February 27, 2021

No justification to disclaim drug cos deduction of bills incurred on freebies to docs: ITAT



Mumbai: The Earnings Tax Appellate Tribunal (ITAT) has stated there isn’t any justification to disclaim drug firms deduction of bills incurred on offering freebies to docs on the idea of a CBDT round and the Indian Medical Council laws.

A bench comprising judicial member Ravish Sood and accountant member G Manjunatha dominated {that a} Central Board of Direct Taxes round and the IMC’s laws couldn’t be relied upon to disallow a drug firm’s expenditure claims. The IMC’s code of conduct applies solely to medical practitioners and docs and to not pharmaceutical firms and the healthcare sector, it stated.

“The CBDT has no energy to increase the scope of the IMC regulation to pharmaceutical firms with none enabling provision both underneath the Earnings Tax Act or the IMA laws,” the bench noticed.

The ITAT stated CBDT circulars can not impose a burden on an assessee, not to mention create a brand new burden, by enlarging the scope of a regulation issued underneath one other act. ET has reviewed a replica of the order.

The matter pertained to tax returns filed by Mumbai-based Medley Prescription drugs Ltd. in September 2012, declaring whole revenue of Rs 29.29 crore. An revenue tax official assessed the corporate’s revenue at Rs 49.23 crore in March 2015, after disallowing bills of Rs 5.37 crore in freebies to docs as a deduction.

The scope and ambit of statutory provisions within the Indian Medical Council Act, 1956, associated to skilled conduct are restricted to medical practitioners registered with the State Medical Council and people whose names are entered within the Indian Medical Register, the bench stated.

The scheme of the Indian Medical Council Act, 1956, offers solely with the conduct of particular person registered medical practitioners, the ITAT stated within the order.

“Even in any other case, the enlargement of the scope of MCI regulation to the pharmaceutical firms by the CBDT is dehors (exterior the scope of) any enabling provision both underneath the Earnings Tax Act or underneath the Indian Medical Council laws,” it stated.

The ITAT stated that although the CBDT can tone down the rigours of regulation in an order to make sure truthful enforcement of the provisions by issuing circulars for clarifying statutory provisions, “it’s divested of its powers to create a brand new impairment antagonistic to an assessee, or to a category of assesses, with none sanction or authority of regulation.”