BISWAS MEDICAL CENTRE,KOLKATA vs. D.C.I.T CIR - 55,KOLKATA, KOLKATA

This appeal by assessee is arising out of order of CIT(A)-XXXVI, Kolkata vide Appeal No. 266/CIT(A)-XXXV1/Kol/Cir-55/10-11 dated 17.04.2013. Assessment was framed by DCIT, Circle-55, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2008-09 vide his order dated 27.12.2010.

The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in disallowing the salary paid to Dr. S. K. Karmakar amounting to Rs.1.80 lacs without deduction of TDS u/s. 194J of the Act thereby invoking the provisions of section 40(a)(ia) of the Act treating the receipt as professional charges.

We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that the assessee is a specialized eye hospital running under the name of Silverline Eye Hospital. During the relevant FY 2007-08 the assessee paid a sum of rs.1.80 lacs to Dr. S. K. Karmakar and claimed the same as deduction in P&L Account as salary. The AO during the course of assessment proceedings noticed this payment and according to him, Dr. S. K. Karmakar is giving professional services to the assessee and accordingly, this payment is a professional charge. According to AO, the assessee has paid a sum of Rs.1.80 lacs on this account and not deducted any TDS in violation of provision of section 194J of the Act. Therefore, the AO made disallowance of this payment by invoking the provisions of section 40(a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO. Aggrieved, the assessee is now in second appeal before us. 4. Before us, ld. Counsel for the assessee produced form No. 16 issued by assessee to Dr. S. K. Karmakar and also query of the AO was answered vide letter dated 15.11.2010 that the Biswas Medical Centre, AY 2008-09 payment of Rs.1.80 lac to Dr. S. K. Karmakar is in the nature of salary and for this assessee has deducted professional tax and paid to the Treasury. The relevant reply in assessee’s paper book page 1 reads as under: “(1) As to your Query why TDS not made on professional services etc., we would like to state that in fact the same represent amount paid to part time staff not to be treated as full time and not being eligible otherwise for ESI & PF benefits. It is to be mentioned that on the part time salary so paid, professional tax has been duly deducted as follows: Period From to Amount Deposited on 03-2007 04-2007 1.825 5/5/2007 05-2007 03-2008 7.375 8/4/2008 You would now be convinced that profession tax is deducted on salary only and not on professional fees.” Ld. Counsel for the assessee also drew our attention to page 4 of assessee’s paper book wherein complete details in respect to deduction of professional tax are available. Ld. Counsel for the assessee also stated that Dr. S. K. Karmakar has also treated this payment as salary and included the same in his return of income as a salary income. Ld. Counsel for the assessee in view of the above, stated that once this is a salary paid to a doctor who was a part time employee, there is no requirement of deduction of TDS u/s. 194J of the Act and hence, no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act.

After hearing the rival submissions, going through facts and circumstances of the case and the argument of Ld. Counsel, we are convinced in view of the evidence produced before us viz. (i) Form No. 16 applicable to salaried employees u/s. 192 of the Act, (ii) appointment letter of Dr. S. K. Karmakar, (iii) details of professional tax deducted and (iv) payment made i.e. this is a payment on account of salary and not professional charges. Accordingly, the disallowance made by AO and confirmed by CIT(A) is hereby deleted. This issue of assessee’s appeal is allowed.