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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 ..... at village levels, do not strictly fall within the scope of 'fee for professional services' which alone can be considered as falling within the scope of the provisions of S.194J - Decided in favor of the assessee by way of direction to AO to bifurcate the payments made by the assessee trust to the hospitals into various element, and confine the demand raised in terms of S.201(1) of the Act, only to the payments which assume the nature of fee for professional services, as noted above - IT APPEAL NOs. 813 & 814 (HYD.) OF 2011 - - - Dated:- 16-3-2012 - CHANDRA POOJARI, SMT. ASHA VIJAYARAGHAVAN, JJ. K. Vasant Kumar for the Appellant. Smt. K. Mythili Rani for the Respondent. ORDER Asha Vijayaraghavan, Judicial Member These two appeals are filed by the assessee and they are directed against the orders of the CIT(A) II, Hyderabad dated 15.3.2011, passed in the context of the appeals of the assessee preferred against the orders of the assessing officer passed under S.201(1) and 201(1A) of the Act for the assessment years 2009-10 and 2010-11, on account of non-deduction of tax at source while making certain payments made during the relevant period, in terms of S.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) and S.201(1A) of the Act, the assessing officer in the interests of justice considered the same as well, but found no merit in the contentions of the assessee. He observed that for invoking the provisions of S.194J, there is no stipulation that the professional services have to be necessarily rendered to the person who makes payment to hospital. He also observed that the incidental services are part of the package, where essentially the agreement is for rendering the medical series. The assessing officer concluded that the payments by the assessee-trust to various hospitals are covered by the provisions of S.194J of the Act, and the Trust is the responsible person for making the payments. 4. Accordingly, the assessing officer, vide his order dated 19.2.2010 for the assessment year 2009-10, calculated the tax under S.201(1) of the Act at Rs.12,24,08,665 and interest under S.201(1A) of the Act at Rs.17,82,65,040, and raised demand to that effect. Similarly, for the assessing officer, vide his similar order also dated 19.2.2010, calculated the tax under S.201(1) of the Act at Rs.15,17,59,194 and interest under S.201(1A) of the Act at Rs.10,04,58,422, and raised demand to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Karnataka High Court in the case of Medi Assist (India) TPA (P.) Ltd. v. Dy. CIT [2010] 324 ITR 356/[2009] 184 Taxman 359, conclude that since facts of the case under appeal are identical in so far as the terms and conditions of the service and the activities are concerned, such as there is no contract between the insurer and the Hospitals and the contract is between the trust and the insurer and the Trust and the Network Hospitals and it is only from the trust funds that payments to hospitals are made even though the assessee is not registered as TPA, it still works in the same way as that of TPA, the cited decisions clearly apply and the assessee is liable to deduct tax under S.201(1) read with S.194J. 7. The next contention of the assessee before the CIT(A) was that the income of the hospitals from the assessee cannot be termed as professional income and the payments to them cannot be considered as payments for professional services, and consequently the assessing officer was not correct in holding that there is a default under S.194J on account of non-deduction of tax on payments made to hospitals. It was also contended in the alternative that it is only a porti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2009-10, read as follows- "1. The order of the learned Commissioner of Income-tax is erroneous both on facts and in law in so far as it is prejudicial to the assessee. 2. The learned Commissioner of Income-tax erred in holding that he assessee is liable to deduct tax from payments made to hospitals without appreciating the fact that there is no contractual obligation between the person on whose behalf the payment is made and the trust. 3. Without prejudice to the above the learned Commissioner of Income-tax (Appeals) erred in holding that the entire amount that is paid to hospital is liable for consideration for making TDS without appreciating the fact that the payment is for different services and all are not professional services. 4. The learned CIT(A) erred in not holding that no interest u/s. 201(1A) is chargeable if it is found that the hospitals to whom payments are made is found to have paid the taxes or not required to pay the taxes." 12. Learned counsel for the assessee, Shri K. Vasantkumar, reiterating the contentions urged before the lower authorities submitted explaining the noble cause and motto of the Trust that the assessee trust has been form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Medi Assist (India) TPA (P.) Ltd. ( supra ), relied upon by the CIT(A) in the impugned order are not applicable to the facts of the present case. It was submitted that the CIT(A) erroneously concluded that since facts of the case under appeal are identical in so far as the terms and conditions of the service and the activities are concerned, such as there is no contract between the insurer and the Hospitals and the contract is between the trust and the insurer and the Trust and the Network Hospitals and it is only from the trust funds that payments to hospitals are made even though the assessee is not registered as TPA, it still works in the same way as that of TPA, the cited decisions clearly apply and the assessee is liable to deduct tax under S.201(1) red with S.194J. 14. Even otherwise, it is submitted that any of the payments made to hospitals in each of the individual cases are made in package mode, and they comprise of various elements, like bed charges, medicines, diet, transportation charges, implants, follow up medicines, besides expenses incurred on conducting medical camps in villages, outpatient care, etc., besides reimbursement of actual fee for profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Andhra Pradesh to act as a nodal agency to implement and monitor the implementation of Arogyasri-II, does not have recognition of the IRDA, the Third Party Agents carrying on the activities as insurers for their beneficiaries have such recognition from IRDA. In the facts and circumstances of the case, she submitted that the decisions relied upon by the CIT(A) in the impugned order clearly cover the issue against the assessee, and the assessee is clearly liable to deduct tax at source in terms of S.194J of the Act in respect of payments made to the hospitals. She submitted that the CIT(A) in the impugned orders considered in detail, various contentions of the assessee with regard to the quantum of tax coming within the scope of the provisions of S.194J and gave appropriate relief and there is no justification for any further interference from the Tribunal. She also submitted that the interest under S.201(1A) being mandatory, it automatically follows the tax demanded under S.201, for the appropriate period as directed by the CIT(A) in the impugned order is to be confirmed. 18. We have considered the rival submissions and perused the material on record. We have also gone throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard for the purposes of section 44AA or of this section; ( b ), ( c ), ( ba ), to ( c )** ** **" There is no dispute between the parties to the proposition that the case of the assessee is not covered by any of the provisos of S.194J of the Act. 20. The term 'person', used in S.194J of the Act, extracted above, has been defined under S.2(31) of the Act to mean- "2(31). "person" includes- ( i ) an individual, ( ii ) a Hindu Undivided family, ( iii ) a company, ( iv ) a firm, ( v ) an association of persons or a body of individuals, whether incorporated or not, ( vi ) A local authority, ( vii ) Every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation -For the purpose of this clause, an association of person or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, or profits or gains." 21. A close reading of the above provisions of S.194J and S.2(31) of the Act, makes it clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability to deduct tax at source in terms of S.194J of the Act. 22. As for the quantum of the demand raised by the assessing officer under S.201 of the Act, we find some force in the contention of the assessee that it is only the element of fee for professional services comprised in each of the payment made by assessee trust to the hospitals which falls within the scope of S.194J of the Act. As canvassed by the learned counsel for the assessee, elements of payment towards bed charges, medicines, follow up services, outpatient services, transportation charges, implants, expenditure incurred for conducting camps at village levels, do not strictly fall within the scope of 'fee for professional services' which alone can be considered as falling within the scope of the provisions of S.194J of the Act. In this view of the matter, we set aside the order of the CIT(A) on this aspect, and direct the assessing officer to bifurcate the payments made by the assessee trust to the hospitals into various elements as noted above, and confine the demand raised in terms of S.201(1) of the Act, only to the payments which assume the nature of fee for professional services, as noted above. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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