Employer medical reimbursements and TDS under section 194J: no liability where payments were made on behalf of employees.

Delay of 2054 days in filing the appeals was condoned on the basis of the affidavit and condonation petition, the delay not being found deliberate or contumacious. On merits, payments to doctors and hospitals were treated as medical expenses and reimbursements made on behalf of employees; the assessee was not regarded as the person responsible for making the payment under section 194J, so no tax deduction at source was required and the consequential demand under sections 201(1) and 201(1A) could not survive.

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Issues: (i) Whether the delay of 2054 days in filing the appeals deserved condonation. (ii) Whether the assessee was liable to deduct tax at source under section 194J of the Income-tax Act, 1961 on payments made to doctors and hospitals, and whether the demand raised under sections 201(1) and 201(1A) was sustainable.

Issue (i): Whether the delay of 2054 days in filing the appeals deserved condonation.

Analysis: The delay was examined on the basis of the affidavit and condonation petition filed by the assessee, together with the judicial principles discouraging refusal of adjudication on merits where delay is not deliberate. The explanation was accepted as not arising from intentional or contumacious conduct.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether the assessee was liable to deduct tax at source under section 194J of the Income-tax Act, 1961 on payments made to doctors and hospitals, and whether the demand raised under sections 201(1) and 201(1A) was sustainable.

Analysis: The payments to doctors and hospitals were treated as medical expenses and reimbursements made on behalf of employees. The assessee was not the person primarily responsible for making those payments in the sense required by section 194J, and the facts were held to be covered by the earlier decision in the assessee's own case. On that basis, the liability to deduct tax at source was negatived, and the consequential demand could not survive.

Conclusion: The assessee was not liable to deduct tax at source under section 194J, and the demand under sections 201(1) and 201(1A) was not sustainable, in favour of the assessee.

Final Conclusion: Both appeals were allowed after condoning the delay, and the TDS demand raised on the assessee was quashed.

Ratio Decidendi: Where payments are made by an employer on behalf of employees towards medical reimbursements and the employer is not the person responsible for making the payment to hospitals or doctors, section 194J is not attracted and no liability under sections 201(1) and 201(1A) arises.

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