Business expenditure u/s 37(1) - pharmaceutical companies’ ...

Case Laws     Income Tax

February 25, 2022

Business expenditure u/s 37(1) - pharmaceutical companies’ gifting freebies to doctors, etc. - The incentives (or “freebies”) given by Apex, to the doctors, had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their practice of medicine. Those sanctions are mandated by law, as they are embodied in the code of conduct and ethics, which are normative, and have legally binding effect. The conceded participation of the assessee- i.e., the provider or donor- was plainly prohibited, as far as their receipt by the medical practitioners was concerned. That medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor, i.e., Apex. - Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. - SC

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