The Supreme Court ruled on Tuesday that drug corporations can’t claim a tax break for freebies given to doctors since it’s against the law. M/s Apex Laboratories stated that the regulations prohibited doctors from taking gifts, but that drug corporations are not prohibited from doing so.
Apex could not be denied the advantage of claiming exclusion of expenditures paid on the delivery of such freebies under Section 37(1) of the Income Tax Act, 1961, in the absence of any clear limitation by law, according to the company.
This claim was dismissed by a court consisting of Justice UU Lalit and Justice S Ravindra Bhatt. Apex Labs has petitioned the court to overturn a Madras High Court judgment denying the corporation this advantage. Expenses paid by pharma and allied health sector firms for distribution of incentives (i.e. freebies) to medical practitioners were disallowed under a CBDT circular released on August 1, 2012, if they were for any purpose that is a “offense” or “prohibited by law.”