A large Bengaluru-based pharmaceutical company, Micro Labs, whose drug Dolo650 was in great demand during the Covid waves, was the target of recent search and seizure operations, according to the Income Tax Department on Wednesday. There are members of the club in more than 50 nations. Around 36 locations located across 9 states were subject to the search operation. Documents and digital data that contained damning evidence were found during the search activities.
As a result of the distribution of freebies to medical professionals, the group had been debiting in its books of account unallowable expenses under the heading “Sales and Promotion,” according to the initial analysis of the evidence. To promote the group’s products, doctors and other medical professionals received travel expenses, perquisites, and gifts under the headings “Promotion and Propaganda,” “Seminars and Symposiums,” “Medical Advisories,” etc.
“The evidence suggests that the organisation used unethical tactics to advertise its brands and products. Estimates place the total amount of these giveaways at close to Rs. 1000 crore “the official said. The group was also discovered to have overappropriated revenue to the unit entitled for such a deduction and suppressed expenses in order to claim an artificially inflated deduction under specific provisions in respect of certain earnings.
Other forms of tax avoidance were also discovered, such as exaggerated claims for weighted deductions under section 35 (2AB) and improper allocating of R&D expenses to qualified units. “Over Rs 300 crore in tax is thought to be sought to be evaded through similar methods. According to the official, instances of violations of the requirements governing tax deductions at source under section 194C of the Income-Tax Act have also been found in relation to transactions involving contracts made with third-party bulk medication producers.
Unaccounted cash worth Rs. 1.20 crore and unaccounted gold and diamond jewellery worth more than Rs. 1.40 crore were found during the search operation. The problem is being looked into further.