Bar expenditure by firms for referral fees to docs: CAG

The Comptroller and Auditor General (CAG) has asked the Central Board of Direct Taxes to disallow expenditure by companies in respect of all kinds of freebies and referral fees paid to medical practitioners.

It also asked the CBDT to disallow advertisement and business promotion expenses within the purview of explanation under section 37 of Income Tax Act 1961 to create an additional deterrence against such unethical practices.

The CAG in its report tabled in Parliament today observed that the "referral fees" paid to the doctors by the private hospitals, nursing homes, diagnostic centres for referring patients and payments made on account of "advertisement expenses" by the medical practitioners were allowed, although such expenditure has been held as disallowable and "unethical" as per CBDT's directives and laws of regulatory bodies.

The CAG has also recommended to CBDT to prescribe measurable parameters for assessment of charitable activities undertaken by private hospital trusts as a pre-condition for granting exemptions under the Income Tax Act.

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