Gujarat High Court
Principal Commissioner Of Income Tax vs Liva Healthcare Ltd....Opponent(S) on 21 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/478/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 478 of 2016
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PRINCIPAL COMMISSIONER OF INCOME TAX - 1....Appellant(s)
Versus
LIVA HEALTHCARE LTD....Opponent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 21/06/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The Revenue is in appeal against the judgment of Income Tax Appellate Tribunal raising following substantial question of law "Whether the Appellate Tribunal was right in law and on facts, in deleting the disallowance of Rs.44,61,400/ being 70% of the expenditure in respect of Physicians' Sample?"
2. The issue pertains to disallowance of Rs.44.61 lacs (rounded off) representing 70% of the expenditure claimed by the assessee in respect of free Physicians' samples. The respondent assessee is in the business Page 1 of 3 HC-NIC Page 1 of 3 Created On Thu Jun 23 02:32:25 IST 2016 O/TAXAP/478/2016 ORDER of manufacturing pharmaceutical drugs. In the course of business, it supplies free samples to the Doctors. Expenditure relatable to such free samples was claimed as an business expenditure. The Assessing Officer disallowed 70% thereof upon which the assessee appealed to the Commissioner of Income Tax (Appeals), who deleted the disallowance. The Revenue approached the Tribunal. By the impugned judgment, the Tribunal upheld the decision of Commissioner of Income Tax (Appeals). In the process, the Tribunal made following observations:
"4. We have gone through the well reasoned order passed by the ld. CIT(A). It is a known fact that the free sample of medicines supplied to the doctors is done for the promotion of the product of the company. Even when a new product is launched, the doctors are given necessary inputs regarding the use and effects etc. of the product and which also contributes imparting knowledge to the doctors about the new medicine/product coming into the relevant for practice of their profession. The genuineness of the transactions has not been doubted by the A.O. We do not find any infirmity in the well reasoned order passed by the ld. CIT(A) holding that the expenses were incurred for the business promotion activity of the assessee. We therefore do not find any merit in the appeal filed by the Revenue and accordingly dismiss the same."
3. Perusal of the orders on record would demonstrate Page 2 of 3 HC-NIC Page 2 of 3 Created On Thu Jun 23 02:32:25 IST 2016 O/TAXAP/478/2016 ORDER that the issue is primarily in the realm of appreciation of material on records. Even the Assessing Officer allowed part of the expenditure, thereby indicating that he would not averse to the expenditure in the nature of free samples being related to assessee's business. He only disputed the quantification. When Commissioner of Income Tax (Appeals) concurrently found sufficient reason to accept the assessee's claim, we do not see any question of law arising.
4. Tax Appeal is therefore dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) ANKIT Page 3 of 3 HC-NIC Page 3 of 3 Created On Thu Jun 23 02:32:25 IST 2016