CBDT Circular prohibiting Freebies to Doctors does not applicable to Distributor of Generic Medicines, without Evidence: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the circular issued by the Central Board of Direct Taxes (CBDT) prohibiting freebies to doctors by pharma companies has no application on distributors of generic medicines without proper investigation and evidence against the assessee.

The assessee, M/s Medi Sales is engaged as pharmaceutical distributors. The Company sells goods to traders and small distributors and to incentivize the chain, it offers gifts which are in the shape of gold items and novelties. The sole grievance of the assessee was relating to disallowance of Business Promotion Expenses by the income tax department.

The division bench comprising Shri Mahavir Singh, Vice President and Shri Manoj Kumar Aggarwal, AM has observed that there is no evidence on record that the assessee wasgiving such gifts to doctors and medical professionals.

“No investigation whatsoever has been carried out to support the same. In such a case, CBDT circular would have no applicability to the case of the assessee. As noted in the impugned order, the business promotion expenses as incurred by the assessee were a normal business practice and net expenditure was merely 1% of total turnover of the assessee. The assessee has already produced invoices, vouchers and ledgers extracts to support the expenditure. At the same time, considering the nature of expenditure, personal element could not be ruled out,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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