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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF JANUARY, 2015 PRESENT THE HON' BLE MR. JUSTICE N. KUMAR AND THE HON' BLE MR. JUSTICE B. VEERAPPA ITA No.143/2009 C/w. ITA Nos.140/2009, 141/2009, 142/2009 ITA No.143/2009
BETWEEN:
THE COMMISSIONER OF INCOME-TAX
55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
THE INCOME-TAX OFFICER (TDS) 55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
... APPELLANTS (BY SRI K. V. ARAVIND, ADVOCATE)
AND:
SRI PETER KENNEDY GENERAL MANAGER (OPERATIONS)
2 (FORMERLY ADMINISTRATOR FOR BGS APPOLLO HOSPITAL) APPOLLO BGS HOSPITAL (UNIT OF M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED, CHENNAI) ADICHUNCHANAGIRI ROAD MYSORE.
... RESPONDENT (BY SRI A. SHANKAR & SRI M. LAVA, ADVOCATES)
THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 07.11.2008 PASSED IN ITA NO. 450/BNG/2008, FOR THE ASSESSMENT YEAR 2005- 06, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA No.450/BNG/2008 DATED 07.11.2008 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER (TDS), MYSORE, IN THE INTEREST OF JUSTICE AND EQUITY.
ITA No.140/2009:
BETWEEN:
THE COMMISSIONER OF INCOME-TAX
55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
THE INCOME-TAX OFFICER (TDS) 55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
... APPELLANTS (BY SRI. K. V. ARAVIND, ADVOCATE)
AND:
SRI. PETER KENNEDY GENERAL MANAGER (OPERATIONS) (FORMERLY ADMINISTRATOR FOR BGS APPOLLO HOSPITAL) APPOLLO BGS HOSPITAL (UNIT OF M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED, CHENNAI) ADICHUNCHANAGIRI ROAD MYSORE.
... RESPONDENT
(BY SRI. A. SHANKAR & SRI. M. LAVA, ADVOCATES)
THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 07.11.2008 PASSED IN ITA NO. 449/BNG/2008, FOR THE ASSESSMENT YEAR 2004- 05, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA No.449/BNG/2008, DATED 07.11.2008 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER (TDS), MYSORE, IN THE INTEREST OF JUSTICE AND EQUITY.
4 ITA No.141/2009:
BETWEEN:
THE COMMISSIONER OF INCOME-TAX
55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
THE INCOME-TAX OFFICER (TDS) 55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
... APPELLANTS (BY SRI. K. V. ARAVIND, ADVOCATE)
AND:
SRI. PETER KENNEDY GENERAL MANAGER (OPERATIONS) (FORMERLY ADMINISTRATOR FOR BGS APPOLLO HOSPITAL) APPOLLO BGS HOSPITAL (UNIT OF M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED, CHENNAI) ADICHUNCHANAGIRI ROAD MYSORE.
... RESPONDENT
(BY SRI. A. SHANKAR & SRI M. LAVA, ADVOCATES)
THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 07.11.2008 PASSED IN ITA NO. 682/BANG/2008, FOR THE BLOCK ASSESSMENT
5 YEAR 2006-07, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA No.682/BANG/2008, DATED 07.11.2008
AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER (TDS), MYSORE, IN THE INTEREST OF JUSTICE AND EQUITY.
ITA No.142/2009:
BETWEEN:
THE COMMISSIONER OF INCOME-TAX
55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
THE INCOME-TAX OFFICER (TDS) 55/1, SHILPASHREE
VIDYARANYA COMPLEX
VISHVESHWARANAGAR
MYSORE – 570 008.
... APPELLANTS (BY SRI. K. V. ARAVIND, ADVOCATE)
AND:
SRI. PETER KENNEDY GENERAL MANAGER (OPERATIONS) (FORMERLY ADMINISTRATOR FOR BGS APPOLLO HOSPITAL) APPOLLO BGS HOSPITAL (UNIT OF
6 M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED, CHENNAI) ADICHUNCHANAGIRI ROAD MYSORE.
... RESPONDENT
(BY SRI A. SHANKAR & SRI M. LAVA, ADVOCATES)
THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 07.11.2008 PASSED IN ITA NO. 448/BNG/2008, FOR THE ASSESSMENT YEAR 2003- 04, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA No.448/BNG/2008, DATED 07.11.2008 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER (TDS), MYSORE, IN THE INTEREST OF JUSTICE AND EQUITY.
THESE ITAs COMING ON FOR HEARING THIS DAY, N. KUMAR, J., DELIVERED THE FOLLOWING:
JUDGMENT
The revenue has preferred these four appeals against the common order passed by the Appellate Tribunal, which relates to four assessment years 2003-2004, 2004-2005, 2005-2006 and 2006-2007 in respect of the same assessee and therefore they have
7 been taken up for consideration together and disposed of by this common judgment.
Sri Peter Kennedy was the Employee/Authorized Representative/Administrator of M/s. Appollo Hospitals Enterprise Ltd., (For short “AHEL”) which was run by M/s. Sri Adichunchanagiri Shikshana Trust.
As per the Operational Management understanding, the hospital was run by the Trust as a franchisee of Appollo Hospital Group up to 30.03.2006. The Appollo Group used to appoint doctors and all other staff were provided by the Trust. The selection of doctors and the terms of the payment were fixed by the Appollo Group. All the financial matters were handled by the Trust including payment of provisional charges to the Doctors/Consultants. The remuneration was paid entirely by the Trust and the accounts were maintained by the Trust. During
8 the course of TDS verification, it was noticed that the assessee has not deducted tax on certain amount payable as professional charges to the consultants/doctors. On the basis of the evidences found during the course of survey, it was concluded that the assessee was not deducting tax at source as per the provisions of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). The Assessing Officer therefore ascertained the amount on which tax was not deducted and raised the demand in respect of short deduction of tax at source and also determined the interest chargeable on account of short deduction of tax. Against the said order assessee filed an appeal before the learned Commissioner of Income tax (Appeals). The Appellate Authority sought verification of the assessing authority regarding the relation between Appollo Hospital Enterprises Ltd., the Trust
9 and the assessee i.e. Sri Peter Kennedy and the assessing authority was authorized to explain as to how the assessee was considered responsible for deducting tax. The assessing authority submitted that the assessee is the Principal Officer for Appollo Hospital Enterprises Ltd., and is managing M/s. Appollo BGS Hospital and he is also the Administrator of the Trust. The assessee has signed TDS returns and TDS certificates. Tax deduction account number is allotted to M/s. BGS Appollo Hospital and the authorized signatory is Sri Peter Kennedy. The said return was made available to the assessee and he has to clarify his stand.
Inspite of the assessee’s submission that M/s. Appollo Hospital Enterprises Ltd. was rendering only the consultancy services and in the process of such services, they were required to recruit personnel
10 for running the hospital. Under the agreement, the activities performed by M/s. Appollo Hospital Enterprises Ltd., were for the account of and on behalf of the Trust only. The personnel recruited were only for the Trust. The salary/remuneration for the personnel recruited were payable and paid by the Trust. The same was the position with reference to the employees who were deputed to AHEL. Hence, it was submitted AHEL was not the employer for the period prior to 30th March 2006. The assessee has disbursed the payments. Such payments made by him is as an employee and the actual payer was the employer. He has signed TDS returns and TDS certificates in the capacity of an employee of the Trust. They then referred to the Sections 200, 201, 192(1A) and contended that the assessee was not
11 liable to deduct TDS. At any rate they cannot proceed against him in his personal capacity.
After considering the aforesaid material, the Appellate Authority has held that the demand raised against the assessee personally is illegal. Therefore, allowed the appeal and directed the deletion of the said demand, reserving liberty to the assessing authority to take action against the correct person in accordance with law.
Aggrieved by the said order, the revenue preferred an appeal to the Tribunal. After referring to the documents produced and also the relevant provisions of the Act, the Tribunal has held that in respect of tax to be deducted under the head salary the persons responsible for paying is an employer and in case the employer is a company then company
12 itself including Principal Officers is responsible. The employers were not rendering services to the Trust. The Trust is not a company and therefore the Principal Officers in the case of Trust cannot be made liable to responsible under Section 201(1) and 201(1)(a) of the Act. Therefore, the Tribunal has held that there is no error committed by the Appellate Authority and accordingly the appeals came to be dismissed.
Aggrieved by the said order the revenue is in these appeals.
The appeals are admitted to consider the following substantial questions of law: “1. Whether the Appellate Authorities were correct in holding that the assessee was not liable to deduct tax at source in respect of 40% professional fee
13 paid to consultants/doctors working in their hospital and action should have been initiated against M/s. Sri Adichunchanagiri Shikshana Trust?
Whether the Appellate Authorities were correct in holding that proceedings u/S.201(1) and 201(1)(a) of the Act cannot be initiated against the assessee who had submitted the TDS returns and in whose name TDS account number was allotted and who was issuing TDS certificates on behalf of the hospital and the Trust?”
We have heard the learned counsel appearing for the parties. 9. Section 201(1) provides consequence of failure to deduct or pay. It provides, where any person, including principal officer of a company- who is required to deduct any sum in accordance with the
14 provisions of the Act or referred to Sub Section (1A) of Section 192, being an employer, does not deduct, or, does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, he be deemed to be an assessee in default in respect of such tax. The present Section substitutes the Finance Act, 2008 w.r.e.f. 01.06.2002.
The consequences of failure to deduct or pay results in the assessee being declared as assessee in default. Therefore, the persons against whom proceedings may be initiated for failure to deduct or pay is the assessee, who may made payment without deducting TDS. In the instant case the assessee was acting as an employee of the Trust. The payment made by him was not in his individual capacity. It was on behalf of the Trust. The money paid is out of the Trust. The consequences of failure to deduct or
15 pay the TDS tax should be visited on that Trust for denying the benefit under the Act. The proceedings initiated is not a criminal proceeding. Under these circumstances the impugned proceedings could not have been initiated against the Administrator, who was only acting as an employee of the Trust, as no payments were made to in his individual capacity and the payments were made by the Trust. Therefore, both the Appellate Authorities were justified in setting aside the order passed by the Assessing Authority, reserving liberty to the department to proceed against the Trust.
Accordingly, the appeals are dismissed.
SD/- JUDGE
SD/- JUDGE Sbs*