INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Business promotion expenses -

Assessee-company was engaged in the business of Trading/Marketing of medicines. Assessee contended that the expenditure incurred by it on making the doctors aware about its medicines by conducting seminars was definitely in the nature of business promotion and was not in the nature of gift or freebies as noted by revenue, hence would be allowable under section 37(1). AO, however, referring to the CBDT Circular No. 5/2012, dated 1-8-2012 and provisions contained under Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations, 2002 disallowed the business promotion expenses under section 37. Held: Since the expenditure incurred by the assessee company was to make the key persons in the market aware about its product/medicine, therefore, the expenditure was purely incurred for business promotion and hence, allowed under section 37(1). Moreover, as revenue failed to provide as to what offence have been committed by assessee on incurring such expenses under any law, there was no question of applying Explanation to section 37(1).

Distinguished:CIT v. Kap Scan and Diagnostic Centre (P) Ltd. (2012) 344 ITR 476 (P&H) : 2012 TaxPub(DT) 2014 (P&H-HC),DCIT v. M/s. OCHOA Laboratories Ltd. (2017) 85 taxmann.com 168 (Delhi-Trib.) : 2017 TaxPub(DT) 4024 (Del-Trib)

REFERRED : Dy. CIT v. PHL Pharma (P) Ltd. (2017) 163 ITD 10 (Mumbai-Trib.) : 2017 TaxPub(DT) 0192 (Mum-Trib)

FAVOUR : In assessee's favour

A.Y. : 2015-16

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