Deductibility denial for prohibited freebies: providers cannot claim deduction and recipients may face taxable income. Expenses by pharmaceutical and allied health sector entities for freebees to medical practitioners or their associations that violate the Indian Medical Council Regulations, 2002 are inadmissible as business deductions under section 37(1) of the Income Tax Act because the Explanation denies deduction for expenses incurred for purposes prohibited by law; the provider must face disallowance. The equivalent value of such freebees is taxable in the hands of the recipient as business income or income from other sources, subject to factual examination by assessing officers.