New Delhi, Feb 23 (TIWN): The Supreme Court on Tuesday expressed concern at freebies - including gold coins, fridges, LCD TVs, and funding international trips for vacations -offered by pharmaceutical companies to "manipulate" doctors' prescriptions and to recommend drugs produced by the firms.

Against this backdrop, the top court held that companies are not entitled to claim tax exemption on the expenditure incurred in giving incentives, and rather it would be considered as part of their income.

A bench of Justices U.U. Lalit and S Ravindra Bhat said: "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 top court did not entertain the plea of a company seeking exemption on expenditure of Rs 4.72 crore incurred for providing freebies to medical practitioners to create awareness on its health supplement.

Justice Bhat, who authored the judgment on behalf of the bench, said 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.

The top court upheld a 2012 circular issued by the Central Board of Direct Taxes clarifying such expenses incurred by pharmaceutical and allied health sector industries for distribution of incentives to medical practitioners are ineligible for the benefit of Section 37(1) pertaining to business deduction.

The bench said: "Pharmaceutical companies' gifting freebies to doctors, etc. is clearly 'prohibited by law', and not allowed to be claimed as a deduction under Section 37(1). Doing so would wholly undermine public policy. The well-established principle of interpretation of taxing statutes - that they need to be interpreted strictly - cannot sustain when it results in an absurdity contrary to the intentions of the Parliament."