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A judgment on issue of illegal, prohibited payments not allowable That medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor – held so by the Supreme Court such expenses are not allowable. |
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A judgment on issue of illegal, prohibited payments not allowable That medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor – held so by the Supreme Court such expenses are not allowable. |
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A judgment on issue of illegal, prohibited payments not allowable That medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor – held so by the Supreme Court such expenses are not allowable. Recent judgment: CIVIL APPEAL NO… /2022 (@ SPECIAL LEAVE PETITION (CIVIL) NO. 23207 OF 2019) Dated: - 22 February 2022 Related judgments of High Court and Tribunal are reported as follows: Earlier articles by the same author on this subject:
Huge amounts are spent: In name of advertisement, publicity and product promotion pharmaceutical companies and diagnostic centers are spending huge amount in providing freebies to doctors. Referral commission is also being paid. These payments are in fact unwanted and undesired incentives to doctors who play role in prescribing costly medicines many of which are not at all required, unnecessary diagnosis are asked. For this pharmaceutical and diagnostic companies are paying huge amount to doctors. Situation is so serious that we can find cases in which referral commission is paid to doctors which is much higher to remuneration paid to doctors who prepare diagnostic reports. From reported judgments we can find a hint of magnitude of such expenses incurred by these organizations. From reported judgments we find that many of disallowances were deleted because payments related to period prior to effective dates of amendment and notifications. After date of amendments there was difference of opinion. A view was taken that restrictions on receiving gifts and freebies apply to doctors who receive and not to persons who pay that is pharmaceutical and diagnostic companies. Another view was that it apply to both. Such payments are against public policy and harmful for public as patients. In case of APEX LABORATORIES PVT. LTD supra The CIT(A) has granted the assessee the benefit of the expenditure till 14.12.2009 and has restricted the disallowance by invoking the explanation to Sec.37(1) of the Act for the period from 14.12.2009. This view has been confirmed by Tribunal, High Court and the Supreme Court in the chain of judgments referred above. Analysis of judgment of the Supreme Court: Agreement between the pharmaceutical companies and the medical practitioners in gifting freebies for boosting sales of prescription drugs is “prohibited by law”? Illegal or immoral act: The Court held and reiterated that it is a settled principle of law that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) . Meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self-defeating. 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. Denial of tax benefit is not penalizing: Denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Participation in illegal and immoral act is not permissible - its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. The incentives (or “freebies”) given by assesse / Apex, to the doctors, had a direct result of exposing the recipients ( that is doctors) to the odium of sanctions, This can lead to a ban on their practice of medicine. Those sanctions are mandated by law, as they are embodied in the code of conduct and ethics, which are normative, and have legally binding effect. The conceded participation of the assessee- i.e., the provider or donor- was plainly prohibited, as far as their receipt by the medical practitioners was concerned. medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor, i.e., assesse / Apex. Supreme Court held that “ In view of the foregoing discussion, the impugned judgment cannot be faulted with and thus the appeal of assesse was dismissed. So now position is that expenses incurred for such freebies which are really not to provide information about new products but in fact are payments as inducement to doctors to prescribe medicines other than generic medicines, prescribe unnecessary medicines and unnecessary tests in laboratories and diagnostic centers. In search for judgments with Search Text: freebies gifts to doctors author found 73 Records in which different views were taken as discussed earlier. Let us hope that after this judgment rampant corruption in medical profession will be checked to some extent. However, in view of competitive business having high costs of capital and fixed costs, businessman in such business will have to find out some way to generate demand for products and services. If all doctors apply there knowledge in examination of patients to find out ailments by taking history of patients, requirements of laboratory test and diagnostic reports can be reduced considerably.
By: DEV KUMAR KOTHARI - March 1, 2022
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Sir, Your talent, knowledge, hard work and dedication towards society are par excellence.
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