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"CIR. NO.5/2012[F.NO.225/142/2012-ITA.II], DATED 1-8-2012 It has been brought to the notice of the Board that some pharmaceutical and allied health sector Industries are providing freebees (freebies) to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India (the 'Council') which is a regulatory body constituted under the Medical Council Act, 1956.

2. The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10-12-2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries.

2.7 The argument of the assessee that the Circular of the Board speaks about freebies and the same is not applicable to the case of assessee as the commission expenditure cannot be termed as freebies to doctors from pharmaceutical retail stores. The said argument of the assessee cannot be accepted as the same is covered stipulated item being cash or monetary grant but, not for any research, study, etc. through approved institutions by the modalities laid down. The further argument of the assessee that the said Circular is not applicable to the case of assessee as the same is applicable to pharmaceutical industry and the assessee is not an industry is also not acceptable as it applies to allied health sector, the assessee being one of them as supplier of medicines which takes care of health of people.

(4) The assessee has paid commission to the two doctors namely Dr. Ratilal G. Patel and Dr. Ramanlal S. Patel for consulting them for the purchases of medicines from time to time. The said expenditure has been disclosed in profit and loss account and the necessary details/explanations in this regard called for by the assessing officer were submitted during the course of assessment proceedings. The assessing officer has disallowed the commission expenses by invoking explanation to section 37(1) of the Income tax Act, 1961 and CBDT Circular no 5/2012. The assessee contended that the commission paid is not covered by CBDT Circular no.5/2012 as the assessee is not a pharmaceutical industry and the commission payment to doctors is not freebies. The Honourable Commissioner(Appeal) has not given any findings on this issue and (5) confirmed the addition on the ground that the assessee has not received any services from concerned doctors. This issue is being contested before Honourable ITAT, Ahmedabad. In the assessment order there is no findings that the assessee has made concealment of income and there is no such evidence on record. The addition has been mode on interpretation of the applicability or otherwise of CBDT Circular in case of the assessee. In assessment year 2012-13 the Honourable Commissioner(Appeal) has held that CBDT Circular 5/2012 is not applicable to the assessee. Thus the basis on which the disallowance has been made has been removed by the appellate authority in assessee's own case on the same facts of the case.

(3) The commission paid is not covered by CBDT Circular no.5/2012 as the assessee is not a pharmaceutical industry and the commission ITO vs. M/s. Sunflower Pharmacy Asst.Year - 2011-12

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payments to doctors are not freebies. The Honourable Commissioner (Appeal) has not given any findings on this issue and confirmed the addition on the ground that the assessee has not received any services from concerned doctors. This issue is being contested before Honourable ITAT, Ahmedabad. In the assessment order there is no findings that the assessee has made concealment of income and there is no such evidence on record. The addition has been mode on interpretation of the applicability or otherwise of CBDT Circular in case of the assessee. In assessment year 2012-13 the Honourable Commissioner (Appeal) has held that CBDT Circular 5/2012 is not applicable to the assessee. Thus the basis on which the disallowance has been made has been removed by the appellate authority in assessee's own case on the same facts of the case.