The doctors and medical establishments accepting "gifts" will also be taxed, according to the circular by the Department.
Coming down heavily on pharmaceutical and allied health sector industries, the Income Tax Department has in a circular said that it will tax the amount spent by these companies on “providing freebies to medical practitioners and their professional associations”.
The doctors and medical establishments accepting “gifts” will also be taxed, according to the circular by the Department.
The circular said: “It has been brought to the notice of the Central Board of Direct Taxes that some pharmaceutical and allied health sector industries are providing freebies to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India, a regulatory body constituted under the Medical Council Act, 1956.”
The Medical Council had in 2009 imposed a prohibition on medical practitioners and their professional associations from taking any gifts, travel facility, hospitality, cash or monetary grant from pharmaceutical and allied health sector industries.
Explaining the new set of guidelines, the Income Tax circular noted: “Section 37(1) of the Income Tax Act provides for deduction of any revenue expenditure (other than those failing under Sections 30 to 36) from the business income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense if the same has been incurred for a purpose which is either an offence or prohibited by law. Thus the claim of any expense incurred in providing freebies in violation of the provisions of the Indian Medical Council regulations shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law.”
Not sparing the doctors and medical establishments, the Department noted: “The sum equivalent of the freebies enjoyed by the medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case.”
Hailing this as a historic move to curb corruption in the medical profession, RTI activist and physician Dr. Babu K.V. speaking to The Hindu over phone said: “This is a step in the right direction which will give more teeth to the Medical Council of India. We welcome this decision.”
Indian Medical Association member Dr. Anil Bansal said: “The Income Tax Department should also look at including in the net quacks who are not only working without adequate or no qualification but also reaping additional benefits and making money through pharmaceutical companies.
This is a move in the right direction and we hope both the pharmaceutical companies and doctors will cooperate.”