The central bureau of direct taxes (CBDT) has accused Micro Labs Ltd, the makers of the famous Dolo-650 medicine tablet, of indulging in 'unethical practices' and distributing freebies of about Rs1,000 crore to doctors and medical professionals in exchange for promoting its products. Dolo650, which was in high demand during the COVID-19 waves, still remains one of the most prescribed medicine by most doctors.
Last week, the income tax (I-T) department searched 36 premises of Bengaluru-based Micro Labs across nine states. The company has a presence in over 50 countries.
During the search operations, incriminating evidence in the form of documents and digital data was seized. The initial analysis of the evidence revealed that the group had been debiting in its books of account unallowable expenses on account of distribution of freebies to the medical professionals under the head sales and promotion.
These freebies included travel expenses, perquisites and gifts to doctors and medical professionals for promoting the group's products under the heads 'promotion and propaganda', 'eminars and symposiums', and 'medical advisories'.
The CBDT says, “The evidence indicates that the group has adopted unethical practices to promote its products or brands. The quantum of such freebies detected is estimated to be around Rs1,000 crore.”
In a statement, CBDT further says the I-T department seized ‘unaccounted’ cash of Rs1.20 crore and gold and diamond jewellery of Rs1.40 crore.
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 quantum of tax sought to be ‘evaded’ through such means is estimated at over Rs300 crore, the CBDT says in the statement. 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.
A team of more than 20 officers attached to the I-T department conducted the raids on the office of the Bengaluru-based pharmaceuticals company located on the Race Course Road last week. Simultaneous raids were conducted in 40 locations by 200 officers across the country, including New Delhi, Sikkim, Punjab, Tamil Nadu and Goa. The residences of Micro Labs CMD (chairman and managing director) Dileep Surana, director Anand Surana were also raided.
Dolo-650, an analgesic (pain killer) and antipyretic (fever-reducing) oral tablet, was being extensively prescribed by doctors and medical shop owners for COVID-19 infected patients to reduce pain and fever.
The company has struck gold in successive waves of COVID-19 pandemic. The company has sold 3,500mn (million) tablets since the COVID-19 outbreak in 2020 and earned revenues of Rs400 crore in a year crushing all rivals, sources say. The sales of Dolo pill broke all records.