HomeLegal NewsSection 194R of IT treating “Samples”to doctor as “Freebies” challenged in HC

Section 194R of IT treating “Samples”to doctor as “Freebies” challenged in HC

Bengaluru : Individual pharmaceutical companies and the Karnataka Drugs and Pharmaceuticals Association have approached the High Court of Karnataka challenging Section 194R of Income Tax Act which treats the free samples to the doctors by the pharma’s as freebies. The petition has challenged the circular dated 16 June, 2022 by the Ministry of Finance which has directed the pharma companies to deduct 10% TDS on the value of free samples provided by them to doctors. Effectively as and when the pharma companies give free samples to a doctor they have to obtain the PAN number of the doctor to whom the free sample is given and the PAN number has to be uploaded in the pharma IT returns. In turn the free samples will be considered as freebies to the doctors and the value of the free samples will be considered as the income of the doctor to whom the free sample has been provided.

The petition is challenging section 194R which was included in the IT Act earlier this year and came into effect from 1st July. The petition is being heard by a division bench headed by Acting Chief Justice Alok Aradhe. The petition claims “The free sample of medicines given to the medical practitioners is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors or for promotion of its products.” The petition further claimed that the circular is illegal and including free samples under Section 194R of the Income Tax (IT) Act, along with freebies like gold, cash and laptops, was irrational. Therefore, “the value of free samples of medicines given to physicians by pharmaceutical companies, cannot be treated as freebies,” according to the petition.

Pharma companies organise seminars and conferences for medical practitioners. The existing ethical code bars gifts to doctors or their families and the bar includes recreational activities and free tickets to events. The petition in the HC says that seminars and conferences organised by the pharma companies for doctors is to update them “of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies.”