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2021 (4) TMI 454 - AT - Income TaxTDS u/s 194C - surrogacy payments without deducting TDS - assessee company runs infertility clinic(s) - Addition u/s 40(a)(ia) - whether payments made to surrogate mothers attract chapter-XVII of the Act requiring TDS deduction? - HELD THAT:- As per the assessee’s sample surrogacy agreement in this regard the introductory portion thereof duly contains the clause that the same is ‘by and among’ the genetic parents, surrogate mothers and the assessee in other words. Not only this, ‘material breach’ clause 17.2 therein also suggests that it is the infertility centre/physician only ‘who shall reimburse intended parents for all sums expended plus interest at the maximum allowable rate’. All this sufficiently negates the assessee’s stand that it is neither a party to the surrogacy agreement nor any right or liability flows thereof on its role as an infertility clinic. Revenue’s able assistance and from a perusal of the case file at pg.35 that the NGO herein has proposed the assessee to arrange for surrogate mothers in lieu of the decided remuneration of ₹ 4 lakhs for single and ₹ 4.5 lakhs in case of twins’ pregnancies; respectively. This NGO further claimed itself as working for rehabilitation for poor & destitute woman after they were neglected by their families facing poverty and other adverse circumstances. The assessee is fair enough in not disputing the fact that it had duly agreed to the said proposal only alongwith its undertaking to pay for the material breach of contract to the genetic parents on account of the surrogate mothers’ default. We make it clear that this payee had also failed to throw any light on payments made to surrogate mothers whose services had been utilized by the assessee/infertility centre for the purpose of surrogate pregnancy on behalf of the genetic parents. We therefore exercise our inherent jurisdiction vested u/s.254 of the Act as well to observe these parties have done nothing else but exploited the poor and destitute surrogate mothers without even paying the adequate compensation. Rather the payee ‘NGO’ and its office bearer(s) have prima facie swindled the entire money. This conclusion flows from the entire surrogacy procedure adopted by the assessee with the so called NGO and its authorised person as it is evident from the perusal of the case file in the light of human probabilities after removing all blinkers as held in Sumati Dayal Vs. CIT [1995 (3) TMI 3 - SUPREME COURT] and CIT Vs. Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT] - We thus conclude that so far as the application of 194C r.w.s. 40(a)(ia) is concerned, the assessee’s all other arguments regarding taxability of the surrogate mothers also deserve to be rejected since its payee himself had admitted that it had not maintained any accounts of the payments made to the surrogate mothers. We thus uphold the learned lower authorities’ action invoking Section 194C r.w.s. 40(a)(ia) disallowance Whether all these payments attract Section 194J so as to hold that the payee concerned had rendered any technical service in arranging poor and destitute women as surrogate mothers? - We do not find any technical service element involved in all this surrogacy process involving the recipient or the surrogate mothers attracting the clinching statutory expression(s) of managerial, professional and technical services u/s.194J r.w.s.9(i)(vii) Explanation (supra). We thus reverse both the lower authorities’ action invoking Section 194J in facts of the instant case(s). It is therefore concluded that our instant 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. TDS u/s 195 - section 40(a)(i) disallowance in case of the overseas payees - HELD THAT:- It is not in dispute that the South Africa based payee Ms.Celeste Coetzee has not performed any services in India herself even if egg donation activity taken as a technical services. What all she has done is to arrange overseas egg donor’s not on salary or contractual assignment but on free lancer basis only. There is further no indication before us that assessee’s egg donor payments per head exceed the threshold limit u/s.194J(1) 1st proviso as well. All this makes it sufficiently clear these payments are not taxable in India so as to be held liable for TDS deduction going by M/s.GE India Technology Centre P. Ltd. [2010 (9) TMI 7 - SUPREME COURT] ; CIT Vs. Faizan Shoes Pvt. Ltd. [2014 (8) TMI 170 - MADRAS HIGH COURT] & DCIT Vs. Welspun Corporation Ltd.[2017 (1) TMI 1084 - ITAT AHMEDABAD]. We thus hold that the impugned 40(a)(i) disallowance in case of the overseas payees deserves to be deleted for this reason alone
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