Distribution of Freebies to Doctors is a regular Business Practice, Dept cannot deny decision when Claim is proved with Documents: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that when the department accepted the fact that the distribution of free samples to doctors is a regular business practice, then the same cannot be denied when the claim is proved with documentary evidence.

The assessee is engaged in the business of manufacturing, trading and marketing of basic vitamins, drugs, laboratory and fine chemicals, reagents, pharmaceutical specialties, diagnostics & pigments. The Assessing Officer, during the course of proceedings disallowed the claim of deduction in respect of cost of free samples provided to doctors/medical practitioners/othersfor want of details of free samples and justify the claim of deduction.

The Tribunal bench comprising ITAT President G S Pannu and Judicial Member Mr. Saktijit Dey found that the assessing officer had disallowed 50% of the total cost incurred by the assessee towards free samples in the relevant assessment years.

“Be that as it may, the respective orders of learned departmental authorities clearly indicate that the disallowance was made purely on estimate basis. The assessing officer has accepted the fact that the assessee had produced before him the details with regard to names of the doctors and their addresses. He has disallowed 50% out of the expenditure saying that in some instances names and address are incomplete. However, the assessing officer has not referred to any such specific instance. On the contrary, on perusal of documents furnished in the paper book, we have noticed that the assessee had furnished the details of free samples along with their quantity and cost. Further, the assessee has also furnished the details of chemists’ shop to which samples have been given. Additionally, the assessee has furnished the list of doctors / medical practitioners with their qualification, the field of practice, detailed address with PIN code,” the Tribunal said.

Noting the fact that the assessee personally does not go and distribute free samples to doctors / medical practitioners, the Tribunal noted thatrather, the assessee has appointed a number of marketing representatives to physically visit doctors / medical practitioners to distribute the samples.

“Therefore, even accepting that the complete address of medical practitioners are not available in few instances, that by itself cannot be a reason to make the disallowance when the departmental authorities have accepted that distribution of free samples is a regular business practice and in fact, have not raised any doubt regarding the genuineness of the expenditure. Thus, when the assessee has furnished the required details relatingto the expenditure claimed, there is no justifiable reason to disallow even a part of it,” the Tribunal said.

“On a perusal of material placed before us, it is noticed that the cost incurred by the assessee towards distribution of free samples in these assessment years is much lesser than similar expenditure incurred in the earlier and subsequent assessment years. Thus, keeping in view the peculiar circumstances of the case, we hold that no disallowance out of the cost incurred towards free physician’s samples is called for in any of these assessment years,” the Tribunal added.

 To Read the full text of the Order CLICK HERE

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Procter & Gamble Health Limited vs Asstt.Commissioner of Income-tax , 2022 TAXSCAN (ITAT) 249 , Smt. Aarti Vissanji , Shri Harendra Narayan Singh