Deputy Commissioner of Income-tax, V. Grant Medical Foundation, Pune

ITA 1926/PUN/2013

• Counselvise Citation: 192624514 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH DAMOR SHRI RAHUL KHARE; SANJ
• Keywords: Charitable institution; Reasonable cause
• Section: 273B; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1926 / P N/ 20 1 3 ASSESSMENT YEAR : 20 08 - 09 D EPUTY COMMISSIONER OF INCOME TAX, (TDS - I), PUNE VS. GRANT MEDICAL FOUNDATION, (RUBY HALL CLINIC), 40, SASSOON ROAD, PUNE - 411001 (APPELLANT) (RESPONDENT) PAN NO. AAATP1145P APPELLANT BY: SHRI RAJESH DAMOR RESPONDENT BY: SHRI RAHUL KHARE & SANJEEV A. JOSHI DATE OF HEARING : 2 2 - 01 - 2015 DATE OF PRONOUNCEMENT : 29 - 0 1 - 201 5 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT(A) - V, PUNE DATED 30 - 08 - 2013 FOR THE A.Y. 20 08 - 09 DELETING THE PENALTY LEVIED BY THE ASSES SING OFFICER U/S. 271C OF THE INCOME - TAX ACT. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY U/S 271C OF THE I T ACT LEVIED IN RESPECT OF PAYMENTS TO DOCTORS DRAWING FIXED REMUNERATION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WITHOUT REASONABLE CAUSE FAILED TO DEDUCT TAX U/S 192 OF THE I T ACT, 1961 ON THESE PAYMENTS WHICH ARE ESSENTIALLY IN THE NATURE OF 'SALARY'. 2. ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY U/S 271C OF THE I T ACT LEVIED IN RESPECT OF PAYMENTS TO DOCTORS DRAWING FIXED PLUS VARIABLE PAY WITH WRITTEN CONTRACT WITHOUT APPRECIATING THE FACT THAT THE 2 ITA NO. 1926/PN/2013, GRANT MEDICAL FOUNDATION, PUNE ASSESSEE WITHO UT REASONABLE CAUSE FAILED TO DEDUCT TAX U/S 192 OF THE I T ACT, 1961 ON THESE PAYMENTS WHICH ARE ESSENTIALLY IN THE NATURE OF 'SALARY'. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY U/S 271C OF THE I T ACT IN RESPECT OF LABORATORY FEES PAYMENT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WITHOUT REASONABLE CAUSE FAILED TO DEDUCT TAX U/S 194J OF THE I T ACT, 1961 ON THESE PAYMENTS WHICH ARE ESSENTIALLY IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES'. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY OR ALL THE GROUNDS OF APPEAL OR ADD A NEW GROUND WHICH MAY BE NECESSARY AT THE TIME OF THE HEARING OF THE CASE OR THEREAFTER. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESS EE IS A PUBLIC CHARITABLE TRUST AND RUNS A HOSPITAL UNDER THE NAME AND STYLE AS RUBY HALL CLINIC IN PUNE. THERE WAS A SURVEY ACTION IN THE HOSPITAL PREMISES OF THE ASSESSEE AND TDS VERIFICATION WAS CARRIED OUT ON 09 - 09 - 2008 AND 10 - 09 - 2008. DURING THE C OURSE OF VERIFICATION, CERTAIN DISCREPANCIES WERE NOTICED BY THE TDS OFFICERS AND ACCORDINGLY, ORDER U/S. 201(1)/201(1A) OF TH E INCOME - TAX ACT DATED 29 - 06 - 2009 WAS PASSED. THE ASSESSEE CHALLENGED THOSE ORDERS BEFORE THE CIT(A) AND GOT THE PARTIAL RELIEF. THE PENALTY PROCEEDINGS WAS INITIATED U/S. 271C OF THE INCOME - TAX ACT AND THE PENALTY OF RS.1,08,13,268/ - WAS LEVIED VIDE ORDER DATED 21 - 03 - 2012 BY THE ADDL. CIT(TDS), PUNE. THE ORDER PASSED U/S. 201(1)/201(1A) OF THE ACT W AS SUBJECT MATTER OF THE FURTHE R APPEAL BEFORE THE ITAT, PUNE AND THE ASSESSEE SUCCEEDED IN GETTING THE RELIEF. IN CONSEQUENCE OF THE ORDER OF THE ITAT, PUNE THE REVISED PENALTY ORDER DATED 08 - 11 - 2012 WAS PASSED AND THE PENALTY OF RS.8,73,692/ - WAS WORKED OUT BY THE ADDL. CIT(TDS), PUN E . THE LD. CIT(A) DELETED THE PENALTY IN ENTIRETY. 3 ITA NO. 1926/PN/2013, GRANT MEDICAL FOUNDATION, PUNE 3. THE FACTS PERTAINING TO THE LEVY OF PENALTY ARE THAT DURING THE COURSE OF VERIFICATION OF RECORD S, IT WAS NOTICED THAT THE ASSESSEE DEDUCTED TAX AT SOURCE U/S. 194J OF THE INCOME - TAX ACT @ 10% ON TH E REMUNERATION PAID TO THE D OCTORS /PHYSICIANS EMPLOYED IN THE HOSPITAL TREATING THE SAME AS FEES FOR PROFESSIONAL SERVICES. IN THE OPINION OF THE TAX AUTHORITIES , THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX IN COMPLIANCE WITH SEC. 192 OF THE INCOME - TAX ACT. AS OBSERVED BY THE ASSESSING OFFICER THERE WERE FOUR CATEGORIES OF D OCTORS WORKING IN THE HOSPITAL OF THE ASSESSEE TRUST. IN RESPECT OF THE PAYMENT OF REMUNERATION PAID TO THE D OCTORS THE ASSESSEE S LIABILITY WAS FIXED U/S. 192 AND ACCORDINGLY THE DEMAN D WAS RAISED . THE ASSESSING OFFICER HAS ALSO OBSERVED IN THE PENALTY ORDER THAT THERE WAS SHORT DEDUCTION OF THE TAX IN RESPECT OF THE PAYMENTS TO THE D OCTORS DRAWING FIXED REMUNERATION AS WELL AS IN RESPECT OF THE D OCTORS DRAWING FIXED PLUS VARIABLE PAY. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT THERE WAS SHORT DEDUCTION OF TAX IN RESPECT OF LABORATORY FEES PAID. IN THE BACKGROUND OF THE ABOVE FACTS , IN THE OPINION OF THE ASSESSING OFFICER THERE WAS A DEFAULT ON THE PART OF THE ASSESSEE AND IT ATTRAC TS THE PENALTY U/S. 271C OF THE ACT. HE, ACCORDINGLY, LEVIED THE PENALTY AS STATED HERE - IN - ABOVE. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND LD. CIT(A) DELETED THE PENALTY. THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 7. I HAVE CARE FULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. IN THIS REGARD THE APPELLANT HAS SUBMITTED THAT THE QUANTUM OF NON - DEDUCTION/SHORT DEDUCTION OF TDS PERTAINS TO DOCTORS HAVING FIXED REMUNERATION AS WELL AS LABORATORY FEES. THE LEAR NED COUNSEL OF THE APPELLANT HAS ALSO SUBMITTED THAT THE DEFAULT WAS ON ACCOUNT OF TECHNICAL INTERPRETATION WITH RESPECT TO NATURE OF CONTRACT AND SERVICES CARRIED OUT BY THE DOCTORS IN RESPECT OF FIRST CATEGORY OF DOCTORS WHEREIN FIXED REMUNERATION WAS GI VEN TO THE DOCTORS, THE APPELLANT HAS ITSELF ACCEPTED ITS DEFAULT AND HAS PAID 4 ITA NO. 1926/PN/2013, GRANT MEDICAL FOUNDATION, PUNE THE TAXES. IN RESPECT OF OTHER CATEGORY OF DOCTORS, THE APPELLANT HAS BEEN ALLOWED RELIEF AT CIT(A) AS WELL AS ITAT LEVEL. THEREFORE, THERE WAS REASONABLE CAUSE FOR NON - DEDUCTI ON OF TDS ON ACCOUNT OF DIFFERENT PERCEPTION IN RESPECT OF INTERPRETATION OF TERMS OF EMPLOYMENT AS WELL AS REMUNERATION GRANTED TO VARIOUS DOCTORS. THE APPELLANT WAS UNDER SINCERE BELIEF THAT THE DEDUCTION IS TO BE REQUIRED U/S. 194J OF INCOME - TAX ACT AND ACCORDINGLY, IT WAS COMPLYING WITH THE PROVISIONS OF TDS SINCERELY. FURTHER, IT IS ALSO SUBMITTED THAT IN RESPECT OF LABORATORY FEES TOO, THE APPELLANT WAS DEDUCTING TDS U/S. 194C OF INCOME - TAX ACT WHILE THE DEPARTMENT'S VIEW IS THAT THE SAME IS TO BE DON E U/S. 194J OF INCOME - TAX ACT. IN THIS REGARD TOO, THE APPELLANT WAS UNDER SINCERE BELIEF THAT THE SAME IS COVERED BY THE TERMS OF CONTRACT AND ACCORDINGLY, THE APPELLANT TRUST WAS COMPLYING WITH PROVISIONS OF TDS AS PER ITS PERCEPTION. THE APPELLANT HAS A CCEPTED THE VIEW TAKEN BY THE DEPARTMENT AND HAS NOT PRESSED THE GROUND BEFORE THE ITAT, PUNE. THEREFORE, THE LEARNED COUNSEL OF THE APPELLANT SUBMITTED THAT THE APPELLANT'S CASE WAS FULLY COVERED BY THE PROVISIONS OF SEC. 273B OF INCOME - TAX ACT AS THERE W AS REASONABLE CAUSE FOR SUCH DEFAULT WHICH IS BASICALLY TECHNICAL IN NATURE AS COMPLIANCE TO THE TDS PROVISIONS WAS MADE BY THE APPELLANT TRUST ACCORDING TO ITS PERCEPTION AS WELL AS INTERPRETATION OF THE PROVISIONS OF INCOME - TAX ACT. AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLANT, I FIND THAT THERE IS SUFFICIENT FORCE IN THE ARGUMENT OF THE APPELLANT AND IT IS SEEN THAT THE APPELLANT HAS COMPLIED WITH THE PROVISIONS OF TDS AS PER ITS OWN UNDERSTANDING OF PROVISIONS OF TDS AND THEREFORE, CONSIDERING THE COMPLIANCE OF THE APPELLANT TRUST, IT IS HELD THAT THERE WAS REASONABLE CAUSE FOR SHORT DEDUCTIONS OF TDS. ACCORDINGLY, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT ADDL. COMMISSIONER OF INCOME - TAX (TDS), PUNE WAS NOT JUSTIFIED IN LEVYI NG PENALTY U/S. 271C OF INCOME - TAX ACT AMOUNTING TO RS.8,73,692/ - . ACCORDINGLY, HE IS DIRECTED TO DELETE THE PENALTY. THUS, THE GROUND IS ALLOWED. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5 ITA NO. 1926/PN/2013, GRANT MEDICAL FOUNDATION, PUNE 4. WE HAVE HEARD THE PARTIES AND PERUSED THE IMPUGNED ORD ER OF LD. CIT(A) AS WELL AS PENALTY ORDER. THE LD. COUNSEL SUBMITS THAT IT IS ONLY THE QUESTION OF INTERPRETATION OF THE TERMS OF CONTRACT VIS - - VIS PROVISIONS OF LAW AND THERE WAS NO DELIBERATE ACT ON THE PART OF THE ASSESSEE TO AVOID THE LEGAL DUTY CAST UPON IT. HE SUBMITS THAT EVEN IF THE ASSESSEE HAS ACCEPTED THAT TAX IS TO BE DEDUCTED U/S. 192 BUT THE FACT REMAIN THAT IT IS THE ISSUE OF INTERPRETATION OF LAW AS ADMITTEDLY THE PROFESSIONAL SERVICES OF THE DOCTORS ARE USED. HE REFERRED TO SEC. 273B OF THE ACT AND SUBMITS THAT THERE WAS A REASONABLE CAUSE CONSIDERING THE FACT OF THIS CASE FOR SHORT DEDUCTION OF TAX . HE ALSO SUBMITS THAT WHATEVER TAX WAS DEDUCTED BY THE ASSESSEE, SAME WAS DEPOSITED IN GOVT. ACCOUNT AS PER PROVISIONS OF LAW. HE PLEADED FOR CONFIRMING THE PENALTY AND RELIED ON THE FOLLOWING DECISIONS: I. CIT VS. MUNICIPAL CORPORATION 365 ITR 254. II. CIT VS. APOLLO HOSPITALS INTERNATIONAL LTD. 359 ITR 78 (GUJ). III. DEDICATED HEALTH CARE SERVICES TPA (INDIA) PVT. LTD. AND OTHERS VS. ACIT AND OTHERS 3 24 ITR 345 (BOM). WE HAVE ALSO HEARD THE LD. DR. 5. THE ISSUE I N CONTROVERSY I S A VERY NARROW COMPASS. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SEC. 271C OF THE INCOME - TAX ACT ON THE SPECIFIC REASON THAT IN RESPECT OF THE DOCTORS RENDERING THEIR SERVICES IN THE HOSPITAL OF THE ASSESSEE TRUST , T HE REMUNERATION PAID TO THEM IS COVERED BY SEC. 192 WHEN THE ASSESSEE HAD DEDUCTED THE TAX AS PER THE PROVISIONS OF SEC. 194J OF THE ACT, TREATING SAID PAYMENT AS PROFESSIONAL FEES . IN RESPECT OF LABORATOR Y FEES , THE ASSESSEE DEDUCTED THE TAX U/S. 192 BUT IN THE OPINION OF THE ASSESSING OFFICER THE ASSESSEE SHOULD HAVE DEDUCTED TAX U/S. 194J. IT IS TRUE THAT THE ASSESSEE HAS ACCEPTED AND MADE THE PAYMENT TOWARDS SHORT DEDUCTION OF TAX AND ALSO PAID THE 6 ITA NO. 1926/PN/2013, GRANT MEDICAL FOUNDATION, PUNE INT EREST . IN THE PENALTY PROCEEDINGS THE ASSESSEE CAN TAKE STAND THAT THE PAYMENT MADE TO THE DOCTORS PARTAKE THE CHARACTER OF THE PROFESSION FEES BUT WE NEED NOT GO INTO THE CONTROVERSY WHETHER THE PAYMENT MADE TO THE DOCTORS RENDERING THEIR SERVICES IN THE HOSPITAL OF THE ASSESSEE PARTAKE THE NATURE OF THE PROFESSION FEES OR REMUNERATION . WE CONFINE TO EXAMINE THE LIMITED ASPECT WHETHER THERE WAS A REASONABLE CAUSE U/S. 273B OF THE ACT AND HENCE, THERE WAS NO NEED TO LEVY PENALTY U/S. 273C OF THE ACT . AS PER THE EXPLANATION OF THE ASSESSEE , IN OUR OPINION THE ORDER OF THE LD. CIT(A) HAS TO BE CONFIRMED FOR THE REASON THAT ADMITTEDLY IT IS NOT A CASE OF NON - DEDUCTION OF THE TAX OR AFTER DEDUCTING OR COLLECTING THE TAX , NOT DEPOSITING THE SAME WITH THE GOVT. AS PER THE PLEA OF THE ASSESSEE , IT IS MERELY THE PROCESS OF INTERPRETATION WHICH WAS ADOPTED IN RESPECT OF BOTH THE PAYMENTS OTHERWISE WHATEVER TAX WAS COLLECTED WAS PAID TO THE GOVT. ACCOUNT. 6. IN THE CASE OF HINDUSTAN STEEL LIMITED VS. STATE OF OR ISSA 83 ITR 26 (SC) IT IS HELD AS UNDER: AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI - CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STA TUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEV A NT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN RE FUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 7. FOR THE ABOVE REASON , WE ARE OF THE OPINION THAT THERE WAS A REASONABLE CAUSE FOR THE ASSESSEE FOR SHORT DEDUCTION OF THE TAX WITHIN 7 ITA NO. 1926/PN/2013, GRANT MEDICAL FOUNDATION, PUNE THE MEANING OF SEC. 273B OF THE ACT. WE, ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT(A) AND GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 8. IN T HE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 - 0 1 - 20 1 5 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 29 TH JANUARY, 2015 RK/ PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V, PUNE 4 THE CIT(TDS), PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL , PUNE