'Rs 300 Crore Tax Evasion' By Dolo-650 Manufacturers, Claims I-T Department

A week after raiding the premises of Dolo-650 tablet manufacturer, Micro Labs Ltd, the Income Tax (I-T) Department has alleged tax irregularities.

A statement released by the administrative body for the I-T department, the Central Board of Direct Taxes (CBDT) said that the department seized 'unaccounted' cash of Rs 1.20 crore and gold and diamond jewellery of Rs 1.40 crore.

The I-T department raided 36 premises of Bengaluru-based Micro Labs Ltd across nine states on 6 July. "During the course of the search operations, substantial incriminating evidence, in the form of documents and digital data, has been found and seized," the statement said.

The drugmaker is accused of indulging in 'unethical practices'. They allegedly distributed freebies of about Rs 1,000 crore to doctors and medical professionals in exchange for promoting products made by the pharmaceutical group.

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 statement said.

It should be noted that Dolo-650 became widely popular during the Covid pandemic. The company claimed that it "virtually became a household name across the country".

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 report.

Dolo-650 is an analgesic (pain killer) and antipyretic (fever-reducing) and was being prescribed by many doctors and medical shop owners for coronavirus patients to reduce pain and fever, common symptoms caused by Covid.

"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 CBDT statement said.

Dolo-650 was able to break all records, crushing all its rivals but now the IT department has found out that the group allegedly adopted unethical practices to promote its products/brands. However, the CBDT statement did not identify the group, sources confirmed it to be Micro Labs Ltd.

Dolo-650 has 650 milligrams (mg) of paracetamol, which is claimed to be more effective than other brands which sell their product with 500 mg. Another strategy that worked for Dolo-650 was that it was promoted as a medicine for fever of unknown origin which made it trustworthy during Covid.

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).

It is claimed that the group "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 IT Act in respect of transactions under contracts entered into with the third-party bulk drug manufacturers.

(With inputs from PTI)