The doctors and medical establishments accepting "gifts" will also be taxed, according to the circular by the Department.
Coming down heavily on pharmaceutical and allied health sector industries, the Income Tax Department has in a circular said that it will tax the amount spent by these companies on “providing freebies to medical practitioners and their professional associations”.
The doctors and medical establishments accepting “gifts” will also be taxed, according to the circular by the Department.
The circular said: “It has been brought to the notice of the Central Board of Direct Taxes that some pharmaceutical and allied health sector industries are providing freebies to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India, a regulatory body constituted under the Medical Council Act, 1956.”
The Medical Council had in 2009 imposed a prohibition on medical practitioners and their professional associations from taking any gifts, travel facility, hospitality, cash or monetary grant from pharmaceutical and allied health sector industries.
Explaining the new set of guidelines, the Income Tax circular noted: “Section 37(1) of the Income Tax Act provides for deduction of any revenue expenditure (other than those failing under Sections 30 to 36) from the business income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense if the same has been incurred for a purpose which is either an offence or prohibited by law. Thus the claim of any expense incurred in providing freebies in violation of the provisions of the Indian Medical Council regulations shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law.”
Not sparing the doctors and medical establishments, the Department noted: “The sum equivalent of the freebies enjoyed by the medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case.”
Hailing this as a historic move to curb corruption in the medical profession, RTI activist and physician Dr. Babu K.V. speaking to The Hindu over phone said: “This is a step in the right direction which will give more teeth to the Medical Council of India. We welcome this decision.”
Indian Medical Association member Dr. Anil Bansal said: “The Income Tax Department should also look at including in the net quacks who are not only working without adequate or no qualification but also reaping additional benefits and making money through pharmaceutical companies.
This is a move in the right direction and we hope both the pharmaceutical companies and doctors will cooperate.”
Keywords: pharmaceuticals, IT dept raid, freebies to medical practitioners, Income Tax circular, Medical Council Act, 1956, corruption in medical profession
A long needed decision. But this should be stronger involving financial
penalties on both parties besides separate action under the Code of
Ethics. All the MCI needs to do is to clamp down on some black sheep
(stringent action which should extend to suspension of registration);
that will be a deterrent to other criminals in our medical community.
This is a welcome move and would be a historic decision once
implemented. This will not only curb the unethical practice widely by
the pharmaceutical companies in connivance with corrupt doctors who
just take this noble profession as just another means to pile up
resources but will also have impact on our economy. I think FMCG
industry as raised by another reader here can not be equated with this
however if it is to be believed that they are spared from this it is
not. Nowhere in country these FMCG industry ever lure any vendor such
hugely by way of giving freebies etc. Celebrities who endorses as
brand ambassadors are already being levied 8% service tax.
Lots of money is spent on this freebies which ultimately is borne by the patients as this element is included in the cost of the medicines. Hope the benefit of this measure will be passed on to the patients.
This in effective means that all the advertisement expense incurred by Pharma Companies will be taxed. Question is why should it apply to only Pharma Companies ?. Why not on consumer products and FMCG compnies. These companies use famous models and bollywood actors to lure public to use their produts. Why should this expense too not be taxed. This will increase huge revenues to IT deptt. Why single out Pharma companies only ? If it means the retrospective payment of taxes from Dec 2009 many pharma companies will crash as they will be unable to pay this liability. Any such law should be prospective in nature and not retrospective. Due some company having erred maybe, the draconian law will take the sheen out of the once sunrise industry that Pharma industry was called.
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