Referral fees paid by the private hospitals

1. As per the Indian Medical Council Regulation 2002, it is illegal for doctors to receive a referral fee for referring patients to another hospital or doctor. 
2. In the hands of the hospital (being a corporate) whatever the amount paid as referral fee will be disallowed u/s 37(1) as it cannot be considered as business expenditure because of its illegality in nature. 
3. CIT vs Cap Scan and Diagnostic Centre P Ltd (2012) (P&H) case law supports this view. 
4. In your case, since the expense in itself is illegal in nature it cannot be considered as a valid receipt in the hands of the doctor and it will not be allowed as business expenditure in the hands of the private hospitals. 
Please correct me if the above solution has an alternative view. 

Advertising a doctor's profession is viewed as an unethical practice. Though many do in a polished way. But referrals are strictly viewed as illegal as per the Indian Medical Council. And from the Income-tax point of view, the above case law supports this view.