INCOME TAX ACT, 1961

Section 194J

Tax deduction at source - Under section 194J - Fees for professional services - Payments made by TPAs to hospitals--Assessee TPA pleading no medical profession carried on by assessee

Assessee-company engaged in the business of providing Third Party Administration services on medical/health insurance policies issued by insurance companies made payments to hospitals. AO treated the payments as fees for professional services and, therefore, disallowed deduction for want of TDS made payment to hospitals under cashless scheme in fulfilment of contractual obligations between insurance companies and the policyholders on one hand and the insurance companies and assessee on the other hand and not in consideration of any professional services rendered by the hospital because hospital did not carry on profession of medicine as it was not a professional, and did not wholly earn professional income.Held: Though hospital did not carry on profession of medicine as it was not a professional and did not wholly earn professional income, also, profession could be carried on by an individual or groups of individuals because profession requires expertise and 'professional skills', However, incidental or ancillary services, which are connected with carrying on Medical Profession are included in the term Professional Services for the purpose of section 194J. The words 'in the course of carrying on' are used with the intention to include incidental, ancillary, adjunct or allied services connected with or relatable to medical services. Thus, the sweep and scope of Explanation (a) to section 194J is not restricted only to payments made to medical or other professionals but services rendered in the course of carrying on stipulated profession. It is pertinent to note that payments are made to the hospitals and not personally by the payer to individual doctors or professionals. The medical services are rendered in the course of carrying on medical profession. Undoubtedly, nature of payment in the hands of the recipient, is determinative of deductibility of tax at source, however, payments in the hands of hospital could not be treated to be business income as payments were received in the course of carrying on of medical profession. It is well settled rule of statutory interpretation that meaning and purport of one section cannot be understood with reference to other sections of the Act. Language employed in section 194J is plain and unambiguous, which does not admit of any two interpretations. Therefore, with reference to sections 35AD(8)(C), 44AA and 80-IB, it could not be inferred that hospitals carry on business and not profession. The submission of assessee-TPA that when it made payments to hospitals, it was not liable to deduct tax at source as hospitals carried on a business activity under section 194J, was, therefore, not worthy of acceptance.

Followed:Vipul Medcorp TPA (P) Ltd. v. CBDT (2011) 245 ITR 325 (Del.) : 2012 TaxPub(DT) 524 (Del-HC), Dedicated Health Care Services TPA (India) (P) Ltd. & Ors. v. Asstt. CIT & Ors. (2010) 191 Taxman 1 (Bom-HC) : (2010) 324 ITR 345 (Bom.) : 2010 TaxPub(DT) 1905 (Bom-HC). Relied by:Nimet Resources Inc. v. Essar Steels Ltd., 2009 17 SCC 313 : 2011 2 SCC (CIV) 385), Indian Immigration Trust Board of Natal v. Govindaswamy, AIR 1920 PC 114, Vanguard Fire and General Insurance Co. Ltd. v. Fraser & Ross AIR 1960 SC 971, 1960 (3) SCR 857, Dilip N. Shroff v. CIT 2007 6 SCC 329 : 2007 TaxPub(DT) 1247 (SC), Indrakumar Patodia v. Reliance Industries Ltd. 2012 (13) SCC 1 : 2013 TaxPub(CL) 0458 (India-SC) and See Ansal Properties & Industries Ltd. v. State of Haryana (2009) 3 SCC 553.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2004-05 to 2009-10

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