Case Law Details
Aristo Pharmaceuticals (P.) Ltd. Vs ACIT (ITAT Mumbai)
Conclusion: Assessee-pharmaceutical company was entitled to claim sales promotion expenses incurred on distribution of articles to the stockists, distributors, doctors etc and the same was not hit by the Explanation to Sec. 37(1) in view of circular issued by MCI and circular of CBDT vide Circular No. 5 of 2012.
Held: Assessee-pharmaceutical company engaged in manufacturing and sales of pharmaceuticals and allied products. During the year, it had debited an amount under the head ‘sales promotional article expenses’. During the assessment proceedings, AO after considering relevant submissions of assessee and also by taking note of the circular issued by the Medical Council of India (MCI, in short) under the Medical Council (Professional Conducts, Etiquettes and Ethics) Regulation Act, 2002 held that expenditure incurred under the head ‘sales promotional article expenses’ was not allowable as deduction u/s 37(1) because such expenditure had been incurred in violation of prescribed law. Therefore, the same could not be allowed as deduction. It was held in the absence of any sanction or authority of law on the basis of which it could safely be concluded that the assessee company which was engaged in the business of manufacturing and sale of pharmaceuticals and allied products, had in the garb of sales promotion expenses incurred expenditure in respect of articles distributed to the stockists, distributors, dealers, customers and doctors, for a purpose which was either an offence or prohibited by law, expenditure incurred by assessee would not be hit by the Explanation to Sec. 37(1). Moreover, in view of circular issued by MCI and also circular of CBDT vide Circular No. 5 of 2012 , assessee was entitled for claim of sales promotion expenses incurred on distribution of articles to the stockists, distributors, dealers, customers and doctors.
FULL TEXT OF THE ITAT JUDGEMENT
These cross appeals filed by the assessee and the revenue are directed against the order of the CIT(A)-4, Mumbai dated 14-07-2017 for the assessment year 2013-14.
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