Deputy Commissioner of Income-tax, Bangalore V. M/s. Teleradiology Solutions P. Ltd., Bangalore

ITA 2237/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7607 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 12; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATH , ACCOUNTANT MEMBER I.T . A. NO S . 2237 TO 2241 /BANG/20 16 (ASSESSMENT YEAR : 20 08 - 09 TO 2012 - 13) DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1), BANGALORE. . APPELLANT. VS. M/S. TELERADIOLOGY SOLUTIONS PVT. LTD., NO.7G1, VISHWESHWARIAH INDL. AREA, ITPL ROAD, OPP. GRAPHITE INDIA, BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI G.R. REDDY, CIT (DR) (ITAT) - 1, BENGALURU. R E SPONDENT BY : NONE. DATE OF H EARING : 07.09.2017. DATE OF P RONOUNCEMENT : 08 .09 .201 7 . O R D E R PER BENCH : THESE ARE FIVE APPEALS BY THE REVENUE, OUT OF WHICH 4 ARE DIRECTED AGAINST THE COMPOSITE ORDER DT.30.09.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) - 7 , BANGALORE FOR THE ASSESSMENT YE ARS 2008 - 09 TO 2011 - 12 2 IT A NO S . 2237 TO 2241 /BANG/201 6 AND 1 APPEAL IS DIRECTED AGAINST THE ORDER DT.20.10.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) - 7, BANGALORE FOR THE ASSESSMENT YEAR 20 12 - 13. 2. AT THE TIME OF HEARING NOBODY APPEARED ON BEHALF OF THE ASSESSEE - RESPONDENT DESPIT E THE SERVICE OF NOTICE THROUGH RPAD. IT TRANSPIRES FROM THE RECORD THAT NONE HAS APPEARED ON BEHALF OF THE ASSESSEE ON THE EARLIER TWO OCCASIONS. ACCORDINGLY, WE PROPOSE TO HEAR AND DISPOSE OF THESE APPEALS EX - PARTE. 3. THE REVENUE HAS RAISED 1 ST C OMMON GROUND IN ALL THESE APPEALS AS UNDER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (APPEALS) WAS JUSTIFIED IN LAW IN HOLDING THAT THE ASSESSEE COMPANY IS ENGAGED IN THE ACTIVITY OF MEDICAL TRANSCRIPTION AND THEREFORE EX EMPT UNDER SECTION 10A OF THE IT ACT, IGNORING THE FACT THAT THE ASSESSEE COMPANY IS NOT CONVERTING INFORMATION INTO TEXT BUT INVOLVED IN GIVING MEDICAL EXPERTISE ADVICE TO ITS FOREIGN COUNTERPARTS WITH THE HELP OF HIRED DOCTORS AND TECHNICIANS. 4 . WE HAVE HEARD THE LEARNED D.R. AND CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE CLAIMED THAT IT ENGAGED IN THE BUSINESS OF IT ENABLED HEALTHCARE SERVICES. THE ASSESSEE HAS EXPLAINED ITS NATURE OF ACTIVITIES DURING THE ASSESSMENT PROC EEDINGS WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN PARA 6 AS UNDER : - 3 IT A NO S . 2237 TO 2241 /BANG/201 6 1. THE RELEVANT SCAN OF HUMAN BODY IS DONE AT THE HOSPITALS IN USA. 2. THE SCAN IMAGES ARE ELECTRONICALLY, USING INTERNET, IS TRANSMITTED TO THE COMPANY S FACILITY AT B ANGALORE. 3. THE COMPANY HAS HIRED MEDICAL DOCTORS, SPECIALIZING IN RADIOLOGY, TO STUDY THE SCANS AND GIVE THEIR FINDINGS. 4. THE RADIOLOGIST REPORT OF FINDINGS AND SCAN IS ELECTRONICALLY TRANSMITTED BACK TO THE HOSPITALS IN USA. 5. IN FEW CASES, THE SCANS STORED IN THE HOSPITAL SERVER ARE ACCESSED AND FINDINGS REPORTED. 6. THE COMPANY EARNS INCOME FROM REPORTING ON THESE SCANS. SECTION 10A OF THE IT ACT, 1961 PROVIDES EXEMPTION TO EXPORT OF COMPUTERS SOFTWARE. COMPUTERS SOFTWARE INCLUDES (AS NOTI FIED BY CENTRAL BOARD OF DIRECT TAXES), THE FOLLOWING IT ENABLED SERVICES : 1. BACK OFFICE OPERATIONS. 2. DATA PROCESSING. 3. MEDICAL TRANSCRIPTION. THE ACTIVITIES CARRIED OUT BY THE COMPANY WOULD FALL UNDER ALL THE ABOVE 3 CATEGORIES. IN VIEW OF THE ABOVE, THE C OMPANY IS ENTITLED TO EXEMPTION UNDER IT ACT, 1961. THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') ON THE GROUND THAT THE 4 IT A NO S . 2237 TO 2241 /BANG/201 6 ACTIVITY UNDERTAKEN BY THE ASSESSEE DOES NOT FALL ANY OF THE 3 NOTIFIED SERVICES UNDER SECTION 10A OF THE IT ACT. 5. ON APPEAL, THE CIT (APPEALS) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE IS ENGAGED IN PROVIDING SERVICE TO THE FOREIGN COUNTER PART BEING RECEIVING DATA IN THE FORM OF IMAGES/SCAN OF PATIENTS WHICH IS STORED AND THEN SUITABLE SUGGESTIONS ARE FORWARDED KEEPING IN VIEW OF THE NATURE OF THE AILMENT APPEARING IN THE IMAGES SENT BY THE FOREIGN COUNTER PART. WE FIND THAT THE DETAILS AND THE NATURE OF ACTIVITY AS DISCUSSED BY THE CIT (APPEALS) ARE NOT MATCHING WITH THE EXPLANATION FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. AS PER THE EXPLANATION FURNISHED BY THE ASSESSEE, THE ASSESSEE IS ONLY AN INTERMEDIARY OF RECEIVING THE REPORTS/IMAGES OF THE PATIENTS FROM US A AND GETTING THE OPINIONS OF THE DOCTORS AND THEN THE SAID OPINION IS BEING SENT BACK TO THE OVERSEAS COUNTER PART. THEREFORE THE ASSESSEE ITSELF IS NOT GIVING ANY OPINION BUT IT IS ONLY AN INTERFERENCE BETWEEN THE FOREIGN COUNTER PART AND DOCTORS AND OT HER MEDICAL SPECIALISTS TO EXAMINE THE REPORT AND SCANS AND GIVE THEIR OPINIONS. FURTHER WE FIND THAT THE NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEALS) HAS RECORDED 5 IT A NO S . 2237 TO 2241 /BANG/201 6 ANY FACT TO SHOW THAT THE ASSESSEE IS A EOU ESTABLISHED IN FREE TRADE ZONE OR EXPORT PROCESSING ZONE OR SEZ AS THE CASE MAY BE FOR CLAIMING THE DEDUCTION UNDER SECTION 10A OF THE ACT. ACCORDINGLY WHEN THERE IS A DISCREPANCY IN THE FACTS RECORDED BY THE CIT (APPEALS) AND THE ASSESSING OFFICER AS WELL AS THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE IS COMPLYING WITH THE PRE - REQUIREMENT OF AN UNDERTAKING IN FREE TRADE ZONE/ECONOMIC PROCESSING ZONE/SEZ FOR CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT THEN IN THE ABSENCE OF RELEVANT RECORD AND REQUISITE EXPLANATION ON THE PART OF TH E ASSESSEE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR FURTHER EXAMINATION AND VERIFICATION OF THE RELEVANT FACTS AS WELL AS THE NATURE OF ACTIVITIES CARRIED OUT BY THE ASSESSEE. NEEDLESS TO SAY THE ASSESSEE BE AFFORDED AN OPPORTUNI TY OF HEARING BEFORE DECIDING THE ISSUE. 6. THERE IS ANOTHER COMMON ISSUE FOR THE ASSESSMENT YEARS 2010 - 11 TO 2012 - 13 WHICH READS AS UNDER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (APPEALS) WAS JUSTIFIED IN LAW IN HO LDING THAT TDS PROVISIONS UNDER SECTION 194C/194J ARE NOT APPLICABLE ON THE PAYMENTS MADE TOWARDS INTERNET/VOIP CHARGES AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. 6 IT A NO S . 2237 TO 2241 /BANG/201 6 7. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CLA IMED THE COMMUNICATION EXPENSES IN RESPECT OF INTERNET / VOIP CHARGES ON WHICH THE TDS HAS NOT BEEN MADE BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE EXPENSES ON ACCOUNT OF COMMUNICATION EXPENSES BY INVOKING THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT. 8. ON APPEAL, THE CIT (APPEALS) HAS CONSIDERED THIS ISSUE AND DELETED THE A DDITION IN PARAS 9.2 & 9.3 OF THE COMMON ORDER AS UNDER : 7 IT A NO S . 2237 TO 2241 /BANG/201 6 9. THE LD. CIT DR HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER HOWEVER , NOTHING HA S BEEN BROUGHT ON RECORD TO SHOW THAT THESE EXPENSES ARE INCURRED IN PURSUANT TO A CONTRACT OR UNDER A CONTRACT. SINCE THESE PAYMENTS ARE MADE TO THE SERVICE PROVIDER AND THERE IS NO SPECIFIC CONTRACT BETWEEN THE ASSESSEE AND THE SERVICE PROVIDER OF INTER NET SERVICES THEREFORE IN VIEW OF VARIOUS DECISIONS AS RELIED UPON BY THE CIT (APPEALS) WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER QUA THIS ISSUE. 10. IN THE RESULT, THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON THE 8TH DAY OF SEPT., 201 7 . SD/ - ( G. MANJUNATH ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER BANGALORE , DT. 08 .09.2017. *REDDY GP 8 IT A NO S . 2237 TO 2241 /BANG/201 6 COPY TO : 1 APPELLANT 4 CIT(A) 2 RESPONDENT 5 DR. ITAT, BANGALORE 3 CIT 6 GUARD FILE SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL BANGALORE.