Expenses on ball pens, medical gifts given to doctors with logo of Pharma co. not to be treated as freebies

M/s. Aishika Pharma Pvt. Ltd. Vs The ITO (ITAT Delhi)

Conclusion: Expenses on  medical camps organized with tea and snacks, ball pens, purchased for distribution to Doctors and Hospitals, with logo of the assessee company, organizing cardiac camps, Doctors meetings for various products for awareness of their product were only on account of business promotion expenses which were allowable under the provisions of section 37 the I.T. Act.

Held:

Assessee was engaged in the business of trading and marketing of medicines. It had to incur expenditure on business promotion mostly on medical camps organized with tea and snacks, ball pens, purchased for distribution to Doctors and Hospitals, with logo of the assessee company, organizing cardiac camps, Doctors meetings for various products for awareness of their product with refreshment and dinners etc., Assessee-company did not provide any gifts to the professionals for referring any patient or customer. The authorities below, rejected the claim of assessee-company considering that assessee company had provided freebies to the Medical Practitioners and referred to the provisions contained under Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations, 2002 and also referred to CBDT Circular No.5/2012, Dated 01.08.2012. Therefore, there was no question of application of Section 37(1). It was held  the activity of assessee company for incurring the sale promotion expenses were to make the persons connected with business of the assessee company, aware of its product and research work carried out by the company for bringing the medicine in the market and its results were based on several efforts made by the assessee company. Since assessee-company made aware of such kind of product to the key persons in the market, then only it could successfully launch its product/ medicine. Thus, these expenditure were purely incurred for business promotion of the assessee company.  Whatever expenses incurred by the assessee company were only on account of business promotion expenses which were allowable under the provisions of the I.T. Act. The authorities below have failed to provide as to what offence have been committed by the assessee company on incurring such expenses under any Law and thus, the entire addition was deleted.

FULL TEXT OF THE ITAT JUDGEMENT

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