Case Number: ITA 871/DEL/2021
Appellant: Boston Scientific India Pvt. Ltd., New Delhi
Respondent: DCIT, Circle 4(2), New Delhi
Assessment Year: 2016-17
Result: Adjustments Partly Allowed
Case Filed on: 2021-07-16
Order Type: Final Tribunal Order
Date of Order: 2023-03-13
Pronounced on: 2023-03-13
Boston Scientific India Pvt. Ltd. (hereinafter referred to as ‘the taxpayer’) filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘I’, New Delhi, challenging the order passed by the Deputy Commissioner of Income Tax (DCIT), Circle-4(2), New Delhi, for the assessment year 2016-17. The appeal focused on the transfer pricing adjustments made to the taxpayer’s income and the disallowance of certain expenses and depreciation claims.
The case was heard by Dr. B. R. R. Kumar, Accountant Member, and Sh. Yogesh Kumar US, Judicial Member, via video conference on 13.12.2022, and the order was pronounced on 13.03.2023.
The primary issues in the appeal were:
The appellant, represented by Sh. Kanchun Kaushal, AR, and Sh. K. Bansal, AR, argued that the adjustments made by the Transfer Pricing Officer (TPO) and upheld by the Dispute Resolution Panel (DRP) were incorrect. They contended that the comparable companies chosen by the TPO were not appropriate, and the disallowances of expenses and depreciation were unwarranted.
The respondent, represented by Sh. Bhaskar Goswami, CIT DR, supported the adjustments and disallowances made by the TPO and the order passed by the DRP.
The Tribunal analyzed the submissions and the relevant case laws presented by both parties. The key findings are as follows:
The TPO had proposed an upward adjustment of INR 11,22,76,671 for the trading segment and INR 1,75,15,590 for the business support service segment. The Tribunal examined the suitability of the comparable companies challenged by the taxpayer and directed the exclusion of certain comparables, reducing the proposed adjustments significantly.
The Tribunal upheld the disallowance of expenses amounting to INR 3,27,74,708 incurred in relation to doctors, citing the CBDT circular No. 5/2012 and the Medical Council of India (MCI) regulations. The Tribunal referred to the judgment of the Hon’ble Supreme Court in the case of M/s Apex Laboratories P. Ltd. vs DCIT, which held that such expenses are not allowable under section 37(1) as they are considered to be prohibited by law.
The Tribunal found that the clinical trial expenses of INR 1,04,72,741 were not incurred solely for the business purposes of the taxpayer. The expenses were incurred for trials comparing the taxpayer’s products with competitors’ products, and the benefit of these trials was not exclusively for the taxpayer. Hence, the disallowance by the AO was upheld.
The Tribunal allowed the claim of depreciation amounting to INR 1,38,45,026 in respect of assets placed with hospitals. The Tribunal found that these assets were used for the purpose of the taxpayer’s business and were owned by the taxpayer. The disallowance by the AO on the grounds of hire purchase transactions was found to be incorrect.
The Tribunal partly allowed the appeal, directing the exclusion of certain comparable companies and the deletion of some adjustments. However, the disallowances under section 37(1) and clinical trial expenses were upheld. The appeal of the taxpayer was partly allowed.
In conclusion, ITA No. 871/DEL/2021 filed by Boston Scientific India Pvt. Ltd. was partly allowed, with significant adjustments in favor of the taxpayer. The Tribunal’s order provided clarity on the inclusion and exclusion of comparable companies and the treatment of expenses and depreciation in transfer pricing and corporate tax assessments.
Order pronounced in open court on this 13th day of March, 2023.
Sd/- (Dr. B. R. R. Kumar)
ACCOUNTANT MEMBER
Sd/- (Yogesh Kumar US)
JUDICIAL MEMBER
Date: 13.03.2023
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. DRP
5. CIT(ITAT), New Delhi
Assistant Registrar, ITAT, New Delhi
Boston Scientific India Pvt. Ltd. vs DCIT: Dispute Over Transfer Pricing and Tax Deductions
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform