No TDS payable as Assessee does not make payment to TSPs: ITAT grants relief to Thyrocare [Read Order]

In a relief to Thyrocare Technologies, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that no TDS payable as assessee does not make payment to Thyrocare Services Providers (TSPs).

The assessee is having Diagnostic Laboratory and is providing pathological testing services. The assessee has made arrangement with Thyrocare Services Providers (TSPs) to collect samples from the patients. The TPSs are local collection centres comprising of laboratory service providers, insurance service providers, home service providers, hospitals, clinics and small entrepreneurs. The assessee enters into an agreement with TSPs. As per the terms and conditions of the agreement, the TSPs collects the samples from the patients and sends the same to the assesssee for testing. The assessee raises periodical invoices on the TSPs against which the TSPs make payment to the assessee after deducting Tax at Source (TDS) under section 194J of the Act. The ld. Counsel pointed that as per the terms of agreement TSPs are not under obligation to send all the collected samples for testing to the assessee. The TSPs may get the samples tested through any other specialized testing laboratory. It is only when the patients insist that the tests are required to be done from the assessee, the TSPs send the sample to the assessee.

A survey action was carried out at the premises of the assessee on 14.10.2011. Pursuant to survey operation, proceedings under section 201 of the Act were initiated against the assessee. During assessment proceedings, the Assessing Officer (AO) held the assessee to be in default for non-deduction of tax under section 194H of the Act in respect of payments made to the TSPs. The ld. Counsel pointed that the AO has erred in recording the fact that the assessee is making payments to the TSPs. The correct fact is that it is the TSPs who were required to make payment to the assessee and it is not the assessee who is making payments to the TSPs. The TSPs are making payment to the assessee after deducting TDS under section 194J of the Act for rendering professional services. To fortify his submissions, the ld. Counsel referred to sample copies of TDS Certificates received from some TSPs and Form 26AS for AY 2009-10. The CIT(A) after correctly appreciating the facts has held that no default is committed by the assessee under section 194H of the Act and deleted the demand raised by the Assessing Officer.

The findings of CIT(A) is that  there is no payer-payee relationship between the assessee and the TSPs. The assessee does not make payment to TSPs, therefore, TDS provisions are not attracted. There is no principal-agent relationship between the assessee and TSPs, therefore, section 194 of the Act does not apply. Different price provided to TSPs does not amount to commission or brokerage. The TSPs i.e. the payers deducts the tax under section 194J of the Act on the payments made to the assessee.

The coram of G.S.Pannu and Vikas Awasthi has held that it is unambiguously clear that the case of Revenue was build up on wrong appreciation of facts. The CIT(A) after having examined and appreciating the correct facts in para-5.5 of the impugned order has rightly observed that the TSPs do not receive any payment from the appellant, rather the TSPs make payment to the appellant as per invoices raised by the appellant for the tests done by it. The ld. DR has failed to controvert the above observation of the CIT(A). Since, the substratum for invoking the provisions of section 201 of the Act has collapsed, the appeal of the Revenue is liable to fail. Thus, in view of the facts of the case, we find no merit in the appeal of the Revenue, hence, the same is dismissed being devoid of any merit.

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