Disallow all expenditure by companies in the name of freebie
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The Comptroller and Auditor General (CAG) has asked CBDT (Central Board of Direct Taxes) to disallow any expenditure made by companies in the name of freebies, referral fees paid to medical practitioners.

In a recent performance audit of the assessment of private hospitals, nursing homes, medical colleges, diagnostic centres, pathological labs and other medical supplies agencies/stores etc., the CAG found that "referral fees" paid to the doctors by these establishments for referring patients and payments made on account of “advertisement expenses” by the medical practitioners were allowed.

This is in direct violation of a CBDT (Central Board of Direct Taxes) directive of August 2012. The directive states that claim for any expense incurred in providing freebies to medical practitioners is in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 and shall be inadmissible under section 37(1) of the Income Tax Act. It has been judicially held that any commission paid to private doctors for referring patients was not to be allowed as business expenditure.

CAG also asked CBDT to disallow advertisement and business promotion expenses under Section 37 of Income Tax Act 1961 to create an additional deterrence against such unethical practices.

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