By Sri K v. Aravind, Advocate

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THER 2 DAY OF JANUARY, 2015 PRESENT THR HON' BLE MR. JUSTICK N. KUMAR ANT) THR HON' BLE MR. JUSTICEK B. VEBRAPPA ITA No.143/2009 C/w. ITA Nos.140/2009, 141/2009, 1142/2009 ITA No.143/2009 BEITWERE 1.)THR COMMISSIONBR OF INCOME-TAX 00/1, SHILPASHREE VIDYARANYA COMPLEX. VISHVESHWARANAGAR.MYSORE — 570 OOS.|MYSORE — 570 OOS.| iaTHE INCOME-TAX OFFICER (TDS) 00/1, SHILPASHREE VIDYARANYA COMPLEX VISHVESHWARANAGAR. MYSORE — 570 OOS.| ~. APPELLANTS| (BY SRI K. V. ARAVIND, ADVOCATE) ANT) SRI PRHTBR KBNNEDYGENERAL MANAGER (OPERATIONS) (FORMERLY ADMINISTRATOR FOR BGsAPPOLLO HOSPITAL)APPOLLO BGS HOSPITAL (UNIT OF|M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED,CHENNALT)ADICHUNCHANAGIRI ROADMYSORK. —. RBSPONDBENT (BY SRI A. SHANKAR & SRI M. LAVA, ADVOCATES)| THIS ITA IS FILED UNDER SECTION 260-A OFTHE INCOME TAX ACT, 1961 ARISING OUT OF ORDER)DATED|07.11.2008 PASSEDIN|ITANO.490/BNG/2008, FOR THE ASSESSMENT YEAR 2005-O06, PRAYING TO FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED THEREIN AND TO)ALLOW THR APPEAL AND SHIT ASIDE THE ORDERPASSEDBY|THEITATBANGALOREINITA.No.450/BNG/2008 DATED 07.11.2008 CONFIRMINGTHR ORDBR OF THR APPBLLATR COMMISSIONER|AND CONFIRM THR ORDER PASSED BY THE INCOME|TAX OFFICER (TDS), MYSORE, IN THE INTEREST OFJUSTICE AND EQUITY. ITA No.140/2009: BETWEEN: 1.)THR COMMISSIONBR OF INCOME-TAX 00/1, SHILPASHREE VIDYARANYA COMPLEX VISHVESHWARANAGAR.MYSORE — 570 OOS.|MYSORE — 570 OOS.| iaTHE INCOME-TAX OFFICER (TDS) 00/1, SHILPASHREE VIDYARANYA COMPLEX VISHVESHWARANAGAR.MYSORE — 570 OOS.| _ APPBRLLANTS| (BY SRI. K. V. ARAVIND, ADVOCATE) AND: SRI. PETBR KBNNEDY_GENERAL MANAGER (OPERATIONS)(FORMERLY ADMINISTRATOR FOR BGsAPPOLLO HOSPITAL)APPOLLO BGS HOSPITAL (UNIT OFM/S. APPOLLO HOSPITAL ENTERPRISE LIMITED,CHENNAI)ADICHUNCHANAGIRI ROADMYSORK. ... RESPONDENT (BY SRI. A. SHANKAR & SRI. M. LAVA, ADVOCATES) THIS [TTA IS FILED UNDER SECTION J6O0-A OTHE INCOME TAX ACT, 1961 ARISING OUT OF ORDER|DATED|O7.11.2008PASSEDIN|ITANO.449/BNG/2008, FOR THE ASSESSMENT YEAR 2004-O5, PRAYING TO FORMULATE THE SUBSTANTIAL)QUESTIONS OF LAW STATED THEREIN AND TO)ALLOW THR APPEAL AND SBT ASIDE THR ORDER|PASSEDBY|THEITATBANGALOREINITA.No.449/BNG/2008, DATED 07.11.2008 CONFIRMINGTHR ORDER OF THR APPBELLAITKE COMMISSIONAND CONFIRM THR ORDER PASSED BY THE INCOME|TAX OFFICER (TDS), MYSORE, IN THE INTEREST OFJUSTICE AND EQUITY. ITA No.141/2009: BETWEEN: 1.)THR COMMISSIONBR OF INCOME-TAX99/1, SHILPASHREEVIDYARANYA COMPLEX.VISHVESHWARANAGAR.MYSORE — 570 OOS.|99/1, SHILPASHREEVIDYARANYA COMPLEX.VISHVESHWARANAGAR.MYSORE — 570 OOS.|iaTHE INCOME-TAX OFFICER (TDS)99/1, SHILPASHREEVIDYARANYA COMPLEXVISHVESHWARANAGAR.MYSORE — 570 OOS.|99/1, SHILPASHREEVIDYARANYA COMPLEXVISHVESHWARANAGAR.MYSORE — 570 OOS.| ~. APPELLANTS| (BY SRI. K. V. ARAVIND, ADVOCATE) ANT) SRI. PETBER KENNEDYGENERAL MANAGER (OPERATIONS)(FORMERLY ADMINISTRATOR FOR BGsAPPOLLO HOSPITAL)APPOLLO BGS HOSPITAL (UNIT OF|M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED,CHENNALT)ADICHUNCHANAGIRI ROADMYSORE.—. RBSPONDBENT (BY SRI. A. SHANKAR & SRI M. LAVA, ADVOCATES)| THIS [TTA IS FILED UNDER SECTION J6O0-A OTHE INCOME TAX ACT, 1961 ARISING OUT OF ORDER|DATED|07.11.2008 PASSEDIN|ITANO.682/BANG/2008, FOR THE BLOCK ASSESSMENT. YHAR.2006-07,PRAYINGTORFORMULATETHESUBSTANTIAL QUESTIONS OF LAW STATED THEREIN|AND TO ALLOW THR APPKAL AND SBT ASIDE THE!ORDER PASSED BY THE ITAL BANGALORE IN IIA!No.682/BANG/2008,DATED|O7.11.2008AND,CONFIRM.THEORDEROFTHEAPPBRLLATECOMMISSIONER AND CONFKIRMINGTHR ORDERPASSED BY THE INCOME TAX OFFICER (TDS),MYSORE, IN THE INTEREST OF JUSTICE AND)EQUITY. ITA No.142/2009: BBRITIWE Ll.THRE COMMISSIONER OF INCOME-TAX 90/1, SHILPASHREE VIDYARANYA COMPLEX VISHVBSHWARANAGARMYSORE — 570 OOS.|MYSORE — 570 OOS.| oOTHE INCOME-TAX OFFICER (TDS) 00/1, SHILPASHREE VIDYARANYA COMPLEX. VISHVBSHWARANAGARMYSORE — 570 OOS.|MYSORE — 570 OOS.| _ APPBRLLANTS| THIS [TTA IS FILED UNDER SECTION J6O0-A OTHE INCOME TAX ACT, 1961 ARISING OUT OF ORDER|DATED|07.11.2008 PASSEDIN|ITANO.682/BANG/2008, FOR THE BLOCK ASSESSMENT. YHAR.2006-07,PRAYINGTORFORMULATETHESUBSTANTIAL QUESTIONS OF LAW STATED THEREIN|AND TO ALLOW THR APPKAL AND SBT ASIDE THE!ORDER PASSED BY THE ITAL BANGALORE IN IIA!No.682/BANG/2008,DATED|O7.11.2008AND,CONFIRM.THEORDEROFTHEAPPBRLLATECOMMISSIONER AND CONFKIRMINGTHR ORDERPASSED BY THE INCOME TAX OFFICER (TDS),MYSORE, IN THE INTEREST OF JUSTICE AND)EQUITY. ITA No.142/2009: BBRITIWE Ll.THRE COMMISSIONER OF INCOME-TAX 90/1, SHILPASHREE VIDYARANYA COMPLEX VISHVBSHWARANAGARMYSORE — 570 OOS.|MYSORE — 570 OOS.| oOTHE INCOME-TAX OFFICER (TDS) 00/1, SHILPASHREE VIDYARANYA COMPLEX. VISHVBSHWARANAGARMYSORE — 570 OOS.|MYSORE — 570 OOS.| _ APPBRLLANTS| (BY SRI. K. V. ARAVIND, ADVOCATE) AND: SRI. PETBR KBNNEDY_GENERAL MANAGER (OPERATIONS)(FORMERLY ADMINISTRATOR FOR BGS|APPOLLO HOSPITAL) APPOLLO BGS HOSPITAL (UNIT OF M/S. APPOLLO HOSPITAL ENTERPRISE LIMITED,CHENNAI)ADICHUNCHANAGIRI ROADMYSORK. —. RBSPONDBENT (BY SRI A. SHANKAR & SRI M. LAVA, ADVOCATES) THIS [TTA IS FILED UNDER SECTION J6O0-A OTHE INCOME TAX ACT, 1961 ARISING OUT OF ORDER|DATED|O7.11.2008PASSEDIN|ITANO.448/BNG/2008, FOR THE ASSESSMENT YEAR 2003-04, PRAYING TO FORMULATE THE SUBSTANTIAL)QUESTIONS OF LAW STATED THEREIN AND TO)ALLOW THR APPEAL AND SBT ASIDE THR ORDER|PASSEDBY|THEITATBANGALORE,INITA.No.448/BNG/2008, DATED 07.11.2008 CONFIRMINGTHR ORDBR OF THR APPBLLATR COMMISSIONER|AND CONFIRM THR ORDER PASSED BY THE INCOME|TAX OFFICER (TDS), MYSORE, IN THE INTEREST OFJUSTICE AND EQUITY. THRSEK [TAs COMING ON FOR HRBRARING THDAY, 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 been taken up tor consideration together anddisposed of by this common judgment. 2.S11PeterKennedyWa StheEmployee /AuthorizedRepresentative /Administratorof M/s. Appollo Hospitals Enterprise Ltd., (For short“AHEL”) which was run by M/s. Sri Adichunchanagir1Shikshana|Trust.AspertheOperationalManagement understanding, the hospital was run bythe Trust as a franchisee of Appollo Hospital Group.up to 30.03.2006. The Appollo Group used to appointdoctors and all other staff were provided by the Trust.The selection of doctors and the terms of the paymentwere fixed by the Appollo Group. All the financialmatters were handled by the Trust including paymentof provisional charges to the Doctors/Consultants.The remuneration was paid entirely by the Trust andthe accounts were maintained by the Trust. During the course of TDS verification, it was noticed that theassessee has not deducted tax on certain amount.payableaS|professionalchargesTOtheconsultants/doctors. On the basis of the evidencesfound during the course of survey, it was concludedthat the assessee was not deducting tax at source asper the provisions of the Income Tax Act, 1961.(hereinaiter referred to as ‘Act’). The Assessing Officertherefore ascertained the amount on which tax was.not deducted and raised the demand in respect ofshort deduction of tax at source and also determined.the interest chargeable on account of short deductionof tax. Against the said order assessee filed an appealbDetfore the learned Commissioner ot [Income t(Appeals). The Appellate Authority sought verificationof the assessing authority regarding the relationbetween Appollo Hospital Enterprises Ltd., the Trust and the assessee i.e. Sri Peter Kennedy and theassessing authority was authorized to explain as tohow the assessee was considered responsible fordeducting tax. The assessing authority submittedthat the assessee is the Principal Officer for AppolloHospital Enterprises Ltd., and is managing M/s.Appollo BGS Hospital and he is also the Administratorof the Irust. The assessee has signed TDS returnsand IDS certificates. Tax deduction account number.is allotted to M/s. BGS Appollo Hospital and the.authorized signatory is Sri Peter Kennedy. The saidreturn was made available to the assessee and he has.to clarify his stand. 3.Inspite of the assessee’s submission that.M/s. Appollo Hospital Enterprises Ltd. was renderingonly the consultancy services and in the process ofsuch services, they were required to recruit personnel for running the hospital. Under the agreement, theactivitiesperformedbyM/s.AppolloHospitalEnterprises Ltd., were for the account of and onbehalf of the Trust only. The personnel recruited wereonly for the Trust. The salary/remuneration for thepersonnel recruited were payable and paid by theTrust. The same was the position with reference to.the employees who were deputed to AHEL. Hence, itwas submitted AHEL was not the employer for theperiod prior to 30[<2]March 2JOO6. The assessee has)disbursed the payments. Such payments made byhim is as an employee and the actual payer was theemployer. He has signed TDS returns and TDScertificates 1n the capacity of an employee of theTrust. They then referred to the Sections 200, 201,192(1A) and contended that the assessee was not liable to deduct TDS. At any rate they cannot proceedagainst him in his personal capacity. 4After considering the aforesaid material,the Appellate Authority has held that the demandraised against the assessee personally is illegal.Therefore, allowed the appeal and directed thedeletion of the said demand, reserving liberty to theassessing authority to take action against the correctperson in accordance with law. 5 |Agegrieved by the said order, the revenuepreferred an appeal to the Tribunal. After referring tothe documents produced and also the _ relevanprovisions of the Act, the Tribunal has held that inrespect of tax to be deducted under the head salarythe persons responsible for paying is an employer andin case the employer is a company then company itself including Principal Officers is responsible. Theemployers were not rendering services to the Trust.The Trust is not a company and therefore thePrincipal Officers in the case of Trust cannot be madelable to responsible under Section 2O1(1) and2O1(1)(a) of the Act. Therefore, the Tribunal has heldthat there is no error committed by the AppellateAuthority and accordingly the appeals came to bedismissed. 6.|Aggrieved by the said order the revenue 1s_in these appeals.| TS|The appeals are admitted to consider the tollowing substantial questions of law: “1WhethertheAppellate Authorities were correct in holding that theassessee was not liqhle to deduct tax at'source in respect of 40% professional fee paid to consultants/ doctors working in theirhospital and action should have beeninitiated against M/s. Sri Adichunchanagir1iShikshana Trust? aWhethertheAppellateAuthorities were correct in holding thatproceedings u/S.201(1) and 201(1)(a) of the|Act cannot be initiated against the assessee|who had submitted the TDS returns and inwhose name TDS account number wasallottedandwhoWasISSUINGTDScertificates on behalf of the hospital and theTrust?” 8.|We.haveheardthelearnedcounsel appearing for the parties. QO section 201(1) provides consequence of.failure to deduct or pay. It provides, where anyperson, including principal officer of a company- whois required to deduct any sum in accordance with the paid to consultants/ doctors working in theirhospital and action should have beeninitiated against M/s. Sri Adichunchanagir1iShikshana Trust? aWhethertheAppellateAuthorities were correct in holding thatproceedings u/S.201(1) and 201(1)(a) of the|Act cannot be initiated against the assessee|who had submitted the TDS returns and inwhose name TDS account number wasallottedandwhoWasISSUINGTDScertificates on behalf of the hospital and theTrust?” 8.|We.haveheardthelearnedcounsel appearing for the parties. QO section 201(1) provides consequence of.failure to deduct or pay. It provides, where anyperson, including principal officer of a company- whois required to deduct any sum in accordance with the provisions of the Act or referred to Sub Section (1A) ofsection 192, being an employer, does not deduct, or,does not pay, or after so deducting fails to pay, thewhole or any part of the tax, as required by or underthis Act, he be deemed to be an assessee in default inrespect of such tax. The present Section substitutesthe Finance Act, 2008 w.r.e.f. 01.06.2002. 10. The consequences of failure to deduct or,pay results in the assessee being declared as assesseein default. Therefore, the persons against whomproceedings may be initiated for failure to deduct orpay is the assessee, who may made payment withoutdeducting TDS. In the instant case the assessee wasacting as an employee of the Trust. The paymentmade by him was not in his individual capacity. Itwas on behalf of the Trust. The money paid is out ofthe Trust. The consequences of failure to deduct or pay the TDS tax should be visited on that Trust fordenying the benefit under the Act. The proceedingsinitiated is not a criminal proceeding. Under thesecircumstances the impugned proceedings could nothave been initiated against the Administrator, whowas only acting as an employee of the Irust, as nopayments were made to in his individual capacity andthe payments were made by the Trust. Therefore,both the Appellate Authorities were justified in settingaside the order passed by the Assessing Authority,reserving liberty to the department to proceed againstthe Trust. Accordingly, the appeals are dismissed. | Sbs* SD/- JUDGE SDf-JUDGE