CHENNAI: The move by a pharmaceutical company to seek income tax exemption for bribe they have paid to doctors in the form of commission for promoting its products has bounced back with the Madras High Court taking suo motu cognisance of the unethical practices in the medical industry.
The case prompting the action was an appeal by the Income Tax department against an order of the Income Tax Appellate Tribunal (ITAT), which had ruled in favour of a Pharma company, Fourrts (India) Labs Pvt. Ltd, which claimed deduction of Rs.42.81 lakhs towards “Sales and Promotion Expenses” including payments to doctors for the promotion of the Company’s brands of medicine.
It was also noted that in the previous year, the National Pharmaceutical Pricing Authority [NPPA] had ordered Fourrts to refund the excess amount collected by overcharging drugs higher than those fixed or notified by the Government, within interest. Whereas Fourrts contended that the same could not be considered a penalty and that the same was a refund, the assessing officer disagreed on this aspect.
The assessment order was challenged by the Fourrts before the Commissioner of Income Tax (Appeals), who dismissed the appeal. The appellant, however, succeeded on second appeal before the ITAT. The High Court was approached by the Income Tax Department on further appeal.
While the Court admitted the appeal, the Bench also opined that the case raises larger issues which the Court ought to consider suo motu. The order passed by Bench of Justices N Kirubakaran and P Velmurugan observed that it was being said that a medical mafia is controlling the pharmaceutical field and they are responsible for overpricing drugs.
“… it is complained that drugs are overpriced and unnecessary drugs are being prescribed by a section of medical practitioners at the instance of pharmaceutical companies, apart from prescribing unnecessary tests, scans, X - Rays etc., for commission from diagnostic laboratories, the order said.
“Though the case on hand is a Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 this Court suo motu invokes Article 226 to consider the larger issues of bribing of doctors and overpricing of drugs by Pharmaceutical Companies, as they directly affect citizens violating their rights under Article 21 of Constitution of India.
In particular, the Bench took critical note of the continuing prevalence of medical malpractices such as professionals taking bribes and gifts to promote or overprice particular medical drugs or services, despite laws barring the same.
Opining that there should be an integrated approach to tackle such malpractices, the Court proceeded to suo motu implead the Ministry of Health and Family Welfare, the Ministry of Pharmaceuticals, the NPPA, the Medical Council of India and the Ministry of Chemicals and Fertilizers as respondents.
In the course of the order, the Court also remarked that, the Central Government has to frame statutory 'Uniform Code of Pharmaceutical Practices' at the earliest.
Before parting with the order, the Court posed the various queries to be answered by the respondents. The queries include action taken against those who violate the laws prohibiting the receipt of law against overpricing of drugs etc., details of pharmaceutical companies who have claimed deductions in tax returns for sale promotion expenses, details of doctors who accepted the hospitality from Fourrts to the tune of Rs. 42, 81, 986 during the assessment year 2012-13 and if the action was taken against them and number of complaints received for overcharging of medicines in the past five years. (With inputs from Bar & Bench)
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