TMI Blog2015 (10) TMI 2366X X X X Extracts X X X X X X X X Extracts X X X X ..... ot. It is also required to be seen as to whether the test reports are given by the assessee directly to the patients referred to by the hospitals/laboratories or they are issued to the hospitals/laboratories, who in turn issue the test results in their own letter heads. This factor will also help to decide about the nature of relationship. Thus all the above facts need to be examined before answering the question about the nature of relationship between the assessee and hospitals/laboratories. This issue requires fresh examination at the end of the assessing officer. Maintenance charges paid to the professionals for maintaining the medical equipment - TDS u/s 194C or 194J - Held that:- Routine, normal maintenance contracts which includes supply of spares will be covered under section 194C. However, where technical services are rendered, the provisions of section 194J will apply in regard to tax deduction at source. CIT(A) was justified in holding that the maintenance charges paid to the professionals for maintaining the medical equipments is a payment falling in the category of contract payments requiring deduction of tax at source u/s 194C of the Act - Decided in favour of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion paid to various persons/institutions in respect of the diagnostic pathological testing charges received by the appellant. He also show caused the appellant, as to why the tax was not deducted under section 194J in respect of annual maintenance charges paid in respect of the appellant's scientific instruments. After considering the reply of the appellant in this regard, the AO passed the impugned order under section 201(1)/201(1A) of the Act. In the said order, the AO has held the appellant to be an assessee in default in respect of discount/commission of ₹ 5,85,16,322/- and AMC charges of ₹ 38,94,056/- paid to various parties. Since, the appellant had deducted tax at source under section 194C of the Act in some cases, the AO has computed the net demand of tax and interest at ₹ 81,17,861/- as per demand notice issued by him. Against this action of the AO, the appellant has filed present appeal.... 4. In the appellate proceedings before Ld CIT(A), the assessee contended that it was not liable to deduct tax at source from the various payments listed above, since the relationship between the assessee and the various parties is on Principal to Principal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices raised on them and the copies of the Form 16A issued by them for the tax deducted at source on the payments made to the Appellant please refer Annexure 11 to 13. Other customers The Appellant provides pathology services to clinics, charitable organizations and government sponsored health check camps etc. for providing health services to the poorer sections of society. The samples collected by the Appellant's representatives from such charitable organizations/ camps and are sent to its laboratories for testing. The Appellant offers a discount to such organizations/ camps against the standard price of the tests conducted by it. Corporate and institutions The appellant has executed agreements with various corporate/institutions for providing pre-employment health check-up facilities to the candidates referred to it by such corporate/ institutions. The appellant offers discounts to such corporate/ institution against the standard price list for such test conducted. The invoices for such tests are raised by the Appellant on the corporate/ institutions. The appellant‟s offers discounts to such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions is also on Principal to Principal basis and hence the assessee is not liable to deduct tax at source on the discount paid to them. The said decision has been accepted by the revenue. 9. We have noticed earlier that the assessee is in appeal before us challenging the decision of Ld CIT(A) in confirming the order of AO in respect of discount paid to others. The Ld A.R submitted that the additional evidences furnished by the assessee has not been accepted by the Ld CIT(A). Accordingly he prayed that the Tribunal may accept the additional evidences and remit the matter to the file of the AO with the direction to examine this issue afresh. 10. We have heard Ld D.R on this issue. We notice that the assessee has given to discount to Others category customers, who consisted of mainly charitable organizations, Government sponsored health checkup camps etc. We notice that the Ld CIT(A) has confirmed the demand raised by the AO in respect of this category mainly for the reason that the assessee did not furnish relevant details before the AO. Even the additional evidences furnished before Ld CIT(A) were not admitted by him. Thus, we notice that the additional evidences and relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ker), wherein it was held that the section shall become inapplicable when the lottery tickets are given at a discount and there is no payment of Commission. The High Court further held that there is no payment in cash or by cheque and the Government never credited any income to the account of the persons like the petitioner. (b) Bharti Airtel Ltd Vs. DCIT (228 Taxman 219)(Kar), wherein it was held that the SIM cards and Prepaid recharge coupons sold by the assessee telecom operator to the distributors at a discounted rate would not attract TDS liability u/s 194H of the Act, since there was no payment of commission or brokerage. (c) CIT Vs. Qatar Airways (332 ITR 253)(Bom), wherein it was held that the TDS was not deductible when the agent is authorized to sell tickets at a discount within the prescribed range. 13. Thus, we notice that the main contention of the assessee is that it is not liable to deduct tax at source on the discount paid to the hospitals/laboratories, since the relationship between them is on Principal to Principal basis. 14. We notice that the AO has considered the relationship between the hospitals/laboratories as Agent-Principal relationsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, what happens when the hospital pays testing charges net of discounting collected from the patient is that the hospital simultaneously gets paid discount at a fixed percentage which it is free to appropriate as its income. Accordingly the AO held that the discount paid to the hospitals/laboratories is in the nature of Commission , which is liable to for deduction at sources u/s 194H of the Act. Since the assessee has failed to deduct tax at source, he raised demand upon the assessee u/s 201(1) and 201(1A) of the Act. The Ld CIT(A), however, has deleted the demand by holding that the nature of relationship between the assessee and hospitals/laboratories is on Principal to Principle relationship and hence the assessee is not liable to deduct tax source. 15. The question that requires examination is what is the nature of relationship? There should not be any dispute that there is no question of deducting tax at source, if the relationship between the assessee and the hospitals/laboratories is on Principal to Principal basis. However, it is required to be seen as to whether the transactions were entered at all times on principal to principal basis or not. We notice tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said status would be conferred. In certain trades, the word agent is often used without any reference to the law of principal and agent. Thus, the essence of Contract of Agency is that the agent does not sell the goods as his own but sells the same as the property of the Principal under his instructions and directors. Thus an agent always acts on behalf of his Principal only and the benefits of the activities done by the agent would be reaped by the principal. Furthermore, since the agent is not the owner of goods, loss, if any, suffered by the agent is to be borne by the Principal and the agent shall be indemnified by the principal. The payment received by the agent for the services rendered to the principal is understood as Commission . The Hon ble Gujarat High Court has followed the above said decision of the Hon ble Supreme Court (supra) in deciding the issue before it in the case of Ahmedabad Stamp Vedors Association. Following observations made by Hon ble Gujarat High Court are also relevant here:- It is also not possible to accept the contentions of Mr. Naik for the Revenue that the definition of commission or brokerage as contained in the Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broker or any other person who manages the affairs or undertakes to do some work or renders some services to another. Mostly it is a percentage on price or value or upon the amount of money involved in any transaction of sale or service or the quantum of work involved in a transaction. It can be for a variety of services and is of the nature or recompense or reward for such services. Rebate , on the other hand, is a remission or a payment back and of the nature of deduction from the gross amount. It is sometimes spoken of as a discount or draw-back. The dictionary meaning of the term includes a refund to the purchaser of a thing or commodity of a portion of the price paid by him. It is not confined to a transaction of sale and includes any deduction or discount from a stipulated payment, charge or rate. It need not necessarily be taken out in advance of payment but may be handed back to the payer after he has paid the stipulated sum. The repayment need not be immediate. It can be made later and in case of persons who have continuous dealings with one another it is nothing unusual to do so. The decision rendered by Hon ble Bombay High Court (supra) also clarifies that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or not. It is also required to be seen as to whether the test reports are given by the assessee directly to the patients referred to by the hospitals/laboratories or they are issued to the hospitals/laboratories, who in turn issue the test results in their own letter heads. This factor will also help to decide about the nature of relationship. In our view, all the above facts need to be examined before answering the question about the nature of relationship between the assessee and hospitals/laboratories. Since the issue has not been examined by the tax authorities by considering the basis facts discussed above, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the same in the light of discussions made supra. The assessee is also directed to furnish all the relevant facts and explanations relevant to this issue and also that may be called for by the AO. 20. The ld A.R submitted that the hospitals/laboratories have declared the discount as their respective income and paid tax t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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