TaxTMI 
TaxTMI 
2015 (10) TMI 2366
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....ring the subject AY the Appellant has earned income of Rs. 24,41,09,507/- from pathological and pre-employment check-up services from the following sources: Particulars Gross sales Discount Net Sales Offered Walk-in Patients 15,93,36,706 1,28,03,265 14,65,33,441 Hospitals 8,94,51,544 2,62,12,206 6,32,39,338 Laboratories 3,75,03,634 1,40,74,712 2,34,28,921 Others 76,81,582 26,07,650 50,73,932 Corporate Health check-up 86,52,364 28,18,489 58,33,875 Total 30,26,25,830 5,85,16,322 24,41,09,507 '--_ .. 3. A survey operation under section 133A of the Act was carried out on 23/09/2011 at the appellant's premises by the officer, having jurisdiction under section 143(3) over the appellant. As a result, the discrepancies were found in respect of deduction of tax at source. Accordingly, the ACIT, Circle-6(1), Mumbai passed assessment order making the disallowances under section 40(a)(ia) of the Act. Subsequently, on the basis of information received from ACIT, Circle-6(1), Mumbai, the TDS Officer (i.e.'the AO') initiated proceedings under section 201(1)/201(1A) of the Act. He issued notices to the appellant to show ....
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.... Hospitals and laboratories The appellant has executed agreement(s) with hospitals for providing high pathology testing series to them. These hospitals, which do not have the necessary technology for conducting complex tests to diagnose ailments of the patiens, send samples of their patients to the appellants for conducting such tests. The samples are collected by the Appellant from the hospitals through its collection representatives. These representatives are paid a fixed commission by the Appellant based on the number of samples collected by them from the hospitals allocated to them. The appellants invoices the hospital(s) for the tests conducted by it and offers them a discount against the standard price list of each test conducted by it. Along with the invoice, the Appellant provides the hospitals with the test reports of the patient under its name, the hospitals in turn provide their patients with the test results under their own name. The hospitals / laboratories while making payment to the Appellant deduct tax at source on such payments. We are attaching herewith the list of hospitals / laboratories to whom the services have been provided, the copies of the invoices rais....
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....this decision of Ld CIT(A). 6. In respect of discount given to laboratories and hospitals, the Ld CIT(A) accepted the contentions of the assessee that the transactions have been entered between them on "Principal to Principal" basis and accordingly held that the assessee is not liable to deduct tax at source thereon. The revenue is contesting this decision of Ld CIT(A) before us. 7. In respect of discount given to "Others", viz., charitable organizations, Government sponsored health checkup camps etc., the assessee filed some additional evidences before Ld CIT(A) in the form of list of such clients. The Ld CIT(A) noticed that the assessee has not given any submissions before AO for this category of customers and further the assessee has not moved formal petition seeking admission of additional evidences. Hence the Ld CIT(A) confirmed the order of the AO on this category of customers. The assessee is contesting this decision of Ld CIT(A). 8. In respect of Corporate health checkup programs, the Ld CIT(A) held that the transactions entered between the assessee and the corporate bodies/institutions is also on Principal to Principal basis and hence the assessee is not liable to....
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....es to any one of the laboratories they choose. He further submitted that the test report given by the assessee may not be given as it is to the patients and the hospitals/laboratories, in turn, may give the results in their letter pads. He further submitted that the assessee carries the tests at the rates agreed between the assessee and hospitals/laboratories prior hand. Further the assessee is not aware about the rates that are charged by the hospitals/laboratories to the patients. Accordingly, the Ld A.R submitted that the foregoing points would show that the assessee is merely rendering service to the hospitals/laboratories at the predetermined rate, which is less than the prescribed standard rate. Hence the transactions are carried on "principal to principal" basis. The Ld A.R further submitted that the recipients of service from the assessee have sometimes deducted tax at source u/s 194J of the Act treating the services provided by the assessee as professional services. The Ld A.R also placed reliance on the following case law:- (a) M.S. Hameed Vs. Director of State Lotteries (249 ITR 186)(ker), wherein it was held that the section shall become inapplicable when the l....
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....by the assessee company. The testing charges collected by the hospital are for the assessee company and the hospital is allowed to retain certain percentage as its commission and remit the balance to the assessee company. This arrangement of withholding certain percentage out of testing charges collected by the hospitals from the patients and payable to assessee company is nothing but a payment made to hospitals in advance by the assessee company before remittance of net testing charges to it by the hospital. It is clear from section 194H that payment includes credit of such sum to the account of the payee or at the time of payment of such income in cash or by the issue of cheque or draft or by another mode. The assessee company receives remittance of the testing charges after deduction of commission (discount) by the hospital, accounts for the full amount as receive from the patient whose test was undertaken, crediting net remittance received in their account and simultaneously crediting the account of the hospital by the amount of commission (discount) paid. Irrespective of the pattern of account maintained by the assessee company, what happens when the hospital pays testing char....
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....title to property in the goods passes on to the buyer on delivery of the goods for a price paid or promised. Once this happens the buyer becomes owner of the property and the seller has no vestige of title left in the property. Having regard to the complexities of modern times the concept of sale has undergone a change and made a departure from the old doctrine of laissez faire. Even if the seller, by an agreement, imposed a number of restrictions on the buyer, such for example as, fixing of price, submission of statement of accounts, area of sale and so on these restrictions would not per se convert a contract of sale into one of agency. A contract of agency differs from a contract of sale in as much as an agent, after taking delivery of the property, does not sell it as his own but sells it as the property of the principal under his instructions and directions. While interpreting the terms of an agreement, the court has to look to the substance rather than the form of the agreement. Use of words like "agent" or "agency", "buyer" and "seller" is not sufficient to lead to the inference that the parties did in fact intend that the said status would be conferred. In....
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....g the warranty period with the customer (purchaser of car) on behalf of the company. However, such services rendered by the dealer in the course of selling cars does not make the activity of selling cars itself an act of agent of the manufacturer when the dealings between the company and the dealer in the matter of sale of cars are on "principal to principal" basis. This is just an illustration to clarify that a service in the course of buying or selling of goods has to be something more than the act of buying or selling of goods. ...." Thus, the "element of agency" is an essential requirement in order to characterize a payment made for services provided as "Commission". We may also refer to the decision rendered by Hon'ble Bombay High Court in the case of Harihar Cotton Processing Factory Vs. CIT (1960)(39 ITR 594), wherein the Hon'ble High Court has observed as under:- "The expression „commission" has no technical meaning but both in legal and commercial acceptation of the term it has definite signification and is understood as an allowance for service or labour in discharging certain duties such as for instance of an agent, factor, broker or any other person wh....
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....y instructions from the patients, then it should be considered that the transactions have been carried on "Principal to Principal" basis, in which case the discount given by the assessee cannot be considered to be commission payments. Thus, in our view, the hospitals/laboratories are doing dual roles. This is particularly in view of the fact that the assessee is also widely advertising its services through the media and also through display of their name before the laboratories/hospitals. Further, if any of the laboratory is dedicated only for the assessee, then the discount paid to such kind of laboratories would fall in the category of "Commission" only, since the patients should be approaching them to get their tests conducted through the assessee. 19. We notice that the neither the assessee nor the tax authorities have brought on record (a) as to how the hospitals/laboratories have approached the assessee, i.e. whether on the specific instruction of the patient or on its own. (b) whether the laboratories/hospitals are dedicated to the assessee only or not, i.e., whether they have such kind of business link with the competitors of the assessee or not. ....