Expenses incurred by pharmaceutical company for distribution of incentives i.e. “freebies” to medical practitioners/doctors are not eligible for the benefit of S. 37(1) of the IT Act, 1961 It is also a settled principle of law that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self- defeating. Doctors and pharmacists being complementary and supplementary to each other in the medical profession, a comprehensive view must be adopted to regulate their conduct in view of the contemporary statutory regimes and regulations. Therefore, denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure i.e. for the expenditure to be allowed in computing the income chargeable, as the same fell within the umbrage of S. 37(1) Expln. 1 of the IT Act, 1961.
[Apex Laboratories (P) Ltd. v. CIT, (2022) 7 SCC 98]