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2010 (5) TMI 98 - HC - Income TaxTax Deducted at Source (TDS) u/s 194J – liability of TPA - whether, while making payments to hospitals TPAs are required to deduct tax at source under the provisions of Section 194J – meaning of professional services - Circular 8/2009 dated 24 November 2009 Held that: a hospital by itself, being an artificial entity, or a corporate enterprise which conducts the hospital is not a medical professional. - when it imposed an obligation under Section 194J to deduct tax, Parliament imposed that obligation on any person (not being an individual or a Hindu Undivided Family) who is responsible for paying to a resident any sum by way of fees for professional services and the expression “professional services” has been defined to mean services rendered by a person in the course of carrying on inter alia the medical profession. Where the provision of medical services takes place within the institutional framework of a hospital, services are rendered as part of an umbrella of services provided by the hospital which engages qualified medical professionals who practise the medical profession. These are services rendered in the course of the carrying on of the medical profession. Hence, it is not possible to accept the submission that TPAs, when they make payments to hospitals are not liable to deduct tax at source under the provisions of Section 194J. – TPAs are required to deduct tax at source (TDS) Circular no. 8/2009 regarding imposition of penalty is in violation of the restraints imposed upon it by the provisions of sub section (1) of Section 119. To that extent, therefore the circular that was issued by the Board would have to be set aside and is accordingly set aside.
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