Case Law Details
M/s D.D. Pharmaceutical Pvt. Ltd. Vs. The ACIT (ITAT Jaipur)
The assessee is engaged in the business of manufacturing of pharmaceuticals. The assessee has claimed to have incurred advertisement, sales promotion, entertainment, traveling, business and miscellaneous expenses on doctors and business guests total amount to Rs. 71,97,585/-. The AO noted that the expenditure incurred by the assessee is hit by explanation to Section 37(1) of the Act in view of the MCI Regulations, 2002 which were issued on 10.12.2009 w.e.f. 14.12.2009 prohibiting the doctors and medical practitioners from receiving gifts, freebies from the pharmaceutical companies/ individuals. Accordingly, the AO disallowed 60% of the said expenditure amounting to Rs. 45,75552/-.
Ld. AR of the assessee has submitted that the CBDT circular dated 01.08.2012 is not applicable in the assessment year under consideration as it is applicable only w.e.f. A.Y. 2013-14.
AO has not doubted the genuineness of the expenditure incurred by the assessee but the disallowance was made by the AO only on the ground that the said expenditure is hit by the explanation to Section 37(1) being prohibited by the MCI Regulations, 2002 issued on 10.12.2012 w.e.f. 14.12.2012 and consequently CBDT Circular no. 5/2012 dated 01.01.2012. Thus, when the genuineness of the expenditure is not doubted then the claim of the assessee cannot be disallowed .
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
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