In a major relief to Pharma Firm, M/s Evolutis India Private Ltd, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench ruled that the Income Tax Deduction is allowable on expenses incurred in oversea workshops for doctors as it cannot be dubbed gift and freebies.
The assessee contended that the expenditure incurred by the assessee company towards travel, stay etc. and payment of honorarium fees qua the workshops that were organized by the assessee in France was also in the nature of an expenditure incurred in the normal course of its business, and accordingly admissible u/s 37(1) of the Act. Further, in support of his claim that the CBDT Circular No. 5/2012, dated 01.08.2012 and the notification of the MCI, dated 10.12.2009 r.w the Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations, 2002 were not applicable to the assessee which belonged to the health sector industry.
The assessee assailed the adverse inferences that had been drawn by the lower authorities as regards the allowability of the expenses on two fold basis that though the Medical Council Regulations, 2002 would apply to medical practitioners but the same were not applicable to the pharmaceutical companies and other health sector industry; and that the circular issued by CBDT cannot impose an obligation adverse to an assessee.
The coram of Accountant Member, S. Rifaur Rahman and Judicial Member, Ravish Sood ruled that Payments made towards travelling expense of doctors for attending the workshops organized at France a/w the expenditure incurred towards their stay, honorarium fees etc. would not be hit by the “Explanation” to Section 37 of the Act.
The ITAT held that the AO was not justified in disallowing the aforesaid expenses of Rs. 12,79,359/- that were incurred by the assessee wholly and exclusively in the normal course of its business by bringing the same within the realm of the „Explanation‟ to Section 37(1) of the Act.
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