Western Coalfields Ltd., Nagpur V. Assistant Commissioner of Income-Tax,(TDS) Circle-2, Nagpur

ITA 35/NAG/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1643 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Section: 201(1)

Judgement Text

1 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. SR.NO. I.T.A. NO. ASSTT. YEAR. 1. 35/NAG/2010 2007 08 2. 36/NAG/2010 2008 09 3. 72/NAG/2012 2009 10 4. 73/NAG/2012 2010 11 5. 74/NAG/2012 2009 10 6. 75/NAG/2012 2010 11 7. 76/NAG/2012 2009 10 8. 77/NAG/2012 2010 11 9. 78/NAG/2 012 2009 10. WESTERN COALFIELDS LTD., ASSTT. COMMISSIONER OF COAL ESTATE, CIVIL LINES, V/S. INCOME TAX (TDS)/ NAGPUR/ KAMPTEE SUB AREA, DY. COMMISSIONER OF KAMPTEE/NAGPUR AREA, JARIPATKA, INCOME TAX (TDS), NAGPUR/PIPLA SUB AREA, PIPLA MINES, CIRCLE 2, NAGPUR/ GONDEGAON SUB AREA, NAGPUR. GONDEGAON PARSEONI, NAGPUR. . APPELLANT RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 25 - 08 - 2015. DATE OF PRONOUNCEMENT : 24 TH SEPT. 2015. 2 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 O R D E R PER BENCH. THESE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST RESPECTIVE ORDERS OF LEARNED CIT(APPEALS) FOR THE CONCERNED ASSESSMENT YEAR. SINCE THE ISSUES ARE COMMON AND APPEALS WERE HEARD TOGETHER, THESE HAVE BEEN CONSOLIDATED AND DISPOSED OF TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THE C OMMON ISSUE RAISED IS THAT THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE ASSESSEE OUGHT TO HAVE COMPLIED WITH THE TAX DEDUCTION AT SOURCE PROVISIONS UNDER SECTION 194J OF I.T. ACT IN RESPECT OF PAYMENTS MADE TO HOSPITALS AND DOCTORS .. 3. AN ADDITIONAL GROUND HAS ALSO BEEN RAISED THAT THE LOWER AUTHORITIES ERRED IN RAISING DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE I.T. ACT WITHOUT BRINGING ON RECORD THAT THERE IS ANY LOSS OF REVENUE OUT OF PAYMENTS MADE BY THE ASSESSEE. 4 . IN THIS CASE THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING. A SPOT VERIFICATION ON 17 06 2008 WAS CONDUCTED BY THE INCOME TAX DEPARTMENT TO VERIFY THE COMPLIANCES WITH THE TDS/TCS PROVISIONS OF THE ACT. DURING THIS VERIFICATION IT WAS FOUND THAT THE ASSESSEE HAS BEEN MA KING SEVERAL PAYMENTS TO DOCTORS AND HOSPITALS TOWARDS PROFESSIONAL CHARGES SAID TO BE REIMBURSEMENT BY EMPLOYEES AGAINST THEIR MEDICAL ENTITLEMENTS. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE TDS PROVISIONS UNDER SECTION 194J WERE ATTRACTED. SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE UNDER SECTION 194J, THE ASSESSING OFFICER HELD THE ASSESSEE A DEFAULTER FOR FAILURE TO DEDUCT TDS AND ACCORDINGLY PASSED ORDER UNDER SECTION 201(1)/201(1A) READ WITH SECTION 194J OF I.T. ACT. 3 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 5 . UPON ASSESSEE S APPEAL LEARNED CIT(APPEALS) BRIEFLY SUMMARIZED THE REASONS STATED BY THE ASSESSEE FOR NON DEDUCTION OF TDS AS UNDER : I) THE PAYMENTS ARE MADE DIRECTLY TO THE DOCTORS AND HOSPITALS INSTEAD OF REIMBURSING THE EXPENDITURE TO THE EMPLOYEES SO AS TO PREVENT MISUSE OF SUCH FACILITY BY THE EMPLOYEES. II) SINCE THE EXPENDITURE INCURRED BY THE COMPANY, BY MAKING PAYMENTS TO THE HOSPITALS AND DOCTORS, IS IN THE NATURE OF PERQUISITE THE APPLICABLE TDS PROVISION IS SECTION 192 OF THE I.T. ACT. 6 . AFTER CONSIDERING THE ISSUE AND SEEKING ASSESSEES RESPONSES, LEARNED CIT(APPEALS) HELD AS UNDER : 8.1 APPELLANT HAS TAKEN A STAND THAT THE PAYMENTS MADE TO THE DOCTORS AND HOSPITALS ARE IN THE NATURE OF REIMBURSEMENT TO THE EMPLOYEES WHO ARE ELIGIBLE FOR SUCH MEDICAL F ACILITIES AND SERVICES. AS PER THIS GROUND, THE APPELLANT HAS TAKEN THE STAND THAT IT HAS TAKEN A CORRECT DECISION NOT TO DEDUCT TAX AT SOURCE ON ALL PAYMENTS MADE TO DOCTORS AND HOSPITALS. HOWEVER, DURING THE APPEAL PROCEEDINGS, SUCH A DECISION IS NOT F OUND TO BE A CORRECT ONE. IT IS AN ADMITTED FACT THAT THE PAYMENTS ARE MADE BY THE APPELLANT DIRECTLY TO THE HOSPITALS AND DOCTORS DURING THE RELEVANT FINANCIAL YEARS. IT IS CLEAR FROM THE SUBMISSIONS MADE THAT THE BILLS ARE PASSED BY THE ACCOUNTS DEPARTM ENT OF THE APPELLANT AND THE CHEQUES HAVE BEEN ISSUED IN FAVOUR OF THE DOCTORS AND HOSPITALS. ALL THE INGREDIENTS REQUIRED TO BE SATISFIED WITH REFERENCE TO SECTION 194J OF THE I.T.ACT SO AS TO MAKE IT APPLICABLE ARE PRESENT IN THIS CASE. THE FACTS OF T HE CASE ARE CLEAR THAT IN THE FIRST INSTANCE THE APPELLANT IS INCURRING THE ENTIRE MEDICAL EXPENDITURE, ALTHOUGH FOR ITS EMPLOYEES, AND IT HAS TO BE NECESSARILY CLASSIFIED AND DEBITED AS MEDICAL EXPENDITURE IN ITS BOOKS OF ACCOUNTS. THE CORRESPONDING ENT RIES ARE NOTHING BUT CREDITING THE RESPECTIVE ACCOUNTS OF THE DOCTORS AND HOSPITALS. AS IS CL LEAR FROM S ECTION 194J OF THE I. T.ACT TDS HAS TO BE COMPLIED WITH AT THIS STAGE ITSELF. I 8.2 THE SECOND LIMB OF THE ARGUMENT OF THE APPELLANT THAT THE EXPENDITURE . INC URRED BY THE APPELLANT IS IN THE NATURE OF REIMBURSEMENT OF MEDICAL EXPENDITURE TO ITS EMPLOYE E S, WHICH IS REQUIRED TO BE TAKEN INTO ACCOUNT ONLY FOR THE PURPOSE OF ARRIVING AT TH E PER QUISITE V ALUATION IN THE HANDS OF THE EMPLOYEES, AND THEREFORE, THERE IS NO REQUIREME NT OF COMPLYING WITH THE TDS WHILE MAKING PAYMENTS TO THE DOCTORS AND HOSPITALS IS ALSO DEVOID OF MERIT. . THE SCHEME OF THE ACT IS VERY CLEAR THAT THE APPLICABLE TDS PROVISIONS AND VALUATION OF THE PERQUISITES OF THE EMPLOYEES UNDER THE HEAD 'SALARIES' OPERATE INDEPENDENT OF EACH OTHER. WHEN THIS PARTICULAR ARGUMENT IS ADVANCED BY THE APPELLANT, IT IS ALSO STATING THAT SUBJECT TO THE A PPLICABLE RULES OF P E RQUISI TE VALUATION, THE T A XABLE ELEMENT OF PERQUISITE, IF ANY, WILL BE CONSIDERED IN THE 4 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 HANDS OF THE EMPLOYEE. IT IS IMPORTANT EMPHASIZE THAT THE APPLICATION OF TDS PROVISIONS UNDER THE I.T.ACT ARE NOT SUBJECTED TO THE RULES GOVERNING THE PERQUISITE VALUATION IN ANY MANNER. IN OTHER WORDS, TDS PROVISIONS HAVE TO BE COMPLIED WITH INDEPENDENTLY OF THE APPLICABILITY OF THE RULES GOVERNING PERQUISITES. THIS POINT WAS ILLUSTRATED TO THE APPELLANT DURING THE APPEAL PROCEEDINGS. FOR INSTANCE, IN CASES OF EMPLOYEES WH EREIN THE EMPLOYE R PROVIDES ANY LEASED ACCOMMODATION, THE EMPLOYER IS DUTY BOUND TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE LESSOR OF THE LEASED ACCOMMODATION SO AS TO COMPLY WITH THE TDS PROVISIONS U/S.1941 OF THE I.T.ACT. HERE AGAIN THE PERQUISITE VALUE AS APPLI CABLE UNDER THE I.T.RULES HAS TO BE TAKEN INTO ACCOUNT IN THE HANDS OF THE EMPLOYEE WHILE COMPUTING THE APPLICABLE TDS UNDER SECTION 192 OF THE I.T.ACT. IT IS LOUD AND CLEAR THAT THE METHODOLOGY PROVIDED UNDER THE I.T.ACT OPERATES INDEPENDENTLY AND PARALL ELY OF EACH OTHER, ONE IN RESPECT OF THE RECIPIENT OF LEASE RENT UNDER SECTION 1941 OF THE I.T.ACT AND THE OTHER IN RESPECT OF THE PERQUISITE IN THE HANDS OF THE EMPLOYEE UNDER SECTION 192 OF THE I.T.ACT. THE SAME M ETHODOLOGY AND P ROCEDURE IS PROVIDED UND ER THE SCHEME OF THE ACT IN RESPECT OF PAYMENTS MADE T O THE DOCTORS AND HOSPITALS, TO WHICH SECTION 194J IS APPLICABLE AND THE PERQUISITE, IF ANY, MAY BE CONSIDERED U/S.192 OF THE I.T.ACT. THEREFORE, THERE IS NO CONTRADICTION AS SOUGHT TO BE POINTED OUT BY THE APPELLANT. IN FACT, IT IS SEEN THAT. THE APPELLANT'S FAILURE TO COMPLY WITH THE TDS PROVISIONS HAS GIVEN RISE TO SEVERAL INCONSISTENT AND LEGALLY UNTENABLE ARGUMENTS, INCLUDING THE ALLEGED MISUSE OF MEDICAL FAC ILITIES BY THE EMPLOYEES. - ;.... . . ~ , \ , 8.3 THE CONTENTION OF THE APPELLANT THAT THE PAYMENTS MADE TO THE DOCTORS . AND HOSPITALS WERE INTENDED TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF ARRIVING AT THE TAXABLE PERQUISITES IN THE HANDS OF THE EMPLOYEES WHO HAVE UTILIZED SUCH FACILITIES AND SERVICES IS ALSO EXAMINED IN TERMS OF THE APPLICABLE I.T.RULES VIZ., RULE 3A OF THE I.T.RULES. AS PER RULE 3A OF THE I.T.RULES, THE MEDICAL BENEFITS AVAILED BY THE EMPLOYEES FROM THE HOSPITALS APPROVED BY THE CHIEF COMMISSIONER OF INCOME TAX ARE NOT REQUIRED TO BE TAKEN INTO ACCOUNT FOR WORKING OUT THE PERQUISITE VALUATION IN HANDS OF SUCH EMPLOYEES. IN OTHER WORDS, THE MEDICAL SERVICES AVAILED FROM THE APPROVED HOS PITALS ARE EXEMPTED FOR THE PURPOSE OF ARRIVING AT THE TAXABLE PERQUISITES. IT IS SEEN FROM THE MATERIALS MADE AVAILABLE FROM THE APPELLANT THAT THE FOLLOWING APPROVED HOSPITALS HAVE ALSO PROVIDED THE SERVICES TO ITS EMPLOYEES. (I) GANGA CARE HOSPITAL L TD. (II) ARNEJA INSTITUTE OF CARDIOLOGY PVT. LTD. (III) WOCKHARDT HEART HOSPITAL (IV) CRESCENT NURSING HOME (V) KUNAL HOSPITAL & RESEARCH HOSPITAL (VI) SURETECH HOSPITAL & RESEARCH HOSPITAL (VII) MURE MEMORIAL HOSPITAL (VIII) GILLURKAR MULTISPECIALITY HOSPITAL (IX) ORANGE CITY HOSPITAL & RESEARCH INSTITUTE . 5 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 IT IS SEEN THAT EVEN IN RESPECT OF THE PAYMENTS MADE TO THE ABOVE HOSPITALS, NO TDS HAS BEEN DONE BY THE APPELLANT. THE ABOVE INSTANCES FURTHER HIGHLIGHT THE FACT THAT THE APPELLANT HAD TAKEN A DECISION NOT TO COMPLY WITH THE TDS PROVISIONS. 8 . .4 IT IS, ONCE AGAIN REITERATED IN THIS CONTEXT THAT THE CORRECT LEGAL POSITION IS THAT THE APPELLANT OUGHT TO HAVE DEDUCTED TDS IN ALL PAYMENTS, IRRESPECTIVE OF THE FACT T HAT THEY ARE APPROVED HOSPITALS OR NOT. 9.0 THE CIRCULAR NO.8 OF 2009 DT.24 TH NOVEMBER, 2009 ISSUED BY THE C B DT HAS FURTHER CLARIFIED THIS ISSUE AS UNDER : ' THE SERVICES. RENDERED BY THE HOSPITALS TO VARIOUS PATIENTS ARE PRIMARILY MEDICAL SERVICES AND, THEREFORE, PROVISIONS OF SECTION 194J ARE APPLICABLE ON PAYMENTS MADE BY TPAS TO HOSPITALS ETC. FURTHER FOR INVOKING PROVISIONS OF 194J THERE IS NO STIPULATION THAT THE PROFESSIONAL SERVICES HAVE TO BE NECESSARILY RENDERE D TO THE PERSON WHO MAKES PAYMENT TO THE HOSPITAL. THEREFORE, TPAS WHO ARE MAKING PAYMENTS ON BEHALF OF INSURANCE COMPANIES TO HOSPITALS FOR SETTLEMENT OF MEDICAL/INSURANCE CLAIMS ETC. UNDER VARIOUS SCHEMES INCLUDING CASH LESS SCHEMES ARE LIABLE TO DEDUCT TAX AT SOURCE U/S.194J ON ALL SUCH PAYMENTS TO HOSPITALS ETC.' 9.1 THE ABOVE CBOT CIRCULAR, ALTHOUGH ISSUED IN THE CONTEXT OF PAYMENTS MADE BY THE THIRD PARTY ADMINISTRATORS (TPAS) TO HOSPI TALS, THE CLARIFICATION IS CLEARLY APPLICABLE TO THE FACTS OF THIS CASE AS WELL. 10.0 BASED ON THE DETAILED EXAMINATION OF THE FACTS AND ANALYSIS AS ABOVE, IT IS HEREBY HELD THAT THE APPELLANT OUGHT TO HAVE COMPLIED WITH THE TOS PROVISIONS U/S.194J OF TH E I.T.ACT IN RESPECT OF ALL THE PAYMENTS MADE TO THE DOCTORS AND HOSPITALS DURING THE F.YRS.2006 - 07 & 2007 - 08. THEREFORE, THE ORDERS PASSED BY THE A.O. U/S.201(1)/201(1A) R.W.S. 194J OF THE I.T.ACT ARE FOUND TO BE ON CORRECT FACTUAL AND LEGAL BASIS AND THE REFORE, THEY ARE HEREBY UPHELD. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 7 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED T HE RECORDS. THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE SHRI K.P. DEWANI IS SUMMARIZED AS UN DER : ~ A) THE LD . A . O . HAS PASSED ORDER UNDER SECTION 201(1)/201(1A) R . W . S . 194J OF I . T . ACT 1961 HOLDING THAT ASSESSEE IS LIABLE FOR TAX DEDUCTION AT SOURCE IN RESPECT TO AMOUNT PAID AS REIMBURSEMENT TO VARIOUS EMPLOYEES TOWARDS MEDICAL EXPENSES . THE A . O . HAS CONCLUDED THAT THERE IS OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF I . T . ACT 1961 . 6 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 B ) ASSESSEE IS A PUBLIC SECTOR COMPANY AND HAS MEDICAL ATTENDANCE RULES FOR REIMBURSEMENT OF MEDICAL EXPENSES TO VARIOUS EMPLOYEES . CHAPTER V OF M EDICAL ATTENDANCE RULES DEALS WITH MEDICAL EXPENSES INCURRED BY EMPLOYEES TO BE REIMBURSED . IT ALSO PROVIDES PROCEDURE FOR ADVANCE & PAYMENT . . C) EMPLOYEES OF ASSESSEE COMPANY VISIT VARIOUS HOSPITALS/DOCTORS TO AVAIL MEDICAL SERVICES WHICH ARE NOT PROVIDED BY THE HOSPITALS SET UP BY ASSESSEE COMPANY. D) THE VARIOUS HOSPITALS/DOCTORS AFTER TREATMENT OF EMPLOYEES OF ASSESSEE COMPANY RAISE INVOICES OF RENDERING PROFESSIONAL SERVICES ON SUCH EMPLOYEES . THE EMPLOYEES SUBMIT SUCH INVOICES WITH ASSESSEE COMPANY FOR REIMBURSING THE SAME . ACCORDINGLY , THE REIMBURSEMENT IS MADE BY ASSESSEE COMPANY TO EMPLOYEES . E) IN CERTAIN CASES , AS PER MEDICAL ATTENDANC E RULES REQUISITION FOR ADVANCE IS MADE BY EMPLOYEE FOR MEDICAL TREATMENT . ADVANCE IS DISBURSED AND PAYMENT IS MADE DIRECTLY IN THE NAME OF DOCTORS/HOSPITAL . THE VOUCHERS FOR MAKING PAYMENT WOULD CLEARLY SHOW THAT PAYMENT MADE BY ASSESSEE IS FOR AND ON BE HALF OF EMPLOYEE AND IS DEBITED IN THE BOOKS OF ASSESSEE COMPANY AS REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEE . THE CONCLUSION DRAWN BY A . O . THAT THE PAYMENT BY ASSESSEE COMPANY IS TOWARDS PROFESSIONAL CHARGES TO H OSPITALS/DOCTORS AND ASSESSEE HAS OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF I . T . ACT 1961 AT THE HANDS OF ASSESSEE IS MISCONCIEVED . THERE IS NO CONTRACT OF ASSESSEE WITH DOCTORS/HOSPITALS. F) THE INVOICES ISSUED BY VARIOUS HOSPITALS/DOCTO RS WOULD SHOW THAT THE SERVICE BILL IS ISSUED IN THE NAME OF EMPLOYEE . RECEIPTS ISSUED BY DOCTORS/HOSPITALS INDICATE THAT AMOUNT IS SHOWN TO HAVE BEEN RECEIVED FROM INDIVIDUAL EMPLOYEE AND NOT FROM THE ASSESSEE COMPANY . THIS IS DEMONSTRATIVE OF FACT THAT P AYMENT TO DOCTORS/HOSPITALS HAS BEEN MADE BY EMPLOYEE BY OBTAINING FUNDS FROM ASSESSEE . G) THE MEDICAL EXPENSES REIMBURSED ARE CONSIDERED AS PERQUISITE AT THE HANDS OF 7 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 EMPLOYEES AND APPROPRIATE TDS IS MADE FROM EMPLOYEES ON THE PERQUISITE VALUE CONSIDER ED AS ASSESSABLE AS SALARY AT THE HANDS OF EMPLOYEE THE SAME SUM CANNOT BE CONSIDERED AS PAYMENT TOWARDS PROFESSIONAL CHARGES TO BE LIABLE FOR TDS BY ASSESSEE COMPANY . H) THE BILLS FOR SERVICES BY HOSPITALS/DOCTORS BEING IN THE NAME OF EMPLOYEES , THE OB LIGATION TO MAKE PAYMENT OF SAME IS NOT THAT OF ASSESSEE . I) ASSESSEE COMPANY HAS NO PRIVITY OF CONTRACT FOR MAKING PAYMENT TO SUCH H OSPITALS/DOCTORS . IN THE ABSENCE OF PRIVITY OF CONTRACT OR OBLIGATION TO MAKE PAYMENT FOR SERVICES RENDERED BY HOSPITALS/ DOCTORS TO EMPLOYEES THE ASSESSEE CANNOT BE HELD TO BE LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194J OF I . T . ACT 1961 . J) RELIANCE BY HON'BLE CIT(A) ON THE CIRCULAR ISSUED BY BOARD DATED 24/11/2009 IN RESPECT TO TRANSACTIONS BETWEEN THIRD PARTY ADMINISTRATOR WITH HOSPITALS FOR UPHOLDING THE ORDER OF A . O . WHEREBY IT IS HELD THAT ASSESSEE IS OBLIGED TO DEDUCT TAX AT SOURCE UNDER SECTION 194J IS MISPLACED. THE THIRD PARTY ADMINISTRATORS HAVE PRIVITY OF CONTRACT WITH HOSPITALS AND IT IS IN PURSUANCE OF WHICH THEY HAPPENED TO MAKE PAYMENT ON BEHALF OF VARIOUS INSURED PERSONS TO THE HOSPITALS. IT IS OBLIGATION OF THIRD PARTY ADMINISTRATOR AND INSURANCE COMPANY TO MAKE PAYMENT TO HOSPITALS/DOCTORS TOWARDS PROFESSIONAL CHARGES IN TERMS OF CONTRACT TO REN DER SERVICES ON BEHALF OF SUCH TPAIINSURANCE COMPANY TO VARIOUS INDIVIDUALS WHO HAVE OBTAINED POLICIES FROM SUCH INSURANCE COMPANY . TPA HAVE ENTERED I NTO REGULAR AGREEMENTS WITH DOCTORS/HOSPITALS . HOSPITAL RAISES BILLS FOR SERVICES RENDERED ON INSURANCE CO ' SITPA AND THUS THERE IS LIABILITY OF TDS ON THEM. THE FACTS IN THE CASE OF ASSESSEE ARE CLEARLY DISTINGUISHABLE AS THERE IS NO PRIVITY OF CONTRACT/OBLIGATION OF ASSESSEE COMPANY TO MAKE ANY PAYMENT TO HOSPITALS/DOCTORS . NO BILLS ARE RAISED BY HOSPITALS/DO CTORS ON ASSESSEE COMPANY. NO OBLIGATION TO PAY TO HOSPITALS/DOCTORS BY ASSESSEE COMPANY. K) PAYMENT IS MADE BY ASSESSEE TO EMPLOYEES AND NOT TO PROFESSIONALS/HOSPITALS . IT IS LIABILITY OF EMPLOYEES WHICH IS BEING DISCHARGED AND THUS SAME IS CORRECTLY CONSIDERED AS PERQUISITE FOR MAKING TDS FROM EMPLOYEES . FURTHER THE LEARNED COUNSEL PLACED RELIANCE ON THE W RITTEN SUBMISSION FILED BEFORE A.O. 8 ITA NOS. 35 & 36/NAG/2010 AND ITA NOS. 72 TO 78/NAG/2012 L) PERUSAL OF SEC . 194J(1) OF I . T . ACT 1961 WOULD MAKE IT EVIDENT THAT OBLIGATION IS ON THE PERSON RESPONSIBLE FOR PAYING FEES FOR PROFESSIONAL SERVICES . IT IS EVIDENT THAT THERE NEED TO BE CONTRACT BETWEEN PAYER & PAYEE . THE SUBMISSION MADE FURTHER GET SUBSTANTIATED FROM LATER PART OF PROVISION WHERE IT IS OBSERVED THAT SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF PAYEE . THUS WHERE THERE IS NO CONTRACT WITH PAYEE AND PAYMENT IS MADE ON BEHALF OF ANY OTHER PERSON THERE WOULD BE NO OBLIGATION TO DEDUCT TAX AT SOURCE . LIVE EXAMPLE COULD BE MEDICAL LOAN GIVEN BY BANK PAID DIRECTLY TO HOSPITAL/DOCTOR WILL NOT BRING OBLIGATION TO DEDUCT TDS ON BANK U/S 194J OF I . T . ACT , 1961. M) WITHOUT PREJUDICE , THE ORDER HAS BEEN PASSED IN THE CASE OF ASSESSEE UNDER SECTION 201 OF I . T . ACT 1961 AND ON THE RECORD OF THE AO. COMPLETE DETAILS AS REGARD TO NAMES OF THE PARTIES TO WHOM PAYMENTS ARE MADE AS WELL AS ADDRESSES ARE ON RECORD. ALL THE PARTIES TO WHOM PAYMENTS HAVE BEEN MADE ARE ASSESSED TO INCOME TAX AND HAVE BEEN DISCHARGING THE TAX OBLIGATIONS . THE AO . HAS BROUGHT NO EVIDENCE ON RECORD TO SHOW THAT PAYMENT MADE BY ASSESSEE HAS RESULTED INTO ANY LOSS OF REVENUE ON ACCOUNT OF ALLEGED OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF I . T . ACT 1961. N) IT IS SETTLED PROPOSITION OF LAW THAT ONUS IS ON THE REVENU E AUTHORITY TO SHOW THAT THERE IS LOSS OF REVENUE ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE AND AO. CAN RAISE DEMAND BY AN ORDER UNDER SECTION 201 OF I . T . ACT 1961 ONLY AFTER BRINGING ON RECORD LOSS OF REVENUE . THE A SSESSEE FOR THIS PROPOSITION PLACES R ELIANCE ON THE FOLLOWING DECISIONS. 1. ITAT ORDER IN ITA NO. 126/AGRA/2013 IN THE CASE OF THE AREA MANAGER , FOOD CORPORATION OF INDIA VIDE ORDER DATED 20/12/2013 . 2. ALLAHABAD BANK VS. ITO ( 2015) 152 ITO 0383 9 ITA NOS.35&36/NAG/2010 & ITA NOS. 72 TO 78/NAG/2012 3. D CIT VS . SAHARA INDIA COMMERCIAL C ORPORATION LTD. , (2014) 42 CCH 0054 (LUCKNOW) 4. ITAT ORDER IN ITA NOS . 372 IAGRA/2013 I N THE CASE OF ACCOUNTS OFFICER , BHARAT SANCHAR NIGAM LTD . , 5. VIDE ORDER DATED 26/02/2014 6. ICICI BANK LTD . , VS. D CIT (2013) 90 D TR 0401 (LUCKNOW TRIB . ) 7. RAMAKRISHNA VEDANTA MATH VS. ITO (2013) 55 SOT 0417 8. KARNATAKA HIGH COURT ORDER IN ITA NOS . 333/07 IN THE CASE OF MIS . SREE MANJUNATHA WINES VIDE ORDER DATED 22/03/2012 (P - 74 , 75) (VOL - I) 9. JAGRAN PRAKASHAN LTD . , VS . OCIT (2012) 345 ITR 0288 (ALL HC) 10. CIT VS . ELI LILLY & COMPANY (INDIA) P . LTD . (2009) 312 ITR 0225 (SC) 11. HINDUSTAN COCA COLA BEVERAGE (P) LTD ., VS . CIT (2007) 293 ITR 0226 (SC) 8 . PER CONTRA, LEARNED D.R. SHRI NARENDRA KANE RELIED UP O N THE ORDERS OF THE AUTHORITIES BELOW. HE INSISTED THAT THERE IS A CONTRACT BETWEEN THE ASSESSEE AND THE HOSPITALS AND HENCE THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX AT SOURCE FROM THE PAYMENTS MADE TO THEM. 10 ITA NOS.35&36/NAG/2010 & ITA NOS. 72 TO 78/NAG/2012 9 . UPON CAREFUL CONSIDERATION WE NOTE THAT THE ASSESSEE COMPANY IN THIS CASE WHICH IS A PUBLIC SECTOR UNDERTAKING HAS MADE PAYMENTS TO HOSPITALS AND DOCTORS. THESE PAYMENTS ARE IN THE NATURE OF MEDICAL EXPE NSE REIMBURSEMENT TO THE EMPLOYEES. INSTEAD OF MAKING PAYMENT DIRECTLY TO THE EMPLOYEES, TO PREVENT MISUSE OF SUCH FACILITIES, THE ASSESSEE COMPANY HAS CHOSEN TO MAKE THE PAYMENT DIRECTLY TO THE HOSPITALS AND DOCTORS ON BEHALF OF EMPLOYEES. THESE PAYMENTS HAVE BEEN DULY CLASSIFIED UNDER PERQUISITE TO THE EMPLOYEES. APPROPRIATE TDS IS MADE FROM THE EMPLOYEES ON THE PERQUISITE VALUE OF MEDICAL FACILITY CONSIDERED AS ASSESSABLE AS SALARY AT THE HANDS OF THE EMPLOYEES. NOW THE AUTHORITIES BELOW ARE OF THE OPIN ION THAT THE ASSESSEE IS MAKING PAYMENTS TO THE HOSPITALS AND DOCTORS AND SHOULD HAVE DEDUCTED TAX AT SOURCE UNDER SECTION 194J OF THE I.T. ACT. 10 . SECTION 194J OF THE I.T. ACT MANDATES THAT A PERSON NOT BEING AN INDIVIDUAL OF HINDU UNDIVIDED FAMILY WHO I S RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF VARIOUS PROFESSIONAL/TECHNICAL SERVICES SHALL AT THE TIME OF CREDIT OF SUCH SUM OR MAKING OF PAYMENT MAKE DEDUCTION OF TAX AT SOURCE. 1 1 . NOW WE FIND THAT FIRST INGREDIENT FOR ATTRACTING SECTION 194 J IS THAT THE PERSON MAKING THE PAYMENT TO THE PAYEE SHOULD BE RESPONSIBLE FOR MAKING THE PAYMENT. IN THIS CASE WE FIND THAT THE ASSESSEE COMPANY HAS NO RESPONSIBILITY FOR MAKING PAYMENTS TO THE HOSPITALS AND DOCTORS. THE RESPONSIBILITY TO MAKE PAYMENTS IS THAT OF THE EMPLOYEES WHO SINCE THEY ARE INDIVIDUALS DO NOT FALL UNDER THE KEN OF SECTION 194J. AS THE FACTS OF THE CASE CLEARLY INDICATE THAT THE ASSESSEE IN THIS CASE HAS MADE PAYMENT ON BEHALF OF THESE EMPLOYEES , I T CANNOT BE SAID THAT THERE WAS ANY RESPONSIBILITY FASTEN ING ON THE ASSESSEE TO 11 ITA NOS.35&36/NAG/2010 & ITA NOS. 72 TO 78/NAG/2012 MAKE PAYMENT TO THE HOSPITALS AND DOCTORS DUE TO ANY CONTRACT BETWEEN THE ASSESSEE AND DOCTORS/HOSPITALS. 1 2 . AS A MATTER OF FACT IT HAS ALSO BEEN A FACT THAT THE ASSESSEE HAS IN FACT MADE ADVANCE PAYMENTS TO TH E EMPLOYEES ON ACCOUNT OF MEDICAL REQUIREMENTS. THESE ADVANCES UPON SANCTIONING HAVE BEEN DIRECTLY PAID TO THE DOCTORS/HOSPITALS. LATER ON WHEN THE MEDICAL FACILITIES HAVE BEEN UTILIZED, THE BILLS HAVE BEEN RAISED AND THE BILLS HAVE BEEN ADJUSTED BY DEBITI NG TO THE MEDICAL EXPENDITURE AND CREDITING TO THE MEDICAL ADVANCE. AS PER THE SCHEME OF ACCOUNTING ENTRY THESE ADVANCES ARE CLEARLY TO THE BENEFIT OF THE ASSESSEES EMPLOYEES. 1 3 . LEARNED CIT(APPEALS) IN THIS REGARD HAS REFERRED TO CIRCULAR NO. 8 (SUPRA) OF CBDT WHICH HAS CLARIFIED THAT PROVISIONS OF SECTION 194J ARE APPLICABLE ON PAYMENTS MADE BY TP AS TO HOSPITALS. LEARNED CIT(APPEALS) HAS EXTENDED THIS ANALOGY TO THE PRESENT CASE AS WELL. IN OUR CONSIDERED OPINION THE SAID ANALOGY IS NOT AT ALL APPLICAB LE TO THE FACTS OF THE CASE. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL OF THE ASSESSEE, THE TP A (THIRD PARTY ADMINISTRATOR) HAVE PR IORITY OF CONTRACT WITH HOSPITALS AND IT IS IN PURSUANCE OF WHICH THEY HAPPEN TO MAKE PAYMENT ON BEHALF OF VARIOUS INSUR ED PERSONS TO THE HOSPITALS. IT IS THE OBLIGATION OF THIRD PARTY ADMINISTRATOR TO MAKE PAYMENT TO HOSPITALS/DOCTORS TOWARDS PROFESSIONAL CHARGES. THE HOSPITAL RAISED ITS BILL FOR SERVICES RENDERED ON INSURANCE COMPANIES/TP A AND THUS THERE IS LIABILITY OF TDS ON THEM. IN THE PRESENT CASE BEFORE US THE MEDICAL FACILITY BILLS ARE NOT RAISED ON THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS NO LIABILITY OF MAKING PAYMENT TO THEM ON ITS OWN. THE PAYMENT IS MADE OF THE SANCTIONED AMOUNT TO THE E MPLOYEE DIRECTLY 12 ITA NOS.35&36/NAG/2010 & ITA NOS. 72 TO 78/NAG/2012 TO THE HOSPITALS/DOCTORS. HENCE THE ASSESSEE COMPANY ON ITS OWN HAS NO OBLIGATION TO PAY HOSPITALS/DOCTORS. HENCE IT CANNOT BE SAID THAT LIABILITY TO DEDUCT TAX AT SOURCE AS ENVISAGED UNDER SECTION 194J FASTENS ON THE ASSESSEE ON THE FACTS AND CIRCUMSTANC ES OF THE CASE. THE CBDT CIRCULAR CITED BY THE LEARNED CIT(APPEALS) IS TOTALLY ON A DIFFERENT CONTEXT AND IS NOT AT ALL APPLICABLE ON THE FACTS OF THE CASE. 1 4 WE FURTHER NOTE THAT ANOTHER PLEA OF THE LEARNED COUNSEL OF THE ASSESSEE IS THAT THE COMPLETE DE TAILS AS REGARDS TO THE NAMES OF THE PARTIES TO WHOM PAYMENTS ARE MADE AS WELL AS ADDRESSES ARE ON RECORD. ALL THE PARTIES TO WHOM PAYMENTS HAVE BEEN MADE ARE ASSESSED TO INCOME TAX AND HAVE BEEN DISCHARGING THE TAX OBLIGATION. THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE PAYMENTS MADE BY THE ASSESSEE HAS RESULTED INTO ANY LOSS TO THE REVENUE ON ACCOUNT OF ALLEGED OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE I.T. ACT. IN THIS REGARD LEARNED COUNSEL OF T HE ASSESSEE HAS REFERRED TO A CATENA OF CASE LAWS FOR THE PROPOSITION THAT ONUS IS ON THE REVENUE AUTHORITIES TO SHOW THAT THERE IS LOSS OF REVENUE ON ACCOUNT OF NO DEDUCTION OF TAX AT SOURCE AND THE ASSESSING OFFICER CAN RAISE DEMAND BY AN ORDER UNDER S ECTION 201 OF THE I.T. ACT ONLY AFTER BRINGING ON RECORD LOSS OF REVENUE. 1 5 . WE FIND THAT THE ABOVE IS AN ALTERNATIVE GROUND BY THE LEARNED COUNSEL OF THE ASSESSEE AND THE SAME SHALL OPERATE ONLY IF IT IS HELD THAT THE PAYMENTS MADE BY THE ASSESSEE IN THIS CASE WERE EXIGIBLE FOR DEDUCTION OF TAX UNDER SECTION 194J OF THE I.T. ACT. AS WE HAVE CLEARLY HELD IN THE PRECEDING PARAGRAPHS THAT THERE WAS NO LIABILITY FASTENING ON THE ASSESSEE TO DEDUCT TAX AT SOURCE IN THE PRESENT CASE ON PAYMENTS MADE TO HOSPI TALS AND DOCTORS ON BEHALF OF THE INDIVIDUAL 13 ITA NOS.35&36/NAG/2010 & ITA NOS. 72 TO 78/NAG/2012 EMPLOYEES WHICH ARE IN THE NATURE OF MEDICAL ADVANCES AND MEDICAL REIMBURSEMENT TO THE EMPLOYEES. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION, THE ADJUDICATION ON THIS LIMB OF THE LEARNED COUNSEL OF TH E ASSESSEES ARGUMENT IS ONLY OF ACADEMIC INTEREST AND WE ARE NOT INCLINED TO ENGAGE INTO THE SAME. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND HOLD THAT THERE WAS NO LIABILITY ON THE ASSESS EE TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE I.T. ACT. ACCORDINGLY THE ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTION 201 (1) /201(1A) ARE HEREBY QUASHED. 1 6 . IN THE RESULT, THESE APPEALS FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF SEPT. 2015. SD/ SD/ (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 24 TH SEPT., 2015. 14 ITA NOS.35&36/NAG/2010 & ITA NOS. 72 TO 78/NAG/2012 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER WAKODE ASSISTANT REGIS TRAR, ITAT, NAGPUR