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8,700 Pharma Cos Claimed Tax Deductions For ‘Gifts’

NEW DELHI: Pharma companies often refute allegations that doctors and chemists are sought to be “influenced” to push specific medicine brands, costly alternatives and even needless prescriptions but the evidence is out that this does not prevent them from claiming tax deductions on such expenses.

Around 8,667 pharmaceutical companies claimed income tax deduction under “sales promotion expenses” and “gifts” during 2019-20, the income tax department informed the Madras high court in response to a suo motu case taken up by the court against such unethical marketing practices.

“Though details have been given, it is evident from details furnished by the Income Tax department that about 1,410 companies during the assessment year 2019-20 (ITR-3), 1,915 companies during the assessment year 2019-20 (ITR-5) and 5,342 companies during assessment year 2019-20 (ITR-6) alone claimed deduction under “Sales Promotion Expenses” and ‘Gift’,” a two-judge bench comprising of N Kirubakaran and P Velmurugan said in a February 17 order.

Interestingly, the irregularities initially came to light in a tax dispute case between a pharmaceutical company and the I-T department. While the company wanted to pass the overcharged amounts as mere excess amount collected from consumers and dubbed them as refunds to the drug regulator, the tax authorities said overcharging is a violation of law and the amount paid to the National Pharmaceutical Pricing Authority (NPPA) was actually a penalty.

The judges said, “It is shocking and surprising to note that the company claimed deduction from Income Tax for the amount spent towards sale promotion expenses as well as for licences & taxes.”

Information provided by the I-T department, prompted the court to take up the issue of unethical marketing practices by pharma companies. In an earlier order, the court said “promotional expenses including payment to the doctors” is “nothing but bribing”.

“It is clear that even though it is prohibited under law, the pharmaceutical companies are still promoting their drugs by providing gifts, travel facilities, hospitality, cash or monetary grant to the doctors. It is also proved that drugs are overpriced illegally by the companies,” one of the orders said pulling up companies for such practices.

The HC directed the I-T department to submit details about such claims made by companies, names of doctors as well as penalties paid by companies for drug overpricing.-Times Of India  

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