTS, WHICH WERE MADE BEFORE THE CIT(A) AND AO. IN SUPPORT OF HIS CONTENTION, HE RELIED ON THE FOLLOWING CASE LAW: 1. DCIT VS. PHL PHARMA (P) LTD., 78 TAXMANN;.COM 36 MUM.ITAT) 2. ACIT VS. GENO PHARMACEUTICALS LTD., ITA NO. 12/P NJ/2014, DTD. 30/05/2014 3. TTK HEALTHCARE LTD. VS. DCIT, 78 TAXMANN.COM 86 (CHENNAI ITAT) 4. DR. REDDYS LABORATORIES LD., VS. ADDL. ACIT, 81 TAXMANN.COM 398 (HYD ITAT) 5. DR. REDDYS LABORATORIES LTD. VS. ADD. CIT, 51 T AXMANN.COM 136 (HYD ITAT) 6. MACLEODS PHARMACEUTICALS LTD. VS. ADDL. CIT, TAX MANN.COM 250 (MUM. ITAT). 7. DCIT VS. OCHOA LABORATORIES LTD., 85 TAXMANN.COM 168 7. LD. DR, ON THE OTHER HAND, SUBMITTED THAT, NO DO UBT, CBDT CIRCULAR WAS ISSUED ON 01/08/2012, HOWEVER, THE CIR CULAR WAS ISSUED ACKNOWLEDGING THE AMENDMENT TO THE INDIAN MEDICAL C OUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULA TIONS, 2002, WHICH WAS ISSUED ON 10/12/2009 IMPOSING A PROHIBITI ON ON THE MEDICAL PRACTITIONER AND THEIR PROFESSIONAL ASSOCIA TES FROM TAKING ANY GIFT, TRAVEL FACILITY, HOSPITALITY, CASH OR MONETAR Y GRANT FROM THE PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES. SHE SUBMITTED THAT THIS AMENDMENT IS IN EXISTENCE SINCE 2009, PRA CTICE OF GIVING GIFTS TO DOCTORS IS AN OFFENCE OR PROHIBITED BY LAW AS PER THE EXPLANATION TO SECTION 37(1) OF THE ACT, AND, THERE FORE, THESE PAYMENTS ARE NOT ALLOWABLE AS DEDUCTION U/S 37(1) O F THE ACT. SHE FURTHER SUBMITTED THAT THE CASE OF DCIT VS. PHL PH ARMA (P) LTD. (SUPRA) IS DISTINGUISHABLE ON FACTS. 7 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE CASES CITED BY THE LD. AR. WE FIND THAT ASSESSEE HAS MADE SALES PROMOTION EXPENDITURE AND A PORTION OF SALES PROMOTION EXPENDITURE WAS INCURRED BY GIVING SMALL GIFTS LIKE PENS, DIARY ETC. AND TO THIS EFFECT A COPY OF THE BILLS/V OUCHERS WERE FILED IN SUPPORT OF SUCH PURCHASES. THE AO NOTED THAT THE VO UCHERS ARE NOT RELATING TO ASSESSEE. HOWEVER, MAJORITY OF THE VOUC HERS SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK ARE BELONGING TO THE ASSESSEE. WE DO NOT SEE ANY REASON NOT TO ALLOW THESE EXPENSES AS S ALES PROMOTION EXPENDITURE. THESE ARE SMALL GIFTS IN PROMOTING BUS INESS NOT TO ANY SPECIFIC DOCTOR OR FOR ANY SPECIAL FAVOUR. WITH REG ARD TO OTHER EXPENDITURE, WHICH IS NOT SUPPORTED BY ANY VOUCHERS /BILLS, BUT, PAID THROUGH BANK AND ASSESSEE HAS NOT SUBMITTED ANY DET AILS FOR WHOM AND FOR WHAT PURPOSE THE EXPENDITURE IS INCURRED. I T IS ONLY THE CLAIM OF THE ASSESSEE THAT IT HAS PAID TO DOCTORS FOR PRO MOTION OF THE BUSINESS IN ORDER TO PROMOTE THE PRODUCTS OF THE SP ECIFIC BRANDS OR COMPANY. LD. AR SUBMITTED THAT THESE ARE BLUNT FAVO URS DONE BY THE ASSESSEE TO DOCTORS IN ORDER TO PROMOTE THE BUSINES S, BUT, HE COULD NOT SUBSTANTIATE THE NATURE OF PAYMENT OR FOR WHAT PURPOSE THESE PAYMENTS WERE MADE TO DOCTORS. HE SUBMITTED THAT TH E CASE LAW RELIED IN SUPPORT OF THE CONTENTION THAT CBDT CIRCU LAR IS PROSPECTIVE IN NATURE AND WHATEVER THE EXPENDITURE WAS INCURRED PR IOR TO THE CIRCULAR IS ALLOWABLE AS EXPENDITURE AND ALSO THE C BDT CIRCULAR IS APPLICABLE TO PRACTICING DOCTORS AND IT WILL NOT BE APPLICABLE TO PHARMACEUTICAL COMPANIES BY RELYING ON THE CASE OF CIT VS. PHL PHARMA (SUPRA). IN THE CASE OF PHL PARMA (SUPRA), T HE ASSESSEE HAS SUBMITTED VARIOUS DETAILS OF EXPENDITURE AND NATURE OF EXPENDITURE, WHICH WAS INCURRED TO FACILITATE THE DOCTORS IN ORD ER TO PROMOTE ITS BUSINESS. WHEREAS, IN THE CASE BEFORE US, ASSESSEE HAS NOT SUBMITTED ANY DETAILS. FURTHER, LD. AR RELIED ON TH E DECISION IN THE CASE OF DR. REDDY LABORATORIES (SUPRA), IN WHICH, V ARIOUS DETAILS OF EXPENDITURE AND NATURE OF EXPENDITURE ARE SUBMITTED , WHICH WAS INCURRED TO FACILITATE THE DOCTORS IN ORDER TO PROM OTE ITS BUSINESS. WHEREAS, IN THE CASE BEFORE US, ASSESSEE HAS NOT SU BMITTED ANY 8 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. DETAILS. FURTHER, LD. AR RELYING ON THE DECISION IN THE CASE OF DR. REDDY LABORATORIES (SUPRA), SUBMITTED THAT THE ISSU E MAY BE REMITTED BACK TO AO FOR VERIFICATION OF THE DETAILS OF EXPEN DITURE. IN THE CASE OF DR. REDDYS LABORATORIES LTD. (SUPRA), THE COORDINA TE BENCH HAS OBSERVED AS UNDER: 43. THIS GROUND PERTAINS TO DISALLOWANCE OF VARIOU S PAYMENTS TOWARDS: I) BUSINESS PROMOTION EXPENDITURE: RS. 8,25 ,910 II) GIFTS & COMPLIMENTS: RS. 68,62,136 III) LOCAL DOCTORS MEET EXPENSES: RS. 1,03,29 ,388 IV) INDIVIDUAL DOCTOR SERVICES: RS. 8,84 ,41,258 44. DURING THE YEAR THE ASSESSEE HAS INCURRED EXPEN DITURE TOWARDS SALES PROMOTION WHICH COMPRISE OF BUSINESS PROMOTION EXPE NDITURE, GIFTS AND COMPLIMENTS, LOCAL DOCTORS MEET EXPENSES, INDIVIDUA L DOCTOR SERVICE. IT WAS SUBMITTED THAT THE EXPENDITURE WERE INCURRED IN THE COURSE OF BUSINESS AND WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO/DRP DISALLOWED THE EXPENDITURE STATING THAT THE EXPENDITURE IS NOT INCURRED IN THE COURSE OF THE BUSINESS OF THE ASSESSEE. 45 THIS ISSUE WAS A RECURRING ONE HAVING BEEN CONSI DERED BY ITAT IN ASSESSMENT YEAR 2003-04 IN ITA NO.655/HYD/07 DATED 29/10/2010 IN AY 2003-04. BUSINESS PROMOTION EXPENDITURE WAS STATED TO BE PAYMENTS TO THE DOCTORS, HOSPITALS IN CASH AMOUNT AND ALSO LIKE GIF TS. THE CONTENTION OF THE ASSESSEE WAS THAT THIS EXPENDITURE WAS INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, WHEREAS AO/DRP WAS OF THE OPINION THAT THE ASSESSEE CAN NOT EXPLAIN SAID PAYMENTS AS RELATED T O BUSINESS. SIMILAR ISSUE WAS EXAMINED BY ASSESSING OFFICER AND CIT(A) IN ASS ESSMENT YEAR 2003-04 IN THE ABOVE ORDER (SUPRA). ITAT ALSO UPHELD THE DI SALLOWANCE OF THESE ITEMS VIDE PARA-39 OF THE ORDER. ACCORDINGLY, THE ADDITIO N ON THIS ACCOUNT STANDS CONFIRMED. LIKEWISE THE EXPENDITURE OF GIFTS AND CO MPLIMENTS AND OTHER EXPENDITURE OF SIMILAR NATURE WAS ALSO NOT ALLOWED IN THE ORDER OF ITAT (SUPRA). RESPECTFULLY FOLLOWING, WE UPHOLD THE ORDE R OF AO/DRP ON VARIOUS EXPENDITURES. IN THE ABOVE CASE, THE DISPUTE WAS THAT THE EXPENDI TURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, WHEREAS, AO/DRP WERE OF THE OPINION THAT THE ASSESSEE DID NOT EXPLA IN THE SAID PAYMENTS ARE RELATED TO BUSINESS. BY FOLLOWING THE ORDER OF ITAT IN AY 2003-04, THE ADDITION WAS CONFIRMED AND IT WAS R EMITTED BACK TO AO FOR VERIFICATION ONLY IN THE CASE OF EXPENDITURE RELATING TO INDIVIDUAL DOCTOR SERVICES. IN THE GIVEN CASE, SINC E ASSESSEE HAS NOT 9 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. GIVEN ANY DETAILS OF NATURE OF EXPENDITURE, WE ARE NOT IN A POSITION TO CLASSIFY THE EXPENDITURE AS INDIVIDUAL DOCTORS SERV ICES OR OTHERWISE. WE FURTHER NOTICE THAT ASSESSEE WAS NOT IN A POSITI ON TO EXPLAIN THE DETAILS, LIKE, NATURE OF PAYMENT AND DETAILS OF IND IVIDUAL RECIPIENTS OF THE PAYMENTS BEFORE THE LOWER AUTHORITIES AND EVEN BEFORE US. MERELY MAKING PAYMENT THROUGH BANK DOES NOT JUSTIFY THAT T HE PAYMENT WAS MADE TO DOCTORS FOR PROMOTION OF BUSINESS ONLY. THE REFORE, WE CANNOT ACCEPT THAT THE PAYMENTS MADE BY THE ASSESSEE ARE T OWARDS BUSINESS PURPOSE IN THE LIGHT OF THE CBDT CIRCULAR NO. 5/12. ACCORDINGLY, WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO FOR THE REASON THAT NO DET AILS WERE FILED TO SUBSTANTIATE THE CLAIM AND, HENCE, UPHOLDING THE O RDER OF THE CIT(A), WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 23 RD MAY, 2018 KV COPY TO:- 1) ARVIND KUMR SHARMA, PROP.: PHARMA CENTRE & SAIN MARKETING H.NO. 5-8-617, 1 ST FLOOR, ABIDS, HYD. 500 001 2) ITO, WARD 5(3), T. TOWERS, AC GUARDS, HYDERAB AD. 3) CIT(A) 10, HYDERABAD. 4) PR. CIT - IV, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE S.NO DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 10 ITA NO. 841/HYD/17 ARVIND KUMAR SHARMA, HYD. 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER