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2021 (5) TMI 753 - AT - Income TaxAdmissibility of expenditures incurred by the assessee (a pharmaceutical company) u/s 37 - disallowance of referral fees paid to doctors in violation of public policy and regulations formulated by the Medical Council of India ("MC!') - allowability of assessee's referral fees paid to various eye clinics/eye specialists in their business premises in lieu of rent and other advantages - HELD THAT:- Assessee; a company engaged in eye care business has shared its revenue with the eye clinics and ophthalmologists inter alia in lieu of availing rent free premises without maintenance charges. We make it clear that the learned senior counsel has himself argued that it is an instance of the emerging business model only. We observe in these facts that no business model could be taken allowable of it since violate public policy as per the above stated CBDT Circular. As observed during the hearing that the learned senior counsel has filed paper book running into 193 pages containing various case law(s), he himself was fair enough that none of the said decisions would apply herein since they do not involve any such business model of revenue sharing. All the said decisions are distinguishable on the facts therefore as per the assessee's stand. These facts and circumstances make it apparent that the interest of general public patients is very much compromised by the assessee’s revenue’s sharing agreement. We accordingly uphold the lower authorities action treating the assessee's referral fees as commission payment not allowable in principle. Whether referral fees involves rental payment without being any maintenance charges etc? - As come on record that neither the assessee itself has placed on record the corresponding rent’s market rate nor the lower authorities have made any such attempt. Faced this situation, we deem it appropriate that a lump sum disallowance of 1/3 rd of the assessee's impugned claim (including the rent and other miscellaneous charges on estimation basis) would be just and proper in the given facts and circumstances. The assessee gets relief to the extent of 2/3rd of the impugned services in other words. Necessary computation shall follow as per law. Very nature of payment stands accepted in earlier year we quote the honourable apex court’s landmark decision in Radhasoami Satsang Vs. CIT [1991 (11) TMI 2 - SUPREME COURT] holds that the principle of res judicata is not applicable in income tax proceedings. The assessee's corresponding argument stands declined therefore.
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