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The Assistant Commissioner of Income-tax (TDS) 3 (2) , Mumbai Versus M/s United Healthcare India Pvt. Ltd.

2016 (9) TMI 904 - ITAT MUMBAI

Penalty proceedings u/s 271C - non deduction uf tds u/s 194J on the payment made to hospitals nursing homes - Held that:- While deleting the penalty the CIT(A) has mentioned that the penalty u/s 271C was not leviable in the case of assessee for the reasons that the assessee did not deduct tax following “favourable decisions” available to them at “that time”. According to which no tax was deductible by them for being TPA u/s 195J. Therefore, the CIT(A) while passing the impugned order has held th .....

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tioning or discussion of ‘any such favourable decisions’, while reaching to a conclusion regarding deletion of penalty. Therefore, in our considered view, the ld. CIT(A) has reached to a conclusion without mentioning its basis. Hence, the order of ld. CIT(A) is nonspeaking to that extent. Considering the facts of the present case, in our considered view the present appeal is to be remanded back to the file of the CIT(A) with a direction to pass speaking order, while mentioning the basis or the d .....

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Philip, For The Revenue : Shri Ashish Sodhani ORDER PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER Both these appeals have been filed by the revenue against the order of the ld.CIT(A)-13, Mumbai dated 11-10-2013 in Appeal No.CIT(A)- 13/IT/Rationalization order no.602/11-12 for the assessment years : 2007-08 and 2008-09, on the following grounds; Based on the facts and circumstances of the case, the Appellant respectfully submits that the learned Assessing Officer erred in passing an order under secti .....

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J of the IT A to payments made to the hospitals because of the various Judicial precedents confirming that the hospitals do not render any professional services 3. The Assessing Officer failed to appreciate that the Appellant was under a "genuine and bonatide" belief on the non-applicability of section 194J of the ITA to payments made to the hospitals because of the various judicial precedents confirming that mere intermediaries were not subjected to withholding obligations under the p .....

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section 194J to the payments made to hospital In light of the afore mentioned ambiguity, the Assessing Officer erred in concluding that the penal provisions of Sec.271C of the !TA could be imposed against the Appellant. 6. The Assessinq Officer failed to appreciate that the Hon'ble High Court after being prima facie convinced that there was ambiguous point of law pertaining to the applicability of section 194J of the IT Act to payments made to the hospitals had admitted the petition filed a .....

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ctice of not deducting tax at source under Section 194J for the payments made by the Third Party Administrators directly to the hospital under the cashless hospitalization scheme was an established industry practice and therefore the penal provisions of section 271C of the ITA could not be imposed against the Appellant. 9. The Assessing Officer erred in imposing penalty under section 271C of the IT Act as the appellant had not acted deliberately in defiance of law and was not guilty of conduct c .....

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013 for the assessment year 2007- 08. 4. The brief facts of the case are that the assessee is stated to be engaged in the business of providing health management services. It is a third party administrator providing health insurance services. In this case, a survey u/s 133A of the IT Act was conducted at the premises of the assessee on 17-09-2009. From the details collected during the course of survey and subsequently during the course of hearing, it was found that the assessee has not deducted .....

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to hospitals. The order passed u/s 201(1) of the IT Act was subsequently, rectified u/s 154 on 30-03-2010 and the total short deduction u/s 201 was held to be ₹ 21.39,048/-. The assessee filed appeal with the CIT(A) and the CIT(A) after hearing both the parties has held that the payment made to hospitals nursing homes is liable for deduction of tax at source as per the provisions of sec.194J of the IT Act, 1961 Thereafter, the penalty proceedings u/s 271C of the IT Act on account of defaul .....

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sistent with the words used in the sec.194J of the IT Act, and since the assessee was unable to show bonafide belief or reasonable cause for non-deduction of tax. Therefore, a sum of ₹ 21,39,048/- was imposed as penalty u/s 271C of I.T. Act. 6. Aggrieved by the order of imposing penalty, the assessee preferred an appeal before the CIT(A) and the CIT(A) after considering the case of both the parties has allowed the appeal and deleted the penalty imposed by the Assessing Officer u/s 271C of .....

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ctual and legal matrix of the case, as clearly bought out by the Addl.CIT(TDS) in his order. 10. We have heard the counsel for both the parties and we have also perused the material placed on record as well as the orders passed by the revenue authorities. 11. The moot question before us, for our consideration is as to whether the CIT(A) has erred in deleting the penalty imposed u/s 271C of the IT Act levied by Addl.CIT(TDS)? In this connection, after hearing both the parties and perusal of the o .....

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services were rendered as part o an umbrella of services provided by the hospital which engages qualified medical professionals who practice the medical profession. These were services rendered in the course of the carrying on of the medical profession. Hence, TPAs, when they made payments to hospitals were liable to deduct tax at source under the provisions of section 194J…. .. By virtue of the law interpreted by the Hon'ble Bombay High Court, it is manifestly clear that the TPA s, .....

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ing of this portion of the order makes it clear that wherever a tax payer is able to show the reasonable cause for his failure to deduct tax, penalty u/s 271C is not leviable automatically. Now coming to present case, the subject matter of this appeal, appellant has argued that there were contradictory decisions available on the issue whether in a case like theirs, TPA, TDS was to be made u/s 194J or not and hence the appellants were under bonafide belief that they are not required to deduct tax .....

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271C was not leviable in this case for the reason that appellant did not deduct tax following favourable decision available to them at that time according to which no tax was deductible by them being TPA u/s 194J. This being a reasonable cause itself in view of provision of section 273B, the penalty levied u/s 271C when the appellant has reasonable cause for not deducting the tax Is not tenable. Accordingly, the penalty imposed u/s 271C of the Act levied at ₹ 21,39,048/- for SAY: 2007- 08 .....

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