Income Tax Appellate Tribunal - Pune
Dekinson Associates,, Sangli vs Income-Tax Officer, Ward - 1(3),, ... on 24 June, 2019
आयकर अपीऱीय अधिकरण पण
ु े न्यायपीठ एक-सदस्य मामऱा पण
ु े में
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "SMC", PUNE
सुश्री सुषमा चावऱा, न्याययक सदस्य के समक्ष
BEFORE MS. SUSHMA CHOWLA, JM
आयकर अपीऱ सं. / ITA No.446/PUN/2018
यििाारण वषा / Assessment: 2012-13
Dekinson Associates,
1137/14, Harbat Road,
Sangli - 416 416
PAN : AAEFD7988G .... अऩीऱाथी/Appellant
Vs.
The Income Tax Officer,
Ward-1(3), Sangli .... प्रत्यथी / Respondent
अऩीऱाथी की ओर से / Appellant by : None
प्रत्यथी की ओर से / Respondent by : Shri M.K. Verma
सन
ु वाई की तारीख / घोषणा की तारीख /
Date of Hearing : 21.06.2019 Date of Pronouncement: 24.06.2019
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by the assessee is against the order of Commissioner of Income Tax (Appeals) - 1, Kolhapur dated 14.12.2017 relating to assessment year 2012-13 against order passed u/s 143(3) r.w.s.263 of the Income Tax Act 1961 (in short 'the Act').
ITA No.446/PUN/2018
2 Dekinson Associates
2. The assessee has raised the following grounds of appeal :
"1. On facts and in circumstances of the case the Learned CIT(Appeals) has erred in law and on merit in upholding the additions made on account of sales promotion and event expenses of Rs.35,61,200/- when such expenses were made in course of business promotion and all the details of expenditure were given before the A.O. as well as the CIT(Appeals) in the submissions dated 28/6/2016, 04/10/2017 and 31/10/2017.
2. On fats and in circumstances of the case the Learned CIT(Appeals) has erred in law and on merit in upholding additions made on account of excess remuneration of Rs.2,06,000/- when there was no excess remuneration paid as per the provisions of the Income Tax Act, 1961.
3. The assessee craves for leave to add, amend, alter or delete any of the grounds of appeal with the permission of the Hon'ble Tribunal."
3. Despite service of notice, none appeared on behalf of the assessee nor any application was moved for adjournment. The case of the assessee has been fixed for hearing on several dates but none is putting appearance, though the notices of hearing from date to date have been served upon the assessee, as is clear from the acknowledgement available on record. Hence, I proceed to decide the present appeal after hearing the learned Departmental Representative for the Revenue.
4. It was pointed out by the learned Departmental Representative for the Revenue that the appeal of the assessee is not maintainable as there is delay in presenting the appeal before the Tribunal by 25 days and no condonation application has been filed by the assessee. Further, the issue also stands covered against the assessee by the order of Hon'ble Himachal Pradesh High Court in Confederation of Indian Pharmaceutical Industry (SSI) Vs. Central ITA No.446/PUN/2018 3 Dekinson Associates Board of Direct Taxes (2013) 353 ITR 388 and by the CBDT Circular No.05/2012, dated 01-08-2012.
5. On the perusal of record, it transpires that the issue which arises in the present appeal is against the claim of deduction on account of sales promotion and event expenses of Rs.35,61,200/-. The assessee firm was engaged in the business of manufacture and sale of medicines through chain of retailers and doctors. The case of the assessee was picked up for scrutiny and was completed at a total income of Rs.5,76,800/- as against the returned income of Rs.4,46,800/-. The Principal Commissioner of Income Tax, Kolhapur issued a proposal under section 263 of the Act in respect of the expenditure of Rs.35,61,200/- as the expenditure was incurred on Tour & Lodging/Boarding of the Doctors & Chemists for the purpose of sales promotion of the firm which amounted to giving of freebies. Since the claim was accepted by the Assessing Officer ignoring the CDBT Circular No.05/2012, dated 01-08-2012, the Principal Commissioner exercised his jurisdiction under section 263 of the Act and held that the assessment order passed in the case of assessee was both erroneous and prejudicial to the interest of the Revenue. The case of the assessee was then taken up for assessment and the Assessing Officer made the aforesaid disallowance in the hands of the assessee which has been confirmed by the CIT(A). The assessee is in appeal against the order of CIT(A). However, I find that the order passed by the Principal Commissioner under section 263 has been confirmed by the Tribunal in ITA No.727/PUN/2018 vide its order dated 19-11-2018. Further, the issue raised in the present appeal stands squarely covered against the assessee by the order of Hon'ble Himachal Pradesh in the case of Confederation of Indian Pharmaceutical Industry (SSI) Vs. Central Board of Direct Taxes (supra) wherein it has been held as under : ITA No.446/PUN/2018
4 Dekinson Associates "2. It is apparent that the Medical Council of India in exercise of the powers vested in it under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 imposed prohibition on any medical practitioner or their professional associates from accepting any gift, travel facility, hospitality, cash or monetary grant from any pharmaceutical and allied health sector Industries. This regulation is a very salutary regulation which is in the interest of the patients and the public. This Court is not oblivious to the increasing complaints that the medical practitioners do not prescribe generic medicines and prescribe branded medicines only in lieu of the gifts and other freebies granted to them by some particular pharmaceutical industries. Once this has been prohibited by the Medical Council under the powers vested in it, Section 37(1) of the Income-tax Act comes into play, which reads as follows:-
"37(1) Any expenditure (not being expenditure of the nature described in Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".
(Explanation - For the removal of doubts, it is hereby declared that 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 profession and no deduction or allowance shall be made in respect of such expenditure.)"
3. Shri Vishal Mohan, Advocate, on behalf of the petitioner contends that the circular goes beyond the section itself. We are not in agreement with this submission. The explanation to Section 37(1) makes it clear that any expenditure incurred by an assessee for any purpose which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession. The sum and substance of the circular is also the same. In case the assessing authorities are not properly understanding the circular then the remedy lies for each individual assessee to file appeals under the Income-tax Act but the circular which is totally in line with Section 37(1) cannot be said to be illegal. In fact para 4 of the circular quoted hereinabove itself clarifies that the value of the freebies enjoyed by the medical practitioner is also taxable as business income or income from other sources depending on the facts of each case. Therefore, if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the assessing officer that the expense is not in violation of the Medical Council Regulations referred to above."ITA No.446/PUN/2018
5 Dekinson Associates
6. In view of the dictate of the Hon'ble Himachal High Court, the claim of the assessee is not maintainable and accordingly I uphold the order of CIT(A) and dismiss the grounds of appeal raised by the assessee.
7. In the result, the appeal of the assessee is dismissed.
Order pronounced on this 24th day of June, 2019.
Sd/-
(SUSHMA CHOWLA) न्याययक सदस्य / JUDICIAL MEMBER ऩण ु े / Pune; ददनाांक Dated : 24 une, 2019 th Satish/GCVSR आदे श की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to :
1. अऩीऱाथी / The Appellant;
2. प्रत्यथी / The Respondent;
3. आयकर आयुक्त(अपील) / The CIT(A)-1, Kolhapur;
4. प्रधान आयकर आयुक्त / The Pr.CIT-1, Kolhapur;
5. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे, एक-
6. सदस्य मामऱा / DR 'SMC', ITAT, Pune;
गार्ड पाईऱ / Guard file.
आदे शािस ु ार/ BY ORDER, सत्यावऩत प्रतत //TRUE COPY// Senior Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune