Payee Who Has Considered Amounts Received By Payer In Its Return & Paid Taxes On Same, Can't Be Treated As In Default U/s 201(1): New Delhi ITAT

The Bench of the ITAT comprising of G.S. Pannu (Vice President) and Challa Nagendra Prasad (Judicial Member) observed while referring to decision of Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT 293 ITR 226 that, “if the payee has taken into consideration the amounts received by payer in their return of income and paid taxes on such amounts the assessee cannot be treated as an assessee in default u/s 201(1) of the Act. The CIT(A) appears to have not considered all these submissions of the assessee and the evidences placed before him.” (Para 7)

As per the brief facts of the case, the assessee made certain payments towards ambulance rent, maintenance of X-ray machine and CVC machine. The assessee deducted TDS on X-ray machine and CVC machine @ 1% u/s 194C. However, the AO was of the view that the assessee should have deducted TDS u/s 194J at 10% on payments made for maintenance of X-Ray and CVC machines as fees paid for professional and technical services. The AO passed order u/s 201(1) and 201(1A) treating the payments made towards maintenance of x ray machine and CVC machine as charges for professional services and deducted TDS @10% u/s 194J.

The CIT(A) also sustained the order passed by the AO while referring the decision of Mumbai ITAT in the case of ITO(OSD)(TOS)-13 Vs Dr Balabhai Nanavati Hospital and reiterated that, “the expenditure on account of AMC of medical equipment etc. is not in the nature of fee for professional and technical services as construed u/s 194J of the Act and hence not liable to deduct TDS u/s 194J of the Act. The assesses has deducted TDS u/s 194C of the Act in regard to payments on AMC of medical equipment and machines etc.”

The Bench noted that the contention of the assessee that the payments made for maintenance of X-ray machine and CVC machine attracts TDS u/s 194C and not u/s 194J as professional charges was rejected and was treated as fee for professional and technical services as per section 194J attracting TDS @10% as against 1% made by the assessee u/s 194C.

The Bench observed that the assessee furnished return of income filed by the payee to show that the income has been accounted for in their returns and paid the tax dues on income declared by them and assessee is in the process of furnishing of certificate to this effect from an Accountant in Form No. 26A, however, the CIT(A) has not considered the submissions of the assessee.

The Bench further observed that the AO has failed to consider the amount already deposited by the assessee even before passing the order u/s 201(1) and 201(1A).

Therefore, on finding the failure at CIT(A)'s end, ITAT allowed the assessee's appeal for statistical purpose.

Counsel for Respondent/Department: Anuj Garg

Case Title: Satya Kiran Healthcare Private Ltd. verses ITO

Case Number: I.T.A Nos.9143/Del/2019

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