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5. During the course of the assessment proceedings, it was observed by the A.O that the assessee company had in its computation of income disallowed the "Sales and promotion expenses" of Rs. 36,92,20,070/- that were otherwise claimed by it as an expense in the Profit & loss account. However, the assessee in the course of the assessment proceedings had vide a letter dated 13.08.2018 revised its computation of income and withdrawn its suo-motto offer for disallowance of the "Sales promotion expenses" of Rs. 36,92,20,070/-. On a perusal of the aforesaid letter dated 13.08.2018, it was observed by the A.O that the assessee had claimed that it had initially disallowed the sales promotion expenses pertaining to the freebies given to doctors in light of the CBDT Circular No. 5/2012 read a/w the Medical Council of India (MCI) Regulations, 2012. However, as stated by the assessee as the ITAT, Mumbai in the case of DCIT-8(2), Mumbai Vs. PHL Pharma Pvt. Ltd. in had thereafter held that the MCI guidelines were not applicable to pharmaceutical companies, therefore, for the said reason it had withdrawn the suo motto disallowance of sales promotion expenses that M/s Ajanta Pharma Ltd. Vs. Dy. CIT, Central Circle 6(2), Mumbai 4 ITA Nos. 4784 & 4785/Mum/2019 was earlier offered in the return of income. The A.O was however not inclined to accept the aforesaid claim of the assessee. It was observed by the A.O that the CBDT vide its Circular No. 5/2012, dated 01.08.2012, had held, that the expenses claimed by the pharmaceutical companies on account of distribution of freebies being in violation of the provisions of Indian Medical Council (Professional conduct, etiquette and ethics) regulations, 2002 were inadmissible as an expense. Observing, that the assessee's claim for deduction of expenses incurred on distribution of freebies was in violation of the express provisions of the Indian Medical Council (Professional conduct, etiquette and ethics) regulations, 2002; and the CBDT Circular No.5/2012, dated 01.08.2012, the A.O was of the view that the same were inadmissible as per the 'Explanation' to Sec. 37(1) of the Act. As regards the reliance placed by the assessee on the order of the ITAT, Mumbai in the case of DCIT-8(2), Mumbai vs. PHL Pharma Pvt. Ltd., ITA No. 4605/Mum/2014 (2017) 78 taxmann.com 36, dated 12.01.2017, it was observed by the A.O that the department had not accepted the said order of the Tribunal and had carried the same before the Hon'ble High Court of Bombay by way of an appeal under Sec. 260A of the Act vide lodging No. ITXAL/1933/2017, which thereafter had been registered as ITXA/827/2018, dated 12.03.2018. It was, thus, observed by the A.O that the order passed by the Tribunal in the case of PHL Pharma Pvt. Ltd. (supra) had been assailed by the department and was on date subjudice before the Hon'ble High Court. Backed by his aforesaid deliberations, the A.O disallowed the assessee's claim for deduction of the sales promotion expenses of Rs. 36,92,20,070/- and vide his order passed u/s 143(3), dated 26.12.2018 assessed its income at Rs. 423,82,80,957/-.

M/s Ajanta Pharma Ltd. Vs. Dy. CIT, Central Circle 6(2), Mumbai 5 ITA Nos. 4784 & 4785/Mum/2019

6. Aggrieved, the assessee assailed the assessment order before the CIT(A). The CIT(A) found favour with the assessee's claim that the Medical Council of India (for short "MCI") regulations were applicable only to the doctors and medical professionals and not to the pharmaceutical companies. However, the CIT(A) was of the view that as the CBDT Circular No. 5 of 2012; dated 01.08.2012 contemplated inadmissility of expenses that were incurred by the pharmaceutical companies in providing freebies to medical practitioners, therefore, the claim for deduction of such expenses being in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 was not to be allowed while computing the assessee's income. Further, the CIT(A) rejected the assessee's claim that the aforesaid expenditure towards providing of freebies to the doctors was incurred by way of a business promotion expense. Rebutting the aforesaid claim, the CIT(A) was of the view that if the aforesaid expenditure was incurred by the assessee towards business promotion, then, there was no reason as to why such freebies were given by the assessee only to the doctors and not to the general public which was the final consumer of its products. It was observed by the CIT(A) that there was no justification on the part of the assessee to have claimed the freebies given to the doctors as a business expense. Also, the CIT(A) did not find favour with the alternative contention of the assessee for allowing its claim for deduction in so far the same pertained to freebies of a value of less than Rs. 1,000/-. As regards the support that was drawn by the assessee from the orders of the ITAT, Mumbai in the case of DCIT-8(2), Mumbai Vs. PHL Pharma Pvt. Ltd., ITA No. 4605/Mum/2014 (2017) 78 taxmann.com 36, dated 12.01.2017 AND Aristo Pharmaceuticals Pvt. Ltd., ITA Nos. 6680/5553 /5479/Mum, the CIT(A) was of the view that as the years involved in the said respective M/s Ajanta Pharma Ltd. Vs. Dy. CIT, Central Circle 6(2), Mumbai 6 ITA Nos. 4784 & 4785/Mum/2019 cases before the Tribunal were prior to the CBDT Circular No. 5/2012, dated 01.08.2012, therefore, the Tribunal in the said cases had after taking cognizance of the fact that the Circular did not have a retrospective application decided the said appeals in favour of the aforesaid assessee's. As regards the order of the ITAT, Delhi in the case of Aishika Pharma Pvt. Ltd. Vs. ITO, ITA No. 732/Del/2019, the same was held by the Tribunal to be distinguishable on facts. Further, it was observed by the CIT(A) that the assessee had offered the sales promotion expenses as its income in the earlier years when survey was conducted in its case. It was observed by the CIT(A) that as the assessee had in the preceding year i.e A.Y 2014-15 not raised any claim for deduction of the sales promotion expenses, therefore, it was not permissible on its part to adopt an inconsistent approach and claim the said expense as a deduction during the year in question. Also, it was observed by the CIT(A) that the claim for deduction of the sales promotion expenses was not raised by the assessee in its return of income but only by way of a revised computation that was filed in the course of the scrutiny assessment. Backed by her aforesaid deliberations the CIT(A) upheld the view taken by the A.O that the sales promotion expenses claimed by the assessee were liable to be disallowed.

7. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorised representative (for short "A.R") for the assessee took us through the facts of the case. It was submitted by the ld. A.R that the assessee during the year under consideration had incurred sales promotion expenditure in the form of gifts etc. to doctors and medical practitioners. It was submitted by the ld. A.R that the specific issue in hand i.e as to whether the prohibition by M/s Ajanta Pharma Ltd. Vs. Dy. CIT, Central Circle 6(2), Mumbai 7 ITA Nos. 4784 & 4785/Mum/2019 IMA on the doctors and medical practitioners qua receiving of freebies could be read into and regulate the providing of such freebies by the pharmaceutical companies, had at length been looked into by the ITAT, Mumbai in the case of DCIT-8(2), Mumbai vs. PHL Pharma (P) Ltd. (2017) 184 TTJ 1 (Mum). The ld. A.R taking us through the aforesaid order drew our attention to the 'Ground of appeal no. 2' as was raised before the Tribunal. It was submitted by the ld. A.R that the Tribunal in the aforementioned case of PHL Pharma (P) Ltd. (supra), had held, that the expenditure incurred by the assessee, a pharmaceutical company, for customer relationship management; key account management; gift articles; free medicine samples; advertisement and sales promotion etc. were purely for brand recognition, and thus, allowable as a business expenditure and not hit by the 'Explanation 1' to Sec. 37(1) of the Act. The ld. A.R further relied on the order of the ITAT, "D"Bench, Mumbai in the case of M/s Medley Pharmaceuticals Ltd. Vs. Dy. CIT, ITA No. 2344/Mum/2018 and drew our attention to the relevant observations therein recorded. Also reliance was placed on the order of the ITAT, "A" Bench in the case of M/s Aristo Pharmaceuticals Pvt. Ltd. Vs. DCIT- 2(1)(1), Mumbai, ITA No. 1104/Mum/2018; ITAT, Delhi Bench "A" in the case of Aishika Pharma (P) Ltd. Vs. ITO, Ward 2(1), New Delhi (2019); and ITAT, Mumbai "K" Bench in the case of India Medtronics Pvt. Ltd. Vs. Dy. CIT, ITA No. 7263/Mum/2018, dated 13.09.2019. Also, reliance was placed on the order of the Hon'ble High Court of Delhi in the case of Max Hospital Vs. Medical Council of India, W.P(C) 1334/2013; dated 10.01.2014. Qua the issue of allowability of "Education cess" and "Higher Education cess" as a deduction while computing the income of the assessee, it was submitted by the ld. A.R that the issue therein involved was squarely covered by the judgment of the Hon'ble High Court of Bombay in the case of Sesa Goa Ltd. vs. JCIT, Range 1, Panaji M/s Ajanta Pharma Ltd. Vs. Dy. CIT, Central Circle 6(2), Mumbai 8 ITA Nos. 4784 & 4785/Mum/2019 Goa (2020) 423 ITR 426 (Bom) and that of the Hon'ble High Court of Rajasthan in the case of CIT, Range-2, Kota Vs. M/s Chambal Fertilizers and Chemicals Ltd., ITA No. 52/2018, dated 31.07.2018.

19. Briefly stated, the assessee company had e-filed its return of income for A.Y 2015-16 on 02.11.2015, declaring its total income at Rs.

428,63,07,770/- and 'book profit' under Sec. 115JB at Rs.451,75,08,196/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. During the course of the assessment proceedings, it was observed by the A.O that the assessee in view of the CBDT Circular No. 5/2012 r.w. Medical Council of India (MCI) Regulations, 2002 had in its return of income offered a disallowance of sales promotion expenses of Rs.34.09 crore in respect of the freebies that were given to doctors during the year in question. However, in the course of the assessment proceedings the assessee vide a revised computation of income withdrew the suo motto disallowance of sales promotion expenses of Rs.34.09 crore that was earlier offered in the original return of income. Elaborating on the withdrawal of the aforesaid disallowance of sales promotion expenses the assessee had drawn support from the order of the ITAT, Mumbai in the case of Dy. CIT-8(2), Mumbai Vs. PHL Pharma Pvt. Ltd., ITA No. 4605/Mum/2014, dated 12.01.2017. In its aforesaid order the Tribunal had observed that the MCI guidelines were not applicable to pharamaceutical companies and there was no violation on the part of M/s Ajanta Pharma Ltd. Vs. Dy. CIT, Central Circle 6(2), Mumbai 39 ITA Nos. 4784 & 4785/Mum/2019 pharmaceuticals companies in giving any kind of freebies to the medical practitioners which being an expenditure incurred purely for business purposes was to be allowed as a business expenditure. However, the aforesaid claim of the assessee did not find favour with the A.O. Observing, that as per the CBDT Circular No. 5/2012, dated 09.08.2012 the expenses incurred by the pharmaceutical companies on distribution of freebies being in violation of the provisions of the Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 was inadmissible as an expenditure, the A.O disallowed the assessee's claim for deduction of the sales promotion expenses of Rs.34.09 crore. As regards the support drawn by the assessee on the order of the ITAT, Mumbai in the case of PHL Pharmaceuticals Pvt. Ltd. (supra), it was observed by the A.O that the department had not accepted the aforesaid order of the Tribunal and had assailed the same before the Hon'ble High Court of Bombay. Accordingly, the A.O observed that to keep the issue alive the aforesaid claim raised by the assessee seeking deduction of the sales promotion expenses amounting to Rs.34.09 crore could not be accepted. Backed by his aforesaid deliberations the A.O assessed the income of the assessee company at Rs.428,63,07,770/- i.e as originally returned.