Case Law Details
Medley Pharmaceuticals Ltd Vs CIT (ITAT Mumbai)
The issue under consideration is whether the freebies paid to pharmaceutical companies will be allowed u/s 37(1) or not?
ITAT states the code of conduct prescribed by the Medical Council is applicable only to medical practitioners/ doctors registered with the MCI and does not apply to pharmaceutical companies & the healthcare sector in any manner. The issue as regards the applicability of the MCI regulations to the pharmaceutical industry was not gone into. Also, the aspect that the burden imposed by the CBDT vide its aforesaid Circular No. 5/2012, dated 01.08.2012 on the pharmaceutical or allied health sector industries, despite absence of any enabling provision under the Income Tax law or under the Indian Medical Council Regulations, which thus clearly impinges on the conduct of the pharmaceutical and allied health sector industries in carrying out its business, was also not deliberated upon. ITAT thus are of the considered view, that the expenditure incurred by the assessee towards sales promotion expenses like freebies would not be hit by the “Explanation” to Sec. 37 of the Act. Accordingly, on the basis of our aforesaid observations, they are of the considered view, that the A.O even otherwise on merits was not justified in disallowing the sale promotion expenses by bringing the same within the realm of the “Explanation” to Sec. 37(1) of the Act. Hence the appeal filed by the assessee allowed.
FULL TEXT OF THE ITAT JUDGEMENT
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