1. This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-12, Pune dated 06.01.2017 for the assessment year 2012-13 as per the grounds of appeal on record.
2. The relevant facts in this case are that the assessee is a company engaged in the business of manufacturing and sale of pharmaceuticals products. The assessee has e-filed return of income on 29.11.2012 declaring total loss of Rs. 28,01,80,904/-. The Assessing Officer assessed total income of the assessee at loss of Rs. 17,70,09,340/- after making additions of Rs. 10,31,71,569/- on account of expenditure made on gifts given to doctors and disallowing claim of deductions u/s. 35AB(1) and u/s. 35(1)(iv) of the Income Tax Act, 1961 (hereinafter referred to as "the Act').
3. Though the assessee has preferred multiple grounds of appeal before us, however, ground Nos. 1.1 to 1.5 pertains to the disallowance of the marketing & Sales promotion expenses to the extent of Rs. 1,96,67,623/- as considered by the Assessing Officer and accordingly, confirmed by the Ld. CIT(Appeals).
4. The relevant facts pertains to this issue are that the assessee company debited an amount of Rs. 52,37,60,040/- under the head "advertisement & promotional materials" in its profit & loss account. On perusal of the details submitted by the assessee company, it was noted by the Assessing Officer that an amount of Rs. 86,02,174/- on account of print & promotional items & another amount of Rs. 1,10,65,449/- on account of sales promotional expenses was debited under the head "advertisement & promotional materials". The assessee was asked to explain the purpose and nature of these expenses. It was submitted before the Assessing Officer that the above referred expenditure of Rs. 1,96,67,623/- was incurred in the normal course of business in the form of gifts given to the doctors. It was further submitted that these gifts were given in the form of electronic equipments, medical books, medical equipments etc. and such types of gifts were given to the doctors with a purpose to promote the sales of the company.
5. This issue has been elaborately discussed by the Assessing Officer in Para 6 to 6.4 of the assessment order and specifically relying on the amendment in Indian Medical Counsel (Professional conduct, etiquettes & ethics) w.e.f. 9th December, 2009 and CBDT Circular No. 5/2012 dated 01.08.2012 according to which the medical practitioners & their professional associates have been prohibited from taking any of gift, travel facility, hospitality or monetary grant from the health & pharmaceutical sector industries, the Assessing Officer disallowed expenditure being prohibited by law as provided in the explanation to section 37(1) of the Act and added the entire amount of Rs. 1,96,67,623/- to the total income of the assessee.
6. That when the matter travelled before Ld. CIT(Appeals), the assessee submitted elaborate written submission reiterating those which has already been made before the Assessing Officer and they are placed on record. The Ld. CIT(Appeals) observed that in assessee's own case on identical issue for assessment year 2010-11, similar disallowance made by the Assessing Officer was upheld u/s. 37(1) of the Act. The Ld. CIT(Appeals) in the present assessment year i.e. A.Y. 2012-13 placing reliance on the order of assessment year 2010-11 had upheld the addition made by the Assessing Officer of Rs. 1,96,67,623/- only by reiterating the findings given in the order for assessment year 2010-11 and reproducing the same in his order which is on record.
7. At the time of hearing, the Ld. Counsel for the assessee appraised the Bench that this issue is covered by the decision of the Pune Bench of the Tribunal in assessee's own case for assessment year 2011-12 in ITA No. 226/PUN/2017 wherein with regard to this issue, disallowance of marketing and sales promotion expenses, the Tribunal at the very outset in its order considered the written submissions of the assessee which is as follows:
"1.1] The assessee is a pharmaceutical company engaged in the business of manufacturing of Generic Drugs. The assessee had claimed expenditure on account of marketing and sales promotion. The details of the expenses incurred by the assessee are given on page 17 of the asst. order. The learned A.O. has disallowed the expenditure incurred by the assessee company on print and promotion items amounting to Rs. 73,11,537/- and on sales promotion amounting to Rs. 1,17,82,480/-. Thus, he has disallowed total expenditure of Rs. 1,90,94,018/-. According to the learned A.O., such expenditure is not allowable u/s. 37(1). He has stated that the circular issued by Medical Council of India is applicable to a pharmaceutical company. He further refers to the CBDT Circular No. 5/2012 dated 01.08.2012 which states that the claim of such expenditure constitutes violation of the circular issued by Medical Council of India. Accordingly, the disallowance has been made by the learned A.O.
1.2] The learned CIT(A) has confirmed the said disallowance. He has discussed this issue in paras 4 to 4.4 of his order. He has relied upon the order passed by him in assessee's own case for A.Y. 2010 - 11.
1.3] The assessee submits that similar disallowance was made in its own case for A.Y. 2010 - 11. The matter travelled before Hon'ble ITAT It has been held by Hon'ble ITAT that the circular issued by Medical Council of India is not applicable to pharmaceutical companies. Accordingly, it has been held that no such disallowance can be made in the hands of a pharmaceutical company. The relevant discussion is in paras 8 and 9 of the order of Hon'ble ITAT. Accordingly, the claim of the assessee was allowed. The assessee submits that the disallowance made in the year under consideration may kindly be deleted in view of the decision of Hon'ble ITAT for A.Y. 2010 - 11."
7.1. Thereafter, at Para 5 of the said order, the Tribunal observed that the assessee further relied on the decision of the Co-ordinate Bench of the Tribunal in assessee's own case vide ITA No. 1532/PUN/2015 for the assessment year 2010-11 dated 29.01.2018, the copy of which is placed on record and submitted that the said issue is now covered by the said decision of the Tribunal (supra.) and decided in favour of the assessee. That thereafter, at Para 7 of the said order, the Tribunal extracted the contents of Para 8 and 9 of the order of the Tribunal which is on record. That further, at Para 8 of the Tribunal's order (supra.) for assessment year 2011-12, it was held and observed as follows:
"8. Considering the above and following of the rule of consistency, we find the said issue i.e. disallowance of marketing and sale promotion expenses should be allowed in favour of the assessee. The Circulars issued by the Medical Council of India read with Circular issued by the CBDT do not cover the Drug making companies like the present assessee. Following the parity of reasoning, the said issue is decided in favour of the assessee. Thus, the relevant grounds on this issue are allowed."
8. Per contra, the Ld. DR placed strong reliance on the orders of the Subordinate Authorities.
9. We have perused the case records and analyzed the facts and circumstances of this case and have heard the parties herein. We observe that in assessee's own case for assessment year 2011-12, the Tribunal had an opportunity to examine this issue and it was brought to the notice of the Tribunal that in assessee's own case for assessment year 2010-11 in ITA No. 1532/PUN/2015 (supra.) the matter was decided in favour of the assessee. Thereafter, the Tribunal while deciding this issue for assessment year 2011-12 (supra.) had held that considering rule of consistency, this issue of disallowance of marketing and sales promotion expenses should be allowed in favour of the assessee and that the Circular issued by the Medical Counsel of India read with Circular issued by the CBDT do not cover the Drug making companies like the present assessee.
Both the parties agreed that the facts and circumstances are similar to that of the earlier years i.e. A.Y. 2010-11 & 2011-12 and therefore, respectfully following our earlier rulings for those previous assessment years, we set aside the order of the Ld. CIT(Appeals) and allow ground Nos. 1.1 to 1.5 in favour of the assessee.
10. Ground Nos. 2.1 & 2.2 pertains to the disallowance of foreign tax credit.
11. The Ld. CIT(Appeals) at Para 6.2 of his order has observed as follows:
"6.2 The claim of remaining foreign tax credit of Rs. 92,45,308 u/s. 90/91 withheld by Heritage Pharma Lab Inc. USA was made for the first time during the course of appellate proceedings. The appellant contended that in view of the decision of Bombay High Court in the case of CIT v Pruthvi Brokers & Shareholders Pvt. Ltd : 349 ITR 336, the CIT(A) has power to consider additional claims which were not made in the return of income and not raised before the A.O. For similar proposition, the appellant relied on decisions of Delhi High Court decision in the case of CIT v Jai Parabolic Springs Ltd : 306 ITR 42 & of ITAT Pune in the case of Jain irrigation Systems Ltd. ITA No. 1319/PN/2009 dated 30.01.2012. In view of the decisions relied upon by the appellant, the additional claim of appellant is being admitted for adjudication. During the appellate proceedings for AY 2011-12 identical issue of raising fresh claim of tax credit u/s. 90/91 withheld by Heritage Pharma labs Inc. came up for adjudication. The appellant filed similar contentions during AY 2011-12."
The Ld. CIT(Appeals) basically relied on the Appellate order for assessment year 2011-12 and rejected the claim of the assessee. The Ld. CIT(Appeals) has reproduced the relevant findings of the Appellate order for assessment year 2011-12 in his present order and summarily rejected this ground of appeal raised before him as per reasoning therein which is on record.
12. At the time of hearing, the Ld. Counsel for the assessee submitted that this issue is covered by the decision of Pune Bench of the Tribunal in assessee's own case for assessment year 2011-12 in ITA No. 226/PUN/2017 (supra.). The Tribunal in its order at Para 9 has discussed this issue regarding claim of credit for foreign TDS and therein has extracted the written submissions of the assessee.
12.1. The Ld. Counsel for the assessee had placed reliance on the decision of Mumbai Bench of the Tribunal in the case of JCIT Vs. Petroleum India International : 26 SOT 105 and submitted that identical issue came before the Tribunal and the Tribunal decided the same in favour of the assessee. The Ld. Counsel further placed reliance on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Petroleum India International : 351 ITR 295 wherein the Hon'ble High Court has held that the object of section 91(1) is to give relief from taxation in India to extent taxes have been paid abroad for relevant previous year and this relief is not dependent upon payment also being made in previous year. The Tribunal thereafter, on this issue has held as follows:
"13. After hearing both the sides and considering the material available on record, we find it relevant to extract the contents of para 12 of the order of Tribunal and the same are extracted hereunder:-
"12. We have considered the rival submissions carefully. We find that the language of s. 91(1) of the Act is unambiguous on the issue, which provides that where the assessee proves that in respect of his income which accrued or arose during that previous year outside India and he has paid in any country with which there is no agreement under s. 90 for the relief or avoidance of double taxation, he shall be entitled to deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income. We find that nowhere in the provision of s. 91(1) of the Act, it is provided that the payment of taxes outside India shall be during the relevant previous year itself. The purpose of this provision of s. 91(1) of the Act is to provide relief in a case where the assessee has paid the taxes outside the country, not to subject such assessee to double taxation on the same income. If the interpretation put forward by the learned CIT-Departmental Representative is accepted, it shall render the provision of s. 91(1) itself as redundant. We find that the assessee has discharged its onus of proving that it has in fact made the payment of taxes in Kuwait in subseque
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nt periods. The CIT(A) has recorded the dates and amount of payment of taxes in Kuwait by the assessee and has recorded that the assessee has furnished before him the original documents evidencing these payments and the same have also been furnished before the AO and has been verified by him. There is no material before us to controvert these findings of the CIT(A). In these facts of the case, we hold that the assessee is entitled to relief under s. 91(1) of the Act and the order of the CIT(A) is confirmed and the ground of appeal of Revenue is dismissed." 14. We further find the Jurisdictional High Court in the case of Petroleum India International (supra) approved the above view of the Tribunal (supra). 15. Considering the above and following of the rule of consistency, we find the said issue i.e. claim of credit for foreign TDS should be allowed in favour of the assessee. Following the parity of reasoning, the said issue is decided in favour of the assessee. Thus, the relevant grounds on this issue are allowed." Respectfully, following our decision as referred hereinabove, we set aside the order of the Ld. CIT(Appeals) on this issue and allow ground Nos. 2.1 and 2.2 raised in appeal by the assessee. 13. Ground No. 3 is general in nature and hence, no adjudication is required. 14. In the result, appeal of the assessee is allowed.