M/s.Shine Pharmaceuticals Ltd., Vadodara V. Asstt. Commissioner of Income Tax,Circle-2(1)(1), Baroda

ITA 939/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5774 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 13-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 939/AHD/2016 (ASSESSMENT YEAR : 2012-13) M/S. SHINE PHARMACEUTICALS LTD., 308-310, DWARKESH COMPLEX, SUN PHARMA ROAD, ATLADARA, VADODARA 390 020 APPELLANT VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), BARODA RESPONDE NT PAN: AAECS2660M / BY ASSESSEE : SHRI BANDISH S. SOPARKAR, A.R. / BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /DATE OF HEARING : 21.03.2018 /DATE OF PRONOUNCEMENT : 28.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES FROM THE CIT(A)-2, VADODARAS ORDER DATED 20.01.2016, IN CAS E NO. CAB/(A)- 2/551/14-15, IN PROCEEDINGS U/S.143(3) OF THE INCOM E TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 939/AHD/16 [M/S. SHINE PHARMACEUTICALS LTD. VS. ACIT ] A.Y. 2012-13 - 2 - HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE CHALLE NGES THE CIT(A)S ACTION AFFIRMING ASSESSMENT FINDINGS DISALLOWING IT S CLAIM OF RS.16,32,427/- PERTAINING TO VARIOUS GIFTS MADE TO DISTRIBUTORS/CH EMISTS WITH THE FOLLOWING DETAILED DISCUSSIONS: 4. I HAVE CAREFULLY CONSIDERED THE FACTS ON RECORD S AND SUBMISSION OF THE LD. AUTHORIZED REPRESENTATIVE. THE FIRST GROUND PERTAI NS TO THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.21,32,427/- U/S.37 READ WITH EXPLANATION. UNDISPUTEDLY, THE APPELLANT HAS GIFTED VARIOUS ITEM S SUCH AS MOBILE PHONE, WATCHES, CAMERA, LAPTOP, WATER FILTER, AC MACHINE, DVD PLAYER, MICROWAVE, COMPUTER, ELECTRIC OPERATION TABLE, EXERCISE TRADEM ILL, ECG MACHINE & HOME THEATER ETC. THE EXPENDITURE ON SUCH GIFTED ITEMS W AS RS.16,32,427/- AS IS DETAILED IN PARA-3.5.6 OF THE ASSESSMENT ORDER. THE APPELLAN T HAS CLAIMED THAT THE ITEMS WERE GIFTED TO THE DISTRIBUTERS/CHEMIST SO AS TO PR OMOTE THE SALES OF THE APPELLANT COMPANY BECAUSE WHENEVER ALTERNATIVE MEDICINE WAS T O BE SOLD, THE CHEMIST NORMALLY PREFERS THE POPULAR BRANDS. FURTHER, IT WA S ARGUED THAT AMENDED THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQU ETTE AND ETHICS) REGULATIONS 2002 ON 10.12.2009 AND CBDT CIRCULAR NO. 5/2012 DAT ED 01.08.2012 ARE NOT APPLICABLE. IN ORDER TO VERIFY CORRECTNESS THE CLAI M OF THE APPELLANT, DURING THE COURSE OF HEARING VIDE ORDER SHEET ENTRY DATED 15.1 2.2015, THE LD. AUTHORIZED REPRESENTATIVE WAS REQUIRED TO PROVE THAT THE GIFTS WERE NOT GIVEN TO THE PROFESSIONALS. HOWEVER, THE LD. AUTHORIZED I REPRES ENTATIVE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE IN THIS REGARD. THEY HAVE NOT ALSO FURNISHED CONFIRMATION ETC. FROM THE DISTRIBUTERS/RETAILERS I N ORDER TO ESTABLISH THAT THE GIFTS WERE GIVEN TO THEM. UNDER THESE CIRCUMSTANCES, IT EMERGES THAT THE APPE LLANT HAS GIVEN GIFTED ITEMS TO THE DOCTORS/MEDICAL PROFE SSIONALS IN ORDER TO PROMOTE ITS SALE OF PRODUCTS. IT MAY ALSO BE NOTED THAT DISTRIB UTERS/RETAILS HAVE NO SAY IN PROMOTING THE SALES OF A PARTICULAR BRAND BECAUSE U NLESS A MEDICINE OF PARTICULAR BRAND IS PRESCRIBED BY THE DOCTORS, RETAILERS ON TH EIR OWN CANNOT GUIDE THE PATIENT TO PURCHASE THE MEDICINE OF THE PARTICULAR BRAND. I T IS ALSO NOTICED THAT THE APPELLANT HAS GIFTED AN ELECTRIC OPERATION TABLE, E CG MACHINE ETC. WHICH ARE EXCLUSIVELY USED BY THE MEDICAL PRACTITIONER. THUS, I HOLD THAT ALL THE GIFTED ITEMS AMOUNTING TO RS.16,32,427/- WERE GIVEN BY THE APPEL LANT TO THE MEDICAL PRACTITIONERS/PROFESSIONALLY ONLY. 4.1. UNDISPUTEDLY, MEDICAL COUNCIL OF INDIA HAS AME NDED INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS ) REGULATIONS 2002 WITH EFFECT FROM 10.12.2009 PROHIBITING FROM ACCEPTING OF GIFTS , TRAVEL FACILITY OR HOSPITALITY, FROM ANY PHARMACEUTICAL COMPANY OR THE HEALTH CARE INDUSTRY BY THE DOCTORS/MEDICAL PROFESSIONALS. THUS REGULATION IS I SSUED BY THE STATUTORY BODY CREATED UNDER THE ACT OF PARLIAMENT I.E. MEDICAL CO UNCIL ACT, 1956. CBDT HAS ALSO ISSUED A CIRCULAR IN THIS REGARD STATING THAT ORE O N FREEBIES TO MEDICAL PROFESSIONALS AND THEIR PROFESSIONAL ASSOCIATIONS IN VIOLATION OF THE REGULATION ISSUED BY THE ITA NO. 939/AHD/16 [M/S. SHINE PHARMACEUTICALS LTD. VS. ACIT ] A.Y. 2012-13 - 3 - MEDICAL COUNCIL OF WHICH IS A REGULATORY BODY CONST ITUTED UNDER MEDICAL COUNCIL ACT, 1956, WILL NOT BE ALLOWED IN VIEW OF THE EXPLA NATION BELOW SECTION 37(1). THE VALIDITY OF THIS CIRCULAR IS ALSO BEEN UPHELD BY TH E HON'BLE HIGH COURT OF HIMACHAL PRADESH VIDE ORDER DATED 26.12.2012 IN CWP NO. 10793 OF 2012 . SINCE MEDICAL COUNCIL OF INDIA HAS PROHIBITED EXPENDITURE ON FREEBIES GIVEN TO THE MEDICAL PROFESSIONAL WITH EFFECT FROM 10.12.2009, I N MY CONSIDERED VIEW, THE CIRCULAR NO. 5 OF CBDT DATED 01.08.2012 ONLY REASSE RTS THE LEGAL POSITION AND HENCE THE EXPENDITURE ON FREEBIES WILL NOT BE ALLOW ABLE U/S. 37(1) BEING AN EXPENDITURE PROHIBITED BY LAW. ACCORDINGLY, I HOLD THAT EXPENDITURE ON GIFTS TO THE EXTENT OF RS.16,32,437/- SHALL NOT BE DEEMED TO HAV E BEEN INCURRED FOR THE PURPOSES OF BUSINESS OR PROFESSION AND HENCE THE DISALLOWANC E TO THIS EXTENT IS CONFIRMED. 4.2. THE ASSESSING OFFICER HAS ALSO DISALLOWED A SU M OF RS.5,00,000/-ON ESTIMATE BASIS OUT OF THE SALE PROMOTION EXPENSES S TATING THAT SALES PROMOTION EXPENSES ALSO CONTAINED LODGING, BOARDING & TRAVELI NG OF THE DOCTORS/MEDICAL PRACTITIONERS IN VIOLATION OF REGULATION ISSUED BY MEDICAL COUNCIL OF INDIA. HOWEVER , NO SPECIFIC INSTANCE OF SUCH FREE LODGING, BOARDI NG & TRAVELING FACILITY PROVIDED TO THE DOCTORS, HAS BEEN POINTED BY THE AS SESSING OFFICER . DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. AUTHORIZED REPRESENTATIVE HAS VEHEMENTLY ARGUED THAT THE LODGING, BOARDING & TRAVELING EXPEN SES ARE PERTAINING TO THE CONFERENCE ORGANIZED IN THE FIELD OF MEDICINE WHERE THE APPELLANT COMPANY HAS ALSO EXPLAINED ITS PRODUCTS INCLUDING ITS FORMULATI ONS AND EFFECT ETC. IN VIEW OF THESE FACTS AND IN THE ABSENCE OF ANY SPECIFIC STAN CES OF FREE FACILITY PROVIDED TO THE DOCTORS, IN MY CONSIDERED VIEW, ADHOC DISALLOWANCE CANNOT BE MADE. THIS VIEW ALSO GETS SUPPORT FROM THE VARIOUS DECISIONS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE IN THE WRITTEN SUBMISSIONS. ACCORDI NGLY, THE ADDITION TO THE EXTENT OF RS.5,00,000/- IS DIRECTED TO BE ALLOWED. THUS, A PPELLANT PARTLY SUCCEEDS IN RESPECT OF GROUND NO.1. 3. HEARD BOTH THE PARTIES VEHEMENTLY REITERATING TH EIR RESPECTIVE STANDS DURING THE COURSE OF HEARING AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. THERE DOES NOT APPEAR TO BE ANY DISP UTE REGARDING GENUINENESS OF THE ASSESSEE HAVING ACTUALLY INCURRED THE SUM IN QUESTION AMOUNTING TO RS.16,32,427/-. THE CIT(A) HOLDS THAT THE ASSESSEE HAS PAID THE IMPUGNED SUM TO THE DOCTORS/MEDICAL PROFESSIONALS ONLY. HE THEN QUOTES BOARDS CIRCULAR DATED 01.08.2012 ON THE VERY ISSUE READ WI TH THE INDIAN MEDICAL COUNCIL REGULATIONS 2002 PRESCRIBED IN (PROFESSIONA L CONDUCT, ETIQUETTE AND ETHICS) FOR DOCTOR/MEDICAL PROFESSIONALS. WE FIND THAT A CO-ORDINATE BENCH IN MACLEODS PHARMACEUTICALS LTD. VS. ACIT (2016) 161 I TD 291 (MUM) HOLDS THE ABOVE CIRCULAR DATED 01.08.2012 TO BE HAVING PR OSPECTIVE EFFECT ONLY FROM ASSESSMENT YEAR 2013-14 ONWARDS. WE REITERATE THAT WE ARE IN ITA NO. 939/AHD/16 [M/S. SHINE PHARMACEUTICALS LTD. VS. ACIT ] A.Y. 2012-13 - 4 - ASSESSMENT YEAR 2012-13. THERE IS NO OTHER REASON IN SUPPORT OF IMPUGNED DISALLOWANCE IN THE CIT(A)S FINDINGS EXTRACTED IN PRECEDING PARAGRAPHS. WE THUS ACCEPT ASSESSEES CLAIM. THE IMPUGNED DISALLOW ANCE IS ACCORDINGLY DELETED. 5. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF MARCH, 2018.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMEDABAD: DATED 28/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 / GUARD FILE. BY ORDER / . // . /0