DR. SADIWALAS CLINIC, MUMBAI V. ITO 11(30(3), MUMBAI

ITA 2484/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 10-08-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: JITENDRA SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH BEFORE SHRI D.MANMOHAN, VICE PRESIDENT & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.2484/MUM/2009 - A.Y 2005-06 DR. SADIWALAS CLINIC, A/4-5, MAJITHIA APARTMENT, S.V.ROAD, IRLA, VILE PARLE (W), MUMBAI 400 056 PAN: AAAFD 0246 M VS. INCOME TAX OFFICER 11 (30)(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI K.GOPAL & JITENDRA SINGH. RESPONDENT BY : SHRI S.K.SINGH. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS: 1. THE LD. CIT[A] ERRED IN CONFIRMING THE DISALLOWANCE OF ` `` ` .38,37,431/-, BEING PAYMENTS MADE TO VISITING DOCTO RS, MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACTS A ND CIRCUMSTANCES. 2. THE LD. CIT[A] FAILED TO APPRECIATE THAT THE PAYMEN TS MADE BY THE APPELLANT WERE IN THE NATURE OF DISBURSEMENT OF FEE S COLLECTED FROM THE PATIENTS ON BEHALF OF THE VISITING DOCTORS. HEN CE, THE PROVISION OF SECTION 40(A)(IA) ARE NOT ATTRACTED. 3. THE CIT[A] FAILED TO APPRECIATE THAT DURING THE COU RSE OF ASSESSMENT THE APPELLANT HAD FURNISHED THE CONFIRMATION FROM A LL THE DOCTORS WHICH PROVIDES THE P.A. NO. ADDRESSES ETC. OF ALL T HE DOCTORS. THUS, THE DISALLOWANCE OF ` `` ` .38,37,431/- IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE IS RUNNING A NURSING HOME AND POLYCLINIC. THE REFERRAL AND CONSULTING DOCTORS DO THE CONSULTANCY WORK IN THE NURSING HOME AT THE ALTERNATE TIMING AND SUCH REFERRAL AND/OR CONSULTING DOCTORS HAVE PAID RENT FOR UTILIZING THE POLICLINIC. THE ASSESSEE HAD SHOWN TO TAL PROFESSIONAL 2 RECEIPTS FROM ROOM RENT, OPERATION THEATER CHARGES AND PROFESSIONAL CHARGES AT ` `` ` .50,88,188/-. THESE CHARGES WERE RECEIVED FROM TOTA L PATIENTS AS PER THE PATIENT REGISTER MAINTAINED ACC ORDING TO RULE 5(F) OF I.T.RULES. A SURVEY WAS CONDUCTED IN THE PREMISES O F THE ASSESSEE ON 5-1-2006 AND IT WAS NOTED THAT TOTAL NUMBER OF PATI ENTS WAS 823. A PERUSAL OF THE SAME SHOWED THAT MAJORITY OF THE CAS ES WERE OPERATED BY DR. AMOL K. SADIWALA AND 201 OTHER PATIENTS WERE OPERATED BY 20 OTHER DOCTORS WHOSE NAMES HAVE BEEN GIVEN IN THE AS SESSMENT ORDER. DURING ASSESSMENT PROCEEDINGS IT WAS NOTED THAT THE ASSESSEE HAD GROSS PROFESSIONAL RECEIPTS OF ` `` ` .97,08,385/- AND PAYMENT OF ` `` ` .38,37,431/- WAS MADE TO CONSULTING DOCTORS. A QUER Y WAS RAISED AS TO WHY THE SUM OF ` `` ` .38,37,431/- SHOULD NOT BE DISALLOWED AS NO TDS HAS BEEN DEDUCTED AGAINST THE SAME. THE ASSESSEE RE PLIED VIDE LETTER DATED 18-12-2007 AS UNDER: AS ALREADY STATED IN OUR LETTER DATED 9-3-2006 THA T THE VISITING DOCTOR COLLECTED PAYMENTS DIRECTLY FROM THE PATIENTS AND H ENCE SECTION 40(A)(IA) OF THE I.T.ACT IS NOT APPLICABLE FOR A.Y 2005-06 TO TH E ASSESSEE. HOWEVER, TO AVOID THE ISSUE THE A HAS STARTED DEDUCTING TDS A ND PAYING TO THE GOVT. TREASURY FROM A.Y 2006-07 FOR PAYMENTS MADE TO THE VISITING DOCTORS. THE ABOVE SUBMISSIONS WERE CONSIDERED BY THE AO AND IT WAS ALSO NOTED THAT THE OTHER DOCTORS HAVE FILED CONFIRMATIO NS THAT ALL OF THEM HAVE RECEIVED A SUM OF ` `` ` .38,37,431/- DURING THE ACCOUNTING PERIOD 2004-05 RELEVANT TO THE A.Y 2005-06. HOWEVER, AO WA S OF THE VIEW THAT FROM THE CONFIRMATIONS AS WELL A\S DEPOSITIONS MADE AT THE TIME OF SURVEY, IT BECAME CLEAR THAT NO TAX HAS BEEN DEDUCT ED ON THESE 3 PAYMENTS. IN THIS REGARDS AO HAS REPRODUCED ANSWER TO QUESTION NO.2 OF THE SURVEY STATEMENT RECORDED ON 5-1-2006 WHICH READS AS UNDER: Q.NO.2. AS STATED DO YOU WANT TO SAY THAT THE P AYMENTS MADE TO DOCTORS FROM GROSS RECEIPTS COLLECTION, IF SO CAN YOU GIVE ME THE DETAILS OF PAYMENTS MADE TO THE DOCTORS BEFORE SHOWING GROS S COLLECTION IN THE BOOKS OF ACCOUNTS? ANS: I AM SHOWING THE PAYMENT MADE TO THE DOCTORS D IRECTLY UNDER THE HEAD PROFESSIONAL CHARGES WITHOUT DEDUCTING TDS. TH E ENTIRE PAYMENTS MADE THROUGH CHEQUE. IN THIS BACKGROUND AO WAS OF THE VIEW THAT TDS WAS REQUIRED TO BE DEDUCTED U/S.40(A)(IA) AND SINCE NO TAX WAS DEDUCTE D, THEREFORE, THE SUM OF KRLS.38,37,431/- WAS DISALLOWED. 3. BEFORE THE CIT[A] IT WAS MAINLY SUBMITTED THAT T HOUGH A COMPOSITE BILL TO THE PATIENT WAS RAISED AND PROFES SIONAL CHARGES OF THE OUTSIDE DOCTORS WERE PAID TO THEM, THUS, THE ASSESS EE NEVER OBTAINED ANY PROFESSIONAL OR MEDICAL SERVICES FROM THE OUTSI DE VISITING DOCTORS. THE LD. CIT[A] AFTER CONSIDERING THE SUBMISSIONS HA S ADJUDICATED THE ISSUE VIDE PARA 3.2 WHICH READS AS UNDER: 3.2 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIALS ON RECORD. THE AO HAS BROUGHT ON RECORD FACTS EMANATING FROM T HE SURVEY OPERATION AND HAS REPRODUCED THE RELEVANT PORTIONS OF THE STATEME NT MADE BY THE PARTNER. FROM THE FACTS ON RECORD, TI IS CLEAR THAT THE CASE WAS COVERED WITHIN THE MEANING OF SEC.40(A)(IA). IT IS ALSO BORNE OUT BY T HE APPELLANTS OWN ACTION W.E.F. ASST. YR. 2006-07. WHAT THE APPELLANT PROBAB LY INTENDED TO SAY WAS THAT THE NON-DEDUCTION WAS DUE TO OVER-SIGHT IN ASS T.YR. 2005-06. BE THAT AS IT MAY, THE AO HAD NO WAY BUT TO MAKE THE SAID DISA LLOWANCE. GROUND NO.1, THEREFORE, DESERVES TO BE REJECTED. 4. BEFORE US, LD. COUNSEL OF THE ASSESSEE MAINLY RE FERRED TO PAGE-8 OF THE PAPER BOOK WHICH IS A COPY OF THE PROFIT & L OSS ACCOUNT AND POINTED OUT THAT THE ASSESSEE HAD SHOWN THE GROSS R ECEIPTS AT ` `` ` .50,88,L188/- AND NO EXPENDITURE OF ` `` ` .38,37,431/- WAS CLAIMED IN THE 4 PROFIT & LOSS ACCOUNT AND, THEREFORE, NO TDS WAS RE QUIRED TO BE DEDUCTED. IN THIS REGARD HE REFERRED TO THE PROVISI ONS OF SEC.40(A)(IA) AND POINTED OUT THAT TAX IS REQUIRED TO BE DEDUCTED ONLY WHEN THE ASSESSEE OBTAINS THE SERVICE. HE ARGUED THAT UNLESS AND UNTILL A DEDUCTION IS CLAIMED, IT CANNOT BE SAID THAT THE AS SESSEE WAS REQUIRED TO DEDUCT TAX. HE SUBMITTED THAT THIS PROPOSITION W AS APPROVED BY THE TRIBUNAL IN THE CASE OF DIANA VISION VS. ACIT 121 I TD 461 (CHENNAI). 5. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE AMO UNTS WERE DEFINITELY RECEIVED BY THE ASSESSEES CLINIC AS ACC EPTED BY THE ASSESSEE DURING SURVEY PROCEEDINGS AS WELL AS ASSESSMENT PRO CEEDINGS AND, THEREFORE, PAYMENTS MADE TO THE OTHER DOCTORS WERE SUBJECT TO TDS AND IN THIS REGARD HE AGAIN INVITED OUR ATTENTION T O SEC.40(A)(IA) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. SECTION 40(A)(IA) WAS SUBSTITUTED BY FINANCE ACT (NO.2) 200 2 W.E.F. 1-4-2005 AND IT READS AS UNDER: ( IA ) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FOR P ROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RE SIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 20 0 : A PLAIN READING OF THE ABOVE CLEARLY SHOWS THAT THE SAME WOULD BE ATTRACTED ONLY WHEN SOME PROFESSIONAL SERVICE HAD B EEN OBTAINED BY THE ASSESSEE. HOWEVER, THIS ASPECT HAS NOT BEEN PRO PERLY GONE INTO BY 5 THE LOWER AUTHORITIES. IN THE COPY OF THE PROFIT & LOSS ACCOUNT FILED IN THE PAPER BOOK AT PAGE 8, GROSS RECEIPTS HAVE BEEN SHOWN AT ` `` ` .50,88,L188/- AND THERE IS NO DEDUCTION ON ACCOUNT OF PROFESSIONAL FEES PAID TO THE DOCTORS AMOUNTING TO ` `` ` .38,37,341/-. BUT AT THE SAME TIME IN THE ASSESSMENT ORDER THE AO HAS OBSERVED TH AT IT WAS ADMITTED BY THE ASSESSEE THAT THERE WERE GROSS RECEIPTS OF ` `` ` .97,08,385/- OUT OF WHICH A PAYMENT OF ` `` ` .38,37,341/- WAS MADE TO ALL THE CONSULTING DOCTORS. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FIL E OF THE AO WITH A DIRECTION TO RE-EXAMINE THE ISSUE AFTER PROVIDING A N ADEQUATE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL P URPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF NOVEMBER, 2010. SD/- SD/- (D.MANMOHAN) (T.R.SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 24 TH NOVEMBER, 2010. P/-*