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2023 (1) TMI 132 - HC - Income TaxTDS u/s 192 or 194J - payment which was made to the professional is salary or professional fees - assessee is running a hospital within State of Rajasthan and they have entered agreement with three different doctors - HELD THAT - Appellant frankly conceded that the appeals involving similar issue have already been dismissed by this Court in view of the judgment passed in Escorts Heart Institute Research Centre Ltd. 2017 (9) TMI 1660 - RAJASTHAN HIGH COURT as held that conditional order shall not absolve the assessee from the deduction of TDS liability. The compliance/non-compliance of the exemption conditions by the recipient in advance cannot be foreseen in advance by the assesseecompany. Moreover TDS liability under s. 194-I is not dependent on the tax liability/entitlement toexemption of the recipient. Irrespective of the tax exemption/tax liability of the recipient the assessee has to discharge the TDS liability under s.194(1). No certificate under s. 197 of the Act is furnished by the assssee to establish that the recipient is exempted from the tax liability. Again same question came up for consideration in other decision of Karnataka High Court 2010 (2) TMI 1163 - KARNATAKA HIGH COURT where after considering the judgment in Elbit Medical Diagnostics Ltd. the Court has come to the conclusion that retainer in service are professional service and issue was answered in favour of the assessee.
Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the Assessment Year 2018-19. Interpretation of whether payments made to professionals constitute salary or professional fees for tax deduction purposes. Analysis: The High Court heard the D.B. Income Tax Appeal filed by the Commissioner of Income Tax-TDS against the order of the Income Tax Appellate Tribunal. The appellant conceded that similar appeals had been dismissed previously by the Court. The Court referred to a previous judgment involving a hospital and doctors to determine if payments to professionals should be treated as salary or professional fees. The Court considered the distinction between contracts for employees and professional services, emphasizing the need to decide the nature of payments based on the specific agreement terms. The Court analyzed the case law cited by both parties, particularly a judgment of the Karnataka High Court, to establish that TDS liability under Section 194-I is not dependent on the tax liability or exemption of the recipient. The Court highlighted that the assessee must discharge TDS liability regardless of the recipient's tax status. The Court emphasized that no certificate was provided to establish the recipient's tax exemption, reinforcing the obligation of the assessee to fulfill TDS requirements. Furthermore, the Court referenced another decision of the Karnataka High Court regarding retainer services, where it was concluded that such services constitute professional services. The Court emphasized that if two views are possible, the one favoring the assessee should be adopted. In this case, the Court found that the Tribunal's decision was contrary to the evidence, leading to a ruling in favor of the assessee and against the Department. Consequently, the appeals were allowed, and the present appeal was dismissed accordingly based on the precedent and legal interpretations provided in the judgment.
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