Case BriefsSupreme Court

Supreme Court: In a case where the Division Bench comprising of Uday Umesh Lalit and S. Ravindra Bhat*, JJ., was to answer whether absence of express provision prohibiting the pharmaceutical companies from providing freebies to the medical practitioners be considered prohibited by law when acceptance of freebies by medical practitioners is expressly made an offence, answering in affirmative, the Bench observed,

“…the cold letter of the law is not an abstract exercise in semantics which practitioners are wont to indulge in. So viewed the law has birthed various ideas such as implied conditions, unspelt but entirely logical and reasonable obligations, implied limitations etc.”

The genesis of the issue was that Apex Laboratories Pvt. Ltd., a pharmaceutical company was issued a notice under Section 142(1) of the Income Tax (IT) Act, 1961 to explain why the expenditure of Rs. 4,72,91,159 incurred towards gifting freebies such as hospitality, conference fees, gold coins, LCD TVs, fridges, laptops, etc. to medical practitioners for creating awareness about the health supplement ‘Zincovit’, should not be added back to the total income of Apex.

Noticeably, an amendment to the Medical Council Act, 1956 through the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 published in the Official Gazette on 14-12-2009, disallowed medical practitioners from accepting emoluments in the form of inter alia gifts, travel facilities, hospitality, cash or monetary grants. Consequently, on 01-08-2012, the Central Board of Direct Taxes issued a circular, which clarified that expenses incurred by pharmaceutical and allied health sector industries for distribution of incentives (i.e., “freebies”) to medical practitioners are ineligible for the benefit of Explanation 1 to Section 37(1), which denies the application of the benefit for any purpose which is an ‘offence’ or ‘prohibited by law’.

Findings of the Courts Below

Therefore, CIT(A) had held that the amounts spend by Apex for distribution of freebies would not classify as ‘business expenditure’ under Section 37(1) of the IT Act, 1961. The order of CIT was concurrently upheld by the Income Tax Appellate Tribunal and the High Court. Relying on the Regulations, 2002, the High Court further held that only the expenses incurred till 14-12-2009 were eligible for the benefit of Section 37(1), and not for the entirety of the Assessment Year 2010-2011, as claimed by Apex.

Contentions of the Parties

The Apex contended that while medical practitioners were expressly prohibited from accepting freebies, no corresponding prohibition in the form of any binding norm was imposed on the pharmaceutical companies gifting them. In the absence of any express prohibition by law, Apex could not be denied the benefit of seeking exclusion of the expenditure incurred on supply of such freebies under Section 37(1).

On the contrary, the State submitted that Parliament’s intention to disincentivize the practice of receiving extravagant freebies in exchange for prescribing expensive branded medication over its equally effective generic counterparts, thereby burdening patients with unnecessary costs, was apparent from the amended Regulations, 2002 and the menace of prescribing expensive branded medication as a quid pro quo arrangement had a direct bearing on public policy, which was implicit in the Regulations, 2002.

Observations and Analysis

Section 37 of the IT Act is a residuary provision which states that any business or professional expenditure which does not ordinarily fall under Sections 30-36, and which are not in the nature of capital expenditure or personal expenses, can claim the benefit of exemption. But the exemption is not absolute and Explanation 1, restricts the application of such exemption for “any purpose which is an offence or which is prohibited by law”.

Doubting the position as had been laid down in CIT 8(2) v. PHL Pharma P. Ltd. (ITA No. 4605/Mum/2014, dated 12.01.2017), that the 2002 Regulations were inapplicable to pharmaceutical companies, and there was no enabling provision to allow the CBDT to bring pharmaceutical companies within the fold of the 2002 Regulations, and even if such an act were to be permitted, it could be only be done so prospectively, the Bench opined,

Such a narrow interpretation of Explanation 1 to Section 37(1) defeats the purpose for which it was inserted, i.e., to disallow an assessee from claiming a tax benefit for its participation in an illegal activity.”

The Bench observed,

“It is but logical that when acceptance of freebies is punishable by the MCI, pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium.”

Thus, the Bench noted that acceptance of freebies given by pharmaceutical companies is clearly an offence on part of the medical practitioner, punishable with varying consequences which falls within the purview of “prohibited by law” in Explanation 1 to Section 37(1).


Emphasising on the 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, the Bench opined that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self-defeating. Observing that a doctor’s prescription is considered the final word on the medication to be availed by the patient, even if the cost of such medication is unaffordable or barely within the economic reach of the patient, the Bench noted,

“…it is a matter of great public importance and concern, when it is demonstrated that a doctor’s prescription can be manipulated, and driven by the motive to avail the freebies offered to them by pharmaceutical companies, ranging from gifts such as gold coins, fridges and LCD TVs to funding international trips for vacations or to attend medical conferences.”

The Bench noted that these freebies are technically not ‘free’ – the cost of supplying such freebies is usually factored into the drug, driving prices up, thus creating a perpetual publicly injurious cycle due to prescribing medication that is significantly marked up, over effective generic counterparts in lieu of such a quid pro quo exchange. Further, the agreement between the pharmaceutical companies and the medical practitioners in gifting freebies for boosting sales of prescription drugs was also held to be violative of Section 23 of the Contract Act, 1872 as Pharmaceutical companies misuse a legislative gap to actively perpetuate the commission of an offence.


In the instant case, the freebies given by Apex, to the doctors had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their practice of medicine. Therefore, the Bench held that the medical practitioners being forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor, i.e., Apex. Hence, the appeal was dismissed.

[Apex Laboratories Pvt. Ltd. v. CIT, 2022 SCC OnLine SC 221, decided on 22-02-2022]

*Judgment by: Justice S. Ravindra Bhat

Appearance by:

For the Appellant: S. Ganesh, Senior Advocate

For the Respondents: Sanjay Jain, ASG

Kamini Sharma, Editorial Assistant has put this report together 


Case BriefsHigh Courts

Madhya Pradesh High Court: The Division Bench comprising of Sujoy Paul and Arun Kumar Sharma, JJ., held that the Demonstrators and Tutors working in cities/urban areas are to be treated as ‘in-service candidates’ as neither the relevant order nor the rule precludes the Medical Officers working in urban areas or hospitals from benefit of being ‘in-service candidate’. The Bench remarked,

“If we hold that the Demonstrators and Tutors are eligible despite being posted in towns (not covered under difficult, rural or remote areas) as in-service candidates and petitioners are not, it will divide a homogeneous class of ‘in-service candidates’ and will create a class within the class without there being any rationale and justification for the same.”

The interesting conundrum in the instant case was whether the petitioners, MBBS qualified Doctors rendering their services as regular employees in the Department of Health Services, State of M.P. fall in the category of ‘in service candidates’ and whether they have separate channel of entry in P.G. Course as per order dated 19-08-2021 issued by the State Government.

As per the Government order dated 19-08-2021, the reservation/separate channel of entry to the extent of 30% in P.G. Degree Course was made. The order covered Demonstrator, Tutors and the Medical Officers, the category to which present petitioners belonged. Further, as per the as per Rule 2(k) of M.P. Chikitsa Shikisha Pravesh Niyam 2018, the petitioners were covered in the definition of “serving employees”.

The petitioners urged that 30% reservation/separate channel of entry, earmarked for Degree Seats for Demonstrator/Tutors/Medicals Officer which made the petitioners being Medical Officers entitled to such reservation yet they were treated to be eligible only for open seats.

Difficult Area vis-a-vis Difficult Services

Evidently, a policy decision dated 28-03-2021 was issued to provide additional marks/incentive to the serving candidates. However, the benefit of incentive was confined to the candidates working in rural, remote and difficult areas.

Although, Harda and Indore, where petitioners were admittedly working did not fall under the umbrella of “difficult area”, the petitioners argued that the policy was issued in Pre-Covid era and considering the fact that Indore and Harda District Hospitals were also difficult areas where the petitioners were rendering their service 24×7 during Pandemic era, they must be treated to be performing difficult service, and therefore, the benefit of the order dated 28-03-2019 must be extended in favour of petitioners as well. Citing the decision in Malpe Vishwanath Acharya and others Vs. State of Maharashtra, (1998) 2 SCC 1, the petitioners submitted that a provision of law may be valid at the time of its issuance but may lose its relevance by efflux of time. Therefore, the petitioners urged that during Pandemic, since all the Doctors working in District Hospitals became vulnerable and worked at the cost of their and families’ lives, they should be included in the category of difficult posting/area.

Accordingly, the Bench accepted the stand of State that under Regulation 9 (8) of the MCI PG Regulations 2000 emphasis is on ‘difficult area’ and not on ‘difficult services’.

(a) Whether ‘in-service candidates’ includes doctors posted in District Hospital, Harda and Indore respectively?

Opining that a conjoint reading of the Government Order dated 19-08-2021 and the rules leaves no room for any doubt that definition of ‘in-service candidate’ is wide enough to include the medical officers and that admittedly, petitioners were working as Medical Officers in District Hospitals, the Bench held that there was no impediment which deprived the petitioner from right of consideration in Post Graduate Degree Course as a separate channel of entry.

Rejecting the argument of the State that the relief claimed by the petitioners was contrary to Medical Council of India (MCI) Regulations and the State Government cannot legislate contrary to the Regulations framed by MCI as prescribing standard of education on Pan India basis is within the domain of MCI, the Bench ruled that there is no Regulation of MCI which deprives the present petitioners for consideration as in-service candidates as the condition of service in “difficult area” as required under Regulation 9(8) is applicable to ‘Diploma Course’ and not the course in question i.e. Postgraduate Degree Course. The Bench stated,

“This argument pales insignificance because present matter does not relate to Diploma Course. Thus, Regulation 9(8) has no application and no other regulation for this purpose is brought to the notice of this Court.”

Since the governing rule (Admission Rules) brought the petitioners within the zone of consideration, the Bench held that the petitioners had a separate channel of entry being Medical Officers in earmarked 30% total seats of Postgraduate Medical Courses.

(b) Whether the petitioners are entitled to get incentive of marks as per circular/order dated 28-03-2019?

The Order dated 28-03-2019 provided for 10% additional marks to the doctors who had their place of posting in the last one and a half year in a ‘difficult area’ as defined under Regulation 9(8). The petitioners, claiming to be serving in difficult situation during pandemic demanded parity with those candidates whose place of service was classified as difficult area and consequently, the petitioner were seeking to get the benefit on 10% incentive marks on that basis.

Accepting the stand of the State was that Regulation 9(8) is very clear that emphasis is on ‘difficult area’ and not on ‘difficult services’ and the area in which petitioners were working were not difficult areas at all, and further observing that the order dated 28-03-2019 was not called in question, the Bench held that the said order is a policy decision taken by the Government which could not be lightly disturbed. The Bench added, the policy decision can be interfered with on limited grounds and when it was not even challenged, it has to be read as such and the Court cannot re-write and insert something which is not there in their policy decision. Accordingly, the claim of the petitioners was rejected with regard to incentive marks.


In view of foregoing analysis, the Bench held the following:

  1. Rules – Definition of ‘in-service candidates’ also includes the Medical Officers working in District Hospital whether or not such Hospital is situated in difficult, remote or rural area. Thus, they are entitled to be considered as special entry under 30%.
  2. MCI Regulations – Regulation 9(8). This regulation is applicable to Diploma Course and not to Degree or Post Graduate Degree Course. No provision was brought to the notice of the Court to show that posting at remote, difficult or rural area is essential to become in-service candidate for Post Graduate Degree Course.
  3. Government – The scope of judicial review is very limited. The Government is best suited to take a policy decision which can be interfered with if shown to be palpably arbitrary, discriminatory or unconstitutional. The order dated 28-03-2019 is not arbitrary, discriminatory or unconstitutional.
  4. ‘Difficult area’ does not include “difficult services” rendered in District Hospital Indore and Harda. Thus, question of grant of incentive marks to the petitioners does not arise.
  5. The petitioners fell in the category of ‘in-service candidates’ for the purpose of Postgraduate Medical Courses and the respondents had erred in not treating them in the said category in the impugned chart/table uploaded on the official website. Accordingly, the impugned entries of the chart/table were set aside.

Consequently, the State Government was directed to treat the petitioners as in-service candidates for Postgraduate Degree Course and consider their claim in accordance with law. [Vijendra Dhanware v. State of Madhya Pradesh, W.P. No.25819 of 2021, decided on 14-01-2022]

Kamini Sharma, Editorial Assistant has reported this brief.

Appearance by:

For petitioners: Shri Siddharth Gupta, Advocate.

For respondent/State: Shri Piyush Dharmadhikari, Govt. Adv. for respondents 1, 2 and 4.

Shri Anoop Nair, Advocate for respondent 3.

Gauhati High Court
Case BriefsHigh Courts

Gauhati High Court: The Division Bench of Sudhanshu Dhulia, CJ., and Manash Ranjan Pathak, J., addressed the issue of violence against doctors. The Bench ordered the State to ensure that no medical practitioner is manhandled or abused in any manner.

In the instant PIL, concern had been raised about the doctors and paramedics, who are the frontline warriors and also about the incident where a Doctor was manhandled and beaten up by a mob in Udali Model Hospital. The petitioner had sought for issuance of directions to the State to take suitable measures to ensure safety and security of medical practitioners.

The stand taken by State was that as far as the incident of Udali was concerned, twenty-four people were arrested and lodged in jail within twenty-four hours. The State assured the Bench that due process of law was being followed as far as the incident was concerned. Moreover, the Government itself was conscious about the care it had to give to its doctors and paramedics and it was open for any suggestions and guidelines in this regard.

In view of the above, the Bench granted two weeks time to the State to inform the Court about the progress made and steps taken to avoid occurrence of such incidence in future. The State was also directed to ensure with immediate effect that no weapon/firearms are allowed to be taken inside a hospital and proper notice of warning is given in every hospital and medical colleges about the consequences to be followed in law if Medicare Service Persons, which include Doctors, Nurses, Para-medical, medical students, nursing students and any other worker employed and working in Medicare Service Institutions [as defined under Assam Medicare Service Persons and Medicare Service Institutions (Prevention of Violence and Damage to Property) Act, 2011], are manhandled or attacked.[Suo Motu v. State of Assam, PIL (Suo Moto) No.4 of 2021, Order dated 14-06-2021]

Kamini Sharma, Editorial Assistant has reported this brief.

Appearance before the Court by:

For the High Court: Sr. Adv. V. Hansaria with Adv. S. Kalita,
For the State of Assam: AG D. Saikia,

Case BriefsHigh Courts

Karnataka High Court: B. Veerappa, J. allowed a petition filed by two nurses for quashing of an order whereby they were held liable for the death of a child due to their negligence. 

Petitioners herein were the two nurses of a hospital who had approached the Court challenging the order of Karnataka Medical Council (KMC) which had held both of them responsible for negligent death of a child. The complaint of negligence was filed by respondent whose child had died in the hospital. KMC passed an order holding that the complainant had failed to prove negligence on the part of doctors, but it held the petitioner-nurses liable for negligence and directed the Medical Superintendent to take action against them.

Counsel for the petitioner, N. Ravindranath Kamath contended that nurses are not medical practitioners as per the provisions of the Karnataka Medical Registration Act, 1961. Whereas counsel for the respondent, R. Nagendra Malik contended that only because of the negligence on the part of the petitioners, the complainant lost her child.   

The Court held that a comprehensive reading of Sections 2, 13 and 15 of the Karnataka Medical Registration Act, lead to the conclusion that nurses could not be categorized as medical practitioners practicing medicine. Thus, KMC had no jurisdiction to take action against the petitioner. 

In view of the above, holding the impugned order to be in excess of KMC’s jurisdiction, it was quashed. [Medical Superintendent, Kasturba Hospital v. Fathima Bi, Writ Petition No. 35640 of 2012 decided on 18-06-2019] 

Hot Off The PressNews

Supreme Court: The vacation bench of Deepak Gupta and Surya Kant, JJ has agreed to hear a plea seeking a direction to the Centre to urgently constitute a team of medical experts for the treatment of the children in Bihar’s Muzaffarpur, who are suffering from suspected Acute Encephalitis Syndrome (AES), which has claimed more than 100 lives. The plea was listed to be heard on June 24 after the petitioner’s counsel sought an urgent listing of the matter.

The plea also sought a direction to the Centre for providing all necessary medical equipment and other supports for the effective treatment of the children suffering from the epidemic disease.

The petition filed by advocate Manohar Pratap claimed that he was deeply pained and saddened by the deaths of more than 126 children, mostly in the age group of one to 10 years, in the past week and the figures were rising day by day.

(Source: PTI)

Hot Off The PressNews

Supreme Court: The vacation bench of Deepak Gupta and Surya Kant, JJ has deferred the hearing on a plea seeking protection of doctors in Government hospitals, saying since doctors have called off their strike in West Bengal and other states, there is no urgency to hear the matter. The bench said it will not issue notice to the Centre but will keep the larger issue of protection of doctors open.

“We agreed to hear the plea today as there was a strike by doctors and medical fraternity in West Bengal and other states. The strike has been called off and there appears no urgency to hear the petition. List (the matter) before an appropriate bench,”

Meanwhile, the Indian Medical Association has also filed an impleadment application seeking the court’s intervention into the plea already filed, saying protection needs to be provided to doctors across the country. The bench said it needs to take a holistic view in providing security to doctors.

“We understand it is a serious issue but we can’t provide security to doctors at the cost of other citizens. We have to take a holistic view. We have to look at the larger picture. We are not against protection to doctors,”

Doctors in Bengal had been on strike since two of their colleagues were assaulted allegedly by relatives of a patient after he died last week. They called off their protest Monday night after West Bengal Chief Minister Mamata Banerjee in a meeting assured them of steps by her Government to scale up security at state-run hospitals in the state.

The plea in the Supreme Court was filed on 14.06.2019 to seek directions to Union ministries of home affairs and health and West Bengal to depute government-appointed security personnel at all state-run hospitals to ensure safety and security of doctors. It had also sought directions to Bengal government to take the strictest legal and penal action against those who assaulted the two junior doctors at a hospital in Kolkata. The plea had cited an IMA data to say that more than 75 percent doctors across the country have faced some form of violence. It said the study concluded that 50 percent violent incidents have taken place in the Intensive Care Unit of hospitals and in 70 percent cases, relatives of patients were actively involved.

(Source: PTI)