Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Income Tax Act 1961: |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case(s) Referred | Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6 Referred Case 7 Referred Case 8 |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Dismissed |
Headnote | Income Tax Act, 1961: s.37(1), Explanation 1 – Pharmaceutical companies gifting freebies to doctors etc. is clearly prohibited by law and not allowed to be claimed as a deduction under s.37(1) of the Act – An amendment to the Medical Council Act, 1956 (now repealed) through the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 published in the Official Gazette on 14.12.2009, disallowed medical practitioners from accepting emoluments in the form of inter alia gifts, travel facilities, hospitality, cash or monetary grants – On 01.08.2012, CBDT also issued a circular, which clarified that expenses incurred by pharmaceutical and allied health sector industries for distribution of incentives (i.e., “freebies”) to medical practitioners are ineligible for the benefit of Explanation 1 to s.37(1), which denies the application of the benefit for any purpose which is an ‘offence’ or ‘prohibited by law’ – When acceptance of freebies is punishable by the MCI (the range of penalties and sanction extending to ban imposed on the medical practitioner), pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium – Doctors and pharmacists being complementary and supplementary to each other in the medical profession, a comprehensive view must be adopted to regulate their conduct in view of the contemporary statutory regimes and regulations – Therefore, denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company – Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure – Medical practitioners have a quasi-fiduciary relationship with their patients – Therefore, it is a matter of great public importance and concern, when it is demonstrated that a doctor’s prescription can be manipulated, and driven by the motive to avail the freebies offered to them by pharmaceutical companies, ranging from gifts such as gold coins, fridges and LCD TVs to funding international trips for vacations or to attend medical conferences – These freebies are technically not ‘free’ – The cost of supplying such freebies is usually factored into the drug, driving prices up, thus creating a perpetual publicly injurious cycle – The 2002 Regulations, applicable to all medical practitioners (including doctors in private practice), was introduced w.e.f. 14.12.2009 – Thus, pharmaceutical companies’ gifting freebies to doctors, etc. is clearly “prohibited by law”, and not allowed to be claimed as a deduction under s.37(1) – Doing so would wholly undermine public policy. Interpretation of statutes: Interpretation of taxing statutes – Taxing statutes need to be interpreted strictly – Income Tax Act, 1961. |
Judge | Hon'ble Mr. Justice S. Ravindra Bhat |
Neutral Citation | 2022 INSC 216 |
Petitioner | M/s Apex Laboratories Pvt. Ltd. |
Respondent | Deputy Commissioner Of Income Tax, Large Tax Payer Unit - Ii |
SCR | [2022] 2 S.C.R. 126 |
Judgement Date | 2022-02-22 |
Case Number | 1554 |
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