Income tax - No Deduction for Freebies to Doctors
CBDT has noticed that some pharmaceutical and allied health sector Industries are providing freebies to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India which is a regulatory body constituted under the Medical Council Act, 1956.
The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries.
Under Section 37(1) of the Income Tax Act, deduction is allowed of any revenue expenditure from the business Income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose, which is either an offence or prohibited by law.
The Board clarifies that the claim of any expense incurred in providing above mentioned or similar freebies in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee that has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income.
Board has further clarified that the sum equivalent to value of freebies enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources, as the case may be, depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action.
CBDT Circular No. 5/2012., Dated: August 01, 2012