Dolo-650 Makers under I-T Scanner: Govt Alleges Unethical Business, Rs 300-Crore Tax Evasion

The Central Board of Direct Taxes has accused the makers of a popular medicine tablet of indulging in “unethical practices” and giving away freebies of around Rs 1,000 crore to medical professionals and doctors in order to get them to promote the products made by the pharmaceutical group. This comes after the Income Tax department had on July 6 conducted a search action covered around 36 premises of premises of the Bengaluru-based pharmaceutical company, which are spread across nine States.

As per reports, the accused in this case is the makers of Dolo-650 tablet, Micro Labs Ltd.

During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized, said the income tax department in a statement on Wednesday, July 13. The CBDT said in the statement that the department seized “unaccounted” cash of Rs 1.20 crore and gold and diamond jewellery of Rs 1.40 crore.

“The initial gleaning of the evidence has revealed that the group has been debiting in its books of account unallowable expenses on account of the distribution of freebies to the medical professionals under the head ‘sales and promotion’,” it said.

“These freebies included travel expenses, perquisites and gifts etc. to doctors and medical professionals for promoting the group’s products under the heads “Promotion and Propaganda”, “Seminars and Symposiums”, “Medical Advisories” etc. The evidence indicates that the group has adopted unethical practices to promote its products/ brands,” the department further alleged.

“The quantum of such freebies detected is estimated to be around Rs 1000 crore,” said the CBDT in its statement.

While the CBDT statement did not identify the group, sources quoted by news agency PTI confirmed it to be Micro Labs Ltd. An email sent to Micro Labs Ltd. seeking its response on the claims made by the department remained unanswered, PTI said in its report.

Meanwhile, the CBDT alleged that the said group was also found to have claimed artificially inflated deduction under special provisions in respect of certain incomes, by resorting to suppression of expenses and over-appropriation of revenue to the unit eligible for such deduction.

“Various other means of tax evasion, including inadequate allocation of research and development expenses to eligible units and inflated claim of weighted deduction under section 35 (2AB), have also been detected. The quantum of tax sought to be evaded through such means is estimated at over Rs 300 crore,” it said.

The department further alleged that “instances of violation of provisions of tax deduction at source” under section 194C of the Income-tax Act, 1961 have also been detected in respect of transactions under contracts entered into with the third-party bulk drug manufacturers.

Dolo-650, an analgesic (pain killer) and antipyretic (fever-reducing ) oral tablet, was being extensively prescribed by doctors and medical shop owners for coronavirus patients to reduce pain and fever, common symptoms experienced by those infected.

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