ORDER
B.L. Chhibber, A.M.
1. A short but vital issue involved in this appeal by the Revenue is whether the expenditure incurred by the assessee-company, which is engaged in the manufacturing of drugs and medicines, on literature and related matters constitutes advertisement expenditure.
2. The assessee is a private limited company and engaged in the manufacture of drugs and medicines. During the course of assessment proceedings, the AO noted that the assessee had incurred an expenditure of Rs. 1,57,149 on literature which was distributed to doctors. It was submitted before the AO that the literature was used for the instructions/information of the doctors and as per the provisions of the Drug Law. The specific head of this expenditure is “details of art work”. It was argued that the literature gives vital information about the chemical contents, clinical pharmacology, indications and contra-indications, dosages and medical references for the limited use of registered medical practitioners/laboratories, and as such, the same could neither be termed as advertisement nor meant to be so. The AO noted that the substantial amount of these expenses had been incurred on procurement of materials such as blocks, colour, enlargement and works related to photography, modelling charges and for printing of literature. Relying upon the decision of the Hon’ble Karnataka High Court in the case of Smith Kline & French (India) Ltd. vs. CIT (1992) 193 ITR 582 (Kar) he held that these expenses were incurred towards advertisement/publicity and sales promotion and consequently, the restrictive clause of s. 37(3A) was held applicable. He, accordingly, disallowed the amount of Rs. 1,57,149.
3. On appeal, the CIT(A) deleted the said addition. He held that distribution of literature amounts to dissemination of information to doctors about a particular medicine and as such, expenses relating to such activity are for education rather than for publicity. He further held that the AO had wrongly applied the ratio of the decision of the Hon’ble Karnataka High Court in the case of Smith Kline & French (India) Ltd. (supra), because in that case the issue relates to expenses incurred on samples, because in that case the expenditure related to distribution of free samples, while in the present case, the expenditure was incurred on literature which was meant to educate the doctors.
4. Shri K. K. Kanwat, the learned Departmental Representative strongly supported the order of the AO. He submitted that the literature was distributed free of cost and there was no other motive but to promote the sales of the products of the company. He submitted that the case of the assessee was squarely covered by the ratio of the Karnataka High Court in the case of Smith Kline & French (India) Ltd. (supra).
4.1 Shri S. N. Soparkar, the learned counsel for the assessee supported the order of the learned CIT(A). He produced before us some of the pieces of literature to show that such literature gives basic information about a product or medicine and its effect on a particular type of alignment. Therefore, what such literature does is that it informs an educated doctor about the formation, chemical mixing, etc. of a drug which can be effective for treatment of some particular disease. A doctor can make use of such knowledge to prescribe any medicine which has got same contents; it need not necessarily be the medicine which is displayed in such literature. He submitted that the expenditure on such type of literature cannot partake the character of expenditure incurred on advertisement. In support of his contentions, he relied upon the judgment of the Hon’ble Andhra Pradesh High Court in the case of CIT vs. J&J Dechane Laboratories (P) Ltd. (1996) 222 ITR 11 (AP).
5. We have considered the rival submissions and perused the facts on record. One of the essential characteristics of advertisement or for that matter sales promotion will be to make available information about the product to maximum number of persons or public at large. The act of advertising means any device for obtaining public favour or notoriety. The literature which contains the basic information about the contents of the products/medicines, the side effects, etc., clinical pharmacology, indications and contra-indications and medical references for the limited use of the medical practitioners/laboratories cannot be said to be an advertisement. Hence, the case of the assessee is not covered by the mischief of s. 37(3A). For this, we are fortified by the decision of the Hon’ble Andhra Pradesh High Court in the case of CIT vs. J&J Dechane Laboratories (P) Ltd. (supra) where it has been held that the expenditure incurred to test the efficacy of the drug would be within the ambit of bare minimum to carry on the business, and the expenditure on physician’s samples distributed to doctors was outside the scope of s. 37(3A) of the Act.
5.1 As regards the Revenue’s reliance on the judgment of the Hon’ble Karnataka High Court in the case of Smith Kline & French (India) Ltd. (supra), the same is not applicable to the case of the assessee as, in our view, the facts in that case were distinguishable from the facts of the case before us. In that case, the expenditure was incurred on physicians samples; whereas in the case before us the expenditure was incurred on literature which was meant for dissemination of knowledge/information and hence was of educative in nature.
5.2 In the light of the above discussion, we decline to interfere and dismiss the Revenue’s appeal.