2017 (1) TMI 943 - AT - Income Tax

TDS u/s 194J - Disallowance under section 40(a)(ia) - non deduction of tax at source on the payments made by the assessee hospital to the doctors and pathology laboratory in relation to inpatients - Held that - Admittedly, neither the AO nor the Ld. CIT(A) have added the amount collected by the hospital from the patients on behalf of the doctors as income of the hospital. What has been disallowed is the expenditure; that too on account of non deduction of TDS as per the provisions of section 194J of the Act. The disallowance has been made accordingly under section 40(a)(ia) of the Act. Admittedly, the assessee hospital has not debited the said expenditure to its P & L account. Once the amount paid has not been claimed as expenditure, there cannot be any question of disallowance of the same. When an expenditure has not been claimed at all, how can the same be disallowed. Without going into further aspects of the matter, the disallowance in this case under section 40(a)(ia) of the Act, is not attracted at all. The same is accordingly ordered to be deleted. - Decided in favour of assessee Addition of Bisi payment under section 69C - Held that - This issue requires re-examination at the hands of the AO. If the assessee will be able to prove that the Bisi payments were out of the income declared during survey action then the same cannot be taxed twice. We therefore restore this issue to the file of the AO with a direction to decide the same afresh. Needless to say that the AO will give proper opportunity to the assessee to explain his case and then the AO will pass a speaking order in accordance with law on this issue. This appeal of the assessee is therefore treated as partly allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance under section 40(a)(ia) for non-deduction of tax at source on payments to doctors and pathology laboratory.
2. Addition of Bisi payment under section 69C of the Act.

Issue 1: Disallowance under section 40(a)(ia) for non-deduction of tax at source on payments to doctors and pathology laboratory:

The case involved appeals by the assessee and the Revenue regarding disallowance of &8377; 11,95,0669 under section 40(a)(ia) for non-deduction of tax at source on payments made by the hospital to doctors and pathology laboratory. The Assessing Officer disallowed the entire payment, invoking section 40(a)(ia) due to the absence of TDS deduction. The CIT(A) upheld the disallowance for inpatients but not for outpatients. The Tribunal analyzed whether the hospital obtained services from doctors or acted as an agent for collecting fees. It noted that the hospital did not claim the payments as expenditure in its profit and loss account, leading to the deletion of the disallowance under section 40(a)(ia).

Issue 2: Addition of Bisi payment under section 69C of the Act:

The assessee had invested &8377; 8 lakh in Bisi payment, not claimed as expenses, stating it was made from declared income during a survey. The CIT(A) rejected this claim, observing the lack of evidence showing the Bisi payments as investments from the declared income. The Tribunal remanded the issue to the AO for re-examination, directing a proper opportunity for the assessee to prove the source of Bisi payments. The Tribunal allowed the appeal partly for statistical purposes.

In conclusion, the Tribunal allowed the assessee's appeals for both assessment years, dismissing the Revenue's appeals. The disallowance under section 40(a)(ia) was deleted as the payments were not claimed as expenditure. The issue of Bisi payment was remanded for further examination by the AO. The appeals of the assessee were treated as allowed for statistical purposes, while those of the Revenue were dismissed.