Ball pens & medical gifts given to doctors by Pharma Co with its logo aren’t freebies: ITAT

Aishika Pharma (P.) Ltd. v. ITO – [2019] 106 taxmann.com 192 (Delhi – Trib.)

Assessee-company was engaged in trading/marketing of medicines. During the year, it had claimed business promotion expenditure by way of organizing medical camps/blood donation camps/free check up camp, etc., with distribution of ball pens and medical gifts, etc, with logo of assessee-company to doctors and hospitals.

Assessing Officer (AO) disallowed above expenditure in terms of Explanation 1 to section 37(1) referring to CBDT Circular No. 5 of 2012, dated 1-8-2012 and ‘Indian Medical Council Regulations, 2002’, imposing prohibition on medical practitioners and their professional associations from taking any gifts, travel facilities, hospitality, cash or monetary grant from pharmaceutical and allied health sectors.

The Delhi ITAT held that MCI Regulation 2002 and CBDT circular No. 5 of 2012 were not applicable to pharma and allied health care companies.

Activity of assessee of distributing ball pens and medical gifts, etc., was to make persons connected with business of assessee aware of its products and research work carried out by company for bringing medicine in market.

Therefore, those expenditures were purely incurred for business purpose of assessee. Thus, impugned expenditure was to be allowed as business expenditure as Explanation 1 to section 37(1) could not be applie