Siddhi Vinayak Hospital, Ahmedabad V. The Jt.CIT.,TDS Range, Ahmedabad

ITA 2017/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6439 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 02/06/2011 DRAFTED ON: 06 /06/2011 1. ITA NO.2017/AHD/2009 A.Y. 2007-08 2. ITA NO.2018/AHD/2009 A.Y. 2008-09 SIDDHI VINAYAK HOSPITAL NR.BALVATIKA, KANKARIA AHMEDABAD VS. THE JT. CIT TDS RANGE AHMEDABAD PAN/GIR NO. : AHMS 09922D ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.N.DIVATIA RESPONDENT BY: SHRI B.L. YADAV, SR. LEARNED DEPARTMENTAL REPRESENTATIVE O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-X, AHMEDABAD DA TED 09/03/2009 PASSED FOR ASSESSMENT YEARS 2007-08 & 2008-09 BY A SINGLE ORDER. FOR BOTH THE YEARS, THE COMMON GROUND HAS BEEN RAIS ED; REPRODUCED BELOW: 1. THAT THE BOTH THE AUTHORITIES BELOW ERRED IN LE VYING PENALTY U/S.271C OF I.T. ACT ON FACTS OF THE CASE. THE TO TAL PENALTY LEVIED IS RS.5,99,958/- FOR ASSESSMENT YEAR 07-08 A ND RS.3,15,032/- FOR A.Y. 08-09. THAT THE SAME BE DEL ETED. ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 2 - ITA NO.2017/AHD/2009 A.Y. 2007-08 2. AS PER THE CORRESPONDING PENALTY ORDER PASSED U/ S.271-C OF THE ACT, DATED 27/06/2008 A SURVEY WAS CONDUCTED A T THE HOSPITAL SIDHI VINAYAK HOSPITAL TO VERIFY THE COMPLIANCE O F TDS PROVISIONS BY THE SAID HOSPITAL. IN RESPECT OF BOTH THE YEARS, FOLLOWING DEFAULT WAS NOTICED: SL.NO. NATURE OF PAYMENT AMOUNT PAID A.Y. 07-08 (RS.) AMOUNT PAID A.Y. 08-09 (RS.) SECTION UNDER WHICH TAX WAS DEDUCTIBLE 1. SECURITY CHARGES 3,60,529 1,26,371 194C 2. HOUSE KEEPING CHARGES 7,88,301 1,33,336 194C 3. PROFESSIONAL FEES TO DR.ABHAY KHANDEKAR 9,80,995 8,29,940 194J 4. PROFESSIONAL FEES TO DR.GARGI KHANDEKAR 1,74,565 1,03,545 194J 5. PROF.FEE TO ALPHABEN PATEL 2,20,000 - 194J 5. PROF. FEE TO VITAL CARE 58,29,616 22,12,334 194J ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 3 - 6. PROF.FEES TO SIDDHI VINAYAK CENTRE 15,83,279 5,33,662 194J 7. PROF. FEES TO PARESH MEHTA 21,56,037 6,21,830 194J 8. PROF.FEE TO BHAVIN MATALIA 14,70,335 8,33,317 194J 2.1. THE ASSESSEE FIRM HAS ACCEPTED THE SAID DE FAULT AND THEREAFTER THE TDS AND INTEREST IN COMPLIANCE OF AN ORDER U/S.201 & 201(1A) OF THE ACT WAS PAID. THEREAFTER, DUE TO NON-DEDUCTION OF TAX, PENALTY PROCEEDINGS U/S.271-C WERE INVOKED. T HE ARGUMENT OF THE ASSESSEE WAS THAT THE HOSPITAL HAD ACTED ONLY A S AN AGENT, THEREFORE, DID NOT DEDUCT THE TAX. IT WAS INFORMED THAT THE HOSPITAL IS COLLECTIVELY OWNED BY DR.ABHEY AND DR.GARGI, THER EFORE, THE PAYMENT TO SELF WAS NOT SUBJECT TO TDS. IT WAS ALS O INFORMED THAT PAYMENTS WERE MADE BY THE PATIENTS INDIVIDUALLY TO A COLLECTING AGENCY, I.E. THE HOSPITAL; FOR AND ON BEHALF OF TH E CONSULTING DOCTORS. THE AO WAS NOT CONVINCED, ACCORDING TO HIM, THE ASS ESSEE BEING A FIRM IS A SEPARATE ENTITY FOR THE PURPOSE OF INCOME -TAX. IT WAS BELIEVED THAT A PAYMENT BY FIRM TO A PARTNER WAS NO T SUBJECT TO TDS. AS AGAINST THAT THE AO HAS HELD THAT THE FIRM IS A LEGAL ENTITY AND A SEPARATE PERSON U/S.2(31) OF THE IT ACT, HENCE, NO SUCH EXEMPTION IS AVAILABLE. IT WAS CONCLUDED BY THE AO THAT THERE WAS NO REASONABLE ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 4 - CAUSE WITHIN THE MEANING OF SECTION 273-B OF THE IT ACT AND, THEREFORE, TO BE PENALISED @ 100% OF THE SAID FAIL URE OF DEDUCTION OF TAX AT SOURCE. CONSEQUENTLY, PENALTY WAS LEVEIE D FOR BOTH THE YEARS. 3. BEFORE LD.CIT(A) THOSE ARGUMENTS WERE REITERATED AND LD.CIT(A) HAS GRANTED PART RELIEF VIDE FOLLOWING PA RAGRAPH:- 5.5. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE LD. A.R. CAREFULLY. THERE IS N DISPUTE ABO UT THE FACT THAT THE PROFESSIONAL FEES AND OTHER AMOUNTS UNDER REFERENCE WERE PAID BY THE APPELLANT TO THE DOCTORS AND OTHER PERSONS WITHOUT DEDUCTION OF TAX IN VIOLATION OF THE PROVIS IONS OF SEC. 194J AND 194C OF THE ACT RESPECTIVELY. AS REGARDS PAYMENTS TO THE DOCTORS WHO ARE PARTNERS OF THE FIRM ALSO, T HE ARGUMENT OF THE LD. A.R. CAN BE APPRECIATED IN THE SENSE THA T THE PAYMENT OF INTEREST TO PARTNERS BY A FIRM IS EXEMPT ED FROM FOR DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SEC. 194A(2)(IV) OF THE ACT. THEREFORE, ON THE SAME ANA LOGY, THE APPELLANT MIGHT HAVE ENTERTAINED A BELIEF THAT THE PROFESSIONAL FEES PAID TO ITS PARTNERS WAS ALSO NOT HIT BY THE P ROVISIONS OF SEC. 194J OF THE ACT. UNDER THESE CIRCUMSTANCES, I AGREE WITH THE LD. A.R. THAT THERE WAS A REASONABLE CAUSE FOR THE APPELLANT FOR NOT TO COMPLY WITH THE PROVISIONS OF SEC. 194J OF THE ACT IN RESPECT OF THE PROFESSIONAL FEES PAID TO THE PARTNERS BY THE APPELLANT. IN VIEW OF THIS, I DO NOT FIND A NY JUSTIFICATION FOR LEVY OF PENALTY U/S.271C ON SUCH PAYMENTS. THE REFORE, THE A.O. IS DIRECTED TO DELETE THE PENALTY IN RESPECT O F SUCH AMOUNT. 5.6. AS REGARDS PAYMENTS TO OTHERS FOR WHICH DEDUCT ION WAS REQUIRED TO BE MADE U/S.194C OF THE ACT THE LD. A.R . HAS NOT ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 5 - GIVEN ANY PLAUSIBLE REASON FOR VIOLATION OF THE PRO VISIONS BY THE APPELLANT. IN VIEW OF THIS, THE LEVY OF PENALT Y U/S.271C IN RESPECT OF SUCH AMOUNT IS HEREBY CONFIRMED. 4. ON BEHALF OF THE APPELLANT, MR. S.N. DIVATIA AP PEARED AND ARGUED THAT THE ASSESSEE WAS UNDER A BONA FIDE BELI EF THAT THE PAYMENT RECEIVED FROM THE PATIENTS WAS IN THE CAPAC ITY OF AN AGENT WHICH WAS SHARED BETWEEN THE HOSPITAL AND THE DOCTO R, THEREFORE, THE FEES PAID TO THE DOCTOR WAS NOT SUBJECT TO DEDUCTIO N OF TAX AT SOURCE. HE HAS CITED A DECISION OF CIT VS. ELI LILLY & CO.( INDIA)(PV) LTD. & ORS. REPORTED AT (2009)312 ITR 225 (SC) FOR THE PRO POSITION THAT IF THERE WAS A REASONABLE CAUSE, THEN THE LEVY OF PENA LTY MUST NOT BE HELD AS MANDATORY. HE HAS EMPHASISED THAT IN TERMS OF THE PROVISIONS OF SECTION 273-B THERE WAS A REASONABLE CAUSE FOR NON- DEDUCTION OF TDS AND UNDER THAT BONA FIDE BELIEF, NO TDS WAS DEDUCTED. 5. FROM THE SIDE OF THE REVENUE LD.DR MR. B.L. YADA V, APPEARED AND INFORMED THAT THE HOSPITAL HAS RAISED BILLS ON THE PATIENTS AND AFTER COLLECTION OF THE PAYMENTS, THE ASSESSEE HAS PAID FEES FOR PROFESSIONAL SERVICES TO THE DOCTORS, THER EFORE, THE PROVISIONS OF SECTION 194-J OF THE ACT WERE CLEARLY ATTRACTED. IN SUPPORT OF HIS ARGUMENT, LD.DR HAS PLACED STRONG RE LIANCE ON PARAGRAPH NO.5.8 OF LD.CIT(A) TO DEMONSTRATE THAT T HE LD.CIT(A) HAS EXAMINED THE LEDGER ACCOUNT OF THE ASSESSEE AND THEREAFTER GIVEN ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 6 - A CATEGORICAL FINDING THAT THERE WAS NO REASONABLE CAUSE FOR NOT COMPLYING WITH THE TDS PROVISIONS. 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE HAVE ALSO PERUSED THE ORDERS OF AUTHORITIES BELOW. AS F AR AS THE QUESTION OF PENALTY U/S.271-C IS CONCERNED, IF ANY PERSON FA ILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED UNDER THE STATUTE, THEN SUCH PERSON SHALL BE LIABLE TO PAY BY WAY OF PENALTY A S UM EQUAL TO THE AMOUNT OF TAX WHICH WAS NOT DEDUCTED. THE STATUTE PRESCRIBES THAT ANY PERSON, NOT BEING ANY INDIVIDUAL OR HUF, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF FEES FOR PR OFESSIONAL SERVICES, OR FEES FOR TECHNICAL SERVICES SHALL AT THE TIME OF CREDIT OR AT THE TIME OF PAYMENT DEDUCT AN AMOUNT AS PRESC RIBED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE -FIRM HAD PAID FEES FOR PROFESSIONAL SERVICES. THE HOSPITAL, THE AS SESSEE-FIRM, HAS COLLECTED MEDICAL FEES FROM THE PATIENTS THROUGH A CONSOLIDATED BILL, A FACTUAL FINDING GIVEN BY THE REVENUE AUTHORITIES, AND THEREAFTER, PAID PROFESSIONAL FEES TO THE DOCTORS IN LIEU OF ME DICAL SERVICES PROVIDED BY THEM. IT COULD BE POSSIBLE THAT IN RES PECT OF THE PAYMENT TO PARTNERS THERE WAS SOME DOUBT WHETHER T O DEDUCT THE TAX AT SOURCE BEING THE HOSPITAL RUN BY THOSE DOCTORS A ND IT WAS A PAYMENT TO THE OWNERS, THEREFORE, LD.CIT(A) HAS THO UGHT IT JUSTIFIABLE NOT TO IMPOSE THE PENALTY AND GRANTED R ELIEF BY TAKING THE SHELTER OF THE PROVISIONS OF SECTION 273-B OF THE I T ACT. WE FIND NO ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 7 - FALLACY IN THE SAID DECISION OF LD.CIT(A). HOWEVER , IN RESPECT OF REST OF THE PAYMENTS; EITHER PAYMENT OF FEES TO DOC TOR, OR PAYMENT OF SECURITY CHARGES OR HOUSE-KEEPING CHARGES, THERE WA S NO ELEMENT OF REASONABLE OR SUFFICIENT CAUSE FOR NON-DEDUCTION OF TAX. THE HOSPITAL BEING GENERALLY ASSISTED BY PROFESSIONALS IN TAX MATTER, HENCE, THERE COULD NOT BE PLAUSIBLE REASON FOR NON- DEDUCTION OF TAX AT SOURCE. AS FAR AS THE DECISION OF HONBLE SUPRE ME COURT CITED ABOVE, NAMELY, ELI LILLY & CO. (INDIA) (PVT) LTD.[S UPRA], THE MANDATE WAS VERY CLEAR THAT IF THE NON-DEDUCTION OF TDS IS ON ACCOUNT OF A CONTROVERTIAL ADDITION, THEN THE LEVY OF PENALTY SHOULD NOT BE HELD AS MANDATORY. IN THAT CASE, THE PENA LTY WAS DELETED BECAUSE IT WAS FOUND THAT THE ASSESSEE WAS UNDER GE NUINE AND BONA FIDE BELIEF THAT THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE. ON THE OTHER HAND, IN THE PRESENT CASE, THE ASSESSEE H AS FAILED TO PROVE THE EXISTENCE OF ANY SUCH BONA FIDE BELIEF. WE T HEREFORE AFFIRM THE PART RELIEF GRANTED BY THE LD.CIT(A) AND DISMISS TH E GROUND FOR BOTH THE YEARS. 7. IN THE RESULT, APPEALS OF THE ASSESSEE FOR BOTH THE YEARS ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 17 TH JUNE, 2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 17/ 06 /2011 ITA NOS.2017 & 2018/AHD/2009 SIDDHIVINAYAK HOSPITAL VS. JT.CIT ASST.YEARS 2007-08 & 2008-09 - 8 - T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-X, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..02/06/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06/06/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 17/6/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/6/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER