Wp(C)/38541/2022 Of The Regional Director, Employees State Insurance Corporation v. The Income Tax Officer (Tds)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. WEDNESDAY, THE 30 DAY OF NOVEMBER 2022 / 9TH AGRAHAYANA, 1944 WP(C) NO. 38541 OF 2022 PETITIONER: 1THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION REGISTERED OFFICE(KERALA) PANCHADEEP BHAVAN, NORTH SWARAJ ROUND, THRISSUR, PIN - 680020 REPRESENTED BY PRIYA J, AGED 47 YEARS SOCIAL SECURITY OFFICER (LEGAL) EMPLOYEE STATE INSURANCE CORPORATION, SUB REGIONAL OFFICE ERNAKULAM BY ADVS.V.P.NARAYANANALAN PRIYADARSHI DEV RESPONDENTS: 1THE INCOME TAX OFFICER (TDS)WARD NTDS, AAYAKAR BHAVAN SAKTHAN THAMPURAM NAGAR TRICHUR, PIN - 6800012THE COMMISSIONER OF INCOME TAX (APPEALS)3RD FLOOR, AAYAKAR BHAVAN, SAKTHAN NAGAR THRISSUR, PIN - 6800013THE COMMISSIONER OF INCOME TAX (TDS)4TH FLOOR, CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI, PIN - 682018 ADV. CHRISTOPHER ABRAHAM, STANDING COUNSEL THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 30.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT Dated this the 30[th] day of November, 2022 The petitioner is the Employees’ State Insurance Corporation, Thrissur. For assessment years 2011-12,2012-13 and 2013-14, there was a dispute betweenthe petitioner and the Income Tax Departmentregarding the provision under which Tax had to beDeducted at Source for payments made by the ESICorporation to various hospitals for treatment ofeligible members of the ESI Scheme. 2. While it was the contention of the petitioner that Tax had to be deducted at the rate of 2% underSection 194C of the Income Tax Act, 1961, it is thecase of the respondent Department that the Tax hasto be deducted at the rate of 10% under Section 194Jof the Act. At the instance of the petitioner ESICorporation, the matter reached the Income TaxAppellate Tribunal and the Tribunal by Ext.P7 order issued certain directions which are extracted below: 9.4 We have duly perused the findings of theTribunal cited supra wherein it has beenobserved as follows: "22. As or the quantum of demand raised by theassessing officer under section 201 of the Act,we find some force in the contention of theassessee that it is only the element of fee forprofessional services comprise in each of thepayment made by assessee trust to the hospitalswhich falls within the scope of s.194J of the Act.As canvassed by the learned counsel for theassessee, elements of payment towards bedcharges, medicines, follow up services, out-patient services, transportation charges,implants, expenditure incurred for conductingcamps at village levels, do not strictly fall withinthe scope of fee for professional services' whichalone can be considered as falling within thescope of the provisions of section 194J of theAct. In this view of the matter, we set aside theorder of the CIT(A) on this aspect, and direct theassessing officer to bifurcate the payments madeby the assessee trust to the hospitals intovarious elements as noted above and confine thedemand raised in terms of section 201(1) of theAct, only to the payments which assume the nature of fee for professional services, as notedabove." 9.5 In conformity with the above findings ofthe co-ordinate bench of the Tribunal, we directthe assessee is directed to file the list ofpayments made by it to the hospitals dulybifurcated into various elements as noted aboveand furnish the same before the AssessingOffice. The Assessing Officer shall examine thedetails so filed and compute the demand u/s.201(1) and 201(1A) on the fees for 'professionalservices'. Further, we also make it clear that ifthe payments are made to the hospitals whichare below the prescribed limit of applicability ofprovisions of section 194J of the Act, the saidpayments shall also be excluded for making theassessee liable for tax u/s. 201(1) and 201(1A)of the Act. With these directions, we dispose ofthe appeals of the assessee for the assessmentyears 2011-12 to 2013-14. 3. The 1[st] respondent has given effect to theorder of the Tribunal through Exts.P8, P9 and P10orders. The petitioner filed a revision petition beforethe 3[rd] respondent under Section 264 of the Act, whoby Ext.P11 order has concluded that the revision petition is not maintainable. 4. After giving effect to the order of the Tribunalfor the assessment year 2011-12, the amountpayable by the petitioner (under Section 201) wasRs.39,853/-, for the assessment year 2012-13 it wasRs.1,865/-, and for the assessment year 2013-14 thedemand under Section 201 was ‘Nil’. However, afteradding interest under Section 201(1A) and underSection 220(2), the demand for the assessment year2011-12 has been shown as Rs.41,44,814/-, whilethe demand for the assessment years 2012-13 and2013-14 have been indicated to be Rs.1,83,642/- andRs.11,362/- respectively. 5. The learned counsel for the petitioner submits that the petitioner has filed Ext.P12 rectificationpetition before the 3[rd] respondent along with a copyto the 1[st] respondent who passed Exts.P8, P9 and P10orders. 6. The learned counsel appearing for the WPC No.38541 of 2022 respondent Department states that Ext.P12 can beconsidered by the 1[st] respondent and appropriateorders can be passed taking into consideration thesubmissions made by the petitioner. It is pointed outthat though Ext.P12 is seen addressed only to the 3[rd]respondent, the matter can be considered by the 1[st]respondent as it is the statement of the learnedcounsel for the petitioner that Ext.P12 has been filedbefore the 1[st] respondent as well. 7. Having heard the learned counsel for thepetitioner and the learned counsel appearing for therespondent Department, I am of the view that thereis some merit in the contention taken by the learnedcounsel for the petitioner that the interest demandedfor assessment years in question under Section201(1A) and 220(2) appears to be excessiveconsidering the fact that the demand for theassessment years in question appears to be minimalas noticed above. For example, for assessment year WPC No.38541 of 2022 2011-12, the demand was only Rs.39,853/-, while thedemand including interest has been shown to beRs.41,44,814/-. 8. I am therefore of the view that this matterneeds to be carefully considered by the 1[st] respondentwho shall consider Ext.P12 and pass orders thereontaking into consideration the contentions raised bythe petitioner as also the observations in thisjudgment. Till such time as orders are passed onExt.P12, any proceedings for recovery of amountspayable in terms of Exts.P8, P9 and P10 orders shallbe kept in abeyance. The writ petition is disposed of as above. SKP/30-11 Sd/- GOPINATH P. JUDGE APPENDIX OF WP(C) 38541/2022 PETITIONER’S EXHIBITS:EXHIBIT P1EXHIBIT P1 TRUE COPY OF ASSESSMENT ORDER DATED 26.02.2013 FOR AY 2011-12EXHIBIT P2EXHIBIT P2 TRUE COPY OF ASSESSMENT ORDER DATED 26.02.2013 FOR AY 2012-13 EXHIBIT P3TRUE COPY OF ASSESSMENT ORDER DATED 26.02.2013 FOR AY 2013-14 EXHIBIT P4TRUE COPY OF THE APPELLATE ORDER DATED 11.09.2017 FOR AY 2011-12EXHIBIT P5TRUE COPY OF APPELLATE ORDER DATED 27.10.2017 FOR AY 2012-13EXHIBIT P6TRUE COPY OF APPELLATE ORDER DATED 27.10.2017 FOR AY 2013-14EXHIBIT P7TRUE COPY OF THE ORDER OF THE ITAT DATED 17.05.2019 EXHIBIT P8TRUE COPY OF CONSEQUENTIAL ASSESSMENT ORDER DATED 24.03.2021 FOR AY 2011-12EXHIBIT P9TRUE COPY OF CONSEQUENTIAL ORDER DATED 24.03.2021 FOR AY 2012-13 EXHIBIT P10TRUE COPY OF CONSEQUENTIAL ASSESSMENT ORDER DATED 24.03.2021 FOR AY 2013-14EXHIBIT P11TRUE COPY OF THE COMMON REVISION ORDER FOR AYS 2011-12, 2012-13 AND 2013-14 DATED 22.02.2022EXHIBIT P12TRUE COPY OF RECTIFICATION APPLICATION DATED 14.11.2022 FILED BEFORE 3RD RESPONDENT WITH A COPY TO 1ST RESPONDENT RESPONDENTS' EXHIBITS:NIL TRUE COPYP.A.TO JUDGE