The Commissioner of Income-tax, Mumbai v. Jaslok Hospital and Research Centre
[Citation -2015-LL-0420-43]

Citation 2015-LL-0420-43
Appellant Name The Commissioner of Income-tax, Mumbai
Respondent Name Jaslok Hospital and Research Centre
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 20/04/2015
Judgment View Judgment
Keyword Tags deduction of tax at source • deduct tax at source • hire charges • use of land • commission payment
Bot Summary: In the assessment om year in question the assessee had debited a sum of Rs.40,66,638/- under the head Operating other administrative charges pertaining to Drug Handling Charges. 13 arrangement of procuring drugs for the drugs store in the hospital. The ladies were to ensure availability of the drugs and medicines for the patients visiting h hospital and getting treated in the hospital. To enable them to procure drugs and supply them to the drug store that the payment was made to the H manufacturers. C In the present case, the assessee has explained both before the Commissioner and the Tribunal that Mrs. Poonam Malani and h Mrs.Beena Mirchandani were in-charge of the drug store of the assessee. Ig The assessee pointed out that they were brought in for administration and management of the drug store under the H agreement. To facilitate the administration and management by them and of the drug store that the hospital agreed with them that the payment would be made to the manufacturers or recognised and reputed agents of the manufacturers in procuring the drugs and medicines for drug 5/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.


Shiv ita2062.13 IN HIGH COURT OF JUDICATURE AT BOMBAY rt ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2062 OF 2013 ou Commissioner of Income Tax, Mumbai .. Appellant. Vs. C M/s.Jaslok Hospital and Research Centre .. Respondent. h Mr. P.C. Chhotaray for Appellant. Mr. Nitesh Joshi along with Mr.Rajesh Poojary i/b M/s.Mint ig & Conferors for Respondents. H CORAM : S.C. DHARMADHIKARI AND A.K. MENON, JJ. DATED : 20TH APRIL, 2015. y P.C. : ba 1. This appeal by revenue challenges order om passed by Income Tax Appellate Tribunal dated 30th January, 2013. assessment year is 2006-07. B 2. Mr.Chhotaray, appearing on behalf of revenue submits that there are substantial questions of law which have been proposed at Page 14 of paperbook. 3. In relation to question (a) Mr.Chhotaray has 1/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 submitted that section 194H of Income Tax Act, 1961 was squarely applicable. As far as that section is concerned, it obliges rt person making payment which could be termed as commission or ou brokerage to deduct tax at source at 5% from income that would be derived by such payment. Mr.Chhotaray submits that payment in present case squarely finds place in C explantion (i) which is for purpose of this section. Mr.Chhotaray submits that deduction at 2% by respondent h assessee is short deduction and such deficit or short fall in ig same would make it assessee in default, therefore, obligation to pay interest as well follows. H 4. Mr.Chhotaray submits that agreement with two y persons and in relation to procurement of drugs and ba contemplating payment of drug handling charges denotes that section 194H is attracted and applicable. In assessment om year in question assessee had debited sum of Rs.40,66,638/- under head Operating other administrative charges pertaining to Drug Handling Charges . Such payments were B explained by pointing out that payment has been made to two parties Mrs. Poonam C. Malani and Mrs.Beena Mirchandani. agreement dated 22nd April, 2004 was executed and it was valid for three years. These two parties were paid those charges and tax at source was deducted under section 194C treating same 2/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 as contract charges. Mr.Chhotaray submits that in light of agreement and stipulation noted by assessing officer rt therein section 194H was attracted. Mr.Chhotaray submits that ou two ladies were to procure drugs for hospital from licensed manufacturers or other reputed reliable and authorised agents. fresh stock had to be brought at drug store. This C was not case of administration and management of drug store, pure and simple but all payments of acquiring drugs h and medicines from manufacturers or agents were made by assessee hospital. ig It is in these circumstances that commission or brokerage contemplated by explanation and H section 194H as whole is attracted. assessee could not have got away by making deduction under section 194C of Income y Tax Act, 1961. Mr.Chhotaray submits that alternate argument was ba not at all open. Mr.Chhotaray relied upon judgment of Hon'ble Supreme Court in case of Federation of Andhra om Pradesh Chambers of Commerce and Industry and Others Vs. State of Andhra Pradesh and Others 247 ITR Page 36. B 5. On other hand Mr.Joshi submits that argument of Mr.Chhotaray overlooks agreement between hospital and two ladies. That agreement must be read in its entirety and as whole. One clause or any part of any such clause cannot be picked up and read out of context to mean that it is 3/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 arrangement of procuring drugs for drugs store in hospital. There is no principal and agent relationship in this case. rt This is not any payment within meaning of section 194H. ou agreement read as whole would indicate that hospital has Pharmacy or drug store of its own. It was finding it difficult to manage it and by own staff. 'Assessee' decided to manage it C with help of these two ladies. ladies were to ensure availability of drugs and medicines for patients visiting h hospital and getting treated in hospital. It was their ig obligation and duty. To enable them to procure drugs and supply them to drug store that payment was made to H manufacturers. This is not procurement for hospital through these ladies and as understood by revenue. In such y circumstances provision was not attracted. In any event ba alternative argument of Mr.Joshi relying on case of Hindustan Coca Cola Beverage P. Ltd. Vs. Commissioner of Income Tax (2007) om 293 ITR 226, is that whatever money has been paid in shape of drugs handling charges is disclosed as income by these two ladies in their returns of income, therefore, there is no question B of any tax being evaded. In any event, concurrent findings do not raise any substantial question of law in relation to this question. 6. We have carefully perused legal provision. 4/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 Section 194H is contemplating deduction of tax at source for payment to resident, on or after 1st day of June 2001 of any rt income by way of commission (not being insurance commission ou referred to in section 194D) or brokerage. words are defined in explanation and in inclusive manner and that inter alia indicates any service in course of buying or selling of goods. C In present case, assessee has explained both before Commissioner and Tribunal that Mrs. Poonam Malani and h Mrs.Beena Mirchandani were in-charge of drug store of assessee. ig assessee pointed out that they were brought in for administration and management of drug store under H agreement. Commissioner as also Tribunal have noted relevant clauses, reproduced them and construed y agreement as whole. They have read clauses of same ba together and harmoniously. Upon such reading of agreement, we find that neither Commissioner nor Tribunal committed om any error of law apparent on face of record or perversity. agreement reiterated that there is no principal and agent relationship. It is independent management and administration B job handed over to these ladies. To facilitate administration and management by them and of drug store that hospital agreed with them that payment would be made to manufacturers or recognised and reputed agents of manufacturers in procuring drugs and medicines for drug 5/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 store. That would ensure that genuine drugs reach drug store. That would also ensure regularity of supply. That would rt also ensure that drugs of reputed manufacturers and procured ou by lawful means alone are available at drug store. It is in these circumstances while not reading this particular arrangement torn from context or in isolation that both C fact finding authorities hold that no commission or brokerage has been paid and therefore section 194H is not attracted. h 7. ig We do not agree with Mr.Chhotaray that something more and which is not there in statute or statutory provision H concerned has been read therein. It is not case where revenue intended to tax something which is clearly within y statute. This is case where construction of statutory ba provision by fact finding authorities in backdrop of peculiar facts and circumstances enables them to conclude that same om is not applicable. This is perfectly legitimate exercise and permissible while dealing with taxing statute. Therefore, judgment of Hon'ble Supreme Court and principle laid B down therein cannot be invoked and applied. appeal to this extent has no merit and must be dismissed. 8. However, we have heard both sides and extensively on two other provisions, namely, section 194J and 194-I on payment 6/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 under head Doctors fees . What has been relied upon for payment to doctors for instrument hire charges by Mr.Chhotaray rt is section 194-I of Income Tax Act, 1961. He submitted that ou assessee has paid hire charges to doctors who bring in their own instruments to check and operate upon patients. On such payments, tax at source has not been deducted. When C explanation was sought, assessee pointed out that this is nothing but reimbursement by trust of amounts collected h from patients and for use of equipment belonging to them ig while operating upon patients in hospital premises. This was therefore not case falling within section 194-I as it then H stood and prior to 13th July, 2006. Mr.Chhotaray would submit that irrespective of whatever clarification has been brought in this y provision, it was always applicable. It takes into account ba something which is named as rent. It means any payment and under whatever name called under whatever arrangement for om use of (separately or together) inter alia any equipment, therefore, this provision was attracted. B 9. Mr.Joshi appearing on behalf of assesee rightly submitted that term rent as defined in explanation has been worded widely and broadly but from 13th July, 2006. Prior to its substitution clause (i) of explanation was worded narrowly and restrictively and it does not mention any equipment and use 7/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 thereof and payment in relation thereto as rent. In such circumstances for atleast assessment year 2005-06 this question rt will not arise. ou 10. Having noted rival contentions and findings of Commissioner and Tribunal we find substance in C submission of Mr.Joshi. Clause (i) of explanation prior to substitution and after its substitution reads as under : h called, ig (i) 'rent' means any payment, by whatever name under any lease, sub-lease, tenancy or any H other agreement or arrangement for use of any land or any building (including factory building), together with furniture, fittings and land y appurtenant thereto, whether or not such building is owned by payee. ba 11. bare perusal thereof would denote as to how om Legislature and Parliament has brought in under whatever arrangement and for use of land, building etc. including equipment whether or not any or all of them are owned by B payee and termed them as rent. Prior thereto pertinent exclusion with regard to equipment would enable both Commissioner and Tribunal to hold that this provisions is not attracted atleast to cases which are arising prior to 13th July, 8/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 2006. To that extent we do not find any perversity or error of law apparent on face of record in impugned order. rt ou 12. However, Mr.Joshi's arguments in relation to subsequent assessment years and as accepted by Commissioner and Tribunal to some extent raise substantial C question of law. Similarly, rival contentions on application of section 194-I and also 194J would also raise substantial questions h of law. appeal, therefore, is admitted on following substantial question of law : ig H (1) Whether on facts and in circumstances of case and in law, Hon'ble ITAT was justified in confirming order of CIT (A) in holding that y assessee was not assessee in default ba u/s.201(1) in respect of amount of tax which has not been deducted from provisions created in respect of Doctors fees payable ? om 13. Mr.Joshi waives service on behalf of respondents. B 14. Registrar (Judicial) / Registrar, High Court, Original Side, Bombay to ensure that original record in relation to this Appeal is summoned from Tribunal and offered for inspection of parties. 9/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: ita2062.13 This paper book is treated sufficient for purpose of admission of this Appeal. However, Registry must further ensure preparation of rt complete paper book in accordance with Rules. Registry in ou first instance must send intimation of admission of this Appeal enclosing therewith copy of this order so as to enable Tribunal to act C accordingly. h (A.K. MENON,J.) (S.C. DHARMADHIKARI,J.) ig H y ba om B 10/10 ::: Uploaded on - 29/04/2015 ::: Downloaded on - 15/02/2016 11:27:42 ::: Commissioner of Income-tax, Mumbai v. Jaslok Hospital and Research Centre
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