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expenses incurred were rightfully belonging to the assessee company and not its foreign subsidiaries which were also engaged in marketing of formulations in other countries. Non application of mind and non enquiry in this regard has rendered the impugned assessment order erroneous and prejudicial to the interest of the revenue."

4.1 The controversy emerging from the show cause notice is broadly summarized as under:

"(i) The assessee debited a sum of Rs.55.14 crores on account of "business advancement expenses" allegedly incurred on gift articles distributed to various persons. The assessee was intimated that the aforesaid amount included Rs.24.32 crores on gift items exceeding Rs.1000 each. The learned Pr. CIT alleged that the Assessing Officer did not make inquiry regarding the persons to whom gifts were given and the record maintained for the same.
(iv) You have claimed an expenditure of Rs.

1214.01 lakhs on Clinical research. The A.O. has failed to apply his mind and not made any enquiries in this regard as to nature and details of expenses incurred - as to whom paid and for what purpose? He has also not enquired if such clinical trial were made for the purpose of regulatory approvals or for R&D work which would have been affected the deduction available u/s 35(2AB) of the IT. Act. Non application of mind and non inquiry in this regard has rendered the impugned order as erroneous and prejudicial to the interest of revenue.

"vi) You have claimed expenses on academic/scientific get together of Rs9.44 Cr., sales promotion expenses of Rs.1.48 Cr., business advancement expenses of Rs.1.48 Cr.

(other than on domestic). The A.O. has not made any enquiry as regards the incurring of such expenses nor has he applied his mind as to whether such or part of such expenses fell foul of local regulations prevailing in those countries regarding gifting/other payments/ expenses incurred on Doctors and Medical practitioners. Further, the A.O. has also not examined if such expenses incurred were rightfully belonging to the assessee company and not its foreign subsidiaries which were also engaged in marketing of formulations in other countries. Non application of mind and non inquiry in this regard has rendered the impugned order as erroneous and prejudicial to the interest of revenue."

In this context, the assessee company submits that the said regulations of Indian Medical Council (MCI) has been issued as per the powers conferred u/s 20A r.w.s 33(m) of the Indian Medical Council Act, 1956 and the said Act is applicable to whole of India, as provided in section \ of the said Act. Accordingly, it can be said that the aforementioned regulation of 2002 are not applicable and binding to medical practitioners outside India. Therefore, there are no provisions which denies the deduction of business expenditure relating to Business Advancements, which is allowable u/s. 37(1) of the Act. Hence, there is no non- application of mind or non-enquiry on the part of the Assessing Officer on this issue.