Kiran Infertility Centre Private Limited, Hyderabad V. Dy. Commissioner of Income Tax(TDS) , Circle-1(1), Hyderabad

ITA 630/Hyd/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5660 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 22-07-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 29-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: TDS
• Section: 40(a)(ia); 194C; 201(1); 194J; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 629/HYD/2019 2011-12 KIRAN INFERTILITY CENTRE PRIVATE LIMITED, HYDERABAD [PAN: AABCK6053F] DEPUTY COMMISSIONER OF INCOME TAX (TDS), CIRCLE-1(1), HYDERABAD 630/HYD/2019 2012-13 FOR ASSESSEE : SHRI S.RAMA RAO, AR FOR REVENUE : SHRI RAJAT MITRA, DR DATE OF HEARING : 22-07-2021 DATE OF PRONOUNCEMENT : 20-09-2021 O R D E R PER S.S.GODARA, J.M. : THESE TWO ASSESSEES APPEALS FOR AYS.2011-12 AND 20 12- 13 ARISE AGAINST THE CIT(A)-4, HYDERABADS ORDER(S) DATED 14-02-2019, IN CASE NOS.10141 & 10142 / 18-19 / DCI T, TDS- CIR.1(1) / CIT(A)-4 / HYD / 18-19, INVOLVING PROCEE DINGS U/S.201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]; RESPECTIVELY. HEARD BOTH THE PARTIES. CASE FILES PERUSED. 2. IT EMERGES AT THE OUTSET THAT THE ASSESSEES IDENTICAL SOLE SUBSTANTIVE GRIEVANCE RAISED IN BOTH THE INSTANT APPEALS CHALLENGES CORRECTNESS OF THE LOWER AUTHORITIES ACTIO N INVOKING SECTION 201(1) AND 201(1A) TDS RECOVERY MECHANISM I NVOLVING ITA NOS. 629 & 630/HYD/2019 :- 2 -: THE IMPUGNED DEMANDS OF RS.7,72,740/- AND RS.1,53,12 6/-; RESPECTIVELY. 3. THE REVENUES STAND THROUGHOUT IS THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON SURROGACY PAYMENTS MADE TO THE CONCERNED PAYEE(S) AS AGAINST THE LATTERS PLEA THAT SECTION 194C DOES NOT APPLY IN THE FACTS HEREIN. 4. IT EMERGED DURING THE COURSE OF HEARING THAT THIS TRIBUNALS CO-ORDINATE BENCH DECISION IN ASSESSEES C ASES ITSELF HAS UPHELD THE LEARNER LOWER APPELLATE AUTHORITIES A CTION INVOKING SECTION 194C OF THE ACT THEREBY TREATING THE SURROGACY PAYMENTS AS CONTRACTUAL IN NATURE AS UNDER: 18. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE PRECEDING RIVAL CONTENTIONS. THERE IS HARDLY ANY DISPUTE BY N OW THAT WE ARE DEALING WITH A VERY MUCH AN UN-TOUCHED ISSUE AS TO WHETHER PAYMENTS MADE TO SURROGATE MOTHERS ATTRACT CHAPTER- XVII OF THE ACT REQUIRING TDS DEDUCTION. WE THEREFORE DEEM IT APPR OPRIATE FIRST OF ALL TO HAVE CLARITY FROM THE ENTIRE PROCEDURE OF SURROG ACY IN SUCCEEDING PARAS. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THIS S URROGACY PROCESS INVOLVES GENETIC PARENTS I.E. A MALE AND A FEMALE; WHERE IN EGGS COLLECTED FROM IVF ARE FERTILIZED WITH THE LAT TERS SPERM AND THEN PLACED IN THE WOMB OF THE SURROGATE MOTHER WHICH IN TURN IS CARRIED TILL DELIVERY OF THE FEATUS. AND THAT SUCH GENETIC PARENTS COULD BE A SOLO FEMALE OR A MALE ONLY AS WELL. APART FROM THE FACT THAT THE DIGITAL PLATFORM THROWS ENOUGH LIGHT ON SURROGACY RIGHT FRO M ANCIENT TIMES COMING TO THE RESCUE OF ISSUELESS COUPLES AS PER TH E LEARNED COUNSELS WRITTEN SUBMISSIONS DISCUSSING THE MYTHOLOGICAL SID E, THE FIRST SUCCESSFUL INSTANCE OF ARTIFICIAL INSEMINATION OF A WOMAN THROUGH SURROGACY REPORTED ONLY IN THE YEAR 1884. AFTER A LONG TIME SPAN OF ALMOST A CENTURY THEREAFTER SAW THE FIRST CASE OF A COMPLETED IVF TRANSFER. THIS WAS FOLLOWED BY THE FIRST LEGAL SURR OGACY AGREEMENT BROKERED IN USA WHICH IN TURN WAS USED TO ESTABLISH AN INFERTILITY CENTRE. THE YEAR 1978 SAW THE FIRST BABY BORN THROU GH IVF TRANSFER. 19. WE CONTINUE TO NOTICE THAT NEXT DECADE OF 1980S TO 1989 WITNESSED THE FAMOUS SURROGATE CHILDS CUSTODY DISP UTE BABY M CASE IN THE YEAR 1986 WHEREIN THE NEW JERS EY SUPREME COURT (USA) REJECTED THE CORRESPONDING SURROGACY AG REEMENT AS AN ILLEGAL ONE. IT WAS DURING ALL THESE DEVELOPMENTS O NLY THAT THE YEAR ITA NOS. 629 & 630/HYD/2019 :- 3 -: 1985 WITNESSED THE FIRST SUCCESSFUL GESTATIONAL SUR ROGACY AND THE SAME PRACTICE PROCEDURE HAS BEEN CONTINUING AS ON D ATE TO HELP ISSUELESS COUPLES OR THOSE FEMALE(S) OR MALE(S) WHO WISH TO HAVE A SURROGATE CHILD. 20. COMING TO INDIA, IT WAS IN THE YEAR 2002 THAT T HE SURROGACY WAS LEGALISED ON COMMERCIAL LINES AND CONTINUED UPT O YEAR 2015 WHEN THE GOVERNMENT OF INDIA PROHIBITED ITS COMMERC IAL PRACTICE. WE ARE INFORMED THAT THE LEGISLATURE HAS ALSO APPROVED THE SURROGACY (REGULATION) BILL, 2020 AS WELL. 21. WE FURTHER NOTE FROM VALUABLE ASSISTANCE COMING FROM BOTH THE PARTIES THAT THE ISSUE OF SURROGACY HAS NOT ONLY BE EN CONFINED TO MERE PROCEDURES AND REGULATORY MECHANISMS. HON'BLE APEX COURT IN BABY MANJI YAMADA VS. UNION OF INDIA WRIT PETITION (CIVI L) NO.369/08, DT.29-09-2008 ALSO DEALT WITH A CASE OF A SURROGATE CHILDS PRODUCTION/CUSTODY WHO HAD OVERSEAS GENETIC PARENTS AND AN INDIAN SURROGATE MOTHER. 22. WE NOW PROCEED TO DEAL WITH THE IMPUGNED ISSUE OF TDS DEDUCTION ON SURROGACY PAYMENTS BEFORE US KEEPING I N MIND THE ABOVE CONCEPTIONAL BACKDROP. THE ASSESSEES CASE AD MITTEDLY IS THAT IT IS NO A PARTY TO ANY AGREEMENT OR A CONTRACT AT ALL SO AS TO BE ELIGIBLE TO SECTION 194C OF THE ACT. WE SEE NO REA SON TO ACCEPT THE INSTANT ARGUMENT. WE MAKE IT CLEAR THAT PGS.31 TO 34 OF THE PAPER BOOK CONTAINES THE ASSESSEES SAMPLE SURROGACY AGRE EMENT IN THIS REGARD. THE INTRODUCTORY PORTION THEREOF DULY CONT AINS THE CLAUSE THAT THE SAME IS BY AND AMONG THE GENETIC PARENTS, SUR ROGATE MOTHERS AND THE ASSESSEE IN OTHER WORDS. NOT ONLY THIS, M ATERIAL BREACH CLAUSE 17.2 THEREIN ALSO SUGGESTS THAT IT IS THE IN FERTILITY CENTRE/PHYSICIAN ONLY WHO SHALL REIMBURSE INTENDED PARENTS FOR ALL SUMS EXPENDED PLUS INTEREST AT THE MAXIMUM ALLOWABL E RATE. ALL THIS SUFFICIENTLY NEGATES THE ASSESSEES STAND THAT IT I S NEITHER A PARTY TO THE SURROGACY AGREEMENT NOR ANY RIGHT OR LIABILITY FLOWS THEREOF ON ITS ROLE AS AN INFERTILITY CLINIC. 23. WE FURTHER NOTICE WITH THE REVENUES ABLE ASSIS TANCE AND FROM A PERUSAL OF THE CASE FILE AT PG.35 THAT THE NGO (S UPRA) HEREIN HAS PROPOSED THE ASSESSEE TO ARRANGE FOR SURROGATE MOTH ERS IN LIEU OF THE DECIDED REMUNERATION OF RS.4 LAKHS FOR SINGLE AND R S.4.5 LAKHS IN CASE OF TWINS PREGNANCIES; RESPECTIVELY. THIS NGO FURTHER CLAIMED ITSELF AS WORKING FOR REHABILITATION FOR POOR & DES TITUTE WOMAN AFTER THEY WERE NEGLECTED BY THEIR FAMILIES FACING POVERT Y AND OTHER ADVERSE CIRCUMSTANCES. THE ASSESSEE IS FAIR ENOUGH IN NOT DISPUTING THE FACT THAT IT HAD DULY AGREED TO THE SAID PROPOS AL ONLY ALONGWITH ITS UNDERTAKING TO PAY FOR THE MATERIAL BREACH OF C ONTRACT TO THE GENETIC PARENTS ON ACCOUNT OF THE SURROGATE MOTHERS DEFAULT. ITA NOS. 629 & 630/HYD/2019 :- 4 -: 24. MR.MUJUMDAM NEXT TOOK US TO MR.SESHA SAI STATEM ENT(S) DT.23- 10-2013 AND 30-10-2013 THAT ALTHOUGH HE HAD BEEN RE CEIVING THE CORRESPONDING AMOUNT FROM THE ASSESSEE/INFERTILITY CENTRE SINCE 2008 THROUGH BANKING CHANNELS BUT HE HAD NOT MAINTAINED ANY PROPER ACCOUNT FOR THE CORRESPONDING EXPENDITURE INCURRED ON SURROGATE MOTHERS. THIS PAYEE FURTHER ADMITTED IN QUESTION N OS.4 TO 10 INTER ALIA THAT HE HAD ENTERED INTO AN AGREEMENT WITH ASS ESSEE AND ALSO THAT NO SURROGATE MOTHER HAD GIVEN HIM ANY CONSENT FOR ACCEPTING AND RECEIVING MONEY ON THEIR BEHALF FROM THE INFERT ILITY CENTRE. APART FROM THE FACT THAT WE ARE ONLY DEALING WITH INCOME TAX LITIGATION, ALL THIS ARRANGEMENT ADOPTED BETWEEN THE ASSESSEE AND I TS PAYEE SHRI SESHA SAI {ACTING FOR THE NGO (ALLEGEDLY LOOKING AF TER POOR AND DESTITUTE WOMEN)} SPEAKS VOLUMES ABOUT THE MECHANIS M ADOPTED; MORE PARTICULARLY FROM THE LATTERS SIDE, NOT ONLY EXPLOITING THE POOR SURROGATE MOTHERS BUT ALSO PROVING CLEAR CUT CHEATI NG OF THE FEMALE WOMBS. WE MAKE IT CLEAR THAT THIS PAYEE HAD ALSO FA ILED TO THROW ANY LIGHT ON PAYMENTS MADE TO SURROGATE MOTHERS WHOSE S ERVICES HAD BEEN UTILIZED BY THE ASSESSEE/INFERTILITY CENTRE FO R THE PURPOSE OF SURROGATE PREGNANCY ON BEHALF OF THE GENETIC PARENT S. WE THEREFORE EXERCISE OUR INHERENT JURISDICTION VESTED U/S.254 O F THE ACT AS WELL TO OBSERVE THESE PARTIES HAVE DONE NOTHING ELSE BUT EX PLOITED THE POOR AND DESTITUTE SURROGATE MOTHERS WITHOUT EVEN PAYING THE ADEQUATE COMPENSATION. RATHER THE PAYEE NGO AND ITS OFFIC E BEARER(S) HAVE PRIMA FACIE SWINDLED THE ENTIRE MONEY. THIS CONCLU SION FLOWS FROM THE ENTIRE SURROGACY PROCEDURE ADOPTED BY THE ASSES SEE WITH THE SO CALLED NGO AND ITS AUTHORISED PERSON AS IT IS EVIDE NT FROM THE PERUSAL OF THE CASE FILE IN THE LIGHT OF HUMAN PROBABILITIE S AFTER REMOVING ALL BLINKERS AS HELD IN SUMATI DAYAL VS. CIT (1995) [21 4 ITR 801] (SC) AND CIT VS. DURGA PRASAD MORE (1971) [82 ITR 540] ( SC). WE THUS CONCLUDE THAT SO FAR AS THE APPLICATION OF 194C R.W .S. 40(A)(IA) IS CONCERNED, THE ASSESSEES ALL OTHER ARGUMENTS REGAR DING TAXABILITY OF THE SURROGATE MOTHERS ALSO DESERVE TO BE REJECTED S INCE ITS PAYEE HIMSELF HAD ADMITTED THAT IT HAD NOT MAINTAINED ANY ACCOUNTS OF THE PAYMENTS MADE TO THE SURROGATE MOTHERS. WE THUS UPH OLD THE LEARNED LOWER AUTHORITIES ACTION INVOKING SECTION 194C R.W.S. 40(A)(IA) DISALLOWANCE OF RS.71,23,300/-, RS.3,35,5 2,200/-, RS.89,02,746/-, RS.70,50,000/- ASSESSMENT YEAR-WISE ; RESPECTIVELY IN CASE OF MR.SAI AND THE OTHER PAYEE (SUPRA). THE SAME STANDS CONFIRMED. 25. NEXT COMES YET ANOTHER EQUALLY IMPORTANT ASPECT AS TO WHETHER ALL THESE PAYMENTS ATTRACT SECTION 194J SO AS TO HO LD THAT THE PAYEE CONCERNED HAD RENDERED ANY TECHNICAL SERVICE IN ARR ANGING POOR AND DESTITUTE WOMEN AS SURROGATE MOTHERS. WE DO NOT FIN D ANY TECHNICAL SERVICE ELEMENT INVOLVED IN ALL THIS SURROGACY PROC ESS INVOLVING THE RECIPIENT OR THE SURROGATE MOTHERS ATTRACTING THE C LINCHING STATUTORY EXPRESSION(S) OF MANAGERIAL, PROFESSIONAL AND TECHN ICAL SERVICES U/S.194J R.W.S.9(I)(VII) EXPLANATION (SUPRA). WE TH US REVERSE BOTH THE ITA NOS. 629 & 630/HYD/2019 :- 5 -: LOWER AUTHORITIES ACTION INVOKING SECTION 194J IN FACTS OF THE INSTANT CASE(S). IT IS THEREFORE CONCLUDED THAT OUR INSTAN T LATTER ADJUDICATION HAS NO BEARING ON FINAL OUTCOME OF THE IMPUGNED 40( A)(IA) DISALLOWANCE AS THE SAME ALREADY STANDS CONFIRMED U /S.194C OF THE ACT. ASSESSEES FIRST APPEAL ITA NO.866/HYD/2016 RAISING THIS SOLE ISSUE FAILS THEREFORE. WE THUS ADOPT JUDICIAL CONSISTENCY AND UPHOLD THE IMPUG NED TDS RECOVERY DEMANDS IN ISSUE. NO OTHER ARGUMENT HAS BEEN RAISED BEFORE US. 5. THESE ASSESSEES APPEALS ARE DISMISSED IN ABOVE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH SEPTEMBER, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 20-09-2021 TNMM ITA NOS. 629 & 630/HYD/2019 :- 6 -: COPY TO : 1.KIRAN INFERTILITY CENTRE PRIVATE LIMITED, H.NO.6- 2-966/4, STREET NO.10, OPP:HINDI PRACHAR SABHA, KHAIRATABAD, HYDERABAD. 2.DEPUTY COMMISSIONER OF INCOME TAX (TDS), CIRCLE-1 (1), HYDERABAD. 3.CIT(APPEALS)-4, HYDERABAD. 4.THE CIT-TDS, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.