Bombay HC rules CBDT Circular disallowing Expenses associated with Doctor Freebies, not applicable to AY 2008-09 [Read Order]
Bombay HC – CBDT Circular – Bombay High Court – CBDT – Expenses – Doctor Freebies – taxscan
Bombay HC – CBDT Circular – Bombay High Court – CBDT – Expenses – Doctor Freebies – taxscan
In a major ruling the Bombay High Court ruled that Central Board of Direct Taxes (CBDT) Circular disallowing Expenses associated with Doctor Freebies, not applicable to Assessment Year 2008-09.
A return of income was fled for the assessment year 2008-09, in which the Petitioner, Abott India Limited, claimed Rs.48 crores as expenditure on gifts as a part of sales promotion expenses and an amount of Rs.2 crores as expenditure on account of distribution of samples of medicines manufactured by the Petitioner and debited under the category ‘physician sample’.
The Counsel for the Petitioner submitted that the Circular issued by the CBDT and the amendment in regulation 6.4 of the Regulations of 2002 in 2009 were not at all applicable to the assessment year 2008-09 and, therefore, the assessing officer could not have any basis for his ‘reason to believe’ that the claim was prohibited in terms of Section 37 r/w the CBDT circular dated Circular No.5/2012 dated 01.08.2012 and the regulations of 2002.
The Counsel for the Revenue submitted that the case of the Petitioner was a fit case for re-opening inasmuch as a claim which was otherwise prohibited by the terms of regulations framed by Medical Council of India could not have been allowed as deduction in terms of the specific prohibition contained under Section 37(1) of the Act. It is stated that the Board Circular dated 1 August 2012 had reiterated the regulations of Medical Council of India and that it was retrospective in nature and applicable for the assessment year 2008-09 also.
The Medical Council of India in exercise of powers conferred under the MCI Act 1956 framed the regulations called the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002. These regulations pertain to the professional conduct, etiquette and ethics for medical practitioners.
Chapter 6 of the regulations in particular deals with certain acts which would be construed as unethical like advertising his professional skill or practice soliciting patients directly or indirectly etc.
However, vide notification dated 10 December 2009 the aforementioned regulations were amended to include Clause 6.8. This was incorporated for the reason that the existing regulations prescribed conditions and regulations for medical practitioners only and did not cover their relationship with the pharmaceutical and allied health industry.
The Board issued the Circular No.5/2012 dated 1 August 2012 for sensitizing its officers that receipt of gifts, cash, travel facilities and hospitality from the pharmaceutical or allied health sector being prohibited under the regulations of 2002 would be inadmissible under Section 37 being prohibited by law.
The Bench comprising Justice Kamal Khata and Justice Dhiraj Singh Thakur observed that “The Circular No.5/2012 referred to the position of the regulations of 2002 after its amendment in the year 2009 and, therefore, neither the circular nor regulation 6.8 incorporated w.e.f. 10 December 2009 would be applicable to the instant case pertaining to assessment year 2008-09.”
To Read the full text of the Order CLICK HERE
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
