Itxa/1629/2017 Of Commissioner Of Income Tax-Tds-2 v. Super Religare Laboratories Ltd

Digitallysigned byGAURIGAURI AMITGAEKWADAMITDate:GAEKWAD2021.10.2517:36:27+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO.1628 OF 2017WITH INCOME TAX APPEAL NO.1629 OF 2017 Commissioner of Income Tax – TDS – 2 ….Appellant V/s. Super Religare Laboratories Ltd. ….Respondent ---- Mr. Suresh Kumar for appellant.Mr. Ravi Sawana i/b. Mr. Sriram Sridharan for respondent. ---- CORAM : K.R. SHRIRAM & AMIT B. BORKAR, JJ. DATED : 21[st] OCTOBER 2021 P.C. : 1 Appellant is impugning an order dated 30[th] September 2016 passed by the Income Tax Appellate Tribunal (ITAT) and the substantial questions of law proposed are as under : “a) Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT was justified in holding that therelationship between the assessee and collection centres is inthe nature of Principal to Principal and not that of Principalto Agent and that the assessee company was not liable todeduct TDS u/s. 194H of the I.T. Act? (b) Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT was justified in not appreciatingthat all the collection centres are working as agents of theassessee company on the basis of commission only and hencethe discounts given to collection centres were in the natureof “commission” within the meaning of Sec. 194H of theAct?” 2Respondent is engaged in providing laboratory and testing services to customers through its own and through third party collection centres. Respondent allowed discounts to the collection centres other than its own centres. For example, collection centres would charge a patientRs.500/- for a particular blood test and hand over the sample drawn torespondent and respondent would charge the collection centre Rs.400/-.The difference of Rs.100/-, according to appellant, is commission to paid tocollection centres and respondent had an obligation under Section 194H ofthe Income Tax Act, 1961 (the IT Act) to deduct TDS. According toappellant, as respondent failed to deduct such TDS, respondent was adefaulter and Assessing Officer passed an order under Section 201 (1) and201 (1A) of the IT Act. 3Respondent challenged that order before Commissioner ofIncome Tax (Appeals) [CIT (A)] who allowed the appeal. Against that order,appellant preferred an appeal before Income Tax Appellate Tribunal (ITAT)and ITAT confirmed the order of CIT (A). The ITAT has relied uponrespondent’s own case for Assessment Year 2006-2007 wherein it has heldthat discount allowed by respondent to the collection centres is notcommission and not attracted by the provisions of Section 194H for thereason that there is no principal agent relationship between respondent andthe collection centre and the relationship between respondent and collectioncentres is only principal to principal relationship and therefore, provisions ofSection 194H have no application. 4Section 194H of the Act reads as under : 194H. - Commission or brokerage Any person, not being an individual or a Hindu undividedfamily, who is responsible for paying, on or after the 1[st] day of June, 2001, to a resident, any income by way ofcommission (not being insurance commission referred to insection 194D) or brokerage, shall, at the time of credit ofsuch income to the account of the payee or at the time ofpayment of such income in cash or by the issue of a chequeor draft or by any other mode, whichever is earlier, deductincome tax thereon at the rate of[five] per cent : Provided that no deduction shall be made under this sectionin a case where the amount of such income or, as the casemay be, the aggregate of the amounts of such incomecredited or paid or likely to be credited or paid during thefinancial year to the account of, or to, the payee, does notexceed [fifteen thousand rupees] : ………………. (emphasis supplied) of June, 2001, to a resident, any income by way ofcommission (not being insurance commission referred to insection 194D) or brokerage, shall, at the time of credit ofsuch income to the account of the payee or at the time ofpayment of such income in cash or by the issue of a chequeor draft or by any other mode, whichever is earlier, deductincome tax thereon at the rate of[five] per cent : Provided that no deduction shall be made under this sectionin a case where the amount of such income or, as the casemay be, the aggregate of the amounts of such incomecredited or paid or likely to be credited or paid during thefinancial year to the account of, or to, the payee, does notexceed [fifteen thousand rupees] : ………………. (emphasis supplied) 5Under Section 194H, the obligations is on any person who isresponsible for paying any income by way of commission or brokerage todeduct tax at source at the time of credit of such income to the account ofthe payee or at the time of payment of such income in cash or by the issueof a cheque or draft or by any other mode, whichever is earlier. In this case,admittedly, respondent has not been paying any money to the collectioncentres. Respondent was only receiving payment from the collection centres.As noted earlier, the collection centres collect money from the patient andpays a reduced amount to respondent and keeps the difference for itself asits margin. As the section is applicable only to a person who is responsiblefor paying to deduct tax at the time of credit to the account of the payee orat the time of payment and as respondent does not perform any act ofpaying, there is no obligation on the company to deduct tax at source.We fail to understand appellant’s arguments as to how respondent was todeduct TDS when it was not making any payment. Mr. Suresh Kumar was unable to explain how respondent should have deducted TDS and paid withthe treasury when respondent was not making any payment. Even theAssessing Officer, who the appellant wishes to support, does not sayanything on this. The Assessing Officer’s order is contrary to sense. 6In our view, ITAT (though has applied slightly differentpreposition while allowing the appeal) has not committed any perversity orapplied incorrect principles to the given facts and when the facts andcircumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises anysubstantial question of law. 7Both appeals are devoid of merit and are dismissed with noorder as to costs. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)