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Tax Publishers Commission expenditure to doctors by a pharmacy whether hit by ethical code of conduct of Indian medical council and is a disallowable expenditure *Facts:* Assessee a pharmacist paid commission to certain doctors for promoting their business which was disallowed by AO and CIT(A) holding that these were not permitted as per ethical guidelines of Indian Medical Council. On appeal it was pleaded that the payments were for some advisory services on stocking of pharma goods and the regulations of the IMC would not apply to the assessee who was only a pharmacist or an allied entity in the medical field. It was also impressed upon that the TDS was applied and the doctors would have disclosed the said payments as income in their assessments and thus it was tax neutral as well. On appeal - Held against the assessee that the payment of commission was not an allowable expenditure. The point of TDS deduction made/tax neutrality of income being taxed in hands of recipient Doctors, IMC guidelines being not applicable to the assessee/allied medical entities were not acceptable to the ITAT. The earlier year favourable decision of the assessee would not apply as Supreme court has clarified this subsequently in its verdict of Apex Labs. Assessee did not establish as to what advisory/consultation was provided by the Doctors either. *Applied:* CBDT Circular No. 5/2012 Dated 01-08-2012 Apex Laboratories (P.) Ltd. (2022) 135 taxmann.com 286 (SC) : 2022 TaxPub(DT) 1374 (SC) Mead Johnson Nutrition (India) (P.) Ltd. (2023) 149 taxmann.com 298 (Mum-Trib.) : 2023 TaxPub(DT) 1630 (Mum-Trib), Stemade Biotech (P.) Ltd. (2022) 138 taxmann.com 368 (Mum-Trib.) : 2022 TaxPub(DT) 3520 (Mum-Trib), Confederation of Pharmaceutical Industry v. CBDT [Writ Petition No. 10793 of 2012, dt. 26-12-2012] : 2013 TaxPub(DT) 1468 (HP-HC) *Ed. Note:* Decision pertains to assessment year 2013-14 and subsequent amendments and the Apex court verdict has been given greater weightage on principles of law. *Case:* Sunflower Pharmacy v. ITO 2023 TaxPub(DT) 6131 (Ahd-Trib)

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Commission expenditure to doctors by a pharmacy whether hit by ethical code of conduct of Indian medical council and is a disallowable expenditure

Facts:

Assessee a pharmacist paid commission to certain doctors for promoting their business which was disallowed by AO and CIT(A) holding that these were not permitted as per ethical guidelines of Indian Medical Council. On appeal it was pleaded that the payments were for some advisory services on stocking of pharma goods and the regulations of the IMC would not apply to the assessee who was only a pharmacist or an allied entity in the medical field. It was also impressed upon that the TDS was applied and the doctors would have disclosed the said payments as income in their assessments and thus it was tax neutral as well. On appeal -

Held against the assessee that the payment of commission was not an allowable expenditure. The point of TDS deduction made/tax neutrality of income being taxed in hands of recipient Doctors, IMC guidelines being not applicable to the assessee/allied medical entities were not acceptable to the ITAT. The earlier year favourable decision of the assessee would not apply as Supreme court has clarified this subsequently in its verdict of Apex Labs. Assessee did not establish as to what advisory/consultation was provided by the Doctors either.

Applied:

CBDT Circular No. 5/2012 Dated 01-08-2012

Apex Laboratories (P.) Ltd. (2022) 135 taxmann.com 286 (SC) : 2022 TaxPub(DT) 1374 (SC)

Mead Johnson Nutrition (India) (P.) Ltd. (2023) 149 taxmann.com 298 (Mum-Trib.) : 2023 TaxPub(DT) 1630 (Mum-Trib),

Stemade Biotech (P.) Ltd. (2022) 138 taxmann.com 368 (Mum-Trib.) : 2022 TaxPub(DT) 3520 (Mum-Trib),

Confederation of Pharmaceutical Industry v. CBDT [Writ Petition No. 10793 of 2012, dt. 26-12-2012] : 2013 TaxPub(DT) 1468 (HP-HC)

Ed. Note: Decision pertains to assessment year 2013-14 and subsequent amendments and the Apex court verdict has been given greater weightage on principles of law.

Case: Sunflower Pharmacy v. ITO 2023 TaxPub(DT) 6131 (Ahd-Trib)