ITA No. 4114/Del/2009 for AY: 2006-07
2. First we take up the appeal of the Revenue for assessment year 2006-07 having ITA No. 4114/Del/2009. The grounds of appeal raised by the Revenue are reproduced as under:
(1) On the facts and circumstances of the case as well as in law, the Ld CIT (A) has erred in deleting the addition of Rs 1,63,90,136/- on account of dis-allowance of 50% of sales promotion expenses without appreciating that the assessee could not establish the allow ability of its claim in spite of multiple opportunities granted to it by the A O and ignoring, inter alia, the following facts:
(i) Assessee’s failure to give the bifurcation of expenses related to business and non business purposes.
(ii) Assessee’s failure to furnish the list of doctors invited by it and who attended the conference – Derma conference 2006- on it invitations.
(iii) Assessee’s failure to furnish attendance sheet of doctors invited by it and who actually attended the conference.
(iv) Assessee’s failure to furnish copy of agreement for sponsorship showing the rates payable for the same.
(v) Assessee’s failure to furnish copy of invitation card printed and issued by it to the doctors.
(vi) Assessee’s failure to furnish the details of expenses incurred on hotel booking, lodging and boarding, traveling and other heads incurred in respect of other than doctors and staff members.
(vii) Assessee’s failure to justify the expenses incurred in respect of family members of doctors and non business associates.
(viii) Assessee’s failure to justify as to how attending of conference by family members of doctors has resulted in increase in sales/business.
(ix) Assessee’s failure to furnish even a single confirmation from the doctors attending the conference on its invitation.
(x) Assessee’s failure to justify the expenses incurred by it on vigorous advertisement campaign to promote its products among the doctors though the same was not permitted by
the Derma association.
(xi) Assessee’s failure to prove the positive impacts on its sale/business as a results of incurring a huge expenditure of Rs 3.85 crores. Rather the sales showed the decline trends during the relevant period and even in subsequent years.
(2) On the facts and circumstances of the case as well as in law. the Ld CIT (A) has erred in deleting the addition of Rs 1,63,90,136/- on account of dis allowance of 50% of sales promotion expenses by accepting the assessee’s plea that the company has to oblige doctors by sponsoring all their expenses regarding traveling, hotels, lodging and food etc., and that if such obligation are not done, the doctors may not prescrible the company’s products. The CIT (A) failed to appreciate that this amounted to bribing the doctors, which was against the public policy, and is an offence. Explanation below Section 3 required such expenses to be disallowed.
3. The facts in brief of the case are that during the year under consideration, the assessee company was engaged in the business of trading in pharmaceutical products by procuring the finished products as well as products manufactured through the loan licensing. The assessee filed return of income electronically on 28/11/2006 declaring total income of Rs. 2,61,13,312/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short “the Act”) was issued and complied with. In the assessment completed under section 143(3) of the Act on 13/10/2008, the Assessing Officer disallowed sales and promotion expenses amounting to Rs. 1,63,90,136/-. Aggrieved, the assessee filed appeal before the Ld. CIT-(A), who deleted the dis allowance. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.
4. In the grounds raised, the Revenue is agitated with the deletion of dis allowance of sales promotion expenses.
4.1 Facts in respect of issue in dispute are that in assessment proceeding, the Assessing Officer observed that the assessee debited sales promotion expenses of Rs. 3,85,04,383/-. Details of expenses submitted by the assessee & reproduced in the assessment order, are extracted as under:
