Pr. Commissioner of Income-tax (TDS) 2, Mumbai v. National Health & Education Society (P.D.Hinduja Hospital & Medical Research Centre)
[Citation -2019-LL-0222-32]

Citation 2019-LL-0222-32
Appellant Name Pr. Commissioner of Income-tax (TDS) 2, Mumbai
Respondent Name National Health & Education Society (P.D.Hinduja Hospital & Medical Research Centre)
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 22/02/2019
Judgment View Judgment
Keyword Tags reimbursement of expenditure • fees for technical services • professional services • nature of commission • nature of payment • delivery charges • deduction of tds • freight charges • demand of tax • remuneration • actual cost • debit note • salary
Bot Summary: As a result of the aforesaid survey and after it was carried out, proceedings under Section 201(1) of the I. T. Act were initiated and the assessee was required to show cause as to why it should not be treated as an assessee in default in respect of certain payments. After considering all the material, the Assessing Officer passed his order dated 24th March, 2011 under Section 201 of the I.T. Act holding the assessee to be in default on certain counts and accordingly raised a demand for tax against the assessee. Thereafter, the Assessing Officer further held that the drug handling charges paid to M/s Saxsons Biotech, the assessee ought to have deducted TDS under Section 194H. The Assessing Officer came to this conclusion because he was of the opinion that M/s Saxsons Biotech had acted as an agent of the assessee and was paid a commission for that purpose. On going through the findings given by the CIT(A) as well as the ITAT on this issue, we are fully satisfied that in the facts of the present case, the assessee correctly deducted TDS under section 194C. We find that in the present case there was no question of payment of any commission to Saxsons Biotech which supplied the radioactive drug used by the assessee in Nuclear Medicine Treatment. The CIT noted that the Hinduja Foundation charges the salaries to the assessee on actual basis and there is no further markup paid by the assessee to the Hinduja Foundation. The personnel deputed by the Hinduja Foundation to the assessee are all highly qualified persons who are deputed to man senior management positions of the assessee hospital. Looking to these facts, the CIT came to the conclusion that the payments made by the assessee to the Hinduja Foundation in respect of the persons deputed by it to the assessee hospital, are not in the nature of 'fees for professional 16/19 itxa-105-165.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: services' but was in the nature of pure reimbursement.


IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL No.105 of 2016. WITH INCOME TAX APPEAL No.116 of 2016. WITH INCOME TAX APPEAL No. 112 of 2016. WITH INCOME TAX APPEAL No. 115 of 2016. WITH INCOME TAX APPEAL No. 121 of 2016. WITH INCOME TAX APPEAL No. 128 of 2016. Pr. Commissioner of Income-tax (TDS)2, Smt. K.G.Mittal Ayurvedic Hospital Bldg. Charni Road, Mumbai 400 002. ..APPELLANT. Vs National Health & Education Society (P.D.Hinduja Hospital & Medical Research Centre), Veer Savarkar Marg Mahim, Mumbai 400 016 PAN AAATN 0093 Q ..RESPONDENT. Mr. Suresh Kumar for Appellant in all Appeals. Mr. S.C. Tiwari a/with Ms. Rutuja Pawar for Respondent in all Appeals. CORAM : S.C.DHARMADHIKARI & B.P. COLABAWALLA, JJ. 1/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: RESERVED ON :-26th September, 2018. PRONOUNCED ON :- 22nd February, 2019 JUDGMENT : [ PER B. P. COLABAWALLA, J. ] 1. All these Income Tax Appeals have been filed under Section 260A of Income-tax Act, 1961 (for short I.T. Act ) challenging orders dated 6th February, 2015 and 10th February, 2015 passed by Income Tax Appellate Tribunal, Mumbai (for short ITAT ). By impugned orders, Tribunal dismissed appeals filed by revenue and partly allowed appeals filed by assessee. It is being aggrieved by these decisions of ITAT that revenue is in appeal before us. 2. Mr. Suresh Kumar, learned Advocate appearing on behalf of revenue, submitted that in ITXA No.105 of 2016, ITXA No. 128 of 2016 and ITXA No.115 of 2016 four questions of law arise for our consideration which read as under :- 2/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: (a) Whether on facts and in circumstances of case and in law, ITAT was correct in not treating Hospital Based Consultants (HBCs) as employees and therefore provisions of Section 192 is not applicable? (b) Whether on facts and in circumstances of case and in law, ITAT was correct in holding that payment made to Hinduja TMT/Hinduja Global Solutions Ltd., TDS is required to be deducted under Section 194C and not under Section 194J of Act? (c) Whether on facts and in circumstances of case and in law, ITAT was justified in holding that drug handling charges paid by assessee are covered under Section 194C for purpose of TDS without appreciating that these charges are commission liable for TDS under section 194H? (d) Whether on facts and in circumstances of case and in law, ITAT was correct in holding that payment made to employees of Hinduja Foundation who had worked with assessee for rendering various services is to be treated as reimbursement and not as payment towards professional fee instead of ITAT treating it as reimbursement of expenditure and TDS was required to be deducted under Section 194J? 3. As far as ITXA No.116 of 2016 and ITXA No.121 of 2016 are concerned, Mr. Suresh Kumar submitted that over and above, above mentioned four questions, additional question arises for our consideration and which reads thus :- (e) Whether on facts and in circumstances of case and in law, ITAT was correct in holding that 3/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: orders passed by Assessing Officer under Section 201 (1) for Financial Year commencing on 1st April, 2007 and earlier years are time-barred without appreciating that as per proviso to sub-section 3 of Section 201 and as per CBDT's Circular No.5/2010 dated 3/6/2010, time limit for passing such orders is 31/3/2011? 4. As far as ITXA No.112 of 2016 is concerned, Mr. Suresh Kumar submitted that questions that arise for our consideration in this appeal are Questions (a), (c), (d) and (e) respectively. Since it is agreed that common questions of fact and law arise in all these appeals, they are being disposed of by this common judgement. For sake of convenience, we shall refer to facts in ITXA No.105 of 2016. 5. It is case of revenue that in this case survey under Section 133A of I. T. Act was conducted on 4th October, 2010 for verification of proper TDS compliance by assessee deductor. During survey, statement of Shri Deepak Samant, Director (Finance) was recorded on oath under Section 131 of I. T. Act. As result of aforesaid survey and after it was carried out, proceedings under Section 201(1) of I. T. Act were initiated and assessee was required to show cause as to why it should not be treated as assessee in default in respect of certain payments. 4/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: In reply to aforesaid show cause notice, assessee furnished its reply and various details as required by Assessing Officer. After considering all material, Assessing Officer passed his order dated 24th March, 2011 under Section 201 (1A) of I.T. Act holding assessee to be in default on certain counts and accordingly raised demand for tax against assessee. 6. Assessing Officer inter alia held that Hospital Based Consultants (HBCs) were employees of assessee and therefore tax was required to be deducted under Section 192 of IT Act. Assessing Officer further held that payments made to Hinduja TMT/Hinduja Global Solution Ltd. required deduction of TDS under Section 194J and not under Section 194C of Act. Since assessee had deducted tax under Section 194C, Assessing Officer brought difference to tax. Thereafter, Assessing Officer further held that drug handling charges paid to M/s Saxsons Biotech, assessee ought to have deducted TDS under Section 194H. Assessing Officer came to this conclusion because he was of opinion that M/s Saxsons Biotech had acted as agent of assessee and was paid commission for that purpose. It is on all these counts, Assessing Officer passed assessment 5/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: order dated 24th March, 2011 under Section 201(1) and order dated 28th September, 2011 under Section 201 (1A). 7. Being aggrieved by these actions of Assessing Officer, assessee filed appeal before Commissioner of Income-tax (Appeals) [for short CIT (Appeals)] . learned CIT (Appeals), vide his order dated 30th March, 2013, partly allowed appeal of assessee for statistical purposes. 8. Being aggrieved by order of CIT (Appeals), revenue as well as assessee, filed cross appeals before ITAT. After hearing parties, ITAT by its order dated 6th February, 2015 dismissed appeal of revenue and partly allowed appeal of assessee. It is in these circumstances that revenue has filed present appeals before this Court under Section 260-A of I.T. Act, challenging legality and validity of impugned orders and raising questions of law as reproduced by us earlier. 9. In this factual backdrop, Mr. Suresh Kumar, learned Advocate appearing on behalf of revenue, submitted that ITAT had completely gone wrong in not treating Hospital Based 6/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: Consultants (HBCs) as employees of assessee. He submitted that Assessing Officer as well as CIT (Appeals) had taken note of salient features of terms of employment of these Consultants and after taking these features as well as other terms of employment into consideration, came to conclusion that such HBCs would fall in category of employees of assessee, though it can be said that they are in category of fixed period / part time contract employees of assessee. This being case, Mr. Suresh Kumar submitted that it was clear that relationship between HBCs and assessee was purely that of employer and employee and that remuneration paid to them as result of said relationship was in nature of salary which would attract provisions of Section 192 of Act. 10. Similarly, Mr. Suresh Kumar submitted that ITAT had completely gone wrong in holding that payments made to Hinduja TMT/Global Solution Ltd, TDS was required to be deducted under Section 194C and not under Section 194J of Act. Mr. Suresh Kumar submitted that payments were made to these two entities Hinduja TMT/Global Solution Ltd., towards call centre expenses, etc. and would therefore clearly be fees for professional or 7/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: technical services and therefore deduction of TDS had to be done under Section 194J and not under Section 194C of I.T. Act. In support of this proposition, Mr. Suresh Kumar relied upon observations of Assessing Officer. 11. Thereafter, Mr. Suresh Kumar further submitted that ITAT had also erred in holding that for drug handling charges paid by assessee, TDS was correctly deducted under Section 194C of I.T. Act. He submitted that ITAT failed to appreciate that charges paid to Saxson Biotech were charges in nature of commission and therefore TDS was liable to be deducted under Section 194H and not under Section 194C of I.T. Act. 12. Similarly, Mr. Suresh Kumar submitted that payments made by assessee to Hinduja Foundation was in nature of payment made for professional fees and therefore required deduction of TDS under Section 194J. He submitted that CIT(A) and ITAT had completely gone wrong in coming to conclusion that these payments were in nature of reimbursements. For all aforesaid reasons, Mr. Suresh Kumar submitted that substantial questions of law arise for our 8/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: consideration (and as reproduced above) and therefore appeals be allowed and impugned orders passed in all above appeals be set aside. 13. On other hand, Mr. Tiwari, learned Advocate appearing on behalf of assessee took us through impugned orders and submitted that ITAT correctly analysed all provisions and thereafter came to conclusions that it did. He submitted that as far as Question (a) is concerned, same is fully covered by decision of this Court in case of Commissioner of Income-tax (TDS), Pune vs. Grant Medical Foundation (Ruby Hall Clinic) [ITXA No.140 of 2013 decided on 22nd January, 2015]. As far as Questions (b), (c) and (d) are concerned, he submitted that no substantial question of law arises since findings in relation thereto were purely factual in nature. ITAT is last fact finding authority and unless it is shown that these findings (based on facts) of ITAT are completely perverse, there is no occasion for any substantial question of law arising therefrom. In this regard, Mr. Tiwari took us through findings given by ITAT and urged that all these findings are based purely on facts which required no interference and certainly did not suffer 9/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: from any perversity which in turn would give rise to any substantial question of law. As far as Question (e) is concerned, Mr. Tiwari submitted that considering findings given by ITAT, this question has become purely academic which need not be considered by us in this case and could be kept open to be considered in appropriate case where issue would be alive and would have direct bearing on outcome of case. For all aforesaid reasons, Mr. Tiwari submitted that all above appeals therefore do not give rise to any substantial question of law and consequently, all appeals be dismissed. 14. We have heard learned Counsel for parties at length and we have perused papers and proceedings in these appeals as well as impugned orders. We shall discuss each question separately. Re: Question (a) :- 15. As far as Question (a) is concerned, we find considerable force in argument canvassed by Mr. Tiwari that same is squarely covered by Division Bench decision of this Court. We find 10/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: that Division Bench of this Court in case of Commissioner of Income-tax (TDS Pune) (ITXA No.140 of 2013) (supra) and to which one of us was party (S. C. Dharmadhikari, J), was considering whether Tribunal was correct in holding that there exists no relationship of employer and employee between assessee Grant Medical Foundation (Ruby Hall Clinic) and Consultant doctors employed in hospital. After perusing law on subject, this Court answered aforesaid question in favour of assessee and against revenue. We find that as far as Question (a) is concerned, same has been answered against revenue and in favour of assessee as per judgment delivered by this Court in case of Commissioner of Income-tax (TDS Pune) (ITXA No.140 of 2013) (supra). In fact, when this judgment was brought to notice of Mr. Suresh Kumar, he fairly conceded that Question (a) would be covered by this decision. This being case, in our opinion, Question (a) does not give rise to any substantial question of law. Re: Question (b):- 16. As far as Question (b) is concerned, we find that CIT 11/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: (Appeals) examined payments made to Hinduja TMT/Global Solution Ltd. towards call centre expenses. CIT (Appeals) noted that work done by these two entities includes primarily providing customer information pertaining to hospital and fixing appointments. appointment list contains names of various Departments/Consultants. call centre gives appointments and also gives instructions to callers, if any. HTMT Global Solutions also also gives information about clinics, labs, blood bank, report availability, home services, ambulance services, admission and billing, hospitality and general enquiry etc. For all this, Hinduja TMT/Global Solution Ltd., raise invoice on monthly basis as per terms of contract. While examining all this material, CIT (Appeals) came to conclusion that from all these activities it was evident that services involved were not of technical or professional nature. He therefore took view that these services were in nature of 'works contract' and accordingly deleted demand of tax raised by Assessing Officer under Section 201 (1) on merits. In other words, CIT (Appeals) held that for payments made by assessee to Hinduja TMT/ Hinduja Global Solution Ltd., TDS was correctly deducted by assessee under Section 194C of I.T. Act. 12/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: 17. In paragraph 12.1 of impugned order dated 6th February, 2015, ITAT noted findings given by CIT (Appeals). Thereafter, in paragraph 13.1, ITAT gave its opinion that activities carried out by both aforesaid entities, namely, Hinduja TMT/Hinduja Global Solutions Ltd., do not fall under head 'technical or professional services'. In these circumstances, ITAT held that CIT (Appeals) was fully justified in holding that TDS was correctly deducted under Section 194C of Act. ITAT held that it did not find any legal infirmity in order passed by CIT (Appeals) and therefore upheld his order on this count. 18. On going through findings given by CIT (Appeals) as well as ITAT, we find considerable force in argument canvassed by Mr. Tiwari that these findings are purely factual in nature. It is after examining record that CIT (Appeals) as well as ITAT came to conclusion that services that were rendered by these two entities were not of technical or professional nature that would require deduction of TDS under Section 194J. CIT (Appeals) specifically came to conclusion that contract between assessee and these two entities was in 13/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: nature of 'works contract' and therefore deduction of TDS under Section 194C was correctly done by assessee. In these circumstances, we do not find that these factual findings suffer from any perversity that would give rise to any substantial question of law. In these circumstances, we find that Question (b) also does not give rise to any substantial question of law requiring for our consideration. Re: Question (c):- 19. Question (c) is regarding Drug Handling Charges paid by assessee to M/s Saxsons Biotech. On this issue CIT (A) noted relevant material. CIT (Appeals) noted that M/s Saxsons Biotech arranges particular drug, which is not ordinarily available in market. It is radioactive material required in nuclear medicine treatment. It is supplied to assessee at particular price. charges invoiced by supplier includes cost of material, freight charges, customs duty, clearing & forwarding charges, delivery charges etc. invoice raised by M/s Saxsons Biotech consist of two parts, one is of actual cost of material supplied and other is for service charges on which tax is 14/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: deducted under Section 194C. After noting all these facts, CIT (Appeals) held that assessee had correctly deducted TDS under Section 194C. These findings are confirmed by ITAT. 20. On going through findings given by CIT(A) as well as ITAT on this issue, we are fully satisfied that in facts of present case, assessee correctly deducted TDS under section 194C. We find that in present case there was no question of payment of any commission to Saxsons Biotech which supplied radioactive drug used by assessee in Nuclear Medicine Treatment. facts and as recorded by authorities below would clearly show that drug supplied by Saxsons Biotech to assessee was invoiced by Saxsons Biotech in manner set out earlier. This being case, there was no question of such payment being in nature of commission that would require deduction of TDS under Section 194H of I.T. Act. We are therefore clearly of view that Question (c) also does not give rise to any substantial question of law requiring our consideration. Re: Question (d) :- 15/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: 21. Question (d) basically relates to payments made to Hinduja Foundation for its employees who had rendered services to assessee in key managerial positions. It was case of assessee that these payments are to be treated as reimbursement and not as payment towards professional fees which would require TDS to be deducted under Section 194J of I.T. Act. CIT (Appeals) noted that Hinduja Foundation charges salaries (and other allowances) to assessee on actual basis and there is no further markup (either as percentage of such charges or otherwise) paid by assessee to Hinduja Foundation. personnel deputed by Hinduja Foundation to assessee are all highly qualified persons who are deputed to man senior management positions of assessee hospital. These highly qualified persons are paid by Hinduja Foundation and it is to reimburse Foundation that payment is made by assessee hospital. fact that Hinduja Foundation charges only actuals from assessee can be appreciated because Hinduja Foundation is also trust. Looking to these facts, CIT (Appeals) came to conclusion that payments made by assessee to Hinduja Foundation in respect of persons deputed by it to assessee hospital, are not in nature of 'fees for professional 16/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: services' but was in nature of pure reimbursement. On this issue, ITAT also agreed with findings given by CIT (Appeals). ITAT noted that CIT (Appeals) after considering order passed by Assessing Officer, submissions of assessee and nature of services carried out by service providers, held that payments made to Hinduja Foundation was towards reimbursing salaries of Senior Management Personnel deputed by Hinduja Foundation to assessee hospital. All these personnel were on pay-roll of Hinduja Foundation and they got all benefits from Foundation. In turn, Foundation raised debit note towards actual cost of employment and accordingly assessee made payments to said Foundation and which was therefore clearly in nature of reimbursement. It was in these circumstances, and after hearing parties and perusing material on record, ITAT concurred with findings of CIT (Appeals). In these circumstances, ITAT opined that payments made by assessee to Foundation were not in nature of fees for technical services and therefore confirmed order passed by CIT (Appeals). 22. On going through findings given by CIT (Appeals) 17/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: as well as ITAT on this issue, we find that both authorities below have given their findings on basis of facts presented before them. We find that authorities below are fully justified in coming to conclusions that they did, namely, that payments made by assessee to Foundation was in nature of reimbursement and not in nature of any technical or professional services which required deduction of TDS under Section 194J of I.T. Act. This being case, Question (d) also does not give rise to any substantial question of law that would require our consideration. Re Question (e):- 23. Question (e) is regarding whether ITAT was correct in holding that orders passed by Assessing Officer under section 201 (1) for Financial Year commencing from 1st April, 2007 and earlier years are time- barred without appreciating that as per said provisions and as per Circular of CBDT dated 5/2010, time-limit for passing such orders was 31st March, 2011. Considering answers that we have already given to Questions (a) to (d) above, and considering that TDS was deducted under correct provisions of I.T. Act, this question really becomes 18/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: academic in facts of present case. We, therefore, do not propose to give any finding on this question and leave it open to be considered in appropriate case. 24. In view of aforesaid discussion, all appeals are dismissed. However, in facts and circumstances of case, there shall be no order as to costs. (B . P. COLABAWALLA, J) (S. C. DHARMADHIKARI, J) 19/19 itxa-105-16_5.doc ::: Uploaded on - 22/02/2019 ::: Downloaded on - 26/02/2019 12:04:49 ::: Pr. Commissioner of Income-tax (TDS) 2, Mumbai v. National Health & Education Society (P.D.Hinduja Hospital & Medical Research Centre)
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