INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Expenditure incurred on doctors - Allowability in the hands of pharmaceutical company -

Assessee-pharmaceutical company claimed deduction of expenditure incurred on doctors under the head business promotion expenses AO disallowed deduction in view of CBDT Circular No. 5/2012, dated 1-8-2012 and MCI Regulations. Held: Expenditure incurred on doctor before 1-8-2012 was to be allowed as revenue expenditure. CBDT Circular No. 5/2012, dated 1-8-2012 clearly stated that any expense incurred in violation of MCI Regulations, dated 10-12-2009, is inadmissible under section 37(1) with effect from 1-8-2012 (i.e., prospectively). Prior to 1-8-2012, expenditure relating to doctors was to be allowed as deduction. When MCI has issued the regulation 6.8 from 10-12-2009, the same is binding only on its members, namely, doctors. The pharma companies are not bound by MCI Regulations. The CBDT Circular No. 5/2012, dated 1-8-2012, extended the applicability of MCI Regulation 6.8 to pharma companies and other health sectors companies. Therefore, expenditure incurred by pharma companies on doctors can only be disallowed, if at all from the date of issuance of Circular No. 5/2012.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08 to 2011-12

INCOME TAX ACT, 1961

Section 36(1(vii)

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