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Judgment
In this reference u/s 256(1) of the income tax Act, 1961, the following question of law has been referred for our opinion:-
"Whether on the facts and in the circumstances of the case, the income tax Appellate Tribunal was right in holding that the expenditure incurred by the Assessee, a manufacturer of medicines, on distribution of samples of such medicines amongst the medical practitioners was an expenditure on advertisement publicity and sales promotion within the meaning of section 37(3B)(i) of the income tax Act, 1961 and was subject to the restriction of section 37(3A) of the act"
An almost similar question arose before the Supreme Court in ESKAYEF (now known as Smithkline Beecham Pharmaceutical (India) Ltd.) v. CIT [2000] 245 ITR 1161. The question considered by the Supreme Court reads as follows:-
"Whether on the facts and circumstances of the case, the expenditure incurred on physician''s samples is in the nature of advertisement expenditure falling within the restrictive provisions of section 37(3A) of the income tax Act, 1961?"
The Supreme Court took the view that the object of distribution of samples of drugs is to make doctors aware that such drugs are available in the market in relation to the cure of a particular affliction and, therefore, to persuade them to prescribe the same in appropriate cases. The Supreme Court held that this tantamounts to publicity and sales promotion.
Following the view laid down by the Supreme Court, we answer the question referred to us in the affirmative, in favour of the revenue and against the assessee. The reference is disposed of accordingly.