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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRAMOD KUMAR, VP & SHRI ABY T. VARKEY, JM
O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the action of the Ld. CIT(A)-60, Mumbai dated 28.09.2017 for A.Y.2008-09, AY. 2009-10 & AY. 2011-12.
At the outset, the Ld. AR of the assessee drew our attention to the Miscellaneous Application (MA) filed by the assessee against the order of the Tribunal in 7203/Mum/2017 & 7205/Mum/2017 pertaining to AYs. 2008-09, 2009-10 & 2011-12 respectively. A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital 3. It is noted that, these appeals were disposed of by this Tribunal vide order dated 31.05.2019 wherein the assessee’s appeal was dismissed. However, by preferring the MA Nos. 63 to 65/Mum/2020, the assessee hospital brought to the notice of the Tribunal that Ground nos. 1, 1.1 and 1.2 of the appeal pertaining to all the assessment years have not been adjudicated. Finding the same to be correct, the Tribunal recalled its common order dated 31.05.2019 for the “Limited Purpose” of adjudicating ground nos. 1, 1.1 and 1.2 of the appeal by holding as under: - “Having perused the material on record, and the order dated 31.05.2019 passed by the Tribunal, we find merit in the contention of the assessee that Ground No. 1, 1.1 and 1.2 of the appeal have not been adjudicated which constitutes a mistake apparent on record. Accordingly, the appeal (ITA No. 7202/Mum/2017) is restored for the limited purpose of adjudication of Ground no. 1, 1.1 and 1.2 of the appeal.”
We note that the aforesaid order is applicable for all the three (3) captioned assessment years as per the order dated 01.06.2022 of this Tribunal. And so we have to adjudicate ground no. 1, 1.1 and 1.2 which is common for all the captioned AYs. With the consent of both the parties, appeal of AY. 2008-09 is taken as lead case and the relevant grounds reads as under: - “1. Appellant submits that it had collected MRI charges from patients of hospital & the said amount was paid back to Bombay MRI Pvt. Ltd. as per the Memorandum of Understanding dated 1-04-2006. Hence question of deduction of tax at source does not arise. Therefore, the A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital levy of interest of Rs.2,18,892/- u/s 201(1A) is unwarranted, unlawful & unjustified. Hence, the same be deleted.
1.1 Without prejudice to above, appellant submits the TDS is to be deducted by person who is responsible for paying to a resident any sum by way of fees for professional or technical services u/s 194J. Appellant submits these services were not rendered to the hospital but to the patients hence there was no liability to deduct tax at source by the appellant. Hence levy of interest of Rs.2,18,892/- under section 201(1A) is contrary to provisions of law and same be deleted.
1.2 Without prejudice to above, Appellant submits that there was no liability to deduct TDS in respect of MRI charges collected in the bill of patients and paid back to Bombay MRI Pvt. Ltd. The MRI charges were only collected by the appellant so as to ensure effective supervision and control and same was remitted Bombay MRI Pvt. Ltd. Hence, the levy of interest of Rs.2,18,892/- on Rs.6,08,035/- is contrary to law & therefore the same should be deleted.”
In the above grounds, the assessee (Hospital) has contended that, as per the Memorandum of Understanding (MOU) dated 01.04.2006 with M/s. Bombay MRI Pvt. Ltd (‘MRI company’), the assessee was only supervising and collecting the MRI charges from the patients at the Hospital for the purpose of effectively ensuring supervision and control of the prices & timely collections on behalf of the MRI company. It has been claimed that these MRI charges collected from the patients were reimbursed/paid to the MRI company after reducing the fixed fee which was agreed upon to be paid to the assessee for rendering such collection & supervision services. A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital According to the assessee, it was not liable to deduct tax at source on these MRI charges paid back to the MRI company. Hence, it has been urged that the question of levy of interest u/s 201(1A) of the Act of Rs.2,18,892/- on Rs.6,08,035/- does not arise.
At the time of hearing, the Ld. AR of the assessee drew our attention to the relevant terms agreed upon in the MOU dated 01-04- 2006 between the Hospital and the MRI company which is found placed at page no. 12 to 15 of the Paper Book. He particularly drew our attention to the relevant Para Nos. 5, 12 and 15 of the MOU which reads as under: - “(5) The company shall take prior approval of the hospital for charges levied by the Company to all its patients. The company shall charge only such amount to its patients as approved by the Hospital. The Company shall not collect any amount independently from the patients admitted to the hospital. In order to have greater control, the hospital shall act as coordinating agency whereby MRI charges levied by the company to patients will get add to the patients bill generated by the Hospital and as and when the amount is received from patient the same shall be paid back by the Hospital to the Company on a monthly basis.
(12) In consideration of Hospital allowing the company to carry on MRI Centre as stated above the company shall pay to the Hospital Rs.25 Lakhs per annum exclusive of taxes if any, as compensation which shall by payable on monthly basis.
(15) This agreement shall remain in force upto 30th June 2014 business end.” A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital 7. According to the Ld. AR, the assessee had permitted the MRI company to operate its MRI facility within its hospital premises and act as a coordinating agency to supervise and collect the charges from the patients as stipulated by the MRI company. He submitted that, during treatment when the hospital advices the patients undergoing treatment with it to get certain MRI tests carried out, they get it done through the Bombay MRI Pvt. Ltd. which is functioning from its premises and the assessee hospital only supervises and collects the prices/fees on behalf of Bombay MRI Pvt. Ltd. This is done as a matter of overall administrative convenience and to ensure unity and coordinated supervision at the Hospital where the patients are required to pay the aggregate fees for their treatments including the MRI testings at one place i.e. to the Hospital. In turn, the fees/bills of the MRI company which is through the Hospital, is reimbursed as such to Bombay MRI Pvt. Ltd. In lieu of providing the hospital premises and the collection & supervision services, the assessee is entitled to receive fee of Rs.25 lacs per annum. The Ld. AR claimed that only this fee of Rs.25 lacs had been reduced from the aggregate monthly payouts made by the Hospital to the MRI company during the year. He thus submitted that, it was a clear case where the assessee was acting as an agent on behalf of the MRI company and collecting fees from its patients who had availed the MRI facilities/diagnostics, which was later on paid back and handed-over to the M/s. Bombay MRI Pvt. Ltd on monthly basis. According to him, since the assessee did not charge any mark-up or profit over and above the charges/fees stipulated by the MRI company to be charged from the patients, it was a case of pure reimbursement and therefore there was no necessity for deduction of A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital tax at source. Since there was no requirement of deduction of tax at source, the question of levy of interest for non-deduction of taxes on the same does not arise. In support of the foregoing, the Ld. AR referred to the Answer to Q No. 7 given by the CBDT in their Circular No. 715 of 1985. He pointed out that the assessee had out of oversight withheld and paid taxes at the rate of 2% u/s 194C of the Act on the payments made to the MRI company. Whereas the AO had held that the taxes were deductible at the rate of 10% u/s 194J of the Act. According to him, on the given facts and circumstances, as set out in foregoing, the assessee was under no obligation to deduct at tax source on such payments. He alternatively contended that, in case it is held that the TDS provisions were appliable on these payments, the appropriate Section was 194C of the Act and not Section 194J as held by the AO. For this, he relied upon the decision of this Tribunal in the cases of DDRC SRL Diagnostic (P) Ltd Vs ITO (65 taxmann.com 146).
Per-Contra, the Ld. DR first pointed out that, none of these arguments were agitated by the assessee before the Ld. CIT(A) and therefore it ought not be taken into cognizance. He further contended that, the assessee itself had deducted and paid tax at the rate of 2% u/s 194C of the Act prior to making payments to the MRI company which showed that there was privity of contract between the assessee and the MRI company and therefore the payments were liable to TDS. Relying on the order of the AO, he contended that the MRI services which were been rendered by the payee in the Hospital involved professional skill, technical knowledge etc. and therefore according to the Ld. CIT, A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital DR, the AO has rightly applied the provisions of Section 194J in the facts of the present case. According to Ld DR therefore, even though the assessee got relief from the AO against the action u/s 201(1) of the Act because the recipient (Bombay MRI Centre Pvt. Ltd.) in its ROI had offered the payments for tax, that fact would not absolve the assessee’s liability u/s 201(1A) of the Act to pay interest on non- deducting of tax u/s 194J of the Act and so he urged that we should not interfere with the impugned order on this issue.
We have heard both the parties on this issue and also perused the material placed before us. The main contention raised by the assessee before us is that, it is not required to withhold tax on the payments made to the MRI company since it is only acting as a collection agent on its behalf. The assessee states that, it is receiving fees from the patients who have availed MRI services from the MRI company and is handing it over back to the MRI company and therefore the question of deducting tax on the same does not arise. It is however noted from the order of the Ld. CIT(A) that, the assessee neither urged before him that the payments made to M/s Bombay MRI Pvt. Ltd. were not liable for deduction of tax at source nor was there any alternate contention raised before him that the payments were otherwise rightly subjected to Section 194C of the Act and that the provisions of Section 194J did not apply. This issue has thus not been examined by the Ld. CIT(A). Before us also, the assessee has only placed on record the MOU between the Hospital and the MRI company. No further details with regard to the collections made, corresponding payments to the MRI company, ledgers etc. has been A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital provided which would substantiate their contention that these payments were collected/recovered on behalf of the MRI company and that the company did not retain any mark-up or profit therein (except their fixed fee of Rs.25 lacs). The assessee has also not placed copies of sample invoices and/or the copies of MRI reports issued to the patients which would substantiate its contention that the privity of contract was between the patients and the MRI company and not the patients and the assessee. For instance, whether the test reports are given by the MRI Centre directly to the patients referred to by the assessee hospital or are they issued to the assessee hospital by MRI Centre, who in turn issue the test results in their own letterheads. It is thus noted that none of these aspects have been looked into by the lower authorities. Neither the assessee nor the lower authorities have been able to bring on record the correct facts as to the relationship between the assessee and the MRI company viz., whether it is a principal-agent or principal -principal relationship. Hence, the contentions raised by the assessee before us remains unsubstantiated and unverified. Upon query from the Bench, the Ld. AR had claimed that the MRI company had deducted taxes on the fees of Rs.25 lacs paid to the Hospital for the collection & supervisory services rendered by it, but no evidence in support thereof was placed before us. According to us, all these factors needs to be analyzed to decide about the nature of relationship and the relevant facts needs to be ascertained as to whether the payments were in the nature of reimbursements or not. A.Ys. 2008-09, 2009-10 & 2011-12 The Bhatia General Hospital 10. It is thus noted that the questions raised before us are mixed question of facts and law. Since none of the above aspects and the relevant facts have been properly looked into and examined by the lower authorities, in the fitness of the matters, we consider it fit to set aside the issue back to the file of the AO to examine this issue afresh. Accordingly, we set aside the order of Ld. CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the same in the light of discussions made supra as well as based on judicial precedents. The assessee is also directed to furnish all the relevant facts and explanation called for by AO and the assessee is at liberty to file relevant evidences/ documents/ written submission/ case laws relevant to this issue.