2013 (6) TMI 896 - AT - Income Tax

Tribunal Rules Payments to Hospitals Are Personal Expenses, Not Professional Fees; No TDS Required u/s 194J.

Chief Medical Officer Versus Income Tax Officer

The Tribunal ruled in favor of the assessee, determining that payments made to hospitals under the 'M.P. State Measure Assistance Fund' were not solely ... Government providing aids for the persons living BPL - Payment to hospitals for rendering medical services - Need to deduct TDS u/s 194J and attract 201(1) on non-deduction? - HELD THAT - State Government acted as agent of such patients. Since it being the personal expenses of such poor patients, as per second proviso to s. 194J, the patients who are individuals are not required to deduct any tax at source. Decision in favor of assessee. Issues Involved:1. Applicability of Section 194J for TDS on payments made to hospitals.2. Liability under Section 201(1) and 201(1A) for non-deduction of TDS.3. Consideration of payments as personal expenses under the second proviso to Section 194J.Summary of Judgment:1. Applicability of Section 194J for TDS on payments made to hospitals:The assessee, a Government officer, made payments to hospitals for medical services under the 'M.P. State Measure Assistance Fund' without deducting tax as required u/s 194J. The AO considered these payments as fees for professional services and raised a demand including interest u/s 201(1A). The assessee argued that the payments were not solely for professional fees but included various components like room charges, investigation charges, and cost of medicines, which do not fall under the ambit of Section 194J.2. Liability under Section 201(1) and 201(1A) for non-deduction of TDS:The CIT(A) confirmed the interest liability u/s 201(1A) but deleted the liability u/s 201(1) by following the Supreme Court decision in Hindustan Coca Cola Beverage (P) Ltd. vs. CIT. The Tribunal noted that the payments were made by the State Government on behalf of low-income patients, and the bills were raised in the names of the patients, not the State Government. Therefore, the State Government acted as an agent, and the patients, being individuals, were not liable to deduct TDS as per the second proviso to Section 194J.3. Consideration of payments as personal expenses under the second proviso to Section 194J:The Tribunal observed that the payments were personal expenses of the patients, and as per the second proviso to Section 194J, individuals are not required to deduct TDS on such payments. The Tribunal also referenced the decision in Dy. CIT vs. Movies Stunt Artists Association, where it was held that payments routed through an association were not liable for TDS u/s 194J. Consequently, the Tribunal allowed the appeals of the assessee, ruling that the AO was not justified in invoking the provisions of Sections 201 and 201(1A) for the payments made.In conclusion, the Tribunal ruled in favor of the assessee, stating that the payments made to hospitals were not solely for professional fees and were personal expenses of the patients, thus not attracting TDS u/s 194J. The appeals of the assessee were allowed.