Dr. M.S. Hiremath,, Pune v. DCIT, Cir.-5,, Pune

ITA 316/PUN/2010 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 31624514 RSA 2010
Assessee PAN ATION2002W
Bench Pune
Appeal Number ITA 316/PUN/2010
Duration Of Justice 1 year(s) 5 month(s) 4 day(s)
Appellant Dr. M.S. Hiremath,, Pune
Respondent DCIT, Cir.-5,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-07-2011
Assessment Year 2006-2007
Appeal Filed On 24-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NOS. 313 TO 316/PN/2010 & 1757/PN/2005 (ASSTT. YEAR : 2001-02 2002-03 2003-04 2005-06 TO 2006-07) DR. M.S. HIREMATH ... APPELLANT 1126/B MODEL COLONY ROAD SHIVAJINAGAR PUNE 411 016 PAN : NOT AVAILABLE V. DCIT CIR-5 PUNE RESPONDENT APPELLANT BY : SHRI M.R. BHAGWAT RESPONDENT BY : SHRI SANJAY SINGH ORDER PER I.C. SUDHIR JM IN ALL THESE APPEALS PREFERRED BY THE ASSESSEE TH E ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1) THE REASSESSMENT UNDER SECTION 147 IS WITHOUT J URISDICTION AND BAD IN LAW AS THE PROVISIONS OF SECTION 147/148 ARE NOT PR OPERTY INVOKED BY THE ASSESSING OFFICER (EXCEPT IN THE APPEAL FOR A.Y. 20 06-07). 2) THE ASSESSING OFFICER ERRED IN DISALLOWING (RS. 757300/- IN A.Y. 2001- 02 RS. 1401800/- IN A.Y. 2003-04 RS. 1560005/- IN A.Y. 2005-06 AND RS.1283120/- IN A.Y. 2006-07) BEING REFERRAL FEES PAID TO OTHER DOCTORS AS EXPENDITURE COVERED BY EXPLANATION TO SECTION 37(1) OF THE INCOME TAX ACT. GROUND NO. 1 2. THE LD. A.R DID NOT PRESS THIS GROUND FOR ADJUDI CATION BY THE BENCH. THE SAME IS ACCORDINGLY REJECTED AS WITHDRAWN. GROUND NO.2 ITA . NOS 313 TO 316/PN/2010 ETC.. DR. M.S. HIREMATH . A.YS.2004-05 2003-04 2005-06 20 06-07 ETC. PAGE OF 5 2 3. THE ISSUE INVOLVED IS AS TO WHETHER REFERRAL FEE S PAID BY THE REFERRED DOCTOR TO THE REFERRING DOCTOR FOR REFERENCE OF THE PATIEN TS TO THE REFERRED DOCTOR IS PROHIBITED UNDER SOME SPECIFIC PROVISIONS OF THE R ELATED LAWS HENCE NOT ALLOWABLE UNDER THE PROVISIONS OF THE EXPLANATION TO SEC. 37( 1) OF THE INCOME TAX ACT 1961 ? 4. AT THE OUTSET OF HEARING THE LD. A.R. POINTED O UT THAT UNDER SIMILAR FACTS AND CIRCUMSTANCES IN THE CASE OF ASSESSEE ITSELF FOR T HE A.Y. 2004-05 THE TRIBUNAL VIDE ORDER DT. 18.2.2010 HAD SET ASIDE THE IMPUGNED ORDE R TO THE FILE OF THE A.O ON THE ISSUE. THE A.O. IN RESPONSE TO THE QUERY RAISED BY HIM FROM INDIAN MEDICAL ASSOCIATION RECEIVED LETTER DATED 5.8.2010 FROM T HE INDIAN MEDICAL ASSOCIATION MAKING IT CLEAR THAT THE PAYMENT OF REFERRAL FEES T O THE REFERRING DOCTORS IS AGAINST THE ETHICS OF MEDICAL PROFESSION AND HENCE UNETHICA L. THEY MADE IT CLEAR THAT AS PER THEIR UNDERSTANDING THERE IS NO INFRINGEMENT OF ANY LAW AND SUCH MATTERS ARE TACKLED BY MEDICAL COUNCIL OF INDIA OR MAHARASHTRA MEDICAL COUNCIL FOR DISCIPLINARY ACTION FOR VIOLATION OF MEDICAL ETHICS.. THE LD. A .R. THUS TRIED TO EXPLAIN BEFORE THE BENCH THAT PAYMENT OF SUCH REFERRAL FEE BY THE REFE RRED DOCTOR TO THE REFEREE DOCTOR IS AT THE MOST VIOLATION OF MEDICAL ETHICS BUT NOT THE VIOLATION OF THE INCOME TAX ACT SINCE ADMITTEDLY THE ASSESSEE (REFERRED DOCTOR) HA S INCURRED EXPENDITURE BY PAYING THE REFERRAL FEES. HE SUBMITTED FURTHER THA T THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADDI VENKATARATNAM & CO. PVT. LTD. VS. CIT 229 ITR 534(SC) IS THEREFORE NOT APPLICABLE TO THE CASE OF THE PRES ENT ASSESSEE. 5. THE RELEVANT FACTS ARE THAT DURING THE ASSESSM ENT YEAR UNDER CONSIDERATION THE A.O DID NOT ALLOW THE CLAIMED EXPENDITURE MADE ON ACCOUNT OF PAYMENT MADE BY THE ASSESSEE ON ACCOUNT OF REFERRAL FEES TO THE DOCTORS WHO HAD REFERRED PATIENTS TO HIM. THE A.O. HELD THAT THE PAYMENT OF REFERRAL FEE AMOUNTS TO SOLICITATION OF PATIENTS WHICH IS AGAINST INDIAN M EDICAL COUNCILS GUIDELINES AND THUS ALSO AGAINST THE PRINCIPLES OF PUBLIC POLICY AND LI ABLE FOR DISALLOWANCE UNDER ITA . NOS 313 TO 316/PN/2010 ETC.. DR. M.S. HIREMATH . A.YS.2004-05 2003-04 2005-06 20 06-07 ETC. PAGE OF 5 3 EXPLANATION TO SECTION 37 OF THE ACT. THE SAME HAS BEEN UPHELD BY THE LD CIT(A). AGAINST THIS ACTION OF THE LD CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. D.R. ON THE OTHER HAND PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. HE REITERATED THE OBJECTIONS RA ISED BY THE A.O AGAINST THE CLAIM. 7. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT IN THE A.Y. 2004-05 THE PUNE BENCH OF THE TRIBUNAL ON AN IDENTICAL ISSUE U NDER SIMILAR FACT HAD SET ASIDE THE MATTER TO THE FILE OF THE A.O. SINCE THE A.O WH ILE MAKING DISALLOWANCE OF CLAIMED EXPENDITURE HAS NOT SPECIFICALLY MENTIONED AS TO UNDER WHICH PROVISION OF THE ACT SUCH PRACTICE IS PROHIBITED. AS SUBMITTED BY THE LD. A.R. THE A.O HAS COMPLIED WITH SAID DIRECTION OF THE TRIBUNAL IN THE A.Y. 2004-05 A COPY WHEREOF HAS BEEN PLACED BEFORE THE TRIBUNAL. IN ITS ASSESSMENT ORDER U/S. 254 R.W.S. 143(3) OF THE ACT FRAMED ON 25 TH NOVEMBER 2010 THE A.O HAS MADE SINCERE EFFORT IN THIS REGARD. HE HAS ALSO SOUGHT CLARIFICATION FROM IN DIAN MEDICAL ASSOCIATION AND HAS GATHERED THE RELEVANT INFORMATION. HE HAS NOTED IN THE ASSESSMENT ORDER DIFFERENT PROVISIONS OF CODE OF ETHICS REGULATIONS 2002 P UBLISHED IN PART III SEC. 4 OF THE GAZETTE OF INDIA DATED 6 TH APRIL 2002. VIDE NOTIFICATION DT. 11 TH MARCH 2002 THE MEDICAL COUNCIL OF INDIA IN EXERCISE OF POWERS CONF ERRED U/S. 20A R.W.S. 33(M) OF THE INDIAN MEDICAL COUNCIL ACT 1956 (102 OF 1956) AND WITH THE PREVIOUS APPROVAL OF THE CENTRAL GOVERNMENT HAS MADE REGULATIONS REL ATING TO THE PROFESSIONAL CONDUCT ETIQUETTE AND ETHICS FOR REGISTERED MEDICA L PRACTITIONERS. PARA 6.4.1 OF THE SAID REGULATION READS AS UNDER : PARA 6.4.1 OF THE REGULATION SPEAK THAT A PHYSICIAN SHALL NOT GIVE SOLICIT OR RECEIVE NOR SHALL HE OFFER TO GIVE SOLI CIT OR RECEIVE ANY GIFT GRATUITY COMMISSION OR BONUS IN CONSIDERATION OF O R RETURN FOR THE REFERRING RECOMMENDING OR PROCURING OF ANY PATIEN T FOR MEDICAL SURGICAL OR OTHER TREATMENT. A PHYSICIAN SHALL NOT DIRECTLY OR INDIRECTLY PARTICIPATE IN OR BE A PARTY TO ACT OF DIVISION TR ANSFERENCE ASSIGNMENT SUBORDINATION REBATING SPLITTING OR REFUNDING OF ANY FEE FOR MEDICAL SURGICAL OR OTHER TREATMENT. ITA . NOS 313 TO 316/PN/2010 ETC.. DR. M.S. HIREMATH . A.YS.2004-05 2003-04 2005-06 20 06-07 ETC. PAGE OF 5 4 WITH THE ASSISTANCE OF THE SAID PROVISION AND OTHE RS THE A.O HAS CONCLUDED THAT PAYMENT OF REFERRAL FEES GIVEN IN VIOLATION OF THE SAID STATUTE CAN NOT BE SAID FOR LAWFUL PURPOSE. HE HAS ALSO HELD THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF CODE OF ETHICS REGULATION 2002 WHICH HAS CONSTITU TIONAL VALIDITY AND BINDING UPON HIM. WE FULLY CONCUR WITH THE A.O. CERTAINLY IT WILL BE AGAINST PUBLIC POLICY TO ALLOW THE BENEFIT OF DEDUCTION UNDER ONE STATUTE OF ANY EXPENDITURE INCURRED IN VIOLATION OF PROVISIONS OF ANOTHER STATUTE. IN VIEW OF THE VIOLATION OF THE SAID SPECIFIC PROVISION OF CODE OF ETHICS REGULATIONS 2002 HAVIN G CONSTITUTIONAL VALIDITY LIKE OTHER LAWS AND ACT PASSED BY THE PARLIAMENT WHICH PROHI BITS THE PRACTICE OF PAYMENT OF REFERRAL FEES CANNOT BE ALLOWED IN THE INCOME TAX ACT AS DEDUCTION TOWARDS THE CLAIMED EXPENDITURE. THE AUTHORITIES BELOW IN OUR VIEW HAS THUS RIGHTLY DISALLOWED THE CLAIMED EXPENDITURE UNDER THE EXPLANATION TO SE C. 37(1) OF THE INCOME TAX ACT 1961. THE SAME IS UPHELD. IT IS ALSO PERTINENT TO MENTION OVER HERE THAT AN IDENTICAL ISSUE RAISED IN THE CASE OF DR. DEEPAK RA NADE V/S. ACIT IN ITA NO. 6/PN/2006 ( A.Y. 2002-03) VIDE ORDER DATED 30 TH JUNE 2011 HAS BEEN DECIDED BY THIS TRIBUNAL AGAINST THE ASSESSEE. THE GROUND NO. 2 (GROUND NO. 1 AND 2 ITA NO. 1757/PN/2005 FOR A.Y. 2002-03) IS THUS REJECTED. 8. IN RESULT APPEALS ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29TH JUL Y 2011. SD/- SD/- ( G.S.PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 29TH JULY 2011 US ITA . NOS 313 TO 316/PN/2010 ETC.. DR. M.S. HIREMATH . A.YS.2004-05 2003-04 2005-06 20 06-07 ETC. PAGE OF 5 5 COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -III PUNE 4. THE CIT(A)-III PUNE 5. THE D.R. A BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE