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Any freebies given to doctors and their associations by the pharmaceutical companies by way of gift, travel facility, hospitality, cash grant and so on, is not allowable as expenditure, while computing the taxable business income of such companies, says a CBDT Circular.
The Medical Council of India (MCI) had in 2009 prohibited medical practitioners and their associations from accepting these and other freebies from the pharmaceutical companies at the pain of being hauled up for violating professional ethics.
The Explanation to Section 37(1) disallows expenses that are in violation to any law of the land.
The regulations made by (MCI) a statutory body is the law of land governing the medical fraternity, and hence, any expenses incurred in violation thereof is squarely hit by the said Explanation, says the circular.
The circular goes on to say that the doctors benefitting from such largesse, however, would not be spared from the tax burden, and hence, have to offer to tax the monetary value of the freebies received from the drug industry.
(The author is a New Delhi-based chartered accountant)
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