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Tax Publishers Medley Pharmaceuticals Ltd. v. Dy. CIT [ITA No. 2344/Mum/2018, ITA No. 1212/Mum/2019, dt. 22-7-2020] : 2020 TaxPub(DT) 2921 (Mum.-Trib.) Sales Promotional spend to doctors -- CBDT circular validity/retrospectivity -- Section 37(1) explanation thereto. *Facts:* Assessee a pharmaceutical company had spent sales promotion to doctors in cash and in kind. Assessing officer disallowed part of the expenditure in the scrutiny assessment but for Rs. 6.25 crores which was disallowed by reopening the scrutiny assessment. On appeal, Commissioner (Appeals) concurred with views of the assessing officer. On higher appeal to ITAT, assessee claimed that reopening was only a mere change of opinion with no fresh facts unearthed thus was invalid besides the fact that the expenditure of Rs. 6.25 crores was allowable on certain grounds. Held in favour of the assessee that the reopening was unwarranted and the expenditure on freebies and promos to doctors was an allowable expenditure for the said assessment year and it was not hit by explanation to section 37(1). The grounds of the argument on allowability of the expenditure by assessee were -- (i) that though the Medical Council Regulations, 2002 would apply to medical practitioners but the same were not applicable to the pharmaceutical companies; (ii) that as the CBDT Circular No. 5 of 2012, dated 1-8-2012 imposing prohibition on the medical practitioners and their professional associations from taking any gifts, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied healthcare sector industries was applicable prospectively, therefore, the same was not applicable in the case of the assessee for the year under consideration, i.e., assessment year 2012-13; (iii) that the circular issued by CBDT cannot impose an obligation adverse to an assessee. On each of the above points the ITAT answered in the affirmative holding that -- -- the regulations of Medical council of India would apply only to medical practitioners registered under council regulations and not to Pharmaceutical entities, hospitals or ancillary healthcare providers. -- the circular since being a taxing circular cannot be read retrospective only prospective. -- the CBDT went beyond its powers to restrict an expenditure citing legality when it did not have any right or say in Medical council of India regulations. *Applied:* Aristo Pharmaceuticals Pvt. Ltd. v. ACIT (ITA No. 6680/Mum/2012, ITAT Mumbai dated 26-7-2018) : 2018 TaxPub(DT) 5275 (Mum-Trib), Max Hospital, Pitampura v. Medical Council of India [CWP No. 1334/2013, dated 10-1-2014] (Del-HC)

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Medley Pharmaceuticals Ltd. v. Dy. CIT [ITA No. 2344/Mum/2018, ITA No. 1212/Mum/2019, dt. 22-7-2020] : 2020 TaxPub(DT) 2921 (Mum.-Trib.)

Sales Promotional spend to doctors -- CBDT circular validity/retrospectivity -- Section 37(1) explanation thereto.

Facts:

Assessee a pharmaceutical company had spent sales promotion to doctors in cash and in kind. Assessing officer disallowed part of the expenditure in the scrutiny assessment but for Rs. 6.25 crores which was disallowed by reopening the scrutiny assessment. On appeal, Commissioner (Appeals) concurred with views of the assessing officer. On higher appeal to ITAT, assessee claimed that reopening was only a mere change of opinion with no fresh facts unearthed thus was invalid besides the fact that the expenditure of Rs. 6.25 crores was allowable on certain grounds.

Held in favour of the assessee that the reopening was unwarranted and the expenditure on freebies and promos to doctors was an allowable expenditure for the said assessment year and it was not hit by explanation to section 37(1).

The grounds of the argument on allowability of the expenditure by assessee were --

(i) that though the Medical Council Regulations, 2002 would apply to medical practitioners but the same were not applicable to the pharmaceutical companies;

(ii) that as the CBDT Circular No. 5 of 2012, dated 1-8-2012 imposing prohibition on the medical practitioners and their professional associations from taking any gifts, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied healthcare sector industries was applicable prospectively, therefore, the same was not applicable in the case of the assessee for the year under consideration, i.e., assessment year 2012-13;

(iii) that the circular issued by CBDT cannot impose an obligation adverse to an assessee.

On each of the above points the ITAT answered in the affirmative holding that --

-- the regulations of Medical council of India would apply only to medical practitioners registered under council regulations and not to Pharmaceutical entities, hospitals or ancillary healthcare providers.

-- the circular since being a taxing circular cannot be read retrospective only prospective.

-- the CBDT went beyond its powers to restrict an expenditure citing legality when it did not have any right or say in Medical council of India regulations.

Applied: Aristo Pharmaceuticals Pvt. Ltd. v. ACIT (ITA No. 6680/Mum/2012, ITAT Mumbai dated 26-7-2018) : 2018 TaxPub(DT) 5275 (Mum-Trib), Max Hospital, Pitampura v. Medical Council of India [CWP No. 1334/2013, dated 10-1-2014] (Del-HC)