ASST (TDS) 3(1), MUMBAI V. UNITED HEALTHCARE INDIA P.LTD, MUMBAI

ITA 7402/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3808 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHISH SODHANI
• Assessee Lawyers: NEIL PHILIP
• Keywords: Bonafide belief; Non-deduction of tax; Reasonable cause
• Section: 133A; 201(1); 27; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO.7402 & 7403(MUM ) 2013 (ASSESSMENT YEARS : 2007-08 & 2008-09) THE ASSISTANT COMMISSIONER OF INCOME-TAX(TDS) 3(2), MUMBAI APPELLANT VS M/S UNITED HEALTHCARE INDIA PVT.LTD., 3B, GUNDECHA ONCLAVE, KHERANI ROIAD, SAKI NAKA, ANDHERI (E), MUMBAI-400 072 RESPONDENT PAN NO.AAACS9480R APPELLANT BY : SHRI NEI L PHILIP, REVENUE BY : SHRI ASHISH SODHANI DATE OF HEARING : 24-05-2016 DATE OF PRONOUNCEMENT : 1 0-08-2016 O R D E R PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD.CIT(A)-13, MUMBAI DATED 11-10-2013 IN APP EAL NO.CIT(A)- 13/IT/RATIONALIZATION ORDER NO.602/11-12 FOR THE AS SESSMENT YEARS : 2007-08 AND 2008-09, ON THE FOLLOWING GROUNDS; BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS THAT THE LEARNED ASS ESSING OFFICER ERRED IN PASSING AN ORDER UNDER SECTION 271 C OF THE IT ACT, 1961 (ITA) FOR ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS. 1. THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE APPELLANT WAS UNDER A 'GENUINE AND BONAFIDE' BELIEF ON ITA NOS.7402 & 7403(M)2013 2 THE NON-APPLICABILITY OF SECTION '194J OF THE ITA T O PAYMENTS MADE BY THE APPELLANT TO THE HOSPITALS UND ER THE CASHLESS HOSPITALIZATION SCHEME. 2 THE ASSESSING OFFICER FAILED TO APPRECIATE THAT T HE APPELLANT WAS UNDER A GENUINE AND BONAFIDE BELIEF ON THE NON-APPLICABILITY OF .SECTION 194J OF THE IT A TO P AYMENTS MADE TO THE HOSPITALS BECAUSE OF THE VARIOUS JUDICI AL PRECEDENTS CONFIRMING THAT THE HOSPITALS DO NOT REN DER ANY PROFESSIONAL SERVICES 3. THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE APPELLANT WAS UNDER A 'GENUINE AND BONATIDE' BELIEF ON THE NON-APPLICABILITY OF SECTION 194J OF THE ITA TO PAYMENTS MADE TO THE HOSPITALS BECAUSE OF THE VARIO US JUDICIAL PRECEDENTS CONFIRMING THAT MERE INTERMEDIA RIES WERE NOT SUBJECTED TO WITHHOLDING OBLIGATIONS UNDER THE PROVISIONS OF THE ITA 4. THE ASSESSING OFFICER FAILED TO' APPRECIATE THA T IN THE 'EVENT OF A REASONABLE CAUSE BEING SHOWN BY THE TAX PAYER FOR FAILURE TO WITHHOLD TAX UNDER SECTION 194J OF T HE IT ACT, THE PENAL PROVISIONS OF SECTION 271 C OF THE IT A C ANNOT BE IMPOSED AGAINST THE APPELLANT 5. THE ASSESSINQ OFFICER FAILED TO APPRECIATE THAT THE CENTRAL BOARD OF DIRECT TAXES HAD ISSUED A CLARIFIC ATION BY VIRTUE OF THE CIRCULAR DUE TO THE AMBIGUITY EXISTIN G PERTAINING TO THE APPLICABILITY OF SECTION 194J TO THE PAYMENTS MADE TO HOSPITAL IN LIGHT OF THE AFORE MEN TIONED AMBIGUITY, THE ASSESSING OFFICER ERRED IN CONCLUDIN G THAT THE PENAL PROVISIONS OF SEC.271C OF THE !TA COULD B E IMPOSED AGAINST THE APPELLANT. 6. THE ASSESSINQ OFFICER FAILED TO APPRECIATE THAT THE HON'BLE HIGH COURT AFTER BEING PRIMA FACIE CONVINCE D THAT THERE WAS AMBIGUOUS POINT OF LAW PERTAINING TO THE APPLICABILITY OF SECTION 194J OF THE IT ACT TO PAYM ENTS MADE TO THE HOSPITALS HAD ADMITTED THE PETITION FIL ED AND THEREFORE THE PENAL PROVISIONS OF SECTION 271 C OF THE ITA COULD NOT BE IMPOSED AGAINST THE APPELLANT. 7. THE ASSESSINQ OFFICER FAILED TO APPRECIATE THAT THERE WAS NO JUDICIAL PRECEDENT DIRECTLY ON THE APPLICAB ILITY OF PAYMENTS MADE TO THE HOSPITAL BY THIRD PARTY ADMINISTRATORS ITS DETERMINATION WAS AT A 'NASCENT' STAGE AND THEREFORE THE PENAL PROVISIONS OF SECTION 271C OF THE IT ACT COULD NOT BE IMPOSED AGAINST THE APPELLANT. 8 THE ASSESSING OFFICER TAILED TO APPRECIATE THAT T HE PRACTICE OF NOT DEDUCTING TAX AT SOURCE UNDER SECTI ON 194J FOR THE PAYMENTS MADE BY THE THIRD PARTY ADMINISTRA TORS DIRECTLY TO THE HOSPITAL UNDER THE CASHLESS HOSPITA LIZATION ITA NOS.7402 & 7403(M)2013 3 SCHEME WAS AN ESTABLISHED INDUSTRY PRACTICE AND THEREFORE THE PENAL PROVISIONS OF SECTION 271C OF T HE ITA COULD NOT BE IMPOSED AGAINST THE APPELLANT. 9. THE ASSESSING OFFICER ERRED IN IMPOSING PENALTY UNDER SECTION 271C OF THE IT ACT AS THE APPELLANT HAD NOT ACTED DELIBERATELY IN DEFIANCE OF LAW AND WAS NOT GUILT Y OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSC IOUS DISREGARD OF ITS OBLIGATIONS. THE APPELLANT SUBMITS THAT EACH GROUNDS OF APPEAL A RE WITHOUT PREJUDICE T ONE ANOTHER. FURTHER, THE APP ELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND OF THE ABOVE GROUND OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF THE APPEAL SO AS TO ENABLE THE CIT(A) TO DE CIDE THIS APPEAL ACCORDING TO LAW. . 3. SINCE THE GROUNDS INVOLVED IN BOTH THESE APPEALS ARE IDENTICAL, FIRST WE TAKE UP APPEAL NO.7402(MUM.)/2013 FOR THE ASSESSMENT YEAR 2007- 08. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS STATED TO BE ENGAGED IN THE BUSINESS OF PROVIDING HEALTH MANAGEM ENT SERVICES. IT IS A THIRD PARTY ADMINISTRATOR PROVIDING HEALTH INSURANC E SERVICES. IN THIS CASE, A SURVEY U/S 133A OF THE IT ACT WAS CONDUCTED AT TH E PREMISES OF THE ASSESSEE ON 17-09-2009. FROM THE DETAILS COLLECTED DURING THE COURSE OF SURVEY AND SUBSEQUENTLY DURING THE COURSE OF HEARIN G, IT WAS FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FOR THE FY: 2006-07, AS THE ASSESSEE COMPANY HAD PAID AN AMOUNT OF RS.42,04,76, 538/- TO VARIOUS HOSPITALS ON WHICH NO TDS HAS BEEN DEDUCTED. FURTH ER, ON THIS PAYMENT TO VARIOUS HOSPITALS, THE ASSESSEE COMPANY WAS LIAB LE TO DEDUCT TAX AS PER THE PROVISIONS OF SEC.194J OF THE IT ACT, 1961. ITA NOS.7402 & 7403(M)2013 4 5. THE ITO(OSD)(TDS)-3(2) PASSED AN ORDER U/S 201( 1) OF THE IT ACT, 1961 ON 05-11-2009 THEREBY, RAISING A DEMAND OF RS. 4,76,39,992/- BEING THE SHORT DEDUCTION ON ACCOUNT OF PAYMENTS MADE TO HOSPITALS. THE ORDER PASSED U/S 201(1) OF THE IT ACT WAS SUBSE QUENTLY, RECTIFIED U/S 154 ON 30-03-2010 AND THE TOTAL SHORT DEDUCTION U/S 201 WAS HELD TO BE RS.21.39,048/-. THE ASSESSEE FILED APPEAL WITH THE CIT(A) AND THE C IT(A) AFTER HEARING BOTH THE PARTIES HAS HELD THAT THE PAYMENT MADE TO HOSPITALS NURSING HOMES IS LIABLE FOR DEDUCTION OF TAX AT SOURCE AS P ER THE PROVISIONS OF SEC.194J OF THE IT ACT, 1961 THEREAFTER, THE PENALTY PROCEEDINGS U/S 271C OF TH E IT ACT ON ACCOUNT OF DEFAULT OF THE ASSESSEE AS PER THE PROVI SIONS OF SEC. 201(1), 201(1A) OF THE ACT, WERE INITIATED. THE AO AFTER C ONSIDERING THE CONTENTIONS RAISED BY THE ASSESSEE AND AFTER CONSIDERING THE CA SE OF DEDICATED HEALTH CARE SERVICES TPA(IND.)PVT. LTD VS ACIT(2010) HELD THAT SEC.194J IS APPLICABLE ON THE PAYMENTS MADE BY TPAS TO THE HOS PITALS AND ALSO THE WORDINGS OF SECTION ARE VERY CLEAR AND NOT AMBIGUOU S. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS INTERPRETED THE LAW IN HIS OWN WAY WHICH IS NOT CONSISTENT WITH THE WORDS USED IN THE SEC.19 4J OF THE IT ACT, AND SINCE THE ASSESSEE WAS UNABLE TO SHOW BONAFIDE BELI EF OR REASONABLE CAUSE FOR NON-DEDUCTION OF TAX. THEREFORE, A SUM OF RS.21 ,39,048/- WAS IMPOSED AS PENALTY U/S 271C OF I.T. ACT. ITA NOS.7402 & 7403(M)2013 5 6. AGGRIEVED BY THE ORDER OF IMPOSING PENALTY, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) AFTER CO NSIDERING THE CASE OF BOTH THE PARTIES HAS ALLOWED THE APPEAL AND DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271C OF THE IT AC, 1961. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE I S APPEAL BEFORE US ON GROUNDS MENTIONED HEREIN ABOVE. 8. GROUND NO.2 & 3 ARE GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 9. GROUND NO.1. IN THIS GROUND, THE REVENUE HAS C HALLENGED THE ORDER OF THE CIT(A) BY PLEADING THAT THE CIT(A) HAD ERRED IN DELETING THE PENALTY IMPOSED U/S 271C OF THE IT ACT, LEVIED BY A DDL.CIT(TDS), AS THE QUANTUM ADDITION HAS BEEN CONFIRMED BY THE LEARNED CIT(A) AND WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE, AS CLEARLY BOUGHT OUT BY THE ADDL.CIT(TDS) IN HIS ORDER. 10. WE HAVE HEARD THE COUNSEL FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS TH E ORDERS PASSED BY THE REVENUE AUTHORITIES. 11. THE MOOT QUESTION BEFORE US, FOR OUR CONSIDERA TION IS AS TO WHETHER THE CIT(A) HAS ERRED IN DELETING THE PENALT Y IMPOSED U/S 271C OF THE IT ACT LEVIED BY ADDL.CIT(TDS)? IN THIS CONNEC TION, AFTER HEARING BOTH THE PARTIES AND PERUSAL OF THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND AFTER GOING THROUGH THE JUDICIAL PRONOUNCEMENTS, WE FOUND THAT THE ISSUE WITH REGARD TO APPLICABILITY OF SEC.194J OF THE IT ACT HAS ALREADY BEEN DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN THE CAS E OF DEDICATED HEALTH ITA NOS.7402 & 7403(M)2013 6 SERVICES TPA (INDIA) PVT.LTD AND OTHERS VS ACIT & O THERS 324 ITR 3465(BOM.) WHICH DECIDED THE MATTER AS UNDER; HELD, (I) THAT , WHETHER THE PROVISION OF MEDICAL SERVICES TAKES PLACE WITHIN THE INSTITUTIONAL FRAME WORK OF A HOSPITAL SERVICES WERE RENDERED AS PART O AN UMBRELLA OF SERVICES PROVIDED BY THE HOSPITAL WHICH ENGAGES QUALIFIED MEDICAL PROFESSIONALS WHO PRACTIC E THE MEDICAL PROFESSION. THESE WERE SERVICES RENDER ED IN THE COURSE OF THE CARRYING ON OF THE MEDICAL PROFESSION. HENCE, TPAS, WHEN THEY MADE PAYMENTS TO HOSPITALS WERE LIABLE TO DEDUCT TAX AT SOURCE UN DER THE PROVISIONS OF SECTION 194J... BY VIRTUE OF THE LAW INTERPRETED BY THE HON'BLE BO MBAY HIGH COURT, IT IS MANIFESTLY CLEAR THAT THE TPAS, WHILE MAKING TH E PAYMENTS TO HOSPITALS ARE LIABLE TO DEDUCT TAX AT SOURCE, UNDER THE PROVI SIONS OF SEC.194J OF THE IT ACT, 1961. THEREFORE, AS PER THE AFOREMENTIONED LAW SETTLED BY THE HON'BLE BOMBAY HIGH COURT THE ASSESSEE WAS ALSO LIABLE TO D EDUCT TAX AT SOURCE, WHILE MAKING PAYMENTS TO HOSPITALS UNDER THE PROVIS IONS OF SEC. 194J OF THE IT ACT. BUT THE CIT(A) WHILE PASSING THE IMPUGN ED ORDER HAS DELETED THE PENALTY. THE OPERATIVE PORTION OF THE CIT(A)S ORDE R IS REPRODUCED BLOW; 5.5 A READING OF THIS PORTION OF THE ORDER MAKES IT CLEAR THAT WHEREVER A TAX PAYER IS ABLE TO SHOW THE REASO NABLE CAUSE FOR HIS FAILURE TO DEDUCT TAX, PENALTY U/S 27 1C IS NOT LEVIABLE AUTOMATICALLY. NOW COMING TO PRESENT CAS E, THE SUBJECT MATTER OF THIS APPEAL, APPELLANT HAS ARGUED THAT THERE WERE CONTRADICTORY DECISIONS AVAILABLE ON THE ISSUE WHETHER IN A CASE LIKE THEIRS, TPA, TDS WAS TO BE M ADE U/S ITA NOS.7402 & 7403(M)2013 7 194J OR NOT AND HENCE THE APPELLANTS WERE UNDER BON AFIDE BELIEF THAT THEY ARE NOT REQUIRED TO DEDUCT TAX. T HE APPELLANT HAS THEN ALSO PLEADED THAT THOUGH ASSESSI NG OFFICER HAS RELIED UPON THIS VERY DECISION OF HON'B LE BOMBAY HIGH COURT FOR LEVYING PENALTY ONLY FOR THE REASON THAT THE CASE WAS DECIDED AGAINST THEM, BUT HE HAS NOT CONSIDERED THE DECISION GIVEN REGARDING APPLICABILI TY OF CBDT CIRCULAR WHICH WAS SET ASIDE FOR THE PURPOSE L EVYING PENALTY U/S 271C. I HAVE ALSO CONSIDERED THIS ASP ECT AND AFTER GOING THROUGH THESE FACTS AVAILABLE ON RECORD . I AM OF THE CONSIDERED VIEW THAT PENALTY U/S 271C WAS NOT L EVIABLE IN THIS CASE FOR THE REASON THAT APPELLANT DID NOT DEDUCT TAX FOLLOWING FAVOURABLE DECISION AVAILABLE TO THEM AT THAT TIME ACCORDING TO WHICH NO TAX WAS DEDUCTIBLE BY THEM BE ING TPA U/S 194J. THIS BEING A REASONABLE CAUSE ITSELF IN VIEW OF PROVISION OF SECTION 273B, THE PENALTY LEVIED U/ S 271C WHEN THE APPELLANT HAS REASONABLE CAUSE FOR NOT DED UCTING THE TAX IS NOT TENABLE. ACCORDINGLY, THE PENALTY I MPOSED U/S 271C OF THE ACT LEVIED AT RS.21,39,048/- FOR SA Y: 2007- 08 BEING NOT SUSTAINABLE IS DELETED HEREWITH. 12. FROM THE CONJOINT READING OF THE IMPUGNED ORDE R PASSED BY THE CIT(A) AS WELL AS THE WRITTEN SUBMISSIONS BY THE A SSESSEE AS WELL AS THE ARGUMENTS ADVANCED BY BOTH THE PARTIES, WE ARE OF T HE CONSIDERED VIEW, THAT WHILE DELETING THE PENALTY THE CIT(A) HAS MENT IONED THAT THE PENALTY U/S 271C WAS NOT LEVIABLE IN THE CASE OF ASSESSEE F OR THE REASONS THAT THE ASSESSEE DID NOT DEDUCT TAX FOLLOWING FAVOURABLE DECISIONS AVAILABLE TO THEM AT THAT TIME . ACCORDING TO WHICH NO TAX WAS DEDUCTIBLE BY THEM ITA NOS.7402 & 7403(M)2013 8 FOR BEING TPA U/S 195J. THEREFORE, THE CIT(A) WHIL E PASSING THE IMPUGNED ORDER HAS HELD THAT THIS BEING A REASONABLE CAUSE ITSELF, IN VIEW OF PROVISIONS OF SEC.273B THE PENALTY LEVIED U/S 271C OF THE ACT, UPON THE ASSESSEE WAS DELETED. 13. THE LD. CIT(A) HAS NO WHERE MENTIONED WHAT WER E THOSE FAVOURABLE DECISIONS AT THAT TIME AVAILABLE TO THE ASSESSEE ACCORDING TO WHICH THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX BEI NG TPA U/S 194J OF THE ACT AND THIS PARTICULAR STAND TAKEN BY CIT(A) IS TH E BASIS FOR REACHING TO THE CONCLUSION. HOWEVER, THE ORDERS PASSED BY THE L D. CIT(A) LACKS MENTIONING OR DISCUSSION OF ANY SUCH FAVOURABLE DE CISIONS, WHILE REACHING TO A CONCLUSION REGARDING DELETION OF PENALTY. THE REFORE, IN OUR CONSIDERED VIEW, THE LD. CIT(A) HAS REACHED TO A CONCLUSION WI THOUT MENTIONING ITS BASIS. HENCE, THE ORDER OF LD. CIT(A) IS NONSPEAKI NG TO THAT EXTENT. CONSIDERING THE FACTS OF THE PRESENT CASE, IN OUR C ONSIDERED VIEW THE PRESENT APPEAL IS TO BE REMANDED BACK TO THE FILE O F THE CIT(A) WITH A DIRECTION TO PASS SPEAKING ORDER, WHILE MENTIONING THE BASIS OR THE DETAILS OF FAVOURABLE DECISIONS WHICH WERE AVAILABLE AT THAT TIME BEFORE THE ASSESSEE, ACCORDING TO WHICH NO TAX WAS DEDUCTIBLE. NEEDLESS TO MENTION THAT THE LD. CIT(A) WOULD GIVE A FRESH OPPORTUNITY OF HEARING TO BOTH PARTIES BEFORE PASSING A FRESH ORDER IN ACCORDANCE WITH LAW . ITA NOS.7402 & 7403(M)2013 9 ITA NO.7403(MUM)/2013 FOR ASSESSMENT YEAR 2008-09 14. AS THE GROUNDS IN THIS APPEAL ARE IDENTICAL, WE HAVE ALREADY DECIDED THE ISSUES IN ITA NO.7402(MUM)/2013 FOR ASS ESSMENT YEAR 2007- 08. HENCE, OUR DECISION IN ITA NO.7402/MUM/2013 IS APPLICABLE TO ASSESSMENT YEAR 2008-09 ALSO. 15. IN THE RESULT, WITH AFORESAID DIRECTIONS BOTH T HE APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10/08/201 6. SD/- SD/- ( JASON P BOAZ) ACCOUNTANT MEMBER ( SANDEEP G OSAIN ) JUDICIAL MEMBER MUMBAI: D A T E D : 10.08.2016 ASHWINI/PS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, MUMBAI 6 GUARD FILE BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI