M/S APEX LABORATORIES P. LTD. vs. THE DEPUTY COMMISSIONER OF INCOME TAX LARGE TAX PAYER UNIT II

C.A. No.-001554-001554 - 2022Supreme Court2022 INSC 21622 February 2022Bench: HON'BLE THE CHIEF JUSTICE24 pages
For Petitioner: M. P. DEVANATH
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the incentives given by Apex to doctors were prohibited by law as the medical practitioners were forbidden from accepting them. Therefore, these expenses were not allowable as business expenditure under Section 37(1) of the Income Tax Act.

What were the facts?

The appellant, Apex Laboratories, incurred expenditure on gifting 'freebies' to medical practitioners. The tax authorities disallowed a portion of these expenses, arguing they were prohibited by the Indian Medical Council Regulations, 2002, which barred doctors from accepting such incentives.

What were the issues?

Whether expenses incurred by a pharmaceutical company for gifting 'freebies' to medical practitioners are allowable as business expenditure when the medical practitioners are prohibited from accepting them by law.

Which sections of the Income-tax Act were involved?

Section 37(1)

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Cause title — parties, addresses and appearances
1 REPORTABLE IN THE SUPREME COURT OF INDIA (CIVIL APPELLATE JURISDICTION) CIVIL APPEAL NO. /2022 (@ SPECIAL LEAVE PETITION (CIVIL) NO. 23207 OF 2019) M/s Apex Laboratories Pvt. Ltd. …Appellant Versus Deputy Commissioner of Income Tax, Large Tax Payer Unit - II …Respondent

O R D E R S. RAVINDRA BHAT, J.

1.

Leave granted. The appellant (hereinafter, “Apex”) is aggrieved by a judgment of the High Court of Judicature of Madras1, wherein the Division Bench upheld an order of the Income Tax Appellate Tribunal2 (hereinafter, “ITAT”), which in turn upheld an order of the Commissioner of Income Tax (Appeals)3 (hereinafter, “CIT(A)”). The CIT(A) had partly allowed an appeal from an order of the respondent Deputy Commissioner of Income Tax4, which partially allowed amounts claimed by Apex as ‘business expenditure’ under Section 37(1) of the Income Tax Act, 1961 (hereinafter, “IT Act”).

2.

The facts in brief are as follows: On 01.08.2012, the Central Board of Direct Taxes (hereinafter, “CBDT”) issued a circular5, which clarified that expenses incurred by pharmaceutical and allied health sector industries for di

The order continues below.

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