1.1.

The bifurcation of the Total Market Research and Product Survey Fees paid
during the Assessment Year is as under: -

Sr. Particulars Amount

No (in Rs.)
.
1 Professional Fees directly to doctors for Market 48,45,82,75
Research and Products Survey. 5
2 Amount paid to Siranskn Research and Marketing 45,20,34,37
Solution Private Limited (herein after referred to as 3
“SRSMPL”)
Total 93,66,17,12
8

1.2. At the outset, we have to state as under: -

a) During the course of Post Survey and Assessment Proceedings it has

been your consistent allegation that our client has been paying
Prescription based commission to doctors. This allegation is merely
based on yconjecture and surmise. During the course of proceedings,
you have not brought on record any cogent reasons and / or any
corroborative evidence to support your allegation.

b) As against this, our client has submitted various letters along with the
supporting evidence and have explained the fact that they have never
indulged in making any Prescription based commission. It has been the
consistent plea of our client that it is not possible to quantify the
Prescription based sales effected by a doctor. Various payments made to
the Doctors (which in your opinion are Prescription based commission)
are in the nature of Market Research and Product Survey Fees.

c) In the subsequent paragraphs, at the cost of repetition, we are trying to

explain the necessity and rationale behind conducting the Product
Surveys, the methodology of conducting Product Surveys and in turn
we are making an attempt to establish that the expenditure incurred by
our client on the Market Research and Product Survey Fees is not in
nature of Prescription based commission but this expenditure has to be
incurred for the very existence and growth of our client.

In view of these facts, the question of invoking section 37(1) or

explanations thereto as regards the Market Research and Product
Survey Fees does not arise.

1.3. Brief Facts about our client & Nature of their Business.

1.3.1. Our client is a Professionally managed, Specialty Dermatological LLP. It

was incorporated in 2013 and it is a dedicated Specialty Product Entity
engaged in Sales & Marketing of High-Quality Range of Dermatological
Products as well as many allied Products for different indications.
1.3.2. Our client is a very well established and organically grown LLP under the
Supervision & guidance of First-Generation Management. Over the Years
our client which is a dedicated specialty product entity, marketing high
quality range of Dermatological products has grown to a multi-crore, multi-
product specialized (Dermatological) entity having a wide network of
Stockists and Retailers throughout India and a small Presence in two of the
neighboring Countries.

1.3.3. Our client has always emphasized using a flat hierarchy structure at Head
Office Level enabling the decision-making process to be transparent, agile &
flexible. The Flat Structure of Hierarchy enables the Senior Management to
have visibility at the micro level of operations. However, it also does away
with the need for creation of document trail in form of formal Proposals/
Reports, approvals thereof, etc. while providing agility in decision making
process along, with speed of execution.

1.3.4. The Trademarks of the various products in which our client deals with are
owned by a Partner of the LLP.

1.3.5. Our client gets their products manufactured from various contract
manufacturers which include M/s HEBA Pharmaceutica LLP (who started
its manufacturing activities from March 2017) who has a Manufacturing
unit setup at Ranipool, Sikkim and M/s HESA Pharmaceutica (a Partnership
Firm registered under the Indian Partnership Act, 1932) who has a
Manufacturing unit setup at Baddi, Solan, Himachal Pradesh. Both these
Entities have the same partners as those of our clients.

1.3.6. Over the period of time, our client has developed various formulations after
extensive market research, manufactured using best-in-class ingredients and
have a decisive edge over similar competitive products. Their product range
covers a wide spectrum of Dermatological indications and includes a range
of Anti-Fungal, Anti-Bacterial, Anti-Acne and Anti-Dandruff products as
well as a superior, widely tested sunscreen – SUNBAN and DERMADEW
range of moisturizers and soaps. Almost all of their Products have been well
accepted by Dermatologists and different Specialty of Medical Professionals
and their patients throughout India and the two neighbouring countries.
Certain products of our client can be sold only with Prescription of a
Medical Practitioner while the other certain products can be sold Over the
Counter (hereinafter referred to as “OTC”) without requirement of any
Prescription.

1.3.7. Our client has already submitted a List of the Prescription Based and OTC
Products in Annexure No. 12 along with their letter dated 20th April, 2023.

1.3.8. During the Financial Year 2017 – 18, the turnover of our client was
₹.5,64,34,45,737/- & they had employed about 1600 Employees out of which
about 95% consist of Field Sales Team. This strong Field Team is directly
responsible for working on achieving their Sales.
1.3.9. Our client has been a regular Taxpayer. Commensurate with the growth in
Revenue, the Tax contribution to the Exchequer has also been timely and
consistently growing. We narrate hereunder details of their turnover, profit,
taxable income and tax paid from the Financial Year 2013 – 14 to 2021 –
22.

(Amount in
₹)
Sr. Financi Turnover Net Profit for Taxable Taxes Paid
No. al Year the Year Income for the
Year
1 2013-14 1,53,64,82,236 28,77,89,214 28,43,09,340 9,77,62,035
2 2014-15 3,33,79,23,071 41,66,12,873 41,72,67,220 14,26,30,828
3 2015-16 4,09,40,00,024 61,15,56,612 60,29,59,770 20,67,58,786
4 2016-17 4,90,60,65,816 66,74,96,978 66,70,79,740 23,09,24,080
5 2017-18 5,64,34,45,737 82,04,44,281 76,94,33,922 26,63,71,769
6 2018-19 6,21,48,86,392 1,05,30,82,257 96,45,35,440 33,54,99,365
7 2019-20 6,75,13,11,837 1,41,83,58,407 1,39,38,58,180 48,41,01,352
8 2020-21 5,39,19,08,282 1,33,43,43,922 1,37,76,78,070 48,56,63,067
9 2021-22 6,39,17,93,354 1,47,43,24,547 1,51,22,57,950 51,94,14,213
Total 44,26,78,16,749 8,08,40,09,091 7,98,93,79,632 2,76,91,25,49
5

1.3.10. Within the Structure of the Regulatory Framework, our client has been using
/ implementing the time-tested tools for promoting the Products through the
Field Team of Medical Representatives, who work in the field at the
designated headquarters, and under the guidance of their seniors in the
Hierarchy, through daily calls to the Practicing Medical Professionals.
Further with the help of Visual Aids & Product Presentations, their Field
Staff explain the specific features & salient points of the Products to these
Medical Professionals.

1.4. Marketing Strategies adopted by our client.

The primary step in marketing of the products is to create awareness about

their products within the various Medical and Non-Medical Fraternities –
Conference & CME Activities.

1.4.1. As a part of the extensive fieldwork, word-of-mouth communication,

supported by Visual Aids, Leave Behind Literature (LBL), Product Samples,
Product Reminders, etc. are the tools available to the field staff for
promoting their Products.

1.4.2. In addition to the above & to supplement the field work, create brand
awareness & to build brand value from time to time, their Field Teams also
plan & they also participate in various programs like Stall at Various
Medical Education Programs & Medical Awareness Camps, Conference –
Local, State as well as National level. These conferences and seminars are
organized by various Professional Bodies, and they are held at National,
Zonal, Regional & State level. These Continuing Medical Education
 programs which may also be conducted either at the venue of the
Conferences themselves or at the various Hospitals and clinics and Medical
store premises.

1.4.3. Various Medical Conferences-structured to provide higher level of

knowledge sharing over a designated number of days-provide an excellent
platform for the Pharma Companies to showcase their Products. Our client
being no exception, has been participating in relevant Conferences on a
regular basis at Local, State as well as National Level.

1.4.4. Apart from Brand Building, these activities also help the respective Medical
Practitioners to have an up-to-date knowledge in respective field.

1.4.5. While a space is hired by our client for setting up a Stall to display the
Products and interact with the visiting Medical Professionals, the Field
Teams at Local Levels, where the Conferences are organized, also
participate, and assist the Organizers in Logistics & execution of Various
tasks during the Conference.

1.4.6. The higher number of Participants provides them with a platform to interact
with various medical professionals from various geographic locations and
thereby educating them about their products which may ultimately result in
increase in their Sales.

1.4.7. Within the given understanding of regulatory framework, our client has been
encouraging Participation of various Medical Practitioners in the
Conferences & assisting them in Registration, Travel arrangements, Hotel
Accommodations for the Conference, etc.

1.4.8. For supplementing and supporting their Field Work, the Product
Management Team of our client (hereinafter referred to as “the PMT”)
based at Head Office also plans and runs certain specific campaigns at
Regional/National Level. These are Product specific, or occasion-based
campaigns and are run for a defined short duration. These Campaigns
would involve focused & targeted Word of mouth publicity, leave Behind
Literatures, specific dress code for field staff, brand reminders in form of
souvenir. The decision as to which campaign to plan is based on various
market inputs being gathered through different methods & analysis of data,
which our client has access to due to its market presence.

The other important step in any business is to constantly improve the

efficacy and quality of the product by continuous Market Research and
Post Marketing Surveys.

1.5. Rationale behind conducting Market Research Surveys and Post Marketing
Surveys by our client.

1.5.1. In order to monitor the Performance & acceptance of their various products,
their Field Team conducts & carries out surveys using pre-designed
questionnaires. These surveys help the Field Teams and as also the PMT at
 H.O. to make an informed assessment about Product Performance, its
efficacy and effectiveness or otherwise, for any given specific medical
condition. It also opens the doors for accessing the vast and valuable
clinical experience to our client which the Medical Practitioners have
acquired through years of their clinical practice of modern medicine.

1.5.2. The factors behind success or otherwise of a particular Product, as also

new developments in the marketplace, adaptability or resistance being
developed for certain molecules, etc. are important factors that come forth
through these surveys.

1.5.3. Taking into account, the operational constraints, at times the Medical
Practitioners do take liberty of dictating the answers to the questions posed
to them through these surveys and as such the Medical Practitioners’
Assistants or their Field Team take the dictation and fill-up the Survey
Forms in their handwriting. However, for ensuring that the sanctity of the
process is maintained, it is mandatory to obtain ‘stamp’ and ‘signature' of
the Medical Practitioner on these filled up survey forms, which are duly
submitted to HO & verified without exception. To compensate them for their
efforts, the Medical Professionals are paid Professional Fees for conducting
Surveys for our client.

1.5.4. During the Financial Year 2017 – 18, our client had conducted approx.
more than 60,000 Market Research Surveys. This activity was carried out
for 90 different products by 13 different specialties of Medical
Professionals for 50 Specific Indications. A copy of the Brief summary of
the conclusions drawn by our client from the various Survey Reports for
the Calendar Year 2017 is already filed in Annexure No. 18 along with
our Letter dated 21st April 2023.

1.5.5. Given the flat hierarchical structure of the organization at H.O. &
organically evolved management processes, the analysis and usage of the
data so captured is done through more informal structure as compared to,
may be some multinational, listed Corporates.

1.5.6. Their Field Teams conducts monthly review meetings where the presence of
all Field Staff is mandatory & these meetings are moderated by the PMT
representative from H.O. These meetings provide an excellent platform for
collecting/reviewing feedback of the Field Team based on their daily field
activity which includes conducting Product Surveys. In addition, the
members of the Field Team, irrespective of their organizational status, can
send their individual feedback to the HO, formally or otherwise.

1.5.7. A collective review of this gathered data, from the Product Surveys, helps
our client to formulate strategy for positioning their products, improving
their formulations and efficacy of their Products, working out campaign
for improved communication about the product features, etc.

1.5.8. As some of the Non-Prescription based products are used / usable by the
professionals working in the cosmeceutical profession, their Field teams
 also conduct surveys with these beauty professionals, for their Products
which are categorized as ‘OTC (so named, taking into account the fact that
these are not Medical Practitioners). These professionals also help our
client by sharing their experience in usage and effectiveness of our products
under certain conditions/treatment protocols / procedures which they are
eligible to Conduct.

1.5.9. Apart from the above objective, which is useful during the current & day-to-
day operations of our client, the other very important objective which the
entity works for and accumulates data on, is about the Product Efficacy,
Safety and Performance.

1.5.10. As a responsible Pharma Corporate our client values and firmly believe
that it is their responsibility to continuously monitor, gather and
accumulate the data related to their products performance and usage to
ensure that it continues to be effective for the cure of Conditions it is
designed for, its efficacy level is maintained at desired level and that there
are no signs of resistance being developed for the given formulation or
otherwise, the usage of the product continues to have no side effects or the
side effects are within manageable and acceptable levels in view of the
Medical Practitioner.

1.5.11. This exercise of conducting Surveys and obtaining Feedback from the
Medical Professionals as well as Beauticians, Cosmeticians and the end
users of our products is of immense help to our client in sustaining their
growth by building the very foundation for a long term, sustainable Brand
building of their pharma products.

1.5.12. The majority of their products consist of dermatological and cosmeceutical

products both prescribed and recommended by medical practitioners and
cosmeticians/beauticians and other allied health care professionals.

1.5.13. As per International Dr Fitzpatrick Classification Skin is divided into 6 skin

types.

Fitzpatrick skin type Description

classification
Fitzpatrick skin type I Skin always burns, never tans, and is sensitive to UV
exposure
Fitzpatrick skin type II Skin burns easily and tans minimally
Fitzpatrick skin type III Skin burns moderately and tans gradually to light brown
Fitzpatrick skin type IV Skin burns minimally and always tans well to moderately
brown
Fitzpatrick skin type V Skin rarely burns and tans profusely to dark
Fitzpatrick skin type VI Skin never burns, is deeply pigmented, and is least
sensitive to UV exposure

In simple layman terms we classify the Skin Types as

a) Type I - Blond Hair, Blue Eyes, Fair Skin (Scandinavian Countries)

 b) Type II - Blond Hair, Brown Eyes, Fair Skin (United States /Europe)
c) Type III - Brown Hair, Brown Eyes, Fair Skin (Mediterranean
Countries)
d) Type IV – Darker Hair, Darker Eyes, Wheat Like Complexion Skin
(Indian Population Northern India Aryan Descendants)
e) Type V- Dark Hair, Dark Eyes, Dark Skin (Indian Population South
India Dravidian Descendants)
f) Type VI - Dark Hair, Dark Eyes, Very Dark Skin (Worldwide Black
Population African Descendants)

1.5.14. Now it is mandatory for a company like our client which specializes in Skin
Care to very closely monitor their products with PMS (Post Marketing
Surveillance) studies, and document, analyze and keep this data for
posterity.

1.5.15. Not only is this very important from a DCGI standpoint but it is very
important from a marketing and strategy viewpoint as well as stability.

1.5.16. Dermatological and Cosmeceutical products are subject to the following

variances.

a) Climatic Conditions – North India at temperatures dropping to -5 to -10

degrees centigrade.
b) South India and Interior Maharashtra with temperatures rising to 45 to
50 degrees centigrade.

1.5.17. Skin Types Variation- A North Indian from Kashmir or Uttarakhand may
have a skin type which is borderline Type III to Type IV, whereas a South
Indian will have a skin type which is Type V.

1.5.18. All of their products have been developed with specific emphasis on the
Indian sub types and all of the studies and data have been conducted on
Indian skin types which validates the efficacy and safety of all their products.

1.5.19. For validation of Fixed Dose Combination of their Dermatological products

our client has submitted the PMS data of different specialties, different
indications for usage of the products, different geographical areas of India
to show efficacy on different skin types as well as stability and safety at all
different climatic conditions.

1.5.20. Further, due to these surveys, our client was able to contribute to
effectively treating related medical conditions across the wide spectrum of
population having different type of Skin. Thus, this activity of gathering
and monitoring the related data is inevitable and extremely important from
the perspective of the Management.

1.5.21. It is also important to note that our client has been marketing varieties of
Derma Product including Soaps, Shampoos, Creams, Ointments etc. and it
has to encounter the products of various Multinationals like GSK Pharma,
Glenmark, Sun Pharma, Macleods, Man Kind etc. and therefore it is
 absolutely necessary for them to gauge the efficacy of their products vis-à-
vis those of the Multinational Brands and these surveys have been of
immense help in sustaining themselves in the competitive environment.

1.5.22. Thus, it can be summarised that, the Market survey work conduct by our
client through the doctors overall helps them in the following manner: -

a) To understand the efficacy of their products with respect to different type

of skin.
b) To understand if there is any need to make any kind of alteration in their
formulation.
c) To understand if there is an increase in any kind of side effect while using
their product or if there is resistance to the product which is developing
in a particular geographic region or specific population.
d) To respond to any Directives received from DCGI to provide the efficacy,
viability, usability of any of their products.
e) It also helps them to formulate their production, distribution, and
marketing strategy.
f) It also helps them to identify any potential products which they can add to
its range of products to increase their sales and business in future.

1.6. Market Research Product Surveys are a must for existence and survival of
the Pharmaceutical Business in view of the regulatory framework in India.

1.6.1. In addition to the above, our client further states that the Drugs and
Cosmetics Act, 1940 regulates the import, manufacture and distribution of
drugs in India. The primary objective of this Act is to ensure that the drugs
and cosmetics sold in India are safe, effective and conform to stated quality
standards.

The related Drugs and Cosmetics Rules, 1945 contains provisions for
classification of drugs under given schedules and there are guidelines for
the storage, sale, display and prescription of each schedule.

1.6.2. The Drug Controller General (India), (herein after referred to as “DCGI”),
is a Statutory Authority constituted under the Drugs and Cosmetics Act,
1940. The DCGI is the Head of Department of the Central Drugs Standard
Control Organization of the Government of India responsible for approval
of licences of specified categories of drugs such as blood and blood
products, I V fluids, vaccines, and sera in India. The DCGI comes under the
Ministry of Health & Family Welfare who also sets standards for
manufacturing, sales, import, and distribution of drugs in India.

1.6.3. The Primary functions of DCGI are as under: -

a) Preparation and maintenance of National reference standard.

b) To bring about the uniformity in the enforcement of the Drugs and

Cosmetics Act,1940.
 c) Training of Drug Analysts deputed by State Drug Control Laboratories
and other Institutions.

d) Analysis of Cosmetics received as survey samples from CDSCO (Central

Drug Standard Control Organization)

A) Additional Comment on the function of the DCGI

 The DCGI, being aware of the fact that natural evolution process of the
Bacterial/Fungal/Viral strains can develop resistance to a particular molecule
& / or formulation consisting combination of molecules, also being privy to
various technological advancements in form of new developments / break-
throughs in formulations, discovery of new applications etc. requires the
manufacturers / marketers to provide the Data on the existing Product /
Formulation efficacy & performance in the market place. Such data is one of
the integral / fundamental elements of permitting / allowing to continue the
marketing of the Products with given formulation.

 Continuous review and confirmation of the potency / efficacy of the Drug /

Formulation is an absolute necessity for the Controlling Authority, given the
fact that Bacterial/Fungal/Viral strains can develop resistance to a particular
molecule & / or formulation consisting of combination of molecules as part of
the natural process of evolution.

 It’s an established fact that the ever-evolving life forms, irrespective of their
form and size, are programmed to evolve in a manner so as to overcome the
threat to their existence. The DNA memory carried forward to the next
generation enables the life-form to develop resistance to the given threat, more
prominently experienced in case of Bacterial/Fungal/Viral strains of the
micro-organisms.

 The Bacterial / Fungal / Viral strains of micro-organisms, causing various

diseases / ailments in Humans are in constant stage of evolution and are likely
to develop resistance to various medicines / drugs, be it single molecule or
formulation over a period of time.

 The sustained, long-term usage of a particular drug & / or formulation also

opens up a serious possibility of adverse and serious side effects in the
Patients exposed to such usage. This being a serious safety hazard, as
Governing Authority, the DCGI constantly monitors and keeps an eye on the
safety data of the product usage.

 Given these facts, the Regulatory Authority, i.e., DCGI is required to

continuously monitor the potency and efficacy of the various approved drugs /
formulations in the marketplace.

 The DCGI monitors these aspects through review of

a) Published reports / articles in various forums across the World,
b) keeps tab on whether there is any adverse report on application / withdrawal
of approval due to safety reasons etc.,
 c) published safety studies carried out if any,
d) marketing data from the Licensed Manufacturers / Marketers of the given
Drug / Formulation etc.

 Thus, based on various parameters the CDSCO through the DCGI takes up
review of any approved Drug & or Formulation when it deems it fit in the
Public Interest. The formulations, which essentially are combination of more
than one molecule, are referred to as ‘Fixed Dose Combinations’ (FDC), well
as the single molecule medicines are open for review.

 The review of approved Drug & or Formulation based on the permissions and
licenses issued to concerned Manufacturers, asking them to prove the safety &
efficacy of their formulations is a regular process undertaken by DCGI.

 This review can be for single molecule product and / or for Fixed Dose
Combination (FDC) products.

 During such review the DCGI not only gathers information from the public
domain / published reports, but it also has the authority to call for and calls the
information from the Licensed Manufacturers through the respective State
Drug Controller.

 The data required to be submitted on demand includes the aspects like Patient
Exposure Data, product Safety and Efficacy, individual case histories if any,
overall safety evaluation etc.

 This exercise is conducted in a timebound manner. While it is mandatory for

the concerned Licensed Manufacturers to respond, the data also needs to
support the claim of the product efficacy and safety.

 Any adverse indication opens the possibility of the Drug & / or the FDC being
banned and License to Manufacture being revoked.

1.6.4. Being the Regulatory Authority DCGI is entitled and empowered to review
the permissions and licenses issued to the concerned Manufacturers and ask
them to prove safety & efficacy of certain Fixed Dose Combinations
(hereinafter referred to as “FDC”) being manufactured by them.

1.6.5. Any failure to submit the requisite data to DCGI upon being directed to do
so and consequentially failing to prove the safety & efficacy of the FDC,
results into the Manufacturing License being revoked and the Brand has to
be taken off the market.

1.6.6. Thus, as a prudent and most essential Business process, our client gathers
the related data through the specific Surveys on regular basis and preserves
the data for all possible future references - Statutory compliance or
otherwise. Given the fact and significance of this exercise of gathering,
accumulating, and preserving the data, the Surveys are carried out through
the Medical Professionals as regards the Prescription based Products and
through Cosmeticians & Beauticians for their other non-prescription based
 products. Accordingly, the Market Research and Survey activities cover
almost their entire Product Portfolio.

1.6.7. It is not possible for any Pharmaceutical Company to gather data about the
safety and efficacy of their Products post-facto the receipt of the directive
from DCGI. If proper Surveys are not conducted regularly and the requisite
data is not analyzed and collated therefrom, it would be impossible for any
Pharma Company to satisfy the DCGI about the safety and efficacy of their
products which may ultimately result into delicensing of its products.

There is no way for the Marketing entity to go back in time for collecting the
Data & the absence of this historical data can be extremely detrimental &
harmful in evaluation process for the Product efficacy, safety &
effectiveness. Also, it is imperative to note that the FDC for which the DCGI
is likely to take up for the review is beyond the sphere of knowledge and
comprehension of any Pharma Company. In view of these facts, our client is
required to collect and monitor the data for the entire Product Portfolio on a
regular & on-going basis. This exercise is continuously carried on with the
help of Medical Professionals as well as Beautician and Cosmeticians.

1.6.8. During the year 2013, DCGI had notified and asked the manufacturers of
certain Pharma products to submit the safety and efficacy data, which list
included about 16 (Sixteen) Products being Marketed by our LLP. The list of
these Products is already enclosed in Annexure No. 20 along with their
letter dated 22nd April, 2023.

1.6.9. Our client, through the contract Manufacturer submitted various requisite &
related data among which the Survey Details and results thereof on the
safety and efficacy of these Products, gathered through over the periodic
surveys as mentioned hereinabove. The voluminous data containing detailed
analytical reports along with the copies of the related Survey Forms were
submitted to DCGI. A copy of the said submission has already been
submitted by our client in Annexure No. 21 along with their letter dated
22nd April, 2023.

(These submissions spread over 4754 Pages and were contained in 14 spiral
bound files. Your Honor may verify the same from the Assessing Officer)

1.6.10. Upon submission of these details, our client along with the Contract
Manufacturers was successful in obtaining the permission to continue to
manufacture and market our Products. A copy of the approval received
from the DCGI is already enclosed in Annexure No. 22 along with their
letter dated 22nd April, 2023.

(The copy of the approval received is once again enclosed herewith in Annexure
No.27)

1.6.11. Had our client not got the approval for these 16 products, they would have
lost the Turnover totaling to ₹.980 Crores. The details of the product wise
year wise sales of these 16 products from the Financial Year 2013 – 14 to
 2021 – 22 is already submitted by our client in Annexure No.23 vide their
letter dated 22nd April, 2023.

(The copy of the details of the product wise year wise sales of these 16 products
from the Financial Year 2013 – 14 to 2021 – 22 is once again enclosed herewith in
Annexure No.28)

B) Additional Comments

 At the outset, Your Appellant draws Your Honor’s attention to the following
communications filed during the course of the reassessment proceedings which
are now also enclosed herewith: -

Sr. Letter Dated Copy Copy once

No. enclosed in again
Annexure enclosed in
No. Annexure
No. (During
Appellate
Proceedings)
1 Letter dated 30th November, 2022 filed in 25 29
response to the Notice u/s 148A(b) of the
Act
2 Letter dated 21st April, 2023 filed in the 33 30
course of the assessment Proceedings
3 Letter dated 22nd April, 2023 filed in the 34 31
course of the assessment Proceedings
4 Letter dated 27th May, 2023 filed through 35 32
the Authorised Representative of Your
Appellant in response to the Show Cause
Notice issued by the Assessing Officer.

 For cursory glance, Your Appellant submits hereunder the details of Year wise
sales of these 16 Products. Your Appellant further submits that if the Market
Research and Product Surveys were not conducted regularly and the data were
not maintained by them, then in such a scenario it would not have been possible
for Your Appellant, to submit the data to the DCGI as required by them and in
turn the approval to sell these products would have been denied to Your
Appellant which would have resulted in the Loss of turnover of ₹. 980 Crores
throughout all these Years.

 The Year wise total sales of all these 16 products is tabulated herewith for Your
Honor’s ready reference.

Sr. Financial Year Amount (₹.)

No.
1 2013 – 2014 50,89,56,675
2 2014 – 2015 95,54,92,107
3 2015 – 2016 1,01,21,37,048
4 2016 – 2017 1,15,70,01,852
 5 2017 – 2018 1,12,87,05,341
6 2018 – 2019 1,30,79,28,026
7 2019 – 2020 1,30,54,97,025
8 2020 – 2021 1,14,96,78,949
9 2021 – 2022 1,27,76,15,597
Total 9,80,30,12,619

 Your Honor may also please note that as recent as in June 2023, DCGI had
issued a notification so as to ban the manufacture / sale / storage of 14 FDC’s
for Cough Syrups manufactured / marketed by various Pharmaceutical
companies considering them as non-effective and redundant.

 Your Appellant is enclosing herewith Annexure No.33 the said notification

dated 2nd June, 2023 issued by the DCGI. We are also enclosing herewith in
Annexure No. 34 the details of the FDCS banned along with the Brand under
which they were sold and also the details of the Pharma Company
Manufacturing / Marketing the said Product.

 This would make it very clear the paramount importance of the Product Surveys
and Market Research Activities as undertaken by your Appellant. We reiterate
that not only helps our organization to improve the efficacy of our products but
also it is a mandatory requirement by DCGI.

 To demonstrate further the paramount importance of Market Research and

Product Survey activities, Your Appellant is attaching hereunder 2 articles
published in Times on India on 3rd June, 2023 & 9th June, 2023.
1.6.12. Recognizing the value, importance and relevance of the information being
gathered, all the Survey Forms are preserved for possible future reference
considering the significance & intrinsic value of the data and the weight of
the opinion of various Medical Practitioners and Beauty Professionals. As a
quid pro quo, these Professionals have to be adequately compensated by our
client for sharing their valuable inputs & precious time devoted for
capturing & sharing the data. Our client after due discussions with these
Professionals, agrees to and pays the requisite Professional Fees to them for
sharing this valuable information.
C) Additional Comments

 The assessment and agreement on payment of professional fees to the medical

practitioners is purely based on their standing in the practice of profession, the
range of experience they carry and their perceived ability to provide insights
into the objective with which the Survey is carried out.

 It is but obvious that any Professional before committing his time and expertise,
would like to know upfront as to what remuneration he would receive for his
such contribution and therefore the Professional Fees are decided in advance
before conducting any survey. This is very normal in case of any Professional
where the Fees are agreed upon before accepting any assignment.

 Unfortunately, the Assessing Officer has given a completely different color to

this normal practice and came to a conclusion that as the Survey Fees are pre
decided they were in the nature of the Prescription Based commission paid to
the doctors. Moreover, the Assessing Officer has not brought on record any
cogent or corroborative evidence to support such a wild allegation.

 Your Appellant further submits that, the Income Tax Department cannot sit in
their arms chair and decide that this activity of Market Research and Survey
does not make any value addition in their business.

 In this connection, Your Appellant would like to rely upon the celebrated
Judgment of the Hon’ble Apex Court in case of Hero Cycles (P) Ltd. Vs.
Commissioner of Income Tax reported in (2015) 94 CCH 0097 ISCC, a
copy of the judgement is enclosed in Annexure No. 35 has accepted the
proposition that Revenue cannot sit in the arm-chair of the businessman or
in the position of the Board of Directors and assume the role to decide
whether a particular expenditure was required to be incurred or not or
how much is reasonable expenditure having regard to the circumstances of
the case so far as the assessee is in the position to prove that the expenditure
was incurred wholly and exclusively for the purpose of business. The
question of testing the reasonability of the expenses does arise only when
the payments are made to the parties covered u/s 40A(2)(b) of the Act.

 Your Appellant has proved beyond doubt that the expenditure incurred for
Market Research and Survey activities was absolutely necessary for the
very existence of their business and moreover, it was not incurred on any
party covered u/s 40A(2)(b) of the Act.

 Under the circumstances, Your Appellant would like to emphasize that

department cannot presume that these activity of Market Research and
Surveys does not add any substantiate value addition to their business and
assume the powers to disallow the same on this ground.

1.6.13. The assessment and agreement on payment of professional fees to the

medical practitioners as also Cosmo professionals is purely based on their
standing in the practiced profession, the range of experience they carry
 and their perceived ability to provide insights into the objective with which
the Survey is carried out. Nowhere there is any linkage with sales of the
products, our client is achieving. We reiterate that our client neither has
any ability to assess, nor is aware of any tool or method which can assist
them in assessing and or capturing the sales value which might be
accruing through an individual professional, be it Medical Practitioner or
Cosmo Professional.

D) Additional Comments

 Your Appellant further submits that the product distribution channel adopted by
them for selling their products is as under: -

a) The Products are sold by Your Appellant to Super Stockiest who in turn sell
it to the stockiest which is further sold to the Distributor and they in turn sell
it to the various Pharmacies in their area.

b) The Products are sold by the Pharmacies to the Patients i.e., to the consumer.

c) Your appellant submits that they do not sell products directly to any Doctors.
In such a setup, it is impossible to gauge the sales achieved due to the
prescription of a particular Medical Professional.

d) Further even if any Doctor prescribes any product to the patients there can
be a possibility that the patient may not buy the product at all or it is possible
that the chemist provides the products of any other competing brand with the
same formulation having lower price. Also, in the current Digital World it
may also happen that the patient in Mumbai may order the Product from an
e-commerce site like Netmeds.com, 1mg.com etc. where the products would
be shipped directly leaving no trail of the prescription of the Medical
Professional.

Considering all these facts, it is not possible for Your Appellant LLP having a
turnover of about ₹. 600 to 700 Crores, to keep track of the sales achieved due
to the Prescription of any Medical Professionals.

1.6.14. These payments are done by our client strictly following and complying with
the applicable Taxation Rules & Regulations governing the transactions of
this nature.

Thus, all the payments are done by our client through Crossed Account
Payee cheques / Bank Drafts or through Bank Transfer using RTGS / NEFT
platforms after due deduction of the withholding tax. All the withholding
Taxes (TDS), so deducted are duly deposited within prescribed time limit by
them with due reference and to the credit of the concerned Professionals’
Permanent Account Number (PAN). Given the protocol being followed, our
client has a reasonable ground to believe that these Professionals, in turn,
duly declare these receipts in their respective Return of Annual Income for
assessment of Income Tax due thereon, subject to the TDS done by them at
the time of the payment. However, our client does not have any mechanism
 to ensure that these Professionals fully disclose their income earned by way
of Survey Fees from them.

1.6.15. Over the years, our clients Product portfolio has grown, so has their
revenue, their employee strength and along with it the quantum of Surveys
being done. As mentioned earlier, our client collects and preserves the
Survey Forms for reference and use in posterity as and when the need arises,
be it Statutory or Business Strategy.

1.6.16. Hitherto, these activities of conducting surveys and collating & analysing
the data were undertaken by our client itself. However, after December 2017
these activities were outsourced to a separate company named Siranskn
Research and Marketing Solutions Private Limited. Please note that during
the Assessment Year 2018 – 19 Your Appellant our client has made also
made direct payment to the Doctors for conducting surveys.

1.6.17. Further our client has also filed the following details in connection with the
survey conducted by SRSMPL on their behalf: -

Sr. Particular Copy Enclosed in Annexure

No. No. along with the Letter
dated 21st April, 2023
1 Copy of the Survey Report for the Surveys 20.01
conducted by them for Q4 of FY 2017-18 (Containing 1366 Pages)

1.6.18. From both the above reports Your Honor would observe that the analysis
made by our client for the Calendar Year 2017 was contained in only 56
Pages giving a brief overview of some of the Products from the Surveys
conducted by them. While the analysis made by SRSMPL for the Q4 of FY
2017-18 (3 months) was contained in 1366 Pages giving the wholistic view
of all the products for all the indications. This was possible only due to the
digitization of the whole process.
_______________________________________________________________
1.6.19. A copy of the Brief summary of the conclusions drawn by our client
from the various Survey Reports for the Calendar Year 2017 is already
filed in Annexure No. 18 containing 56 Pages along with our Letter
dated 21st April 2023. (Your may verify the same with the Assessing
Officer).

1.7. Para 1 of your SCN explicitly alleges that our client has been making
payment of commission to doctors and such payments made by our client
are not allowable u/s 37 of the Act. Unfortunately, your this allegation is
based on wild guess work without any basis. This allegation of yours is
absolutely based on conjecture and surmise. None of your communications
so far has pointed out as to how you have arrived at such a conclusion.
Your Honor has not brought on record any corroborative evidence to prove
the fact that our client has been making Prescription Based Commission
payments to doctors.

1.8. In earlier communications as well as in this letter the need and necessity as
 well as the rationale and methodology for conducting Market Research and
Product Surveys have been undoubtedly explained. Moreover, the entire
details in this regard including confirmation letters from the doctors have
been placed on your records. Thus, against your baseless allegation that
our client has been making payment of Prescription based commission to
the doctors, our client has sufficiently established that the doctors were
paid professional fees for conducting Market Research and Product Survey
and not Prescription based commission.

1.9. We understand that you have issued notices u/s 133(6) of the Act to various
doctors. Some of these doctors have forwarded us the copy of their reply
filed in response to the said notice. None of these doctors has confirmed
that they have been receiving Prescription based commission, but they have
confirmed that they have been rendering our client their professional
services for conducting Market Research and Product Surveys.

1.10.In fact, our client, has filed Confirmation Letters of 21,822

doctors confirming the receipt of the Professional Fees for
conducting Market Research and Product Surveys from our
client. Your Honor may refer to the letter dated 22nd May
2023 filed by our client in your TAPAL on 24 th May, 2023
along with all the confirmations in 48 spiral binding files.
Moreover, considering the size restriction on the Income
Tax Portal, 500 Confirmations along with the letter has
been filed online on 27th May, 2023 vide E-Acknowledgment
No. 176610291270523.

1.11. It seems that Your Honor has not realized the fact that Market Research
and Products Surveys conducted by our client are absolutely necessary for
the very existence of our client. As already explained, during the year 2013,
the DCGI had notified and asked the manufacturers of certain Pharma
products (including our client) to submit the safety and efficacy data, which
list included about 16 (Sixteen) Products being Marketed by our client. As
the proper surveys were conducted and the data was readily available with
our client, it was possible for them to satisfy the requirements of DCGI.
Ultimately, they could continue their business after getting the necessary
approvals from DCGI.

1.12. Moreover, our client has introduced 12 products for the first time in India.
To understand and keep a track of the efficacy, effectiveness and
performance of their products on the various types of skin and also to know
about any new side effects being encountered in a particular type of skin or
any resistance being developed due to the use of their products, the Market
Research and Product Surveys were to be conducted and Professional Fees
were being paid for the same.
 1.13. Unfortunately, Your Honor has come to an erroneous conclusion that the
Professional Fees paid towards the Market Research and Survey Fees to the
doctors is in disguise of Prescription based commission paid to doctors. All
the plethora of evidence submitted during the Post Survey Proceedings as
well as during the Re-assessment and assessment proceedings thereafter
have been simply brushed aside. Moreover, during the course of survey, the
survey team did find various Survey Forms from our premises which were
impounded. The questions were raised to the Designated Partner, Dr.
Hemanth Hegde who explained the entire process of survey.

1.14. It is felt that entire basis of your allegation that, the payments effected by our
client towards the Market Research and Product Survey Fees are in disguise
of prescription-based commission have no legs to stand on. In the entire Post
Survey and assessment Proceedings the department has not brought on
record any substantial and cogent reasons behind coming to such a
conclusion. Moreover, in the entire proceedings, you have not brought on
records any corroborative evidence to support your finding that the payments
made by our client to doctors are nothing but “Prescription based
Commission”. Even your show cause notice has no whisper as to how you
have arrived at such a drastic conclusion when during the course of
assessment proceedings, our client has submitted volumes of evidence to
substantiate that such payments made to the doctors were nothing, but the
Professional Fees paid for conducting Market Research and Product
Surveys. Moreover, the independent inquiries made by you during the course
of the assessment proceedings also do not support your allegation but in fact
they negate the same.

1.15. Having concluded that, the Market Research and Product Survey Fees were
payment in the nature of Prescription based commission in disguise, you
further allege that such payments are in violation of guidelines issued by
Medical Council of India.

E) Additional Comments

 The Assessing Officer has issued notice u/s 133(6) of the Act for the
Assessment Year 2018 – 19 to 15 Medical Professionals. We tabularize
hereunder the relevant questions posed to them and their replies. Unfortunately,
while framing the huge addition of ₹.93,66,17,128/- the Assessing Officer has
not taken any cognizance of these replies submitted by the Medical
Professionals.

Sr Name Of Medical Q. Question Answer

No. Practitioner No.
1 VAISHNAV 1 Whether, you have  I am skin practitioner and I have
KALPANA P rendered any services conducted market research
(PAN: for M/s. Hegde & &surveys for M/s Hedge &
ADSPV3078L) Hegde Pharmaceutica Hedge Pharmaceutica LLP these
LLP for the surveys are conducted to find
year under out the effects of the different
consideration. If yes, type of skin ailments.
you are requested to
 provide the details  Copy 32(nos) surveys forms, for
regarding nature of surveys conducted by me during
services rendered with the financial year 2016-17 is
documentary evidences attached herewith for your kind
to substantiate the reference.
same.
2 2 If the service rendered  Every pharmaceutical company
is in the form of including M/s Hedge & Hedge
survey, please explain Pharmaceutical LLP would like
for what the survey has to monitor the performance of
been their products on various
done. Further, please ailments suffered by various
furnish the copies of patients. It is absolutely
survey forms in this necessary for the pharmaceutical
regard. company to ascertain the
regulatory authorities but also
give the pharmaceutical
companies feedback about their
products to enable them to
improve the same.

 As a skin practitioner for 12

years, at the instance of the M/s
Hedge & Hedge Pharmaceutica
LLP, I have conducted
professional surveys on my
various patients which enable
me to share my clinical
experience about the efficacy of
the products marketed by them.

 Copy of survey forms is

attached herewith.
3 3 Please explain  Different people have different
elaborately the process types of skin and they suffer
in which the survey has different ailments due to various
been done. reasons.

 Different products are available

in the market for different
ailments and skin.

 Any dermatology company

would like to measure the
effects of their products on
various ailments suffered by
different patients. To
understand, the impact of their
products, M/s Hedge & Hegde
Pharmaceutica LLP, had
assigned me a task of
conducting surveys on efficacy
of their products and improve
them or to add new products in
 the market.

 The survey forms are designed

by M/s Hedge & Hedge
Pharmaceutica LLP in which
various question are raised as
regards different types of skin
and different ailments.

 Based on my day to day

experience, in dealing with the
different ailments.

 Based on my day to day

experience, in dealing with the
different type of patients and
based on my expertise I provide
answers to the questions posed
in the survey forms as regards
the various products marketed
by M/s Hedge & Hedge
Pharmaceutica LLP vis-à-vis the
others products in the markets.
4 10 Please explain whether  These surveys conducted by me
surveys conducted for on behalf of M/s Hegde &
entities like M/s. Hegde Pharmaceutica LLP are in
Hegde & Hegde my professional capacity and I
Pharmaceutica am competent to conduct the
LLP are against any same.
regulation or guidelines
by MCI/any such  The MCI guidelines in no way
regulatory body. prohibits a medical practitioner
to affiliate himself with the
Pharma Company in his
professional capacity.

 However, the Medical

professional has to ensure that he
does not violate the code of
ethics prescribed by the MCI.
5 DIWAKAR 1 Whether, you have  During the Financial Year
SHARMA rendered any services 2016-17, I have rendered
(PAN:BPQPS4730H) for M/s. Hegde & Professional Services in the
Hegde Pharmaceutica nature of Market Research,
LLP for the
Surveillance & Survey Fees
year under
consideration. If yes,
for the various
you are requested to Dermatological and allied
provide the details Products Marketed by them.
regarding nature of  In order to provide the
services rendered with documentary evidence in
documentary evidence connection with the services
to substantiate the provided by me to the M/s.
same. Hegde & Hegde
 Pharmaceutica LLP, I am
enclosing herewith in
Annexure No.4, copy of 34
(nos) Survey Forms, for
surveys conducted by me
during the Financial Year
2016-17.
6 2 If the service rendered In this connection, I would like to
is in the form of state as under: -
survey, please explain
for what the survey has  I am a Skin Specialist,
been practicing as a Medical
done. Further, please Professional in the field of
furnish the copies of Dermatology since 15 Years.
survey forms in this
regard.  M/s. Hegde & Hegde
Pharmaceutica LLP wanted to
monitor the efficacy,
effectiveness& performance of
the various Products Marketed
by them and also the effects of
their products on the various
types of the Skin.

 These Surveys help them to

know if any resistance is
developing in the population or
if there are any new side effects
developing due to the use of
certain molecules of the M/s.
Hegde & Hegde Pharmaceutica
LLP vis-a vis other similar
products.

 It is also the mandate of the

Drug department that Pharma
Companies must conduct Post
Surveillance studies on their
products so as to continuously
monitor the effectiveness,
efficacy and any new side
effects being developed due to
the use of their products.

 Accordingly, I was assigned the

professional task of conducting
Surveys on my various patients
which would open the doors for
the LLP to the vast and valuable
clinical experience acquired by
me over the Years of my
clinical practice in modern
medicine.
  The copy of the Survey Forms
are already enclosed in
Annexure No.4 herewith.
7 3 Please explain  M/s. Hegde & Hegde
elaborately the process Pharmaceutica LLP is
in which the survey has desirous of conducting
been done. Market Research,
Surveillance and Survey
Studies on various products
marketed by them for
approved indications only.

 These research studies help

them to monitor the efficacy,
effectiveness & performance
of the various Products
Marketed by them and gauge
the effects of their products
on the various skin types.

 These Surveys help them to

know if any resistance is
developing in the patients
using their products, or if
there are any new side effects
due to the use of certain
molecules in their products.

 These Surveys serve twin

purposes one by helping the
M/s Hegde & Hegde
Pharmaceutica LLP to know
about the effectiveness of
their products and the other
being providing improved line
of treatment to the patients.

 As the Surveys are

undertaken for and on behalf
of M/s Hegde & Hegde
Pharmaceutica LLP to
understand the effectiveness
and efficacy of their product
they design the survey forms
for the different range of
products for their specific
indication.

 To answer the Questions

posed in the Survey forms, I
 use my professional
judgement and expertise to
reply the same.

 Based on the No of patients

treated by me for a particular
indication, and my line of
treatment with a particular
molecule being used for the
treatment of the patients I
summarize my results in the
survey forms which are meant
to give a complete insight to
M/s Hegde & Hegde
Pharmaceutica LLP as regards
the efficacy, effectiveness &
performance of the various
Products vis-à-vis other
generic products.
8 10 Please explain whether  I would like to state that the
surveys conducted for Surveys conducted by me on
entities like M/s. behalf of the LLP are not
Hegde & Hegde contravening any regulation or
Pharmaceutica guidelines issued by MCI or any
LLP are against any other regulatory body.
regulation or guidelines
by MCI/any such  In fact, clause (g) of regulation
regulatory body. 6.8.1. of the MCI guidelines,
permits me to affiliate myself
with a Pharmaceutical Company
in a professional capacity as an
advisor, consultant, as researcher
or as a treating doctor or in any
other professional capacity.

 However, while affiliating with a

Pharmaceutical Company I have
to ensure that my professional
integrity and freedom is
maintained, and the interest of
my patients are not
compromised in any manner,
which I take care of while
conducting such surveys.

 In view of the above, I state that

the Surveys conducted by me on
behalf of M/s Hegde & Hegde
Pharmaceutica LLP are within
the framework of the MCI
Guidelines.
9 RENU GARG (PAN: 1 Whether, you have  M/s Hedge & Hedge
AHPPG5017M) rendered any services
 for M/s. Hegde & Pharmaceutical LLP is engaged
Hegde Pharmaceutica in the business of marketing of
LLP for the various dermatological and
year under allied products for human use
consideration. If yes, and in the financial year 2016-17
you are requested to I have rendered my professional
provide the details service to M/s Hedge & Hedge
regarding nature of Pharmaceutical LLP in the
services rendered with nature of market research,
documentary evidences surveillance & survey regarding
to substantiate the various dermatological and
same. allied products
10 2 If the service rendered  During the financial year 2016-
is in the form of 17, I have rendered professional
survey, please explain services in the nature of market
for what the survey has research, surveillance & survey
been for the various dermatological
done. Further, please and allied products marketed by
furnish the copies of them.
survey forms in this
regard.
11 3 Please explain  In order to provide the
elaborately the process documentary evidence in
in which the survey has connection with the services
been done. provided by me to the M/s
Hedge & Hedge Pharmaceutica
LLP , I am enclosing herewith in
annexure no 1, copy of 73
survey forms total page in
annex1 is 74), for surveys
conducted by me during the
financial year 2016-17.
12 10 Please explain whether  It is humbly submitted that I am
surveys conducted for a qualified MBBS doctor with a
entities like M/s. post qualification experience of
Hegde & Hegde 21 years in the field of
Pharmaceutica dermatology and gynaecology.
LLP are against any
regulation or guidelines
by MCI/any such
regulatory body.
13 GUDEPU REVATHI 1 Whether, you have  During the Financial Year
(PAN rendered any services 2016-17, I have rendered
ASMPG6189J) for M/s. Hegde & Professional Services in the
Hegde Pharmaceutica nature of Market Research,
LLP for the
Surveillance & Survey Fees
year under
consideration. If yes,
for the various
you are requested to Dermatological and allied
provide the details Products Marketed by them.
regarding nature of
services rendered with  In order to provide the
documentary evidences documentary evidence in
to substantiate the connection with the services
 same. provided by me to the M/s.
Hegde & Hegde
Pharmaceutica LLP, I am
enclosing herewith in copies
of Survey Forms, for surveys
conducted by me during the
Financial Year 2016-17.

14 2 If the service rendered  It is to be submitted that M/S.

is in the form of Hegde & Hegde
survey, please explain Pharmaceutica LLP wanted to
for what the survey has monitor the efficacy,
been
effectiveness & performance
done. Further, please
furnish the copies of
of the various Products
survey forms in this Marketed by the demand also
regard. the effects of their products
on the various types of the
Skin disease.

 These Surveys help the

manufacturer to know if any
resistance is developed in the
population or if there are any
new side effects developing
due to the use of certain
molecules of the M/S. Hegde
& Hegde Pharmaceutica LLP
Products vis-a vis other
similar products.

 It is also the mandate of the

Drug department that Pharma
Companies must conduct Post
Surveillance studies on their
products so as to continuously
monitor the effectiveness,
efficacy and any new side
effects being developed due
to the use of their products.

 Accordingly, I was assigned

the task of conducting
Surveys on various patients
treated by Dr. Sri. G.
Suryanarayana Rao, who is a
senior Dermatologist, having
completed his Post
Graduation in Dermatology in
the year 1992which would
open the doors for the LLP to
 the vast and valuable clinical
experience.

15 3 Please explain  M/S. Hegde & Hegde

elaborately the process Pharmaceutica LLP is
in which the survey has desirous of conducting
been done. Market Research,
Surveillance and Survey
Studies on various products
marketed by them for
approved indications only.

 These research studies help

them to monitor the efficacy,
effectiveness & performance
of the various Products
Marketed by them and gauge
the effects of their products
on the various skin types.
These Surveys help them to
know if any resistance is
developing in the patients
using their products, or if
there are any new side effects
due to the use of certain
molecules in their products.

 These Surveys serve twin

purposes one by helping the
M/S Hegde & Hegde
Pharmaceutica LLP to know
about the effectiveness of
their products and the other
being providing improved
line of treatment to the
patients. As the Surveys are
undertaken for and on behalf
of M/S Hegde & Hegde
Pharmaceutica LLP to
understand the effectiveness
and efficacy of their product
they design the survey forms
for the different range of
products for their specific
indication.

 I answer the Questions posed

in the Survey forms. Based on
the No of patients enquired by
me for a particular indication,
 and my line of treatment with
a particular molecule being
used for the treatment of the
patients summarize my results
in the survey forms which are
meant to give a complete
insight to M/S Hegde &
Hegde Pharmaceutica LLP as
regards the efficacy,
effectiveness & performance
of the various Products vis-ä-
vis other generic products.

16 10 Please explain whether  I would like to state that the

surveys conducted for Surveys conducted by me on
entities like M/s. behalf of the LLP are not
Hegde & Hegde contravening any regulation
Pharmaceutica
or guidelines issued by MCI
LLP are against any
regulation or guidelines
or any other regulatory body.
by MCI/any such
regulatory body.

1.16. We are enclosing herewith in Annexure No. 27, (We are once again
enclosing herewith in Annexure No.38 a copy of the same) a copy of the
Indian Medical Council (Professional conduct, Etiquette and Ethics)
Regulations, 2002. We reproduce hereunder, the relevant para of the
guidelines issued by MCI:-

Quote

“6.8 Code of conduct for doctors and professional association of doctors in

their relationship with pharmaceutical and allied health sector industry.

6.8.1 In dealing with Pharmaceutical and allied health sector industry, a

medical practitioner shall follow and adhere to the stipulations given
below:-
…………..
d) Cash or monetary grants: A medical practitioner shall not receive any
cash or monetary grants from any pharmaceutical and allied healthcare
industry for individual purpose in individual capacity under any pretext.
Funding for medical research, study etc. can only be received through
approved institutions by modalities laid down by law / rules / guidelines
adopted by such approved institutions, in a transparent manner. It shall
always be fully disclosed.
…………………….

g) Affiliation: A medical practitioner may work for pharmaceutical and

allied healthcare industries in advisory capacities, as consultants, as
researchers, as treating doctors or in any other professional capacity. In
doing so, a medical practitioner shall always:
 (i) Ensure that his professional integrity and freedom are maintained.
(ii) Ensure that patient’s interest are not compromised in any way.
(iii) Ensure that such affiliations are within the law.
(iv) Ensure that such affiliations / employments are fully transparent and
disclosed.
h) ………...”

Unquote

1.17. If your honor goes through the above guidelines, Your Honor would observe
that the Medical Professionals shall not receive any cash or monetary
grants from any pharmaceutical and allied healthcare industry for
individual purpose in individual capacity under any pretext.

F) Additional Comments

 The term grant has not been defined under the Income Tax Act, 1961 and
therefore one has to look at the general dictionary to understand the meaning
thereof.

 Collins Dictionary defines the word “grant” as under: -

Quote

“A grant is an amount of money that a government or other institution gives

to an individual or to an organization for a particular purpose such
as education or home improvements.
They'd got a special grant to encourage research.
Unfortunately, my application for a grant was rejected.
Synonyms: award, allowance, donation, endowment More
Synonyms of grant”

Unquote

 Thus, the word grant implies gratuitous payment. What is prohibited a per the
MCI Guidelines is that a Doctor cannot receive a gratuitous payment from a
Pharma Company to oblige to write prescription for the benefit of a
Pharmaceutical Company. Therefore, in such a scenario there is no legal quid
pro quo.

 In case of Your Appellant, the payments were paid to doctors for conducting
Market Research and Product Survey activity which are properly deduced in
survey forms and they are available on record for the analytical purpose to
gauge the efficacy and effectiveness of the Products marketed by Your
Appellant as well as to be submitted to the Statutory Authorities whenever
asked for. It is an accepted fact that, Your Appellant did submit these survey
forms in 2013 to DCGI so as to enable them to continue to market the 16
products.
  Thus, in such payment there was no question of a grant. In fact, there was a
quid pro quo where the Medical Practitioners carried out the surveys and spent
their valuable time for which they have received the survey fees. Accordingly,
such payments do not come within the purview of “monetary grant” and is
outside the ambit of the MCI Guidelines.

1.18. Having provided so, clause 6.8.(g) of the MCI guidelines, does permits the
doctors to affiliate themselves with the Healthcare industry in advisory
capacities, as consultants, as researchers, as treating doctors or in any
other professional capacity.

1.19. Please understand that only the Medical Practitioners in the field are the
only persons competent enough to judge the efficacy, effects and side effects
of a product and their help is absolutely necessary for a Pharma Company to
understand the efficacy of their products as well as improvements required
therein. Thus, by conducting Market Research and Product Surveys the
medical practitioners are helping the society at large.

1.20. Now to further support our stand that our client has never engaged itself in
Prescription based commission payments to doctors, we would like to draw
your attention to the fact that the original assessments of our client for the
Assessment Year 2014 – 15 to 2018 – 19 have been completed u/s 143(3) of
the Act with meagre technical additions. During the course of all this
assessment proceedings all the necessary details regarding i) Market
Research and Product Survey Fees, ii) Conference Registration Fees and
iii) Scientific Books & Periodicals were filed before the Assessing Officer.
After due deliberations all these expenses have been considered allowable
considering the Indian Medical Council (Professional conduct, Etiquette
and Ethics) Regulations, 2002 and the Circular No. 5/2012 [F. No.
225/142/2012-ITA.II], dated 1-8-2012 issued by CBDT in this connection.

We are enclosing herewith the following: -

Sr. Particulars Copy

No. enclosed
in
Annexure
No.
1 Copy of the Assessment Order passed u/s 143 (3) of the 28.01
Act for the Assessment Year 2014-15
2 Copy of the Assessment Order passed u/s 143 (3) of the 28.02
Act for the Assessment Year 2015-16
3 Copy of the Assessment Order passed u/s 143 (3) of the 28.03
Act for the Assessment Year 2016-17
4 Copy of the Assessment Order passed u/s 143 (3) of the 28.04
Act for the Assessment Year 2017-18
5 Copy of the Assessment Order passed u/s 143 (3) of the 28.05
 Act for the Assessment Year 2018-19

Now, after the survey, you have alleged that all these three expenses are
violative of MCI guidelines, meaning thereby that while framing the
original assessments in all these years there was a lack of application of
mind by the then Assessing Officer. It is very unfortunate to note that in
post survey as well as the reassessment proceedings you have not brought
on records any new material or any cogent reasons to support your
allegation that these expenses are not allowable u/s 37(1) of the Act.

1.21. To reiterate that we state that: -

a) Our client has not paid any Prescription based commission to any
doctors. In fact, it is not feasible for any pharma company like our client
to gauge the quantum of Prescription based sales achieved through a
Doctor. Your Honor has not given any basis as to how the conclusion
has been arrived at that our client has been paying Prescription based
commission. Moreover, you have not informed our client as to whether
you have collected any adverse corroborative evidence against our client
during the course of survey, post survey, recording of the statements u/s
131 of the Act and during the assessment proceedings, to lead you to a
conclusion that our client was engaged in Prescription based
commission to doctors.

b) Our client has established in unequivocal terms that the payments made
to Doctors were Professional Fees for the purpose of the Market
Research and Product Surveys conducted by them. This fact has been
confirmed by various doctors in response to the notices issued to them
u/s 133(6) of the Act as well as the confirmation letters filed by our
client.

Further, we submit that Your Honor has not rebutted the various
evidence submitted by our client to establish the fact that they have paid
professional fees to doctors towards the Market Research and Product
Surveys conducted by them as against Prescription based commission as
alleged by you.

c) MCI Guidelines do not debar a medical practitioner from associating

with the pharma company in advisory capacities, as consultants, as
researchers, as treating doctors or in any other professional capacity
and therefore the payment of ₹. 65,63,18,695/- towards Market
Research and Survey Fees is well within the purview of MCI Guidelines.

Under the circumstances, our client is of the opinion that by making payment of
professional fees for the Market Research and Product Surveys neither our client
nor the recipient doctors have violated the MCI guidelines and therefore the
question of making disallowance of ₹. 65,63,18,695/- u/s 37(1) of the Act does not
arise.”
Unquote