Union Budget 2022:

Freebies to doctors are illegal, no tax deduction allowed

1. Explanation 1 of sub-section (1) of section 37 of the Income Tax Act provides that if any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.

2. CBDT, vide circular No. 5/2012 dated 1.8.2012, noted that the Indian Medical Council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10.12.2009 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.

3. It is now proposed to insert another Explanation to sub-section (1) of section 37 to further clarify that the expression “expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law”, under Explanation 1, shall include and shall be deemed to have always included the expenditure incurred by an assessee, —

i. for any purpose which is an offence under, or which is prohibited by, any law, in India or outside India.

ii. to provide any benefit or perquisite, to a person,and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guidelines.

iii. to compound an offence under any law, in India or outside India.

In short, Finance Bill 2022 has reiterated that Freebies to doctors are illegal & so no tax deduction sha be allowed towards it.