Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 88676 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 7 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-03-2015
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
15-12-2014
Assessment Year
2010-2011
Appeal Filed On
05-08-2013
Judgement Text
, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , .. , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER ITA NOS.5389 & 5390/MUM/2013 ASSESSMENT YEARS: 2009-10 & 2010-11 ITO (TDS)3(4), 10THE FLOOR, ROOM NO.1011, SMT. K.G.M. AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002 / VS. M/S THYROCARE TECHNOLOGIES LTD., D-37/1, TTC, MIDC, TURBHE, NAVI MUMBAI-400703 ( / REVENUE) ( /ASSESSEE) P.A. NO. AABCT2577P / REVENUE BY : SHRI SACHIDANAND DUBEY-DR / ASSESSEE BY) SHRI R. MURLIDHAR ! ' / DATE OF HEARING : 13/02/2015 DATE OF ORDER : ! ' / 31/03/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : BOTH THESE APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE IMPUGNED ORDERS DATED 29/05/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, ON THE FOLLOWING COMMO N GROUNDS:- THYROCARE TECHNOLOGIES LTD 2 I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN NOT CORRECTLY APPRECIATING THE NATURE OF T HE PAYMENT MADE TO TSPS THAT THERE IS A PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND TSPS. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN NOT CORRECTLY APPRECIATING THE NATURE OF T HE PAYMENT MADE TO TSPS AS THE SAME IS IN THE NATURE O F COMMISSION OR BROKERAGE WHICH IS EVIDENT FROM THE AFFIDAVIT CUM UNDERTAKING EXECUTED BY THE TSPS AND THEIR APPLICATION FORMS FOR APPOINTMENT AS TSPS. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN NOT CORRECTLY APPRECIATING THE NATURE OF T HE PAYMENT MADE TO TSPS AS THE SAME IS IN THE NATURE O F COMMISSION OR BROKERAGE WHICH IS EVIDENT FROM THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY U/S 133A OF THE INCOME TAX ACT, 1961, ON 14/10/2011. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN DELETING THE INTEREST LEVIED U/S 201(1A) O F THE INCOME TAX ACT, 1961. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD, SHRI SACHIDANAND DUBEY, LD. DR, AND SHRI R. MURALIDHAR, LD. COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENT ON B EHALF OF THE REVENUE IS BROADLY IN SUPPORT OF ASSESSMENT ORDER B Y FURTHER CONTENDING THAT THE LD. FIRST APPELLATE AUTHORITY D ID NOT THYROCARE TECHNOLOGIES LTD 3 CORRECTLY APPRECIATE THE NATURE OF PAYMENTS MADE TO TSPS THAT THERE IS A PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND TSPS AS THE SAME ARE IN THE NA TURE OF COMMISSION OR BROKERAGE WHICH IS EVIDENT FROM THE S TATEMENTS RECORDED DURING THE COURSE OF SURVEY U/S 133A OF TH E INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON 14/10/2011. IT WAS PLEADED THAT DURING THE COURSE OF SURVEY, STATEMENT OF SHRI A. SUNDARARAJU, EXECUTOR DIRECTOR AND SHRI SACHIN SALV I, MANAGER FINANCE WAS RECORDED ON OATH FOR WHICH OUR ATTENTION WAS INVITED TO PAGE-2 ONWARDS OF THE ASSESSMENT ORD ER BY SUBMITTING THAT SHRI SACHIN SALVI TENDERED DIFFEREN TLY WHICH HAS BEEN OVERLOOKED BY THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI R. MURLIDHAR, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. DURING ARGUMENT, THE BENCH RAISED A QUERY TO THE LD. COUNSEL FOR THE ASSESSEE TO EXPLAIN THE FOL LOWING POINTS. 1. NATURE AND TYPE OF CONTRACT WITH (A) THYROCARE S ERVICE PROVIDER AND (B) THYROCARE AGGREGATOR. 2. WHETHER, THE ASSESSEE AND AFOREMENTIONED CONTRAC TOR DEDUCTED 10% TAX AT SOURCE. 3. HOW MUCH TAX WAS DEDUCTED BY THE ASSESSEE AND IT S CLIENTS. 4. HOW MUCH INCOME WAS DECLARED BY THE ASSESSEE. 5. HOW MANY PERSONS/CLIENTS/CONTRACTORS DEDUCTED TA X AT SOURCE. 6. HOW MUCH EXPENSES WERE CLAIMED BY THE ASSESSEE ON PURCHASE OF PROMOTIONAL MATERIAL AND HOW MUCH MONEY WAS TAKEN BY THE ASSESSEE FROM THE CLIENTS/CONTRACTORS/SERVIC E PROVIDERS/ AGGREGATORS. THYROCARE TECHNOLOGIES LTD 4 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, OBSERVATION MADE IN THE ASSESSMENT ORDER, CONCLUSIO N DRAWN IN THE IMPUGNED ORDER AND FIND THAT THE ASSESSEE DI D NOT SATISFACTORILY EXPLAIN THE AFOREMENTIONED QUERIES R AISED BY THE BENCH. EVEN, NEITHER THE LD. ASSESSING OFFICER NOR THE COMMISSIONER OF INCOME TAX (APPEALS) HAS EXAMINED T HE AFOREMENTIONED POINTS, WHICH GOES TO THE ROOTS OF T HE MATTER. WE HAVE ALSO GONE THROUGH THE STATEMENT TENDERED BY SHRI SACHIN SALVI, RECORDED BY THE DEPARTMENT, WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE AND ANALYSIS:- 3 . STATEMENT OF SHRI SACHIN SALVI . 'Q. 4 PLEASE EXPLAINS THE MODUS OPERANDI OF AND BUS INESS MODULE OF THE COMPANY IN DETAIL. ANS. THE MODUS OPERANDI OF AND BUSINESS MODULE OF THE COMPANY IS AS FOLLOWS: THYROCARE TECHNOLOGIES LIMITED (TTL) IS A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES AC T, 1956. TTL IS HAVING NETWORK OF THYROCARE SERVICE PROVIDER S (TSPS) ALL OVER THE COUNTRY. TSPS ARE ENTITIES, HOSPITALS, NURSING HOMES, ETC, E NTITIES WHICH ARE HAVING NOT ASSOCIATED WITH TTL. TO BECOME A TSP THE ENTITY IS REQUIRED TO FOLLOW STRINGENT TERMS & CONDITIONS WHEREIN STANDARD OPERATING PROCEDURES HAVE BEEN PRESCRIBED BY TTL FOR COLLECTING SAMPLE FROM THE PA TIENT, DISPATCH OF THE SAMPLE TO TTL, ETC. IT IS PERTINENT HERE TO NOTE THAT NO SINGLE SAMPLE OF THE PATIENT IS DIRECTLY COLLECTED BY TTL. EACH AND EVER Y SAMPLE PROCESSED AT TTL HAS TO COME THROUGH PROPER PROCEDU RE PRESCRIBED AND VIA TSPS. TTL IS NOT 'CONDUCTING ANY DIRECT TEST ON THE PATIENTS AND THEREFORE TO TTL THE CUSTO MERS ARE TSPS. THE B2B RATES FOR TSPS ARE FIXED AND CHARGED FROM THE RESPECTIVE TSPS ON THE BASIS OF SAMPLES PROCESS ED. TO CONTROL CHARGING OF HIGH PRICES FOR TESTS AS COMPARED TO THE COMPETITORS AND TO SAFEGUARD THE INTEREST OF THE GE NERAL PUBLIC TTL HAS DEFINED CATALOGUE RATES AND THE TSPS SHALL NOT CHARGE ANY AMOUNT ABOVE THE CATALOGUE RATES. TH E BILLING TO TSP IS DONE ONLY AS PER THE B2B RATES. THE TSPS ARE COLLECTING SAMPLES FROM THE PATIENTS. THE PATIENTS MAY BE WALK IN CUSTOMERS, NURSING HOMES, C LINICS, THYROCARE TECHNOLOGIES LTD 5 ETC. THESE PATIENTS ARE THE CUSTOMERS OF THE RESPEC TIVE TSPS. THE TSPS ARE REQUIRED TO SEND THE SAMPLE IN FROZEN ICE PACK TO TTL, THERE IS SOP PRESCRIBED FOR SAFEGUARDING TH E CONTENT AND VOLUME OF THE SAMPLES. THE SAMPLES ARE GENERALL Y REACHING TO TTL ON THE SAME DAY AFTER 6.00 PM DAILY . WHILE DISPATCHING THE SAMPLES THE RESPECTIVE TSPS ARE REQ UIRED TO DO WORK ORDER ENTRY SPECIFYING THEREIN THE DETAILS OF THE PATIENT, REFERRED DOCTORS NAME, TESTS ASKED FOR ETC. THE TSPS ARE REQUIRED TO AFFIX A UNIQUE BARCODE ON EACH AND EVERY SAMPLE SENT TO TTL FOR PROCESSING. THIS BARCODE IS THE MAIN IDENTITY TO TRACK ANY PARTICULAR SAMPLE. THE TSPS ARE EXPLAINED THE ENTIRE PROCEDURE WHICH THEY REQUIRE T O FOLLOW RIGIDLY FAILING WHICH THE COMPANY MAY CHARGE AND RE COVER FROM THEM NON-COMPLIANCE PENALTIES. AS SOON AS THE SAMPLE IS RECEIVED AT TTL END. THE SAME IS SCANNED AND THE BARCODE SIGHTING IS DONE FOR EACH AND EVERY SAMPLE TO BE PROCESSED. BASED ON THE BARCODE SIGHTI NG THE WORK ORDER ENTRY AND THE TEST PROPOSED TO BE DONE A RE MAPPED TO THE IDENTITY BARCODE. GENERALLY ENTIRE LA BORATORY PROCESSING OPERATION IS DONE IN THE NIGHT SHIFT ONL Y DUE TO ADMINISTRATIVE AND LOGISTIC CONSTRAINTS. ONCE THE B ARCODE SIGHTING IS DONE THE SAMPLES ARE PLACED IN .TRAY ON THE LABORATORY TRACK. THE TRACK TAKES CARE OF THE SAMPL ING BIFURCATION BASED ON THE TESTS PROPOSED AND THERE IS NO HUMAN INTERVENTION NEEDED OR REQUIRED IN THE ENTIRE PROCESSING OPERATION. THE TESTS ARE PERFORMED BY THE WHOLLY AUTOMATED MACHINES CALLED AS ANALYSERS. THE ANALYSERS ARE THE MACHINES DESIGNATED TO DO PARTICULAR TESTS. THE ANALYSERS TAKES THE QUANTITY OF SAMPLE ADDS REAGENT AND PROCESSES THE. SAMPLE AND GIVE RESULTS. THE RESULTS ARE MAPPED TO WORK ORDER ENTRY AND THUS BILLING IS DONE TO TSP FOR EACH ARID EVERY SAMPLE PROCESSED IN TTL. THE SAMPLES SOMETIMES ARE REJECTED BY THE ANALYSERS FOR WANT OF INSUFFICIENT QUANTITY OF SAMPLES, NOT PROPE RLY PACKED AND FOR OTHER REASONS. FOR WHICH TTL GIVES REBATES FOR THE CANCELLED TESTS. FOR CANCELLATION OF TESTS THEY MAY BE OTHER REASONS ALSO LIKE WRONG WO ENTRY, ERROR IN WO ENTRY FOR WHICH THE REBATES ARE GIVEN TOWARDS CANCELLED TESTS . IN CASE PROPER PROCEDURES ARE NOT ADHERED TO ON THE PART OF THE TSP THEY ARE PENALIZED FOR THE LAPSE. APART FROM THE SAME QC ARE CONDUCTED RANDOMLY ON THE SAMPLES PROCESSED IN TTL. THE SAMPLES PROCESSED ARE STORED IN. THE FROZEN CON DITION FOR AT LEAST 15 DAYS AFTER FIRST PROCESSING AND DUR ING THIS TIME THE DOCTORS REFERRING THE SAMPLE MAY ASK FOR A DDITIONAL TESTS ON THE SAME SAMPLE WHICH ARE DONE AS PER THE REQUISITION AND THE TSPS ARE BILLED. THYROCARE TECHNOLOGIES LTD 6 Q.10. ON PERUSAL OF THE AFFIDAVIT CUM UNDERTAKING OF HARDYESH SINGH GEHLOT, BHILUIARA, RAJASTHAN IT IS SEEN THAT THEY ARE AUTHORIZED TO COLLECT SAMPLES/SPECIMEN ON VARIOUS CONDITIONS STIPULATED BY YOU. THE OFFER LETTER GIVE N BY YOU STATES THAT YOU ARE AUTHORIZING THE COLLECTION CENT ERS/TSP AS FRANCHISEES OF THYROCARE. YOU ARE ALSO ALLOTTING SO URCE CODE TO THEM TO OPERATE AS YOUR FRANCHISEE. YOU ARE ALSO TAKING A SECURITY DEPOSIT FROM THEM. THEY ARE ALSO ISSUING T HE REPORTS ON YOUR LETTER HEAD. WHAT IS THE MARGIN EARNED BY T HEM FOR COLLECTING THE SAMPLES. ANS. TSPS ARE AUTHORIZED TO COLLECT SPECIMENS FROM THE PATIENTS AND THEY ARE BOUND TO SEND THE SAME TO LAB ORATORY FOR PROCESSING. THE SECURITY DEPOSIT IS TAKEN FROM THEM AGAINST THE CREDIT LIMIT GIVEN TO THEM AGAINST THE BILLING. NO BENEFITS PASSED ON TO THE TSPS FOR COLLECTING THE S AMPLES. THE TSPS ARE SENDING THE SPECIMENS TO TTL FOR WHICH THEY ARE BILLED AS PER THE AGREED B2B RATES AND AGAINST WHICH THE PAYMENTS ARE RECEIVED FROM THEM. THE TSPS ARE SEPAR ATE BUSINESS ENTITY OPERATING IN DISTANT PARTS OF THE C OUNTY AND HAVING NO RELATION WITH TTL. SINCE NONE OF THE PATI ENT IS DIRECTLY RELATED TO TTL, TTL CANNOT COMMENT ON THE MARGINS EARNED BY THEM AS THEY ARE DIFFERENT. AS MENTIONED HEREIN ABOVE THE B2B RATES FOR TSPS ARE FIXED AND CHARGED FROM THE RESPECTIVE TSPS ON THE BASIS O F SAMPLES PROCESSED. TO CONTROL CHARGING OF HIGH PRIC ES FOR TESTS AS COMPARED TO THE COMPETITORS AND TO SAFEGUA RD THE INTEREST OF THE GENERAL PUBLIC TTL HAS DEFINED CATALOGUE RATES AND THE TSPS SHALL NOT CHARGE ANY AMOUNT ABOVE THE CATALOGUE RATES. THE BILLING TO TSP IS DONE ONLY AS PER THE B2B RATES AND NO OTHER AMOUNT IS COLLECTED OR PAID TO TSP OVER OR BELOW THE SAME. Q.11 AS PER PARA NO.18 OF THE AFFIDAVIT} TSP IS NOT ALLO WED TO GIVE SAMPLES FOR TESTING TO ANY OTHER LABORATORI ES. IT SHOWS THAT THE TSP IS EXCLUSIVE AGENT. ANS. TSPS ARE NOT AGENT OF TTL THEY ARE SEPARATE ENTITY. TSPS ARE RESTRICTED FROM FORWARDING SAMPLES' TO ANY OTHE R COMPETITOR LABORATORY FOR THE REASON THAT THE PATIE NTS WHO ARE GOING TO THE RESPECTIVE TSPS FOR GETTING THE TH YROCARE TEST DONE ON THE UNDERSTANDING THAT THE TSP IS AUTH ORIZED THYROCARE SERVICE PROVIDER SHALL GET REPORTS OR SHA LL GET THEIR SPECIMENS PROCESSED FROM TTL ONLY FOR WH.ICH THEY HAVE BEEN REFERRED TO BY THE RESPECTIVE DOCTORS. Q.12 YOU HAVE PROVIDED TWO PRICE LISTS FOR THE TEST S BEING THYROCARE TECHNOLOGIES LTD 7 CONDUCTED BY THY RO CARE. ONE SHOWS THE PRICE YOU ARE CHARGING FROM THE FRANCHISEE AND OTHER ONE IS THE P RICE THAT IS CHARGED BY THE FRANCHISE FROM THE PATIENTS/CLIEN TS. THERE IS A MARGIN OF 100% GIVEN TO THE FRANCHISEE. PLEASE EXPLAIN THIS. ANS. THE TSPS ARE CHARGED AS PER THE B2B RATES. THE CATALOGUE PRICES ARE DEFINED AS THE PRICES BEYOND W HICH THE TSP SHALL NOT CHARGE TO THE GENERAL PATIENT. AS EXP LAINED HEREINABOVE THE ONLY INTENTION OF PRESCRIBING THE C ATALOGUE PRICE IS ONLY TO CONTROL CHARGING OF HIGH PRICES FO R TESTS AS COMPARED TO THE COMPETITORS AND TO SAFEGUARD THE IN TEREST OF THE GENERAL PUBLIC. WE COMPLETELY DENY THE STATEMENT THAT A MARGIN OF 100% IS GIVEN TO FRANCHISEE. NO MARGIN/ CONCESSION IS GIVEN TO THE TSPS. AS STATED HEREINABOVE TSPS ARE CHARGED AT B2B RATES AND THEY ARE BILLED FOR THE SAMPLE PROCESSED FOR WH ICH PAYMENTS ARE RECEIVED FROM THE TSPS. Q.13 KINDLY PROVIDE THE BREAKUP OF MONEY RECEIVED F ROM THE FRANCHISEE FOR TESTING CHARGES FOR THE A.YS. 2009-10, 2010- 11, 2011-12 AND A. Y.12-13 (TILL DATE). ANS. THE AMOUNT BILLED TO TSPS FOR SAMPLES PROCESSE D FY WISE IS AS MENTIONED BELOW:- FY 2011-2012 39,17,17,840/- FY 201 0-2011 68,72,08,991/ - FY 2009-2010 53,34,20,166/ - FY 2008-2009 43,09,62,682/ - Q.14 A PERUSAL OF THE TRIAL BALANCE FOR THE CURRENT YEAR IT IS SEEN THAT YOU HAVE GIVEN DISCOUNT REBATES AMOUNTING TO R S. 81.88 LACS (TILL DATE). WHAT IS THE NATURE OF THIS DISCOUNT AND WHETHER TDS IS DEDUCTED THERE FROM? ANS. AS EXPLAINED ABOVE THE TSPS ARE BILLED FOR E ACH AND EVERY WORK ORDER ENTRY SENT TO TTL FOR PROCESSING O F THE SAMPLE. BUT FOR ANY REASON IF THE TESTS CANNOT BE PERFORMED ON THE SPECIMEN/ SAMPLE THE BILLING DONE IS TO BE REVERSED BY WAY OF GIVING CREDIT NOTE TO THE TSP. THE REASON FOR TH E CANCELLATION OF TESTS VARIES FROM INSUFFICIENT QUANTITY OF SPECIMEN/ SAMP LE TO SAMPLE NOT PACKED OR PROCESSED TO TTL PROPERLY. APART FROM THE SAME IF AFTER INITIAL PROCESSING OF SAMPLE IF DOCTOR HAS REFERRED FOR ADDITIONAL . TESTS ON THE SAME SAMPLE THOUGH THE TSP IS BILLED FOR' B2B RATE REBATE IS GIVEN TO THE TSP FOR THE SAME AS NO SAMPLE NEEDS TO BE COLLECTED AGAIN FROM THE PATI ENT THYROCARE TECHNOLOGIES LTD 8 . THERE IS NO TDS DEDUCTED FROM THE SAID AMOUNT AS IT IS TOWARDS CANCELLATION OF TESTS OR FOR REBATE ON ADDITIONAL TESTS PERFORMED. Q. 15 DO YOU HAVE ANY DIRECT TIE-UP WITH HOSPITALS/ DOCTO RS AND OTHER CORPORATE ENTITIES FOR DOING THE TESTS OTHER THAN THROUGH TSPS? TTL IS NOT HAVING ANY DIRECT TIE-UP WITH HOSPITALS/ DOCTOR S. TTL IS HAVING ARRANGEMENT WITH CORPORATE ENTITIES FOR DOIN G THE TESTS WHEREIN THE CORPORATE ARE BILLED FOR SERVICES PROVIDED TO THE SAMPLE PROCESSED. THE SAID ARRANGEMENTS HOWEVER ARE NOT LONG TERM AND ARE CORPORATE PROJECT BASIS ONLY. IF FOR EXAMPLE A PARTICULAR CORPORATE ENTITY WANTS TO TEST THE SAMPLES OF ITS STAFF OR CUSTOMERS THEY MAY ENTERING INTO CONTRACT WITH THE TTL TO AVAIL THE SERVICES. THE RATES IN WHICH CASE ARE MUTUALLY DECIDED BETWEEN THE PARTIES AS PER THE TERMS AND IT VARIES FOR CORPORATE TO CORPORATE. IT NEEDS TO BE NOTED HERE HOWEVER THAT NO SUCH CORP ORATE ENTITIES CAN BECOME TSP OF TTL IN THE GENERAL PUBLI C INTEREST. Q.16 YOU ARE PROVIDING THE TEST KITS TO THE TSPS. WHETHER IT IS GIVEN FREELY OR YOU ARE CHARGING ANY MONEY FOR THE KITS? HAW YOU ACCOUNT THE SAME IN YOUR BOOKS OF ACCOUNTS? ANS. THE MATERIAL SUPPLIED TO. TSPS LIKE TUBE PACKI NG MATERIAL ETC. IS CHARGED FROM TSP. THE COMPANY IS A CCOUNTING THE SAME AS SALES IN THE BOOKS OF ACCOUNTS AND PAYING VAT/CST AS APPLICABLE ON THE SAID SALES. Q.17 HAW THE BILLING IS DONE TO. THE TSP AND HAW T HE INCO ME IS ACCOUNTED IN COMPANIES BOOKS OF ACCOUNTS. FOR EACH WORK ORDER ENTRY REQUISITIONED FROM TTL THE WORK ORDER ENTRY IS BOOKED IN THE SYSTEM FROM THE RESPEC TIVE LOGIN OF THE TSP. AFTER RECEIVING THE SAMPLE AND PROCESSING THE SAMPLE THE REPORTS ARE RELEASED TO. TSPS AND SIMULTANEOUSLY FAR EACH AND EVERY WORK ORDER ENTRY A BILLING IS DONE TO. TS PS IMMEDIATELY AUTO AND THE SAME IS DEBITED TO THE TSPS AN DAILY BASIS. TSP CAN CHECK THE BILLING OF THE DAY AND THE SAMPLES PROCESSED DETAILS FROM THEIR LOGIN. THE BILLING IS THEN ACCOUNTED IN THE BOOK: 'OF ACCOUNTS. SIMILARLY FAR EACH DISPATCH OF MATERIAL TO. TSP AFTER BOOKING OF THE OUTWARD CHALLAN, SALES BILLING ALONGWITH. VAT/ CST IS DONE TO. TSP. TSPS ARE ASSIGNED CREDIT LIMIT BASED ON THE SECURITY DEPOSIT S MAINTAINED BY THE TSPS. IF THE BALANCE AFTER BILLING FAR THE D AY OF THAT PARTICULAR TSP IS CROSSING THE CREDIT LIMIT THE REP ORTS ARE LACKED THYROCARE TECHNOLOGIES LTD 9 AND ARE RELEASED ONLY AN PAYMENT. THE PAYMENTS ARE DONE BY TSPS IN OUR AXIS BANK ACCOUNT DIRECTLY FAR WHICH TH EY ARE REQUIRED TO SEND THE PROOF OF PAYMENT TO TTL. THE RECEIPTS ARE THEN ACCOUNTED IN THE BOOKS OF ACCOUNTS. Q7. WHAT IS THE RELATIONSHIP BETWEEN THE COLLECTION AGENT/CENTER AND YOUR COMPANY. ARE THEY ALLOWED TO WORK FOR ANY OTHER COMPANY ENGAGED IN THE SAME TYPE OF PATHOLOGICAL WORK? WHETHER WRITTEN DOCUMENT SUCH AS AUTHORIZATION. OR ANY OTHER DOCUMENT WHICH IS BEING DULY SINGED BY THE BA TH THE PARTIES ALLOWS THIS FREEDOM TO THE COLLECTION AGENT / CENTER. ANS. WE INSIST AND TAKE IN WRITING THAT FOR THE TES TS DONE BY US THE COLLECTION CENTER SHALL NOT AVAIL THE SER VICES FROM ANY OTHER SERVICE PROVIDERS AND WE TAKE AFFIDAVIT C UM UNDERTAKING TO THE SAID EFFECT. THE RELATIONSHIP BE TWEEN THE COMPANY AND THE COLLECTION CENTER IS NOT THAT OF FR ANCHISER AND FRANCHISEE OR PRINCIPAL AND AGENT OF EMPLOYER A ND EMPLOYEE THE COLLECTION CENTERS ARE TREATED AS OUR SERVICE PROVIDERS AND THEY ARE CHARGED AT FIXED RATES FOR T HE TESTS THEY HAVE ASKED FOR. WE CAN PROVIDE THE COPIES OF AUTHORIZATION LETTER, AFFIDAVIT CUM UNDERTAKING GIV EN BY THE INCHARGES OF COLLECTION CENTERS . 2.2. THE STATEMENT OF SHRI SUNDARARAJU, EXECUTIVE DIRECT ORS WAS ALSO RECORDED AND HE WAS EXAMINED ON OATH. WHIC H IS ALSO REPRODUCED HEREUNDER FOR READY REFERENCE AND A NALYSIS:- 4. STATEMENTS OF SHRI SUNDARARAJU, EXECUTIVE DIRECT OR: (THE DIRECTOR WAS ALSO EXAMINED UNDER OATH ON THE S AME LINE AS THAT OF MANAGER FINAN C E AND HEN C E THE S A M E A R E NOT DWELLED INT O ONCE AGAIN F O R THE S AK E OF BREVITY . THE ANSWER S PROVIDED BY THE DIRECTOR ARE ALSO IN SYNC WITH THAT OF THE MANAGER FINANCE). HOWEVER, CERTAIN SPECIFIC FACTS MENTIONED BY THE D IRECTOR, WHICH WAS NOT MENTIONED BY THE MANAGER FINANCE, ARE REPRODUCED HE R EUNDE R : Q.9. FROM THE TRIAL BALANCE FOR THE YEAR 01-04-2011 , IT IS SEEN THAT AS ON DATE 21 ST SEP, 2011, UNDER THE HEAD SHOWING TESTING ( REBATE/DISCOUNT) PROVIDED OF RS 81,88,694/ HAS BEEN DEBITED . IN THIS REGARD PL EXPLAIN WHY IT SHOULD BE TREATED AS DISCOUNT/COMMISSION PROVIDED TO THE COLL ECTION AGENT/CENTER AND ALSO PLEASE EXPLAIN WHY TDS HAS NO T BEEN MADE ON THIS AMOUNT? ANS. WE INSIST FOR BIG BLOOD TESTING CAMPS BY THE C OLLECTION CENTERS AND AS AND WHEN SUCH CAMPS ARE CONDUCTED WE THYROCARE TECHNOLOGIES LTD 10 CHARGE THE COLLECTION CENTERS AS PER RATE LIST AND HOWEVER, IN VIEW OF BIG CAMPS THE RATES ARE REDUCED TO THE P ATIENT BY THE COLLECTION CENTERS AND WE ALSO REDUCE THE BILLI NG OF CAMP SAMPLES AND GIVE CREDITS FOR THE DIFFERENTIAL AMOUN T. WE HAVE STARTED GIVING INCENTIVES DURING THE CURRENT Y EAR TO INCREASE THE WORKLOADS AND TURNOVERS AND SUCH INCEN TIVES ARE CREDITED TO THE TSP AND REQUIRED TDS IS DEDUCTE D FROM THE SAID INCENTIVES. I WILL ASK OUR CHARTERED ACCOU NTANT TO GIVE YOU THE BREAK UP FOR THE AFORESAID AMOUNT. Q. 10 WHETHER YOUR COMPANY WILL GIVE ANY DISCOUNTS TO THE CENTERS FOR THEIR EXTRAORDINARY PERFORMANCE IF YES, WHETHER TDS IS DEDUCTED. ANS: WE GIVE RATES LESSER, THAN THE RATE LIST FOR B ULK VOLUME OF SAMPLES IN CAMPS CONDUCTED WHEREIN THE PA TIENTS ARE CHARGED LESS AND AS THE BILLING IS DONE AT NORMAL R ATES THE DIFFERENCE BETWEEN BILLING RATES AND LESSER RATES A GREED FOR THE CAMPS IS CREDITED BACK TO THE COLLECTION CENTERS AS THEY HAVE CHARGED LESS CHARGES TO THE PATIENTS IN THE CAMPS. WE HAVE DEDUCTED TDS AS WHEN INCENTIVES ARE OFFERED TO THE COLLECTION CENTERS Q11. FROM THE FACTS AND CIRCUMSTANCES, BUSINESS MOD ULE AND ACTIVITIES IT APPEARS THAT THERE IS CRYSTAL CLE AR NEXUS AND RELATIONSHIP BETWEEN~ THE COMPANY AND COLLECTION AG ENT/CENTER AS THAT OF PRINCIPAL AND AGENT. WHAT DO YOU HAVE TO SAY IN THIS REGARD? ANS: THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGEN T BECAUSE HE IS NOT REPRESENTING ME IN THE. MARKET A S MY AGENT AND HIS ACTIVITIES SUCH AS MANAGEMENT OF COLLECTION CENTERS, COLLECTION STAFF MANAGEMENT, SAMPLE COLLECTION, AMO UNT COLLECTION, WHETHER TO GIVE CREDIT OR NOT WHETHER T O CHARGE CATALOGUE RATES OR, LESSER THAN THAT OR MORE THAN T HAT ALL DECIDED BY THE COLLECTION CENTER AND HE IS NOT EXCL USIVELY WORKING FOR ME AND THEY DO COLLECT AND PROCESS THE TESTS WHICH ARE NOT DONE BY US ON THEIR OWN OR FROM SOME LOCAL PATHOLOGY LABS. THERE IS NO AGENCY COMMISSION, BROKERAGE PAID BY THE COMPANY TO THE COLLECTION CENTER. THERE IS A WRITTE N CONTRACT BETWEEN THE COMPANY AND THE COLLECTION CENTER AND THEY HAVE TO MARKET MY SERVICES LOCALLY, GET THE SAMPLES AND SEND IT TO US FOR PROCESSING AND WE CHARGE THEM AT FIXED RATES. T HEREFORE, THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP OR PRINC IPAL AGENT RELATIONSHIP AS THEY ARE NOT DOING WHAT WE ARE DOIN G AND WE ARE NOT DOING WHAT THEY ARE DOING. Q 12 IT APPEAR AND WE APPRECIATE THAT YOUR COMPANY CHARGES PATHOLOGICAL TEST RATE AT LOWEST STAGE WHEN COMPARED WITH THE TEST RATES AVAILABLE IN THE MARKET. PLEASE EXPLAIN WHAT THYROCARE TECHNOLOGIES LTD 11 ARE THE REASONS FOR SUCH LOW CHARGES FOR PATHOLOGIC AL TEST OF YOUR COMPANY? ANS: THE BUSINESS MODEL IS BASED ON VOLUMES. WHEN M ORE NO OF TESTS ARE DONE THE REAGENTS COST WILL BE LOW. WE WANT TO BE DIFFERENT FROM, LOCAL PATHOLOGY,, LABS WHICH OPERATE IN 5 TO 10 KMS RADIUS. THE REAGENT COST FOR DOING THYROID TEST AS ON DATE IS RS.30-00 FOR US WHILE WE CHARGE RS. 100-00 TO THE COLLECTION CENTER. THIS LOW COST OF REAGENT IS POSSIBLE WHEN W E PURCHASE BULK VOLUME OF REAGENTS AND THE SUPPLIERS REDUCE TH E RATES TO US DUE TO VOLUMES. THE LOCAL LABS CANNOT COMPETE IN RA TES WITH US BECAUSE OUR RATES ARE LOW DUE TO HIGH VOLUME AND HI GH VOLUME OF TESTS ARE POSSIBLE ONLY WHEN WE CHARGE LESS. WE ARE CHARGING THE SAME AMOUNT OF RS. 100-00 FOR. THYROID TO OUR COLLECTION CENTER FOR THE LAST 15 YEARS THOUGH INI TIAL YEARS WE ARE NOT MAKING PROFITS, NOW A DAYS OUR PROFITS HAV E GROWN DUE TO BULK BUYING OF REAGENTS. Q.13 IN HOW MANY( GENERALLY OR ON AVERAGE BASIS) CA SES THE COLLECTION AGENTS/CENTER CHARGES MORE THAN AS R ATES ARE PRINTED ON THE TEST CATALOGUE? DO YOU THINK THAT OV ERALL SUCH MORE CHARGING MAY HAPPEN IN 10 TO 20% EVEN THOUGH THE COLLECTION AGENTS/CENTERS ARE INDEPENDENT AND FREE TO CHARGE AS PER THEIR WISH, AND CIRCUMSTANCES? ANS: I WOULD LIKE TO STATE THAT THE BUSINESS GENER ATED BY THE COLLECTION CENTERS IN DIRECT PATIENT WILL BE AROUND 10% OF THE TOTAL BUSINESS. REST 90 % IS THE BUSINESS WHICH ARE COMING FROM HOSPITALS, PATHOLOGY LABS AND DRS ,AND IN THAT BUSI NESS THE COLLECTION CENTERS CANNOT HAVE BIG MARGIN BECAUSE T HE SAID, HOSPITALS, PATHOLOGY LABS AND DRS WILL PAY LESSER AMOUNT. ONLY WHEN A DIRECT PATIENT IS SERVED, THE COLLECTION CEN TER CAN CHARGE THE RATES BETWEEN OUR RATE LIST AND CATALOGU E RATES. IT MAY HAPPEN THEY ARE CHARGING THE DIRECT PATIENTS MO RE THAN CATALOGUE RATES BUT IT IS VERY RARE AS WE CHARGE HE AVY PENALTIES IF THERE ARE COMPLAINTS THAT THE COLLECTION CENTERS H AVE CHARGED MORE. IT IS VERY DIFFICULT TO FIND OUT THE RATES CHARGED BY THE COLLECTION CENTERS AS THERE IS A DOCTOR INVOLVE D BETWEEN THE COLLECTION CENTER AND THE PATIENT AND THE SAID DOCT OR MAY DECIDE AS TO HOW MUCH TO COLLECT FROM THE PATIENTS. - Q 14 FROM THE ABOVE DISCUSSION IT IS CERTAIN THAT COL LECTION AGENTS/CENTER ARE BEING PROVIDED COMPUTERIZED SOURC E CODE, BLOOD COLLECTION EQUIPMENT AND KIT, YOU PROVIDE TRA INING AND OTHER LOGISTIC, ADVERTISEMENT OF THE COMPANY, FINAL IZING OF TEST CATALOGUE TO BE SHOWN TO THE CUSTOMERS, THERE IS CO NDITION IN THE AGREEMENT THAT THEY HAVE TO MAKE BUSINESS /TURNOVER OF RS 25,OOO/- MINIMUM AND YOU OBTAIN SECURITY OF RS 50,O OO/- TO RS L,00,OQO/-, DOCUMENTS SHOW THE COLLECTION AGENT/CEN TER AS THYROCARE TECHNOLOGIES LTD 12 FRANCHISE ,GIVE HIM RIGHTS COLLECTING BLOOD SAMPLE, HENCE FROM THE ABOVE DISCUSSION PLEASE SHOW CAUSE WHY NEXUS AN D RELATIONSHIP~ SHOULD NOT BE TREATED AS THE RELATION SHIP OF PRINCIPAL AND AGENT AND PURELY ACTING ON BEHALF OF YOUR COMPANY AND WHY IT SHOULD NOT CHARGED U/S 194 H OF THE INCOME TAX ACT, 1961 ANS. THE SECURITY DEPOSIT IS COLLECTED TO PROVIDE C REDIT LIMITS TO THE COLLECTION CENTERS AND WE CANNOT TAKE RISK OF CREDIT. THE COLLECTION CENTERS ARE AUTHORIZED TO INCREASE T HE BUSINESS VOLUMES AND THEREFORE, WE PUT VARIOUS CONDITIONS TO PRESSURIZE THE COLLECTION CENTER TO GIVE MORE BUSINESS. I REPE AT THAT THE COLLECTION CENTER CANNOT BE AN AGENT BECAUSE HE IS NOT DOING ONLY WHATEVER WE SAY. HE IS HAVING HIS OWN BUSINESS INTEREST AND MAKING PROFITS IN HIS SIDE AND HE IS NOT BOUND TO LISTEN TO ME AND ACT ONLY AS PER OUR INSTRUCTIONS. 2.3. WE FIND THAT THE LD. ASSESSING OFFICER IN FEW CASES EXAMINED THE ROLE OF SERVICE PROVIDERS TO THE ASSES SEE, THEREFORE, THE EXTRACT OF THEIR STATEMENTS IS ALSO REPRODUCED FOR READY REFERENCE AND ANALYSIS:- 5. DURING THE COURSE OF PROCEEDINGS U/S 201, A FEW TSPS WERE EXAMINED UNDER OATH VIS-A-VIS THEIR ROLE IN RE SPECT OF THE SERVICES PROVIDED THEM TO TTL EXTRACT FROM ONE OF SUCH STATEMENTS IS REPRODUCED HEREUNDER STATEMENT OF SHRI MANISH GANDHI Q 3 WHAT IS YOUR EDUCATIONAL AND OTHER PROFESSIONAL QUALIFICATION ANY MINIMUM QUALIFICATION OR SPECIALIZATION IS REQUIRED TO BECOME THE 2 SERVICE PROVIDER OF THYROCARE TECHNOLOGIES LTD. ANS. I AM B.COM AND DMLT BY PROFESSION FOR BECOMIN G A FRANCHISEE, WE HAVE TO APPOINT B SC DMLT STAFF FO R THE SMOOTH WORK. THE COMPANY IS GIVING TRAINING 2-3 TIM ES A YEAR ON A SPECIFIC SUBJECT TO ME AND MY STAFF. Q.4. PLEASE DESCRIBE THE NATURE OF BUSINESS IN WHI CH YOU ARE ENGAGED AND WHAT IS THE NATURE OF SERVICES YOU ARE RENDERING FOR THYROCARE LTD.? ANS. WE ARE PROVIDING SPECIALIZED PATHOLOGICAL BLO OD TESTING FOR OUR HOSPITALS, NURSING HOMES AND OTHER PATHOLOGY LABORATORIES AND FOR PATIENTS. WE ALSO COLLECT SAM PLES FROM THE THYROCARE TECHNOLOGIES LTD 13 RESIDENCE OF THE PATIENTS (HOME SERVICE). I AM GETT ING SERVICES FROM THYROCARE TECHNOLOGIES LTD., METROPOLIS LAB. L TD., GENEOMBIO TECHNOLOGIES P. LTD. VK IMMUNOTECH P. LTD ., RELIANCE LIFE SCIENCES P. LTD. AND OTHER LOCAL LABO RATORIES. TESTING SERVICES ARE AVAILED FROM ANY. OF THESE SER VICES AS PER THE PATIENTS REQUIREMENT AND AVAILABILITY OF THE TE ST PARAMETERS WITH THE RELEVANT PATHOLOGICAL LABORATORIES. MORE T HAN 80% OF THE WORK WE DO WITH THYROCARE TECHNOLOGIES LTD. AS THE COMPANY IS CHEAPEST IN THE MARKET. Q.6 WHAT IS THE MODUS OPERANDI IN COLLECTING THE S AMPLES, SENDING IT AND GENERATING THE REPORTS FOR THYROCARE TECH. LTD. ANS. I AM COLLECTING SPECIMEN FROM SMALL LABORATOR IES, HOSPITALS AND NURSING HOMES ETC. AND ALSO COLLECTS SPECIMEN FROM THE RESIDENCE OF THE PATIENTS ON THEIR DEMAND. AFTER CENTRIFUGING, SEND IT TO THE CONCERNED LABORATORIES . THE COMPANY GIVES THE REPORT BY WEBMAIL. I AM DOWNLOADI NG THE REPORT AND. GIVE TO THE CONCERNED DOCTORS/PATIENTS/ PATHOLOGISTS. Q. 7 HOW DO YOU FIX THE RATE FOR THE TESTING. HOW THE PAYMENT IS MADE AND WHO ISSUES THE RECEIPT FOR THE SAME. ANS. FOR THE HOSPITALS, NURSING HOMES AND SMALL LABORATORIES, THE RATE WILL BE DECIDED BY US ONLY A ND THAT RATES WE HAVE TO CIRCULATE TO THE HOSPITALS, NURSING ETC. CATALOGUE RECOMMENDED RATE BY THYROCARE TECH. LTD. WILL, BE C HARGED FOR DIRECT PATIENTS. WE ARE ISSUING THE RECEIPT FOR THE SAME. Q. 8. WHAT IS THE MARGIN YOU RECEIVE FOR THE TESTING. DO YOU HAVE ANY SEPARATE RATE OTH.ER THAN GIVEN BY THYROCA RE? ANS. THE MARGIN IS VARIED DEPENDING UPON BULK BUSIN ESS AND CAMPS AND CHARITABLE INSTITUTIONS. THYROCARE TE CH. LTD. HAS GIVEN US SERVICE PROVIDER RATE AND CATALOGUE RATE. WE CANNOT CHARGE ANYTHING ABOVE THE CATALOGUE RATE GIVEN BY T HYROCARE. Q. 9. APART FROM MARGIN DO YOU GET ANY OTHER INCENTIVE , DISCOUNTS ETC. FROM THYROCARE FOR ACHIEVING THE TAR GETS? ANS. YES. FOR ACHIEVING THE TARGET, THE COMPANY IS GIVING INCENTIVES AND HONOURS. THE COMPANY- IS ALSO GIVING INCENTIVES AND DISCOUNTS FOR THE PARTICULAR PERIOD AND PARTICU LAR TIME FOR CAMP AND AWARENESS OF THE DISEASE. Q. 10 HOW THYUROCARE TECH. LTD IS GIVING THE DISCOUNTS OR INCENTIVES TO YOU? ANS. THEY GIVE DISCOUNTS AND INCENTIVES BY CREDIT N OTES. THYROCARE TECHNOLOGIES LTD 14 Q. 11 ARE YOU USING THE LOGO OR NAME OF THYROCARE TECH . LTD. IN YOUR RECEIPTS OR BILLS? ANS. YES. WE ARE USING LOGOS AND COMPANY NAME WITH THE PERMISSION OF THEM. Q. 12 WHO IS PROVIDING THE SAMPLE KITS FOR TESTING, SO FTWARE FOR COMPUTER ETC? ANS. COST OF THE CONSUMABLES REQUIRED AT THE COLLEC TING CENTER, OR AT THE RESIDENCE IS ENTIRELY BORNE BY ME WHICH I S SUPPLIED BY THYROCARE TECH. LTD. THE COMPANY IS ALSO PROVIDING SOFTWARE FOR ONLINE SYSTEM. Q. 13 HOW YOU ARE SHOWING THE ACCOUNTING ENTRIES FOR T HE TRANSACTION WITH THYROCARE? ANS. THERE ARE TWO RATES GIVEN BY THYROCARE ONE IS CATALOGUE RATE AND THE OTHER ONE SERVICE PROVIDER RATE. I CHA RGE THE AMOUNT IN BETWEEN THESE ACCORDING TO THE CUSTOMER B UT CANNOT CHARGE MORE THAN CATALOGUE RECOMMENDED RATE. THEY H AVE GIVEN A CERTAIN CREDIT LIMIT. ABOVE THAT WE HAVE TO PAY AS PR THE BILLS. 6. ON PERUSAL OF SAMPLE COPY OF STANDARD AFFIDAVI T CUM UNDERTAKING EXECUTED BY TSPS ALONGWITH, THEIR APPLI CATION FORM FOR APPOINTMENT AS TSP, IT IS SEEN THAT THE ASSESSE E COMPANY EXERCISES COMPLETELY CONTROL OVER THE TSPS. SOME OF THE SALIENT FEATURES OF THIS UNDERTAKING /AFFIDAVIT, WHICH WILL A GO A LONG WAY IN DESCRIBING THE NATURE OF RELATIONSHIP BETWEE N THE TSP AND ASSESSEE COMPANY ARE AS UNDER: - 1) THE TSP SOLICITS ITS BUSINESS BY DISPLAYING THE BOARD/POSTER WITH LOGO OF THE COMPANY THE TSP CANNOT USE, THE LOGO OF THE COMPANY WITHOUT THE LATTERS EXPLICIT APPROVAL. 2) ON SUCCESSFUL APPOINTMENT AS TSP THE COMPANY ALL OTS SOURCE CODE BEING A UNIQUE CODE SPECIFIC TO EACH TSP BY WH ICH IT CAN ACCESS THE COMPANY WEBSITE. THE TSP SO APPOINTED AR E REQUIRED TO UNDERGO A TRAINING PROGRAM WHICH IS SPECIFIC TO COMPANIES, REQUIREMENTS SUCH TRAINING PROGRAM IS CONDUCTED RE GULARLY FOR EXISTING TSP TOO ANNUALLY. 3) THE TSP CANNOT ASSIGNS RIGHTS/AUTHORITY CONFERRE D ON IT BY THE COMPANY TO ANY OTHER PERSON WITHOUT PRIOR APPROVAL OF THE COMPANY 4) THE TSP IS LIABLE FOR PENAL ACTION IN TERMS OF MONETARY PENALTY TO BE LEVIED BY THE COMPANY IN CASE OF ANY VIOLATION OF THE TERMS AND CONDITION OF AFFIDAVIT / UNDERTAKING . THYROCARE TECHNOLOGIES LTD 15 5) THE TSP IS OBLIGED TO CHARGE ITS CLIENTS WITHIN THE LIMITS OF FIXED MARGIN SET FORTH BY THE COMPANY. THIS MEANS THAT EVEN THE SERVICE CHARGES ARE FIXED BY THE COMPANY AND NOT BY THE TSP. 6) THE TSP HAS INDEMNIFIED THE ASSESSEE COMPANY FRO M ANY CLAIM MADE BY ANY THIRD PARTY AGAINST, THE COMPANY. 7) THE TSP IS PROVIDED WITH COMPANY SOFTWARE FOR VA RIOUS PURPOSE MAINTAINING ACCOUNTS DOWNLOADING REPORT FROM COMPAN Y WEBSITE, PRINTING OF REPORTS (SAMPLE REPORT) CONTAI NING COMPANYS LOGO. 8) THE TSP IS NOT PERMITTED TO GET THE TEST DONE F ORM ANY OTHER LABORATORY OR HOSPITALS WITHOUT PRIOR KNOWLEDGE OF THE ASSESSEE COMPANY 9) THE TSP IS OBLIGED TO MAINTAIN THE SECURITY DEPOSIT WITH THE COMPANY AND THE AMOUNT FIXED BY THE COMPAN Y. 10) ON TERMINATION/ ANNULMENT OF THE AGREEMENT THE TSP IS OBLIGED TO HANDOVER BACK THE PROPERTIES OF THE COMPANY SUCH AS REPORT FORMS, BAR CODED VIALS, REPO RT ENVELOPES MARKETING MATERIALS LITERATURE AND PAMPHL ETS HAVING COMPANIES LOGO TO THE COMPANY. 11) THE TSP IS OBLIGED TO PROVIDE RATES DETAILS' & CLIENT DETAILS TO THE ASSESSEE COMPANY, ON DEMAND, IN RESPECT OF SERVICES RENDERED BY THE TSP BY VIRTUE O F THIS CONTRACT, CLIENT DETAILS IN RESPECT OF THE SERVICE PROVIDED. FURTHER, THE TSP IS BOUND TO PROVIDE AND PRODUCE TH E BANK DETAILS, AS AND WHEN DEMANDED, IN RESPECT THE CHARGES RECEIVED 12) COMPULSORY USAGE OF THE SOFTWARE PROVIDED BY THE ASSESSEE WITH A PRECAUTION THAT NO MISUSE IN RESPEC T OF MANIPULATING OF REPORTS OR ANY OTHER KIND OF BREACH . 7. CONSIDERING ALL OF THE ABOVE FACTS AND MODUS OPERENDI OF THE ASSESSEE COMPANY & THAT OF TSPS, A FINAL QUESTIONNAIRE CUM SHOW CAUSE LETTER WAS ISSUE D TO THE ASSESSEE COMPANY AND IT WAS REQUIRED TO EXPLAIN AS TO WHY YOU SHOULD NOT BE TREATED AS ASSESSEE IN DEF AULT FOR NON-DEDUCTION OF TDS UNDER THE PROVISIONS OF SECTION 194H OF THE I.T. ACT ON THE AMOUNTS CHARGED BY THE TSPS FROM THE CLIENTS FOR COLLECTION OF SAMPLES. 8. IN RESPONSE TO THE ABOVE THE, ASSESSEE COMPANY HAS MADE A DETAILED SUBMISSION. SOME EXTRACTS OF THE SUBMISSIONS, RELEVANT PROCEEDINGS, ARE REPRODUCED HEREUNDER, FOR PROPER READING AND UNDERSTANDING: THYROCARE TECHNOLOGIES LTD 16 'THYROCARE TECHNOLOGIES LIMITED (TTL) IS IN THE BUS INESS OF PROVIDING DIAGNOSTIC SERVICES. TTL IS' AN ACCREDITE D LABORATORY. THYROCARE TECHNOLOGIES LIMITED (TTL) IS PROCESSING THE SAMPLES RECEIVED FROM THYROCARE SERV ICE PROVIDERS (WHO ARE ASSIGNED TSP SOURCE CODES) AND N O BUSINESS IS SOURCED BY ANY PATIENT DIRECTLY FROM TT L. THE TSPS DO NOT DO ANY TESTING AT THEIR END AND THEY AR E MORE INVOLVED IN .THE PRE ANALYTICAL FUNCTIONS OF DIAGNOSTIC TESTING. THYROCARE SERVICE PROVIDERS (TSPS) ARE AUT HORIZED BY THE COMPANY AFTER TAKING A REFUNDABLE SECURITY DEPOSIT AND AFTER SUBMISSION OF THE REQUIRED DOCUMENTS TO S UFFICE THEIR QUALIFICATION TO HANDLE HUMAN BLOOD SAMPLES. THE METHOD OF BUSINESS OPERATION BETWEEN TTL AND TSPS IS SUCH THAT TTL ENTERS INTO AN ARRANGEMENT WITH LOCAL COLL ECTION CENTERS COMPRISING OF LABORATORY SERVICE PROVIDERS) RECOMMENDED SERVICE PROVIDERS) INSURANCE SERVICE PROVIDERS) HOME SERVICE PROVIDERS) HOSPITAL) CLINIC S) SMALL BUSINESSMEN & ENTREPRENEURS AND IN ACCORDANCE WITH THE TERMS OF THE AGREEMENTS AND IN ACCORDANCE WITH STAN DARD OPERATING PROCEDURES INVOLVED IN THE HANDLING OF HU MAN BLOOD SAMPLES) THESE AGGREGATORS COLLECT SAMPLES FR OM THEIR PATIENTS / CUSTOMERS DESIROUS OF AVAILING VARIOUS DIAGNOSTIC SERVICES. THEY ALSO RAISE AN ONLINE WORK ORDER FOR THE TEST REQUISITIONED ON THE SAMPLE DISPATCHED TO THE LABOR ATORY. THE TSPS MAY AVAIL THE SERVICES OF ANY SUCH SPECIAL IZED TESTING LABORATORY UNLESS THE BENEFICIARY INSISTS T HAT THE REQUIRED TEST BE GOT DONE ONLY FROM TTL. THE TSP SE NDS THE SPECIMEN OF THAT BENEFICIARY TO TTL FOR TESTING IT. THE TSP ISSUES ITS OWN BILL / INVOICE TO THE PATIENT / CUSTOMER (THE COPY WHEREOF FOR SOME OF THEM WERE ALREADY PROVIDED TO J USTIFY THE CONTENTION). THE TSP COLLECTS HIS FEES FOR THE TEST AND ISSUES RECEIPTS FOR THE FEES COLLECTED. THE TSP THU S THEN AVAILS THE PROFESSIONAL SERVICES OF PATHOLOGICAL LA BORATORIES LIKE THAT OF TTL WITH RESPECT TO TESTING OF SAMPLE AND ISSUANCE OF NECESSARY REPORTS. IN CASE THE TESTS AR E DONE BY TTL, TTL REAISES PERIODICAL INVOICES ON THE TSPS AN D FOR WHICH IN TURN THE TSP MAKES THE PAYMENT TO TTL AFTE R DEDUCTING OF APPLICABLE TAXES. THE SERUM SAMPLES SENT BY THE TSPS HAVE TO BE FIT F OR TESTING BY THE ANALYZERS. AT TIMES THE SAMPLES MAY NOT BE F IT FOR PROCESSING DUE TO VARIOUS REASONS AND IN SUCH SITUA TIONS) THE PART OF THE BILLED AMOUNT IS CREDITED BACK TO THE C OLLECTION CENTERS AS THEY HAVE TO PAY BACK THE CHARGES COLLEC TED FROM THEIR PATIENT OR CUSTOMER FOR NOT GIVING THEM THE R EPORTS. THE COMPANY PAYS BACK PART OF THE BILLED AMOUNT TO THE COLLECTION CENTERS BECAUSE IT IS TO INSIST THEM TO SEND ONLY THE SAMPLES WHICH ARE FIT FOR PROCESSING AND TO AVOID A NY HUMAN ERRORS THAT MAY HAPPEN IN HANDLING THE SERUM SPECIM EN AT THYROCARE TECHNOLOGIES LTD 17 THE END OF THE COLLECTION CENTERS. AT TIMES, THE .SAMPLE ARE SENT BY AIRWAYS OR BY COURIER TO THE COMPANY BY THE COLLECTION CENTERS) DATA REQUEST ING FOR TESTING IS ENTERED AND EXPORTED BY THE COLLECTION CENTER) THE COMPANY BILLS AS PER THE RATE CONTRACT ON THE COLLE CTION CENTER BUT THE SAMPLES COULD NOT REACH THE LABORATORY DUE TO REASONS SUCH AS CONSIGNMENT MISPLACED, HEAVY RAINS, ETC., AND IN SUCH CASES THE AMOUNT BILLED AS PER THE RATE CON TRACT IS GIVEN BACK TO THE COLLECTION CENTER BY WAY OF CREDIT AS N O SAMPLES RECEIVED AND NO TESTS HAVE BEEN PERFORMED BY THE CO MPANY. THE REBATE ON ACCOUNT OF CANCELLED TESTS GIVEN TO T SP LEDGER IS NOTHING BUT SIMILAR TO GOODS RETURN WHEREIN AFTER S ALE OF GOODS IF THE SAME ARE NOT FIT FOR CONSUMPTION OR FOR ANY OTHER REASONS THE BUYER RETURNS THE GOODS TO THE SELLERS AND THE SELLER OWES BACK TO THE BUYER. THE CREDIT ON ACCOUNT OF CANCELL ED TESTS, WRONG BILLING OR ERROR IN BILLING SHALL NOT CONSTRU ED TO BE TAKEN AS COMMISSION OR BROKERAGE AS CONTENDED BY YOU IN Q UESTION NO. 4 FOR APPLICATION OF THE PROVISIONS OF SECTION. 1 94H OF THE INCOME TAX ACT, 1961. YOUR GOODSELF HAS CONTENTED IN THE SAID QUESTION AB OUT APPLICABILITY OF SECTION 1 94H OF THE ACT TO THE RE BATE PART WHICH IS UNJUSTIFIABLE ON ACCOUNT OF THE REASONS ME NTIONED ABOVE. THE EXISTENCE OF A PRINCIPAL - AGENT RELATIONSHIP IS A MUST FOR THE APPLICABILITY OF THE PROVISIONS OF SECTION 1 94 H OF THE ACT. THESE TSPS ACTS AS AGGREGATORS WHO COLLECTS SAMPLES AND AVAILS THE SERVICES OF PATHOLOGICAL LABORATORIES LI KE TTL WITH RESPECT TO TESTING OF SAMPLES AND ISSUE OF THE NECE SSARY REPORTS FOR THE TECHNOLOGICAL DIAGNOSIS. TTL RAISES PERIODI CAL INVOICES ON THE TSPS. THE AMOUNT COLLECTED OR CHARGED BY THE SE TSPS FROM THEIR RESPECTIVE CUSTOMERS IS NOT ON ACCOUNT O F ON BEHALF OF THE ASSESSEE. IT IS PERTINENT HERE TO NOTE THAT TTL NEVER AUTHORIZES TSPS TO COLLECT ANY AMOUNT FOR IT OR ON ITS BEHALF THE TSPS ISSUES ITS OWN BILL / INVOICE TO THEIR CUSTOMERS (THE COPIES WHEREOF WERE SUBMITTED ON RECORD FOR YOUR REFERENCE ALONGWITH OUR LETTER DATED 27.09.2011 FOR YOUR REFERENCE). TH E TSPS IN TURN, MAKES PAYMENT TO TTL AFTER DEDUCTING APPLICAB LE TAXES. TTL DOES NOT PAY OR CREDIT ANY AMOUNT TO THE ACCOUN T OF THE COLLECTION CENTER. THE SERVICES IN THE FORMAT OF ME DICAL. DIAGNOSTIC SERVICES ARE PROVIDED TO THE TSPS ARID N OT TO THE PATIENTS/ CUSTOMERS OF THE THESE TSPS. IT IS ONLY T HE TSPS AND THEIR PATIENT/CUSTOMERS WHO HAVE THE PRIVITY OF THE CONTRACT INTER SE BETWEEN THEMSELVES. YOUR GOODSELF HAS CONTENDED IN THE SAID QUESTION AB OUT APPLICABILITY OF PROVISIONS OF SECTION 1 94H OF THE ACT ON THE THYROCARE TECHNOLOGIES LTD 18 AMOUNT OF DIFFERENCE IN THE AMOUNT CHARGED TO TSPS AND THE STANDARD PRICE LIST IN CERTAIN INSTANCES WHEREIN SP ECIAL RATES WERE OFFERED TO TSPS .FOR GENERATING VOLUME BY COND UCTING PREVENTIVE HEALTHCARE CAMPS IN THEIR RESPECTIVE LOC ATIONS. TO THIS IT IS NECESSARY TO QUOTE HERE THAT THERE EXIST S NO PRINCIPAL AGENT RELATIONSHIP BETWEEN TTL AND TSPS, THE TSPS D O PROVIDE SERVICES THEIR CUSTOMERS NOT ONLY FROM TTL BUT ALSO FROM OTHER RECOGNIZED PATHOLOGICAL LABORATORIES LIKE SUPER REL IGARE LABORATORY, METROPOLIS, DR. LAL PATHIAB, PATHCARE E TC. TO NAME, SOME OF THOSE. THUS THE TSPS ACT AS A COLLECT ION CENTER FOR OTHER RECOGNIZED LABORATORIES AS WELL. IT IS AB SOLUTE UPTO THE DISCRETION OF THE TSPS TO SEND THE SAMPLE TO ANY OF THESE SERVICE PROVIDERS UNLESS SPECIFICALLY INSISTED BY THE BENEF ICIARY. THE TSPS COLLECTS FROM THEIR PATIENTS THE RATES AS FIXE D BY THEM AND NO RATES ARE PRESCRIBED BY TTL FOR COLLECTION FROM THE CUSTOMERS OF TSPS. THE TSPS ARE OBLIGED TO PAY TO T TL THE BILLING RAISED ON THEM PERIODICAL AS PER THE B2B RA TES AGREED AND ACCEPTED IRRESPECTIVE OF THE COLLECTION OR NON COLLECTION FROM THEIR PATIENT AGAINST THEIR INVOICES OR IRRE SPECTIVE OF PROVIDING OF FREE SERVICES TO ANY OF ITS CUSTOMERS. THE TPS THUS ARE BEARING THE RISK AT THEIR END ONLY FOR COLLECTI ON OF THEIR DUES, LOSS OF SAMPLES DURING TRANSIT FOR WHICH TTL IS NEVER AND SHALL NOT BE ACCOUNTABLE AT ANY EVENT IN TIME. . FURTHER TO THIS THE TSPS HAVE TOTALLY DIFFERENT AND INDEPENDENT INFRASTRUCTURE, LOGISTICS AND SAMPLES ADMINISTRATIO N. THEY ALSO MAINTAIN THEIR OWN SET OF ACCOUNTS INDEPENDENT FROM THAT OF TTL AS THEY AVAIL SERVICES FROM OTHER LABORATORIES TOO. TTL IS PROVIDING SPECIALIZED DIAGNOSTIC SERVICE TO TSPS AN D IT IS NOT THAT THESE TSPS ARE PRO VIDI.NG ANY KIND OF SERVICE S WHEREIN THE PROVISIONS OF TDS EVER WILL APPLY. IF AS ALLEGED BY YOUR GOODSELF THE TSPS ARE ACTING AS THE AGENTS OF TTL, THE ENTIR E RECEIPT COLLECTED BY THEM WOULD HAVE BEEN RECOGNIZED AS INC OME OF 7TL, THE TSPS WOULD NOT HAVE TO DEDUCT TAX AT SOURC E OUT OF THE PAYMENTS MADE TO TTL FOR SERVICES AND THAT IN SUCH CASE THE COMMISSION ALLEGED AS PER YOUR CONTENTION WOULD HAV E BEEN DEBITED TO EXPENDITURE ACCOUNT HOWEVER THIS IS NOT TRUE AND FACTUALLY THIS IS NOT CORRECT. WITH REFERENCE TO THE PROVISIONS OF SECTION 1 94H O F THE ACT, THE FACTS OF THE CASE AS HAS BEEN DEMONSTRATED FURING T HE SURVEY PROCEEDINGS AND DURING THE COURSE OF THE SUBMISSION . THE TDS PROVISIONS DO NOT APPLY ON THE REBATE GIVEN IT TSP LEDGER ON ACCOUNT OF THE CANCELLED TESTS, WRONG BILLING OR EX CESS BILLING AS THESE ARE NOTHING BUT THE CANCELLATION OR CORRECTIO NS TO TESTING REVENUE AND NOT ANY KIND OF COMMISSION TO COVER UND ER THE STATED PROVISIONS 1. WITH REFERENCE TO THE SHOW CAUSE NOTICE STATED ABO VE WE UNDERSTAND THAT YOUR GOOD SELF HAD EXAMINED THE TSP S AND THYROCARE TECHNOLOGIES LTD 19 RECORDED THEIR STATEMENT ON OATH, THE FACTS AND CON TENTS OF WHICH ARE NOT AVAILABLE TO US. FT SEEMS THAT THE S AID STATEMENT RECORDED IS NOT INTERPRETED CORRECTLY IN LIGHT OF T HE FACTS WHICH ARE MENTIONED IN OUR EARLIER REPLIES FILED WITH YOU R GOOD SELF DURING THE PROCEEDINGS. A. THE COLLECTION CENTERS SEPARATE BUSINESS ENTITY, WH O APPLIES FOR AVAILING OF THE SERVICES OF THE COMPANY. ACCORD INGLY THESE TSPS ARE CHARGED ON THE BASIS OF ORDERS RECEIVED. T HE BILLS FOR PROVIDING OF THE TESTING SERVICES TO THE TSPS ARE R AISED ON DAILY BASIS AND THE TSPS ARE BOUND TO PAY IN. ADVANCE TO AVAIL THE SERVICES FROM TTL. AS EACH OF THESE TSPS ARE SEPARA TE BUSINESS ENTITIES OPERATING FROM THEIR RESPECTIVE LOCATIONS AND AS THEY ARE GENERATING ORDERS FROM THEIR AU END, TTL IS NOT CONCERNED WITH THE AMOUNT CHARGED BY THESE TSPS FROM THEIR CU STOMERS. TTL IS NOT AWARE ABOUT THE OPERATIONS, ARRANGEMENT BETWEEN THE TSPS AND THEIR CUSTOMERS SUCH AS LABORATORIES, HOSPITALS, NU8RSING HOMES ETC. TTL ALSO NEVER SEEKS UC INFORMATION FROM ANY OF THESE CUSTOMERS OF THESE TSPS ABOUT THE TYPE OF RATES CHARGED TO THEM, WHETHER THERE EXISTS ANY CREDIT FA CILITY OR NOT OR WHETHER THERE IS ANY FREE TESTING PROVIDED BY TH ESE TSPS TO THE SAID CUSTOMERS OR TO THEIR PATIENTS. TTL IS CHA RGING ON THE ORDERS RAISED BY THE TSPS AND ENTTTLED TO RECEIVE O NLY THE PAYMENTS AGAINST THE BILLING DONE TO TSPS. TTL NEVE R CLAIMS NOR ENTTTLE TO ANY AMOUNT OVER AND ABOVE WHAT HAS B EEN BILLED TO TSPS. NOW WINCE WE ARE NOT SEEKING ANY INFORMATION ABOUT THE INCOMES OR RECEIPTS OF THESE TSPS, WE ARE UNABLE TO REVIEW THE CORRECTNESS OF THEIR STATEMENT BUT EVEN OTHERWISE I F 80% - 95 % OF THEIR TURNOVER CONSTITUTES THAT OF THE BUSINESS OF TTL, THE SAME MIGHT BE ON ACCOUNT OF THE FOLLOWING REASONS I) THE RATES AT WHICH THESE SPECIALIZED DIAGNOSTIC SERVICES ARE OFFERED BY TTL ARE CHEAPEST ON THE EARTH. IN FA CT NO OTHER COMPETITOR OF TTL CAN EVER MATCH THE RATES AT WHICH THESE DIAGNOSTIC SERVICES ARE OFFERED. TTL OVER THE YEARS HAS PIONEERED IN PROVIDING THESE SERVICES AT AFFORD ABLE COSTS, AT BEST OF THE QUALITY AND AT SHORTEST POSSI BLE TIME. II) THE AVERAGE INDIAN CONSUMER PREFERS TO AVAIL T HE SERVICES OR PROCURE GOOD AT AFFORDABLE COST BE IT H EALTHCARE OR ANY OTHER SERVICE, GOOD TTL OVER THESE YEARS COU LD CREATE AN OPTION TO THESE AVERAGE CONSUMERS TO AVAI L THE BEST OF QUALITY SERVICES AT AFFORDABLE COSTS. III) THE RATES AT WHICH SIMILAR SERVICES ARE OFFER ED BY THE COMPETITORS ARE TWICE OR THRICE OF THE RATES AT WHICH THESE SERVICES ARE OFFERED BY TTL AND THAT IS THE REASON THAT EVEN TTL PROCESSES LARGER VOLUME OF TESTS PER DAY, THE THYROCARE TECHNOLOGIES LTD 20 TURNOVER OF TTL IS LESSER AS COMPARED TO MOST OF THESE COMPETITORS. TTL AS A POLICY NEVER OFFERS ANY COMMISSION, INCENTIVE, FREE SERVICES, AND CONCESSION TO ANY OF THE DOCTORS, CLINICS, MEDICAL COMMUNITY. APART FROM THE SAME SINCE IT HAS BEEN EXAMINED BY Y OUR GOODSELF DURING THE STATEMENT TAKEN ON OATH OF THES E RESPECTIVE TSPS THAT THEY ARE AVAILING SERVICES NOT ONLY FROM TTL BUT FROM OTHER PATHOLOGICAL LABORATORIES, THIS ITSELF BEYOND ANY DOUBT STRESSES OUR CONTENTION THA T THESE COLLECTION CENTERS' ARE AT THEIR OPTION FREE TO AVA IL SERVICES FROM ANY PATHOLOGICAL LABORATORY AS PER THEIR DISCRETION AND AS PER THEIR BUSINESS INTERESTS. THEY AT THEIR DISCRET ION CHOSE TO SEND SAMPLE TO TTL. TTL NEVER FORCES TO AN Y OF THESE COLLECTION .CENTERS TO SEND SAMPLES TO ONLY T HEM AS HAD IT BEEN THE CASE 100% OF THEIR TURNOVER WOULD HAVE BEEN FROM THE SAMPLES SENT TO TTL. THE INDEPENDENCE EXERCISED BY THESE COLLECTION CENTERS AT THEIR DISC RETION IN AVAILING THE SERVICES PROVES THAT THEY ARE SEPARATE BUSINESS ENTITY OPERATING FOR THEIR PERSONAL BUSINESS INTEREST IN THEIR RESPECTIVE LOCALITY AND AS PER THEIR OWN BUSINESS STRATEGIES. A NORMAL BUSINESS TRANSACTION BETWEEN TWO BUSINESS ENTITIES WHEREIN SERVICES WERE PROVIDED TO TSP) AS ORDERED BY TSP) PROVIDED BY AND BILLED BY AND PAID FOR SHALL NOT BE CONSTRUED TO ESTABLISH ANY PRINCIPAL AGENT KIND 'OF RELATIONSHIP BETWEEN THESE TWO ENTITIES MERELY BECA USE THESE COLLECTION CENTERS ARE AVAILING MAJORITY AND/ OR NOT FULL OF THEIR SERVICES FROM TTL. B. TTL CHARGES TO ITS. TSPS AT B2B RATES FOR EACH A ND EVERY SAMPLE PROCESSED AT ITS LABORATORY. TTL IS GETTING THE BUSINESS ONLY FROM THE TSPS TO WHOM A SOURCE CODE I S GIVEN. THERE IS NO SLAB SYSTEM IN THE B2B RATES CHARGED TO THE TSPS. THE RATES ARE PRESCRIBED AND ARE IRRESPECTIVE OF THE QUANTUM OF THE TURNOVER OF THE SAMPLES SENT TO TTL. THUS THERE IS CLEAR UNIFORMITY IN THE B2B RATES CHARGED TO ALL TSPS. TO AVOID THE MENACE OF THE WASTED INTEREST ME DICAL COMMUNITY OPERATORS TTL HAS TO KEEP A CLOSE WATCH ON THE CHARGES LEVIED ON THE PATIENTS) AT LEAST BY ITS TSP S. SINCE TTL IS HAVING ITS CENTRALIZED BUSINESS OPERATION AN D DAILY ON AND AVERAGE INVESTIGATING 15000-17000 SAMPLES WHICH ARE COMING FROM ALL PARTS OF THE COUNTRY) TO ASK FO R INFORMATION ABOUT THE AMOUNT CHARGED BY THE TSPS TO THEM IS IMPRACTICABLE) IMPOSSIBLE AND UNJUSTIFIABLE AS NONE OF THESE PATIENTS :ARE CUSTOMERS OF TTL. IN ORDER TO P ROTECT THE GENERAL INTEREST OF THESE PATIENTS TTL HAS THEREFOR E RESTRICTED ITS TSPS FROM CHARGING HIGH PRICES FOR T HE TESTS OFFERED BY IT BY PRESCRIBING CATALOGUE RATES FOR EA CH OF THE TESTS WHICH ARE OFFERED BY TTL. THE CATALOGUE RATES ARE THE THYROCARE TECHNOLOGIES LTD 21 RATES WHICH ARE PROHIBITORY ONLY BEYOND WHICH TSPS ARE NOT SUPPOSED TO CHARGE AS PER THE UNDERTAKING GIVEN BY THEM TO TTL AND ARE NOT SUGGESTIVE RATES. THE PURPOSE OF PRESCRIBING THE CATALOGUE RATE IS ONLY TO REGULATE THE' MEDICAL COMMUNITY AT LEAST THE TSPS OF TTL WHICH IS AT PRESENT IS NOT FORMALLY REGULATED BY ANY OF THE STATUTORY PROHIBITIONS AND NOTHING BEYOND THAT. TTL NEVER DIR ECTS NOR DOES ORDER TO ANY OF ITS TSPS TO CHARGE AS PER THE CATALOGUE RATES NEITHER ANY OF THE PROVISIONS OF ANY LAW ENTI TLE HIM TO DO THE SAME. THE CATALOGUE RATES ARE ONLY MEANT AS A PROHIBITION IN ORDER TO PROTEST THE INTEREST OF THE PATIENT FROM THE WASTED INTEREST MEDICAL COMMUNITY. THEREFO RE) THE PRESCRIPTION OF THE CATALOGUE PRICE ONLY IS AN ETHI CAL BUSINESS PRACTICE FOLLOWED TO REGULATE THE MENACE O F THE WASTED INTEREST AGAINST THE GENERAL PUBLIC AND CANN OT OR SHALL NOT BE CONSIDERED AS A SUGGESTIVE PRACTICE IN ORDER TO GAIN AN UNDUE ADVANTAGE BY UNETHICAL BUSINESS PRACTICES. NOW SINCE WE ARE NOT SEEKING ANY INFORMATION ABOUT THE RATES CHARGED BY THESE TSPS WE ARE UNABLE TO REVIEW THE CORRECTNESS OF THEIR STATEMENT BUT EVEN OTHERWISE I T WOULD BE INCORRECT TO STATE A GENERAL STATEMENT THAT CATALOGUE RATES ARE CHARGED. FIRST AND FOREMOST IMPORTANT PLEASE NO TE AN IMPORTANT POINT WHICH WAS EMPHASIZED BY US DURING T HE PROCEEDINGS, TTL NEVER RECOMMENDS ANY OF THE TSPS T O CHARGE AS PER THE CATALOGUE RATE. WE HAVE WITH OUR SUBMISSION EARLIER PROVIDED WITH THE COPIES OF THE BILLS RAISED BY THE TSPS WHICH WE COULD ABLE TO MANAGE TO RECEIVE ON REQUEST FROM THEM WHEREOF THESE TSPS HAV E CHARGED MUCH LESSER THAT THOSE CATALOGUE RATES. WE ARE ENCLOSING HEREWITH THIS LETTER SOME 'OF THE CASES WHEREIN COMPLAINTS' HAVE BEEN RECEIVED ON OUR OFFICIAL WEBS ITES THAT THE TSPS HAVE OVER CHARGED. ON REVIEW OF OUR EARLIE R SUBMISSION AND ENCLOSURES TO THIS LETTER IT CAN BE POINTED OUT IN PARTICULAR THAT IT IS THE DISCRETION OF THESE TSPS WHO ARE CHARGING TO THEIR CUSTOMERS AS PER THEIR BUSINESS INTERESTS AND TTL NEVER RECOMMENDS OR CANNOT RECOMMEND THEM T O WHAT THEY CHARGE. B. WITH REFERENCE TO THE STATEMENT AS RECORDED ABOUT THE RATES CHARGED BY THESE TSPS WE HAVE ALREADY OFFERED OUR EXPLANATION ABOVE AND FURTHER TO THIS WE HAVE ALSO ENCLOSED THE CASES WHEREIN SOME OF THESE TSPS HAVE ACTUALLY OVER CHARGED. IT IS IN THE GENERAL INTEREST OF PATIENT THAT THEY SHALL NOT OVER CHARGE AND NOT ANY STRINGENT COMPULSION EMPHASIZED BY TTL. THE TSPS ARE SEPARATE BUSINESS ENTITIES WHO CHARGE TO THEIR PATIENTS AS PER THEIR INDIVIDUAL RATE LISTS. C. THE TSPS ARE NOT ALLOWED TO USE LOGOS OF THE COMPAN Y OR COMPANY NAME IN ANY OF THEIR CORRESPONDENCE. WE ARE THYROCARE TECHNOLOGIES LTD 22 HEREBY QUOTING BELOW THE CLAUSE OF THE AFFIDAVITS T HE COPY WHEREOF IS ALREADY SUBMITTED TO YOUR GOODSELF, SIGNED BY THESE TSPS WHEREIN THEY HAVE BEEN RESTRICTED TO DO SO. D. THE TSPS ARE NOT ALLOWED TO USE LOGOS OF THE COMPAN Y OR COMPANY NAME IN ANY OF THEIR CORRESPONDENCE. WE ARE HEREBY QUOTING BELOW THE CLAUSE OF THE AFFIDAVITS THE COPY WHEREOF IS ALREADY SUBMITTED TO YOUR GOODSELF, SIGNED BY THESE TSPS WHEREIN THEY HAVE BEEN RESTRICTED TO DO SO. CLAUSE NO. 4. I UNDERTAKE NOT TO PUT UP A BOARD O R POSTER IN ANY PREMISES WITH THE LOGO OF THE COMPANY AND SOLIC IT FOR DIRECT PATIENT SERVICE (DPS) WITHOUT THE EXPLICIT WRITTEN APPROVAL FROM THE COMPANY AFTER DULY COMPLYING FOR DOING A DIRECT PATIENT SERVICE SINCE BY THIS UNDERTAKING, I AM ONLY PERMIT TED TO COLLECT SPECIMEN FROM NURSING HOMES, CLINICS, DOCTORS, LABO RATORIES AND HOSPITALS (BUSINESS TO BUSINESS).. CLAUSE NO. 6. I SAY THAT I AM AWARE THAT I SHALL N OT EITHER DIRECTLY OR INDIRECTLY PRINT THE LOGOS, BRAND NAMES , LETTER HEADS, RECEIPTS, PROMOTIONAL MATERIALS AND STATIONERY OF T HE COMPANY, ITS SERVICES, ITS ASSOCIATED AND ITS ACCREDITATION BODIES WITHOUT THEIR WRITTEN APPROVAL AN VIOLATION OF. THE SAME IS AN OFFENSE, WHICH WILL ATTRACT CRIMINAL LIABILITY AS WELL AS CI VIL LIABILITY. CLAUSE NO. 7 I SPECIFICALLY UNDERTAKE DIRECTLY OR INDIRECTLY NOT TO USE THE NAME, LOGOS, BRAND NAMES OF THE ACCREDIT ING AGENCIES SUCH AS ISO, CRISIL, NABL, CAP, THYROCARE, AAROGYAM , ETC. AT ANY POINT OF TIME IN ANY LETTER HEADS, REPORT FO RMS, ADVERTISEMENT, HAND BILLS, VISITING CARDS, RECEIPTS AND OR ANY OTHER STATIONARY AND I AM AGREEABLE FOR ANY PUNISHM ENT/ PENALTY IMPOSED BY THE COMPANY ON ME FOR VIOLATION OF THIS CLAUSE. ON REVIEW OF THESE CLAUSES IT CAN BE CLEARLY MARKED THAT THESE TSPS HAVE AFFIRMED NOT TO USE LOGOS OR NAMES OF THE COMPANY AND FAILING OF WHICH THEY MAY FACE CRIMINAL LIABILI TY AS WELL AS CIVIL LIABILITY.. THIS HAS BEEN CLEARLY MADE KNOWN TO THEM AND THEY HAVE AFFIRMED FOR THE SAME. THE NON COMPLIANCE OF THE AFFIRMATION ON THE PART OF THESE TSPS SHALL NOT CON STRUED TO MEAN THAT THEY ARE ALLOWED TO DO WHICH IS PUNISHABL E UNDER LAW. EVEN OTHERWISE THE TSPS ARE NOT ALLOWED TO USE THE NAME OF THE COMPANY FOR ANY REPORTING, ANY COLLECTION FR OM THEIR CUSTOMERS. WE CAN ABLE TO SUBMIT DOCUMENTS WHEREIN WE HAVE ACTUALLY PENALIZED SUCH ERRANT TSPS FOR NON COMPLIA NCE WHEN IT WAS BROUGHT TO OUR NOTICE BY THE COMPLAINANT. NOW FURTHER IT NEEDS TO BE EMPHASIZED THAT CLEAR MENTION ABOUT TH E CLAUSE ABOUT NON USAGE OF THE LOGOS OR NAME OF THE COMPAN Y IN THE AFFIDAVIT AND FURTHER SEEKING AFFIRMATION FROM THE TSPS ABOUT THE SAME CLEARLY INDICATES THAT THERE DOES NOT EXIS T ANY THYROCARE TECHNOLOGIES LTD 23 PRINCIPAL AND AGENT RELATIONSHIP BETWEEN TTL AND ,T SPS AS BECAUSE HAS IT BEEN THE CASE OTHERWISE, THERE WOULD HAVE BEEN IMPLIED AUTHORITY GIVEN TO. THESE TSPS THAT THEY MA Y USE LOGOS OR NAME OF THE COMPANY AS SOON AS THEY BECOME THE T SP. HOWEVER THIS IS NOT THE CASE AND MERELY SINCE THE C OLLECTION CENTER BECOME TSP IT IS NOT IMPLIED THAT HE MAY USE THE LOGO OR NAME OF THE COMPANY AS HE IS NOT AGENT OF THE COMPA NY. E. THE SPECIALIZED DIAGNOSTIC SERVICES WHICH ARE PR OVIDED TO TSPS REQUIRE ELEGANCE IN REPORTING AND ADHERENCE OF HIGH STANDARDS. TTL IS IN THE BUSINESS OF PROVIDING PRO FESSIONAL SERVICES AND THAT TOO BY WAY OF MEDICAL TESTING. TH ERE ,IS A STRICT PROFESSIONAL CONDUCT WHICH HAS TO BE ABIDED BY TTL. TTL IS UNDER STRINGENT OBLIGATIONS BY THE ACCREDITING AGEN CIES TO FOLLOW THE TERMS ON WHICH THE CERTIFICATION IS GIVE N TO THEM. THE SMALLEST OF THE NEGLIGENCE AND/ OR DEFICIENCY ON TH E PART OF TTL, MAY HAVE SERIOUS EFFECTS ON THE REPORTING OF THE PA TIENTS AND THEN THE DIAGNOSIS. THIS BECOMES MORE CRITICAL THE TESTING IS RELATED TESTS LIKE DIAGNOSIS OF HIV. SECONDLY THE RESULTS OF MOST OF THESE DIAGNOSTIC TE STS DEPEND UPON THE CONDITION OF THE SAMPLE AND REQUIRE PROCES SING AS IMMEDIATELY EN AS POSSIBLE. IT IS PERTINENT HERE TO NOTE THAT TTL IS HAVING ONLY ,ONE CENTRALIZED LABORATORY AT NAVI MUMBAI WHERE SAMPLES FROM ALL OVER THE COUNTRY ARE ACCUMUL ATED THROUGH LOGISTICS PROCESSED AND REPORTED. THE TIME OF REPORTING IN NONE OF ITS CASES EXCEEDS MORE THAT 24 HOURS. TH E EFFICIENCY IN REPORTING COULD ONLY BE ATTAINED THROUGH THE IT INFRASTRUCTURE IN BUILT DEVELOPED BY THE ORGANIZATION. THE TSPS AR E ASSIGNED LOGIN TO, REQUISITION A TEST IN CASE THEY WISH TO AVAIL THE SAME FROM TTL AND TO PROVIDE THE INFORMATION SUCH AS SEX , AGE, REFERRED DOCTOR, CLINICAL HISTORY OF THE PATIENT TO BE DIAGNOSED (THE SAID DETAILS OF THE PATIENT IS INSISTED AS PER THE PRESCRIBED REGULATORY STANDARDS BY THE LABORATORY ACCREDITING AGENCY). THUS THE LOGIN, IS PROVIDED ONLY TO FASTEN THE PROC ESS OF REPORTING AND FOR NOTHING ELSE, THE OPTIONS PROVIDE D TO THE TSPS IS ONLY TO DO, EDIT WORK ORDER ENTRY AND SEARCH FOR THE STATUS OF PROCESSING. F TSPS ARE NOT OBLIGED TO GIVE ANY INFORMATION AS , TO THE CHARGES THEY HAVE COLLECTED FROM THE PATIENTS AND T HE SAME IS NOT RELEVANT OR MATERIAL TO TTL. TTL CANNOT ASCERT AIN WHAT TYPE OF TESTS AND HOW MANY TESTS WILL BE ORDERED BY THE TSPS ON A DAILY BASIS. THE NUMBER OF TESTS AND TYPE OF TEST S ARE DECIDED BY THE TSPS ON THE BASIS OF THEIR REQUIREMENTS FROM THEIR CUSTOMERS AND PATIENTS AND THEY ORDER FOR THEIR RE QUIREMENTS ON DAY TO DAY BASIS. THEY HAVE BEENALLOTTED A CRED IT LIMIT AS HAPPENS IN CASE OF ANY DEBTOR/CREDITOR RELATIONSHIP . THE TSPS WHO HAVE EXCEEDED THEIR CREDIT LIMIT CANNOT GET THE IR REPORTS FROM TTL TILL THE CLEARANCE OF THEIR DUES. FOR THE ADVANTAGE OF THYROCARE TECHNOLOGIES LTD 24 THE TSPS TO KNOW WHAT TYPE OF TESTS ARE PROVIDED BY TTL AND AT WHAT RATES THE TSP WILL BE BILLED, WHAT TECHNOLOGY IS USED IN DOING THE TESTS, WHAT ARE THE NORMAL RANGES FOR EAC H AND EVERY TEST PERFORMED AND WHAT ARE ALL THE INFORMATION AND DATA TO BE PROVIDED BY TSPS TO TTL FOR GETTING THE TESTS DONE AND THE SAME IS FACILITATED BY THE SOFTWARE PROVIDED BY TT L. THE LEDGER ACCOUNT SHOWS THE AMOUNT BILLED TO THEM, THE DEBIT NOTES RAISED FOR THE CANCELLED TESTS, THE AMOUNT RE CEIVED FROM THEM AGAINST THE BILLING AND THE CLOSING BALANCE DU E TO THEM. THIS LEDGER INFORMATION OR LEDGER CONFIRMATION IS P ROVIDED BY TTL TO THE TSPS AND NEVER OBTAINED FROM THE TSPS. T HE TSPS ARE BUSINESSMEN HAVING THEIR OWN SELF BUSINESS MOTI VES AND OPERATING FROM THEIR RESPECTIVE LOCATIONS. THEY DEC IDE OF THE PRICES TO BE CHARGED FROM THEIR RESPECTIVE CUSTOMER S FOR DIFFERENT TESTS OR FOR SAME TESTS FROM DIFFERENT CU STOMERS. SOME OF WHOM HARDLY BOTHER TO MAINTAIN THE BOOKS OF ACCO UNTS ALSO AND WHICH MAY LEAD TO DISCREPANCY ON ACCOUNT OF NON PAYMENT OF DUES TO TTL. TTL ONLY MAKES THE TSPS AVAILABLE THE LEDGER ACCOUNT DETAILS AS APPEARING IN THE BOOKS OF ACCOUN TS OF TTL SO THAT THEY CAN DO TIMELY PAYMENT. TTL NEVER SEEKS AN Y INFORMATION NOR CAN INSIST FOR ANY INFORMATION ABOU T THE TURNOVER OF THESE TSPS. G. DURING THE COURSE OF THE PROCEEDINGS WE HAVE PRO VIDED YOUR GOODSELF THE COPIES OF ANNUAL ACCOUNTS OF ALL THE R ELEVANT YEARS STATED ABOVE AND THE LEDGER ACCOUNTS FOR EXPENDITUR E WERE ALSO REVIEWED. TTL HAS NEVER DEBITED ANY EXPENDITURE TO ITS BOOKS WHICH ARE PERTAINING TO EXPENDITURE INCURRED BY THE TSPS AND REIMBURSED TO THEM BY THE COMPANY AS TTL NEVER PAYS ANY EXPENDITURE OF TSPS. THE TSPS ARE SEPARATE BUSINESS ENTITIES HAVING THEIR OWN INFRASTRUCTURE, HAVING THEIR OWN O FFICE SPACE, HAVING THEIR OWN BLOOD TECHNICIAN, HAVING THEIR OWN ADMINISTRATIVE STAFF, ARRANGING THEIR OWN REGULATOR Y REQUIREMENTS AT LOCAL PLACES, PAYING THEIR OWN TELE PHONE AND/ OR ELECTRICITY BILLS, PAYING THEIR OWN ADMINISTRATI ON EXPENSES. NONE OF THESE EXPENDITURES HAVE EVER BEEN REIMBURSE D TO THE TSPS OR CREDITED TO THEIR LEDGER. NONE OF THESE EXP ENDITURES HAVE EVER BEEN DEBITED IN THE BOOKS OF TTL EVER. NO W SINCE WE UNDERSTAND THE STATEMENT OF THESE TSPS ARE TAKEN ON OATH, THEY MIGHT HAVE BEEN DIRECTED TO PROVIDE THEIR INCOME TA X RETURN COPIES AND YOUR GOODSELF CAN BEST ABLE TO REVIEW TH E SAME TO UNDERSTAND THAT THESE EXPENSES OF TSPS ARE DEBITED TO THEIR PROFIT AND LOSS ACCOUNT. THE DEBIT OF THESE EXPENDI TURE TO THEIR INDIVIDUAL PROFIT AND LOSS ACCOUNT ITSELF PROVES TH AT THESE EXPENSES WERE NEVER REIMBURSED BY ANYONE ELSE. H. TTL NEVER SETS ANY MANDATORY TARGETS TO ANY OF T SPS. IN ITS OWN BUSINESS INTEREST TTL PERSUADE AND PROMOTE ITS BUSINESS THROUGH LAUNCH OF VARIOUS TESTS OR PROFILES TO ITS EXISTING MENUS. THYROCARE TECHNOLOGIES LTD 25 TTL CHARGES TO TSPS ONLY AT AN AGREED B2B RATES. TH E SPECIAL RATES IF ANY OFFERED TO ANY OF THE TSPS IS PURELY O N THE BASIS OF UNDERSTANDING TO GENERATE VOLUME. THERE IS NO DIFFE RENTIATION IN THE TSPS AS PER THEIR GRADE OR ELSE BASED ON THE TU RNOVER OR BASED ON ANY OF THE OTHER CRITERIA. THE B2B RATES A RE UNIQUE AND SAME TO EACH AND EVERY TSPS SO THERE DOES NOT E XISTS ANY QUESTION OF AWARDING OR HONORING OF ANY OF THESE TS PS. BASED ON THE BILLING DONE ANNUALLY DO THESE TSPS INTERNAL LY FOR UNDERSTANDING OF THE MANAGEMENT MIS ARE GENERATED T O UNDERSTAND THE TSP WISE BILLING BUT FOR THE REASON THAT ONE TTL HAS RECEIVED REVENUE FROM ONE TSP MORE THAN SOMEONE OTHER NO TSP IS DIFFERENTIATED OR HONORED IN B2B RATES. I. THE TSPS AVAILING THE SERVICES OF TTL SENDS THE SPECIMEN OF THAT BENEFICIARY TO TTL FOR TESTING IT. THE TSP ISS UES ITS OWN BILL/INVOICE TO THE PATIENT/CUSTOMER (THE COPY WHER EOF FOR SOME OF THEM WERE ALREADY PROVIDED TO JUSTIFY THE CONTEN TION). THE TSP COLLECTS THE CHARGES FOR THE TEST AND ISSUES RE CEIPTS FOR THE AMOUNTS COLLECTED. THE TSP THUS THEN SEND THEIR SAM PLES TO PATHOLOGICAL LABORATORIES LIKE THAT OF TTL WITH RES PECT TO TESTING OF SAMPLES AND ISSUANCE OF NECESSARY REPORTS. IN CA SE THE TESTS ARE DONE BY TTL, IT RAISES PERIODICAL INVOICES ON T HE TSPS AND FOR WHICH IN TURN THE TSP GENERALLY MAKES PAYMENT T O TTL AFTER DEDUCTING REQUIRED TAXES. FOR PAYMENTS MADE TO TTL AN ONLINE RECEIPT IS GENERATED AND THE SAME CAN BE TAKEN ON R ECORD BY THE RESPECTIVE TSP AS A PROOF OF THE RELEVANT PAYMENT. THE RECEIPTS ISSUED BY TTL ARE FOR THE PAYMENTS MADE BY TSP TO T TL. THE TSPS ONLY ARE ALLOWED TO DOWNLOAD THE RECEIPT FOR T HE PAYMENT MADE TO TTL FROM THEIR LOGIN. THE ONLINE RECEIPTS A RE ISSUED TO THE BENEFICIARY IF HE BOOKS A TEST ONLINE THROUGH COMPANY WEBSITES AS, THE PAYMENTS ARE RECEIVED BY TTL AND I T IS CREDITED TO COMPANY ACCOUNTS. THE BENEFICIARY FOR ONLINE BOO KING DONE IS BEING PROVIDED SERVICES AS PER THE TESTS ASKED F OR. IN A NUTSHELL THE NEXUS AND RELATIONSHIP OF KIND OF PRINCIPAL AND AGENT SHALL NOT BE ESTABLISHED ON THE WRONG FOOTING MENTIONED IN THE SAID QUESTION AS A. THOUGH MAJOR COMPONENT OF BUSINESS OF THESE TSPS IS WITH TTL AS STATED BY YOU THAT IS PURELY ON ACCOUNT OF T HE AFFORDABLE PRICES AT WHICH THESE SPECIALIZED SERVICES ARE AVAI LABLE AS COMPARED TO THE PRICES CHARGED BY THAT OF THE COMPE TITORS AND THE INTERPRETATION THAT SOME COMPONENT OF THE BUSIN ESS OF THESE COLLECTION CENTERS IS CONSTITUTED THAT FROM OTHER L ABORATORIES ITSELF PROVES BEYOND DOUBT OUR CONTENTION THAT THE COLLECTION CENTERS ARE NOT AGENTS OF TTL. OR FOR THAT MATTER A NY OF THE PATHOLOGICAL LABORATORIES FROM WHICH THEY AVAIL SER VICES. THE DISCRETION IS EXERCISED BY THEM AS PER THEIR OWN IN DEPENDENT BUSINESS INTEREST AND THEY OPERATE AS A SEPARATE BU SINESS ENTITY. THERE EXIST ONLY A RELATIONSHIP OF PRINCIPAL TO PRI NCIPAL BETWEEN THYROCARE TECHNOLOGIES LTD 26 THESE COLLECTION CENTERS AND THE PATHOLOGICAL LABOR ATORIES INDEPENDENT BUSINESS INTEREST AND THEY OPERATE AS A SEPARATE BUSINESS ENTITY. THERE EXIST ONLY A RELATIONSHIP OF PRINCIPAL TO PRINCIPAL BETWEEN THESE COLLECTION CENTERS AND THE PATHOLOGICAL LABORATORIES. B. THE CATALOGUE RATES ARE NEVER RECOMMENDED BY TTI AND ARE MEANT ONLY AS DETERMINANT TO THE WASTED INTEREST MEDICAL COMMUNITY TO PROVIDE THE HEALTHCARE SERVICES TO PATIENTS AT AFFO RDABLE COST AND AT BEST OF QUALITY. IT IS INCORRECT TO GENERALIZE THE STATEMENT OF CATALOGUE RATES ARE CHARGES IN LIGHT OF THE DOCUMENTS PROVIDE D WITH OUR SUBMISSION WHEREIN THE TSPS HAVE OVER CHARGED TO TS PS AND OR OTHERWISE EVEN HAVE CHARGES LESS IN SOME CASES. C. AS POINTED IN OUR SUBMISSION, SOME TSPS ARE CHARGIN G LESS AS COMPARED TO OTHER TSPS. SOME TSPS ARE OVER CHARGING THE PATIENTS, SOME TSPS ARE CHARGING DIFFERENT RATES TO THE SAME TEST TO TWO DIFFERENT PATIENTS, SOME TSPS ARE CHARGING DIFFEREN T RATES TO THE SAME TEST TO PATIENTS AND LABORATORIES, CLINICS, SOME TS PS ARE CHARGING DIFFERENT RATES TO THE SAME TEST TO TWO DIFFERENT C LINICS/ LABORATORY, SOME TSPS ARE PROVIDING FREE OF COST, SOME TSPS MAY BE CHARGING AS PER CATALOGUE RATES AS PER YOUR CONTENTION. SOME TS P ARE CHARGING RATES OF THAT OF THE COMPETITORS. THESE RATES ARE T HUS DECIDED BY THE COLLECTION CENTER AT THEIR INDIVIDUAL LEVEL AND AS PER THEIR DISCRETION. TTL CANNOT EXERCISE ANY CONTROL ON THE SAME. D. THE USAGE OF LOGO OR NAME OF THE COMPANY TO THE COLLECTION CENTERS IS STRICTLY PROHIBITED AS PER THE AFFIDAVITS GIVEN BY THE COLLECTION CENTERS TO TTL FAILING OF WHICH THEY MAY FACE CRIMI NAL AND/OR CIVIL LIABILITY INSPITE OF THIS IF ANY OF THESE COLLECTIO N CENTERS ARE MISUSING THE RIGHTS THE COLLECTION CENTERS ARE PENALIZED FOR ' THE SAME WHENEVER THE SAME IS BROUGHT TO THE NOTICE OF TTL. THE COLLE CTION CENTERS ARE OBLIGED TO SEND THE SAMPLES OF THE PATIENTS WHO SPE CIFICALLY ASKS FOR THYROCARE REPORT AND FOR WHICH THEY ARE AUTHORIZED TO OPERATE BEYOND THIS THEY DO .NOT HAVE ANY RIGHT TO REPRESEN T THEMSELVES ON BEHALF OF THE COMPANY AS PER THE AFFIDAVIT GIVEN BY THEM TO THE COMPANY. E. THE ONLINE LOGIN PAGE ACCESS PROVIDED TO TSPS IS FOR SMOOTH FUNCTIONING AND EFFICIENT REPORTING OF THE TESTS RE QUISITIONED BY THEM. F. THE COLLECTION CENTERS CAN AVAIL THE OUTSTANDING IN FORMATION IN THEIR ACCOUNT FROM THE LOGIN AS PER THE BOOKS OF ACCOUNT S OF THE COMPANY. THE LEDGER ACCOUNT AVAILABLE FOR VERIFICATION IN CA SE THE COLLECTION CENTERS SO IS NOTHING BUT THE COPY OF THE LEDGER OF THE TSPS IN THE BOOKS OF THE COMPANY AND NOTHING BEYOND THAT IT IS NOT AN ACCOUNTING PACKAGE WHEREBY THEY CAN PREPARE THE BOOKS OF ACCOU NTS INFACT THE TSPS CANNOT EVEN EDIT THE LEDGER ACCOUNT AS APPEARI NG IN THE BOOKS OF ACCOUNTS OF TTL AS IT IS BOOKS OF ACCOUNT OF TTL AND NOT THAT OF THYROCARE TECHNOLOGIES LTD 27 TSPS. THE TSPS ARE MAINTAINING THEIR BOOKS INDEPEND ENTLY AND THEY MIGHT BE CHECKING THE LEDGER ACCOUNT OF THEIRS APPE ARING IN BOOKS OF TTL AS A LEDGER CONFIRMATION FOR THE FINANCIAL YEAR . G. THE EXPENDITURE INCURRED BY TSPS ARE DEBITED TO PROFIT AND LOSS ACCOUNT OF THE COLLECTION CENTERS AND THE SAME CAN BE VERIFIES FROM THE COPIES OF STATEMENTS SUBMITTED TO YOU DURING SUMMON S PROCEEDINGS. NO EXPENDITURE OF THE TSPS ARE3 INCURRED BY TTL NOR ANY OF THESE DEBITED TO PROFIT AND LOSS ACCOUNT OF TTL. H. TTL NEVER GIVES ANY HONOURS OR INCENTIVES FOR AC HIEVEMENTS OF THE TARGET AND 17L CHARGES ONLY AT THE B2B RATES TO THE RESPECTIVE TSPS. I. TTI ISSUES RECEIPTS TO TSPS FOR THE PAYMENT MADE BY THESE TSPS TO THE COMPANY THROUGH ONLINE WEBSITE. FURTHER TO THIS IT IS PERTINENT HERE TO NOTE SOME BASIS POINTS WHICH NEGATIVES YOUR CONTENTION THAT THE NEXUS OR RELATIO NSHIP OF PRINCIPAL AND AGE IT DO EXIST BETWEEN TTL & TSPS. I. THE TSPS ARE THE BUSINESSMEN WHO' ARE WORKING IN R ESPECTIVE LOCALITY TO PROMOTE THESE BUSINESS. THEY PROMOTE TH EIR BUSINESS THROUGH MARKETING AND/OR PROMOTIONAL ACTIVITIES AND GENERATE THE SAMPLE WORKLOAD. THUS THE INITIATION OF THE BUSINES S IS DONE BY THE TSPS AND NOT BY TTL THE TSPS ARE GENERATING THE WORKLOAD PROMOTING THE BUSINESS BY APPLYING MARKETING AND OT HER TACTICS TO DEFY THE LOCAL COMPETITION WHICH THEY DO FACE. THEY ARE NOT THE MIDDLEMAN BUT THEY ARE CREATORS OF THEIR BUSINESS A ND ONCE THE WORKLOAD IS GENERATED THEY ARE AT DISCRETION TO SEN D THE SAMPLE WORKLOAD TO ANY OF THE PATHOLOGICAL LABORATORIES. T HEY AVAIL THE SERVICES OF PATHOLOGICAL LABORATORIES LIKE TTL FOR REPORTING ON A SPECIALIZED TESTS. II. THE AFFIDAVIT OBTAINED FROM THE TSPS FOR AUTHO RIZATION DOES NOT MENTION ANY PRINCIPAL AGENT KIND OF RELATIONSHIP IN FACT THE SAME CLEARLY MENTIONS THAT THE TSPS SHALL NOT CONSIDER T HEMSELVES AS AN AGENT. THEREFORE CLEAR MENTION OF THE TERMS AND AFF IRMATION BY THE TSPS OF THE TERMS ITSELF PROVES THAT THE AUTHORIZAT ION GIVEN TO TSPS IS RESTRICTED ONLY WITH RESPECT TO THE SAMPLES WHICH A RE PROCESSED AT TTL AND NOTHING BEYOND THAT THEY ARE NOT SUPPOSED TO VO LUNTARILY OR OTHERWISE SHALL CONSIDER THEMSELVES AS AGENTS OF TH E COMPANY. III. THE AFFIDAVIT OR OTHER AUTHORIZATION DOES NOT MENTION ANY THING ABOUT THE COMMISSION, INCENTIVES ETC., THE B2B RATES ARE CLEARLY DEFINED BY THE AGREEMENT AND FURTHER TO THAT THERE IS NO DIFFERENTIATION IN THESE RATES ALSO. THEY ARE IDENTICAL TO EACH AND EVERY TSP NO MATTER TO WHICH REGION HE BELONGS. HOW MUCH WORKLOAD HE AC HIEVES, HOW MUCH YEARS OF ASSOCIATION HE HAS. THE UNDERSTANDING IS SIMPLE. TTL WILL CHARGE FOR THE SERVICES PROVIDED AND TSPS SHALL PAY FOR ANY AMOUNT CHARGES. NOTHING IS IMPLIED AND NOTHING SHAL L BE THYROCARE TECHNOLOGIES LTD 28 MISINTERPRETED FURTHER TO THIS SIMPLE UNDERSTANDING . THEREFORE IN RESPONSE TO YOUR QUESTION WE MAY CONCLUDE IN LIG HT OF THE ABOVE FACTS THAT THERE EXISTS NO NEXUS OR RELATIONS HIP BETWEEN TTL & TSPS WHICH MAY BE CATEGORIZED AS SIMPLE TO AG ENT. 6. DURING THE COURSE OF THE PROCEEDINGS OUR REPRESE NTATIVE SHRI SACHIN SALVI, MANAGER FINANCE HAS BEEN ASKED TO GIV E THE AMOUNT BILLED TO TSPS FOR SAMPLES PROCESSED FINANCI AL YEAR WISE WHICH WERE PROVIDED FOR AND ARE RECORDED IN TH E STATEMENT VIDE ANSWER TO QUESTION NO. 13 AS STATED: DURING THE COURSE OF THE PROCEEDINGS TO AN INDEPEND ENT QUESTION ASKED TO SHRI A SUNDARARAJU, EXECUTIVE DIR ECTOR ABOUT THE BILLING DONE BY THESE TSPS TO THEIR CUSTOMERS, THE STATEMENT IS RECORDED VIDE REPLY TO QUESTION NO.8 AS YOUR GOO DSELF HAS STATED. WITH THIS REFERENCE WE WISH TO STATE THAT THE INFOR MATION WHICH YOUR GOODSEIF SOUGHT TO AVAIL IS IRRELEVANT AS APPL ICATION OF SECTION 194H OF THE INCOME TAX ACT, 1961 IS HIGHLY UNJUSTIFIABLE ON ACCOUNT OF THE REASONS ELABORATELY MENTIONED AS PER THE FACTS OF THE CASE. FOR YOUR REVIEW WE AR E ONCE AGAIN QUOTING ALL THE FACTS OF THE CASE AND EXPLAINING BE LOW AS TO WHY SUCH ASSUMPTIONS SHALL NOT BE APPLIED TO CHARGE TH E DIFFERENCE AS PER YOUR CONTENTION. THE EXISTENCE OF A PRINCIPAL AGENT RELATIONSHIP IS A MUST FOR THE APPLICABILITY OF THE PROVISIONS OF SECTION 194H. OF THE ACT IN LIGHT OF ,THE DETAILED NATURE OF BUSINESS ACTIVITIE S OF THE COMPANY, SUBMISSIONS MADE, FACTS OF THE CASE PRESEN TED DURING THE HEARING WHENEVER CALLED FOR, YOUR GOODSELF WOUL D CERTAINLY APPRECIATE OUR CONTENTION THAT THERE DOES NOT EXIST ANY SUCH RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN THE COM PANY AND THE COLLECTION CENTERS. FURTHER TO THIS SINCE THE A SSESSEE HAD NOT MADE ANY PAYMENT TO THE COLLECTION CENTERS, THE PRO VISIONS OF SECTION 194H OF THE ACT, COULD NOT EVEN OTHERWISE., CAN BE APPLIED IN THIS CASE. THE MODE OF OPERATION OF THE BUSINESS OF THE COMPAN Y (TTL) IS THAT IT ENTERS INTO A NON-EXCLUSIVE AGREEMENT WITH THE COLLECTION CENTERS (TSPS). AS PER THE TERMS OF THE AGREEMENT T HESE TSPS CAN AVAIL THE PROFESSIONAL SERVICES OF TTL REGARDIN G TESTING OF SAMPLES. THESE CENTER OPERATE AS AN AUTHORIZED COLL ECTION CENTERS AND SUCH AUTHORIZATION IS REQUIRED PURELY B ECAUSE TTL IS OPERATING UNDER HEALTHCARE BUSINESS SEGMENT AND THE PROCEDURES ADOPTED IN DEALING WITH HUMAN BLOOD FOR DIAGNOSIS OF DISEASES IS CLOSELY MONITORED CONTROLLED AND REG ULATED BY VARIOUS GOVERNMENT AGENCIES THESE TSPS THOUGH HAVE AN AUTHORIZATION OF TTL MAY HAVE SIMILAR AUTHORIZATION FROM THEIR CONCERNS AND SUMMONS PROCEEDINGS TO THE TSPS YOU GO ODWILL THYROCARE TECHNOLOGIES LTD 29 HAD ALSO COME ACROSS RECORDS WHEREIN THEY HAVE AGRE ED THAT THEY ARE AVAILING THE SERVICES OF OTHER PATHOLOGICA L LABORATORIES ALSO. THE TSPS ARE NOT OBLIGED TO ALWAYS FORWARD THE SAMP LES ONLY TO TTL AND IT IS UPTO THE COMPLETE DISCRETION OF THESE TSPS AND THEIR INDIVIDUAL BUSINESS INTEREST THAT THE DECISIO N IS RESORTED TO THESE TSPS. THESE TSPS ALSO HAVE THE OPTION TO COND UCT THE TESTS THEMSELVES OR TO OUTSOURCE THEIR MEDICAL SERVICES T O OTHER LABORATORIES HAD THEY HAVE THE REQUISITE EXPERTISE AND INFRASTRUCTURE .LT NEEDS TO BE NOTED THAT SOME OF T HESE TSPS ARE ACTUALLY PERFORMING THE ROUTINE TESTS AT THEIR LOCA TIONS ON THE SAMPLE COLLECTED BY THEM. IF A BENEFICIARY INSISTS WITH TTL AND/OR UNFAVORABLE EXPERIENCE WITH ANY OF THE OTHER PATHOLOGICAL LABORATORY AS A MATTER OF ETHICAL BUSI NESS PRACTICE IT IS ANTICIPATED THAT THESE SAMPLES SHALL BE FORWA RDED TO TTL ONLY. THE TSPS FORWARD THE SAMPLES TO TTL AS STATED ABOVE. THE TSPS ALSO SUBMITS ONLINE WORK ORDER ENTRY FOR R EQUISITION OF THE TEST. THE ONLINE ENTRY PAGE MANDATES THEM TO SUBMIT THE HISTORY OF THE PATIENT ALSO AS SINCE THE SAME IS RE QUIRED TO UNDERSTAND IN THE DIAGNOSIS PROCESS PARTICULARLY IN THE DISEASES LIKE HIV, AIDS, HEPATITIS B, ETC., TTL THEN CONDUCTS THE TESTS OR TESTS AS PER THE REQUISITION AND ISSUES A REPORT WI TH REGARD THERETO, TO THE TSPS. THE TSPS ISSUES THEIR OWN BIL L/IN VOICE/ RECEIPT TO THEIR PATIENT/CUSTOMERS IT NEEDS TO BE N OTED THAT MOST OF THESE TSP5 ARE OPERATING THEIR OWN CLINICS, DISP ENSARIES, HOSPITALS ETC., AND THUS ARE PROVIDING HEALTHCARE S ERVICES TO THEIR PATIENT CUSTOMERS ALSO AVAILING THE SPECIALIZ ED SERVICES OF VARIOUS PATHOLOGICAL LABORATORIES INCLUDING THAT OF TTL ON BEHALF OF THEIR CUSTOMERS. THUS THE FEES FOR VARIOU S SERVICES PROVIDED BY THESE TSPS ARE COLLECTED BY THESE COLLE CTION CENTERS AND FOR WHICH THEY ARE ALSO ISSUING THEIR RECEIPTS FROM THEIR OWN RECEIPT BOOK. TTI RAISES PERIODICAL INVOICES ON THE TSPS. THE TSP S MAKES PAYMENT TO TTL AFTER TDS/U/S 194J OF THE ACT. NOW THEREFORE EACH TSP IS ONLY A DEBTOR AS FAR AS TTL IS CONCERNE D AND FROM THEM AN AMOUNT EQUAL TO THE OUTSTANDING ON BILLING DONE TO THEM IS DUE TO BE REACHED. THE CREDIT LIMITS ARE AL LOCATED TO THESE DEBTORS AND HE WHICH THEY ARE REQUIRED TO ADH ERE FAILING WHICH THEY ARE PENALIZED FOR THE LATER PAYMENT/NONP AYMENT AS PER THE CASE. EVEN THE BANK CHARGES ON ACCOUNT OF O UTSTATION CHEQUES, DISHONOR OF THE CHEQUES, CORRECTION IN CHE QUES IS RECOVERED FROM THEM IF THE BANKERS CHARGE THE SAME TO TTL. FURTHER TO THIS WE HAVE BEEN ABLE TO PRODUCE ALONGW ITH THE SUBMISSIONS CASES WHEREIN SOME TSPS HAVE CHARGES LE SS AS COMPARED TO OTHER TSPS. SOME TSPS HAVE OVER CHARGES THE PATIENTS SOME TSPS DO CHARGE DIFFERENT RATES TO THE SAME TEST TO TWO DIFFERENT PATIENTS, SOME TSP DO NOT CHARGE DIFF ERENT RATES TO THE SAME TEST TO PATIENTS AND LABORATORIES, CLINICS . SOME TSPS THYROCARE TECHNOLOGIES LTD 30 DO CHARGE DIFFERENT RATES TO THE SAME TEST TO PATIE NTS AND LABORATORIES, CLINICS. SOME TSPS DO CHARGE DIFFEREN T RATES TO THE SAME TEST TO TWO DIFFERENT CLINICS/LABORATORY/SOME TSP5 DO PROVIDE SERVICES FREE OF COST. SOME TSPS MAY BE CHA RGING AS PER CATALOGUE RATES AS PER YOUR CONTENTION, SOME TS PS MAY BE CHARGING AS PER CATALOGUE RATES OF THAT OF THE COMP ETITORS. THESE RATES ARE THUS DECIDED BY THE COLLECTION CENT ER AT THEIR INDIVIDUAL LEVEL AND AS PER THEIR DISCRETIONS. TTL HARDLY HAS ANY SAYING IN THIS AND CANNOT EXERCISE ANY CONTROL ON THE SAME IN WHICH CASE IT WOULD BE HIGHLY UNJUSTIFIABLE TO C ONCLUDE THAT THEY MUST BE CHARGING ALWAYS 100% MORE THAN WHAT TH EY ARE CHARGES EVEN OTHERWISE. THE FACTS CLEARLY LEADS TO A CONCLUSION THAT THE RATES CHARGES BY THE TSPS FROM ITS: CUSTOM ERS ARE SOLELY AT THE DISCRETION OF THESE TSPS. AS MENTIONED EARLIER THESE TSPS ARE OPERATING FROM WITHIN DIFFERENT LOCALITIES AND HAVING THEIR OWN CLINICS., DISPENSARIES, HOSPITALS ETC., PROVIDING HEALTHCARE SERVICES TO T HEIR PATIENTS AND AVAILING SPECIALIZED DIAGNOSTIC SERVICES FROM V ARIOUS PATHOLOGICAL LIKE THAT OF TTL. THESE COLLECTION CEN TERS HAVE THEIR OWN SET UPS OWN OFFICE , CLINIC & LOGISTIC INFRASTRUCTURE TOTALLY DIFFERENT APART FROM OUR EXPLANATION ABOVE WE HAVE PREVIOUSLY IN DETAILED ELABORATED OUR STAND AS TO WHY THE NEXUS O R RELATIONSHIP AS PRINCIPAL AND AGENT SHALL NOT BE ES TABLISHED BETWEEN TTL AND THE TSPS. THERE ARE TWO SEPARATE LE GAL RELATIONSHIPS. IT IS NOT JUSTIFIABLE OR CORRECT IN LAW IN MIXING UP THE TWO DISTINCT RELATIONSHIPS OR MERGING ONE INTO THE OTHER TO HOLD THAT BECAUSE THE TSPS DO PROVIDE THYROCARE SER VICES., THEY ARE CARRYING ON THE BUSINESS AS AGENT OF TTL. THUS THE DETAILED BUSINESS ACTIVITIES UNDERTAKEN BY THE COMPANY, THE BILLING, THE RATES, THE REBATES ON ACCOUNT OF CANCELLED TESTS, E TC., HAS BEEN ELABORATELY EXPLAINED BEFORE YOU DURING THE PROCEED INGS AS WELL BY OUR LETTER DATED 27.09.2011. ALL THESE FACTS , SUBMISSIONS, RECORDS & DETAILS ARE TO BE REFERRED IN CONJUNCTION ANDWHICH CERTAINLY POINTS OUT TO THE FACT THAT THERE DOES NO T EXISTS A SO CALLED PRINCIPAL AND AGENT KIND OF RELATIONSHIP BET WEEN THESE TWO DIFFERENT INDEPENDENT AND DISTINCT BUSINESS ENT ITIES. SUBJECT TO THIS, EVEN OTHERWISE THE ASSUMPTION OF Y OUR THAT 100% OF THE BILLING AMOUNT OVER THE AMOUNT CHARGES TO THESE TSPS IS THE REVENUE OF TTL WOULD BE COMPLETELY FALS E AND BASELESS AS WE HAVE DURING THE COURSE AND AS PER TH E DOCUMENTARY SUBMISSIONS FROM TIME AND AGAIN STATED BEFORE YOUR GOODSELF THAT IT IS NEVER THAT THE TSPS ARE CH ARGING EXACTLY 100% OF THE BILLING AMOUNT TO THEM FROM THEIR CUSTO MERS AS THEIR TESTING FEES. IN FACT THEY ARE CHARGING IN MO ST OF THE CASES MUCH LOWER THAN THAT AS PER THE CIRCUMSTANCE PREVAI LING IN THE LOCAL MARKET. SECONDLY IT IS TOTALLY IMPRACTICABLE AND THYROCARE TECHNOLOGIES LTD 31 UNJUSTIFIABLE TO US AS SINCE WE HAVE BEEN ASKED TO PRODUCE DETAILS OF THE TESTING FEES COLLECTED BY THESE TSPS FROM THEIR CUSTOMERS AND FALLING WHICH YOUR GOODSELF WISH TO R ESORT TO THE ASSUMPTION. KINDLY UNDERSTAND DAILY ON AND AVERAGE TTL PROCESSES APPROXIMATELY 1,00,000 INVESTIGATION AND HAD TO HANDLE APPROXIMATELY ON AN AVERAGE 20,000 SAMPLES C OMING FROM ALL PARTS OF THE COUNTRY AND SENT BY THE COLLE CTION CENTERS WHO COLLECTS THESE SAMPLES FROM VARIOUS LABORATORIE S, CLINICS, WALK IN PATIENTS, DOCTORS, INSURANCE COMPANIES, HOS PITALS, GOVERNMENT AGENCIES, CORPORATE, CHARITABLE INSTITUT ES, ORGANIZATIONS. THE INFORMATION WHICH YOUR GOODSELF WISH TO HAVE IS FOR THE PREVIOUS FINANCIAL YEAR WHICH EVEN OTHERWISE CANNOT EVER POSSIBLE TO COLLECT AND IRRELEVANT EVEN THOUGH COLLECTED DUE TO THE FACTS MENTIONED BY US. WITH REFERENCE TO OUR SUBMISSIONS, EXPLANATIONS DUR ING THE COURSE OF THE PROCEEDINGS AND DURING THE COURSE OF THE HEARIN GS THEREAFTER, FURTHER WE WISH TO SUPPORT OUR CONTENTION OF NONEXISTENT OF AN Y PRINCIPAL AGENT RELATIONSHIP BETWEEN THE TSPS AND T TL BY QUOTING THE EXTRACT OF THE JUDGEMENT PASSED BY THE HONORABL E HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MOTHER DAIRY INDIA LIMITED IN THE MATTER OF APPEAL NO. 1925 OF 2010 AND 310,312,313 & 319 OF 2011 ON 30.01.2011. 'IT IS A WELL SETTLED PREPOSITION THAT IF THE PROPERTY IN THE GOODS IS TRANSFERRED AND GETS VESTED IN THE CONCESSIONAIRE A T THE TIME OF THE DELIVERY, THEN HE IS THEREAFTER LIABLE FOR THE SAME AND WOULD BE DEALING WITH THEM IN HIS OWN RIGHT AS A PRINCIPAL A ND NOT AS AN AGENT OF THE DAIRY. THE CLAUSES OF THE AGREEMENTS SHOW TH AT THERE IS AN ACTUAL SALE, AND NOT MERE DELIVERY OF THE MILK AND THE OTHER PRODUCTS TO THE CONCESSIONAIRE, THE CONCESSIONAIRE PURCHASES TH E MILK FROM THE DAIRY. THE DAIRY RAISES A BILL ON THE CONCESSIONAIRE AND THE AMOUNT IS PAID FOR. THE DAIRY MERELY FIXED THE MRP AT WHICH THE' CONCESSIONAIRE CAN SELL THE MILK. UNDER THE AGREEME NT THE CONCESSIONAIRE CANNOT RETURN THE MILK UNDER ANY CIR CUMSTANCE, WHICH IS ANOTHER CLAUSE INDICATION THAT THE RELATIONSHIP WAS THAT OF PRINCIPAL TO PRINCIPAL. EVEN IF THE MILK GETS SPOILED FOR ANY REASON AFTER DELIVERY IS TAKEN, THAT IS TO THE ACCOUNT OF THE CO NCESSIONAIRE AND THE DAIRY IS NOT RESPONSIBLE FOR THE SAME. THESE CLAUSE HAVE ALL BEEN NOTICED BY THE TRIBUNAL. THE FACT THAT THE BOOTH AN D THE EQUIPMENT INSTALLED THEREIN WERE OWNED BY THE DAIRY IS OF NO RELEVANCE IN DECIDING THE NATURE OF RELATIONSHIP BETWEEN THE ASS ESSEE AND THE CONCESSIONAIRE .: FURTHER, THE FACT THAT THE DAIRY CAN INSPECT THE BOOTHS AND CHECK THE RECORDS MAINTAINED BY THE CONC ESSIONAIRE IS ALSO NOT DECISIVE. AS RIGHTLY POINTED OUT BY THE TR IBUNAL. THE DAIRY HAVING GIVEN SPACE MACHINERY AND EQUIPMENTS TO THE CONCESSIONAIRE WOULD NATURALLY LIKE TO INCORPORATE CLAUSES IN THE AGREEMENT TO ENSURE THAT ITS PROPERTY IS PROPERLY MAINTAINED BY THE CONCESSIONAIRE, PARTICULARLY BECAUSE MILK AND THE OTHER PRODUCTS AR E CONSUMED IN LARGE QUANTITIES BY THE GENERAL PUBLIC AND ANY DEFE CT IN THE STORAGE THYROCARE TECHNOLOGIES LTD 32 FACILITIES, WHICH REMAINS UNATTENDED CAN CAUSE SERI OUS HEALTH HAZARDS. THESE ARE ONLY TERMS INCLUDED IN THE AGREE MENT TO ENSURE THAT THE SYSTEM OPERATES SAFELY AND SMOOTHLY. FROM THE MERE EXISTENCE OF THESE CLAUSES IT CANNOT BE SAID THAT T HE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONCESSIONAIRE IS THAT OF A PRINCIPAL AND AN AGENT. THAT QUESTION MUST BE DIVIDED, ON THE BAS IS OF THE FACT AS TO WHEN AND AT WHAT POINT OF TIME THE PROPERTY IN THE GOODS PASSED TO THE CONCESSIONAIRE. IN THE INSTANT CASES, THE CONCE SSIONAIRE BECAME THE OWNER OF THE MILK AND THE PRODUCTS ON TAKING DE LIVERY OF THE SAME FROM THE DAIRY. HE, THUS PURCHASED THE MILK AND THE PRODUCTS FROM THE DAIRY AND SOLD THEM AT THE MRP. THE DIFFERENCE BETWEEN THE MRP FROM THE DAIRY AND SOLD THEM AT THE MRP. THE DIFFER ENCE BETWEEN THE MRP AND THE PRICE WHICH CONCESSIONAIRE PAYS TO THE DAIRY IS HIS INCOME FROM BUSINESS. IT CANNOT BE CATEGORIZED AS C OMMISSION. THE LOSS AND GAIN IS OF THE CONCESSIONAIRE. THE DAI RY MAY HAVE FIXED THE MRP AND THE PRICE AT WHICH THEY SELL THE PRODUCTS TO THE CONCESSIONAIRE BUT THE PRODUCTS ARE SOLD AND OW NERSHIP VESTS AND IS TRANSFERRED TO THE CONCESSIONAIRES. TH E SALE IS SUBJECT TO CONDITIONS AND STIPULATIONS. THIS BY ITS ELF DOES NOT SHOW AND ESTABLISH PRINCIPAL AND AGENT RELATIONSHIP . THE SUPERVISION AND CONTROL REQUIRED IN CASE OF AGENCY IS MISSING. IT IS RELEVANT THAT THE CONCESSIONAIRES WERE OPERAT ING FROM THE BOOTHS OWNED BY THE DAIRY AND WERE ALSO USING THE E QUIPMENT AND FURNITURE BY THE DAIRY. THAT FACT IS NOT DETERM INATIVE OF THE RELATIONSHIP BETWEEN THE DAIRY AND THE CONCESSIONAI RES WITH REGARDS TO THE SALE OF THE MILK AND OTHER PRODUCTS. THEY WERE LICENSES OF THE PREMISES AND WERE PERMITTED THE USE OF THE EQUIPMENT AND WERE LICENSES OF THE PREMISES AND WER E PERMITTED THE USE OF THE EQUIPMENT AND FURNITURE FO R THE PURPOSE OF SELLING THE MILK AND OTHER PRODUCTS. BUT SO FAR AS THE MILK AND THE OTHER PRODUCTS ARE CONCERNED, THESE ITEMS BECAM E THEIR PROPERTY THE MOMENT THEY TOOK DELIVERY OF THEM AND THEY WERE SELLING THE MILK AND THE OTHER PRODUCTS IN THEIR OW N RIGHT AS OWNERS. THESE ARE TWO SEPARATE LEGAL RELATIONSHIPS. THE INCOME TAX AUTHORITIES WERE NOT JUSTIFIED OR CORRECT IN LA W IN MIXING UP THE TWO DISTINCT RELATIONSHIPS OR TELESCOPING ONE I NTO THE OTHER TO HOLD THAT BECAUSE THE CONCESSIONAIRES WERE SELLI NG THE MILK AND OTHER PRODUCTS FROM THE BOOTHS OWNED BY THE DAI RY AND WERE USING THE ASSESSEES EQUIPMENT AND FURNITURE I N THE COURSE OF THE SALE OF THE MILK AND OTHER PRODUCTS, THEY WE RE CARRYING ON THE BUSINESS ONLY AS AGENTS OF THE DAIRY (PARA 13) THEREFORE NO SUBSTANTIAL QUESTION OF LAW ARISES FRO M THE ORDER OF THE TRIBUNAL. THE APPEALS OF THE REVENUE ARE ACC ORDINGLY DISMISSED (PARA 15) NOW IN THE CASE ADJUDGED BY THE HONORABLE HIGH COUR T, EVEN THOUGH THE CONCESSIONAIRES APPOINTED BY THE DAIRY A RE OPERATING FROM THE PREMISES OWNED BY THE DAIRY AND USING THE THYROCARE TECHNOLOGIES LTD 33 INFRASTRUCTURE ALSO OF THAT OF THE DAIRY, IT SHALL NOT CONSTRUED TO MEAN THAT THERE EXISTS A PRINCIPAL AGENT KIND OF RE LATIONSHIP BETWEEN THEM. IN CASE BEFORE YOUR GOODSELF THE COLLECTION CENTERS PREMISES ARE ALSO NOT OWNED BY THE COMPANY, THE INFRASTRUCTURE A LSO IS TOTALLY OWNED BY THESE CENTERS AND MANAGED BY COMPA NY, THE INFRASTRUCTURE ALSO IS TOTALLY OWNED BY THESE CENTE RS AND MANAGED BY THESE CENTERS AND THEREFORE RELYING ON T HIS DECIDED JUDGEMENT OF THE DELHI HIGH COURT IT CAN BE CLEARLY CONCLUDED THERE DOES NOT EXIST ANY PRINCIPAL AGENT RELATIONSH IP BETWEEN TTL AND TSPS. FURTHER THE CONTENTION OF OURS CAN BE FULLY AFFIRME D IN ONE ANOTHER DECIDED CASE OF THE INCOME TAX APPELLATE TR IBUNAL, DELHI BRANCH G IN THE CASE OF SRL RANBAXY LTD VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 9, DEL HI IN THE CASE OF HEARING FOR THE APPEAL NO. 434 (DELHI) OF 2 011 DATED 16.12.2011. THE DETAILED EXTRACT OF THE JUDGEMENT P ASSED BY THE HONORABLE ITAT BENCH IS REPRODUCED BELOW FOR YOUR R EFERENCE HEREUNDER: SECTION 194H BROUGHT IN FROM 1.6.2001, PROVIDES THA T ANY PERSON, OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVID ED FAMILY, RESPONSIBLE FOR PAYING COMMISSION AND BROKERAGE TO A RESIDENT, SHALL DEDUCT, SHALL DEDUCT TAX AT SOURCE AND THAT T HE TAX SHALL BE DEDUCTED AT THE TIME OF CREDIT OF SUCH INCOME TITHE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVE R IS EARLIER. TO FALL WITHIN THE PROVISION OF SECTIONS OF SECTION 194H, THE PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECT LY, IS TO BE BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON (I) FOR SERVICES RENDERED, NOT BEING PROFESSION AL SERVICES, OR (II) FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOOD S OR (III) IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING. THE ELEMENT OF AGENCY IS NECESSAR ILY TO BE THERE IN CASES OF ALL THE SERVICES OF THE TRANSACTIONS CO NTEMPLATED BY SECTION (PARA-8). WHERE THE DEALING BETWEEN THE PARTIES IS NOT ON A P RINCIPAL TO AGENT BASIS, SECTION 194H DOES NOT GET ATTRACTED (P ARA 9). IN THE PRESENT CASE, THE BUSINESS WORKING OF THE AS SESSEE IS THAT IT SIGNS AGREEMENTS WITH THE COLLECTION CENTERS, ON A NON- EXCLUSIVE BASIS. IT IS UNDER THESE AGREEMENTS THAT THE COLLECTION CENTERS AVAIL THE PROFESSIONAL SERVICES OF THE ASSE SSEE REGARDING TESTING OF SAMPLES. THESE CENTERS OPERATE AS AUTHOR IZED COLLECTORS FOR COLLECTING THE SAMPLES. NOW, THESE C OLLECTION CENTERS ARE WORKING IN THIS MANNER WITH VARIOUS CON CERNS, OF WHICH THE ASSESSEE IS ONE. THE COLLECTION CENTER IS UNDER NO THYROCARE TECHNOLOGIES LTD 34 OBLIGATION TO ALWAYS FORWARD THESE SAMPLES TO THE A SSESSEE. IT IS ONLY IN CASE THE PATIENT/CUSTOMER INSISTS THAT THE LABORATORY TESTING BE DONE BY THE ASSESSEE, THAT THE COLLECTIO N CENTER, FORWARDS THE SAMPLE OF SUCH A PATIENT TO THE ASSESS EE, FOR TESTING. THE COLLECTION CENTER ALSO FILLS UP THE NE CESSARY TEST REQUISITION FORMS TO BE SENT ALONGWITH THE SAMPLE.T HE ASSESSEE CONDUCTS THE TEST /TESTS AND ISSUES THE REPORT WITH REGARD THERETO, TO THE COLLECTION CENTER. THE COLLECTION C ENTER ISSUES ITS OWN BILL/INVOICE TO THE PATIENT/CUSTOMER. THE FEES FOR THE TESTING IS COLLECTED BY THE COLLECTION CENTER AND THE RECEI PT IS ALSO ISSUED BY THE COLLECTION CENTER. THE ASSESSEE RAISE S ITS PERIODICAL INVOICES ON THE COLLECTION CENTERS. THE COLLECTION CENTER MAKES THE, PAYMENT TO THE ASSESSEE AFTER TDS UNDER SECTION 194J. UNDER THE AGREEMENT , THE SERVICES ARE RENDERED BY THE ASSESSEE IN THE FORM OF LABORATORY TESTING A T A DISCOUNTED PRICE FROM THE PRICE GIVEN IN THE STANDARD PRICE LI ST. THIS DISCOUNT HAS BEEN CONSIDERED BY THE AUTHORITIES BEL OW AS COMMISSIONS AND THEY HAVE HELD THAT TAX WAS REQUIRE D TO BE DEDUCTED THEREON UNDER SECTION 194H (PARA 10.) NOW, IT HAS NOT BEEN SHOWN THAT THESE FACTS, AS CAN VASSED ON BEHALF OF THE ASSESSEE, ARE NOT THE CORRECT FACTS. IT HAS NOT BEEN SHOWN THAT THE RATES CHARGED BY THE COLLECTION CENT ER FROM ITS CUSTOMERS ARE NOT DECIDED BY THE COLLECTION CENTER, BUT BY THE ASSESSEE. IT HAS NOT BEEN SHOWN THAT THE COLLECTION CENTER IS UNDER ANY OBLIGATION TO FORWARD THE SAMPLES FOR TES TING ONLY AND ONLY BY THE ASSESSEE AND NOT BY THE OTHER LABOR ATORIES AS WELL. THE SET-UPS OF THE COLLECTION CENTERS ARE ALS O ENTIRELY DIFFERENT FROM THAT OF THE ASSESSEE. THE STAFF OF T HE TWO ARE ALSO DISTINCT AND SEPARATE. THE: ACCOUNTS ARE NOT EITHER INTER-MIXED OR INTER-TWINED. ON THE OTHER HAND, THERE EXISTS A PRIVITY OF CONTRACT BETWEEN THE COLLECTION CENTERS AND THEIR C USTOMERS. OUT OF THE PAYMENT MADE TO THE ASSESSEE, TAX IS DED UCTED AT SOURCE FOR PROFESSIONAL SERVICES RENDERED, UNDER SE CTION 194)) THE. RECEIPT OF THE COLLECTION CENTERS, AS SUCH, IS THE INCOME OF THE COLLECTION CENTERS THEMSELVES AND NOT THAT OF T HE ASSESSEE. TO BRING HOME THIS POINT, IT IS ENOUGH TO CONSIDER THAT THE AMOUNT, ALLEGED TO HAVE BEEN PAID BY THE ASSESSEE T O. THE COLLECTION CENTERS, HAS NOT BEEN CONSIDERED TO BE D EDUCTIBLE EXPENDITURE (PARA)1. THE COMMISSIONER (APPEALS) HAS OBSERVED THAT THE SU BMISSION OF THE ASSESSEE THAT IF PROVIDED PROFESSIONAL SERVI CES IN THE FORM OF MEDICAL DIAGNOSTIC SERVICES TO THE COLLECTION CE NTERS, WAS NOT ACCEPTABLE. FOR ARRIVING AT HIS OBSERVATION, THE COMMISSIONER(APPEALS) NOTED THAT THE ASSESSEE PROVI DES PROFESSIONAL SERVICES TO THE PATIENTS AND NOT TO TH E COLLECTION CENTERS, WHICH WORK ON BEHALF OF THE ASSESSEE TO CO LLECT SAMPLES FROM PATIENTS. IN THIS REGARD; IT IS SEEN , AS NOTICED HEREINABOVE, THAT THE ASSESSEE HAD APPOINTED COLLECTION CENTERS UNDER NON- THYROCARE TECHNOLOGIES LTD 35 EXCLUSIVE AGREEMENTS TO COLLECT SAMPLES AND TO FORW ARD THEM FOR TESTING TO THE ASSESSEE. THE PROFESSIONAL SERVICES IN THE FORM OF MEDICAL DIAGNOSTIC, SERVICES, WERE PROVIDED TO THE COLLECTION CENTERS AND NOT TO THE PATIENTS/CUSTOMERS OF THE CE NTERS. THE COLLECTION CENTERS AND THE PATIENTS/CUSTOMERS ARE T HE ONES WHICH HAVE PRIVITY OF CONTRACT INTER SE. THE COLLEC TION CENTERS DEDUCTED TAX AT SOURCE FROM THE PAYMENT MADE TO THE ASSESSEE, FOR PROFESSIONAL SERVICES, UNDER SECTION 194J] ESTA BLISHING THAT THE COLLECTION CENTERS WERE NOT THE AGENTS OF THE ASSESSEE. WERE IT OTHERWISE, THE ENTIRE RECEIPT WOULD HAVE BEEN CO LLECTED ON BEHALF OF THE ASSESSEE BY THE COLLECTION CENTERS. I T HAS NOT BEEN SHOWN TO BE SO. MOREOVER THE AMOUNT RETAINED BY THE COLLECTION CENTERS WAS NOT REGARDED AS THE INCOME OF THE ASSES SEE AND THE COMMISSION ALLEGEDLY PAID BY THE ASSESSEE TO THE CO LLECTION CENTERS WAS $ NOT TREATED AS THE DEDUCTIBLE EXPENDITURE (PARA 13] . THE ASSESSEES CONTENTION THAT THE COLLECTION CENTE RS HAVE THE OPTION TO CONDUCT THE TESTS, THEMSELVES OR TO OUT-S OURCE THEIR MEDICAL SERVICES TO OTHER LABORATORIES, HAS BEEN SI MPLY BRUSHED ASIDE BY THE COMMISSIONER (APPEALS) STATING IT TO B E OF NO SIGNIFICANCE. THIS, HOWEVER, IS NOT CORRECT. FIRSTL Y, THIS CONTENTION HAS NOT BEEN DISPROVED. IT IS BORNE OUT FROM THE AGREEMENTS. THEN, IF THIS AVERMENT ON BE HALF OF TH E ASSESSEE IS CORRECT, THE ELEMENT OF AGENCY IN THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE COLLECTION CENTERS GOES AWAY. TRUE , THE COLLECTION CENTERS HAVE TO FOLLOW THE TERMS OF THE CONTRACT ENTERED INTO BY THEM WITH THE ASSESSEE. HOWEVER, NO VIOLATION OF THE TERMS OF THESE AGREEMENTS HAS BEEN SHOWN. THE COMMISSIONER (APPEALS) HAS CONCLUDED THAT THE ASSES SEES CONTENTION THAT THE CENTERS CAN OUT-SOURCE THEIR SE RVICES TO OTHER LABORATORIES, IS FACTUALLY INCORRECT. THIS IS BASED ON THE RECITAL IN THE AGREEMENT, THAT THE COLLECTION CENTE RS CANNOT COLLABORATE WITH THE COMPETITORS, EVEN ON THE TERMI NATION OF THE AGREEMENT. THE ASSESSEES STAND IN THIS REGARD HAS BEEN THAT SUCH A RESTRICTION WAS IMPOSED SIMPLY TO PREVENT TH E COLLECTION CENTERS FROM DIVULGING THE ASSESSES CONFIDENTIAL SP ECIFIC KNOW- HOW TO ITS COMPETITOTS, THEREBY PREJUDICING THE ASS ESSEES BUSINESS. AND NOT ONLY THIS, THE MERE EXISTENCE OF SUCH ALLEGED RESTRICTION DOES NOT, BY ITSELF, ESTABLISH A PRINCI PAL-AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE COLLECTIO N CENTERS. [PARA 14] IT HAS FURTHER BEEN THE OBSERVATION OF THE COMMISSI ONER (APPEALS) THAT THERE WERE GEOGRAPHICAL RESTRICTION IMPOSED ON THE COLLECTION CENTERS. HPWEVER, AS RIGHTLY CONTENT ED, IT HAS NOT BEEN SHOWN THAT ANY SUCH RESTRICTIONS WERE EVER IMP OSED ON THE COLLECTION CENTERS FROM REFERRING THE TESTS TO LABO RATORIES OTHER THAN THE ASSESSEE. IT HAS BEEN CONTENTED ON BEHALF OF THE ASSESSEE THAT ALL THROUGH, I.E. IN THE PAST, AS WEL L AS IN THE THYROCARE TECHNOLOGIES LTD 36 PRESENT, THE COLLECTION CENTERS HAVE BEEN AND ARE E NGAGING THE SERVICES OF OTHER LABORATORIES. THIS HAS NOT BEEN D ISPUTED. [PARA15] THE COMMISSIONER (APPEALS) HAS ALSO OBJECTED THAT I T IS NOT TRUE TO CONTEND, AS DONE ON BEHALF OF THE ASSESSEE, THAT THE COLLECTION CENTERS ARE FREE TO CHARGE A RATE AS DESIRED BY THE M FROM THEIR PATIENTS; THAT THE ADVERTISEMENT CLEARLY SPECIFIES THE RATE WHICH IS TO BE CHARGED BY THE COLLECTION CENTERS, AND THA T FROM THAT, IT IS CLEAR THAT THE ASSESSEE HAS CONTROL OVER THE PRI CING OF THE TEST [PARA 16] IN THIS REGARD, THE CONTENTION ON BEHALF OF THE AS SESSEE HAS BEEN THAT THE FINDINGS OF THE ID. COMMISSIONER (APP EALS) IS INCORRECT. IT HAS BEEN REITERATED THAT THE COLLECTI ON CENTERS ARE FREE TO CHARGE THE DESIRED RATES FROM THE CUSTOMERS /PATIENTS. IT HAS BEEN SUBMITTED THAT THOUGH IN THE ADVERTISEMENT REFERRED TO IN THE COMMISSIONER (APPEALS)S ORDER, THE RATES HA VE BEEN SPECIFIED, THE COLLECTION CENTERS CHARGE THE RATES FIXED BY THE COLLECTION CENTERS THEMSELVES ARE NOT AT THOSE DECI DED BY THE ASSESSEE; THAT IN CERTAIN CASES, THE COLLECTION CEN TERS HAVE CHARGED OVER AND ABOVE THE STANDARD PRICE LIST PROV IDED BY THE ASSESSEE TO THE COLLECTION CENTERS [PARA 17]. IN SUPPORT OF AFORESAID CONTENTION, THE DOCUMENTS W ERE PLACED BEFORE THE AUTHORITIES BELOW, IN THE IMPUGNED ORDER , HOWEVER, THE COMMISSIONER (APPEALS) HAS NOT TAKEN THOSE INTO CONSIDERATION. IN FACT, NO REFERENCE WHATSOEVER HAS BEEN MADE TO THIS DOCUMENTARY EVIDENCE. THEREFORE, THE CONTEN TION OF THE ASSESSEE REGARDING THE COLLECTION CENTER FREE TO CH ARGE THE RATES AS DESIRED BY THEM FROM THE CUSTOMERS/PATIENT S DOES NOT STAND REBUTTED AND THE COMMISSIONER (APPEALS) HAS W RONGLY BASED HIS FINDING IN THIS REGARD MERELY ON THE ADVE RTISEMENT ARE, NO DOUBT, THE SPECIFIED RATES, BUT THE ASSESSE E HAS BEEN ABLE TO SHOW THAT THE COLLECTION CENTERS DO CHARGE RATES OVER AND ABOVE SUCH SPECIFIED RATES, AS DESIRED BY THEM. THE OBSERVATION OF THE ID. COMMISSIONER (APPEALS) AGAINST THE ASSES SEE IN THIS REGARD IS, THEREFORE, NOT CORRECT [PARA 19]. THE COMMISSIONER (APPEALS) HAS ALSO OBSERVED THAT THE ASSESSEE IS BOUND TO THE COLLECTION CENTERS IN TERM S OF THE REPORT ISSUED IN RESPECT OF SAMPLES REFERRED BY THE CENTERS TO THE ASSESSEE AND TESTED BY THE ASSESSEE. NO PRINCIP AL AGENT RELATIONSHIP STANDS ESTABLISHED BY THIS SOLE FACT, OBVIOUSLY, SINCE THE ASSESSEE RENDERS PROFESSIONAL SERVICES, AND THA T TOO, PROFESSIONAL CONDUCT WHICH HAS TO BE ABIDED BY THE ASSESSEE. THE ASSESSEE IS UNDER A STRICT OBLIGATION. IF THERE IS ANY NEGLIGENCE OR DEFICIENCY ON THE PART OF THE ASSESSE E, IT IS THE ASSESSEE WHO IS ANSWERABLE(PARA 20]. AS SEEN FROM THE ABOVE, IT IS EVIDENT THAT THERE IS NO PRINCIPAL THYROCARE TECHNOLOGIES LTD 37 AGENT RELATIONSHIP EXISTING BETWEEN THE ASSESSEE AN D THE COLLECTION CENTERS. THE FINDINGS OF THE COMMISSIONE R (APPEALS) IN THIS REGARD ARE, THEREFORE, INCORRECT [PARA 21]. BESIDES THE ABOVE IT IS PATENT ON RECORD THAT THE A SSESSEE DOES NOT PAY OR CREDIT ANY AMOUNT TO THE ACCOUNT OF THE COLLECTION CENTERS, EITHER DIRECTLY OR INDIRECTLY. THAT BEING SO, THE PROVISIONS OF SECTION 194H DO NOT GET ATTRACTED ON THIS SCORE ALSO. IT IS OBVIOUS THAT THE OBLIGATION OF DEDUCTIO N OF TAX AT SOURCE UNDER SECTION 194H COMES UP ONLY AT THE TIME OF PAYMENT OR CREDIT OF THE AMOUNT IN THE BOOKS OF ACC OUNT OF THE PAYER, WHICHEVER IS EARLIER. HEREIN, THE AMOUNT REC EIVED BY THE ASSESSEE HAS BEEN CREDITED IN ITS BOOKS OF ACCOUNT. THIS IS BASED ON THE INVOICES RAISED BY THE ASSESSEE ON THE COLLE CTION CENTERS. NO DEBIT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FO R ANY DISCOUNT AND/OR COMMISSION PAID TOWARDS THE COLLECT ION CENTERS HAS BEEN SHOWN TO EXIST. ON THE CONTRARY, T HE ASSESSEE HAS BEEN TAXED ON THE GROSS RECEIPT OF AS. 50.42 CR ORES, WHICH STANDS REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE.[PARA 22]. THEN, THE DISALLOWANCE IN TERMS OF SECTION 40(A)(IA ) READ WITH SECTION 194H CAN BE MADE ONLY IN RESPECT OF EXPENDI TURE IN THE NATURE OF COMMISSION PAID/CREDITED TO THE ACCOUNT O F THE RECIPIENT, OR TO ANY OTHER ACCOUNT IN THE PRESENT C ASE, THE ASSESSEE RECEIVES THE AMOUNT OF THE INVOICE RAISED ,NOT OF DISCOUNT FROM THE COLLECTION CENTERS. THIS DISCOUNT , INDISPUTABLY, CANNOT, IN ANY MANNER, BE SAID TO BE EXPENDITURE INCURRED BY THE ASSESSEE AND SO, SECTION 40(A)(IA) IS NOT ATTRACTED.[PARA 23]. IN THE PRESENT CASE, THE COLLECTION CENTER HAS ITS OWN PREMISES, INFRASTRUCTURE, STAFF AND NECESSARY LICENSES/APPROV ALS. THE COLLECTION CENTER ACTS AS AN AUTHORIZED COLLECTOR F OR COLLECTING SAMPLES AND AVAILS THE PROFESSIONAL SEERVICES OF TH E ASSESSEE WITH RESPECT TO TESTING OF SAMPLES AND ISSUE OF NEC ESSARY REPORTS THE ASSESSEE RAISES PERIODICAL INVOICES ON THE COLL ECTION CENTERS. THE AMOUNT COLLECTED BY THE COLLECTION CENTERS FROM THE PATIENTS IS NOT ON ACCOUNT OF OR ON BEHALF OF THE ASSESSEE. THE COLLECTION CENTER, IN TURN MAKES PAYMENT TO THE ASSESSEE AFTER DEDUCTING TAX AT SOURCE UNDER SECTION 194) FOR THE PROFESSION AL SERVICES RENDERED. THE COLLECTION CENTER HAS THE FLEXIBILITY AND FREEDOM TO CHOOSE THE LABORATORY TO WHICH SAMPLES HAVE TO B E SENT FOR TESTING., UNLESS THE SAME IS MANDATED BY THE PATIEN T/CUSTOMER. MOREOVER, THE COLLECTION CENTER CHARGES THE CUSTOME R RATES FIXED BY THE COLLECTION CENTER ,(AND NOT DECIDED BY THE ASSESSEE) THOUGH AT THE SAME TIME, KEEPING IN MIND THE AMOUNT THAT WOULD HAVE TO BE PAID BY THE COLLECTION CENTER TO THE ASS ESSEE OR TO ANY OTHER LABORATORY TO WHICH THE SAMPLES HAVE TO BE SE NT FOR TESTING. IN FACT, IN CERTAIN CASES, THE COLLECTION CENTERS HAVE, $ THYROCARE TECHNOLOGIES LTD 38 AS ALSO BROUGHT ON RECORD, CHARGES OVER AND ABOVE T HE STANDARD PRICE LIST PROVIDED BY THE ASSESSEE TO ALL COLLECTI ON CENTERS, WHICH AVERMENT HAS GONE UNREBUTTED. [PARA 39]. IN VIEW OF THE ABOVE, IT IS TO BE HELD THAT (1) THE RE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE ASSESSEE A ND THE COLLECTION CENTERS AND THAT BEING SO, THE PROVISION OF SECTION 194H HAVE BEEN WRONGLY INVOKED;(II) THE PROVISIONS OF SECTION 194H COULD, EVEN OTHERWISE, NOT HAVE BEEN MET, SINC E NO PAYMENT HAS BEEN SHOWN TO HAVE BEEN MADE BY THE ASS ESSEE TO THE COLLECTION CENTERS; (III) THE PAYMENT MADE TO T HE ASSESSEE BY THE COLLECTION CENTERS WAS AT THE RATES AGREED TO I N TERSE BETWEEN THEM; (IV) THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 40(A ) FOR THE ALLEGED FAILURE OF TDS BY THE ASSESSEE UNDER SECTIO N 194H.[PARA 46] IN THE RESULT, THE APPEAL FILED BY THE ASSSSEE IS ALLOWED [PARA 49] THE RECENT JUDGEMENT PASSED BY THE HONOURABLE ITAT FURTHER AFFIRMS ON OUR CLAIM THAT THERE DOES NOT EXIST ANY PRINCIPAL AGENT KIND OF RELATIONSHIP BETWEEN TTL AND TSP5 AND THEREFORE THE QUESTION OF APPLICATION OF SECTION 194H OF THE INCOME TAX ACT, 1961 DOES NOT ARISE AT ALL: THE ASSESSEES SUBMISSIONS HAVE BEEN CAREFULLY PERU SED. THE ASSESSEE HAS ADVANCE VARIOUS THEORIES AND ARGUMENTS TO WRIGGLE OUT OF THE BASIC FACT THAT ITS RELATIONSHIP WITH T HE TSPS IS IN THE NATURE OF PRINCIPAL AGENT. THE FOLLOWING LITMUS TE ST IS APPLIED TO UNAMBIGUOUSLY ESTABLISH THAT THE TSPS ARE INDEED TH E AGENTS OF THE ASSESSEE COMPANY IN SO FAR AS COLLECTION OF SAM PLES AND DELIVERY OF REPORT. IS CONCERNED. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 9. THE ABOVE LITMUS TEST, WHICH IS ANSWERED IN AFFIRMATIVE, GOES TO ESTABLISH, BEYOND ANY IOTA OF DOUBT THAT TH E TSPS ARE AGENTS OF THE COMPANY AND ARE ALLOWED TO COLLECT NE CESSARY ,CHARGES FROM ITS CLIENTS FOR COLLECTING SAMPLES AN D DELIVERING TEST REPORTS. SUCH, AN ARRANGEMENT HAS BEEN MADE BY THE ASSESSEE WITH AN INTENTION TO EXPAND ITS BUSINESS AND HAVE ITS PAN-INDIA PRESENCE. ALSO, THE SHARING OF TESTING CHARGES, BET WEEN THE TSPS AND THE ASSESSEE COMPANY IS SO ARRANGED SO AS TO GI VE THE SAME A COLOUR DISTINGUISHABLE FROM COMMISSION OR BROKERAGE , AS ENVISAGED IN SECTION 194H OF THE I T ACT. 10. AS FAR AS THE CITATIONS RELIED UPON BY THE ASSE SSEE COMPANY IS CONCERNED, THE SAME ARE DISTINGUISHABLE FROM THE THYROCARE TECHNOLOGIES LTD 39 FACTS OF THE CASE OF THE ASSESSEE AND AS SUCH THE S AME ARE NOT RELEVANT TO THE PRESENT PROCEEDINGS. 11. NOW, COMING TO THE QUANTIFICATION OF THE DEFAUL T U/S 201 OF THE I.T. ACT, IN THE ABSENCE OF TURNOVER DETAILS OF THE TSPS, IT CAN REASONABLY BE PRESUMED THAT THE COMMISSION AMOU NT IS EQUIVALENT TO THE TOTAL AMOUNT OF BILLS RAISED BY T HE COMPANY ON THE TSPS DURING THE F.Y. 2008-09 AND 2009-10 AS THE TSPS ARE ALLOWED TO CHARGE THEIR CLIENTS AT 100 % RATE OF TH E CATALOGUE RATE, AT WHICH THE TSPS ARE BILLED BY THE COMPANY. THUS T HE TOTAL COMMISSION, DEFAULT AMOUNT @ 10.3%) AND INTEREST U/ S 201(1A) @ 1% P.M. FOR 48 MONTHS & 36 MONTHS FOR A.Y. 2009-1 0 & 2010-11 RESPECTIVELY, ARE TABULATED HERE BELOW: AMT. IN RS. S.N O. A.Y. COMMISSION DEFAULT INTEREST TOTAL 1. 2009-10 43,09,62,682 4,43,89,156 2,13,06,795 6,56,95,951 2. 2010-11 RS. 53,34,20,166 5,49,42,277 1,97,79,220 7,47,21,497 12. THE ASSESSEE HAS NOT DISCHARGED ITS BURDEN, AS CASTED UPON BY THE HON. APEX COURT, IN THE CASE OF M/S HINDUSTA N COCA COLA, THE BENEFIT OF THE SAME CANNOT BE GRANTED TO THE AS SESSEE AT THIS POINT OF TIME. THE ASSESSEE IS DIRECTED TO PAY THE ABOVE DEMANDS. SEPARATE DEMAND NOTICES ARE ENCLOSED FOR BOTH ASSES SMENT YEARS. 2.4. THE BROAD PRINCIPAL ESTABLISHES THAT THE TSPS ARE INDEED THE AGENTS OF THE ASSESSEE IN SO FAR AS COLLECTION OF SAMPLES AND DELIVERY OF REPORT IS CONCERNED, FOR READY REFERENC E, OUR VIEW IS FORTIFIED BY THE FOLLOWING POINTS WHICH ARE ALSO ME NTIONED IN THE ASSESSMENT ORDER :- SL. NO. SERVICE DESCRIPTION/OBLIGATION YES/NO. 1. WHETHER THE ASSESSEE APPOINTS THE TSPS? YES 2. WHETHER ALL THE TERMS AND CONDITIONS, FOR PERFOR MANCE AND FUNCTIONALITIES OF TSPS, ARE SET FORTH BY ASSESSEE COMPANY? YES 3. WHETHER THE ASSESSEE COMPANY EXERCISE COMPLETE C ONTROL OVER THE TSPS. IN THE LATTERS DAY TO DAY FUNCTIONING? YES 4. WHETHER THE ASSESSEE COMPANY IS RESPONSIBLE FOR ANY WRONG HAPPENING/REPORTING BY IT AND NOT TSPS, EXCEPT IN C ASES WHERE WRONG DOING ORIGINATE FROM THE TSPS? YES THYROCARE TECHNOLOGIES LTD 40 5. WHETHER TRAINING IS PROVIDED BY THE ASSESSEE COM PANY? YES 6. WHETHER THE ASSESSEE COMPANY USES LOGO OF THE CO MPANY IN ITS STATIONERY, POSTERS/BANNERS ETC. YES 7. WHETHER THE ASSESSEE COMPANY HAS RIGHT TO SEEK B USINESS DETAILS OF THE TSPS YES 8. WHETHER THE ASSESSEE COMPANY CAN SEEK BANK DETAI LS OF THE TSPS, WHERE THE TRANSACTION IN RESPECT OF THE SAMPL ES SENT TO THE COMPANY HAS BEEN RECORDED? YES 9. WHETHER ON TERMINATION OF CONTRACT, THE TSPS ARE OBLIGED TO HAND OVER BACK THE LOGOS, STATIONERY, VIALS ETC. TO THE ASSESSEE COMPANY? BY DOING SO, THE TSPS EXPLOIT THE GOODWILL OF THE ASSESSEE COMPANY. YES 10. WHETHER THE ASSESSEE COMPANY GIVES INCENTIVES T O TSPS TO BOOST ITS BUSINESS? YES 11. WHETHER THE RATES OF PATHOLOGICAL TESTING ARE F IXED BY THE COMPANY AND TSPS HAVE TO MANDATORY FOLLOW THE RATES SO FIXED? YES 2.5. IF THE TOTALITY OF FACTS ARE EXAMINED, THE FOL LOWING UNDISPUTED FACTS EMERGES (A) THE TSPS ARE AGENTS OF THE ASSESSEE COMPANY WHO ARE ALLOWED TO COLLECT NECESSARY CHARGES, FROM ITS CLIENTS, FOR COLLECTING SAMPLES AND DELIVERY TEST REPORT. (B) THE ARRANGEMENT HAS BEEN MADE BY THE ASSESSEE TO EXPAND ITS BUSINESS THROUGHOUT THE COUNTRY (C) THE SHARING OF TESTING CHARGES BETWEEN THE ASSESSEE AND SUCH TSPS/COLLECTORS/AGGREGATORS IS SO ARRANGED TO GIVE IT COLOUR DISTINGUISHABLE FROM COMMISSION OR BROKERAGE AS ENVISAGED IN SECTION 194H OF THE ACT. 2.6. DURING THE COURSE OF HEARING, THE LD A.R VE HEMENTLY CONTENDED THAT THE RELATIONSHIP BETWEEN THE ASSESSE E AND TSPS/COLLECTORS/AGGREGATORS ARE THAT OF PRINCIPAL T O PRINCIPAL BASIS, YET NO DOCUMENT WAS PRODUCED BEFORE US TO SU BSTANTIATE THOSE CONTENTIONS. FURTHER, WE NOTICE THAT THE TES T RESULTS GIVEN BY THE ASSESSEE DIRECTLY BENEFIT THE PATIENTS AND IN THAT CASE THE TSPS/COLLECTORS/AGGREGATORS APPEAR TO ACT AS MERE THYROCARE TECHNOLOGIES LTD 41 AGENTS OF THE ASSESSEE IN COLLECTING THE SAMPLES FR OM THE PATIENTS AND GIVING THE RESULTS TO THEM. WHEN THIS FACTUAL MATRIX WAS PUT BEFORE THE LD A.R, HE TRIED TO CONVI NCE THE BENCH THAT THESE ACTIVITIES ARE AKIN TO THE TRADERS OF GOODS, WHEREIN THE TRADERS ARE ALSO SUPPLYING THE GOODS TO THE ULTIMATE CONSUMERS. HOWEVER, WE ARE NOT CONVINCED WITH THE SAID ARGUMENTS OF LD A.R. IN TRADING OF GOODS, THE TITLE TO THE GOODS PASSES FROM THE MANUFACTURER TO THE WHOLESALE R AND FROM THE WHOLESALER TO THE RETAILER AND THEN FROM T HE RETAILER TO THE ULTIMATE CONSUMERS, I.E., EACH OF THE PARTIES M ENTIONED ABOVE BECOME OWNERS OF THE GOODS IN THEIR INDEPENDE NT CAPACITIES AND THEY ARE ENTITLED TO DEAL WITH THE G OODS IN ANY MANNER AS HE LIKES. HOWEVER, IN THE CASE OF LAB RE SULTS, THE TSPS/ COLLECTORS / AGGREGATORS ARE NOT GOING TO BE BENEFITED BY THE TEST RESULTS AND IT IS THE PATIENT WHO IS GOING TO BE BENEFITTED BY THE LAB RESULTS. HENCE, WE ARE OF TH E VIEW THAT THE TRADERS OF THE GOODS CANNOT BE COMPARED WITH TH E TSPS/COLLECTORS/AGGREGATORS, AS THEY PROVIDE ONLY A GENCY SERVICES AS EXPLAINED EARLIER. IN OUR VIEW, THE A SSESSING OFFICER SHOULD EXHAUSTIVELY EXAMINE THE RELATIONSHIP BETWEE N THE PARTIES IN THE LIGHT OF DISCUSSIONS MADE SUPRA. TH E ASSESSEE IS ALSO DIRECTED TO EXTEND FULL CO-OPERATION TO THE AS SESSING OFFICER. IN VIEW OF THESE FACTS, THE ASSESSING OFFICER IS DI RECTED TO EXAMINE THE ISSUES AFRESH, COLLECT THE DETAILS FROM SUCH TSPS/COLLECTORS/AGGREGATORS/ASSESSEE AND IF NECESSA RY EXAMINE THEM AND DECIDE THE ISSUE IN ACCORDANCE WIT H LAW. WE ARE OF THE VIEW THAT THE ASSESSEE HAS CERTAINLY NOT DISCHARGED THE BURDEN AND THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) GRANTED RELIEF TO THE ASSESSEE IGNORING THE TRUE FA CTS AND THYROCARE TECHNOLOGIES LTD 42 OBSERVATION MADE IN THE ASSESSMENT ORDER, THEREFORE , THE IMPUGNED ORDERS ARE SET ASIDE. THE ASSESSING OFFIC ER IS DIRECTED TO EXAMINE THE CASE AFRESH WITH DIFFERENT ANGLES INCLUDING THE OBSERVATIONS MADE BY US. THE ASSESSE E BE GIVEN OPPORTUNITY OF BEING HEARD, SO THAT NO GRIEVANCE IS CAUSED TO EITHER SIDE. FINALLY, THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31/03/2015. SD/ - (B.R. BASKARAN) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; $ DATED : 31/03/201 5 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %&'( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. + ( %& ) / THE CIT, MUMBAI. 4. + / CIT(A)- , MUMBAI 5. -. ) / , %&' %/ 0 , / DR, ITAT, MUMBAI 6. .1 2 / GUARD FILE. / BY ORDER, *-& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Business Valuations
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1:1 Consultation on Tax Litigation
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1:1 Consultation on Salary Structuring
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Initial LLP Agreement
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Co-Founder Separation Agreement
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