Cost incurred towards the distribution of free samples provided to doctors allowed as business Expenditure: ITAT

The assessee is a resident company engaged in the business of manufacturing, trading and marketing of basic vitamins, drugs, laboratory and fine chemicals, reagents, pharmaceutical specialties, diagnostics & pigments. In course of assessment proceedings for the impugned assessment years, the assessing officer noticed that the assessee had claimed deduction towards cost of free samples provided to doctors / medical practitioners / others. Being unsatisfied with the evidence furnished by the assessee, the assessing officer disallowed the cost incurred towards free samples in all the assessment years under consideration. Contesting the disallowances, assessee preferred appeals before the first appellate authority and thereafter before (ITAT) the Tribunal.

Supreme Court Dismisses Apex Laboratories (P) Ltd appeal for claiming Income Tax Relief on freebies given to Doctors

Smt. Aarti Vissanji, learned counsel appearing for the assessee submitted, it is a regular business practice of all drug manufacturers to provide free samples to doctors / medical practitioners / others to promote their business activity. She submitted, the assessee has appointed marketing representatives, who travel to different places and physically meet the doctors / medical practitioners to distribute the free samples.

It is a fact that the assessee personally does not go and distribute free samples to doctors / medical practitioners. Rather, the assessee has appointed a number of marketing representatives to physically visit doctors / medical practitioners to distribute the 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 relating to the expenditure claimed, there is no justifiable reason to disallow even a part of it.

The order was pronounced by G.S. Pannu, President, and Saktijit Dey, Judicial Member.