TaxTMI 
TaxTMI 
2018 (10) TMI 604
X X X X Extracts X X X X
X X X X Extracts X X X X
....consolidated order. 2. We will first take up the appeal of the assessee for the assessment year 2009-10, wherein the assessee has raised following grounds: 1. The Ld/- CIT (A) has erred in law and facts of the case, in confirming the levy of interest amounting to Rs. 1,24,61,884/- u/s 201(1A) on the tax calculated on all the payments made by the assessee company to the hospital without deducting TDS u/s 194J for which the assessee was exempted having furnished the auditor's certificates from the deductee hospital. The interest was charged on the estimated basis on the monthly payment for the period starting from 7th day of the subsequent month till filing of the return by the deductee which is based upon the conjectures and presumption and is bad in law. 2. The Ld/- CIT(A) has erred in law and facts of the case in sustaining the addition of tax of Rs. 15,54,696/- and Interest thereon amounting to Rs. 4,77,122/- charged u/s 201(1)/(1A) of the Income Tax Act, 1961 on the amount of Rs. 1,50,94,139/- for which the auditors certificates could not be provided, ignoring the submission of the assessee company, which is highly arbitrary, unjustified, against the principles of natu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paid for the assessment year concerned, then it would be sufficient compliance. However, it will alter the liability to charge interest u/s 201(1A) of the Income Tax Act, up till the payment of tax by the deductee of the assessee. After inviting assessee's submission on various issues in this regard and after submission of various certificates by the assessee from the hospitals, AO held that liability of TDS as 'assessee in default' u/s 201(1) read with section 201(1A) should be calculated at Rs. 1,88,90,792/-, for which he has given a separate working in annexure to the assessment order. For the sake of ready reference, the amount of payment made by the assessee to the hospital and number of certificates obtained by the assessee and the interest charged u/s 201(1A) by the AO can be summarized in the following manner: Particulars Amount of Payment (Rs.) No. of certificates Interest charged under section 201(1A) of the Act by the Ld. AO (Rs.) Total payments made to hospitals by the assessee during the year under reference 108,28,80,515 1,614 Less: Payments for which auditor's certificates were produced before the Ld. AO. (103,96,29,9....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f payment till the date of order under section 201(1) of the Act. 4,77,122/- 6. Before us, Ld. Counsel submitted that, earlier there was no clarification as to when the TPA was required to deduct tax at source of payment made by the hospital and due to lack of this clarification only, CBDT had issued a circular on 24.11.2011, but the clarification has given in the subsequent year much after the expiry of the financial year, by which the TPAs have charged with obligation to deduct TDS over payment made to the various hospitals during the year under reference. Further, the assessee had deducted and deposited the TDS from the date of circular in question, but for the payments pertaining to prior to the date of the circular which assessee could not have forecasted any liability to deduct tax. Despite that assessee started collecting certificates from the auditors of deductee hospitals, since there was huge payment, the assessee could not submit 90 certificates for the payment aggregating Rs. 1,50,94,139/- out of total payment of Rs. 108.28 crores. The assessee had also furnished the list of hospitals, names and addresses with PAN and amount of payment made to the hospitals, the detai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tes which could not be produced. 9. Ld. Counsel before us has also raised additional ground No. 3 challenging that the levy of tax u/s 194J on composite bills received from the hospitals is not correct. On the additional ground, Ld. Counsel submitted that the provision of section 194J has been made applicable to the payments made by the assessee company to the hospitals which should only be restricted to the extent of professional fees contained in the hospitals bill and not for consumables and bed charges, etc. The assessee has made payments aggregating to Rs. 108.29 crores and the break-up of each and every payment to different hospitals has been given in paper book volume I. Based on these details assessee has given a break up of average percentage of different components in the payments made to the hospital which is as under :- Break Up Grand Total Investigation Medicines Others Professional Charges Room Tariff Consumables Percentage 16% 20% 6% 26% 17% 15% 100% 10. Thus, he submitted that tax u/s 194J ought to have been restricted only to 26% which is the professional charges and the other components do not fall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quence of failure to deduct tax or after deducting tax failure to pay on all such transactions would make the deductor (TPAs) deemed to be an assessee in default in respect of such tax and also liable for charging of interest under Section 201 (IA) and penalty under Section 271 C. 4. Considering the facts and circumstances of the class of cases of TP As and insurance companies, the Board has decided that no proceedings U/S 201 may be initiated after the expiry of six years from the end of financial year in which such payment have been made without deducting tax at source etc by the TPAs. The Board is also of the view that tax demand arising out of Section 201 (1) in situations arising above, may not be enforced if the deductor(TP A) satisfies the officer in charge of TDS that the relevant taxes have been paid by the deductee assessee (hospitals etc.). A certificate from the auditor of the deductee assessee stating that the tax and interest due from deductee assessee has been paid for the assessment year concerned would be sufficient compliance for the above purpose. However, this will not alter the liability to charge interest under Section 201 (1A) of the Income Tax Act till pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest u/s 201(1A) was to be charged where assessee is treated to be 'assessee in default' u/s 201(1). Here in this case, the assessee had submitted the certificates of the hospitals and hence assessee cannot be treated to be in default u/s 201(1) and consequently interest u/s 201(1A) cannot be charged for the year under reference. The exception which has been provided by the proviso to section 201(1A) has been made effective by the Finance Act 2012 and not in the year under reference. The said exception cannot be enforced against the assessee by way of circular and that too with retrospective effect. The circular only clarified that, where the deductee has filed its return and assessee furnishes a certificate to corroborate the same, the interest if any has to be in accordance with the provisions of section 201(1A) of the Act. Such a circular cannot impose any liability of interest, and had it been so, then the amendment in the sections 201(1) and 201 (1A) through Finance Act, 2012 would have been made applicable retrospectively. 16. We find considerable strength in the aforesaid arguments of the Ld. Counsel, because in so far as the interest charged u/s 201(1A) of Rs. 1,24,61,884....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct from an accountant, then in that case the interest has been provided to be payable from the date on which tax was deductable to the date of furnishing of return of income by such person. This proviso imposing such kind of levy of interest brought in the statute w.e.f. 1.7.2012 cannot be held to be applicable retrospectively for the year under consideration. It is trite law that CBDT circular per se can neither supersede the provision of the Act nor can it enhance the scope of section. This proposition has been reiterated by the Hon'ble Jurisdictional High Court in the case of CIT vs. Karan Bihar Thapar, 335 ITR 541, wherein the Hon'ble Court held that an amendment in the section which was to be made applicable from a prospective date, should not be given a retrospective effect by way of CBDT Circular. Otherwise an amendment which determines the tax burden is substantive in nature and cannot be given a retrospective effect. Apart from that, Hon'ble Supreme Court on various occasions has held that circular cannot override or detract from the provisions of the Act but it can only seek to mitigate the rigour of a particular provision for the benefit of the assessee in certain specif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of medical investigation fee. The payments towards bed charges, medicines used on the patients, transportation charges, implants, consumables, etc. will not fall into professional medical services. This view has been upheld by the coordinate Benches of Tribunal in the case of Arogya Sri Health Care vs. ITO (supra); Medi Assist vs. DCIT (supra), TTK Healthcare TPA Pvt. Ltd. Vs DCIT (supra). Before us Ld. Counsel had filed break up of each payment made by the assessee to different hospitals which have been given in the paper book Volume I, to point out that more than 50% of the payments relate to reimbursement on account of medicines, room tariff, consumables, etc. Accordingly, we direct the AO that, he should examine these payments and only payment relating to 'professional medical services' like, professional charges and medical investigation fees should alone be held to be liable for TDS u/s 194J and not other reimbursements. Only with regard to these payments which are held to be professional charges, the liability u/s 201(1) should be charged and consequently the interest u/s 201(1A) will also be levied, because qua these payments the assessee would be treated as 'assessee in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6/- Interest under section 201(1A) of the Act calculated on the payments of Rs. 93,46,50,857/- made prior to the month of issue of circular. 30,86,659/- Interest under section 201(1A) of the Act calculated on the payment of Rs. 33,84,97,959/- on which TDS has been deducted 7,31,533/- 22. Here also the assessee company has made total payment amounting to Rs. 181,05,67,595/- to various hospitals for which assessee could not produce the auditor certificate on the payments amounting to Rs. 15,08,98,748/- in compliance with the circular which was introduced on 24.11.2009 i.e., during the year under reference. It has been stated by the Ld. Counsel that assessee company has deducted and paid TDS on the payments made during the year under reference from the month of issue of circular, i.e., November, 2010 amounting to Rs. 14,11,36,260/-. Consequently, the tax liability u/s 201(1) was worked out as Rs. 9,76,249/- and further more the interest of Rs. 6,48,865/- u/s 201(1A) was charged on which auditor's certificate has not been produced. In so far as the issue raised in ground No. 1 is concerned, that the Ld. CIT (A) was not justified in sustaining the addition of Rs. 9,76,249/- u/s 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... their Return of Income." 25. In view of the finding given above, the appeal of the revenue is dismissed, as we have already held that prior to the amendment by the Finance Act 2012, no interest shall be charged u/s 201(1A) where the assessee is not treated as 'assessee in default'. Thus revenue's appeal is dismissed. 26. Now coming to the levy of penalty u/s 271C the AO has levied the penalty u/s 271C for non deduction of tax u/s 194J on the payments of Rs. 1,50,94,139/- and thereby levying the penalty of Rs. 15,54,696/- in the A.Y. 2009-10. The contention of the Ld. AO is that the assessee could not produce the bills on the payments where auditor's certificate has not been provided by the assessee and CBDT circular No. 8/2009 makes it very clear that it was the responsibility of the deductor to deduct and deposit the correct amount otherwise assessee shall be liable to penalty u/s 271C. Ld. CIT (A) has confirmed the penalty rejecting the assessee's contention that there was a bonafide belief that the payments through the hospital should not deducted u/s 194J as CBDT circular has given only after expiry of eight months from the end of the relevant financial year. Before us Ld. ....