The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) in a recent ruling while allowing deduction to pharma company has held that the free samples to doctors recognised under Uniform Code of Pharmaceutical Marketing Practices by The Department of Pharmaceuticals (UCPMP) guidelines were not violative of Indian Medical Council (MCI) Rules
Assessee Merk Limited, subsidiary of Merk Group Germany was a company engaged in the business of manufacturing of pharmaceutical filed its return of income declaring income. The return of income was picked up for scrutiny where the assessing officer (ao) disallowed conference expenses with respect to the sales promotion and restricted the disallowance of 50% regarding free sample distributed
Arati Vissanji who appeared for the assessee submitted that the conference expenses were expense incurred for the purpose of business of the assessee. He also submitted that the disallowance in support of free sample had been deleted by the co-ordinate bench in assessee’s own case earlier.
Samuel Pitta on behalf of the revenue referred the decision in apex laboratory private limited vs. DCIT in his contentions.
The bench of Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail(Judicial Member) observed that , “free samples help impart knowledge to other doctors about the new medicine/product coming into the relevant practice of their profession. Therefore, distribution of free samples is directly related to business promotion activity of the pharmaceutical company.”
“Providing samples of pharmaceutical products is not prohibited under either The Indian Medical Council (Professional Conduct, Etiquette and Ethics), regulations 2002 (mci code) or the Uniform Code Of Pharmaceutical Marketing Practices By The Department Of Pharmaceuticals, 2014 (UCPMP) or 2019 organization of pharmaceutical producers of India (OPPI) code of practice. The UCPMP prescribes guidelines under which medical samples should be dispensed which ensure that they are used strictly for clinical evaluation purposes and each sample shall be marked “free medical sample – not for sale” the bench said. The bench further directed the lower authority to delete the disallowance of expenses on free samples and allowed the appeal.
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