ITO (OSD) (TDS) 1(3), MUMBAI V. DDRC SRL DIAGNOSTIC P.LTD, MUMBAI

ITA 5044/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101146 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 133A; 194C; 201(1); 15

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./ I.T.A. NO. 3872 /MUM/20 13 ( / ASSESSMENT YEAR : 2010 - 11 ) M/S DDRC SRL DIAGNOSTIC P LTD.,(FORMERLY KNOWN AS DDRC PIRAMAL DIAGNOSTICS SERVICES PVT LTD.) 4 TH FLOOR PRIME SQUARE, PL.NO.1 GAIWADI INDUSTRIAL ESTATE, S V ROAD, GOREGAON (W), MUMBAI - . / VS. INCOME TAX OFFICER - (OSD), (TDS),1(3), ROOM NO. 811 , K.G.MITTAL HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400002 ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 5044 /MUM/20 13 ( / ASSESSMENT YEAR : 2010 - 11 ) INCOME TAX OFFICER - (OSD), (TDS),1(3), ROOM NO. 811 , K.G.MITTAL HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400002 / VS. M/S DDRC SRL DIAGNOSTIC P LTD., 4 TH FLOOR PRIME SQUARE,PLOT NO.1, GAIWADI INDUSTRIAL ESTATE, S V ROAD, GOREGAON (W), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN : AACCD4433H / ASSESSEE BY SHRI NEIL PHILLIP / RSPONDENT BY SHRI YOGESH THAR / DATE OF HEARING : 26.6. 201 5 / DATE OF PRONOUNCEMENT : 23. 9. 201 5 ITA NO.5044/M/13 AND 3872/MUM/2013 2 / O R D E R PER B.R. BASKARAN (AM) : THESE ARE THE CROSS - APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER DATED 15.3.2013 PASSED BY THE LD. CIT(A) - 14, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2010 - 11. 2. THE ISSUES URGED IN BOTH THE APPEALS RELATE TO THE LIABILITY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE DISCOUNT OFFERED BY IT TO VARIOUS PERSONS. 3. THE FACTS RELATING TO THE ISSUE UNDER CONSIDERATION HAVE BEEN DESCRIBED AS UNDER BY LD CIT(A): - 2. T HE APPELLANT IS ENGAGE D I N THE BUSINESS O F RUNNING DIAGNOSTIC LABORATORIES IN K ERALA. IT PROVIDES CLINICAL AND CORPORATE HEALTH CHECK - UP SERVICES TO ITS CLIENTS. DURING THE SUBJECT AY THE APPELLANT HAS EARNED INCOME OF RS.24,41,09,507/ - FROM PATHOLOGICAL AND PRE - EMPLOYMENT CHECK - UP SERVICES FROM THE FOLLOW ING SOURCES : PARTICULARS GROSS SALES DISCOUNT NET SALES OFFERED WALK - IN PATIENTS 15,93,36,706 1,28,03,265 14 , 65,33,441 HOSPITALS 8,94,51,544 2,62,12,206 6,32,39,338 LABORATORIES 3,75,03,634 1,40,74,712 2,34,28,921 OTHERS 76,81,582 26,07,650 50,73,932 CORPORATE HEALTH CHECK - UP 86,52,364 28,18,489 58,33,875 TOTAL 30,26,25,830 5,85,16,322 24,41,09,50 7 ' -- _ .. 3. A SURVEY OPERATION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON 23/09/2011 AT THE APPELLANT'S PREMISES BY THE OFFICER, HAVING JURISDICTION UNDER SECTION 143(3) OVER THE APPELLANT. AS A RESULT, THE DISCREPANCIES ITA NO.5044/M/13 AND 3872/MUM/2013 3 WERE FOUND IN RESPECT OF DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, THE ACIT, CIRCLE - 6(1), MUMBAI PASSED ASSESSMENT ORDER MAKING THE DISALLOWANCES UNDER SECTION 40(A)(IA) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM ACIT, CIRCLE - 6(1), MUMBAI, THE TDS OFFICER (I.E.'THE AO') INITIATED PROCEEDINGS UNDER SECTION 201(1)/201(1A) OF THE ACT. HE ISSUED NOTICES TO THE APPELLANT TO SHOW CAUSE AS TO WHY THE TAX WAS NOT DEDUCTED UNDER SECTION 194H IN RESPECT OF THE DISCOUNT/COMMISSION PAID TO VARIOUS PERSONS/INSTITUTIONS IN RESPECT OF THE DIAGNOSTIC PATHOLOGICAL TESTING CHARGES RECEIVED BY THE APPELLANT. HE ALSO SHO W CAUSED THE APPELLANT, AS TO WHY THE TAX WAS NOT DEDUCTED UNDER SECTION 194J IN RESPECT OF ANNUAL MAINTENANCE CHARGES PAID IN RESPECT OF THE APPELLANT'S SCIENTIFIC INSTRUMENTS. AFTER CONSIDERING THE REPLY OF THE APPELLANT IN THIS REGARD, THE AO PASSED T HE IMPUGNED ORDER UNDER SECTION 201(1)/201(1A) OF THE ACT. IN THE SAID ORDER, THE AO HAS HELD THE APPELLANT TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF DISCOUNT / COMMISSION OF RS.5,85,16,322/ - AND AMC CHARGES OF RS.38,94,056/ - PAID TO VARIOUS PARTIES. SINCE, THE APPELLANT HAD DEDUCTED TAX AT SOURCE UNDER SECTION 194C OF THE ACT IN SOME CASES, THE AO HAS COMPUTED THE NET DEMAND OF TAX AND INTEREST AT RS.81,17,861/ - AS PER DEMAND NOTICE ISSUED BY HIM. AGAINST THIS ACTION OF THE AO, THE APPELLANT HAS FILED PR ESENT APPEAL.... 4. IN THE APPELLATE PROCEEDINGS BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE VARIOUS PAYMENTS LISTED ABOVE, SINCE THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE VARIOUS PARTIES IS ON PRINCIPAL TO PRINCIPAL BASIS. THE NATURE OF AGREEMENT BETWEEN THE ASSESSEE AND VARIOUS PARTIES HAS BEEN TABULATED AS UNDER BY THE ASSESSEE AND THE SAME HAS BEEN EXTRACTED AS UNDER BY LD CIT(A): - ITA NO.5044/M/13 AND 3872/MUM/2013 4 N ATURE OF C USTOMER ARRANGEMENT WALK - IN - PATIENTS THESE ARE INDIVIDUAL PATIENTS WHO DIRECTLY WALK INTO THE APPELLANT'S LABORATORIES FOR AVAILING TESTING SERVICES. IT IS SUBMITTED THAT THE APPELLANT HAS 4 HIGH TECH REGIONAL LABS AND 61 LABORATORIES / BRANCHES WHERE ROUTINE TESTS ARE PERFOR MED AND IN ADDITION TO THIS APPELLANT ALSO HAS 7 LABORATORIES IN THE HOSPITALS THE LIST OF WHICH IS ATTACHED AS ANNEXURE 10. THE APPELLANT AS PART OF INDUSTRY PRACTICE OFFERS DISCOUNT TO THE PATIENTS AGAINST THE STANDARD PRICE LIST. IT IS RESPECTFULLY SUBMITTED THAT WITH REGARD TO THE LABORATORIES IN THE HOSPITALS THE APPELLANT PAYS COMMISSION TO THE HOSPITAL AT THE RATE MUTUALLY AGREED FOR THE INCOME EARNED FROM THE PATIENTS TO WHOM SERVICES ARE PROVIDED. THE APPELLANT DEDUCTS TAX AT SOURC E ON PAYMENT OF SUCH COMMISSION TO THE HOSPITALS. COPIES OF THE TDS CERTIFICATES ISSUED BY THE APPELLANT IN THIS REGARD ARE ATTACHED AS ANNEXURE 6. ITA NO.5044/M/13 AND 3872/MUM/2013 5 HOSPITALS AND LABORATORIES THE APPELLANT HAS EXECUTED AGREEMENT(S) WITH HOSPITALS FOR PROVIDING HIGH PATHOLOGY TESTING SERIES TO THEM. THE S E HOSPITALS, WHICH DO NOT HAVE THE NECESSARY TECHNOLOGY FOR CONDUCTING COMPLEX TESTS TO DIAGNOSE AILMENTS OF THE PATIENS, SEND SAMPLES OF TH EIR PATIENTS TO THE APPELLANTS FOR CONDUCTING SUCH TESTS. THE SAMPLES ARE COLLECTED BY THE APPELLANT FROM THE HOSPITALS THROUGH ITS COLLECTION REPRESENTATIVES. THESE REPRESENTATIVES ARE PAID A FIXED COMMISSION BY THE APPELLANT BASED ON THE NUMBER OF SAMPLES COLLECTED BY THEM FROM THE HOSPITALS ALLOCATED TO THEM. THE APPELLANTS INVOICES THE H OSPITAL(S) FOR THE TESTS CONDUCTED BY IT AND OFFERS THEM A DISCOUNT AGAINST THE STANDARD PRICE LIST OF EACH TEST CONDUCTED BY IT. ALONG WITH THE INVOICE, THE APPELLANT PROVIDES THE HOSPITALS WITH THE TEST REPORTS OF THE PATIENT UNDER ITS NAM E, THE HOSPITALS I N TURN PROVIDE THEIR PATIENTS WITH THE TEST RESULTS UNDER THEIR OWN NAME. THE HOSPITALS / LABORATORIES WHILE MAKING PAYMENT TO THE APPELLANT DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. WE ARE ATTACHING HEREWITH THE LIST OF HOSPITALS / LABORA TORIES TO WHOM THE SERVICES HAVE BEEN PROVIDED, THE COPIES OF THE INVOICES RAISED ON THEM AND THE COPIES OF THE FORM 16A ISSUED BY THEM FOR THE TAX DEDUCTED AT SOURCE ON THE PAYMENTS MADE TO THE APPELLANT PLEASE REFER ANNEXURE 11 TO 13. OTHER CUSTOMERS TH E APPELLANT PROVIDES PATHOLOGY SERVICES TO CLINICS, CHARITABLE ORGANIZATIONS AND GOVERNMENT SPONSORED HEALTH CHECK CAMPS ETC. FOR PROVIDING HEALTH SERVICES TO THE POORER SECTIONS OF SOCIETY. THE SAMPLES COLLECTED BY THE APPELLANT'S REPRESENTATIVES FROM SUC H CHARITABLE ORGANIZATIONS/ CAMPS AND ARE SENT TO ITS LABORATORIES FOR TESTING. THE APPELLANT OFFERS A DISCOUNT TO SUCH ORGA NIZATIONS/ CAMPS AGAINST THE STANDARD PRICE OF THE TESTS CONDUCTED BY IT. CORPORATE AND INSTITUTIONS THE APPELLANT HAS EXECUTED AGREEMENTS WITH VARIOUS CORPORATE/INSTITUTIONS FOR PROVIDING PRE - EMPLOYMENT HEALTH CHECK - UP FACILITIES TO THE CANDIDATES REFERRED TO IT BY SUCH CORPORATE/ INSTITUTIONS. THE APPELLANT OFFERS DISCOUNTS TO SUCH CORPORA T E/ INSTITUTION AGAINST THE STANDARD PRIC E LIST FOR SUCH TEST CONDUCTED. THE INVOICES ITA NO.5044/M/13 AND 3872/MUM/2013 6 FOR SUCH TESTS ARE RAISED BY THE APPELLANT ON THE CORPORATE/ INSTITUTIONS. THE APPELLANTS OFFERS DISCOUNTS TO SUCH CORPORATE/INSTITUTION AGAINST THE STANDARD PRICE LIST FOR SUCH TEST CONDUCTED. THE INVOICES F OR SUCH TE S TS ARE RAISED BY THE APPELLANT ON THE CORPORATE/ INTUITIONS. THE APPEL LANT IS NOT ENTITLED TO CHARGE/RECOVER THE CO S T OF THE TEST FROM THE INDIVIDUAL CANDIDATES. THE CORPORATE/INSTITUTIONS DEDUCT TAX A SOURCE WHILE MAKING PAYMENT TO THE APPELLA NT FOR SUCH SERVICE. WE ARE ATTACHING HEREWITH THE COPIES OF THE AGREEMENTS WITH THE CORPORATE/INSTITUTIONS, THE COPIES OF THE INVOICES RAISED BY THE APPELLANT ON THEM AND THE COPIES OF FORM 16A FOR THE TAX DEDUCTED AT SOURCE BY THEM WHILE MAKING THE PAYM ENT TO THE APPELLANT. PLEASE REFER A NNEXURE 9, 14 AND 15. 5. IN RESPECT OF DISCOUNT GIVEN TO WALK IN PATIENTS, THE ASSESSEE HAD REPRESENTED THAT IT HAS GIVEN DISCOUNT TO THEM BASED ON CERTAIN CRITERIA AND IT HAS ALSO PAID COMMISSION TO HOSPITALS WHO REFERRED THE PATIENTS TO IT. IT WAS REPRESENTED THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE IN RESPECT OF COMMISSION PAID TO THE HOSPITALS. ACCORDINGLY, THE LD CIT(A) HELD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE DISCOUNT PAID TO WALK IN CUSTOMERS, SUBJECT TO THE VERIFICATION OF THE DEDUCTION OF TDS ON THE COMMISSION PAID TO THE HOSPITALS. WE NOTICE THAT BOTH THE PARTIES HAVE ACCEPTED THIS DECISION OF LD CIT(A). 6. IN RESPECT OF DISCOUNT GIVEN TO LABORATORIES AND HOSPITALS , THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE TRANSACTIONS HAVE BEEN ENTERED BETWEEN THEM ON PRINCIPAL TO PRINCIPAL BASIS AND ACCORDINGLY HELD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE THEREON. THE REVENUE IS CONTESTING THIS DECISION OF LD CIT(A) BEFORE US. ITA NO.5044/M/13 AND 3872/MUM/2013 7 7. IN RESPECT OF DISCOUNT GIVEN TO OTHERS, VIZ., CHARITABLE ORGANIZATIONS, GOVERNMENT SPONSORED HEALTH CHECKUP CAMPS ETC., THE ASSESSEE FILED SOME ADDITIONAL EVIDENCES BEFORE LD CIT(A) IN THE FORM OF LIST OF S UCH CLIENTS. THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS NOT GIVEN ANY SUBMISSIONS BEFORE AO FOR THIS CATEGORY OF CUSTOMERS AND FURTHER THE ASSESSEE HAS NOT MOVED FORMAL PETITION SEEKING ADMISSION OF ADDITIONAL EVIDENCES. HENCE THE LD CIT(A) CONFIRMED TH E ORDER OF THE AO ON THIS CATEGORY OF CUSTOMERS. THE ASSESSEE IS CONTESTING THIS DECISION OF LD CIT(A). 8. IN RESPECT OF CORPORATE HEALTH CHECKUP PROGRAMS, THE LD CIT(A) HELD THAT THE TRANSACTIONS ENTERED BETWEEN THE ASSESSEE AND THE CORPORATE BODI ES/INSTITUTIONS IS ALSO ON PRINCIPAL TO PRINCIPAL BASIS AND HENCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE DISCOUNT PAID TO THEM. THE SAID DECISION HAS BEEN ACCEPTED BY THE REVENUE. 9. WE HAVE NOTICED EARLIER THAT THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING THE DECISION OF LD CIT(A) IN CONFIRMING THE ORDER OF AO IN RESPECT OF DISCOUNT PAID TO OTHERS. THE LD A.R SUBMITTED THAT THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSE E HAS NOT BEEN ACCEPTED BY THE LD CIT(A). ACCORDINGLY HE PRAYED THAT THE TRIBUNAL MAY ACCEPT THE ADDITIONAL EVIDENCES AND REMIT THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH. 10. WE HAVE HEARD LD D.R ON THIS ISSU E. WE NOTICE THAT THE ASSESSEE HAS GIVEN TO DISCOUNT TO OTHERS CATEGORY CUSTOMERS, WHO CONSISTED OF MAINLY CHARITABLE ORGANIZATIONS, GOVERNMENT SPONSORED HEALTH CHECKUP CAMPS ETC. WE NOTICE THAT THE LD CIT(A) HAS CONFIRMED THE DEMAND RAISED BY THE AO I N RESPECT OF THIS CATEGORY MAINLY FOR THE REASON THAT THE ITA NO.5044/M/13 AND 3872/MUM/2013 8 ASSESSEE DID NOT FURNISH RELEVANT DETAILS BEFORE THE AO. EVEN THE ADDITIONAL EVIDENCES FURNISHED BEFORE LD CIT(A) WERE NOT ADMITTED BY HIM. THUS, WE NOTICE THAT THE ADDITIONAL EVIDENCES AND RELATE D EXPLANATIONS HAVE NOT BEEN EXAMINED BY ANYONE. HENCE, IN THE INTEREST OF NATURAL JUSTICE, WE ADMIT THE ADDITIONAL EVIDENCES AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE SAME AFRESH BY DULY CONSIDERING THE ADDITIONAL EVI DENCES AND EXPLANATIONS OF THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 11. IN THE APPEAL FILED BY THE DEPARTMENT, THE REVENUE IS QUESTIONING THE DECISION OF LD CIT(A) IN HOLDING THAT THE TRANSACTIONS HAVE BEEN ENTERED BETWEE N THE ASSESSEE AND THE HOSPITALS/LABORATORIES ON PRINCIPAL TO PRINCIPAL BASIS AND HENCE THERE IS NO REQUIREMENT OF DEDUCTING TAX AT SOURCE ON THE DISCOUNT GIVEN BY THE ASSESSEE TO THEM. 12. WE HEARD THE PARTIES ON THIS ISSUE. AT THE TIME OF HEARING, THE LD A.R TOOK US THROUGH A COPY OF AGREEMENT ENTERED BETWEEN THE ASSESSEE AND ONE OF THE HOSPITALS. HE SUBMITTED THAT THE SAID AGREEMENT CLEARLY PROVIDE THAT THE RELATIONSHIP IS ON PRINCIPAL TO PRINCIPAL BASIS. HE FURTHER SUBMITTED THAT, WHEN THE PAT IENTS APPROACH THE HOSPITAL/LABORATORY FOR CARRYING OUT INVESTIGATION, THEY DO NOT INSIST THAT THE TEST SHOULD BE CONDUCTED THROUGH THE ASSESSEE ONLY. HE SUBMITTED THAT THE HOSPITALS/LABORATORIES HAVE PREROGATIVE TO CONDUCT THE TESTS ON ITS OWN OR IT MAY SEND THE SAMPLES TO ANY ONE OF THE LABORATORIES THEY CHOOSE. HE FURTHER SUBMITTED THAT THE TEST REPORT GIVEN BY THE ASSESSEE MAY NOT BE GIVEN AS IT IS TO THE PATIENTS AND THE HOSPITALS/LABORATORIES, IN TURN, MAY GIVE THE RESULTS IN THEIR LETTER PADS. HE FURTHER SUBMITTED THAT THE ASSESSEE CARRIES THE TESTS AT THE RATES AGREED BETWEEN THE ASSESSEE AND HOSPITALS/LABORATORIES PRIOR HAND. FURTHER THE ASSESSEE IS NOT AWARE ABOUT ITA NO.5044/M/13 AND 3872/MUM/2013 9 THE RATES THAT ARE CHARGED BY THE HOSPITALS/LABORATORIES TO THE PATIENTS. ACCORD INGLY, THE LD A.R SUBMITTED THAT THE FOREGOING POINTS WOULD SHOW THAT THE ASSESSEE IS MERELY RENDERING SERVICE TO THE HOSPITALS/LABORATORIES AT THE PREDETERMINED RATE, WHICH IS LESS THAN THE PRESCRIBED STANDARD RATE. HENCE THE TRANSACTIONS ARE CARRIED ON PRINCIPAL TO PRINCIPAL BASIS. THE LD A.R FURTHER SUBMITTED THAT THE RECIPIENTS OF SERVICE FROM THE ASSESSEE HAVE SOMETIMES DEDUCTED TAX AT SOURCE U/S 194J OF THE ACT TREATING THE SERVICES PROVIDED BY THE ASSESSEE AS PROFESSIONAL SERVICES. THE LD A.R ALS O PLACED RELIANCE ON THE FOLLOWING CASE LAW: - (A) M.S. HAMEED VS. DIRECTOR OF STATE LOTTERIES (249 ITR 186)(KER), WHEREIN IT WAS HELD THAT THE SECTION SHALL BECOME INAPPLICABLE WHEN THE LOTTERY TICKETS ARE GIVEN AT A DISCOUNT AND THERE IS NO PAYMENT OF C OMMISSION. THE HIGH COURT FURTHER HELD THAT THERE IS NO PAYMENT IN CASH OR BY CHEQUE AND THE GOVERNMENT NEVER CREDITED ANY INCOME TO THE ACCOUNT OF THE PERSONS LIKE THE PETITIONER. (B) BHARTI AIRTEL LTD VS. DCIT (228 TAXMAN 219)(KAR), WHEREIN IT WAS H ELD THAT THE SIM CARDS AND PREPAID RECHARGE COUPONS SOLD BY THE ASSESSEE TELECOM OPERATOR TO THE DISTRIBUTORS AT A DISCOUNTED RATE WOULD NOT ATTRACT TDS LIABILITY U/S 194H OF THE ACT, SINCE THERE WAS NO PAYMENT OF COMMISSION OR BROKERAGE. (C) CIT VS. QAT AR AIRWAYS (332 ITR 253)(BOM), WHEREIN IT WAS HELD THAT THE TDS WAS NOT DEDUCTIBLE WHEN THE AGENT IS AUTHORIZED TO SELL TICKETS AT A DISCOUNT WITHIN THE PRESCRIBED RANGE. 13. THUS, WE NOTICE THAT THE MAIN CONTENTION OF THE ASSESSEE IS THAT IT IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE DISCOUNT PAID TO THE ITA NO.5044/M/13 AND 3872/MUM/2013 10 HOSPITALS/LABORATORIES, SINCE THE RELATIONSHIP BETWEEN THEM IS ON PRINCIPAL TO PRINCIPAL BASIS. 14. WE NOTICE THAT THE AO HAS CONSIDERED THE RELATIONSHIP BETWEEN THE HOSPITALS/LABORATORIES AS AGENT - PRINCIPAL RELATIONSHIP ON THE FOLLOWING REASONING: - (A) THERE IS DIRECT RELATIONSHIP BETWEEN THE ASSESSEE AND PATIENTS. THE HOSPITALS/LABORATORIES AND THE COLLECTION REPRESENTATIVES ARE THE INTERMEDIARIES BETWEEN THE ASSESSEE AND PATIENTS. (B) THE HOSPITALS/LABORATORIES ARE NOT RESPONSIBLE FOR ANY RISK OR FOR FAULTY REPORTS, EVEN THOUGH THEY HAVE RAISED BILLS UPON THE PATIENTS. THE ASSESSEE IS FULLY RESPONSIBLE FOR THE DEFECTS IN THE TEST REPORT. THE ASSESSEE IS ISSUING THE TEST REPORT IN ITS NAME. (C) SINCE THE ASSESSEE HAS PRESCRIBED STANDARD CHARGES FOR EACH OF THE TESTS, IT CANNOT BE SAID THAT THE HOSPITALS/LABORATORIES ARE FREE TO CHARGE ANY AMOUNT ON THE PA TIENTS. (D) THE HOSPITALS/LABORATORIES SHOULD HAVE CREDITED IN ITS BOOKS OF ACCOUNT THE AMOUNT OF DISCOUNT RECEIVED FROM THE ASSESSEE. HENCE, EVEN IF THE ASSESSEE HAS NOT RECORDED THE DISCOUNT PAYMENT, THE SAME WOULD NOT MAKE ANY DIFFERENCE. (E) THE AO HAS MADE THE FOLLOWING OBSERVATIONS IN CONCLUSION: - THE ARRANGEMENT BETWEEN THE HOSPITAL AND THE ASSESSEE COMPANY IS THAT OF PROVIDING SAMPLES OF IN - HOUSE PATIENTS OF HOSPITALS FOR DIAGNOSTIC TESTS TO THE ASSESSEE COMPANY. THE HOSPITAL RECOVE RS THE TESTING CHARGES FROM THE PATIENTS AS PER FIXED PRICE LIST PROVIDED BY THE ASSESSEE COMPANY. THE TESTING CHARGES COLLECTED BY THE HOSPITAL ARE FOR THE ASSESSEE COMPANY AND THE HOSPITAL IS ALLOWED TO RETAIN CERTAIN ITA NO.5044/M/13 AND 3872/MUM/2013 11 PERCENTAGE AS ITS COMMISSION AND RE MIT THE BALANCE TO THE ASSESSEE COMPANY. THIS ARRANGEMENT OF WITHHOLDING CERTAIN PERCENTAGE OUT OF TESTING CHARGES COLLECTED BY THE HOSPITALS FROM THE PATIENTS AND PAYABLE TO ASSESSEE COMPANY IS NOTHING BUT A PAYMENT MADE TO HOSPITALS IN ADVANCE BY THE AS SESSEE COMPANY BEFORE REMITTANCE OF NET TESTING CHARGES TO IT BY THE HOSPITAL. IT IS CLEAR FROM SECTION 194H THAT PAYMENT INCLUDES CREDIT OF SUCH SUM TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF CHEQUE OR DRAFT OR BY ANOTHER MODE. THE ASSESSEE COMPANY RECEIVES REMITTANCE OF THE TESTING CHARGES AFTER DEDUCTION OF COMMISSION (DISCOUNT) BY THE HOSPITAL, ACCOUNTS FOR THE FULL AMOUNT AS RECEIVE FROM THE PATIENT WHOSE TEST WAS UNDERTAKEN, CREDITING NET REMITTAN CE RECEIVED IN THEIR ACCOUNT AND SIMULTANEOUSLY CREDITING THE ACCOUNT OF THE HOSPITAL BY THE AMOUNT OF COMMISSION (DISCOUNT) PAID. IRRESPECTIVE OF THE PATTERN OF ACCOUNT MAINTAINED BY THE ASSESSEE COMPANY, WHAT HAPPENS WHEN THE HOSPITAL PAYS TESTING CHARG ES NET OF DISCOUNTING COLLECTED FROM THE PATIENT IS THAT THE HOSPITAL SIMULTANEOUSLY GETS PAID DISCOUNT AT A FIXED PERCENTAGE WHICH IT IS FREE TO APPROPRIATE AS ITS INCOME. ACCORDINGLY T HE AO HELD THAT THE DISCOUNT PAID TO THE HOSPITALS/LABORATORIES IS I N THE NATURE OF COMMISSION, WHICH IS LIABLE TO FOR DEDUCTION AT SOURCES U/S 194H OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE, HE RAISED DEMAND UPON THE ASSESSEE U/S 201 (1) AND 201(1A) OF THE ACT. T HE LD CIT(A) , HOWEVER, HAS DELETE D THE DEMAND BY HOLDING THAT THE NATURE OF RELATIONSHIP BETWEEN THE ASSESSEE AND HOSPITALS/LABORATORIES IS ON PRINCIPAL T O PRINCIPLE RELATIONSHIP AND HENCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX SOURCE . 15. THE QUESTION THAT REQUIRES EXAMINATION I S WHAT IS THE NATURE OF RELATIONSHIP? THERE SHOULD NOT BE ANY DISPUTE THAT THERE IS NO QUESTION OF DEDUCTING TAX AT SOURCE, IF THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE HOSPITALS/LABORATORIES IS ON PRINCIPAL TO PRINCIPAL BASIS. HOWEVER, IT IS REQUI RED TO BE SEEN AS TO WHETHER THE TRANSACTIONS WERE ENTERED AT ALL TIMES ON PRINCIPAL TO PRINCIPAL BASIS OR NOT. WE NOTICE THAT THE TESTING ITA NO.5044/M/13 AND 3872/MUM/2013 12 SERVICES PROVIDED BY THE ASSESSEE FALL IN THE CATEGORY OF SERVICES AND THEY CANNOT FALL IN THE CATEGORY OF SALE OF PRODUCTS. 16. THE ANSWER TO THE ABOVE SAID QUESTION, IN OUR VIEW, WOULD DEPEND UPON THE QUESTION AS TO WHETHER THE HOSPITALS/LABORATORIES ARE ACTING AS MERE LINK BETWEEN THE PATIENTS AND THE ASSESSEE OR NOT. IF THE HOSPITALS/LABORATORIES ACT AS MERE LINK BETWEEN THE TWO, THEN THE DISCOUNT GIVEN BY THE ASSESSEE WOULD DEFINITELY FALL UNDER THE CATEGORY OF COMMISSION LIABLE FOR DEDUCTION U/S 194H OF THE ACT. ON THE CONTRARY, IF THE HOSPITALS/LABORATORIES ARE TRANSACTING WITH THE ASSESSEE IN AN INDEPE NDENT MANNER AND THE PATIENTS ARE IN NO WAY CONCERNED WITH THE SAME, THEN THE ASSESSEE CAN BE SAID TO BE SERVING THE HOSPITALS/LABORATORIES AT THEIR REQUEST, IN WHICH CASE, THE RELATIONSHIP BETWEEN THEM SHALL BE ON PRINCIPAL TO PRINCIPAL BASIS. 1 7 . AT THIS JUNCTURE, WE MAY GAINFULLY REFER TO THE DECISION RENDERED BY T HE HON'BLE SUPREME COURT IN THE CASE OF BHOPAL SUGAR INDUSTRIES LTD VS. STO AIR 1977 SUPREME COURT 1275, WHEREIN THE HONBLE APEX COURT HAS EXPLAINED ABOUT CONTRACT OF SALE AND CONTR ACT OF AGENCY. THE HEAD NOTES OF THE SAID JUDGMENT ARE EXTRACTED BELOW: - IN A CONTRACT OF SALE, TITLE TO PROPERTY IN THE GOODS PASSES ON TO THE BUYER ON DELIVERY OF THE GOODS FOR A PRICE PAID OR PROMISED. ONCE THIS HAPPENS THE BUYER BECOMES OWNER OF T HE PROPERTY AND THE SELLER HAS NO VESTIGE OF TITLE LEFT IN THE PROPERTY. HAVING REGARD TO THE COMPLEXITIES OF MODERN TIMES THE CONCEPT OF SALE HAS UNDERGONE A CHANGE AND MADE A DEPARTURE FROM THE OLD DOCTRINE OF LAISSEZ FAIRE. EVEN IF THE SELLER, BY AN A GREEMENT, IMPOSED A NUMBER OF RESTRICTIONS ON THE BUYER, SUCH FOR EXAMPLE AS, FIXING OF PRICE, SUBMISSION OF STATEMENT OF ACCOUNTS, AREA OF SALE AND SO ON THESE RESTRICTIONS WOULD NOT PER SE CONVERT A CONTRACT OF SALE INTO ONE OF AGENCY. ITA NO.5044/M/13 AND 3872/MUM/2013 13 A CONTRACT OF AG ENCY DIFFERS FROM A CONTRACT OF SALE IN AS MUCH AS AN AGENT, AFTER TAKING DELIVERY OF THE PROPERTY, DOES NOT SELL IT AS HIS OWN BUT SELLS IT AS THE PROPERTY OF THE PRINCIPAL UNDER HIS INSTRUCTIONS AND DIRECTIONS. WHILE INTERPRETING THE TERMS OF AN AGREEM ENT, THE COURT HAS TO LOOK TO THE SUBSTANCE RATHER THAN THE FORM OF THE AGREEMENT. USE OF WORDS LIKE AGENT OR AGENCY, BUYER AND SELLER IS NOT SUFFICIENT TO LEAD TO THE INFERENCE THAT THE PARTIES DID IN FACT INTEND THAT THE SAID STATUS WOULD BE CON FERRED. IN CERTAIN TRADES, THE WORD AGENT IS OFTEN USED WITHOUT ANY REFERENCE TO THE LAW OF PRINCIPAL AND AGENT. THUS, THE ESSENCE OF CONTRACT OF AGENCY IS THAT THE AGENT DOES NOT SELL THE GOODS AS HIS OWN BUT SELLS THE SAME AS THE PROPERTY OF THE P RINCIPAL UNDER HIS INSTRUCTIONS AND DIRECTORS. THUS AN AGENT ALWAYS ACTS ON BEHALF OF HIS PRINCIPAL ONLY AND THE BENEFITS OF THE ACTIVITIES DONE BY THE AGENT WOULD BE REAPED BY THE PRINCIPAL. FURTHERMORE, SINCE THE AGENT IS NOT THE OWNER OF GOODS, LOSS, IF ANY, SUFFERED BY THE AGENT IS TO BE BORNE BY THE PRINCIPAL AND THE AGENT SHALL BE INDEMNIFIED BY THE PRINCIPAL. THE PAYMENT RECEIVED BY THE AGENT FOR THE SERVICES RENDERED TO THE PRINCIPAL IS UNDERSTOOD AS COMMISSION. THE HONBLE GUJARAT HIGH COURT HAS FOLLOWED THE ABOVE SAID DECISION OF THE HONBLE SUPREME COURT (SUPRA) IN DECIDING THE ISSUE BEFORE IT IN THE CASE OF AHMEDABAD STAMP VEDORS ASSOCIATION. FOLLOWING OBSERVATIONS MADE BY HONBLE GUJARAT HIGH COURT ARE ALSO RELEVANT HERE: - IT IS ALSO NOT POSSIBLE TO ACCEPT THE CONTENTIONS OF MR. NAIK FOR THE REVENUE THAT THE DEFINITION OF COMMISSION OR BROKERAGE AS CONTAINED IN THE EXPLANATION TO SECTION 194H IS SO WIDE THAT IT WOULD INCLUDE ANY PAYMENT RECEIVABLE, DIRECTLY OR INDIRECTLY, FOR SERVICES I N THE COURSE OF BUYING OR SELLING OF GOODS AND THAT, THEREFORE, THE DISCOUNT AVAILED OF BY THE STAMP VENDORS CONSTITUTES COMMISSION OR BROKERAGE WITHIN THE MEANING OF SECTION 194H. IF THIS CONTENTION WERE TO BE ACCEPTED, ALL TRANSACTIONS OF SALE FROM A MA NUFACTURER TO A WHOLESALER OR FROM A WHOLESALER TO A SEMI WHOLESALER OR FROM SEMI WHOLESALER TO A RETAILER WOULD BE COVERED BY SECTION 194H. TO FALL ITA NO.5044/M/13 AND 3872/MUM/2013 14 WITHIN THE AFORESAID EXPLANATION, THE PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, IS BY A PERS ON ACTING ON BEHALF OF ANOTHER PERSON (I) FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES), OR (II) FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS, OR (III) IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THIN G. THE ELEMENT OF AGENCY IS TO BE THERE IN A CASE OF ALL SERVICES OR TRANSACTIONS CONTEMPLATED BY EXPLANATION (I) TO SECTION 194H. IF A CAR DEALER PURCHASES CARS FROM THE MANUFACTURER BY PAYING PRICE LESS DISCOUNT, HE WOULD BE THE PURCHASER AND NOT THE A GENT OF THE COMPANY, BUT IN THE COURSE OF SELLING CARS, HE MAY ENTER INTO A CONTRACT OF MAINTENANCE DURING THE WARRANTY PERIOD WITH THE CUSTOMER (PURCHASER OF CAR) ON BEHALF OF THE COMPANY. HOWEVER, SUCH SERVICES RENDERED BY THE DEALER IN THE COURSE OF SE LLING CARS DOES NOT MAKE THE ACTIVITY OF SELLING CARS ITSELF AN ACT OF AGENT OF THE MANUFACTURER WHEN THE DEALINGS BETWEEN THE COMPANY AND THE DEALER IN THE MATTER OF SALE OF CARS ARE ON PRINCIPAL TO PRINCIPAL BASIS. THIS IS JUST AN ILLUSTRATION TO CLAR IFY THAT A SERVICE IN THE COURSE OF BUYING OR SELLING OF GOODS HAS TO BE SOMETHING MORE THAN THE ACT OF BUYING OR SELLING OF GOODS. . THUS, THE ELEMENT OF AGENCY IS AN ESSENTIAL REQUIREMENT IN ORDER TO CHARACTERIZE A PAYMENT MADE FOR SERVICES PROVIDED AS COMMISSION. WE MAY ALSO REFER TO THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF HARIHAR COTTON PROCESSING FACTORY VS. CIT (1960 ) (39 ITR 594), WHEREIN THE HONBLE HIGH COURT HAS OBSERVED AS UNDER: - THE EXPRESSION COMMISSI ON HAS NO TECHNICAL MEANING BUT BOTH IN LEGAL AND COMMERCIAL ACCEPTATION OF THE TERM IT HAS DEFINITE SIGNIFICATION AND IS UNDERSTOOD AS AN ALLOWANCE FOR SERVICE OR LABOUR IN DISCHARGING CERTAIN DUTIES SUCH AS FOR INSTANCE OF AN AGENT, FACTOR, BROKER OR AN Y OTHER PERSON WHO MANAGES THE AFFAIRS OR UNDERTAKES TO DO SOME WORK OR RENDERS SOME SERVICES TO ANOTHER. MOSTLY IT IS A PERCENTAGE ON PRICE OR VALUE OR UPON THE AMOUNT OF MONEY INVOLVED IN ANY TRANSACTION OF SALE OR SERVICE OR THE QUANTUM OF WORK INVOLVED IN A TRANSACTION. IT CAN BE FOR A VARIETY OF SERVICES AND IS OF THE NATURE OR RECOMPENSE OR REWARD FOR SUCH SERVICES. REBATE, ON THE OTHER HAND, IS A REMISSION OR A PAYMENT BACK AND OF THE NATURE OF DEDUCTION FROM THE GROSS AMOUNT. IT IS SOMETIMES ITA NO.5044/M/13 AND 3872/MUM/2013 15 SP OKEN OF AS A DISCOUNT OR DRAW - BACK. THE DICTIONARY MEANING OF THE TERM INCLUDES A REFUND TO THE PURCHASER OF A THING OR COMMODITY OF A PORTION OF THE PRICE PAID BY HIM. IT IS NOT CONFINED TO A TRANSACTION OF SALE AND INCLUDES ANY DEDUCTION OR DISCOUNT FR OM A STIPULATED PAYMENT, CHARGE OR RATE. IT NEED NOT NECESSARILY BE TAKEN OUT IN ADVANCE OF PAYMENT BUT MAY BE HANDED BACK TO THE PAYER AFTER HE HAS PAID THE STIPULATED SUM. THE REPAYMENT NEED NOT BE IMMEDIATE. IT CAN BE MADE LATER AND IN CASE OF PERSON S WHO HAVE CONTINUOUS DEALINGS WITH ONE ANOTHER IT IS NOTHING UNUSUAL TO DO SO. THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT (SUPRA) ALSO CLARIFIES THAT THE COMMISSION IS IN THE NATURE OF RECOMPENSE OR REWARD FOR THE SERVICES RENDERED. THE D ECISIONS RELIED UPON BY THE ASSESSEE ALSO REITERATE THIS PRINCIPLE ONLY. 1 8 . BEFORE US, THE LD A.R PLACED HEAVY RELIANCE ON THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND HOSPITALS TO CONTEND THAT THE SAID AGREEMENT CLEARLY PROVIDES THAT THE RELATIONSHIP IS ON PRINCIPAL TO PRINCIPAL' BASIS. IN OUR VIEW, THE AGREEMENT ENTERED BETWEEN THE PARTIES ALONE CANNOT BE CONSIDERED TO BE THE DETERMINATIVE FACTOR. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE SUBSTANCE WILL PREVAIL OVER THE FORM. HEN CE, IN OUR VIEW, WHAT IS REQUIRED TO BE SEEN TO RESOLVE THIS ISSUE IS WHETHER THE HOSPITALS/LABORATORIES HAVE AVAILED THE SERVICES OF THE ASSESSEE ON THEIR OWN WITHOUT THE INSTRUCTIONS FROM THE CONCERNED PATIENTS OR NOT. ACCORDINGLY , (A) IF THE HOSPITAL S/LABORATORIES HAVE AVAILED THE SERVICES OF THE ASSESSEE ON THE SPECIFIC INSTRUCTIONS OF THE PATIENTS, THEN THEY SHOULD BE CONSIDERED AS MERE AGENTS, IN WHICH CASE THE DISCOUNT PAID TO THEM SHOULD BE CONSIDERED AS COMMISSION LIABLE FOR DEDUCTION U/S 194H OF THE ACT. ITA NO.5044/M/13 AND 3872/MUM/2013 16 (B) IF THE HOSPITALS/LABORATORIES HAVE AVAILED THE SERVICES OF THE ASSESSEE ON THEIR OWN, WITHOUT ANY INSTRUCTIONS FROM THE PATIENTS, THEN IT SHOULD BE CONSIDERED THAT THE TRANSACTIONS HAVE BEEN CARRIED ON PRINCIPAL TO PRINCIPAL BASIS, IN W HICH CASE THE DISCOUNT GIVEN BY THE ASSESSEE CANNOT BE CONSIDERED TO BE COMMISSION PAYMENTS. THUS, IN OUR VIEW, THE HOSPITALS/LABORATORIES ARE DOING DUAL ROLES. THIS IS PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEE IS ALSO WIDELY ADVERTISING ITS SE RVICES THROUGH THE MEDIA AND ALSO THROUGH DISPLAY OF THEIR NAME BEFORE THE LABORATORIES/HOSPITALS. FURTHER, I F ANY OF THE LABORATORY IS DEDICATED ONLY FOR THE ASSESSEE, THEN THE DISCOUNT PAID TO SUCH KIND OF LABORATORIES WOULD FALL IN THE CATEGORY OF COM MISSION ONLY, SINCE THE PATIENTS SHOULD BE APPROACHING THEM TO GET THEIR TESTS CONDUCTED THROUGH THE ASSESSEE. 1 9 . WE NOTICE THAT THE NEITHER THE ASSESSEE NOR THE TAX AUTHORITIES HAVE BROUGHT ON RECORD (A) AS TO HOW THE HOSPITALS/LABORATORIES HAVE APPROACHED THE ASSESSEE, I.E. WHETHER ON THE SPECIFIC INSTRUCTION OF THE PATIENT OR ON ITS OWN. (B) WHETHER THE LABORATORIES/HOSPITALS ARE DEDICATED TO THE ASSESSEE ONLY OR NOT , I.E., WHETHER THEY HAVE SUCH KIND OF BUSINESS LINK WITH THE COMPETITORS OF TH E ASSESSEE OR NOT. IT IS ALSO REQUIRED TO BE SEEN AS TO WHETHER THE TEST REPORTS ARE GIVEN BY THE ASSESSEE DIRECTLY TO THE PATIENTS REFERRED TO BY THE HOSPITALS/LABORATORIES OR THEY ARE ISSUED TO THE HOSPITALS/LABORATORIES, WHO IN TURN ISSUE THE TEST RESUL TS IN THEIR OWN LETTER HEADS. THIS FACTOR WILL ALSO HELP TO DECIDE ABOUT THE NATURE OF RELATIONSHIP. IN OUR VIEW, ALL THE ABOVE ITA NO.5044/M/13 AND 3872/MUM/2013 17 FACTS NEED TO BE EXAMINED BEFORE ANSWERING THE QUESTION ABOUT THE NATURE OF RELATIONSHIP BETWEEN THE ASSESSEE AND HOSPITALS/LAB ORATORIES. SINCE THE ISSUE HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES BY CONSIDERING THE BASIS FACTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT T HIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME IN THE LIGHT OF DISCUSSIONS MADE SUPRA. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE RELEVANT FACTS AND EXPLANATIONS RELEVANT TO THIS ISSUE AND ALSO THAT MAY BE CALLED FOR BY THE AO. 20. THE LD A.R SUBMITTED THAT THE HOSPITALS/LABORATORIES HAVE DECLARED THE DISCOUNT AS THEIR RESPECTIVE INCOME AND PAID TAX THEREON . ACCORDINGLY HE SUBMITTED THAT THE DEMAND U/S 201(1) SHOULD NOT BE RAISED AS PER THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES LTD (293 ITR 266)(SC). THERE IS MERIT IN THIS CONTENTIONS OF LD A.R. ACCORDINGLY, WE DIRECT THE AO TO DEC IDE THE ISSUE IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME COURT REFERRED ABOVE. 2 1 . THE REVENUE HAS URGED ONE MORE ISSUE VIZ., WHETHER THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE MAINTENANCE CHARGES PAID TO THE PROFESSIONALS FOR MAINTAINING THE MEDICAL EQUIPMENTS IS A PAYMENT FALLING IN THE CATEGORY OF CONTRACT PAYMENTS REQUIRING DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT OR A TECHN I CAL FEE PAYMENT REQUIRING DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT. THE ASSESSEE HAD DEDUCTED TAX AT SOURCE U/S 194C OF THE ACT. HOWEVER, THE AO HELD THAT THE ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE U/S 194J OF THE ACT AND ACCORDINGLY RAISED DEMAND U/S 201(1) /201(1A) OF THE ACT FOR SHORT DEDUCTION OF TAX AT SOURCE. ITA NO.5044/M/13 AND 3872/MUM/2013 18 2 2 . BEFORE LD CIT(A), THE ASSE SSEE PLACED RELIANCE ON THE CIRCULAR NO.715 DATED 08 - 08 - 1995 ISSUED BY THE CBDT, WHEREIN THE BOARD HAD CLARIFIED THIS ISSUE AS UNDER IN THE ANSWER GIVEN TO Q. NO.29: - Q.NO.29: - WHETHER A MAINTENANCE CONTRACT INCLUDING SUPPLY OF SPARES WOULD BE COVERED UNDER SECTION 194C OR 194J OF THE ACT? ANS: - ROUTINE, NORMAL MAINTENANCE CONTRACTS WHICH INCLUDES SUPPLY OF SPARES WILL BE COVERED UNDER SECTION 194C. HOWEVER, WHERE TECHNICAL SERVICES ARE RENDERED, THE PROVISIONS OF SECTION 194J WILL APPLY IN REGARD TO TAX DEDUCTION AT SOURCE. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION RENDERED BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF LUFTHANSA CARGO INDIA (P) LTD VS. DCIT (91 ITD 133) AND ALSO DECISIONS RENDERED IN THE CASE OF KANDLA PORT TRUST VS. DCIT (50 SOT 109)(RAJKOT) AND TATA AIG GENERAL INSURANCE CO. LTD (43 SOT 215)(MUM). IN VIEW OF THE ABOVE, THE LD CIT(A) HELD THAT THE ASSESSEE HAS NOT COMMITTED ANY DEFAULT BY DEDUCTING TAX AT SOURCE U/S 194C OF THE ACT ON THE ROUTINE MAINTENANCE CHARGES PAID IN RESPECT OF MEDICAL EQUIPMENTS. 2 3 . WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. BEFORE US, THE REVENUE COULD NOT PRODUCE ANY MATERIAL TO SHOW THAT THE CLARIFICATIONS ISSUED BY THE CBDT DO NOT APPLY TO THE FACTS PREVAILING IN THIS CASE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION RENDERED BY LD CIT(A) ON THIS ISSUE. ITA NO.5044/M/13 AND 3872/MUM/2013 19 24 . IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE AND REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 23RD SEPT, 2015 23RD SEPT , 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 23RD SEPT,2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI