9911796707
TMI Blog2011 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... n (not being an individual or a Hindu Undivided Family) who is responsible for paying to a resident any sum by way of fees for professional services and the expression “professional services” has been defined to mean services rendered by a person in the course of carrying on inter alia the medical profession - Writ petition is accordingly disposed of X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed-- (i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a) , or (ii) thirty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) thirty thousand rupees, in the case of royalty referred to in clause (c), or (iv) twenty thousand rupees, in the case of sum referred to in clause (d) : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of Section 44-AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income tax under this section: Provided also that no individual or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein….". Further as per Explanation (a) to 194J "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession etc...' 3. The services rendered by hospitals to various patients are primarily medical services and, therefore, provisions of 194J are applicable on payments made by TPAs to hospitals "1 etc. Further for invoking provisions of 194J, there is no stipulation that the professional services have to be necessarily rendered to the person who makes payment to hospital. Therefore TPAs who are making payment on behalf of insurance companies to hospitals for settlement of medical/insurance claims etc under various schemes including Cashless schemes are liable to deduct tax at source under Section 194J on all such payments to hospitals etc. 3.1. In view of above, all such past transactions between TPAs and hospitals fall within provisions of Section 194J and consequence of failure to deduct tax or after deducting tax failure to pay on all such transactions would make the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be tax paid by the payee. The TDS deducted is treated as income received and credit is given in tax payable by the payee. Deduction is only a mode of recovery. (See Sections 198 and 199 of the Act). Payments made by the insurance company or the TPAs may be a business expenditure as per accounts/books maintained by them but TDS has to be deducted under Section 194J if the payment is made to a resident towards "fee for professional services". The fact that a third person and not the payer has availed of the professional services is immaterial. Section 194J does not state that the payer must have availed and taken benefit of the professional services. The payer may be making payment on behalf of a third person but would be liable to deduct TDS under Section 194J if Explanation (a) applies. Sub- section (1) to Section 194J uses the expression "any person... who is responsible for paying...". The expression "person responsible for paying" has been defined in Section 204 of the Act. The said section stipulates that for section 194J, the expression "person responsible for paying" means the payer himself or if the payer is a company, the company itself including the principal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who carries on the legal, medical, engineering or architectural profession or any of the other professions listed in the clause. If Parliament intended to restrict the ambit of Explanation (a) only to fees received by an individual in the discharge of his or her duties as a professional, it was open to Parliament to use words that would be indicative of that position…." 9. In the light of the aforesaid discussion, there can be no doubt that in case payment is made to a recipient for rendering services in course of carrying on medical profession or other professions as stipulated, deduction of tax at source has to be made and it is immaterial whether the recipient is an individual, firm or an artificial person. 10. It cannot also be doubted that TDS has to be deducted for all services rendered by a person in the course of carrying on medical profession. Incidental or ancillary services which are connected with carrying on medical profession are included in the term "professional services" for the purpose of Section 194J. The words "services... in the course of carrying on medical profession" in Explanation (a) are used with the intention to include incidental, ancillary, ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or profession" and wherever it intended to restrict the benefit to either business or profession, then the legislature has used the word either "business" or "profession", meaning thereby that it intended to extend the benefit to either "business" or "profession" i.e. the one would not include the other. 22. We agree with the submission made by the counsel for the appellant that in view of the settled law, if two interpretations are possible, then the one in favour of the assessee should be adopted. But, we are of the view that in the present case two interpretations are not possible as the word "business" occurring in Clause (iv) of Section 32(1), by no stretch of imagination, can be said to include "profession" as well. If the expression "business" is interpreted as including within its scope "profession", it would not mean that the lacuna has been made good by giving a wider interpretation to the word business. There is nothing in Section 32(1)(iv) which envisages the scope of word "business" to include in it "profession" as well. If the expression "business" is interpreted to include within its scope "profession" as well, it would be doing violence to the provisions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther vocations also receive the name, which implies professed attainments in special knowledge as distinguished from mere skill." 19. The question, therefore, is what is covered by the expression "professional services" under Explanation (a) and requires deduction of TDS under Section 194J. What is the legislative intent behind the definition in Explanation (a) to Section 194J of the Act? As noticed above, Section 2(36) defines the term "profession" and Section 14 also refers to profits and gains of business or profession. The term used in Section 194J, however, is "professional services" and Explanation (a) defines the said term for the said Section exclusively. The word "services" in the expression "professional services" is significant and has to be given due weightage. The primary purpose and objective of the definition clause is to define the services included and regarded as professional services and not the person who renders the said services. 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 recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octors who are associated with the hospital as consultants or as employees. The said doctors are professionals and income earned by them is professional income but Section 194J is attracted, not only when professional fee is paid for services rendered by the recipient but income/fee received by the recipient is towards services rendered in the course of carrying on medical profession. Thus payments/fee for the services specified should be to a person who is a resident and Section 194J is not confined to payments to the person who is a professional. 22. We do not think it appropriate to interpret the Explanation (a) in a manner that the person, to whom payment is made, should himself/herself be a professional Doctor. The aforesaid interpretation will be highly restrictive, and would ignore the reality and the factum that the services in the field of medicine are not confined and rendered by individuals but in most cases rendered in hospitals which may be corporate or juristic entities. Professional activity is undertaken in the hospitals. Medical procedures require equipment, operation theatre and other facilities which are available in hospitals and nursing homes. The payments are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essarily attract a penalty under section 271C. Besides interfering with the quasi-judicial discretion of the Assessing Officer or, as the case may be, the appellate authority the direction which has been issued by the Board would foreclose the defence which is open to the assessee under section 273B. By foreclosing a recourse to the defence statutorily available to the assessee under section 273B, the Board has by issuing such a direction acted in violation of the restraints imposed upon it by the provisions of sub-section (1) of section 119. To that extent, therefore the circular that was issued by the Board would have to be set aside and is accordingly set aside. We also clarify that in making assessments or, as the case may be, in passing orders on appeals filed under the Act, the Assessing Officers and the Commissioner (Appeals) shall do so independently and shall not regard the exercise of their quasi-judicial powers as being foreclosed by the issuance of the circular." 25. We respectfully agree with the aforesaid ratio recorded by the Bombay High Court. To this extent, as held above by the Bombay High Court, the impugned circular is liable to be set aside and is accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
