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TMI Blog2022 (6) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue raised in the appeal does seek to reignite, what many believe to be, a controversy laid at rest. We must, therefore, deal with the issue in appeal in some detail. 3. Grievance of the appellant, as raised in grounds of appeal numbers 1 and 2 and in substance, is that the authorities below erred in holding that referral commission paid to doctors is in violation of the professional conduct under the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002, and, as such, inadmissible as a tax deduction under section 37 of the Income Tax Act, 1961. 4. The assessee before us is a company engaged in the business of 'extraction, collection, preservation and banking of stem cells'- mainly from dental pulp. As its product brochure, a copy of which is filed before us as well, indicates, stem cells are master cells that have the potential to become any type of cell in the body and which have the unique trait of self-renewal and multiplication and the potential to develop into other types of cells. These stem cells are said to have potential use in the treatment of several life-threatening diseases, and what is referred to as stem cell banking is the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the inimitable words of Hon'ble Justice Ravindra Bhatt, "medical practitioners have a quasi-fiduciary relationship with their patients" and " a doctor's prescription is considered the final word on the medication to be availed by the patient, even if the cost of such medication is unaffordable or barely within the economic reach of the patient - such is the level of the trust reposed in doctors" It was then added that "Therefore, it is a matter of great public importance and concern when it is demonstrated that a doctor's prescription can be manipulated". What essentially follows is that when the advice given by a medical professional to his client is influenced by an inducement by someone else, who has a stake in the course of action to be then followed by the client as a result of this advice, it is this undesirable influence which vitiates the performance of medical practitioner's fiduciary duties to his client, and that is what makes it unethical. When a referral fee is paid to a doctor for advising his client in a particular way so as to benefit the person paying the referral fee, that is clearly unethical and is susceptible to being used to manoeuvre the advice given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable obligations, implied limitations etc. The process of continuing evolution, refinement and assimilation of these concepts into binding norms (within the body of law as is understood and enforced) injects vitality and dynamism to statutory provisions. Without this dynamism and contextualization, laws become irrelevant and stale. 10. Viewed thus, the hyper-technical plea of the learned counsel does not meet our approval. The expression 'allied healthcare industry' is required to be interpreted in the context in which appears in the code of conduct for the medical practitioners, and not on the basis of how this expression has been defined in some other context in a journal or on website guidelines. We are unable to see any justification for excluding a medical service provider, like the assessee before us, from the segment of the 'pharmaceutical and allied healthcare industry' in the present context. 11. It is then contended that the doctor has rendered a service for which he is being remunerated, and, in that sense, payment of referral fees is not a freebie. There is no merit in. this argument either. The doctor is being paid for his services separately, as clearly discernib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or monetary grants and thereby, actively and with full knowledge, enabling the commission of an act which attracts, to borrow the strong words of disapproval as used by Their Lordships, such "opprobrium". To sum up, in our humble understanding and in the plain words, the law as it stands now-, particularly in the light of the law laid down by the Hon'ble Supreme Court in the case of Apex Laboratories (supra), any financial inducement, by freebies or by monetary grants, which vitiates, or has the potential to vitiate, the unbiased performance of fiduciary duties of a medical practitioner to his client is forbidden by the code of conduct for the medical practitioners and is no longer tax-deductible under section 37(1). 13. In a rather recent judgment dated 19th April 2022, in the case of Peerless Hospitex Hospital & Research Centre Pvt Ltd Vs PCIT [(2022) 137 taxmann.com 359 (Cal)], His Lordship of Hon'ble Calcutta High Court, dealing specifically with the referral fee- though in the context of reopening of assessment, has observed that "Considering the submission of the parties, aims and object of the amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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