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Direct Tax Amicus: June 2017


Business expenses of pharma companies – A regulatory hurdle -

Pharmaceutical companies incur huge expenses in launching and promoting their products by way of gifts to medical professionals, holding conferences and distribution of promotional material. Tax deductibility of such expenses has been a contentious issue in certain recent tribunal decisions. Revenue authorities contend that these expenses are in contravention of law and not allowable as deduction in view of the Explanation 1 to Section 37 since as per regulation issued by the Medical Council of India, medical practitioners are prohibited from receiving any gift, travel facility for vacations or for attending conferences, hospitality from pharma industry or endorsing publicly any drug. It can also be argued that expenses on arranging conference for promoting the product and sharing field developments cannot be said to be a gift or perquisite. However gifting household items, travel, stay etc., could well be in breach of the Regulations. A distinguishing line between the two categories may be difficult to draw but must be drawn...



  • Revised Safe Harbour Rules notified

Ratio Decidendi

  • Non-inclusion of certain intangibles may not affect character of slump sale – ITAT, Kolkata
  • Marked to market loss on forward contracts which are not stock in trade, not allowable – ITAT, Delhi
  • Payment for sharing of SOPs is taxable as royalty under India-Germany DTAA – ITAT, Ahmedabad
  • Payment of export commission is not Royalty or FTS – Delhi High Court


News Nuggets

  • CBDT releases draft notification on special provisions when a foreign company can be said to be resident in India, on account of PoEM


June, 2017/Issue-34 June, 2017/Issue-34

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