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2013 (11) TMI 1551 - AT - Income TaxTds liability - assessee was observed to have paid blood processing charges - (AO) was of the view that the said payment stood covered u/s. 194J - Held that - From the copy of the receipt issued by the blood bank and the above reply of the blood bank, it is evident that payment is made by the patient or his relatives to the blood bank and not the assessee. It is settled law that the entries in the books of account are not decisive. It is the substance of the transactions which is to be seen. When the assessee did not make any payment to the Blood Bank, the question of affixing the liability u/s 194J upon the assessee, does not arise. - Decided in favour of assessee. Applicability of provisions of section 192 or section 194J in case of retainer doctors - Held that - Considering the facts of the assessee s case in the light of the agreement between the assessee and the retainer doctors, learned Accountant Member rightly held that the fixed monthly remuneration payable to retainer doctors is in the nature of salary liable for deduction of tax under Section 192 of the Income-tax Act. - Decided against assessee. Mark up/profits earned by Fortis Health World Ltd. (FHWL) on sale of medicines to the assessee - whether is a commission chargeable to tax under section 194H or is a sale on which provisions of section 194H are not applicable? - Held that - The agreement has to aspects - one is with regard to sale of the medicines by FHWL to the assessee. As per the agreement, FHWL is to sell the medicines at cost plus certain markup which has been fixed on the basis of turnover as given in paragraph 2.2 of the agreement. The second aspect is the providing of the manpower by FHWL to the assessee for smooth running of their pharmacy. However, as per Paragraph 2.6 of the agreement, all expenses incurred by FHWL on the employees and the smooth running of IPP Pharmacy are to be reimbursed by the assessee to FHWL on monthly basis. Thus, FHWL is not charging anything for providing the manpower for running the IPD Pharmacy. On the above facts, in my opinion, it cannot be presumed that the markup on the sale of medicines is to be treated as consideration for providing the manpower by FHWL to the assessee. Paragraph 2.2 of the agreement is very clear that FHWL is to sell the medicines to the assessee at purchase cost plus certain markup. Merely because the sale price is fixed as per the agreement between the parties, it cannot be said that the difference between the purchase cost and the sale price i.e. the markup is the commission for sale of medicines. The sale price charged by FHWL i.e., cost plus markup is the price of the medicines sold by FHWL to the assessee. Therefore, the stand of the Revenue that the markup is the commission cannot be accepted. Similarly, the view of the learned Accountant Member that the markup is a consideration for providing the manpower is also based upon the presumption and contrary to the express provisions of the agreement. - Decided against revenue.
Issues Involved:
1. Applicability of Section 194J on payments made to blood banks. 2. Applicability of Section 192 or Section 194J on payments made to retainer doctors. 3. Applicability of Section 194H on the markup/profits earned by Fortis Health World Ltd. (FHWL) on the sale of medicines to the assessee. 4. Whether the Tribunal can invoke Section 194C in the context of the markup/profits earned by FHWL where neither the department nor the assessee raised this issue. Issue-wise Detailed Analysis: 1. Applicability of Section 194J on Payments Made to Blood Banks: The primary question was whether the payments made to blood banks by the assessee hospital for blood processing charges were subject to tax deduction at source (TDS) under Section 194J of the Income Tax Act, 1961. The Tribunal noted that the payments were made by the patients directly to the blood banks, and the hospital merely adjusted these amounts against the package charged to the patients. The Tribunal concluded that since the hospital did not make any direct payments to the blood banks, the provisions of Section 194J were not applicable. The Tribunal emphasized that the substance of the transaction, rather than the entries in the books of account, should be considered. Therefore, the hospital was not liable to deduct TDS under Section 194J on these payments. 2. Applicability of Section 192 or Section 194J on Payments Made to Retainer Doctors: The second issue was whether the payments made to retainer doctors should be treated as salary (subject to TDS under Section 192) or professional fees (subject to TDS under Section 194J). The Tribunal analyzed the terms of the retainership agreements, which included fixed monthly remuneration, reporting to the head of the department, and adherence to the hospital's rules and regulations. The Tribunal concluded that the relationship between the hospital and the retainer doctors was that of employer and employee, as the retainer doctors were subject to significant control by the hospital and were not entitled to benefits typically associated with independent professionals. Consequently, the payments to retainer doctors were deemed to be salary, and TDS was required to be deducted under Section 192. 3. Applicability of Section 194H on the Markup/Profits Earned by FHWL on the Sale of Medicines to the Assessee: The third issue was whether the markup on the sale of medicines by FHWL to the assessee hospital should be treated as commission (subject to TDS under Section 194H). The Tribunal examined the agreement between the hospital and FHWL, which specified that FHWL would sell medicines to the hospital at cost plus a predetermined markup. The Tribunal determined that the markup was part of the sale price and not a commission. The Tribunal noted that the sale of medicines was a transaction of purchase and sale, and the markup was merely a pricing mechanism. Therefore, the provisions of Section 194H were not applicable to the markup on the sale of medicines. 4. Whether the Tribunal Can Invoke Section 194C in the Context of the Markup/Profits Earned by FHWL Where Neither the Department Nor the Assessee Raised This Issue: The fourth issue was whether the Tribunal could invoke Section 194C (related to TDS on payments to contractors) in the context of the markup/profits earned by FHWL, even though neither the department nor the assessee raised this issue. The Tribunal noted that while it has the authority to apply the law to the facts found, it should not make a new case that was not argued by either party. The Tribunal concluded that the markup on the sale of medicines could not be treated as consideration for manpower services provided by FHWL, as per the agreement, the costs of manpower were reimbursed separately. Therefore, Section 194C was not applicable in this context. Conclusion: - The Tribunal ruled that Section 194J was not applicable to payments made to blood banks as these were made by the patients, not the hospital. - Payments to retainer doctors were deemed to be salary, subject to TDS under Section 192. - The markup on the sale of medicines by FHWL was not considered commission, and thus, Section 194H was not applicable. - The Tribunal should not invoke Section 194C as it was not raised by either party and was not relevant to the markup on the sale of medicines.
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