2013 (2) TMI 866 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of tax at source u/s 194J for payments to hospitals.
2. Composite payments liable for TDS u/s 194J.
3. Recovery of taxes from the assessee for hospital payments not covered by CA certificates.

Summary:

Issue 1: Deduction of tax at source u/s 194J for payments to hospitals
The assessee company, engaged in third-party administration services for health insurance, was found not deducting TDS on payments made to hospitals. The AO treated the assessee as 'an assessee-in-default' u/s 201(1) and levied interest u/s 201(1A). The CIT(A) upheld the AO's decision, referencing the Hon'ble Bombay High Court ruling in Dedicated Health Care Services TPA (India) Pvt. Ltd v. ACIT, which mandated TDS u/s 194J for payments made by TPAs to hospitals. The Tribunal concurred, affirming that the assessee was required to deduct tax at source under s. 194J for payments made to hospitals.

Issue 2: Composite payments liable for TDS u/s 194J
The assessee argued that TDS should apply only to the professional fees in hospital bills, not the entire composite bill. The Tribunal directed the AO to bifurcate payments into professional fees and other charges, following the Hyderabad Tribunal's ruling in Arogya Sri Health Care Trust v. ITO. The AO was instructed to compute the demand u/s 201(1) only for payments constituting professional fees.

Issue 3: Recovery of taxes from the assessee for hospital payments not covered by CA certificates
The assessee contended that taxes should be the liability of the deductee-hospitals if not deducted by the assessee, as per s. 191. The Tribunal restored this matter to the CIT(A) for de novo consideration, directing the AO to verify if hospitals had discharged their tax obligations. Additionally, the Tribunal instructed the AO to re-compute interest u/s 201(1A) only up to the date of tax payment by hospitals, aligning with the Hon'ble Karnataka High Court's ruling in Solar Automobiles India (P) Ltd v. DCIT (TDS).

Conclusion:
The appeals for AYs 2004-05 to 2009-10 were partly allowed, with directions for re-computation and verification by the AO and CIT(A) as specified. The order was pronounced on 28th February 2013.