The 2022 budget prohibits pharmaceutical companies from claiming freebies to doctors tax cuts under section 37 of the act. This simply means that these expenses are not considered business deductions and  will count as taxable profit for the pharmaceutical industry. 

The Memorandum of Understanding explaining the provisions of the Expropriation Bill 2022 states that a claim for any costs incurred in providing the foregoing or similar benefits is contrary to the provisions of this Regulation. Regulations of the Medical Council of India (Professional Conduct Ethics and Ethics)  2002 would not qualify under subsection (1) of section 37 of the Act as an expense prohibited by  law. 

In December 2009 the  Medical Council of India Regulations (Code of Conduct Ethics and Ethics)  2002 (Regulations) prohibited physicians and their professional associations from accepting gifts, transportation, hospitality cards, cash or monetary benefits. pharmaceutical and medical industries. 

 In August 2012 the Central  Direct Tax Commission stated that doctors who receive gifts from pharmaceutical companies should declare the equivalent value as business taxable income while companies should clearly state freebies to doctors as such  in their annual accounts. 

Also in 2013 Honorable High Court of Himachal Pradesh rejected petition of Confederation of Indian Pharmaceutical Industry stating that The regulation of the Medical Council prohibiting medical practitioners from availing of ferries is a very salutary regulation which is in the interest of the patients and the public. This Court is not oblivious to the increasing complaints that the medical practitioners do not prescribe generic medicines and prescribed branded medicines only in lieu of the gifts and other freebies granted to them by some particular pharmaceutical industries. 

The latest amendment by the government clarifies that in order to make the intention of the legislation clear and to make it free from any misinterpretation it is proposed to insert another explanation to further clarify that the expression “expenditure incurred by an assessee for any purpose which is an offense or which is prohibited by law”. 

This disallowance was directed to be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid benefits and claimed it as a deductible expense in its accounts against income.

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