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TMI Blog2016 (9) TMI 1609X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and the relationship between the parties was not on a principal to principal basis. It is in these circumstances that in BHARTI CELLULAR LTD. [ 2006 (4) TMI 50 - ITAT, KOLKATA] held the provisions of sec. 194H of the Act to be applicable to the amount which was regarded as being in the nature of commission. The present case, on the other hand, is not one of sale of goods, but one of rendering of services. The assessee renders diagnostics services to the collections centers against payment, on which necessary tax is deducted at source u/s 194 J of the Act. There is no element of agency between the assessee and the collection centers. Bharti Cellular (supra), therefore, has no application whatsoever to the facts of the present case . Since facts and circumstances being identical, respectfully following the said decision, we hold that the provisions of Sec. 194H have no application for the discounts allowed by the assessee to the collection centres. Thus, we sustain the order of the Ld. CIT(A). - Decided against revenue. - I.TA Nos. 4579 & 4580/Mum/2014 - - - Dated:- 30-9-2016 - SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER For the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive vehemently supports the order of the Assessing Officer in holding that the assessee is defaulter u/s. 201(1) and 201(1A) for non deduction of TDS u/s. 194H of the Act on the discounts allowed by the assessee to the collection centres. 5. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. The assessee is engaged in providing laboratory and testing services to the customers through own collection centres and also through collection centres comprising of hospitals, nursing homes, clinics, other laboratories etc. The assessee allowed discounts to the collection centres other than its own centres. The Assessing Officer treated such discounts as commission paid to collection centres and since the assessee did not deduct TDS u/s. 194H of the Act, he passed order u/s. 201(1) and 201(1A) treating the assessee as defaulter. We find that an identical issue has been decided in assessee s own case which is reported as SRL Ranbaxy Ltd. Vs ACIT (supra) for Assessment Year 2006-07 wherein it was held that the discounts allowed by the assessee Laboratory to the collection centres is not commission and not attracted by the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g professional services)or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (ii) the expression professional services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA; (iii) the expression securities shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act,1956 (42 of 1956 ; (iv) where any income 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 income, such crediting shall be deemed tobe credit of such income to the account of the payee and the provisions of this section shall apply accordingly. 8. Thus, Section 194 H, brought in from 1.6.2001, provides that any person, other than an individual or a Hindu Undivided Family, responsible for paying commission or brokerage t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee raises its periodical invoices on the Collection Centres. The Collection Centre makes the payment to the assessee after TDS u/s 194 J of the Act. Under the Agreement, the services are rendered by the assessee in the form of laboratory testing at a discounted price from the price given in the standard price list. This discount has been considered by the Authorities below as commission and they have held that tax was required to be deducted thereon u/s 194 H of the Act. 11. Now, it has not been shown that these facts, as canvassed on behalf of the assessee, are not the correct facts. It has not been shown that the rates charged by the Collection Centre from its customers are not decided by the Collection Centre, but by the assessee. It has not been shown that the Collection Centre is under any obligation to forward the samples for testing only and only by the assessee and not by other laboratories as well. The set- ups of the Collection Centres are also entirely different from that of the assessee. Their expenditure has also not been shown to be interlacing with that of the assessee. The staff of the two are also distinct and separate. The accounts are not either intermi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Centres. The Collection Centres and the Patients/customers are the ones which have privity of contract inter se. The Collection Centres deducted tax at source from the payment made to the assessee, for professional services, u/s 194 J of the Act, establishing that the Collection Centres were not the agents of the assessee. Were it otherwise, the entire receipt would have been collected on behalf of the assessee by the Collection Centres. It has not been shown to be so. Moreover, the amount retained by the Collection Centres was not regarded as the income of the assessee and the commission allegedly paid by the assessee to the Collection Centres was not treated as the deductible expenditure. 14. The assessee s contention that the Collection Centres have the option to conduct the tests themselves or to out-source their medical services to other laboratories, has been simply brushed aside by the ld. CIT(A) stating it to be of no significance. This, however, to our mind, is not correct. Firstly, this contention has not been disproved. It is borne out from the agreements. Then, if this averment on behalf of the assesssee is correct, the element of agency in the relationship bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not convert a contract of sale into one of agency, because in spite of these restrictions, the transaction would still be a sale and subject to all the incidents of a sale. 15. It has further been the observation of the ld. CIT(A) that there were geographical restrictions imposed on the Collection Centres. However, as rightly contended, it has not been shown that any such restrictions were ever imposed on the Collection Centres. Rather, no restrictions have been shown to have been imposed on the Collection Centres from referring the tests to laboratories other than the assessee. It has been contended on behalf of the assessee that all through, i.e., in the past, as well as in the present, the Collection Centres have been and are engaging the services of other laboratories. This has not been disputed. 16. The ld. CIT(A) has also objected that it is not true to contend, as done on behalf of the assessee, that the Collection Centres are free to charge a rate as desired by them from their patients; that the advertisement clearly specifies the rate which is to be charged by the Collection Centres; and that from this, it is clear that the assessee has control over the pricing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the impugned order as Annexure-A. The rates contained in the said advertisement are, no doubt, the specified rates, but the assessee has been able to show that the Collection Centres do the charge rates over and above such specified rates, as desired by them. The observation of the ld. CIT(A) against the assessee in this regard is, therefore, not correct. 20. The ld. CIT(A) has also observed that the assessee is bound to the Collection Centres in terms of the report issued in respect of samples referred by the Centres to the assessee and tested by the assessee. However, it has not been shown as to how this acts detrimentally to the assessee. No Principal Agent relationship stands established by this sole fact. Obviously, since the assessee renders professional services, and that too, professional services by way of medical testing, there is a strict professional conduct which has to be abided by the assessee. The assessee is under a strict obligation. If there is any negligence or deficiency on the part of the assessee, it is the assessee who is answerable. 21. As seen from the above, it is evident that there is no Principal Agent relationship existing between the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 ITD 105(JP). 27. Apropos CIT v. Singapore Airlines Ltd. (supra), it was observed, inter alia, that in the area of travel business, the airline appoints agents who are accredited with IATA. These agents maintain blank ticket stock of the airline. The agents are authorized to issue tickets to passengers against collection of consideration. When a ticket is issued by the agent, a contract comes into existence between the passenger and the airline, for carrying the passenger on the scheduled flight(for which the ticket is booked). The amounts collected by the agents are credited to the airlines on a fortnightly basis. The agent receives a pre-agreed commission, which is fixed for the industry as a whole, after deducting tax at source under section 194 H of the Act. In that view of the matter, there is no dispute that there is a Principal Agent relationship between the airline on the one hand and travel agent on the other. 28. In the aforesaid background of facts, the question arose whether the supplementary commission retained by the travel agents was in the nature of Commission for the purposes of section 194 H of the Act, on which, tax was required to be withheld, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he customer. 34. On the aforesaid facts, it was held that the commission of 15% retained by the agent out of advertisement charges collected by the agent on behalf of Doordarshan was subject to deduction of tax at source under section 194 H of the Act, since the transaction was a pure agency agreement between Doordarshan and the advertising agency, in view of the fact that one acted for the other and the act of the agent bound Doordarshan in its capacity as Principal of the Agent. It was held that the parties understood their relationship as that of Principal and Agent and what was paid to the agent by Doordarshan was 15per cent of the advertisement charges collected and remitted the agent which was in the form of commission payable to the agent by Doordarshan. Further, it was found on facts that the advertisement contract entered into between the customer and the agency was for telecasting advertisement on Doordarshan channels. 35. In the present case, on the contrary, the collection center has no authority to bind the assessee in any form. The collection centers, acting in their own right, engage the assessee for lab testing services and do not, in any manner, act as agents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, makes payment to the assessee after deducting tax at source u/s 194J of the Act for the professional services rendered. The collection centre has the flexibility and freedom to choose the laboratory to which samples have to be sent for testing, unless the same is mandated by the patient/customer. Moreover, the collection centre charges the customer rates fixed by the collection centre (and not decided by the assessee) though at the same time, keeping in mind the amount that would have to be paid by the collection centre to the assessee or to any other laboratory to which the samples have to be sent for testing. In fact, in certain cases, the collection centers have, as also brought on record before us, charged over and above the standard price list provided by the assessee to all collection centers, which averment has gone unrebutted. Hence, Delhi Milk Scheme (supra) is also not of any avail to the Department. 40. In Bharti Cellular (supra), the assessee was providing cellular mobile telephone services in specific area through distributors by providing SIM and pre-paid cards at fixed rates below the market price, which were further sold to retailers, who ultimately sold the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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