Lawstreet Journal

Pharmaceutical companies gifting freebies to doctors “prohibited by law”; cannot claim tax deduction: Supreme Court

Lawstreet Journal 23 Feb 2022 9:37pm

Image courtesy: Lawstreet Journal Judiciary Pharmaceutical companies gifting freebies to doctors “prohibited by law”; cannot claim tax deduction: Supreme Court

The Supreme Court has held in the case Apex Laboratories Pvt Ltd vs Deputy Commissioner of Income Tax that pharmaceutical companies gifting freebies to doctors is clearly prohibited by law and it cannot, therefore, be claimed as a deduction under Section 37(1) of the Income Tax Act of 1961.

A bench comprising justice UU Lalit and S Ravindra Bhat dismissed the appeal of pharmaceutical firm Apex Laboratories Pvt. Ltd against the High Court (HC). In the verdict, the top court dealt with a tricky legal issue where tax deduction on account of granting freebies to doctors was claimed.

The pharma company Apex Laboratories Pvt. Ltd claimed that though medical practitioners are restrained under the regulations from accepting such gifts, it was not an offence under any law and hence, companies are entitled to the tax benefit. The pharmacy company, in its appeal, said the amended 2002 Regulations for doctors did not apply to pharmaceutical companies.

While medical practitioners were expressly prohibited from accepting freebies, no corresponding prohibition in the form of any binding norm was imposed on the pharmaceutical companies gifting them, and in the absence of any express prohibition by law, it could not be denied the benefit of seeking exclusion of the expenditure incurred on supply of such freebies under Section 37(1) of the IT Act.

Under the provision, any expenditure, such as payment of ‘hafta’, freebies, donations, protection, or extortion money will not be allowed as a deduction.

This court is of the opinion that such… Continue Reading...


Tagged: Pharmaceutical Companies   Supreme Court of India   Income Tax  
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