Tribunal held that entire purchase value cannot be added. Estimate of profit rate of eight per cent is fair and reasonable. Addition of professional fees is not valid. Selling and marketing expenses comprising gifts, travelling expenses, hotel expenses and conference registration charges cannot be disallowed considering the Board Circular and Medical Council Regulations effective only from 14-12-2009 as the sales promotion expenses are incurred prior to that date, not to be disallowed as prohibited by law whether or not including freebies given to doctors. Patient detection and education camp and camp expenses comprising medicine and testing kits, certain instruments purchased as required in medical camps are incurred for benefit of patients and not doctors hence can not to be disallowed. Sponsorship expenses made to trade bodies or associations not been prohibited by Medical Council Regulations disallowance is unwarranted. Sponsorship expenses to create brand awareness and expenses on participation in symposiums and Exhibitions there is no bar under Medical Council Regulations on registering at different symposiums, hiring and erecting stalls is allowable as deduction. Expenses paid to institutions and trade bodies not resulting in benefit to medical Practitioner hence allowable as deduction. Hotel and travelling expenses benefitted doctors and amounting to availing of hospitality from a pharmaceutical company, hotel expenses and travelling expenses is disallowable. Expenditure incurred for organising conference not freebies. Brand recall purchases being expenses of nominal value less than Rs. 1,000 on articles with assessee’s name and logo given to customers, retailers, stockists and distributors are excluded from mischief of medical council regulations hence allowable as deduction. Expenses on journals and periodicals incurred for researching and printing literature or purchasing journals regarding products and its related uses and effects is allowable as deduction. Reimbursements of local taxi and conveyance expenses incurred by sales employees and staff on their outstation visits, no disallowance can be made. Expenses related to printing of files, folders, pads and pens to be used by field staff and doctors who were attending camps is allowable as deduction. Expenses on articles and gifts purchased by field staff to be distributed to wholesalers, stockists and business partners is allowable as deduction. Expenses on air tickets of doctors attending conferences is not allowable a deduction. Ad hoc disallowance adopting estimated disallowance of 10 Per Cent. without rejecting books of account or pointing out any defect or omission, disallowance is not justified. Employees’ Stock Option Plan expenses is allowable as revenue expenditure. (AY.2009-10 to 2012-13, 2014-15)
IPCA Laboratories Ltd. v. Dy. CIT (2024)113 ITR 53 /230 TTJ 409 (Mum)(Trib)
S. 37(1) : Business expenditure-Purchase of raw materials-Over-invoicing-Statements of employees not corroborated by facts-Addition is deleted-Bogus purchases-Entire purchase value cannot be added-Profit rate of eight per cent is fair and reasonable-Professional fees-Addition is not valid-Selling and marketing expenses comprising gifts, travelling expenses, hotel expenses and conference registration charges-Board Circular and Medical Council Regulations effective only from 14-12-2009-Sales Promotion expenses incurred prior to that date, not to be disallowed as prohibited by law whether or not including freebies given to doctors-Patient detection and education camp and camp expenses comprising medicine and testing kits, certain instruments purchased as required in medical camps-Incurred for benefit of patients and not doctors-Not to be disallowed–Sponsorship expenses made to trade bodies or associations not been prohibited by Medical Council Regulations-Disallowance is unwarranted-Sponsorship expenses to create brand awareness-Expenses on participation in symposiums and Exhibitions-No bar under Medical Council Regulations on registering at different symposiums, hiring and erecting stalls-Allowable as deduction-Expenses paid to institutions and trade bodies not resulting in benefit to medical Practitioner-Allowable as deduction-Hotel and travelling expenses benefitted doctors and amounting to availing of hospitality from a pharmaceutical company-Hotel expenses and travelling expenses is disallowable–Expenditure incurred for organising conference not freebies-Brand recall purchases-Expenses of nominal value less than Rs. 1,000 on articles with assessee’s name and logo given to customers, retailers, stockists and distributors-Excluded from mischief of medical council regulations-Allowable as deduction-Expenses on journals and periodicals incurred for researching and printing literature or purchasing journals regarding products and its related uses and effects-Allowable as deduction-Reimbursements of local taxi and conveyance expenses incurred by sales employees and staff on their outstation visits-No disallowance can be made-Expenses related to printing of files, folders, pads and pens to be used by field staff and doctors who were attending camps-Allowable as deduction-Expenses on articles and gifts purchased by field staff to be distributed to wholesalers, stockists and business partners-Allowable as deduction Expenses on air tickets of doctors attending conferences-Not allowable a deduction–Ad hoc disallowance-Estimated disallowance of 10 Per Cent. without rejecting books of account or pointing out any defect or omission-Disallowance is not justified-Employees’ Stock Option Plan Expenses-Allowable as revenue expenditure-[S. 37(1) Expln. 1, 69C, Central Board Of Direct Taxes Circular No. 5 Of 2012, Dated 1-8-2012, Medical Council Of India Regulations, 2009]
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