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2022 (6) TMI 1146 - AT - Income TaxAllowable business expenditure u/s 37 - deductibility of freebies etc to medical practitioners - referral commission paid to doctors is in violation of the professional conduct under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 - Whether authorities below erred in holding that referral commission paid to doctors is in violation of the professional conduct under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002, and, as such, inadmissible as a tax deduction under section 37? - HELD THAT:- The expression ‘allied healthcare industry’ is required to be interpreted in the context in which appears in the code of conduct for the medical practitioners, and not on the basis of how this expression has been defined in some other context in a journal or on website guidelines. We are unable to see any justification for excluding a medical service provider, like the assessee before us, from the segment of the ‘pharmaceutical and allied healthcare industry’ in the present context. When an unsuspecting client walks into the consulting chamber of a dentist who advises him to go for stem banking from his dental plump, one cannot be sure whether it is the doctor’s genuine advice on its merits of what the doctor actually believes to be beneficial to the client or it is a piece of advice influenced by the financial inducement by way of ‘referral fee’ that the doctor will get for his client being referred to the service provider in question. Such a situation de facto amounts to receipt of cash or monetary grant by the medical professional from the allied healthcare industry, on the pretext of referral fees- in clear violation of rule 6.8.1(d) of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002. The true consideration for this referral fee is the advice given to the doctor’s patient, and a potential customer of the service provider, in favour of stem cell banking. The fiduciary relationship between the doctor and patient is, or has the potential of being, compromised as such by the extraneous considerations. That is clearly contrary to the letter, as also the spirit, of the code of conduct for the medical practitioners. The acceptance of such a referral fee by a medical practitioner is thus forbidden by the legally enforceable code of conduct, which renders it an expense for a purpose that is ‘prohibited by law’ depriving the assessee company to claim a tax deduction in respect of the said expenditure. We, therefore, approve the conclusions arrived at by the learned Commissioner (Appeals) on this issue, and decline to interfere in the matter. Ground dismissed. Additional receipts having been brought to tax in the hands of the assessee - HELD THAT:- Assessee has now got some material to demonstrate that this receipt was already accounted for, but he fairly admits that this material was not available earlier, and, as such, authorities below had no occasion to deal with the same. Learned Departmental Representative also fairly accepts that this issue can be remitted to the file of the Assessing Officer for fresh examination, and taking an appropriate call in the light of such fresh examination. With the consent of the parties, therefore, the matter stands restored to the file of the Assessing Officer. Ground no. 3 is thus allowed for statistical purposes in the terms indicated above.
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