IT : Where low income group patients were provided aid by State Government under a scheme but bill were raised in name of patients and payment were made by State Government on behalf of such patients, section 194J was not attracted
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[2013] 40 taxmann.com 156 (Indore - Trib.)
IN THE ITAT INDORE BENCH
Chief Medical Officer
v.
Income-tax Officer*
JOGINDER SINGH, JUDICIAL MEMBER
AND R.C. Sharma, ACCOUNTANT MEMBER
AND R.C. Sharma, ACCOUNTANT MEMBER
IT Appeal Nos. 503 & 504 (Indore) of 2012
[ASSESSMENT YEARS 2009-10 & 2010-11]
[ASSESSMENT YEARS 2009-10 & 2010-11]
JUNE 28, 2013
Section 194J, read with section 201, of the Income-tax Act, 1961 - Deduction of tax at source - Fees for professional or technical services [Medical services] - Assessment years 2009-10 and 2010-11 - Low income group patients were provided medical aid by State Government under M.P. State Measures Assistance Fund - When such patients were treated at hospital, payment was made by Government - Such payment included investigation charges, doctor's consultation fee, cost of equipment used for patients etc. - Assessing Officer held assessee - Medical Officer in default for not deducting TDS under section 194J on said payments to various hospitals - Whether payment made for equipments like pace maker, stunt etc. could not be said to be payment for professional fee; these are equipments put in heart and cost of such equipments could not be said to be professional fee paid to doctors - Held, yes - Whether for professional services rendered to patients, bills were raised in names of patients and not in name of State Government, individual patients to whom treatment was given, were liable to make payment, and, therefore, first criteria of section 194J, was not satisfied - Held, yes - Whether since assessee had acted only as disbursement officer on behalf of State Government, assessee was not required to deduct any tax at source - Held, yes [Para 7] [In favour of assessee]
CASES REFERRED TO
Hindustan Coca Cola Beverage (P.) Ltd. v. CIT [2007] 293 ITR 226/163 Taxman 355 (SC) (para 4) and Dy. CIT v. Movies Stunt Artist Association [2006] 6 SOT 204 (Mum.) (para 6).
Prakash Jain for the Appellant. R.A. Verma for the Respondent.
ORDER
R.C. Sharma, Accountant Member - These are the appeals of the assessee against the order dt. 25th June, 2012 of the CIT(A) for the financial years 2008-09 and 2009-10 in the matter of order passed under s. 201(1)/201(1A).
2. Rival contentions have been heard and record perused. The brief facts of the case are that the assessee is a Government officer and is engaged in disbursing the aids granted by the State Government under "M.P. State Measure Assistance Fund" set up by the Government of Madhya Pradesh for the persons living BPL. TDS verification was conducted in the case of the assessee on 21st Dec, 2009. On verification of records, it was found that the assessee deductor is responsible for deducting tax at source under Chapter XVII of the IT Act, 1961. During the financial year 2009-10 the assessee has made the payment of Rs. 44,24,234 to various hospitals for rendering medical services to the referred patients without deducting tax as required under s. 194J of the IT Act. Therefore the AO has created the demand of Rs. 4,49,540 including interest of Rs. 64,617 under s. 201(1A).
3. Contentions of the assessee before the CIT(A) were as under :
"The present appeals have been filed against the order passed under s. 201/201(1A) by ITO (TDS), Ujjain treating the assessee deductor as assessee in default and required to pay the amount of TDS sought to be deducted by him as per the provisions of s. 194J of the Act. For the amounts paid out of the grant in aid received for the treatment of a particular patient from the State Government under 'M.P. State Measure Assistance Fund' set up by then Government of Madhya Pradesh for the persons living BPL, paid to various approved hospitals which include all the investigation charges as well as doctor's consulting fee. The learned AO was of the opinion that these payments fall under the definition of fees and as such the assessee deductor was required to deduct tax at source as per the provisions of s. 194J of the Act. The assessee deductor failed to act accordingly, therefore treating the assessee in default and passed the order against the assessee to deposit the same as per the provisions of s. 201(1) of the Act along with interest under s. 201(1A) of the Act. In this regard the assessee has to submit as under for your kind consideration and perusal :
The assessee has submitted before the learned AO the details of Rs. 35,15,234 and Rs. 30,02,000 as claimed by him to have been paid to various hospitals during the financial years 2009-10 and 2008-09 respectively. No doubt the assessee has made the payments of Rs. 35,15,234 and Rs. 30,02,000 to various hospitals but the same are not covered under s. 194J of the Act and requiring the assessee to deduct any tax as per the provisions of s. 194J of the Act. Since no payment has been made by the assessee which falls within the ambit of s. 194J of the Act, therefore, the assessee has not committed any default within the meaning of provisions of s. 194J of the Act. Since no default has been committed by the assessee within the meaning of s. 194J of the Act, therefore, question of invoking the provisions of s. 201(1) does not arise against the assessee.
The assessee wishes to explain under what circumstances the payments of Rs. 35,15,234 and Rs. 30,02,000 have been made to various hospitals during the financial years 2009-10 and 2008-09 respectively. The assessee was in receipt of grant of Rs. 40 lacs from the Government of State of Madhya Pradesh under the 'M.P. State Disease Fund' set up by the Government of Madhya Pradesh for the person living BPL during the financial year 2009-10. Under the rules of the above fund set up by the State Government persons who are living the BPL and suffers from any notified disease and are unable to meet out expenses of treatment of that disease can approach the Government and require for the treatment of such disease out of the fund created by the Government. The Government every year through State Budget set up a particular amount and allocates the same for each District of the State and the District Head is empowered to utilise the amount for treatment of the needy person through the help of District Chief Medical Officer. Under the said allocation of the fund the CMO, Ujjain has been allocated a sum of Rs. 40 lacs for the financial year under consideration, to be utilised for the treatment of the needy person with the approval of the District Head. Out of such allocated fund the assessee has made the payment of Rs. 35,15,234 to various hospitals for the treatment of various such needy persons who qualify themselves for such aid of the Government during the said financial year. In this regard the assessee has already submitted before the learned AO copy of some sample orders for such approval of the various patients who have been sanctioned treatment of their respective diseases with amount sanctioned by the Collector out of the amount sanctioned out of this fund. After the approval of Collector the treatment of the patient was undertaken in the hospital for which the approval was obtained from the Collector. The patient is referred to the respective hospital on the recommendation of CMO and the undertaking of CMO for the payment of the treatment expenses. The patient was admitted in the hospital where all the expenses like room charges, investigation charges and cost of medicines including fees of doctors are being paid to the hospital by CMO. In this regard the assessee has submitted the complete record of Collector dt. 2nd April, 2008 in which various patients were approved for the treatment along with the sanctioned amount and the name of the hospital for which treatment was approved. In which a patient Shri Kaluram was sanctioned a sum of Rs. 60,000 for treatment in CHL Hospital, Indore. The said patient has incurred a sum of Rs. 70,726 for the pacemaker. The entire expenses of Rs. 70,726 were incurred for room rent, investigation charges and package fees for pacemaker cost and fees of doctor. Thus a sum of Rs. 70,726 was paid to CHL Hospital, Indore through CMO, Ujjain. Thus the entire amount was not paid as fees to doctor requiring the assessee to deduct the amount of TDS as per the provisions of s. 194J of the Act. All these type of payments made to various hospitals the total of which is Rs. 35,15,234 during the financial year 2009-10 and Rs. 30,02,000 during the financial year 2008-09 which comprises of all treatment expenses like room charges, investigation charges, cost of medicines and instruments and fees of doctor. Further it is also mentioned that as per the provisions of s. 194J the limit specified is applicable to each category of payment taking the same as separately, therefore, in none of the cases the payment of fees as defined under s. 194J has exceeded the limit specified in the section i.e. Rs. 20,000. Thus the entire amount was not in the form of fees of doctor which fall within the provision of s. 194J of the Act. Therefore, the assessee was not required to deduct tax at source as per the provisions of s. 194J of the Act. All the payments have been made against the various bills raised by the hospital for various components as in the case of Kaluram that too against the bills raised in the name of respective patients for various components of complete treatment expenses. The assessee only being the disbursement officer authorised by the Collector to make the payment on behalf of the State Government.
Now coming to the requirements of the provisions of s. 194J of the Act it is submitted that the assessee was not required to deduct any amount towards TDS as being expected by the learned AO out of the payments made by the assessee of Rs. 35,15,234 and 30,02,000 during the financial years 2009-10 and 2008-09 respectively. The provisions of s. 194J read as under :
'194J. Fees for professional or technical services.—(1) Any person, not being an individual or an HUF, 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) | any sum referred to in cl. (va) of s. 28, |
shall, at the time 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 is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein :
Thus, from the plain reading of the provisions of s. 194J it is clear that as per cl. (a) of the section only fees which are being paid fall within the ambit of the provisions of s. 194J and not all the payments as made to such persons. Similarly as per the second proviso of the section all the individuals and HUF are not required to deduct tax as per the provisions of s. 194J where such payments are made for personal expenses of such persons. The second proviso reads as under :
'Provided also that no individual or an HUF referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of HUF.'
Since all the bills were raised in the names of the patients and the CMO has acted only as disbursement officer on behalf of the State Government therefore the actual payment has been made by the patient who is an individual and has also made the payment towards personal purposes of such individual falling within the meaning of second proviso to s. 194J. Since it being the personal expenses and as such as per the second proviso to s. 194J the person is not required to deduct any tax as per the provisions of s. 194J of the Act therefore invoking the provisions of s. 201(1) of the Act was not required as per the provisions of law. No amount of tax can be recovered from the assessee for the failure of the assessee to deduct the amount from the disbursements of treatment expenses to various hospitals by calling them as fees within the provisions of s. 194J of the Act.
Thus, it is most humbly submitted that action of the learned AO for invoking the provisions of s. 201(1) of the Act was required not to be initiated against the assessee deductor as such it is most respectfully submitted that the order passed by the learned AO against the assessee under ss. 201(1) and 201(1A) of the Act may kindly be quashed.
Without prejudice to the above it is further submitted that the various hospitals to whom the entire payment of Rs. 35,15,234 during the financial year 2009-10 and Rs. 3,00,200 during the financial year 2008-09 has been made, have submitted their respective IT returns and paid the tax chargeable to their respective income as such they have duly discharged their respective tax liabilities, therefore, oh the facts and circumstances there is no loss of revenue caused due to alleged non-compliance of TDS provisions by the assessee deductor, therefore, in no case be the assessee deductor be treated as defaulter and the amount of revenue loss to the extent of amount deductible on such payments be recovered from the assessee deductor. In this regard the reliance is placed on the following decision of the apex Court in CIT v. Eli Lilly & Co. (India) (P.) Ltd. [2009] 312 ITR 225 (SC), Childrens Education Society v. Dy. CIT [2009] 319 ITR 409 (Kar.) and CIT v. Bharti Cellular Ltd. [2011] 330 ITR 239 (SC).
In all these cases it was held that since mere is no loss of revenue as tax has been paid by the recipients, no amount under s. 201 of the Act can be recovered.
The assessee is enclosing herewith the necessary evidence in support of the fact that the respective recipients have discharged their respective tax liabilities under the Act with respect to their respective income.
Thus it is most humbly submitted that looking to the facts of the case firstly the payments under consideration were made in the nature of personal expenditure of individuals, therefore, as per the second proviso to the s. 194J of the Act, requires any deduction of tax at source and lastly there is no revenue loss to the Department as the recipients have discharged their respective tax liabilities."
4. By the impugned order, the CIT(A) confirmed the action of the AO with respect to claim of interest under s. 201(1A) in respect of defaulted amount. However, by following the decision of the Supreme Court in the case of Hindustan Coca Cola Beverage (P.) Ltd. v. CIT [2007] 293 ITR 226/163 Taxman 355 the liability created under s. 201(1) was deleted.
5. Against the order of the CIT(A), the assessee is in appeal before us. However, no appeal is filed by Department for CIT(A)'s action for relieving the assessee under s. 201(1) of the IT Act, 1961.
6. At the outset the learned counsel for the assessee placed on record the order of Tribunal, Mumbai Bench in the case of Dy. CIT v. Movies Stunt Artists Association [2006] 6 SOT 204 (Mum.) wherein it was held that provisions of s. 194J were not attracted where the payment is routed through the assessee when it is found that neither the assessee was liable for making the payment nor the recipient of income was included anywhere in r. 6F or notification under s. 44AA. On the other hand, learned senior Departmental Representative relied on the orders of lower authorities and contended that the assessee was liable to pay interest under s. 201(1A) of IT Act.
7. We have considered the rival contentions, carefully gone through the orders of the authorities below and found from record that payments were made by District Hospital, Agra Road, Ujjain out of the grant-in-aid received for treatment of low income group patients from the State Government under "M.P. State Measure Assistance Fund" set up by the Government of Madhya Pradesh for the persons living below poverty line, to various hospitals. The payments so made include all investigation charges as well as doctors consulting fee, cost of equipment used etc. Chief Medical Officer of State Government was made responsible for not deducting tax at source and also for interest on default in delay of such payment under ss. 201 and 201(1A) of the IT Act, 1961. As per AO, the Chief Medical Officer has made payments of professional fee to hospitals and for which he was liable to deduct tax at source under provisions of s. 194J. From the record, we found that low income group patients were provided medical aid by the Government under M.P. State Measures Assistance Fund, When such patients were treated at the hospital, payment was made by the Government. Such payment includes investigation charges, doctor's consultation fee, cost of equipment used for the patients etc. There is no dispute that as per provisions of s. 194J only payment made for professional fee is liable for TDS. However, payment made for equipments like pace maker, stunt etc. cannot be said to be payment for professional fee. These are the equipments put in heart and the cost of such equipments cannot be said to be professional fee paid to the doctors. In the instant case before us, professional services were rendered by hospitals/doctors directly to the low income group patients. However, the payments were made by the State Government on behalf of such patients, who are individuals. For the professional services rendered to the patients, bills were raised in the names of patients and not in the name of State Government. However, to provide assistance to the poor patients, payment was made by the State Government on behalf of such patients. Thus, the State Government acted as agent of such patients. Services were directly rendered by the hospitals/doctors to these patients who were responsible for making the payment. However, due to the scheme framed by the State Government for the patients below poverty level, the payment was routed through it. However, as per provisions of s. 194J, the assessee should be a person responsible to make payment. In the instant case, individual patients to whom treatment was given, were liable to make the payment, therefore, the first criteria of s. 194J, if not satisfied. The fact that hospitals/doctors rendered services to patients and patients were to make payments for the services rendered, was not denied. It is also not in dispute that State Government was making payment on behalf of such poor patients with respect to the bills raised by the hospital for the treatment carried out in respect of such patients. Since all the bills were raised in the names of patients and the CMO has acted only as disbursement officer on behalf of the' State Government, therefore, the actual payment has been made by the patients, who are individuals and have made payment towards their personal purposes. Since it being the personal expenses of .such poor patients, as per second proviso to s. 194J, the patients who are individuals are not required to deduct any tax at source. Under these circumstances, the AO was not justified in invoking of provisions of ss. 201 and 201(1A) in respect of payment made under s. 194J.
8. Our view is also supported with the view of the decision of the Co-ordinate Bench in Movies Stunt (supra), wherein it was held that payment made to artist through the assessee, who is association of stunt artists is not liable to deduct tax under s. 194J. No contrary judgment was brought to our notice by the Department. We, are, therefore, inclined to follow the decision of the Co-ordinate Bench as stated above and allow the appeals of the assessee.
9. In the result, the appeals of the assessee are allowed.
USP __._,_.___
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