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2015 (8) TMI 277 - KERLA HIGH COURT

2015 (8) TMI 277 - KERLA HIGH COURT - [2016] 380 ITR 284 - Disallowance under Section 40(a)(ia) - professional services to the assessee's hospital - assessee deducted tax at the rate of 2% under Section 194C but assessment was completed on the basis that tax deductible was at 5% as prescribed under Section 194J - assessee in default under Section 201 - whether where tax is deducted by the assessee, even if it is under a wrong provision of law, as in this case, the provisions of Section 40(a)(ia) .....

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urusahai Saigal v. Commissioner of Income Tax, Punjab [1962 (8) TMI 66 - SUPREME COURT] it can be seen that the expression "tax deductible at source under Chapter XVII-B" occurring in the Section has to be understood as tax deductible at source under the appropriate provision of Chapter XVII-B. Therefore, as in this case, if tax is deductible under Section 194J but is deducted under Section 194C, such a deduction would not satisfy the requirements of Section 40(a)(ia). The latter part of this Se .....

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COME TAX FOR THE RESPONDENT : SRI.P.BALAKRISHNAN (E), SRI.MOHAN PULIKKAL, SRI.P.P.NARAYANAN AND SRI.R.ANAS MUHAMMED SHAMNAD JUDGMENT Antony Dominic, J. ITA 2/12 is filed by the assessee challenging the order of the Tribunal in ITA 874/08 concerning the assessment year 2005-2006. The assessee, a hospital, had entered into Annexure D agreement dated 19th August 2002 with M/S Lakeshore Hospital and Research Centre Limited by which, the latter had undertaken to perform various professional services .....

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6. 2. In ITA 572/11 filed against the order of assessment for the assessment year 2006-2007, the assessment order applying tax at the rate of 5% prescribed under Section 194J was upheld. Thereafter, following the Calcutta High Court judgment in Commissioner of Income Tax v. S.K.Tekriwal [2014] 361 ITR 432 (Cal), the Tribunal held that the conditions laid down under Section 40(a)(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. According t .....

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ly. Applying the Culcutta High Court judgment, Tribunal held the issue regarding the application of Section 40(a)(ia) of the Act in favour of the assessee. It is challenging this order of the Tribunal that the Revenue has filed ITA16/14. 3. The first question that arises for consideration is regarding the appropriate Section under which TDS has to be deducted. 4. Annexure D in ITA 2/12 is the agreement dated 19th August 2002 entered into between the assessee and M/S Lakeshore Hospital and Resear .....

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y together with the Consultants in the said Departments i.e., Dr.Mathew Philip. Dr.G.N.Ramesh, Dr.Roy J. Mukkada, Dr.Deepak Varma, Dr.A.Venugopal, Dr.Lekha, Dr.George Jacob etc. the Urology team headed by Dr.George P.Abraham, the Nephrology team headed by Dr.Mohan A Mathew would continue to extent their professional services on behalf of the Second Party to the First Party, for a period of three (3) years from the date of their joining the Second Party or till such time as they are in the servic .....

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ions of the agreement, M/S Lakeshore Hospital and Research Centre had undertaken to render professional services to the assessee and this was not a case where they were undertaking a contract work. If that be so, tax was deductible under Section 194J and not under Section 194C as done by the assessee. 6. The second question is regarding the applicability of Section 40 (a)(ia) of the Act. The Section 40(a)(ia) as it stood at the relevant time reads thus: "(ia) any interest, commission or bro .....

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) of Section 200." 7. Reading of this provision shows that any fees or professional services or fees for technical services payable to a resident 'on which' tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the 'time prescribed' under Section 200(1) of the Act, this provision is attracted. 8. This provision is attracted in cases wh .....

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ent in Gurusahai Saigal v. Commissioner of Income Tax, Punjab [ITR (XLVIII - 1963)] which reads thus: Now it is well recognised that the rule of construction on which the assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statute. It does not, for example, apply to a provision not creating a charge for the tax but laying down the machinery for its calculation or procedure for its collection. The provisions in a taxing statute dealing with mach .....

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