In Brief
Apex Laboratories challenged the denial of tax deduction under Section 37(1) of the Income Tax Act for expenditure on gifts and freebies supplied to doctors to promote their products. The High Court upheld the disallowance, holding that such expenditure was prohibited by the Medical Council's ethical regulations. The Supreme Court dismissed the appeal, ruling that pharmaceutical companies gifting freebies to doctors—conduct prohibited by the Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002—cannot claim the expenditure as a deduction. The Court held that the prohibition applied equally to both giver and receiver, and allowing such deduction would defeat public policy and encourage manipulation of prescriptions, burdening patients with unnecessary costs for branded over generic medicines.
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