2015 (10) TMI 2051 - AT - Income Tax

Non deduction of TDS U/S 194J - payment made for hospitality services doctor s fees annual maintenance contrary payment - revenue imposed tax u/s.201(1) and also charged interest u/s.201(1A) - AO did not accept assessee s contention regarding its liability to deduct tax u/s.194C and held that the assessee was liable to deduct tax u/s.190J - Held that - As decided in DCIT v. Parasrampuria Synthetics Ltd 2007 (11) TMI 436 - ITAT DELHI the persons rendering certain services has only maintained machinery or converted yarn but that knowledge is not now vested with the assessee by which itself it can do research work. In the circumstances the amount paid cannot be considered as fees for technical services within the meaning of section 194J of the Act. After holding the assessee in default under various provisions of Section 194 the AO has passed order u/s.154 wherein he held that in view of the decision of Hindustan Coco-cola Beverage Pvt. Ltd. 2007 (8) TMI 12 - SUPREME COURT OF INDIA since the recipient of income have already paid the tax the AO has deleted the tax liability so imposed however he has confirmed the interest thereon. Thus even during the appellate proceedings before the CIT(A) the AO has passed rectification order under section 154 and deleted all the liability created under Section 201(1) of the I.T.Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-deduction of tax at source for hospitality services, doctor's fees, and annual maintenance contract payments.
2. Applicability of Section 194C vs. Section 194J for catering services.
3. Applicability of Section 192 vs. Section 194J for payments to doctors.
4. Tax deduction applicability for payments directly made by patients to doctors.
5. Applicability of Section 194J for annual maintenance contracts of medical equipment.

Detailed Analysis:

1. Non-deduction of Tax at Source:
A survey under Section 133A revealed that the assessee did not properly deduct tax at source for payments related to hospitality services, doctor's fees, and annual maintenance contracts. Consequently, the Assessing Officer (AO) computed the tax difference under Section 201(1) and charged interest under Section 201(1A) of the Income Tax Act.

2. Applicability of Section 194C vs. Section 194J for Catering Services:
The AO contended that the assessee should have deducted tax under Section 194J instead of Section 194C for payments made to a contractor for catering services. However, the CIT(A) held that the services rendered were in the nature of catering, which falls under the definition of 'work' as per Section 194C. The Tribunal upheld CIT(A)'s decision, noting that the primary services rendered were cooking and serving food, which do not qualify as professional services under Section 194J.

3. Applicability of Section 192 vs. Section 194J for Payments to Doctors:
The AO argued that payments to doctors should be subject to tax deduction under Section 192, treating them as employees. The CIT(A) disagreed, stating that the relationship between the assessee and the doctors was of a consultant nature, not employer-employee. The Tribunal confirmed this, emphasizing that the doctors were independent practitioners, not entitled to employee benefits, and their services were availed on a consultancy basis. The consultancy agreements allowed doctors to maintain independent practices, further supporting the application of Section 194J.

4. Tax Deduction Applicability for Payments Directly Made by Patients to Doctors:
The AO applied Section 194J for payments made directly by patients to doctors. CIT(A) deleted this liability, stating that Section 194J applies only when sums are credited or paid by the assessee to the doctors. Since no such payments were made by the hospital, the Tribunal upheld CIT(A)'s decision, noting that the AO did not provide tangible evidence to support the deduction under Section 194J.

5. Applicability of Section 194J for Annual Maintenance Contracts of Medical Equipment:
The AO applied Section 194J for annual maintenance contracts (AMC) payments, considering them technical services. CIT(A) upheld this view. However, the Tribunal found that the services under AMCs were routine maintenance, not technical services requiring tax deduction under Section 194J. The Tribunal referred to precedents like DCIT v. Parasrampuria Synthetics Ltd. and Kandla Port Trust Vs. DCIT, which differentiated routine maintenance from technical services.

Conclusion:
The Tribunal allowed the assessee's appeal and dismissed the revenue's appeal. It confirmed that:
- Tax on catering services should be deducted under Section 194C.
- Payments to doctors should be deducted under Section 194J, not Section 192.
- No tax deduction under Section 194J for payments directly made by patients to doctors.
- AMCs for medical equipment do not qualify as technical services under Section 194J.

The Tribunal also noted that the AO had rectified the order under Section 154, deleting the tax liability but upholding the interest based on the Supreme Court's decision in Hindustan Coco-cola Beverage Pvt. Ltd. v. CIT.

Order Pronouncement:
The judgment was pronounced in the open court on 16/09/2015.