DCIT (TDS) 2(1), MUMBAI V. JASLOK HOSPITAL & RESEARCH CENTER, MUMBAI

ITA 1296/MUM/2014

• Counselvise Citation: 129619914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: SHRISMT INDIRA G ANAND
• Keywords: Relationship of principal and agent
• Section: 133A; 194C; 201(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1296/MUM/2014 ASSESSMENT YEAR: 2009-10 D.C.I.T.-2(1), R. NO.702, 7 TH FLOOR, SMT. K.G. MITTAL AYURVEDI HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002 / VS. M/S JASLOK HOSPITAL & RESEARCH CENTER, 15, DR. G. DESHMUKH MARG, MUMBAI-400026 ( / REVENUE) ( !'# /ASSESSEE) P.A. NO. AAA AJ0028Q / REVENUE BY SHRI K.RAVI KIRAN, -DR !'# / ASSESSEE BY SHRI/SMT. INDIRA G. ANAND $ % & ' / DATE OF HEARING : 13/08/2015 & ' / DATE OF ORDER: 26/08/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 18/12/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, IN HOLDING THAT PROVISION OF SECTION 194C OF THE ACT A RE APPLICABLE AND NOT SECTION 194H AS HELD BY THE ASSE SSING OFFICER. M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 2 2. THE CRUX OF ARGUMENT ADVANCED BY LD. DR, SHRI K.RAVI KIRAN, IS THAT WHILE HOLDING SO THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) IGNORED THE FACTS THAT DRUG HA NDLING CHARGES ARE IN THE NATURE OF COMMISSION, THEREFORE, CANNOT BE HELD AS CONTRACTUAL CHARGES THEREBY ERRED IN DELETI NG THE SHORT DEDUCTION U/S 201(1) AND INTEREST U/S 201(1A) OF THE ACT. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE, SHRI INDIRA G. ANAND, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. IT WAS ALSO CLAIMED THAT IDENTICAL ISSUE AROSE FOR A.Y. 2005-06 TO 2007-08 AND 2008-09 (ITA NO.2894 TO 2896/MUM/2009) AND (ITA NO.3100 TO 3103/MUM/2009 ) ORDER DATED 31/01/2013. IT WAS ALSO POINTED OUT TH AT THE APPEAL OF THE REVENUE WAS DISMISSED BY THE HONBLE HIGH COURT (ITA NO.2063 OF 2013) ORDER DATED 20/04/2015. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 30/0 1/2013 FOR READY REFERENCE AND PERUSAL:- 2. THE REVENUE HAS CHALLENGED THE CORRECTNESS OF T HE ORDER OF THE LD. CIT(A)XXX, MUMBAI DT. 13.2.2009 PERTAINING TO ASSESSMENT YEAR 2005- 06. THE CORRECT NESS OF THE ORDER HAS BEEN CHALLENGED BY RAISING FOLLOWING THREE GROUNDS OF APPEAL: M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 3 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN TREATING TDS ON DRUG HANDLING U/S. 194C AS AGAINST 194H. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN GRANTING RELIEF FOR DEFAULT U/S. 194-I FOR NON DEDUCTION OF TAX ON PAYMENT TO DOCTORS FOR INSTRUMENT HIRE CH ARGES FOR THE PERIOD PRIOR TO THE AMENDMENT TO SEC. 194-I. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO F OR NON DEDUCTION OF TAX ON PROVISION FOR DOCTORS FEES U/S. 194J. 3. GROUND NO. 1 RELATES TO TDS ON DRUG HANDLING CH ARGES U/S. 194C VIS--VIS 194H. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 19.9.2007. DURING THE COURSE OF THE SURVEY PROCEEDI NGS, THE REVENUE AUTHORITIES CAME TO KNOW THAT THE ASSES SEE HAS BEEN DEDUCTING TAX ON PAYMENT MADE UNDER THE HEAD D RUG HANDLING CHARGES U/S. 194C OF THE ACT. IT WAS THE CONTENTION OF THE AO THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX U/S. 194H OF THE ACT BECAUSE THE PAYME NT MADE UNDER THE HEAD DRUG HANDLING CHARGES WERE NOTHING BUT COMMISSION. THEREFORE, THE CORRECT PROV ISION FOR TDS WAS SEC. 194H OF THE ACT. 3.1. THE AO SUPPORTED THE CONTENTION ON THE STRENGT H OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS OF THE CFO OF THE ASSESSEE. BY VIRTUE O F WHICH THE AO CAME TO THE CONCLUSION THAT THE CFO HAS ALSO ADMITTED THAT THE TDS MADE U/S. 194C WAS INCORRECT AND THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX U/S. 194H O F THE ACT. THE OFFICER FURTHER SUPPORTED HIS VIEW BY TAKI NG A LEAF OUT OF THE AGREEMENT BETWEEN THE ASSESSEE AND SMT. M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 4 POONAM C. MALANI & MRS. BEENA MIRCHANDANI WHO WERE IN CHARGE OF THE DRUG STORE OF THE ASSESSEE. THE AO BASED HIS FINDING ON THE FACT THAT THE DRUG STORE HANDLIN G CHARGES PAID BY THE ASSESSEE WERE BASED ON PERCENTAGE OVER THE SUPPLIES AND THEREFORE CONCLUDED THAT THE DRUG HAND ING CHARGES WERE NOTHING BUT COMMISSION. THE AO FURTHER SUPPORTED HIS VIEW ON THE FACT THAT THE ASSESSEE HI MSELF IN ITS BOOKS OF ACCOUNT HAS DEBITED THE PAYMENTS AS COMMISSION. 4. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEF ORE THE LD. CIT(A). IT WAS EXPLAINED THAT THE PAYMENT CANNO T BE STATED TO BE COMMISSION AS CONTEMPLATED IN SEC. 194 H MERELY FOR THE REASON THAT THE ACCOUNTS OF THE ASSE SSEE HAVE TERMED THE CHARGES AS COMMISSION. IT IS THE SA Y OF THE ASSESSEE THAT WHAT IS MATERIAL IS THE SUBSTANCE OF THE PAYMENT RATHER THAN THE ACCOUNT NAME WHICH OUGHT TO DECIDE THE CHARACTER OF THE PAYMENT. IT WAS ALSO CO NTENDED THAT THE STATEMENT OF THE CFO HAS BEEN MISINTERPRETED/MISUNDERSTOOD BY THE OFFICER. THE AS SESSEE SUBSTANTIATED ITS CLAIM BY REPRODUCING THE ANSWER O F THE CFO WHICH IS AS UNDER: WE WERE DEDUCTING THE TDS U/S. 194C AS WE THOUGHT THAT THIS IS A CONTRACT, HOWEVER, SINCE THIS MATTER HAS BEEN BROUG HT TO OUR NOTICE, WE WILL IMPLEMENT IF NECESSARY. 5. THE ASSESSEE POINTED OUT THAT FROM THIS ANSWER I T CANNOT BE SAID THAT THE CFO HAS ADMITTED THAT THE TDS U/S. 194C DEDUCTED BY THE INSTITUTION WAS WRONGLY DONE. THE L D. M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 5 CIT(A) CAREFULLY EXAMINED THE COPY OF THE AGREEMENT DT. 22.4.2004 BETWEEN THE ASSESSEE AND THE PAYEES AND C AME TO THE CONCLUSION THAT THE CLAUSES OF THE AGREEMENT NOWHERE INDICATE THAT THE PAYEES ARE ACTING ON BEHA LF OF THE ASSESSEE ARE AFFECTING PURCHASES AND SALES ON B EHALF OF THE ASSESSEE AS HELD BY THE AO. THE LD. CIT(A) ALSO REJECTED THE OBSERVATIONS OF THE AO THAT THE ASSESS EE HAS RECORDED THE PAYMENTS AS COMMISSION HOLDING THAT TH E TRUE NATURE OF PAYMENT SHOULD BE TAKEN INTO ACCOUNT. THE LD. CIT(A) FINALLY CONCLUDED THAT THE PAYMENT MADE BY T HE ASSESSEE IS A CONTRACTUAL PAYMENT PURSUANT TO THE AGREEMENT AND HENCE THE ASSESSEE WAS OBLIGED TO DED UCT TAX U/S. 194C OF THE ACT ONLY WHICH IT HAS RIGHTLY DONE AND ALLOWED THE GROUND OF APPEAL IN FAVOUR OF THE ASSES SEE. 6. AGGRIEVED BY THE FINDING OF LD. CIT(A), THE REVE NUE IS BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE STRO NGLY SUPPORTED THE FINDINGS OF THE AO AND REITERATED THA T THE BASIS FOR THE PAYMENT OF DRUG HANDLING CHARGES CLEA RLY SHOW THAT THE PAYMENT IS NOTHING BUT A COMMISSION. THE LD. DR FURTHER ARGUED THAT THE AGREEMENT CLEARLY SH OW THE RELATIONSHIP OF PRINCIPAL AND AGENT AND THEREFORE T HE PAYMENT MADE WERE COMMISSION AND THE CORRECT PROVIS ION APPLICABLE FOR DEDUCING TAX AT SOURCE IS SEC. 194H OF THE ACT. 7. PER CONTRA, THE LD. SENIOR COUNSEL REFERRED TO T HE AGREEMENT BETWEEN THE TRUSTEES OF THE ASSESSEE AND MRS. POONAM C. MALANI AND MRS. BEDENA MIRCHANDANI AND M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 6 POINTED OUT THAT THE SAID AGREEMENT HAS BEEN ENTERE D FOR HANDLING THE DRUG STORE ACTIVITY OF THE ASSESSEE. T HE LD. COUNSEL FURTHER DREW OUR ATTENTION TO CLAUSE 2,5,9, 12 & 17 WHICH WE REPRODUCE AS UNDER: 2. ANY REPRESENTATIVE AUTHORIZED BY THE FIRST PART Y WILL GIVE TO THE SECOND PARTY A DETAILED INDENT OF DRUGS REQUIRED FO R THE AFOREMENTIONED HOSPITAL. AND THE SECOND PARTY SHALL MAKE THE SAID DRUGS AVAILABLE BY PROCURING THE SAID DRUGS FOR THE HOSPITAL FROM LICENSE MANUFACTURER OR THEIR REPUTED RELIABLE AND AUTHORIZED AGENTS OF THOSE MANUFACTURERS FROM THEIR FRESHEST S TOCK EXPIRY DATE THEREOF BEING AS DISTANT AS POSSIBLE AND STOCK THEM IN THE DRUG STORES AND THE FIRST PARTY SHALL PAY FOR THEM TO TH E MANUFACTURERS OR THE AGENT FROM WHOMSOEVER THE SECOND PARTY IS ABLE TO PROCURE THOSE DRUGS AT THE PRICES FIXED THEREOF LESS DISCOUNT ON MRP AS THE GOVT. MAY FIX FROM TIME TO TIME. 5. THE SECOND PARTY SHALL SUPPLY DRUGS TO THE PATIE NTS AS PER THE INDENTS SEND BY THE WARDS FOR THE TREATMENT BY THE HOSPITAL AT PRICE NOT EXCEEDING MRP. SUPPLY PRICES WILL BE FIXED IN C ONSULTATION WITH THE HOSPITAL MANAGEMENT. PATIENTS OF THE SAID HOSPI TAL WHO HOLD THE PRESCRIPTIONS OF THE DOCTORS WORKING IN THE HOSPITA L AS WELL AS THE EMPLOYEES WORKING IN THE HOSPITAL AT PRICES DETERMI NED BY THE MANAGEMENT. 9. THE SECOND PARTY SHALL BE LIABLE FOR THE DEAD ST OCK OTHER THAN THAT WHICH IS INCLUDED IN THE INVENTORY AFOREMENTIONED A S WELL AS DEAD STOCK OUT OF FUTURE PURCHASES MADE AND THAT THEY SH ALL BE RESPONSIBLE FOR ANY PILFERAGE OR SHORTAGE OCCURRING IN THE STOC K SHOWN IN THE AFOREMENTIONED INVENTOR OR PURCHASED HEREAFTER. 12. THE FIRST PARTYS REPRESENTATIVE AUTHORIZED BY CHIEF EXECUTIVE DIRECTOR OR MEDICAL DIRECTOR OR MEDICAL SUPERINTEND ENT SHALL BE M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 7 ENTITLED TO CHECK THE STOCK OR HAVE IT CHECKED OR C AUSE IT TO BE CHECKED FROM DAY TO DAY OR AS FREQUENTLY AS THE SAI D REPRESENTATIVE MAY IN HIS DISCRETION CONSIDER IT NECESSARY WITHOUT ANY PREVIOUS NOTICE TO THE SECOND PARTY AND THE SECOND PARTY SHA LL NOT OBJECT TO SUCH CHECKING BEING DONE AS REQUIRED BY THE FIRST P ARTYS AUTHORIZED REPRESENTATIVE. 17. THE SECOND PARTY SHALL MAINTAIN PROPER ACCOUNT BOOKS IN REGULAR COURSE OF BUSINESS AND ALSO MAINTAIN STOCK BOOK AND KEEP THEM POSTED FROM DAY TODAY AND PRESERVE ALL BOOKS O F ACCOUNT AND ALL LETTERS, VOUCHERS, CASH MEMOS, RECEIPTS, ORDERS , CONTRACTS AND OTHER DOCUMENTS, THAT MAY BE RECEIVED BY THEM AND C OPIES OF ALL LETTERS, ORDERS AND DOCUMENTS ISSUED BY THEM AND HE SHALL BE BOUND TO ALLOW A REPRESENTATIVE OF THE FIRST PARTY AUTHOR IZED BY THE CHIEF EXECUTIVE DIRECTOR OR THE MEDICAL SUPERINTENDENT IN THIS BEHALF AT ALL TIMES. 8. THE LD. SENIOR COUNSEL STRONGLY SUBMITTED THAT A FTER CONSIDERING THE AGREEMENT AS A WHOLE, IT IS A CLEAR CUT CASE OF PRINCIPAL TO PRINCIPAL AND NOT ONE OF PRINCIPAL- AGENT AND THEREFORE THE ASSESSEE HAS RIGHTLY DEDUCTED TAX U/S. 194C OF THE ACT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES AND THE AGREEME NT REFERRED TO BY THE LD. SENIOR COUNSEL WHICH IS PART OF THE PAPER BOOK EXHIBITED AT PAGES 13 TO 17. A CAREFUL P ERUSAL OF THE AGREEMENT CLEARLY SHOW THAT THE AGREEMENT BE TWEEN THE ASSESSEE AND MRS. POONAM C MALANI AND MRS. BEEN A MIRCHANDANI IS TESTIMONY TO THE FACT THAT THERE IS NO PRINCIPAL-AGENT RELATIONSHIP BETWEEN THE TWO RATHER THE AGREEMENT LIST OUT THE TASK TO BE CARRIED OUT BY TH E M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 8 INDEPENDENT AGENCY ENGAGED TO LOOK AFTER THE REGULA R RUNNING OF THE DRUG STORES MANAGED BY THE HOSPITAL. WE AGREE WITH THE FINDINGS OF THE LD. CIT(A) THAT THE PAYMENT MADE BY THE ASSESSEE IS A CONTRACTUAL PAYMENT PURSU ANT TO THE AGREEMENT AND HENCE THE ASSESSEE WAS OBLIGED TO DEDUCT TAX U/S. 194C OF THE ACT ONLY. WE THEREFORE DO NOT FIND ANY REASON TO TAMPER WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD AND THE FACTUAL FINDING/CONCLUSION RECORDED/ARRIVED AT BY THE TRIBUNAL, ASSERTIONS MADE BY THE LD. RESPECTIVE COU NSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT THE TRI BUNAL HAS ALREADY DELIBERATED UPON THE ISSUE IN PARA 3 ONWARD S OF THE ORDER DATED 30/01/2013 AND BY CONSIDERING THE CLAUS E 2,5,9,12 AND 17 OF THE AGREEMENT ENTERED FOR HANDLI NG THE DRUG STORE ACTIVITY OF THE ASSESSEE HELD THAT THE P AYMENT MADE BY THE ASSESSEE IS A CONTRACTUAL PAYMENT, PURSUANT TO THE AGREEMENT, THEREFORE, THE ASSESSEE WAS OBLIGED TO D EDUCT TAX U/S 194C OF THE ACT. THIS STAND OF THE TRIBUNAL WAS AFFIRMED BY HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DAT ED 20/04/2015 (ITA NO.2063 OF 2013), ANALYSING THE DEC ISION IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VS CIT (2007) 293 ITR 226. THUS, WE FIND NO INFIRMITY IN T HE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), CONSEQUENTLY, APPEAL OF THE REVENUE IS H AVING NO MERIT, THEREFORE, DISMISSED. M/S JASLOK HOSPITAL & RESEARCH CENTRE ITA NO.1296/MUM/2014 9 FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 13/08/2015. SD/ - (ASHWANI TANEJA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 26/08/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1 ( + ) / THE CIT, MUMBAI. 4. 0 0 $ 1 / CIT(A)- , MUMBAI 5. 34 .! , 0 +' ! 5 , $ % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. / BY ORDER, /3+ . //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI