2022 (2) TMI 1320 - AT - Income Tax

TDS u/s 194H OR 194J - Payment made to Thyrocare Services Providers (TSPs) to collect samples from the patients - Assessee has made arrangement with Thyrocare Services Providers (TSPs) to collect samples from the patients As per the terms and conditions of the agreement the TSPs collects the samples from the patients and sends the same to the assesssee for testing - assessee raises periodical invoices on the TSPs against which the TSPs make payment to the assessee after deducting Tax at Source (TDS) - HELD THAT - It is an admitted fact that the TSPs have option to forward the specimen samples for testing either to the assessee or any other specialized testing laboratory. TSPs are not under obligation to send every sample for testing to the assessee unless the patients/customers specifically ask the TSPs to send the samples to the assessee for testing. The assessee is remunerated for the testing services provided to the TSPs at an agreed rate. The assessee raises periodical invoices on the TSPs. The TSPs make payment to the assessee after deducting TDS under section 194J of the Act for rendering professional services. What emanates from the submissions made by ld. AR and the supporting documents is it is the TSPs who are the payers and not the assessee. The assessee is a recipient of the amount for providing testing services to the TSPs. The assessee receives the payment on the basis of periodical invoices raised on TSPs the TSPs make payment to the assessee after deducting TDS under section 194J of the Act. Thus the findings of the AO are contrary to the facts the AO) on presumptions surmises and conjectures has entirely made out a new case by reversing the payer and payee. AO has erred in observing that the assessee is a payer and the TSPs are recipients of the amount. The AO further erred in holding that since the assessee is making payment to the TSPs the assessee was under obligation to deduct TDS under section 194H of the Act on commission paid to the TSPs. Thus from the above facts it is unambiguously clear that the case of Revenue was build up on wrong appreciation of facts. The CIT(A) after having examined and appreciating the correct facts in para-5.5 of the impugned order has rightly observed that the TSPs do not receive any payment from the appellant rather the TSPs make payment to the appellant as per invoices raised by the appellant for the tests done by it. The ld. DR has failed to controvert the above observation of the CIT(A). - Decided against revenue.

Summary

Issues involved:
- Interpretation of provisions under section 194H and 194J of the Income Tax Act, 1961.
- Determination of payer-payee relationship between the assessee and Thyrocare Services Providers (TSPs).
- Assessment of liability to deduct tax at source under section 194H.
- Examination of the nature of payments made by the assessee to TSPs.
- Analysis of the findings of the Commissioner of Income Tax (Appeals) and the Assessing Officer.

Issue 1: Interpretation of provisions under section 194H and 194J:
The case involved a dispute regarding the application of sections 194H and 194J of the Income Tax Act, 1961. The Assessing Officer had held the assessee in default for non-deduction of tax under section 194H in relation to payments made to Thyrocare Services Providers (TSPs). However, the Commissioner of Income Tax (Appeals) correctly appreciated the facts and held that no default was committed by the assessee under section 194H. The Tribunal concurred with the CIT(A)'s findings, emphasizing that the TSPs were the payers who deducted tax under section 194J, not the assessee.

Issue 2: Determination of payer-payee relationship:
The Tribunal scrutinized the relationship between the assessee and the TSPs to ascertain the payer-payee dynamics. It was established that the TSPs collected samples and sent them to the assessee for testing, with the option to use other laboratories. The TSPs made payments to the assessee after deducting tax at source under section 194J. The Tribunal rejected the Assessing Officer's contention that the assessee was the payer, highlighting that the TSPs were the actual payers. This understanding was pivotal in dismissing the Revenue's appeal.

Issue 3: Assessment of liability under section 194H:
The core contention revolved around whether the assessee was liable to deduct tax under section 194H in connection with payments to the TSPs. The Assessing Officer argued that a principal-agent relationship existed, necessitating TDS deduction under section 194H. Conversely, the assessee contended that no such relationship existed, and the TSPs were not recipients of payments but rather payers deducting tax under section 194J. The Tribunal sided with the assessee, emphasizing the absence of a payer-payee relationship and the incorrectness of the AO's presumptions.

Issue 4: Examination of nature of payments to TSPs:
The Tribunal delved into the nature of payments made by the assessee to the TSPs. It was elucidated that the TSPs remunerated the assessee for testing services rendered, with payments made after deducting tax under section 194J. The Tribunal underscored that the TSPs were not receiving payments from the assessee but were paying for services rendered. This clarification debunked the AO's assertion that the assessee was making payments to TSPs, leading to the dismissal of the Revenue's appeal.

Issue 5: Analysis of CIT(A) and AO findings:
The Tribunal critically analyzed the findings of the Commissioner of Income Tax (Appeals) and the Assessing Officer. It noted that the CIT(A) correctly appreciated the facts, concluding that the TSPs did not receive payments from the assessee. In contrast, the AO's observations were based on erroneous presumptions, leading to an incorrect assessment. The Tribunal concurred with the CIT(A)'s findings, ultimately dismissing the Revenue's appeal due to the lack of merit in the AO's approach.

This detailed analysis of the judgment highlights the key issues addressed, the arguments presented by both parties, and the Tribunal's rationale for dismissing the Revenue's appeals.