| The Tax Publishers2020 TaxPub(DT) 0474 (Mum-Trib) INCOME TAX ACT, 1961
Section 37(1)
CBDT by extending the scope and gamut of the MCI Regulations traversed beyond the scope of its jurisdiction and provided casus omissus to the regulation issued by MCI, which though had not been expressly provided therein. Thus, as CBDT is divested of its power to create a new impairment adverse to an assessee or to a class of assessee's without any sanction or authority of law, therefore, rigours as regards pharmaceutical companies or the allied healthcare sector contemplated in CBDT Circular No. 5/2012, dated 1-8-2012 were not valid and thus, sales promotion expenses incurred in respect of articles distributed to stockists, distributors, dealers, customers and doctors were not hit by Explanation to section 37(1) and no disallowance could be sustained.
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Business expenditure - Sales promotion expenses incurred on distribution of articles to stockists, distributors, dealers, customers and doctors - Assessee-company engaged in manufacturing and sale of pharmaceuticals and allied products - Disallowance in view of CBDT Circular No. 5/2012, dated 1-9-2012
Assessee-company engaged in manufacturing and sale of pharmaceuticals and allied products claimed deduction of sales promotion expenses incurred on the distribution of articles to stockists, distributors, dealers, customers and doctors and medical conference expenditure, AO relying on CBDT Circular No. 5/2012, dated 1-8-2012 denied assessee's claim. Held: CBDT by extending the scope and gamut of the MCI Regulations traversed beyond the scope of its jurisdiction and provided casus omissus to the regulation issued by MCI, which though had not been expressly provided therein. Thus, as CBDT is divested of its power to create a new impairment adverse to an assessee or to a class of assessee without any sanction or authority of law, therefore, rigours as regards pharmaceutical companies or the allied healthcare sector contemplated in CBDT Circular No. 5/2012, dated 1-8-2012 were not valid and thus, sales promotion expenses incurred in respect of articles distributed to stockists, distributors, dealers, customers and doctors were not hit by Explanation to section 37(1) and no disallowance could be sustained.
Followed:Dy. CIT v. PHL Pharma Limited [ITA. No. 4605/Mum/2014 Order, dated 12-1-2017) : 2017 TaxPub(DT) 192 (Mum-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2014-15
IN THE ITAT, MUMBAI BENCH
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