Aaroyasri Health Care Trust, Hyd, Hyderabad V. ITO, Ward=14(2) (TDS), Hyderabad

ITA 814/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59316 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2010-2011
• Appeal Filed On: 04-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: K VASANT KUMAR
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBE R. ITA NO.813 & 814/HYD/2011 (ASSESSMENT YEAR 2009-10 AND 2010-11) AROGYA SRI HEALTH CARE TRUST, HYDERABAD (PAN - HYDAO 7828 C) V/S INCOME - TAX OFFICER, WARD 14(2), (TDS), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.VASANT KUMAR RESPONDENTS BY : SMT. K.MYTHILI RANI DATE OF HEARING 17.1.2012 DATE OF PRONOUNCEMENT 16.3.2012 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND T HEY ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A) II, HYDER ABAD DATED 15.3.2011, PASSED IN THE CONTEXT OF THE APPEALS OF THE ASSESSEE PREFERRED AGAINST THE ORDERS OF THE ASSESSING OFFIC ER PASSED UNDER S.201(1) AND 201(1A) OF THE ACT FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11, ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE WHILE MAKING CERTAIN PAYMENTS MADE DURING THE RELEVANT PE RIOD, IN TERMS OF S.194J OF THE ACT. SINCE COMMON ISSUES ARE INVOLVE D, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS A TRUST FORMED BY GOVERNMENT OF ANDHRA PRADESH. THE TRUST A CTS AS AN INDEPENDENT NODAL AGENCY OF GOVERNMENT OF ANDHRA PR ADESH TO PROVIDE HEALTH CARE COVERAGE UNDER AROGYASRI-II SCH EME. FOR THE PURPOSE OF ADMINISTERING THIS SCHEME, THE TRUST DIR ECTLY MAKES ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 2 PAYMENTS TO VARIOUS HOSPITALS AS PER THE MOUS IT EN TERED WITH SUCH HOSPITALS. CONSEQUENT TO THE SURVEY CONDUCTED ON 15 .10.2009, INFORMATION WAS FURNISHED BY THE TRUST REGARDING PA YMENTS MADE UNDER AROGYASRI SCHEME TO VARIOUS HOSPITALS FOR THE PERIOD FROM 17.7.2008 TO 31.3.2009 AND FROM 1.4.2009 TO 19.10.2 009. AS PER THIS INFORMATION, AN AMOUNT OF RS.115,44,19,988 WAS PAID DURING THE FINANCIAL YEAR 2008-09, RELEVANT TO ASSESSMENT YEAR 2009-10, AND RS.143,21,969 WAS PAID TILL 19.10.2009, DURING THE FINANCIAL YEAR 2009-10, RELEVANT TO ASSESSMENT YEAR 2010-11. 3. THE ASSESSING OFFICER ISSUED LETTER CALLING FOR THE OBJECTIONS OF THE ASSESSEE FOR TREATING THE TRUST AS RESPONSIB LE PERSON AND THE PAYMENTS TO HOSPITALS AS COVERED UNDER S.194J OF TH E ACT. PURSUANT TO THE SUBSEQUENT SHOW-CAUSE NOTICE THAT WAS ISSUED T HE ASSESSEE HAD FIELD EVIDENCES ENCLOSING TO THE LETTER FILED ON 18 .1.2010 IN THREE CASES WHICH APPEARED PRIMA FACIE ACCEPTABLE, OUT OF THE 2 7 CASES LIST SHOWN IN ANNEXURE TO LETTER DATED 16.1.2010. THE BALANCE 24 CASES WERE EXAMINED WITH RESPECT TO THE EVIDENCES/INFORMATION PRODUCED BEFORE THE ASSESSING OFFICER AND DEFICIENCIES WERE EXPLAIN ED ITEM-WISE TO ADMINISTRATIVE OFFICER OF THE TRUST. THOUGH THE AS SESSEE HAS NOT FILED AS SUCH ANY OBJECTION BEFORE THE ASSESSING OFFICER TO THE PROPOSAL OF ASSESSING OFFICER TO TREAT THE ASSESSEE AS RESPONSI BLE PERSON, AND THE PAYMENTS TO HOSPITALS AS COVERED BY THE PROVISIONS OF S.194J OF THE ACT, THE CEO OF THE TRUST FILED SUCH A LETTER DATED 31.12.2009 BEFORE THE CCIT, WHEREIN THE MAIN PLANK OF THE ARGUMENTS O F THE ASSESSEE- DEDUCTOR APPEARED TO BE THAT THE PAYMENTS WERE REIM BURSEMENTS OF THE CLAIMS ON BEHALF OF THE INDIVIDUAL PATIENTS AND SUCH PAYMENTS INCLUDES VARIOUS CHARGES LIKE TRANSPORTATION, FOOD CHARGES, ETC. NOTWITHSTANDING THE FACT THAT SUCH LETTER WAS NOT F ILED BEFORE HIM AND AS SUCH DID NOT CONSTITUTE RECORD OF THE PROCEEDING S INITIATED BY HIM UNDER S.201(1) AND S.201(1A) OF THE ACT, THE ASSESS ING OFFICER IN THE ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 3 INTERESTS OF JUSTICE CONSIDERED THE SAME AS WELL, B UT FOUND NO MERIT IN THE CONTENTIONS OF THE ASSESSEE. HE OBSERVED THAT F OR INVOKING THE PROVISIONS OF S.194J, THERE IS NO STIPULATION THAT THE PROFESSIONAL SERVICES HAVE TO BE NECESSARILY RENDERED TO THE PER SON WHO MAKES PAYMENT TO HOSPITAL. HE ALSO OBSERVED THAT THE INC IDENTAL SERVICES ARE PART OF THE PACKAGE, WHERE ESSENTIALLY THE AGREEMEN T IS FOR RENDERING THE MEDICAL SERIES. THE ASSESSING OFFICER CONCLUDE D THAT THE PAYMENTS BY THE ASSESSEE-TRUST TO VARIOUS HOSPITALS ARE COVE RED BY THE PROVISIONS OF S.194J OF THE ACT, AND THE TRUST IS T HE RESPONSIBLE PERSON FOR MAKING THE PAYMENTS. 4. ACCORDINGLY, THE ASSESSING OFFICER, VIDE HIS O RDER DATED 19.2.2010 FOR THE ASSESSMENT YEAR 2009-10, CALCULAT ED THE TAX UNDER S.201(1) OF THE ACT AT RS.12,24,08,665 AND INTEREST UNDER S.201(1A) OF THE ACT AT RS.17,82,65,040, AND RAISED DEMAND TO THAT EFFECT. SIMILARLY, FOR THE ASSESSING OFFICER, VIDE HIS SIMI LAR ORDER ALSO DATED 19.2.2010, CALCULATED THE TAX UNDER S.201(1) OF THE ACT AT RS.15,17,59,194 AND INTEREST UNDER S.201(1A) OF THE ACT AT RS.10,04,58,422, AND RAISED DEMAND TO THAT EFFECT A CCORDINGLY. 5. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE PLEA DED IN THE FIRST PLACE, THAT THE TRUST IS ACTING AS AGENT BETW EEN THE CHIEF MINISTERS RELIEF FUND AND THE HOSPITAL IN PASSING ON THE PAYMENT ON BEHALF OF THE SUBJECT (PATIENT) OF THE STATE AND I T IS NOT REQUIRED TO DEDUCT TAX, SINCE THE SUBJECT (PATIENT) IS NOT REQU IRED TO DEDUCT TAX. THE CIT(A) DID NOT FIND MERIT IN THIS CONTENTION OF THE ASSESSEE, AFTER TAKING INTO ACCOUNT THE OBJECTS FOR WHICH THE ASSES SEE TRUST WAS FLOATED, AND OBSERVING THAT THE ASSESSEE ACTS AS IN DEPENDENT NODAL AGENCY OF GOVERNMENT OF ANDHRA PRADESH TO PROVIDE H EALTH CARE COVERAGE AND FOR THE PURPOSE OF ADMINISTERING THE S CHEME, THE TRUST DIRECTLY MADE PAYMENTS TO VARIOUS HOSPITALS AS PER THE MOU IT ENTERED ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 4 INTO WITH SUCH HOSPITALS. HE ALSO FOUND NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE BENEFICIARIES ARE LIABLE TO M AKE THE PAYMENT AND THEREBY IT IS THE BENEFICIARIES WHO ARE LIABLE TO D EDUCT TAX, OBSERVING THAT IT IS THE GOVERNMENT/TRUST WHICH HAS UNDERTAKE N TO MAKE PAYMENT OF THE PREMIUM ON BEHALF OF THE BENEFICIARI ES AND TO REIMBURSE OR TO PAY FOR THE PROFESSIONAL SERVICES R ENDERED TO THE NETWORK HOSPITALS, WITH WHOM IT ENTERED INTO AGREEM ENT ON BEHALF OF THE BENEFICIARIES. THERE IS A CONTRACTUAL LIABILITY BETWEEN THE ASSESSEE AND THE NETWORK HOSPITAL FOR PROVIDING MEDICAL TREA TMENT/PROFESSIONAL SERVICES TO THE INTENDED BENEFICIARIES, AND THEREFO RE, THE CIT(A) CONCLUDED THAT THE LIABILITY TO DEDUCT TAX FROM THE PROFESSIONAL SERVICES RENDERED BY THE HOSPITALS IS WITH THE ASSESSEE-TRUS T ONLY. 6. RELIANCE WAS ALSO PLACED BEFORE THE CIT(A), ON THE BOARD CIRCULAR NO.8 OF L2009 DATED 24.11.2009, WHICH IS A PPLICABLE TO THE PROVISIONS OF S.194J IN CASE THE TRANSACTIONS BY TH E 3 RD PARTY ADMINISTRATOR WITH THE HOSPITALS, ETC. THE CIT(A) NOTED THAT THE TERMS AND CONDITIONS OF AROGYASRI SCHEME ARE VERY MUCH IN LINE WITH THE TRANSACTIONS BY 3RD PARTY ADMINISTRATOR WITH THE HO SPITALS ETC., WITH THE ONLY DIFFERENCE THAT THE TRUST HAS NOT OBTAINED THE LICENCE REQUIRED UNDER INSURANCE REGULATORY AND DEVELOPMENT AUTHORIT Y OF INDIA, WHEREAS THE 3 RD PARTY ADMINISTRATORS AS SUCH ARE REQUIRED TO TAKE LICENCE FROM THE IRDA. THE CIT(A) RELYING ON THE D ECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DEDICATED HEALTH CARE SERVICES TPA (INDIA) PVT. LTD. V/S. ACIT(324 ITR 34 5); AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MEDI AS SIST (INDIA) TPA PVT. LTD. (324 ITR 356), CONCLUDE THAT SINCE FACTS OF THE CASE UNDER APPEAL ARE IDENTICAL IN SO FAR AS THE TERMS AND CON DITIONS OF THE SERVICE AND THE ACTIVITIES ARE CONCERNED, SUCH AS THERE IS NO CONTRACT BETWEEN THE INSURER AND THE HOSPITALS AND THE CONTRACT IS B ETWEEN THE TRUST AND THE INSURER AND THE TRUST AND THE NETWORK HOSPITALS AND IT IS ONLY FROM ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 5 THE TRUST FUNDS THAT PAYMENTS TO HOSPITALS ARE MADE EVEN THOUGH THE ASSESSEE IS NOT REGISTERED AS TPA, IT STILL WORKS I N THE SAME WAY AS THAT OF TPA, THE CITED DECISIONS CLEARLY APPLY AND THE A SSESSEE IS LIABLE TO DEDUCT TAX UNDER S.201(1) READ WITH S.194J. 7. THE NEXT CONTENTION OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE INCOME OF THE HOSPITALS FROM THE ASSESSEE CANNOT BE TERMED AS PROFESSIONAL INCOME AND THE PAYMENTS TO THEM CAN NOT BE CONSIDERED AS PAYMENTS FOR PROFESSIONAL SERVICES, A ND CONSEQUENTLY THE ASSESSING OFFICER WAS NOT CORRECT IN HOLDING TH AT THERE IS A DEFAULT UNDER S.194J ON ACCOUNT OF NON-DEDUCTION OF TAX ON PAYMENTS MADE TO HOSPITALS. IT WAS ALSO CONTENDED IN THE ALTERNATIV E THAT IT IS ONLY A PORTION OF THE PAYMENT IN A PACKAGE, WHICH IS FOR P ROFESSIONAL SERVICES AND THE BALANCE IS FOR VARIOUS SERVICES AND AS SUCH THE ASSESSING OFFICER WAS NOT CORRECT IN HOLDING THE ENTIRE PAYME NT AS ATTRACTING DEDUCTION OF TAX AT SOURCE. IT WAS ALSO CONTENDED THAT THE ENTIRE EXPENDITURE WOULD NOT BE COVERED FOR THE PURPOSE OF DEDUCTION OF TAX, SINCE THE AMOUNT OF REIMBURSEMENT TO THE NET WORK H OSPITALS ALSO INCLUDE THE OTHER HOSPITAL CHARGES LIKE CONDUCTING VILLAGE LEVEL MEDICAL CAMPS, OUTPATIENT CARE, TRANSPORTATION TO PATIENTS, FOOD FOR THE PATIENTS, MEDICINES, IMPLANTS, FOLLOW UP MEDICINES ETC. AND THE ENTIRE PAYMENT IS DONE ON A PACKAGE MODE. THE CIT(A) REJE CTED THIS CONTENTION AS WELL, RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF DEDICATED HEALTH CARE SERVICES TPA ( INDIA) PVT. LTD. (SUPRA). 8. THE CIT(A) HOWEVER, FOUND SOME MERIT IN THE CO NTENTIONS OF THE ASSESSEE WITH REGARD TO THE QUANTUM OF DEMAN D UNDER S.201(1) RAISED BY THE ASSESSING OFFICER, ON ACCOUNT OF NON- DEDUCTION OF TAX AT SOURCE IN RESPECT OF PAYMENTS MADE TO GOVERNMENT HO SPITALS, AND OTHER PAYMENTS IN RESPECT OF WHICH THE RECIPIENTS H AVE DISCLOSED THE ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 6 INCOME AND MADE PAYMENT OF DUE TAXES. HE ACCORDING LY, DIRECTED THE ASSESSING OFFICER TO VERIFY AND BIFURCATE THE PAYME NTS MADE TO BOTH THE GOVERNMENT AND PRIVATE HOSPITALS, AND CONFINE H IMSELF TO NON- DEDUCTION OF TAX BY THE ASSESSEE IN RESPECT OF PAYM ENTS MADE TO PRIVATE HOSPITALS. SIMILARLY, FOLLOWING THE DECIS ION OF THE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE ( P)LTD. V/S. CIT (293 ITR 226), THE CIT(A) DIRECTED THE ASSESSING OF FICER TO VERIFY THE VERACITY OF THE CLAIM OF PAYMENT OF TAXES BY THE DE DUCTEE-HOSPITALS FROM THE PAYMENT RECEIVED FROM THE ASSESSEE TRUST A ND GIVE CREDIT FOR THE SAME AND RAISE THE DEMAND ONLY FOR THE BALANCE TDS LIABILITY, IF ANY, UNDER S.201(1) OF THE ACT. 9. AS FOR INTEREST CHARGED UNDER S.201(1A), THE C IT(A), OBSERVING THAT CHARGING OF INTEREST IS MANDATORY, D IRECTED THE ASSESSING OFFICER TO CHARGE INTEREST FROM THE DATE OF TAX DEDUCTIBLE AT SOURCE TILL THE DATE OF PAYMENT OF TAXES BY THE DED UCTEE-HOSPITALS, AND RECALCULATE THE INTEREST ACCORDINGLY. 10. AGGRIEVED BY THE ORDERS OF THE CIT(A), ASSESS EE IS IN APPEAL BEFORE US FOR BOTH THE YEARS. 11. COMMON GROUNDS OF THE ASSESSEE IN THESE APPEAL S, AS TAKEN FROM ITA 813/HYD/2011 FOR ASSESSMENT YEAR 200 9-10, READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX IS ERRONEOUS BOTH ON FACTS AND IN LAW IN SO FAR AS IT IS PREJUDICIAL TO THE ASSESSEE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN HOLDING THAT HE ASSESSEE IS LIABLE TO DEDUCT TAX FROM PAYMENTS M ADE TO HOSPITALS WITHOUT APPRECIATING THE FACT THAT THERE IS NO CONTRACTUAL OBLIGATION BETWEEN THE PERSON ON WHOSE BEHALF THE PAYMENT IS MADE AND THE TRUST. ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 7 3. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED COMMI SSIONER OF INCOME-TAX(APPEALS) ERRED IN HOLDING THAT THE ENTIR E AMOUNT THAT IS PAID TO HOSPITAL IS LIABLE FOR CONSIDERATIO N FOR MAKING TDS WITHOUT APPRECIATING THE FACT THAT THE PAYMENT IS FOR DIFFERENT SERVICES AND ALL ARE NOT PROFESSIONAL SER VICES. 4. THE LEARNED CIT(A) ERRED IN NOT HOLDING THAT NO INTEREST U/S. 201(1A) IS CHARGEABLE IF IT IS FOUND THAT THE HOSPI TALS TO WHOM PAYMENTS ARE MADE IS FOUND TO HAVE PAID THE TAXES O R NOT REQUIRED TO PAY THE TAXES. 12. LEARNED COUNSEL FOR THE ASSESSEE, SHRI K.VASAN TKUMAR, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES SUBMITTED EXPLAINING THE NOBLE CAUSE AND MOTTO OF T HE TRUST THAT THE ASSESSEE TRUST HAS BEEN FORMED BY THE GOVERNMENT OF ANDHRA PRADESH FOR PROVIDING HEALTH CARE COVERAGE UNDER THE NAME O F AROGRYA SRI II SCHEME, AND IT ACTUALLY REIMBURSES THE CLAM MADE BY THE HOSPITALS ON BEHALF OF ANY INDIVIDUAL PATIENT WHO IS INCLUDED IN 8.16 CRORE OF BPL POPULATION. THE TRUST IN TURN RECEIVES SUCH PAYME NT FROM THE CHIEF MINISTERS RELIEF FUND AGAIN AS REIMBURSEMENT OF TH E AMOUNT INCURRED BY THE TRUST ON SUCH PATIENT. HE THEREFORE, SUBMIT TED THAT THE OBJECT AND THE AIM OF THE TRUST IS TO IMPLEMENT, ESTABLISH , PROVIDE, ADMINISTER, MODIFY AND SUPERVISE EITHER DIRECTLY OR INDIRECTLY THE AROGYASRI II SCHEME FOR THE BENEFIT OF THE BENEFIC IARIES WHO ARE FROM BPL POPULATION OF THE STATE. REFUTING THE ASSESSEE S LIABILITY TO DEDUCT TAX AT SOURCE UNDER S.194J OF THE ACT FROM THE PAYM ENTS MADE BY IT TO THE VARIOUS HOSPITALS, HE SUBMITTED THAT THERE IS NO SUCH TERM IN THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE RE SPECTIVE HOSPITALS, AND IN ANY EVENT, ALL THE HOSPITALS TO WHICH THE P AYMENTS ARE MADE, HAVE CONFIRMED THAT THEY INCLUDED THE RECEIPTS FROM THE TRUST IN THEIR INCOME AND ARE PAYING TAXES ON THE SAME. HE FURTHE R SUBMITTED THAT A HOSPITAL, AS SUCH, DOES NOT FALL WITHIN THE DEFI NITION OF THE PROVISIONS OF S.194J. IT IS ALSO SUBMITTED THAT THE PAYMENTS IN QUESTION, ARE NOT MADE BY THE ASSESSEE TRUST BY ITSELF, BUT IT IS BY THE INDIVIDUALS WHO TOOK TREATMENT AND RECEIVE THE MONEY FROM THE CHIEF MINISTERS RELIEF FUND, AND IN THAT PROCESS THE ASSESSEE TRUST ONLY A CTS AS A ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 8 MEDIUM/AGENT FOR SUCH PAYMENT. HE SUBMITTED THAT S INCE THE ASSESSEE TRUST IS ACTING AS AGENT BETWEEN THE CHIEF MINISTERS RELIEF FUND AND THE HOSPITAL IN PASSING ON THE PAYMENT ON BEHALF OF THE SUBJECT (PATIENT) OF THE STATE AND IT IS NOT REQUIR ED TO DEDUCT TAX, SINCE THE SUBJECT (PATIENT) ITSELF IS NOT REQUIRED TO DED UCT TAX. HE FURTHER CONTENDED IN THE ALTERNATIVE THAT THE BENEFICIARIES ARE LIABLE TO MAKE THE PAYMENT AND THEREBY IT IS THE BENEFICIARIES WHO ARE LIABLE TO DEDUCT TAX. RELIANCE IS ALSO PLACED BEFORE THE CIT(A), ON THE BOARD CIRCULAR NO.8 OF L2009 DATED 24.11.2009, WHICH IS APPLICABLE TO THE PROVISIONS OF S.194J IN CASE THE TRANSACTIONS BY THE 3 RD PARTY ADMINISTRATOR WITH THE HOSPITALS, ETC. 13. HE SUBMITTED THAT THE DECISIONS OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF DEDICATED HEALTH CARE SERVICES TPA (INDIA) PVT. LTD. V/S. ACIT(324 ITR 345); AND OF THE HONBLE KAR NATAKA HIGH COURT IN THE CASE OF MEDI ASSIST (INDIA) TPA PVT. LTD. (3 24 ITR 356), RELIED UPON BY THE CIT(A) IN THE IMPUGNED ORDER ARE NOT AP PLICABLE TO THE FACTS OF THE PRESENT CASE. IT WAS SUBMITTED THAT TH E CIT(A) ERRONEOUSLY CONCLUDED THAT SINCE FACTS OF THE CASE UNDER APPEAL ARE IDENTICAL IN SO FAR AS THE TERMS AND CONDITIONS OF THE SERVICE AND THE ACTIVITIES ARE CONCERNED, SUCH AS THERE IS NO CONTRACT BETWEEN THE INSURER AND THE HOSPITALS AND THE CONTRACT IS BETWEEN THE TRUST AND THE INSURER AND THE TRUST AND THE NETWORK HOSPITALS AND IT IS ONLY FROM THE TRUST FUNDS THAT PAYMENTS TO HOSPITALS ARE MADE EVEN THOUGH THE ASSE SSEE IS NOT REGISTERED AS TPA, IT STILL WORKS IN THE SAME WAY A S THAT OF TPA, THE CITED DECISIONS CLEARLY APPLY AND THE ASSESSEE IS L IABLE TO DEDUCT TAX UNDER S.201(1) RED WITH S.194J. 14. EVEN OTHERWISE, IT IS SUBMITTED THAT ANY OF T HE PAYMENTS MADE TO HOSPITALS IN EACH OF THE INDIVIDUAL CASES A RE MADE IN PACKAGE MODE, AND THEY COMPRISE OF VARIOUS ELEMENTS, LIKE B ED CHARGES, ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 9 MEDICINES, DIET, TRANSPORTATION CHARGES, IMPLANTS, FOLLOW UP MEDICINES, BESIDES EXPENSES INCURRED ON CONDUCTING MEDICAL CAM PS IN VILLAGES, OUTPATIENT CARE, ETC., BESIDES REIMBURSEMENT OF ACT UAL FEE FOR PROFESSIONAL SERVICES PAYABLE TO THE HOSPITAL IN RE SPECT OF EACH PATIENT. PAYMENTS FOR ALL THESE ELEMENTS CANNOT BE CONSTRUE D AS FEE FOR PROFESSIONAL SERVICES, AND IT IS THE ACTUAL COMPONE NT OF FEE PAYABLE TO A HOSPITAL FOR PROFESSIONAL SERVICE RENDERED WHICH WOULD ATTRACT THE PROVISIONS OF S.194J OF THE ACT. IN THIS VIEW OF T HE MATTER, IT IS SUBMITTED THAT EVEN IF THE ASSESSEE IS COVERED BY T HE PROVISIONS OF S.194J OF THE ACT IN RESPECT OF THE PAYMENTS MADE B Y IT TO VARIOUS HOSPITALS, EACH OF SUCH PAYMENTS HAS TO BE BIFURCAT ED INTO VARIOUS ELEMENTS, AS NOTED ABOVE, AND ASSESSEES LIABILITY TO DEDUCT TAX AT SOURCE IN TERMS OF S.194J HAS TO BE DETERMINED, CON FINING ONESELF ONLY TO SUCH ELEMENT WHICH CONSTITUTES THE ACTUAL FEE PA ID TO THE HOSPITALS FOR RENDERING PROFESSIONAL SERVICES. 15. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THOUGH THE CIT(A) BY THE IMPUGNED ORDER DIRECTED TH E ASSESSING OFFICER TO REDUCE THE AMOUNT ON WHICH TDS IS NOT MA DE TO THE EDTENT THE ASSESSEE PROVIDES INFORMATION ABOUT THE HOSPITA L PAYING TAXES ON PAYMENTS RECEIVED FROM THE ASSESSEE TRUST, THE ASSE SSEE IS FINDING IT DIFFICULT TO OBTAIN DETAILED INFORMATION FROM THE H OSPITALS, WHICH ARE TOO MANY IN NUMBER AND SOME OF THEM ARE EVEN BLACK LIST ED. IT IS SUBMITTED THAT MORE IMPORTANTLY FROM THE BLACK LIST ED HOSPITALS, IT IS DIFFICULT FOR THE ASSESSEE TO OBTAIN AND FURNISH TH E REQUISITE INFORMATION WITH REGARD TO PAYMENT OF DUE TAXES ON THE INCOMES RECEIVED BY THEM FROM THE ASSESSEE-TRUST. LEARNED COUNSEL FOR THE A SSESSEE HAS ALSO FILED BRIEF WRITTEN SUBMISSIONS ELABORATING THIS AS PECT OF THE MATTER. 16. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DISP UTED THE CHARGING OF INTEREST UNDER S.201(1A) OF THE ACT, AN D SUBMITTED THAT ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 10 THE ASSESSEE-TRUST, CONSTITUTED BY THE STATE HAS NO INCOME OF ITS OWN, AND IT SURVIVES ONLY AS A NODAL AGENCY MONITORING T HE PAYMENTS ON BEHALF OF THE BENEFICIARIES OF AROGYASRI-II OF THE STATE GOVERNMENT, FROM THE CHIEF MINISTERS RELIEF FUND TO THE RESPEC TIVE HOSPITALS. 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE, SMT. MYTHILI RANI, ON THE OTHER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE CIT(A). SHE SUBMITTED THAT THE ACTIVITIES OF THE A SSESSEE-TRUST ARE AKIN TO A THIRD PARTY AGENT, THOUGH THERE IS SLIGHT DIFFERENCE IN THE STATUS OF THE TPA, WHEN COMPARED TO THAT OF THE ASS ESSEE-TRUST. WHILE THE ASSESSEE TRUST IS CONSTITUTED BY THE GOVERNMENT OF ANDHRA PRADESH TO ACT AS A NODAL AGENCY TO IMPLEMENT AND MONITOR T HE IMPLEMENTATION OF AROGYASRI-II, DOES NOT HAVE RECOGNITION OF THE I RDA, THE THIRD PARTY AGENTS CARRYING ON THE ACTIVITIES AS INSURERS FOR T HEIR BENEFICIARIES HAVE SUCH RECOGNITION FROM IRDA. IN THE FACTS AND CIRC UMSTANCES OF THE CASE, SHE SUBMITTED THAT THE DECISIONS RELIED UPON BY THE CIT(A) IN THE IMPUGNED ORDER CLEARLY COVER THE ISSUE AGAINST THE ASSESSEE, AND THE ASSESSEE IS CLEARLY LIABLE TO DEDUCT TAX AT SOURCE IN TERMS OF S.194J OF THE ACT IN RESPECT OF PAYMENTS MADE TO THE HOSPITAL S. SHE SUBMITTED THAT THE CIT(A) IN THE IMPUGNED ORDERS CONSIDERED I N DETAIL, VARIOUS CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE QUAN TUM OF TAX COMING WITHIN THE SCOPE OF THE PROVISIONS OF S.194J AND GA VE APPROPRIATE RELIEF AND THERE IS NO JUSTIFICATION FOR ANY FURTHER INTER FERENCE FROM THE TRIBUNAL. SHE ALSO SUBMITTED THAT THE INTEREST UND ER S.201(1A) BEING MANDATORY, IT AUTOMATICALLY FOLLOWS THE TAX DEMANDE D UNDER S.201, FOR THE APPROPRIATE PERIOD AS DIRECTED BY THE CIT(A) IN THE IMPUGNED ORDER IS TO BE CONFIRMED. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE LEARNED COUNSEL FOR THE AS SESSEE AS NOTED ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 11 ABOVE, BESIDES THE TRUST DEED OF THE ASSESSEE-TRUST AND OTHER PROCEEDINGS ISSUED BY THE STATE GOVERNMENT, WHICH H AVE BEEN FURNISHED IN THE PAPER-BOOK FILED BY THE ASSESSEE. IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE TRUST IS THE PERSON RESPO NSIBLE FOR MAKING PAYMENTS TO VARIOUS HOSPITALS IN TERMS OF THE AROGY ASRI-II SCHEME OF THE STATE GOVERNMENT OF ANDHRA PRADESH, AND SUCH PA YMENTS CONSTITUTING 'FEE FOR PROFESSIONAL SERVICES , PROVIDED BY SUCH HOSPITALS, ATTRACT THE PROVISIONS OF S.194J OF THE ACT, WHICH OBLIGATE THE ASSESSEE TO DEDUCT TAX AT SOURCE BEFORE MAKING THE PAYMENTS IN QUESTION. THE CASE OF THE ASSESSEE ON THE OTHER HAND, DISPUTES IN THE FIRST PLACE ITS LIABILITY, BEING A NODAL AGENCY, TO THE DEDUCT TAX AT SOURCE; THEN, DISPUTES THE NATURE OF THE RECIPIENT, HOSPITAL, BEI NG NOT COVERED BY THE PROVISIONS OF S.194J OF THE ACT, THE NATURE OF SERV ICES, BEING ENTIRELY AND IN THE ALTERNATIVE, IN PART, BEING NOT CONSTITU TING FEE FOR PROFESSIONAL SERVICES, AND THEREBY FALLING OUTSIDE THE SCOPE OF THE PROVISIONS OF S.194J OF THE ACT. 19. WE MAY, AT THE OUTSET, NOTE THE PROVISIONS OF S.194J OF THE ACT, TO THE EXTENT RELEVANT FOR OUR PURPOSE, HEREUN DER- 194. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF- (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, OR (C) ROYALTY, OR (D) ANY SUM REFERR4ED TO IN CLAUSE (VA) OF SECTION 28, SHALL, AT THE TIM E OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER I S EARLIER, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOM E TAX ON INCOME COMPRISED THEREIN; PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION.. PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY, ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 12 PROVIDED ALSO THAT NO INDIVIDUAL OR A HINDU UNDIVID ED FAMILY EXPLANATION- FOR THE PURPOSES OF THIS SECTION- (A) PROFESSIONAL SERVICES MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINE ERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCO UNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADV ERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS SECTION; (B) (C) (BA) (C). THERE IS NO DISPUTE BETWEEN THE PARTIES TO THE PROP OSITION THAT THE CASE OF THE ASSESSEE IS NOT COVERED BY ANY OF THE P ROVISOS OF S.194J OF THE ACT. 20. THE TERM PERSON, USED IN S.194J OF THE ACT, EXTRACTED ABOVE, HAS BEEN DEFINED UNDER S.2(31) OF THE ACT TO MEAN- 2(31). PERSON INCLUDES- (I) AN INDIVIDUAL, (II) A HINDU UNDIVIDED FAMILY, (III) A COMPANY, (IV) A FIRM, (V) AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS, WHETHER INCORPORATED OR NOT, (VI) A LOCAL AUTHORITY, (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLING WITH IN ANY OF THE PRECEDING SUB-CLAUSES. EXPLANATION- FOR THE PURPOSE OF THIS CLAUSE, AN AS SOCIATION OF PERSON OR A BODY OF INDIVIDUALS OR A LOCAL AUTHORIT Y OR AN ARTIFICIAL JURIDICAL PERSON SHALL BE DEEMED TO BE A PERSON, WH ETHER OR NOT SUCH PERSON OR BODY OR AUTHORITY OR JURIDICAL PERSON WAS FORMED OR ESTABLISHED OR INCORPORATED WITH THE OBJECT OF DERI VING INCOME, OR PROFITS OR GAINS. ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 13 21. A CLOSE READING OF THE ABOVE PROVISIONS OF S. 194J AND S.2(31) OF THE ACT, MAKES IT CLEAR THAT THE ASSESSE E, WHICH IS CLAIMED TO BE HAVING NO SOURCE OF INCOME AND CONSTITUTED WI THOUT ANY PROFIT MOTIVE, AS WELL AS THE HOSPITALS TO WHICH PAYMENTS HAVE BEEN MADE CLEARLY CONSTITUTE PERSON AS DEFINED IN S.2(31) O F THE ACT, AND THE SERVICES RENDERED BY THE HOSPITALS, BEING IN THE NA TURE OF MEDICAL SERVICES, ALSO COMES WITHIN THE SCOPE OF PROFESSIONAL SERVICES AS DEFINED IN EXPLANATION TO S.194J, THEREBY, MAKING T HE PAYMENTS MADE BY THE ASSESSEE TOWARDS SUCH SERVICES FALL WITHIN T HE AMBIT OF PROFESSIONAL SERVICES. CONSEQUENTLY, THERE CAN BE NO AMBIGUITY WITH REGARD TO THE ASSESSEES LIABILITY TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENT TO THE HOSPITALS. EVEN THOUGH IT IS THE CO NTENTION OF THE ASSESSEE THAT THE PAYMENTS MADE BY IT TO THE HOSPIT AL ARE ON BEHALF OF THE BENEFICIARIES, AND THE BENEFICIARY, BEING AN IN DIVIDUAL, FALLS OUTSIDE THE PURVIEW OF S.194J OF THE ACT, WE FIND NO MERIT IN THIS CONTENTION OF THE ASSESSEE, INASMUCH AS THE ASSESSEE HAS BEEN CON STITUTED BY THE STATE BY VIRTUE OF DEED OF TRUST, TO MONITOR AND IM PLEMENT THE AROGYASRI II SCHEME OF THE GOVERNMENT OF ANDHRA PRA DESH. IT IS IN PURSUANCE OF THIS DEED OF TRUST, THE ASSESSEE HAS ENTERED INTO AGREEMENTS WITH THE EMPANELLED HOSPITALS, WHO RENDE R MEDICAL PROFESSIONAL SERVICES TO THE BENEFICIARIES OF THE AROGYASRI II SCHEME OF THE GOVERNMENT. VIEWED IN THAT CONTEXT, THE BILLS O F THE HOSPITAL SETTLED BY THE ASSESSEE TRUST ARE IN PURSUANCE OF I TS AGREEMENT WITH THOSE HOSPITALS, AND AS SUCH, IT IS IN DISCHARGE OF ITS CONTRACTUAL OBLIGATION. THE BENEFICIARIES OF THE SCHEME HAVE N OTHING TO DO EITHER WITH THE BILL OR SETTLEMENT THEREOF, INASMUCH AS TH ERE IS NO PRIVITY OF CONTRACT BETWEEN THE BENEFICIARY AND THE CONCERNED HOSPITAL, AND WHATEVER SERVICE IS RENDERED BY THE HOSPITAL IS ONL Y IN PURSUANCE WITH THE AGREEMENT BETWEEN THE ASSESSEE-TRUST AND THE HO SPITAL CONCERNED, AND WHATEVER BILL RAISED IS ALSO IN ACCORDANCE WITH THE SAME. THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF DEDICATED ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 14 HEALTH CARE SERVICES TPA (INDIA) PVT. LTD. V/S. ACI T (SUPRA) AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MEDI AS SIST (INDIA) TPA PVT. LTD. (SUPRA), RELIED UPON BY THE CIT(A) IN THE IMPUGNED ORDER, CLEARLY COVER THE ISSUE AGAINST THE ASSESSEE. IN T HIS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE ACTION OF THE C IT(A) IN REJECTING THE CONTENTIONS OF THE ASSESSEE DENYING ITS VERY LIABIL ITY TO DEDUCT TAX AT SOURCE IN TERMS OF S.194J OF THE ACT. 22. AS FOR THE QUANTUM OF THE DEMAND RAISED BY THE ASSESSING OFFICER UNDER S.201 OF THE ACT, WE FIND SOME FORCE IN THE CONTENTION OF THE ASSESSEE THAT IT IS ONLY THE ELEMENT OF FEE FOR PROFESSIONAL SERVICES COMPRISED IN EACH OF THE PAYMENT MADE BY ASSESSEE T RUST TO THE HOSPITALS WHICH FALLS WITHIN THE SCOPE OF S.194J OF THE ACT. AS CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, ELEMENTS OF PAYMENT TOWARDS BED CHARGES, MEDICINES, FOLLOW UP S ERVICES, OUTPATIENT SERVICES, TRANSPORTATION CHARGES, IMPLAN TS, EXPENDITURE INCURRED FOR CONDUCTING CAMPS AT VILLAGE LEVELS, DO NOT STRICTLY FALL WITHIN THE SCOPE OF FEE FOR PROFESSIONAL SERVICES WHICH ALONE CAN BE CONSIDERED AS FALLING WITHIN THE SCOPE OF THE PROVI SIONS OF S.194J OF THE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE O RDER OF THE CIT(A) ON THIS ASPECT, AND DIRECT THE ASSESSING OFFICER TO BI FURCATE THE PAYMENTS MADE BY THE ASSESSEE TRUST TO THE HOSPITALS INTO VA RIOUS ELEMENTS AS NOTED ABOVE, AND CONFINE THE DEMAND RAISED IN TERMS OF S.201(1) OF THE ACT, ONLY TO THE PAYMENTS WHICH ASSUME THE NATU RE OF FEE FOR PROFESSIONAL SERVICES, AS NOTED ABOVE. 23. AS FOR THE PLEA OF THE ASSESSEE THAT FOR EXCLU SION OF THE PAYMENTS MADE BY THE ASSESSEE, WHICH HAVE ALREADY B EEN DISCLOSED IN THEIR INCOME BY THE RESPECTIVE HOSPITALS, DULY PAYI NG TAXES THEREON, WE FIND THAT THE CIT(A) HAS ALREADY IN PRINCIPLE ACCEP TED THE CONTENTION OF THE ASSESSEE FOLLOWING THE DECISION OF THE APEX COU RT IN THE CASE OF ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 15 HINDUSTAN COCA COLA BEVERAGE (P)LTD. (SUPRA) AND H AS GIVEN DIRECTION TO THE ASSESSING OFFICER TO EXCLUDE SUCH PAYMENTS I N RESPECT OF WHICH THE ASSESSEE COULD FURNISH DETAILS TO PROVE THAT TH E INCOME IN RESPECT THEREOF HAS ALREADY BEEN DISCLOSED BY THE RECIPIENT HOSPITALS. HOWEVER, THE GRIEVANCE OF THE ASSESSEE BEFORE US IS THAT THERE ARE A NUMBER OF HOSPITALS WHICH ARE BLACKLISTED FOR WHICH IT IS DIFFICULT FOR THE ASSESSEE TO PROCURE AND FURNISH ALL THE REQUISITE DETAILS TO SEEK EXCLUSION OF PAYMENTS IN RESPECT OF WHICH INCOME H AS ALREADY BEEN OFFERED FOR ASSESSMENT BY RECIPIENT HOSPITALS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO TRY AND OBTAIN INFORMATION FROM THE BLACKLISTED HOSPITALS WITH REG ARD TO WHETHER PAYMENTS MADE BY ASSESSEE HAVE BEEN DISCLOSED IN TH E INCOME OF AFORESAID HOSPITALS. 24. AS FAR AS THE GROUND OF THE ASSESSEE DISPUTING THE INTEREST CHARGED UNDER S.201(1A) OF THE ACT, WE ARE IN AGREE MENT WITH THE CIT(A) THAT SUCH INTEREST IS MANDATORY AND ONE CANN OT ESCAPE FROM THE SAME HAVING VIOLATED THE PROVISIONS OF S.194J O F THE ACT. WE ONLY DIRECT THE ASSESSING OFFICER AS FOLLOWS- (A) TO RECOMPUTE THE INTEREST CHARGEABLE UNDER S.201(1A ) WHILE RECOMPUTING THE DEMAND TO BE RAISED U/S. 201 (1) OF THE ACT FOR THE YEARS UNDER APPEAL IN PURSUANCE OF OUR DIRECTIONS CONTAINED IN PARA 22 HEREINABOVE; AND (B) TO CHARGE INTEREST UNDER S.201(1A) ONLY IN CASES WH ERE THE RECIPIENT INCOME IS TAXABLE; AND FURTHER MORE, EVEN IN SUCH CASES, WHERE RECIPIENT INCOME IS TAXABLE, TO C ALCULATE THE PERIOD OF INTEREST TO BE ONLY UPTO THE DATE OF THE FIRST INSTALMENT WHICH COVERS THE AMOUNT THAT SHOULD HAVE BEEN WITHHELD BY THE ASSESSEE. ITA NO.813 & 814/HYD/2008 AROGYA SRI HEALTH CARE TRUST, HYDERABAD 16 25. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 16.3.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 16 TH MARCH, 2012 COPY FORWARDED TO: 1. AROGYA SRI HEALTH CARE TRUST, C/O. SHRI K.VASANTKUM AR , & SHRIU A.V.RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 2. 3. INCOME - TAX OFFICER, WRD - 14(2)(TDS), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) II HYDERABAD 4. COMMISSIONER OF INCOME - TAX TDS HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE , ITAT, HYDERABAD B.V.S.