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This is an appeal filed by the assessee against the order of CIT-2, Mumbai dated 30/03/2016 for A.Y.2011-12 in the matter of order passed u/s.263.

2. In this appeal, assessee is aggrieved by the order of CIT holding that order passed by the AO is erroneous and prejudicial to the interest of revenue.

3. Rival contentions have been heard and record perused.

4. In the order passed u/s.263, CIT observed that the assessee has incurred Advertisement Expenses of Rs.25,02,929/- and Publicity and M/s. Solvy Pharma India Ltd., Propaganda Expenses to the tune of Rs,15,94,99,360/-. The assessee although vide letter dated 19.02.2015 in the footnote has mentioned that the Advertisement Expenses are in compliance with the CBDT Circular No.5/2012 dated 01.08.2012, but no further details have been furnished. The AO neither called for the books of accounts nor called for any evidence such as invoices, vouchers etc. The assessee was neither asked to file by the AO nor suo-motto filed any corroborative details in respect to Publicity and Propaganda Expenses amounting to Rs.15,94,99,360/-. As per CIT it is a case of lack of proper enquiry and decision. If any expenditure is incurred U/s 37 of the Act, especially those expenditure which the business entities incur on items, which may broadly be classified as 'Advertisement, Marketing and Business Promotion 7 in short AMP, the possibility of incurring expenditure on prohibited items as per explanation below section 37(1) of the Act exists which must be ruled out by some examination of corroborative evidence called for and produced before the AO. But the AO did not make any inquiry in this matter. CIT also rejected assessee's contention that MCI regulations are not applicable to pharma companies but only to medical practitioners. CIT also rejected assessee's contention that expenditure so incurred are not in the nature of freebies to the doctors. In these circumstances, the assessment order dated 08.03.2015 was held by CIT to be erroneous and prejudicial to the interest of revenue. Assessee is in further appeal before us.

9. Reliance was also placed on the decision of the Co-ordinate Bench in case of PHL Pharma (P) Ltd., dated 12/01/2017 wherein similar expenditure was examined threadbare by the Tribunal.

10. It was further argued by learned AR that were two views are possible and the AO has taken one of the of the possible view, the CIT has no jurisdiction u/s.263 so as to impose his opinion.

11. It was also argued by learned AR that MCI guidelines are not applicable to the pharma company but is applicable only to the professional doctors in practice and accordingly when circular itself is not applicable to the assessee company during the assessment under consideration, the assumption of jurisdiction u/s.263 by CIT was wrong. Our attention was also invited to the detailed submission filed before the AO which is placed on page 20-28 of the paper book and also to the foot note where it was clearly mentioned that these expenses were in compliance to the CBDT Circular. It was further submitted that perusal of amendment/notification in the MCI regulation, it is quite clear that same is applicable for medical practitioners only and the censure/action which has been suggested by it is only on medical practitioners and not for pharmaceutical companies or allied health sector industries. The violation of the aforesaid regulation would not only ensure a removal of a doctor from the Indian Medical Register or State Medical Register for a certain M/s. Solvy Pharma India Ltd., period of time and it does not impinge upon the conduct of pharmaceutical companies. This important distinction has to be kept in mind that regulation issued by Medical Council of India is qua the doctors/medical practitioners and not for the pharmaceutical companies. As a logical corollary to it, if there is any violation or prohibition as per MCI regulation in terms of section 37(1) read with Explanation-1, then it is only meant for medical practitioners and not for pharmaceutical company (assessee company) for claiming the expenditure. Further highlighting the nature of expenses Mr. Madhur Agarwal submitted that the assessee makes endeavour to create awareness amongst 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 diagnosis and treatment of the patients. The said activities by the assessee are to make the doctors aware of its products and research work carried out by it for bringing 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 successfully launch its products/medicines. This kind of expenditure is definitely in the nature of sales and business promotion, which has to be allowed. With regard to the gift articles and free samples of medicines, the assessee gives various kind of articles like, diaries, pen sets, calendars, paper weights, injection boxes etc. embossed with bold logo of its brand name and the product M/s. Solvy Pharma India Ltd., name so that the doctors remembers the brand of the assessee and also the name of the medicine. All the gift articles are low cast articles which bears the name of assessee and it is purely for the promotion of its product, brand reminder, etc. These 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 doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic 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 object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies.

21. CBDT Circular no. 5 of 2012 seeks to disallow expenditure incurred by pharmaceutical companies inter-alia in providing 'freebies' to doctors in violation of the MCI Regulations. The term "freebies' has neither been defined in the Income-tax Act nor in the MCI Regulations'. However, the expenditure so incurred by assessee does not amount to provision of 'freebies' to medical practitioners. The expenditure incurred by it is in the normal course of its business for the purpose of marketing of its products and dissemination of knowledge etc and not with a view to giving M/s. Solvy Pharma India Ltd., something free of charge to the doctors. The act of giving something free of charge is incidental to the main objective of product awareness. Accordingly, it does not amount to provision of freebies. Consequently, there is no question of contravention of the MCI Regulations and applicability of Circular no. 5 of 2012 for disallowance of the expenditure.

24. We observe that the CBDT Circular dated 1-8-2012 (supra) in its clarification has enlarged the scope and applicability of 'Indian Medical Council Regulation 2002' by making it applicable to the pharmaceutical companies or allied health care sector industries. Such an enlargement of scope of MCI regulation to the pharmaceutical companies by the CBDT is without any enabling provisions either under the provisions of Income Tax Law or by any provisions under the Indian Medical Council Regulations. The CBDT cannot provide casus omissus to a statute or notification or any regulation which has not been expressly provided therein. The CBDT can tone down the rigours of law and ensure a fair enforcement of the provisions by issuing circulars and by clarifying the statutory provisions. CBDT circulars act like 'contemporanea expositio' in interpreting the statutory provisions and to ascertain the true meaning enunciated at the time when statute was enacted. However the CBDT in its power cannot create a new impairment adverse to an assessee or to a class of assessee without any sanction of law. The circular issued by the CBDT must confirm to tax laws and for purpose of giving administrative relief or for clarifying the provisions of law and cannot impose a burden on the assessee, leave alone creating a new burden by enlarging the scope of a different regulation issued under a different act so as to impose any kind of hardship M/s. Solvy Pharma India Ltd., or liability to the assessee. In any case, it is trite law that the CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of 'Indian Medical Council Regulation, 2002' and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. 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 doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic 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 object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies.