No TDS applicable on Surrogacy payments: ITAT [Read Order]

Surrogacy payments - TDS - ITAT - taxscan

The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench ruled that no TDS applicable on Surrogacy payments.

The assessee company, Kiran Infertility Central Private Limited runs infertility clinic. It had admittedly claimed an amount of Rs.71,23,300/- to Mr. Sai as surrogacy charges without deducting TDS thereupon to Shri Sesha Sai.

The Assessing Officer’s assessment order suggests that he sought to treat the same as payments made under section 194J of the Act in the nature of fee for technical services as well as contractual payments  under section 194C of the Act, requiring mandatory TDS deduction going by chapter-XVII of the Act.

The assessee vehemently contended during the course of hearing that both the lower authorities have erred in law and on facts in holding the impugned surrogacy payments as contractual as well as fee for technical services requiring TDS deduction u/s.194C and 194J of the Act; respectively. He submitted that the assessee or infertility clinic is neither a party to the corresponding agreement executed between the genetic parents and surrogate mothers nor has it availed any technical services from either of them so as to deduct TDS in issue.

The issue raised was whether payments made to surrogate mothers attract chapter-XVII of the Act requiring TDS deduction.

The coram of Laxmi Prasad Sahu and S.S.Godara did not find any technical service element involved in all the surrogacy process involving the recipient or the surrogate mothers attracting the clinching statutory expression of managerial, professional and technical services under section 194J read with section 9(i)(vii) Explanation. Thus reversed both the lower authorities’ action invoking Section 194J in facts of the instant case.

The Tribunal while relying on various case laws  M/s.GE India Technology Centre P. Ltd. Vs. CIT; CIT Vs. Faizan Shoes Pvt. Ltd; and DCIT Vs. Welspun Corporation Ltd. held that  Surrogacy payments are not taxable in India so as to be held liable for TDS deduction.

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