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Saifee Hospital Trust, 15/17, Mumbai Versus ACIT (TDS) -3 (2) , Mumbai and Vica-Versa

Non deduction of TDS U/S 194J - payment made for hospitality services, doctor’s fees, annual maintenance contrary payment - revenue imposed tax u/s.201(1) and also charged interest u/s.201(1A) - AO did not accept assessee’s contention regarding its liability to deduct tax u/s.194C and held that the assessee was liable to deduct tax u/s.190J - Held that:- As decided in DCIT v. Parasrampuria Synthetics Ltd [2007 (11) TMI 436 - ITAT DELHI] the persons rendering certain services has only maintained .....

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OURT OF INDIA] since the recipient of income have already paid the tax, the AO has deleted the tax liability so imposed, however, he has confirmed the interest thereon. Thus, even during the appellate proceedings before the CIT(A) the AO has passed rectification order under section 154 and deleted all the liability created under Section 201(1) of the I.T.Act. - Decided in favour of assessee. - ITA No.387/Mum/2014 - Dated:- 16-9-2015 - SHRI R.C.SHARMA, AM and SHRI SANJAY GARG, JM, JJ. For The Ass .....

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ot properly deducted tax at source in respect of payment made for hospitality services, doctor s fees, annual maintenance contrary payment. Accordingly, the AO computed the difference of tax u/s.201(1) and also charged interest u/s.201(1A) of the I.T.Act. 3. By the impugned order, the CIT(A) upheld the AO s action for non-deduction of tax in respect of annual maintenance contract and held the assessee liable for tax of interest thereon. However, in respect of other payments, the CIT(A) accepted .....

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Facility Management Agreement executed on 01.04.2009. The costs of materials, services and other utilities are borne by the assessee Hospital. The services of the contractor are monitored and governed as per agreement executed by the assessee and the contractor. The contractor is required to provide the services within the premises of the Hospital by preparing the food as per the instructions of the Hospital and serving the same to the patients, customers, relatives of patients and visitors. Fo .....

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considered the facts of the case, submission of the appellant and order u/s•.201(1)(1A) and the order u/s.154 passed on 27.12.2012. In that order the AO relying on the decision of Hon ble Supreme Court in the case of M/s. Hindustan Coco-cola Beverage Pvt. Ltd. v. CIT [293 ITR 226] has deleted/cancelled the demand so created amounting to ₹ 1061450/-. However the interest on the same is upheld. Therefore the issue that whether TDS is to be deducted u/s 194Cor 194J on Annual maintenance .....

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with regard to the contracts entered into by the assessee, which is a Govt. Medical College at Jammu, has entered into agreements with various parties to maintain operation theatre and surgical equipments. RO system, CT Scan Machine, MRI machine, Lift, Sterilisation and Medical equipments along with Anti-termite treatment and also there were contracts for supply of Bread and Butter and supply of security and personnel. As regards supply of Bread and Butter and supply of security end personnel, .....

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ent any sum by way of (a) fees for professional services, or (b) fees for technical services, shall at the time of credit of such sum to the account of the payee or a: the time of payment thereof cash or by issue of a cheque or draft or by any other mode whichever is earlier, deduct an amount equal to ten percent of such sum as income-tax on income comprised therein. This 10% has been inserted by the Finance Act w.e.f 01.06.2007 in place of 5%. As per Explanation of section 194J, professional se .....

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have the same meaning as in Explanation 2 to clause (vii) of sub-section (l) of section 9; 6.3 As per section 9(1)(vii) - Explanation (2) - the technical services have been defined as under: Explanation [2) - For the purposes of this clause, fees for technical services means any consideration (including .any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include con .....

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for the purpose of section 194J of the Act. In the, present case, on perusal of the various agreements placed on record by the assessee that firstly with regard to Theatre and Surgical operation with M/s, Thermtronics Krilosker Pvt. Ltd. As per conditions mentioned in the agreement in clauses (i) to (vi), the services of a technical qualified person are to be, made available to the assessee to maintain equipments and therefore, the said technical services as per CBDT Circular 715 dated 8.8.1995 .....

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em, M/s. Siemens Ltd M/s. OTIS Elevator and M/s. Expert Technical Service respectively. Therefore, we are of the view that these contracts cannot be the contracts in a routine or normal manner but for which technical service has .been rendered and provisions of section 194J read with section 9(1) of Explanation-2 are attracted, read with section 201(1) and 201(1A), which the AO has rightly applied. We find no infirmity in the order of the Assessing Officer in this regard. 7.5 Adverting ,to the f .....

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), which the AO has rightly applied. Accordingly, the action of the A.O.is upheld. Ground is dismissed. 7. We have considered rival contentions and also gone through the terms of agreement entered with the contractor reflecting the nature of services rendered, which clearly shows that the principle services rendered by the contractor Monginis are cooking of food and supply of trained workforce to serve the said food. By no stretch of imagination such services of preparation of food and serving t .....

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at source u/s.194C of the Act, in respect of payments made for catering services. 8. The AO also held that assessee was liable to deduct tax at source from payment made to doctors u/s.192 instead of Section 194J of the Act. 9. By the impugned order the CIT(A) held that assessee has correctly deducted tax at source u/s.194J after having the following observation :- 5.3 I have considered the ,facts of the case, submission of the appellant and order u/s.201 (1 )(1A). After passing of the order in .....

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ors as under employment of the assessee, accordingly liable to deduction of tax u/s.192. From the record we found that payments were not made to doctors treating the said payments as salaries eligible for deduction of tax u/s. 192 of The Act Instead of 194J of the Act. The Doctors are individual Doctors and entitled to have independent practice. As such, they are not on the pay roll of the assessee and their services are availed on rotation basis fixed as per the needs emergencies by the assesse .....

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and found that the said consultancy agreement is entered into to obtain services of the consulting doctors on retainer / consultancy basis for providing various services to the hospital. We also found that the services rendered by such doctors are only for specified time which may be mutually agreed upon between the parties. Further the agreement also permitted the consultants to carry out their independent professional services. The above understanding is evident from the following clauses of .....

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ility and shot! be borne by the consultant along without any liability on the part of the hospital. …….. …….. (6) The consultation timing allotted to the consultant shall be mutually agreed between the hospital and the consultant. The time slot so allotted to the consultant may be changed or rescheduled by the hospital as and when necessary. (7) Nothing contained in Clause 6 shall preclude the consultant from rendering professional services and the same shall not conf .....

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yment agreement. Similarly, the terms of payments are also in connection with the consultancy services. Moreover, none of the clauses reflects the nature of relationship to be that of employeremployee between the 2 parties. In order to bring the payments within the scope of s. 192 of the Act, it is necessary that there should be an employeremployee relationship between the 2 parties. As such the relationship between the assessee hospital and doctors is that purely of a consultants and not of an .....

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the impugned order the CIT(A) deleted the tax and interest so levied by observing as under :- 6.3 I have considered the facts of the case, submission of the appellant and order u/s.201 (1)(1A). Considering the language of section 194J, it is stated that the same can be invoked only in 2 circumstances. a. Where any sum is credited to the account of the payee. b. Where any payment is made to the payee The section nowhere states that TDS has to be done on assumption. The A.O. has not brought out a .....

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t the amount of professional fees as envisaged by the A.O. is credited or paid in the Doctor s account the AO is not justified in invoking the provisions of section 194J. Since no evidence is brought on record to show that the amount is credited to the account of doctor or any payment is. made to doctor, the addition of ₹ 32, 93,247 stands deleted as the condition stipulated u/s.194J is not satisfied. 13. We have considered rival contentions and found that as a practice, the doctors are en .....

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ustified in invoking Section 194J in the absence of any tangible evidence and material to show that the amount of professional fees as envisaged by the AO was credited or paid in doctors account by the assessee. The detailed finding recorded by the CIT(A) has not been controverted. Accordingly, we do not find any infirmity in the order of the CIT(A) for not invoking the provisions of Section 194J with respect to the payments directly made by the patients to the doctors. 15. The AO has also appli .....

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upplier for maintenance of equipments is in the nature of technical services, liable for deduction u/s.194J of the Act. As per the said contract, the service provider is required to carry out the ongoing maintenance and inspection of all the equipment, special inspection of the equipment safety and functional @ inspection of the equipment. Similarly, he is also required to keep the record of all the preventive maintenance and periodic inspections and report the progress to the assessee through t .....

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of the said maintenance is only to ensure the longer life of the equipment. Such maintenance cannot be considered to be of technical nature. 17. The issue under consideration is squarely covered by Delhi Tribunal in the case of DCIT v. Parasrampuria Synthetics Ltd. [20 SOT 248] wherein the Tribunal, while dealing with the issue relating to applicability of s. 194J of the Act in respect of the payment towards AMC contract, observed as under: In the present case, it is seen that there may be use o .....

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ssee. In such a case, it cannot be said that the amount is paid as fees for technical services . Rendering services by using technical knowledge or skill is different than charging fees for technical services. In a latter case, the technical services are made available due to which the assessee acquired certain right which can be further used. In the present case, it is not so. The persons rendering certain services has only maintained machinery or converted yarn but that knowledge is not now ve .....

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vehicle hire contracts cover under section 194C or u/s 194J and 194-I of the Act. The assessee deducted tax at source under section 194C. The revenue is of the view that annual maintenance contract and pilotage contract are in the nature of technical services, therefore, falls under section 194J and vehicle contract is rent contract therefore section 194I is applicable. To examine this issue first of all we see what are the activities of the assessee, AMC & pilotage contract. The assessee i .....

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such sum to the account of the contractor 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 one per cent of the payment as applicable of such sum as income-tax. The Apex court in the case of Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435 / 67 Taxman 346 held that any work means any work and not a work contract which has a special connotation in the lip law. Indeed, in the sub-section, the work referred to .....

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inclusion in the sub-section. 15. Now let us see what is the meaning of fee for technical services . The meaning of fee for technical services provided in Explanation (2) of section 9(1)(vii) reads as under: Explanation (2) - For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but dopes .....

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