S.37(1): Business expenditure – Referral commission paid to doctors – Violation of the professional conduct- Not allowable as deduction. [Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations 2002, R. 6.8. 1(d)]
The assessee is a company engaged in the business of ‘extraction, collection, preservation and banking of stem cells ‘mainly from dental pulp. The assessee company has paid referral service fee to the medical practitioners for availing of the steam cell banking services. The Assessing Officer disallowed the said expenses, which was affirmed by the CIT(A ).On appeal the Appellate Tribunal referred the rule 6. 8. 1(d)) of the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations 2002 and held that the acceptance of such a referral fee by a medical Practitioner is forbidden by the legally enforceable code of conduct which renders it an expenses for a purpose that is ‘prohibited by law, depriving the assessee company to claim a tax deduction in respect of the said expenditure. Order of CIT (A) is affirmed. Referred Apex Laboratories P. Ltd v. Dy. CIT (2022) 442 ITR 1 (SC)(ITA No. 7823/Mum) 19 dt.20-05-2022 (AY. 2015 -16)