TaxTMI 
TaxTMI 
2026 (5) TMI 723
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..../MUM/2025(AY 2018-19) REVISED GROUNDS OF APPEAL 1. In the facts and in circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) [the "Ld. CIT(A)" for short] erred in partly confirming the action of the Learned Assistant Commissioner of Income Tax-TDS [the "Ld. AO-TDS" for short], in levying interest under section 201(1)/201(1A) of the Income Tax Act, 1961 [the "Act" for short]. 1.2 While so confirming, the order of the Ld. AO, the Ld. CIT(A) failed to appreciate that: i. The Appellant, in fact had no liability to deduct TDS u/s 194J of the Act based on the very findings/observation of the Ld. AO-TDS; ii. The Appellant had rightly deducted TDS under the correct section being S. 194C of the Act under a bona fide view; iii. The Ld. CIT(A) himself has held that the Assessee is not an Assessee in default in terms of section 201 of the Act and therefore the interest u/s 201 of the Act could not have been levied; iv. In any case, there is no loss to the Revenue and therefore there is no question of levying interest u/s 201 of the Act since the parties to whom the payments have been made have admittedly ....
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....r section under which Tax Deduction of Source(TDS) was required to be deducted by assessee while making payments to them. The assessee made TDS u/s 194C of the Act treating the work as Contract while the AO considered that same as professional services liable to be deducted u/s 194J of the Act and passed consequent orders u/s 201(1) and 201(1A) of the Act which is the point of discord in the instant appeal. Following contracts were entered into on behalf of the State: a. BVG India Ltd(BVG) to provide emergency ambulance services; b. HLL Lifecare Ltd.(HLL) to provide services in relation to collection, storage, transportation and reporting of blood samples for various blood tests conducted on the public admitted in Government run/ aided Hospitals; c. Faber Sindoori Management Services P. Ltd.(FSMS)to provide for Annual maintenance and upkeep of the bio-medical equipment's used in the said Hospitals or PHC, RHS, SDH & Civil Hospital in each district of Maharashtra State. 3.1 According to the order passed u/s 201(1) and 201(1A) of the Act, on verification of the bills/invoices/agreements submitted by the assessee, it was noticed by the AO that such servic....
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....ce and work towards improving delivery of emergency response of global standards over a period of time. Service provider shall equip all the 233 Advanced Life Support & 704 Basis Life Support Ambulances (ALS & BLS) with Global Positioning System receivers and with two active mobile telephone connections. - The service provider was required to ensure that in every ambulance operated under this scheme, at least one Pilot and one Emergency Medical Technician (EMT) shall be present at any given point of time to provide patient- stabilization, first aid and other pre hospital care. - All Advanced Life Support (ALS) ambulance should have Emergency Medical Technician at any given time. The basic minimum qualification of the Emergency Medical Technician (EMT) to be appointed by the service provider shall be Registered Medical Practitioner (RMP) from recognized university and shall be registered particular with the Medical Councils in Maharashtra for both ALS and BLS life Support ambulances. - The service provider was required to recruit, train and position the required man power Including Pilots (drivers) and Emergency Medical Technicians (EMT) who will be presen....
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....ophisticated medical equipment, medicines and Emergency Medical Technicians which should be a Registered Medical Practitioner (RMP). - Therefore, these ambulances could not be classified as a patient transportation vehicle with first aid medicines but classified as a 'mini hospital on wheel' with doctor, medicines and necessary medical equipment. They were designed to manage first few critical hours of the patients. - Further, for invoking provisions of section 194J of the Act of the Act, there was no stipulation that the professional services have to be necessarily rendered to the person who made payment to hospital. Therefore TPAs (Third Party Administrator) who were making payment on behalf of insurance companies to hospitals for settlement of medical/insurance claims etc. under various schemes including Cashless schemes were liable to deduct tax at source under section 194J on all such payments to hospitals etc. Similarly, the payments to the service provider fell under the purview of section 194J and not 194C of the Act. - As far as assessee's contention that the deductees must have filed return and paid taxes thereon which can be verified by the Dep....
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....of short deduction of tax at source. According to the ld.CIT(A) section 194J of the Act mandates deduction of tax at source at a higher rate on payments made for "fees for professional services or technical services" and as per the Explanation to Section 194J, "professional services" include services rendered by persons in the medical, legal, engineering, architectural, accountancy professions, or other professions notified by the Board. The term "technical services" encompasses services requiring expertise in a technical field. On the other hand, section 194C of the Act applies to payments made under a contract for carrying out any work, including supply of labour. The definition of "work" under Explanation (iv) includes carriage of goods (excluding rail transport) and excludes professional or technical services as defined in Section 194J of the Act. 4.1 Before him, the assessee made a detailed submission which has been reproduced in the appellate order.It was argued that the services provided by HLL were largely logistical in nature including the collection, transportation, storage, and analysis of blood samples and should, therefore, fall under Section 194C of the Act. Howeve....
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....the Government of Maharashtra (DHS) and was not the actual service recipient was also not sustainable. The agreement was between the assessee and HLL/FSMSPL, and it was directly responsible for making the payments. The fact that the ultimate beneficiary of the services was the public and the government might be reimbursing the Appellant did not absolve the assessee of its obligation to deduct TDS under the appropriate section of the Act. Accordingly, he concluded that the assessee was liable to deduct tax at source u/s 194J of the Act on payment made/credited to these concerns. 4.4 In respect of interest charged u/s 201(1A) of the Act, the assessee contended that the Form No. 26A could only be obtained after the assessment proceedings were completed. The purpose of obtaining Form No. 26A was to demonstrate that the revenue had not suffered any loss due to the alleged short deduction of TDS, as the deductees had already paid tax on the income. The ld.CIT(A) noted that this was a relevant piece of evidence that ought to be considered for a just determination of the appeal, particularly with respect to the chargeability of default under Section 201(1) of the Act. Therefore, in the ....
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....al to the main purpose of transportation of patients. The payment terms further supported this position since the payments were made on the basis of a fixed rate per ambulance per month calculated with reference to 2,000 km. per month per ambulance and for any extra kilometres run the compensation is at Rs. 6 per km, and not on the basis of (1) per patient transported, (ii) per treatment rendered, or (iii) per service performed. 5.2 It was contended that he completely erred in assuming that the EMT's were the same as doctors. There was a significant and marked difference between the emergency medical technician and a full-fledged qualified doctor. The only reason for treating the payment made by the assessee to BVG India as professional Services was because of this misconception of the AO.Further, the salary of the technicians was also paid directly by BVG India Ltd. and not by the assessee. Therefore, what the assessee received under the contract was merely a carriage service, i.e., transportation of patients (passengers). Whether BVG deputed a technician or not, did not alter the dominant nature of the contract, which remained that of carriage of patients akin to the presence ....
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....O erred in not considering that the primary purpose of the arrangement/contracts was to provide a routine maintenance and upkeep of the bio-medical equipment's which did not involve technical professional services. Technical services rendered, if any, were only when there was a breakdown of any bio-medical equipment's which would then require technical expertise. However, this aspect of the matter was not considered by both the lower authorities which was akin to the maintenance contract with a car service garage, which undertakes maintenance and upkeep of vehicles, as well as office maintenance contract where personnel are engaged to keep office equipment like tables, printers, air conditioners, etc. in working condition. Such maintenance contracts are not considered as professional services liable for TDS u/s 194J of the Act though these would also have to be treated as rendering professional services and liable for TDS u/s 194J based on the logic adopted by the lower authorities. At the most, such repairs could be treated as provision of technical services. The AO erred in concluding that the maintenance of hospital equipment amounts to rendition of professional services merely ....
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....ore, the assessee had correctly deducted tax at source u/s 194C of the Act. 5.10 As far as the contract with HLL is concerned, it is submitted that, HLL is a company and not a doctor/medical professional so as to render professional services. As per Clause 4(e)(iii), pg. 86 of the Contract with HLL, it is explicitly mentioned that HLL shall provide reports from qualified pathologists. It is nowhere mentioned in the contract that HLL shall report or certify the report of pathological examination. In fact, it is the doctor/qualified pathologist who has personally analysed the pathological samples and is thereafter certifying the reports and not the company HLL. Therefore, the agreement between HLL and the said doctor/qualified pathologist certifying the report can, if at all, be treated in the nature of professional services. The Appellant is not privy to this contract. However, the contract between the assessee and the HLL is in respect of multiple tasks which includes collection of pathological samples being urine. stools, etc., storage of pathological samples, transportation of pathological samples and ultimately delivery of pathological samples. It is only one limb of the enti....
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....iable for TDS u/s 194J or 194C has now been decided in favour of the assessee's by the Hon'ble Jurisdictional High Court in the case of CIT v/s Asian Heart Institute and Research Centre (2019) 262 Тахman 395 (Bombay)affirming the order of the Hon'ble ITAT in DCIT v/s Asian Heart Institute-ITA 7051 to 7054/M/12 wherein it is held that such contract for maintenance of bio-medical equipment is liable for TDS u/s 194C. Similar view in an almost identical issue of TDS on maintenance of medical equipment was taken by the Hon'ble Jurisdictional High Court in the case of CIT (TDS) v/s Saifee Hospital-(2019) 262 Taxman 343 (Bombay). Also refer, Orbit Resorts WACIT-(2026) 183 Taxmann.com 728 (Del. Trib)holding that payments for annual maintenance contracts (AMC) of computers. DG set, elevators and telecommunication services involving routine and periodic maintenance, such payments constituted "work" under section 194C and not fees for technical services under section 194J. The contract is for the maintenance of the equipment. However, it appears that the Ld. CIT(A) has based his conclusion on the assumption that the contract is only for repair of the equipment which has pro....
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....to the details of the contract with FSMS. The ld. CIT(A) was not empowered to render a finding adverse to the Assessee, without confronting the same to the AO. As such, the matter would require fresh examination and must therefore be remanded back. 5.14 In the alternative and without prejudice to the above since the AO or the CIT(A) have not considered all the contracts in their entirety and in fact the contract with the other two parties, HLL and Faber Sindoori has not been considered at all, it is prayed that all the three contracts be reverified, scrutinised and analysed by the Assessing Officer and thereafter, an opinion be formed as to whether the TDS is rightly deducted u/s 194C or 194J of the Act. 6. Per contra, the ld. DR has relied on the decision of the lower authorities. 7. We have given thoughtful consideration to the entire matrix of the case, heard rival submissions, the provisions of the law in this regard. We have also gone through the impugned agreements and the terms and conditions laid therein. In so far as the agreement with BVG pertaining to ambulance service is concerned, an inference which is palpable from the terms are that the assessee was engaged ....
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....paid, shall be liable to deduct income-tax under this section :] [ Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such. sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.] (2) [ ***] (3) [ ***] Explanation. -- For the purposes of this section, -- (a) "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified ' by the Board for the purposes of section 44AA or of this section; (b) "fees for technical services" shall have the same meaning as in Explanation 2 to claus e (vii) of sub-section (I) of section 9; [(ba) "royalty " shall have the same meaning as in Explanation 2 to clause (vi) of s ub-sect ion (I) of section 9; (c) where any sum referred to in sub-section (I) is credited t o any account, whether called "suspense ac....
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....s found therein are conclusive only in the year of assessment; they are not binding or conclusive in subsequent years. The Department is entitled to judge the accounts of an assessee each year on their merits. The fact that they have accepted a particular form of accounts as sufficient in one year does not debar them from holding later that particular items or particular claims made by the assessee in later years have not been established. There is no question of estoppel in such a case. 8. Accordingly, the ground w.r.t. services rendered by BVG in ITA No.4665/Mum/2025 is dismissed. 9. In so far as the other two contracts with FSMS and HLL are concerned which is common issue in both the above stated appeals, we find that the contentions of the ld.AR with reference to specific clauses of the agreement have not been properly appreciated by the lower authorities. Moreover, the ld.CIT(A) did not consider the arguments of the assessee based on coordinate bench decisions of ITAT, Mumbai, that the issue of maintenance of equipment's etc. have been decided in favour of several such cases by the coordinate benches of ITAT, Mumbai. Before us, the ld.AR has placed reliance on various ot....