Pharma promotions tax exempt: tribunal

Pharma promotions tax exempt: tribunal

Context:

• A recent decision of the Income Tax Appellate Tribunal’s Pune bench allowing pharmaceutical companies to account for their spending on doctors as a deductible expenditure has sparked off a fresh debate on ethics.

More in news:

• Since the companies are out of the purview of the Medical Council of India (MCI), money spent on promotions, which in some cases could be gifts, travel, hospitality and so on for doctors, besides medical conferences and samples, can be claimed as deductible expenditure.
• Doctors accepting such promotions may be violating the code of ethics of the MCI.

Why is it in news?

• The tribunal’s order came in a case involving Emcure Pharmaceuticals Ltd, which filed returns in which expenses of Rs. 2.07 crore were claimed as ‘advertisement sales promotions’.
• Of this, about Rs. 50 lakh was for ‘print and promotion’ and the remaining Rs. 1.57 crore was for ‘sales promotions’.
• The pharma company’s claim was disallowed by the IT department on the ground that it violated the MCI code of ethics.
• However, the IT Appellate Tribunal reversed the decision by the assessing officer and ruled in favour of the company.

Conclusion:

• The MCI code may not govern pharma companies but there are ethical problems as it directly affects patients.
• The companies should have a code of ethics.