The Apex Committee For Pharma Marketing Practices has looped Central Board of Direct Taxes (CBDT) in the case where a Pharma Company, Abbvie Healthcare was involved in unethical distribution of freebie to the 30 healthcare professionals in the form of foreign trips.
The apex committee has requested the Central Board of Direct Taxes (CBDT) to evaluate the tax liability of M/s. AbbVie Healthcare India Pvt Ltd along with 30 Heathcare Practitioners and take action in accordance with the provisions of the Income Tax Act, 1961 read with the subordinate circulars issued in this regard.
On May 21, 2024, the Department of Pharmaceuticals received an anonymous complaint, accompanied by documents supporting the claims, concerning unethical marketing practices related to AbbVie Inc.’s subsidiary AbbVie Healthcare India Private Ltd, alleging a breach of the Uniform Code for Pharmaceutical Marketing Practices (UCPMP).
The complaint outlined that the pharmaceutical company – AbbVie provided travel tickets and hotel accommodations for extravagant pleasure trips under the guise of conferences (Aesthetics & Anti-Aging Medicine World Congress 2024), which took place from February 1 to 3, 2024, and from March 26 to 29, 2024, in Monaco and Paris, respectively, for 30 doctors connected to the medical aesthetics/anti-ageing products (Botox and Juvederm).
The supporting documents comprised AbbVie’s internal records, featuring a sales and expense tracker, outlining the expenditures for each doctor’s travel and copies of flight tickets and hotel booking vouchers.
The conduct of the pharmaceutical company(s) with the Healthcare professionals (HCPs) was initially regulated under UCPMP 2014, and later, following the new code under UCPMP 2024. Both the 2014 and 2024 codes are grounded in the shared principle: they forbid pharmaceutical companies from offering ‘Travel and Hospitality,’ to any healthcare professional.
Income Tax On Freebies Prohibited By Law
The Supreme Court in the case of M/s Apex Laboratories Pvt. Ltd. versus Deputy Commissioner of Income Tax, Large Taxpayer Unit – II has held that incentives (or freebies) given by the taxpayer to the doctors has resulted in exposing such doctors to potential sanctions, as embodied in the code of conduct and ethics. The court observed that prohibition on the medical practitioners’ acceptance of such freebies is applicable to the payer as well. Accordingly, expenditure incurred on such freebies will be inadmissible under section 37 of the Income-tax Act, 1961 (the Act) in the hands of the taxpayer, as it is ‘prohibited by law’.
