Indian Kanoon - Search engine for Indian Law

16.

2. Notwithstanding the final word spoken by the Hon‟ble Supreme Court in the case of Apex Laboratories Pvt Ltd [(2022) 442 ITR 1 (SC)] on the issue of tax-deductibility of freebies etc to medical practitioners, and notwithstanding the amendment made in the related tax law provision by the Finance Act 2022, many would not let the litigation come to an end until the legal ingenuity is exhausted- which is always a good distance away. The amount involved in this appeal may be relatively small at Rs 9,61,140, but the issue raised in the appeal does seek to reignite, what many believe to be, a controversy laid at rest. We must, therefore, deal with the issue in appeal in some detail.

11. It is then contended that the doctor has rendered a service for which he is being remunerated, and, in that sense, payment of referral fees is not a freebie. There is no merit in. this argument either. The doctor is being paid for his services separately, as clearly discernible from the offer documents- extracts from which have been reproduced 4 above, and the referral fees is for his convincing the client to buy the service offered by the assessee company- a Assessment year: 2015-16 service he ought not to have rendered in the course of, or in the garb of, discharging his fiduciary duties towards his patients. That is where the advice given by him in a fiduciary capacity is sought to be maneuvered to suit the commercial interests of the assessee and that is where the breach of fiduciary duties takes place- something unequivocally disapproved by the Hon‟ble Supreme Court and prohibited by the code of conduct applicable on medical professionals.

12. It is then contended that the kind of freebies dealt with by the Hon‟ble Supreme Court in the case of Apex Laboratories (supra) were in the nature of LCDs, laptops, refrigerators and gold coins etc which are not the same thing as a payment for the rendition of services, and, as such the views expressed by Hon‟ble Supreme Court have no application to the facts of this case. That again is a very superfluous way of reading the judgment of our highest, and most revered, judicial forum. One has to read the judgment in totality and attempt to discern the law laid down by Their Lordships. Whatever were the facts of the case being dealt by Hon‟ble Supreme Court, the principle laid down by Their Lordships is of the wide ramification which will be equally applicable in all situations in which medical professionals have acted in violation of their code of conduct- in letter and in spirit. It is important to bear in mind the fact that Hon‟ble Supreme Court has observed, in very emphatic words, that ".... when acceptance of freebies is punishable by the MCI (the range of penalties and sanction extending to ban imposed on the medical practitioner), pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium". Applying this principle to the fact situation that we are dealing with, when the receipt of "any cash or monetary grants from any pharmaceutical and allied healthcare industry.......under any pretext" is forbidden for the medical professional and is punishable by the MCI, such pharmaceutical and allied healthcare companies cannot be granted the tax benefit for provides such cash or monetary grants and thereby, actively and with full knowledge, enabling the commission of an act which attracts, to borrow the strong words of disapproval as used by Their Lordships, such "opprobrium". To sum up, in our humble understanding and in the plain words, the law as it stands now-, particularly in the light of the law laid down by the Hon‟ble Supreme Court in the case of Apex Laboratories (supra), any financial inducement, by freebies or by monetary grants, which vitiates, or has the potential to vitiate, the unbiased performance of fiduciary duties of a medical practitioner to his client is forbidden by the code of conduct for the medical practitioners and is no longer tax-deductible under section 37(1).