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TMI Blog2020 (10) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Dedicated Health Care Service TPA (India) Pvt Ltd Vs ACIT [2010] 324 ITR 345 (Bom.) and of the Hon'ble Delhi High Court in the case of Vipul Medcorp TPA (P) Ltd., v. Central Board of Direct Taxes [2011] 245 ITR 325 (Del.) in arriving at the above conclusion? (iii) Circular No.8/2009 dated 24.11.2009 issued by the CBDT can be said to be in conformity with the provision contained in Section 194J of the Act? (iv) The Hon'ble Tribunal was correct in remanding the matter to the CIT(A) to consider de novo the alternate contention of the Appellant that it cannot be held to be an 'assessee-in-default' unless it is demonstrated that the payee-hospitals had failed to discharge their tax liability on the payments made to them by the Appellant? (v) The Appellant is liable to pay interest in terms of Section 201(1A) of the Act? FACTUAL BACKGROUND: 2. Factual background, in which the aforesaid substantial questions of law arise for our consideration in this appeal need mention. The assessee is a company engaged inter alia in the business of providing Third Party Administration (hereinafter referred to as the TPA for short) services on medical / health insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 dated 24.11.2009 by which it was provided that all payments made by the TPAs to the hospital on behalf of the insurance company would attract deduction of tax at source under Section 194J of the Act. In the meanwhile, the aforesaid Medi Assist India filed writ appeals challenging the order passed by the learned Single Judge on 18.12.2009. The Deputy Commissioner of Income Tax (TDS) passed an order on 21.01.2010 under Section 201(a) and 201(1A) of the Act for Financial years 2008-09 and 2009-10 holding the assessee to be liable for tax deduction at source under Section 194J of the Act in respect of payments made by it to the hospitals and issued demand notices. The assessee challenged the aforesaid order in a writ petitions viz., W.P.No.6385-86/2010. 5. In the meanwhile, the Commissioner of Income Tax (Appeals) by an order dated 22.02.2011 inter alia relying on the order passed by the learned Single Judge of this court in case of Medi Assist as well as Circular No.8/2009 dated 24.11.2009 upheld the order passed by the Deputy Commissioner of Income Tax (TDS). The assessee thereupon approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween TPAs and the individual. 7. It is contended that hospitals do not carry on any profession but are engaged in business activity. Therefore, they would be outside the definition of Explanation (a) to Section 194J(3) of the Act. It is further submitted that only an individual can carry on a medical profession and a hospital cannot carry on profession. In this connection, our attention has been invited to the expression 'profession' as mentioned in Black's Law Dictionary 6th Edition. It is also argued that exercise of profession requires intellectual skill and ability and special qualification and hospital is simply a place for medical treatment, which by itself does not provide any professional services or does not carry on medical profession. It is also pointed out that from perusal of Sections 35AD(8)(C), 44AA and 80-IB, it is evident that hospitals carry on a business and not a profession. Our attention has also been invited to provisions of Indian Medical Council Act, 1956 in support of the proposition that only an individual is entitled to practice medicine and therefore, the hospital cannot practice medicine. The provisions of the Chartered Accountants Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S', (1960) 2 SCR 866, 'DR.P.VADAMALAYAN VS. COMMISSIONER OF INCOME-TAX', (1969) 74 ITR 94 (MADRAS), 'COMMISSIONER OF INCOME- TAX VS. DR.V.K.RAMACHANDRAN', (1981) 6 TAXMAN 348 (MADRAS), 'NATVARLAL AMBALAL DAVE VS. COMMISSIONER OF INCOME-TAX', (1997 225 ITR 936 (GUJARAT), 'COMMISSIONEROF INCOME-TAX VS. UPASANA HOSPITAL', (1996) 89 TAXMAN 525 (KERALA), 'SRI.LAKSHMI TRUST VS. COMMISSIONER OF INCOME-TAX', (1995) 53 ITD 528 (BANGALORE), 'COMMISSIONER OF INCOME- TAX VS. DR.K.K.SHAH', (1982) 135 ITR 146 (GUJARAT), 'COMMISSIONER OF CENTRAL EXCISE VS. RATAN MELTING AND WIRE INDUSTRIES', (2008) 17 STT 103 (SC), 'UCO BANK VS. COMMISSIONER OF INCOME-TAX', (1999) 104 TAXMAN 547 (SC), 'BEN GORM NILGIRI PLANTATIONS CO. CONOOR (NILGIRIS) AND OTHERS VS. SALES TAX OFFICER (1964) 15 STC 753, ' COMMISSIONER OF INCOME-TAX VS. CARGO LINKERS', (2009) 179 TAXMAN 151 (DELHI), 'CIT VS. VEGETABLE PRODUCTS LTD.', (1973) 88 ITR 192 (SC), 'CIT VS. MADHO PD. JATIA', (1976) 105 ITR 179 (SC), CIT VS. KULU VALLEY TRANSPORT CO. P. LTD.', (1970) 77 ITR 518 (SC), 'GE INDIA TECHNOLOGY CEN. (P.) LTD. VS. CIT', (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the interpretation clause, prima facie that definition governs, whenever that word is used in the body of the statute (SEE: INDIAN IMMIGRATION TRUST BOARD OF NATAL V. GOVINDASWAMY, AIR 1920 PC 114, VANGUARD FIRE AND GENERAL INSURANCE CO. LTD., MADRAS V. FRASER & ROSS, AIR 1960 SC 971, 1960 (3) SCR 857). As was observed by Lord Dunedin: "It is a novel and unheard of idea that an interpretation clause which might easily have been so expressed as to cover certain sections and not to cover others should be when expressed in general terms divided up by a sort of theory of applicana singula singulis, so as not to apply to sections where context suggests no difficulty of application. And as recently stated by Lord Lowry: "If Parliament in a statutory enactment defines its terms (whether by enlarging or by restricting the ordinary meaning of a word or expression), it must intend that, in the absence of a clear indication to the contrary, those terms as defined shall govern what is proposed, authorized or done under or by reference to that enactment. But where the context makes the definition given in the interpretation clause inapplicable, a defined word when used in the body of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. [SEE: 'DILIP N. SHROFF V. CIT 2007 6 SCC 329]. It is well settled rule of statutory interpretation that where the legislature intends to express different intention, it uses the language differently (SEE - INDRAKUMAR PATODIA V. RELIANCE INDUSTRIES LTD. 2012 (13) SCC 1). The Court cannot read anything into statutory provision, which is plain and unambiguous (SEE: ANSAL PROPERTIES & INDUSTRIES LTD. V. STATE OF HARYANA (2009) 3 SCC 553). The Court would ordinarily take recourse to golden rule of literal interpretation. RELEVANT STATUTORY PROVISIONS: 12. After having noticed the well settled legal principles with regard to statutory interpretation, we may notice the relevant provisions of Section 194J(1) and relevant extract of Circular No.8/2009 issued by Central Board of Direct Taxes dated 24.11.2009, which read as under: Fees for professional or technical services. 194J. (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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section shall have effect, as if for the words "ten per cent", the words "two per cent" had been substituted in the case of a payee, engaged only in the business of operation of call centre. (2) [***] (3) [***] Explanation.--For the purposes of this section,-- (a) "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (ba) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Hindu Undivided Family. The aforesaid provision mandates deduction of an amount equal to 10%, where any person not being an individual or a Hindu Undivided Family is responsible for paying to a resident any sum inter alia by way of fees for professional services. While defining the character of the payer, the Parliament has referred to the expression any person not being an individual or a Hindu Undivided Family, nothing repugnant to the context appears in Section 194J(1), so as to not read the expression "person" as defined in Section 2(31) of the Act, which includes an individual; a Hindu Undivided Family; a company; a firm; an association of persons or a body of individuals whether incorporated or not; a local authority; and every artificial judicial person not covered in the previous clauses. The contention that there is no privity of contract between TPAs and individuals and TPAs make payment on behalf of individual also is excluded from purview of Section 194J(1) of the Act, therefore, TPAs should also be excluded appears to be attractive at the first blush, but does not deserve acceptance as on closer scrutiny and taking into account the stand of the assessee before assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 'DR. DEVENDRA. M. SURTI V. STATE OF GUJARAT', AIR 1969 SC 63. However, 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 "in the course of carrying on" are used with the intention to include incidental, ancillary, adjunct or allied services connected with or relatable to medical services. Thus, the sweep and scope of Explanation (a) to Section 194J is not restricted only to payments made to medical or other professionals but services rendered in the course of carrying on the stipulated profession. It is pertinent to note that payments are made to the hospitals and not personally by the payer to the individual doctors or professionals. The medical services are rendered in the course of carrying on the medical profession. Undoubtedly, the nature of payment in the hands of the recipient, is determinative of deductibility of tax at source, however, the payments in the hands of hospital cannot be treated to be business income as the payments are received in the course of carrying on the medical profession. It is well settled rule of statutory inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a failure to deduct tax on payments made by TPAs to hospitals under Section 194J will necessarily 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. 17. We respectfully agree with the aforesaid findings recorded by the High Court and to the extent as held by the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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