2019 (2) TMI 1454 - HC - Income Tax

TDS u/s 192 OR 194J - payment to Hospital Based Consultants (HBCs) / Doctors - Employee employer relationship exists or not - HELD THAT - We find that a Division Bench of this Court in the case of Commissioner of Income-tax (TDS Pune) v/s GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC) (2015 (2) TMI 457 - BOMBAY HIGH COURT) and to which one of us was a party (S. C. Dharmadhikari, J), was considering whether the Tribunal was correct in holding that there exists no relationship of employer and employee between the assessee Grant Medical Foundation (Ruby Hall Clinic) and the Consultant doctors employed in the hospital. Assessee treated the same as professional services and deducted TDS u/s 194J - After perusing the law on the subject, this Court answered the aforesaid question in favour of the assessee and against the revenue. TDS u/s 194C OR 194J - Payments made to Hinduja TMT/Global Solution Ltd. towards call centre expenses - HELD THAT - After examining the record that the CIT (Appeals) as well as ITAT came to the conclusion that the services that were rendered by these two entities were not of a technical or professional nature that would require deduction of TDS under Section 194J. The CIT (Appeals) specifically came to the conclusion that the contract between the assessee and these two entities was in the nature of a works contract and therefore the deduction of TDS under Section 194C was correctly done by the assessee. In these circumstances, we do not find that these factual findings suffer from any perversity that would give rise to any substantial question of law. TDS u/s 194C OR 194H - Drug Handling Charges paid - HELD THAT - We are fully satisfied that in the facts of the present case, the assessee correctly deducted TDS under section 194C. We find that in the present case there was no question of payment of any commission to Saxsons Biotech which supplied the radioactive drug used by the assessee in Nuclear Medicine Treatment. The facts and as recorded by the authorities below would clearly show that the drug supplied by Saxsons Biotech to the assessee was invoiced by Saxsons Biotech in the manner set out earlier. This being the case, there was no question of such a payment being in the nature of commission that would require deduction of TDS under Section 194H. TDS u/s 194J - Payments made to Hinduja Foundation for its employees who had rendered services to the assessee in key managerial positions - HELD THAT - On going through the findings given by the CIT (Appeals) as well as the ITAT on this issue, we find that both the authorities below have given their findings on the basis of facts presented before them. We find that the authorities below are fully justified in coming to the conclusions that they did, namely, that the payments made by the assessee to the Foundation was in the nature of reimbursement and not in the nature of any technical or professional services which required deduction of TDS under Section 194J. Orders u/s 201 (1) for the Financial Year commencing from 1st April, 2007 and earlier years as time- barred - HELD THAT - As per the said provisions and as per the Circular of CBDT dated 5/2010, the time-limit for passing such orders was 31st March, 2011. Considering the answers that we have already given to Questions (a) to (d) above, and considering that TDS was deducted under the correct provisions of the I.T. Act, this question really becomes academic in the facts of the present case. We, therefore, do not propose to give any finding on this question and leave it open to be considered in an appropriate case.

Summary

Issues Involved:

1. Classification of Hospital Based Consultants (HBCs) as employees.
2. TDS deduction on payments made to Hinduja TMT/Hinduja Global Solutions Ltd.
3. TDS deduction on drug handling charges paid by the assessee.
4. Classification of payments made to employees of Hinduja Foundation.
5. Time-barred orders under Section 201(1) for Financial Year 2007 and earlier years.

Issue-wise Detailed Analysis:

Re: Question (a): Classification of Hospital Based Consultants (HBCs) as employees

The primary issue was whether the Hospital Based Consultants (HBCs) should be treated as employees, thereby requiring TDS deduction under Section 192 of the Income-tax Act, 1961. The revenue argued that the relationship between the HBCs and the assessee was that of employer and employee, making the remuneration "salary." However, this issue was found to be covered by the Division Bench decision in Commissioner of Income-tax (TDS Pune) vs. Grant Medical Foundation (Ruby Hall Clinic), where it was held that no employer-employee relationship existed. Thus, the question did not raise any substantial question of law.

Re: Question (b): TDS deduction on payments made to Hinduja TMT/Hinduja Global Solutions Ltd.

The second issue was whether TDS on payments to Hinduja TMT/Global Solutions Ltd. should be deducted under Section 194C or 194J. The CIT (Appeals) and ITAT found that the services provided by these entities were not of a technical or professional nature but were in the nature of a 'works contract,' thus requiring TDS under Section 194C. This finding was based on the factual analysis of the services rendered, which included customer information and appointment scheduling, and did not suffer from any perversity. Hence, no substantial question of law arose.

Re: Question (c): TDS deduction on drug handling charges

The third issue involved whether drug handling charges paid to M/s Saxsons Biotech required TDS deduction under Section 194C or 194H. The CIT (Appeals) and ITAT concluded that these charges were not commissions but included costs like material, freight, customs duty, and service charges, thus correctly falling under Section 194C. The factual findings indicated that the payments were for the supply of radioactive drugs and related services, not commissions, negating the need for TDS under Section 194H. Therefore, no substantial question of law was identified.

Re: Question (d): Classification of payments made to employees of Hinduja Foundation

The fourth issue was whether payments to Hinduja Foundation for employees rendering services to the assessee were reimbursements or professional fees requiring TDS under Section 194J. The CIT (Appeals) and ITAT found these payments to be reimbursements, as the Foundation charged only the actual costs without any markup. The personnel were on the Foundation's payroll, and the payments were purely to cover these costs. This factual determination was upheld, and no substantial question of law arose.

Re: Question (e): Time-barred orders under Section 201(1) for Financial Year 2007 and earlier years

The final issue was whether the ITAT was correct in holding that the orders passed by the Assessing Officer under Section 201(1) for the Financial Year 2007 and earlier years were time-barred. Given the conclusions on the other questions, this issue became academic and was left open for consideration in an appropriate case.

Conclusion:

All appeals were dismissed as none of the questions raised substantial questions of law. The findings of the CIT (Appeals) and ITAT were based on factual analyses and did not suffer from any legal infirmities. No costs were ordered in the dismissal of the appeals.