9911796707
TMI Blog2021 (4) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... s thereof on its role as an infertility clinic. Revenue s able assistance and from a perusal of the case file at pg.35 that the NGO herein has proposed the assessee to arrange for surrogate mothers in lieu of the decided remuneration of 4 lakhs for single and 4.5 lakhs in case of twins pregnancies; respectively. This NGO further claimed itself as working for rehabilitation for poor destitute woman after they were neglected by their families facing poverty and other adverse circumstances. The assessee is fair enough in not disputing the fact that it had duly agreed to the said proposal only alongwith its undertaking to pay for the material breach of contract to the genetic parents on account of the surrogate mothers default. We make it clear that this payee had also failed to throw any light on payments made to surrogate mothers whose services had been utilized by the assessee/infertility centre for the purpose of surrogate pregnancy on behalf of the genetic parents. We therefore exercise our inherent jurisdiction vested u/s.254 of the Act as well to observe these parties have done nothing else but exploited the poor and destitute surrogate mothers without even paying the adequate c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REME COURT] ; CIT Vs. Faizan Shoes Pvt. Ltd. [ 2014 (8) TMI 170 - MADRAS HIGH COURT] DCIT Vs. Welspun Corporation Ltd.[ 2017 (1) TMI 1084 - ITAT AHMEDABAD] . We thus hold that the impugned 40(a)(i) disallowance in case of the overseas payees deserves to be deleted for this reason alone X X X X Extracts X X X X X X X X Extracts X X X X ..... ment shall extend to include to the benefit of and be binding upon the parties hereto and their respective permitted successors and assignees. I have also perused the written submissions containing the detailed explanation made by the appellant in response to the show cause letter issued by the AO. I am unable to concur with the view of the appellant. Once the payment to the surrogate mother or to the egg donor is that of the appellant, then the responsibility of deducting the amount of TDS required to be done u/s.194J / 194C in accordance with the agreement also vests in the hands of the appellant. The appellant cannot take a plea that it is only a conduit through which the genetic parent makes the payment either to the surrogate mother of the egg donor. I also do not agree with the proposition by the appellant that the surrogate mother is not rendering any services to the appellant hospital. The AO has elaborately brought out the facts in the assessment order vide para 7 of the order which needs to be reproduced: "7. The issue involved in the assessment is whether the payments made towards surrogacy services attract tax deduction provisions u/s.194J /194C of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given by the assessee and the consultant, it is evident that all the medical expenses and maintenance expenses of the surrogate mothers are borne by the assessee and the consultant. Therefore, the amount, paid to the surrogate mothers at ₹ 2 lakh for single pregnancy and ₹ 2.25 lakh for carrying pregnancy of twins, is income in the hands of the surrogate mothers. Besides, the contention of the assessee, that the payments made to the surrogate mothers through the consultant are not governed by the provisions of sec.194C of the IT Act, is not correct. It is very clear from the agreement entered into by the consultant and the assessee that the consultant is under obligation to supply the surrogate mothers to the assessee as and when the assessee(Hospital) requires the services of the surrogate mother either for donation of egg or for carrying pregnancy for a price. Since, supply of surrogate mothers for a price took place as per the agreement between the assessee and the consultant, the payments made for surrogacy services attract provisions of sec.194C. The contention of the assessee that supply of surrogate mothers does not fit into the phrase given U/s 194C ie. &quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 to 2012-13 with a view to reassess the income of the assessee company. In this regard, the assessee humbly submits that the returns of income for the above assessment years were already filed as detailed below: Sl. No. Assessment year Date of filing of the original return of income Date of filing of the revised return of income Income admitted (Rs.) Tax paid including advance tax and TDS 1. 2009-10 01-10-2009 05-10-2009 17,16,308 5,62,050 2. 2010-11 26-09-2010 -- 35,46,610 11,07,946 3. 2011-12 27-09-2011 07-03-2013 72,27,106 25,61,800 4. 2012-13 29-09-2012 05-03-2013 1,39,55,115 47,33,344 The above mentioned returns of income may please be treated as the return of income filed in response to notice u/s 148 of the I.T. Act. The assessee humbly submits that the Assessing Officer conducted survey u/s 133A of the IT. Act on 22-10-2013 at the premises of the company. A statement was recorded by the Assessing Officer at the time of survey. From the statement, it can be ascertained that the Assessing Officer entertained a doubt that the assessee should have deducted tax at source in respect of the payments made to the egg don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, in many cases of infertility it is found that the woman is not capable of carrying a pregnancy in her womb to term which maybe because of several disorders and therefore needs a surrogate mother to preserve the pregnancy. g) The genetic parents choose the surrogate mother to carry the pregnancy on behalf of the genetic mother. They choose the surrogate mother through organization such as AMMA WOMEN'S WELFARE SOCIETY or from others. Always it is the choice of the genetic parents to choose the surrogate mother and is not the choice of the hospital. h) All the connected parties i.e. the genetic parents, surrogate mother and the hospital (fertility centre) discuss about the issue after the surrogate mother is chosen by the genetic parents. At that stage the genetic parents, the hospital and the surrogate mother enter into a tripartite agreement, a copy of which is submitted. i) The fertility centre conducts the pathological and other tests in order to decide the possibility of transferring the embryo in the womb of surrogate mother. If she is found medically fit, the process commences as per the terms of the agreement. j) In the said agreement, the total amount is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would also furnish assurance to the appropriate authority of the Government of India before taking the child to their country. It can be seen from the said letter filed before ITO of International taxation that the payments made to the surrogate mothers and payments made to egg donors do not require deduction of tax at Source as they were made on behalf of the genetic parents and not as an expenditure of the assessee and that the payments are towards expenditure to be incurred by the surrogate mother, supply of eggs and the activity carried on by the surrogate mother, supply of eggs would not attract any deduction of tax at Source under Chapter XVII of the IT. Act. Therefore, the provisions of Chapter XVII or Sec.40(a)(ia) of the IT. Act would not apply to the payments made to the surrogate mothers and payments for supply of eggs. It is also submitted that the payment for the supply of eggs is for the human reproductive cell/genetic material. It is the payment for the material and, therefore, no deduction of tax at Source need be made. In view of the above, the assessee humbly submits that the presumption of the Assessing Officer that there is any escapement of income on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upliftment of poor and destitute women in the state of Andhra Pradesh. We provide food housing and rehabilitation for women who have been neglected by their families we work towards reconciliation and helping them learn vocational trades arid become self reliant. I have learnt about you esteemed institute online and some of the women at Our NGO have come forward to provide this very noble service to help childless couples by becoming surrogate mothers and Egg donors because they understand the plight of childless couples in the Indian society. AMMA will arrange for Surrogate mothers and egg donors for Kiran Infertility Centre and on the basis of the decided remuneration which will be 4 lakhs for a single pregnancy and 4,50,000 for carrying twins. In the mentioned amounts Amma will arrange for food accommodation, clothing, travel and any other non medical expenditure for the surrogate mothers and egg donors including their compensations. All medical procedures and treatments and medical / surgical care will be the responsibility of the Kinin Infertility Centre. AMMA is also in the process of applying with ICMR for registration as an ART bank. Thanking you, For Ammo W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the process of treatment given to the patients. Ans. IVF : on registration and consultation of the patients, detailed history is taken followed by investigation if required to reach a diagnosis. Based on the diagnosis, a particular type of treatment is suggested which may be lUI / IVF / ICSI / Surrogacy Majority of patients requiring treatment of IUI / IVF / ICSI. do not require prolonged admission / stay in the hospital. Surrogate mothers may require to stay in the hospital from 12 week pregnancy to till the delivery, Which differs from case to case. However the genetic parents and the donors in majority cases may not require any hospitalization but they are required to visit the hospital for dally monitoring. As a part of package, any complication related to the surrogacy is the responsibility of the hospital. As far as IVF treatments are concerned, our monitoring extends up to 12 weeks of pregnancy. Q.11. Please explain the procedure followed for identifying the surrogate mothers? Ans. Amma Women Welfare Society, an NGO has panelled voluntary women for surrogacy and on requirement basis, and whenever there is a requirement the clinic informs the NGO/ABT bank. Then the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n orderly manner suggesting that you own up responsibility for ensuring successful completion of the complex surrogacy medical procedure. Please say Yes or No. Ans. This answer needs a detailed explanation because of the complexity involved and cannot be answered in YES/NO. Q.9. Do you state that Mr.Sesha Sai has been providing the human resources independently for the success of the your practice? Ans. Amma women's welfare society provides for surrogate mothers and egg donors to our clinic upon request from Commissioning parents to us and he also takes care of logistical requirement such as food, travel, stay etc for surrogate mothers and egg donors. Q.10.When the NGO has been providing the Human Resources, why the compensation to surrogate mothers is being paid into the personal account of Mr.Sesha sai but not into the account of the NGO ? Ans. According to Mr. Sesha sai his Ngo is involved in several welfare activities for the betterment of poor women and to streamline the timely payments for benefit of surrogate mothers the payments for them is made into his account upon authorisation from his NGO. Sri.T .Sesha Sai : Q.4 [Sworn statement dt.23.10.2013] please gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y service. Q.10. Have any surrogate mother gave you any consent for accepting or receiving money on their behalf from M/s Kiran Infertility Centre? Ans. No surrogate mother gave any such consent. In fact I take an undertaking from the surrogate mothers specifying that only ₹ 2,00,000 will be paid as compensation for the surrogacy service in instalments and that they will not go away till one month after the delivery. Q.11. When you pay only ₹ 2 lakh to the surrogate mother, what do you do with the remaining ₹ 2 lakh or 2.25 lakh? Ans. I have to pay ₹ 50,000 to 60,000 to the middlemen and I have to meet the expenditure towards salary to the Care Taker J.Vijaya Lakshmi, Cooks, Drivers etc. Q.12. Do any commissioning/genetic parent ever questioned you about the well being of the surrogate mother or they ever made you responsible for the well being of the surrogate mothers? Ans. As I said earlier, there is no contact with the Commissioning/Genetic parent. But mostly Dr.Samit Sekhar of M/s Kiran Infertility Centre monitors the entire process. I am answerable only to Dr.Samit Sekhar of M/s Kiran Infertility Centre, Hyderabad. Q.3. [Sworn statement dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes all the activities for the success of the treatment. [b] Sri T.Sesha Sai as per the agreement with the assessee, is required to supply willing surrogate mother to the assessee hospital for which service he is paid. Mr.T.Sesha Sai is having network in all the districts and through various contacts obtains information about poor women who are in need of money and these women are made to get convinced about the remuneration they get for providing the Surrogacy service or the Egg as the case may be. For this purpose, he pays to middlemen. Mr.T.Sesha Sai always maintains 8. group of willing women and he employed a caretaker to take care of their maintenance. As and when he gets a requisition from the assessee, he readily provides willing woman of the prescribed age group for the surrogacy service. 7. The issue involved in the assessment is whether the payments made towards surrogacy services attract tax deduction provisions u/. U/s 194J/194C of the IT Act. From the foregoing, it is discernible that Mr.Sesha Sai, the supplier of surrogate mothers has been the consultant in true sense to the assessee in finding out and supplying suitable and willing surrogate mothers, who are el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2 lakh for single pregnancy and ₹ 2.25 lakh for carrying pregnancy of twins, is income in the hands of the surrogate mothers. Besides, the contention of the assessee, that the payments made to the surrogate mothers through the consultant are not governed by the provisions of see.194C of the IT Act, is not correct. It is very clear from the agreement entered into by the consultant and the assessee that the consultant is under obligation to supply the surrogate mothers to the assessee as and when the assessee[Hospital] requires the services of the surrogate mother either for donation of egg or for carrying pregnancy for a price Since, supply of surrogate mothers for a price took place as per the agreement between the assessee and the consultant, the payments made for surrogacy services attract provisions of sec 194C. The contention of the assessee that supply of surrogate mothers does not fit into the phrase given u/s.194C ie. "including supply of labour for any work" does not hold good. It is only extension of the section and inclusive in nature but does not restrict the scope of sec 194C to cover the contracts or agreements entered into for supply of any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her a party to the corresponding agreement executed between the genetic parents and surrogate mother(s) nor has it availed any technical services from either of them so as to deduct TDS in issue. Learned counsel next referred to assessee's sample agreement (pgs.31 to 34) AY.2010-11's paper book that this taxpayer is not in any way liable for the corresponding obligations between the generic parents and surrogate mothers and therefore, it neither enjoys any right nor any liability flowing therefore. 10. Mr.Rama Rao thereafter took pains to make us go through all the relevant clauses in the sample agreement. And that the purpose of entering into the said kind of agreement is that it is the desire of mainly the overseas genetic parents wishing to have a child by way of In Vitro Fertilization 'IVF' by engaging an Indian surrogate mother so as to carry and deliver their biological child. And that the said overseas genetic parents themselves arrange surrogate mothers on their own. She is then brought to the clinic for the entire 'IVF' process followed by duly monitored gestation cycle of a human pregnancy involving normal time span of 36 weeks in average, finally culminating in delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding income is assessable in the payee's hands under any heads defined in Section 14 of the Act. And that the surrogate mothers herein do not perform any business or professional services thereby deriving taxable income. His further case is that providing surrogacy services does not amount to commercial use of a female womb in any manner and therefore, the impugned payments are otherwise exempt from taxation as well as per Hindustan Cococola Beverages Pvt. Ltd Vs. CIT 293 ITR 226 (SC) and GE India Technology Centre P. Ltd. Vs. CIT [327 ITR 456] (SC) that liability of TDS deduction is applicable only when the corresponding income is taxable in the recipient's hands. 16. Mr.Rama Rao's concluding remarks next touched upon the issue of Section 40(a)(i) r.w.s.195 disallowance of foreign egg donors' payments made through the payee based in South Africa in latter three assessment years (supra) since he has not performed any services in India. He accordingly contended that the impugned disallowance made under both u/s.40(a)(i) as well as u/s.40(a)(ia) of the Act are liable to be deleted in above terms. 17. Mr.Mujumdar has strongly supported the impugned twin disallowance(s) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gacy (Regulation) Bill, 2020 as well. 21. We further note from valuable assistance coming from both the parties that the issue of surrogacy has not only been confined to mere procedures and regulatory mechanisms. Hon'ble apex court in Baby Manji Yamada Vs. Union of India Writ Petition (Civil) No.369/08, dt.29-09-2008 also dealt with a case of a surrogate child's production/custody who had overseas genetic parents and an Indian surrogate mother. 22. We now proceed to deal with the impugned issue of TDS deduction on surrogacy payments before us keeping in mind the above conceptional backdrop. The assessee's case admittedly is that it is no a party to any agreement or a contract at all so as to be eligible to Section 194C of the Act. We see no reason to accept the instant argument. We make it clear that pgs.31 to 34 of the paper book containes the assessee's sample surrogacy agreement in this regard. The introductory portion thereof duly contains the clause that the same is 'by and among' the genetic parents, surrogate mothers and the assessee in other words. Not only this, 'material breach' clause 17.2 therein also suggests that it is the infertility centre/physician only 'who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing else but exploited the poor and destitute surrogate mothers without even paying the adequate compensation. Rather the payee 'NGO' and its office bearer(s) have prima facie swindled the entire money. This conclusion flows from the entire surrogacy procedure adopted by the assessee with the so called NGO and its authorised person as it is evident from the perusal of the case file in the light of human probabilities after removing all blinkers as held in Sumati Dayal Vs. CIT (1995) [214 ITR 801] (SC) and CIT Vs. Durga Prasad More (1971) [82 ITR 540] (SC). We thus conclude that so far as the application of 194C r.w.s. 40(a)(ia) is concerned, the assessee's all other arguments regarding taxability of the surrogate mothers also deserve to be rejected since its payee himself had admitted that it had not maintained any accounts of the payments made to the surrogate mothers. We thus uphold the learned lower authorities' action invoking Section 194C r.w.s. 40(a)(ia) disallowance of ₹ 71,23,300/-, ₹ 3,35,52,200/-, ₹ 89,02,746/-, ₹ 70,50,000/- assessment year-wise; respectively in case of Mr.Sai and the other payee (supra). The same stands confirmed. 25. Next come ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
