2015 (1) TMI 605 - AT - Income Tax

TDS u/s 194J - payments made for professional services - assessee is an insurance company - Held that - Section 194J under sub-section 1 applies when payment is made to a resident towards any sum by way of fee for professional services. The object of the definition clause Explanation (a) is not to identify the resident , or the recipient, who receives or is paid fee for professional services but to define the services. Thus assessee is liable for payment of TDS for professional services. Default in deducting tax at source - liability to pay interest under section 201(1A) - Held that - CIT(A) keeping in view the complexity of the issue involved and the feasibility of evidence to be available in the given facts considered the entire issue on the basis that 90% of the advance tax must have been paid by the hospital and, therefore, he has computed the interest on short fall of 10% of TDS amount. Considering the entire conspectus of the case and the voluminous exercise required in obtaining the details, we do not find any infirmity in these findings of ld. CIT(A) as the final conclusion, in any case, will not be materially different from that arrived at by ld. CIT(A) and, accordingly, confirm the same, as the interest has been charged up to the due date of filing of return by the deductees. We are not in agreement with the submissions of ld. counsel for the assessee that the interest should have been charged only up to the 31st March of financial year because as held by Hon ble Madras High Court in the case of CIT Vs. Chennai Metropolitan Water Supply and Sewerage Board 2011 (9) TMI 224 - CHENNAI, HIGH COURT , interest is required to be paid up to the date on which the return had been filed by the payee. Decided against revenue as well as assessee.

Summary

Issues Involved:
1. Applicability of Section 194J for TDS on payments made to hospitals for professional services.
2. Validity of the additional evidence submitted by the assessee under Rule 46A.
3. Calculation of interest under Section 201(1A) for non-deduction of TDS.

Detailed Analysis:

1. Applicability of Section 194J for TDS on Payments Made to Hospitals for Professional Services:
The primary issue was whether the payments made by the insurance company to hospitals for treating policyholders were subject to TDS under Section 194J of the Income Tax Act, 1961. The Assessing Officer (AO) held that the payments were for professional services, thus necessitating TDS under Section 194J. This view was supported by the Karnataka High Court's decision in Medi Assish India TPA Vs. DCIT and CBDT Circular No. 8/2009.

The CIT(A) upheld the AO's decision, noting that the hospitals rendered professional services to the policyholders under an agreement with the insurance company. The Delhi High Court in Vipul Medicorp TPA (P) Ltd. & others Vs. CBDT confirmed that payments made by TPAs to hospitals fall under Section 194J, as the services provided by hospitals are professional services.

2. Validity of the Additional Evidence Submitted by the Assessee under Rule 46A:
The assessee submitted additional evidence to the CIT(A) under Rule 46A, which included certificates from hospitals indicating that taxes had been paid on the income received. The CIT(A) admitted these under Rule 46A(4) due to the voluminous nature and time constraints in obtaining the evidence earlier. The CIT(A) forwarded these submissions to the AO for comments, but no report was received from the AO.

The Tribunal found that the AO was given reasonable opportunity to examine the additional evidence, satisfying the requirements under Rule 46A as interpreted by the Delhi High Court in CIT Vs. Manish Buildwell (P) Ltd. Thus, the additional evidence was validly admitted.

3. Calculation of Interest under Section 201(1A) for Non-Deduction of TDS:
The CIT(A) determined that interest under Section 201(1A) should be charged up to the date the deductees (hospitals) filed their returns, not merely up to the end of the financial year. The CIT(A) computed interest based on the assumption that hospitals paid 90% of their taxes through advance tax, with interest on the remaining 10% of TDS amount calculated up to the due date of filing returns.

The Tribunal upheld this approach, noting that the detailed and voluminous nature of the evidence required made the CIT(A)'s method practical and fair. The Tribunal rejected the assessee's argument that interest should only be charged up to the end of the financial year, referencing the Madras High Court's decision in CIT Vs. Chennai Metropolitan Water Supply and Sewerage Board, which supported charging interest up to the date of return filing by the payee.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross objections, upholding the CIT(A)'s order in its entirety. The Tribunal confirmed the applicability of Section 194J to the payments made to hospitals, validated the admission of additional evidence under Rule 46A, and endorsed the CIT(A)'s method of calculating interest under Section 201(1A).