Leading Bengaluru pharma company in trouble for concealing Rs 1000 crore income to dodge tax

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The Income Tax Department has detected that a leading Bengaluru-based pharmaceutical group has dodged tax to the tune of Rs 300 crore which it should have paid up, according to information provided by the Finance Ministry today.</p>
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The initial gleaning of the evidence found in the tax raid has revealed that the group has been debiting in its books of account unallowable expenses of a whopping Rs 1000 crore on account of distribution of freebies to the medical professionals under the head “Sales and Promotion”.</p>
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The search and seizure operations on the group which has presence in over 50 countries were carried out on July 6.  The search action covered around 36 premises spread across 9 States.</p>
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Reports had emerged on the same date that income tax raids were conducted on the premises of Micro Labs Ltd, a company that manufactures Dolo-650 tablets used for treating Covid-19 patients.</p>
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The Rs 1,000 crore worth 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.</p>
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During the search action, unaccounted cash amounting to Rs. 1.20 crore and unaccounted gold and diamond jewellery worth more than Rs. 1.40 crore have also been seized. </p>
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Substantial incriminating evidence, in the form of documents and digital data, has been found and seized from the premises of the group engaged in the business of manufacturing and marketing of pharmaceutical products and Active Pharmaceutical Ingredients (API).</p>
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The group is 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.</p>
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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.</p>
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Further investigations are still in progress.       </p>
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<strong>Also read: <a href="https://www.indianarrative.com/economy-news/rs-crore-black-money-trail-unearthed-in-tax-raid-on-two-top-bengaluru-hyderabad-real-estate-groups-183281.html">Rs 500 crore black money trail unearthed in tax raid on two top Bengaluru & Hyderabad real estate groups</a></strong></p>