CAG blames I-T officials for Rs 1,348 crore loss in pharma companies

New Delhi: Coming down heavily on the I-T department, CAG has said non-compliance of procedures for giving incentives to pharmaceutical firms, including Ranbaxy, Dr Reddy’s and Piramal, resulted Rs 1,348.44 crore loss to the exchequer.

The Comptroller and Auditor General (CAG) in its report on the pharmaceuticals sector said the I-T department allowed firms to claim benefits on R&D expenses without verification, while assessing officers (AOs) allowed expenses on freebies and gifts to doctors despite such a practise being illegal.

The auditor in the assessment report completed during the period from 2010-11 to 2013-14 also lashed out at the I-T department for not maintaining proper data on incentives given to the sector.

The report, which contains 246 cases, where the CAG pointed out “deficiency in the system or in the compliance with the laid down provisions involving total tax effect of Rs 1,348.44 crore”.

Citing examples of how due procedures were not followed, the CAG said Ranbaxy Laboratories had claimed weighted deduction on R&D expenditure of Rs 670.8 crore and Rs 645.5 crore for assessment years 2008-09 and 2009-10 respectively.

“The claim deduction had been allowed without the confirmation of approved expenditure,” CAG said, adding that it “resulted in under assessment of income.

The CAG said assessing officer had allowed Dr Reddy’s to count as expense Rs 15.43 crore paid as penalty to NPPA, which was not allowable.