The Federation of Medical & Sales Representatives Association of India claimed before the Supreme Court that the Central Board for Direct Taxes has accused makers of Dolo-650 tablet 50 of distributing freebies worth Rs 1,000 crore to doctors as consideration for prescribing the tablet.
Senior Advocate Sanjay Parikh, appearing for Federation of Medical & Sales Representatives Association of India, submitted that DOLO had invested 1,000 core in freebies to have its anti-fever drug prescribed to patients” This is not music to my ears. I was also asked to have the same when I had COVID. This is a serious issue and matter,” Justice Chandrachud remarked.
The Supreme Court was hearing a PIL seeking directions to make pharmaceutical companies liable for giving freebies to doctors as incentive to prescribe their drugs. The plea by the Federation of Medical & Sales Representatives Association of India sought direction to give statutory backing to the Uniform Code of Pharmaceutical Marketing Practices (UCPMP). The petitioner pointed out the example of the excessive sale and prescription of the drug Remdisivir during the COVID-19 pandemic as an example.
The Bengaluru-based pharmaceutical company Micro Labs Ltd, the manufacturer of Dolo-650 tablet, was under the income tax scanner for suspected tax evasion. The Income Tax Department carried out search and seizure operations last month. The group has presence in over 50 countries. The search action covered around 36 premises spread across 9 states. During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized, the finance ministry had said in a statement.
The initial gleaning of the evidence revealed that the group has been debiting in its books of account unallowable expenses on account of distribution of freebies to the medical professionals under the head “Sales and Promotion”. These freebies included travel expenses, perquisites and gifts etc. to doctors and medical professionals for promoting the group’s products under the heads “Promotion and Propaganda”, “Seminars and Symposiums”, “Medical Advisories” etc.
The evidence indicated that the group adopted unethical practices to promote its products/ brands. The quantum of such freebies detected is estimated to be around Rs 1,000 crore, the statement said. The group is also found to have claimed artificially inflated deduction under special provisions in respect of certain incomes, by resorting to suppression of expenses and over-appropriation of revenue to the unit eligible for such deduction.
Various other means of tax evasion, including inadequate allocation of research and development expenses to eligible units and inflated claim of weighted deduction under section 35 (2AB), were detected. The quantum of tax sought to be evaded through such means is estimated at over Rs. 300 crore.
Instances of violation of provisions of tax deduction at source under section 194C of the Income-tax Act, 1961 detected in respect of transactions under contracts entered into with the third-party bulk drug manufacturers. During the search action, unaccounted cash amounting to Rs 1.20 crore and unaccounted gold and diamond jewellery worth more than Rs. 1.40 crore were seized.
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