Outsourcing of the Services - whether the Tax is to be deducted u/s 194-C (Contracts) or u/s 194-J

[MOHAN S]

One of our clients is a Company running a Hospital. They refer( Outsource) the Laboratory and Clinical Diagnosis Services to another Private Limited Company. When payment is being made by the Hospital whether the Tax is to be deducted u/s 194C (Contracts) or u/s 194J Professional Services. In my opinion, as this is basically a contract only 194C is applicable. Can any one give their views?

[JainPal Jain]

This is nothing but Technical and Professional service.

[sm surana]

Section 194J must be applicable in this case.

[Rama Krishana]

TDs u/s 194J is deductible only if the same is professional service or technical service or royalty or non compete fee u/s 28(va). The activity of outsource of clinical diagnosis services to another provide company is neither a professional service, nor a royalty or non compete fee. On the other side, the term technical service has been defined u/s 9(1)(vii) which read as, "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 consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries" - Therefore, the nature of service being provided by the Laboratory to be ascertained. Since the service being provided by the laboratory is not only technical but also based on science in the form of expert report, the same would fall within the category of "fees for technical services". Therefore tax at source (TDS) u/s 194J is required to deducted.

AI Summary

Fees for technical services: TDS required on outsourced laboratory and clinical diagnostic services provided by third parties. Where outsourced laboratory and clinical diagnostic services involve scientific analysis and the provision of expert reports or specialised technical inputs, they fall within the scope of fees for technical services and TDS should be applied under the provisions governing technical/professional fees rather than under contract payment provisions.