Held that a hospital is not eligible or entitled to get deduction on expenditure by way of commission to the doctors as “referral to doctors” for referring patients for treatment in its hospital as business expenditure under section 37(1) of the Act, in view of Explanation 1 to section 37(1) of the Income-tax Act, 1961, read with Circular No. 5 dated August 1, 2012 ([2012] 346 ITR (St.) 95) of the Central Board of Direct Taxes which is retrospective in nature with effect from December 14, 2009, and in view of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 under which such receipt by the medical practitioner is prohibited and violation of which invites punishment and disciplinary proceedings against doctors. However reassessment proceedings are quashed..(AY.2011-12, 2012-13)
Peerless Hospitex Hospital and Research Center Ltd. v. PCIT (2022) 447 ITR 60 / 326 CTR 249 / 213 DTR 81 / 287 Taxman 711 (Cal.)(HC)
S. 37(1) : Business expenditure-Expenditure prohibited by law-Amounts paid by Hospitals as referrals to Doctors-Not deductible-Interpretation of taxing statutes-Interpretation taking into account intention of legislature-Reassessment notice was quashed. [S. 147, 148, Art. 226, General Clauses Act, 1897, S. 2(38), Indian Penal Code, 1860, S. 43, Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, R. 6.8]