INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance on account of gift given by assessee to doctors and medical practitioners - Allowability -

Assessee-company was engaged in the business of manufacturing of pharmaceutical formulations and had claimed sales promotion expenses in his profit and loss account. AO noticed that the sales promotion expenses include the gift, freebies, and articles to the doctors and medical practitioners. Accordingly, AO alleged that such expenses were not allowable as deduction to assessee as per CBDT Circular No. 5/2012, dt. 1-8-2012 and Medical Council of India, notification bearing No. 6.8.1, dt. 10-12-2009. Assessee submitted that it had not incurred any expenses in contravention to the notification issued by the CBDT and Medical Council of India. Held: Assessee had not produced any evidence to prove that there was no benefit extended to the doctors/medical practitioners out of the purchases of laptops, wrist watches, mobile phones, cameras, etc. Assessee duly admitted the disallowance made by AO on an ad hoc basis during the assessment proceedings. AO made the addition by observing that assessee failed to furnish the details of the actual recipient of these gift articles. Thus in the absence of necessary documentary evidence AO had no alternative except to make the disallowance on an ad hoc basis.

REFERRED : Confederation of Indian Pharmaceutical Industry (SSI) v. Central Board of Direct Taxes (2013) 353 ITR 388 (HP-HC) : 2013 TaxPub(DT) 1468 (HP-HC)

FAVOUR : Against the assessee

A.Y. :

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