Around 200 officials of the Income Tax Department had last week searched around 36 locations across the country owned by the Bengaluru-based Micro Labs.

Bengaluru: Dolo-650 manufacturer Micro Labs Limited office where Income Tax Department conducted searches on charges of alleged tax evasionMicro Labs office in Bengaluru | PTI
Atom Income Tax Thursday, July 14, 2022 - 08:28

The CBDT on Wednesday, July 13, accused the makers of the widely-known Dolo-650 medicine tablet of indulging in "unethical practices" and distributing freebies of about Rs 1,000 crore to doctors and medical professionals in exchange for promoting products made by the pharmaceutical group. The claims came after the Income Tax department had on July 6 raided 36 premises of Bengaluru-based Micro Labs Ltd. across nine states. 

After the action against the drugmaker, the Central Board of Direct Taxes (CBDT) said in a statement that the department seized "unaccounted" cash of Rs 1.20 crore and gold and diamond jewellery of Rs 1.40 crore. The CBDT is the administrative body for the I-T department.

An email sent to Micro Labs Ltd. seeking its response on the claims made by the department remained unanswered. 

"During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized. The initial gleaning of the evidence has revealed that the group has been debiting in its books of account unallowable expenses on account of the distribution of freebies to the medical professionals under the head 'sales and promotion'," the I-T Department said.

The CBDT alleged these "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. The quantum of such freebies detected is estimated to be around Rs 1,000 crore," it said.

While the CBDT statement did not identify the group, sources confirmed it to be Micro Labs Ltd.

Dolo-650, an analgesic (pain killer) and antipyretic (fever-reducing ) oral tablet, was being extensively prescribed by doctors and medical shop owners for coronavirus patients to reduce pain and fever, common symptoms experienced by those infected.

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The company website showcased a news article, published in February, that said: "The company has sold 350 crore tablets (of Dolo-650) since the Covid-19 outbreak in 2020, and earned revenues of Rs 400 crore in a year." The CMD of the company, Dilip Surana, was quoted in the story.

The CBDT also alleged certain other irregularities on part of the group that has a presence in more than 50 countries and manufactures pharma products and active pharmaceutical ingredients (API).

The group claimed that "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 CBDT said.

The quantum of tax sought to be "evaded" through such means is estimated at over Rs 300 crore, the statement said.

It added that the department also found instances of "violation" of provisions of tax deduction at source (TDS) under section 194C of the I-T Act in respect of transactions under contracts entered into with the third-party bulk drug manufacturers.

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