Code of conduct laid down by the Medical Council of India (MCI) in its regulations which debar or limit freebies are meant to be followed by the medical fraternity alone, stated the tribunal
IT tribunal allows Rs 23 crore relief to pharma Co giving freebies to doctors
Mumbai: In a major turnaround from an earlier decision of not allowing money spent by pharma on foreign trips of doctors as expense, the Income Tax Appellate Tribunal, was recently seen allowing a pharma company to take tax benefits against funds that were spent giving freebies to medical practitioners.
The current case related to that of PHL pharma and the IT appellate tribunal was seen allowing the firm to deduct a total sum of Rs 23 crores which were spent towards various freebies for medical practitioners including sponsoring trips for doctors for medical seminars, providing them with costly medical journals, and buying them stationery and pens bearing the logo of the pharma company as well as giving them free samples.
This is indeed a major turnaround from an earlier decision of the same tribunal, which disallowed a pharma company, Liva healthcare to claim expenses worth Rs 76 lakhs that were made towards foreign trips of doctors and their spouses in its statements.
Read more at Medical Dialogues: Money spent on foreign trips of doctors cannot be claimed as expense: IT Tribunal
In the recent decision however, the tribunal allowed the concerned company to claim the deductions. The more than 34 pages order examines various legal postitions and issues, while also distinguishing with the facts of the case of the earlier order. As per a TOI report, two takeaways that emerged from the said order include
- First, the ITAT held that the code of conduct laid down by the Medical Council of India (MCI) in its regulations which debar or limit freebies are meant to be followed by the medical fraternity alone. It does not cover pharma companies in any manner. A reference was also drawn by the ITAT to a Delhi high court decision, which made a similar observations
- Second, the ITAT also examined a circular dated August 1, 2012, issued by the Central Board of Direct Taxes (CBDT), which said that any expense in providing freebies in violation of the MCI’s code shall not be allowed as a business deduction. The ITAT in its decision pointed out that as the code of conduct did not cover the pharma company, the expenditure of Rs 23 crore did not violate this code. It also noted that since the expenses were incured by the company in 2009-10, the said circular of the CBDT could not be applied retrospectively.