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"Thus, in guise of the use of funds for Medical Education the funds were used for providing freebies to doctors like travel, stay etc. It is clear that the grant was not utilized for the purposes of Medical Education of doctors as claimed. This shows that the grants are nothing but a façade used to camouflage the freebies provided to doctors as quid pro quo for the business provided to the assessee company in the form of increased prescriptions of its medicines by such doctors and thereby increased sales for it.

On taking a holistic view of the facts on record of violations of Medical Council of India Guidelines, which were required to be explained, the submission of the assessee company is found to be completely inadequate and is not found to give any plausible justification for the claim of expenditure in the hands of the assessee company. It is settled law that the onus of providing justification for the claim of any expenditure is on the claimant which in this case is the assessee. It is seen that the assessee company has given advances to the IFMER Trust purportedly for organizing Medical Education Programmes for Doctors. It was admitted on behalf of the Trust by its Chief Trustee that he did not organize any Medical Conferences and the funds were expended on instruction of the assessee company received through its employees on providing freebies to doctors. The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations. 2002 (the regulations) further amended on 10/12/2009, prohibits the medical practitioners and their professional associations from taking any gift, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied health sector industries. It is further seen that Circular No 05/20212 issued by the CBDT, New Delhi prohibits the allowance of expenditure which is in violation of the aforesaid regulations. The assessee company has neither denied the existence of the violations pointed out nor has it given any justification for claim of the expenditure in the background of the violations done at its behest. Therefore, the submission is found to be without any substance and is not found to be plausible. The intention of the assessee is clearly to create a façade of giving Grants for Medical Conferences and in the guise to provide freebies to doctors. By entering in this arrangement the assessee company has avoided the disallowance of the expenditure mandated under explanation (1) to Sec 37(1) of the IT Act. The Hon'ble Supreme Court in the case of M/s Apex Laboratories Pvt. Ltd [135 Taxmann.com 286(SC)]has taken note of the following in Para (34):

"It is also a known principle that what cannot be done directly, cannot be achieved indirectly. As was said in Fox v. Bishop of Chester that it is a:
"Well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance"

And that :

"To carry out effectually the object of a Statute, it must be construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined"

Therefore, the assessee company's act of routing the expenses through IFMER does not exempt the assessee company from the disallowance envisaged under explanation (1) to Sec 37(1) of the IT Act. The Hon'ble Supreme Court has conclusively held that since acceptance of freebies by medical practitioners was punishable as per Circular issued by Medical Council of India under MCI regulations, 2002, gifting of such freebies by pharmaceutical company to medical practitioners would also be prohibited by law and thus, expenditure incurred in distribution of such freebies would not be allowed as a deduction in terms of Explanation 1 to section 37(1) of the Act. The Hon'ble Supreme Court has further held-

The decision of the Hon'ble Supreme Court has now become the law of land which not only prohibits medical practitioners from accepting freebies but also provider or donor from providing or giving freebies. In light of the above findings and discussion grants provided by the assessee to IFMER considered as freebies to the medical professionals shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by law and which are against public policy as per the MCI Regulations in view of the CBDT Circular No 05/2012 and the Supreme Court's decision in the case of M/s Apex Laboratories Pvt. Ltd [135 Taxmann.com 286(SC)]. Therefore, the entire amount of Rs 1,75,68,000/- appearing in the ledger as provided to IFMER is added back as inadmissible expenditure under section 37(1) of the Act."