CIT v. Kap Scan and Diagnostic Centre (P.) Ltd.

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The Tax Publishers2012 TaxPub(DT) 2014 (P&H-HC) : (2012) 047 (I) ITCL 0592 : (2012) 344 ITR 0476 INCOME TAX ACT, 1961 --Business expenditure--AllowabilityCommission paid to doctors for referring patients--Assessee was doing business of CT Scan, ultra sond and X rays. in the relevant assessment year, it claimed busienss expenditure on account of commission paid to practising doctors who referred the patients for various tests. AO disallowed the claim of assessee. On appeal, CIT(A) as well as Tribunal allowed the commission as business expenditure. Being aggrieved revenue challenged the order of the Tribunal on the ground that the commission paid to doctors was an illegal payment and same was not allowable as per the Explanation to section 37(1). Assessee argyued that giving of commission to the private doctors refering the patients for various medical tests was a trade practice which could not be termed to be illegal and, therefore, the same cannot be disallowed under section 37(1). Held: Under the 'Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 demanding such commission was bad, paying it was equally bad. Both were privies to a wrong. Therefore, such commission paid to private doctors was opposed to public policy and should be discourated. The payment of commission by the assessee for referring patients to it cannot by any stretch of imagination be accepted to be legal or as per public policy. Thus, commission paid to practicing doctors for referring patients for diagorisis could not be allowed as business expdenditure in view of Explanation to section 37(1). Consequently, order of Tribunal did not sustain. Income Tax Act, 1961 Explanation to section 37(1) IN THE PUNJAB AND HARYANA HIGH COURT ADARSH KUMAR GOEL & AJAY KUMAR MITTAL JJ. CIT v. Kap Scan and Diagnostic Centre (P.) Ltd. I. T. A. Nos. 445, 522, 533 and 549 of 2006 A.Y. 1997-98 3 December, 2010 Appellant by : Rohit Sud, Advocate, Respondentby in I.T.A. No. 445 of 2006 Akshay Bhan, Advocate, Respondent by : in I.T.A. Nos. 522, 533 and 549 of 2006. JUDGMENT SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 2014 (P&H-HC) : (2012) 047 (I) ITCL 0592 : (2012) 344 ITR 0476

INCOME TAX ACT, 1961

--Business expenditure--AllowabilityCommission paid to doctors for referring patients--Assessee was doing business of CT Scan, ultra sond and X rays. in the relevant assessment year, it claimed busienss expenditure on account of commission paid to practising doctors who referred the patients for various tests. AO disallowed the claim of assessee. On appeal, CIT(A) as well as Tribunal allowed the commission as business expenditure. Being aggrieved revenue challenged the order of the Tribunal on the ground that the commission paid to doctors was an illegal payment and same was not allowable as per the Explanation to section 37(1). Assessee argyued that giving of commission to the private doctors refering the patients for various medical tests was a trade practice which could not be termed to be illegal and, therefore, the same cannot be disallowed under section 37(1). Held: Under the 'Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 demanding such commission was bad, paying it was equally bad. Both were privies to a wrong. Therefore, such commission paid to private doctors was opposed to public policy and should be discourated. The payment of commission by the assessee for referring patients to it cannot by any stretch of imagination be accepted to be legal or as per public policy. Thus, commission paid to practicing doctors for referring patients for diagorisis could not be allowed as business expdenditure in view of Explanation to section 37(1). Consequently, order of Tribunal did not sustain.

Income Tax Act, 1961 Explanation to section 37(1)

IN THE PUNJAB AND HARYANA HIGH COURT

ADARSH KUMAR GOEL & AJAY KUMAR MITTAL JJ.

CIT v. Kap Scan and Diagnostic Centre (P.) Ltd.

I. T. A. Nos. 445, 522, 533 and 549 of 2006

A.Y. 1997-98

3 December, 2010

Appellant by : Rohit Sud, Advocate,

Respondentby in I.T.A. No. 445 of 2006 Akshay Bhan, Advocate,

Respondent by : in I.T.A. Nos. 522, 533 and 549 of 2006.

JUDGMENT