The Tax Publishers2019 TaxPub(DT) 6604 (Mum-Trib)

INCOME TAX ACT, 1961

Section 37(1), Expln. 1

CBDT Circular, dt. 5/2012, and dt. 1-8-2012 enlarged the scope and applicability of 'Indian Medical Council Regulation, 2002' by making it applicable to pharmaceutical companies. Such CBDT circular which created new impairment and imposed disallowability not envisaged in any of the Act or regulation could not be reckoned to have retrospective effect and, therefore, not applicable during the year under consideration. Hence, there was no violation by the assessee in so far as giving any kind of freebies to medical practitioners and the expenditure being purely for business purpose had to be allowed as business expenditure and was not impaired by Expln. 1 to section 37(1).

Business exenditure - Freebies given to doctors by pharmaceutical company - Applicability of CBDT Circular No. 5 of 2012, dt. 1-8-2012 -

Assessee, a pharmaceutical company claimed expenditure on freebies given to doctors. AO taking plea of CBDT Circular No. 5/2012, dated 1-8-2012 held the expenditure to be in violation of Mexical Counsel fo India (MCI) regulations and accordingly disallowed deduction in view of Explanation 1 to section 37(1).Held: CBDT Circular, dt. 5/2012, and dated 1-8-2012 enlarged the scope nd applicability of 'Indian Medical Council Regulation, 2002' by making it applicable to pharmaceutical companies. Such CBDT circular which created new impairment and imposed disallowability not envisaged in any of the Act or regulation could not be reckoned to have retrospective effect and, therefore, not applicable during the year under consideration. Hence, there was no violation by the assessee in so far as giving any kind of freebies to medical practitioners and the expenditure being purely for business purpose had to be allowed as business expenditure and was not impaired by Expln. 1 to section 37(1).

Followed:Asstt. CIT v. Liva Healthcare Ltd. [ITA 847/Mum/2012] for assessment year 2008-09.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

IN THE ITAT, MUMBAI BENCH

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