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TMI Blog2012 (4) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide health care coverage under Arogyasri-II Scheme. For the purpose of administering this scheme, the Trust directly makes payments to various hospitals as per the MOUs it entered with such hospitals. Consequent to the survey conducted on 15.10.2009, information was furnished by the Trust regarding payments made under Arogyasri Scheme to various hospitals for the period from 17.7.2008 to 31.3.2009 and from 1.4.2009 to 19.10.2009. As per this information, an amount of Rs.115,44,19,988 was paid during the financial year 2008-09, relevant to assessment year 2009-10, and Rs.143,21,969 was paid till 19.10.2009, during the financial year 2009-10, relevant to assessment year 2010-11. 3. The assessing officer issued letter calling for the objections of the assessee for treating the Trust as responsible person and the payments to hospitals as covered under S.194J of the Act. Pursuant to the subsequent show-cause notice that was issued the assessee had field evidences enclosing to the letter filed on 18.1.2010 in three cases which appeared prima facie acceptable, out of the 27 cases list shown in annexure to letter dated 16.1.2010. The balance 24 cases were examined with respect to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to deduct tax. The CIT(A) did not find merit in this contention of the assessee, after taking into account the objects for which the assessee trust was floated, and observing that the assessee acts as independent nodal agency of Government of Andhra Pradesh to provide health care coverage and for the purpose of administering the scheme, the Trust directly made payments to various hospitals as per the MOU it entered into with such hospitals. He also found no merit in the contention of the assessee that the beneficiaries are liable to make the payment and thereby it is the beneficiaries who are liable to deduct tax, observing that it is the Government/Trust which has undertaken to make payment of the premium on behalf of the beneficiaries and to reimburse or to pay for the professional services rendered to the network hospitals, with whom it entered into agreement on behalf of the beneficiaries. There is a contractual liability between the assessee and the network hospital for providing medical treatment/professional services to the intended beneficiaries, and therefore, the CIT(A) concluded that the liability to deduct tax from the professional services rendered by the hospit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reimbursement to the net work hospitals also include the other hospital charges like conducting village level medical camps, outpatient care, transportation to patients, food for the patients, medicines, implants, follow up medicines etc. and the entire payment is done on a package mode. The CIT(A) rejected this contention as well, relying on the decision of the Bombay High Court in the case of Dedicated Health Care Services TPA (India) (P.) Ltd. (supra). 8. The CIT(A) however, found some merit in the contentions of the assessee with regard to the quantum of demand under S.201(1) raised by the assessing officer, on account of non-deduction of tax at source in respect of payments made to government hospitals, and other payments in respect of which the recipients have disclosed the income and made payment of due taxes. He accordingly, directed the assessing officer to verify and bifurcate the payments made to both the Government and private hospitals, and confine himself to non-deduction of tax by the assessee in respect of payments made to private hospitals. Similarly, following the decision of the Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. v. CIT [2007] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reimbursement of the amount incurred by the Trust on such patient. He therefore, submitted that the object and the aim of the trust is to implement, establish, provide, administer, modify and supervise either directly or indirectly the Arogyasri II Scheme for the benefit of the beneficiaries who are from BPL population of the State. Refuting the assessee's liability to deduct tax at source under S.194J of the Act from the payments made by it to the various hospitals, he submitted that there is no such term in the agreements entered into by the assessee with the respective hospitals, and in any event, all the hospitals to which the payments are made, have confirmed that they included the receipts from the trust in their income and are paying taxes on the same. He further submitted that a hospital, as such, does not fall within the definition of the provisions of S.194J. It is also submitted that the payments in question, are not made by the assessee Trust by itself, but it is by the individuals who took treatment and receive the money from the Chief Ministers Relief Fund, and in that process the assessee Trust only acts as a medium/agent for such payment. He submitted that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the assessee is covered by the provisions of S.194J of the Act in respect of the payments made by it to various hospitals, each of such payments has to be bifurcated into various elements, as noted above, and assessee's liability to deduct tax at source in terms of S.194J has to be determined, confining oneself only to such element which constitutes the actual fee paid to the hospitals for rendering professional services. 15. The learned counsel for the assessee submitted that though the CIT(A) by the impugned order directed the assessing officer to reduce the amount on which TDS is not made to the edtent the assessee provides information about the hospital paying taxes on payments received from the assessee trust, the assessee is finding it difficult to obtain detailed information from the hospitals, which are too many in number and some of them are even black listed. It is submitted that more importantly from the black listed hospitals, it is difficult for the assessee to obtain and furnish the requisite information with regard to payment of due taxes on the incomes received by them from the assessee-trust. Learned counsel for the assessee has also filed brief written submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als in terms of the Arogyasri-II Scheme of the State Government of Andhra Pradesh, and such payments constituting 'fee for professional services', provided by such hospitals, attract the provisions of S.194J of the Act, which obligate the assessee to deduct tax at source before making the payments in question. The case of the assessee on the other hand, disputes in the first place its liability, being a nodal agency, to the deduct tax at source; then, disputes the nature of the recipient, hospital, being not covered by the provisions of S.194J of the Act, the nature of services, being entirely and in the alternative, in part, being not constituting fee for professional services, and thereby falling outside the scope of the provisions of S.194J of the Act. 19. We may, at the outset, note the provisions of S.194J of the Act, to the extent relevant for our purpose, hereunder- "194. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) Fees for professional services, or (b) Fees for technical services, or (c) Royalty, or (d) Any sum referr4ed to in clause (va) of section 28, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to S.194J, thereby, making the payments made by the assessee towards such services fall within the ambit of professional services. Consequently, there can be no ambiguity with regard to the assessee's liability to deduct tax at source while making payment to the hospitals. Even though it is the contention of the assessee that the payments made by it to the hospital are on behalf of the beneficiaries, and the beneficiary, being an individual, falls outside the purview of S.194J of the Act, we find no merit in this contention of the assessee, inasmuch as the assessee has been constituted by the State by virtue of Deed of Trust, to monitor and implement the Arogyasri II scheme of the Government of Andhra Pradesh. It is in pursuance of this deed of trust, the assessee has entered into agreements with the empanelled hospitals, who render medical professional services to the beneficiaries of the Arogyasri II scheme of the Government. Viewed in that context, the bills of the hospital settled by the assessee Trust are in pursuance of its agreement with those hospitals, and as such, it is in discharge of its contractual obligation. The beneficiaries of the scheme have nothing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction to the assessing officer to exclude such payments in respect of which the assessee could furnish details to prove that the income in respect thereof has already been disclosed by the recipient hospitals. However, the grievance of the assessee before us is that there are a number of hospitals which are blacklisted for which it is difficult for the assessee to procure and furnish all the requisite details to seek exclusion of payments in respect of which income has already been offered for assessment by recipient hospitals. In view of these facts and circumstances, we direct the Assessing officer to try and obtain information from the blacklisted hospitals with regard to whether payments made by assessee have been disclosed in the income of aforesaid hospitals. 24. As far as the ground of the assessee disputing the interest charged under S.201(1A) of the Act, we are in agreement with the CIT(A) that such interest is mandatory and one cannot escape from the same having violated the provisions of S.194J of the Act. We only direct the assessing officer as follows- (a) to recompute the interest chargeable under S.201(1A) while recomputing the demand to be raised u/s. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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