Gujarat HC: In absence of agency element provisions contained in Sec 194H cannot be invoked
Gujarat HC: In absence of the existence of the element of agency, the provisions contained in Section 194H of the Act can not be invoked
Commissioner of Income Tax (TDS) v. Intas Pharmaceuticals Ltd. ; R/TAX APPEAL NOS. 172 TO 177 OF 2021; AUGUST 11, 2021
6 Appeals arose out of common order passed by the Income-tax Appellate Tribunal, Ahmedabad. Filed by the Commissioner of Income-tax (TDS), Ahmedabad under section 260A of the Income-Tax Act, 1961 .
The Assessee is a limited Company engaged in the business of manufacturing and trading of pharmaceuticals. A survey under section 133A of the Act was carried out at the premises of the assessee on 10-10-2013. As per the case of the appellant -Department, during the course of the said survey proceedings various E-mails were found, suggesting that the services provided to the doctors such as taxi services, booking of air-tickets, cost of souvenir and cost of registration for the conference for doctors, etc., and certain facilities provided to the doctors were in lieu of the business provided by them. These expenses were claimed by the assessee under various heads as its own expenses and no TDS was deducted on the same.
Contention of the Appellant: As per the Notification issued by the Indian Medical Counsel dated 10-12-2009, which barred medical practitioners from taking gifts, travel facilities, hospitality, cash and monitory grants from any pharmaceutical industry and observed that the assessee had incurred the expenditure on the doctors for various conferences/workshops/camps etc., for which no TDS was deducted under section 194H of the said Act. That the relationship between the assessee company and the doctors was that of the principal and agent, and therefore, the payments made under different heads for regional conference, scientific conference, sale promotion expenditure, etc., would fall within the definition of “commission”.
- As per the relevant part of the Explanation contained in Section 194H, “commission or brokerage would include any payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered not being “Professional Services”.
- “professional services” are the services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession etc. On the conjoint reading of the provisions contained in Section 194H and the Explanation thereof, there remains no shadow of doubt that any payment received or receivable by a person for rendering medical services is excluded from the purview of Section 194H of the Act.
- the E-mails and other correspondences ensued between the sales executive and the General Manager, seized during the survey operations, suggested that the doctors had acted as the agents of the respondent – assessee, by prescribing the medicines of the respondent assessee over a period of time, and therefore, the expenses incurred by the assessee company on the doctors towards taxi-fare, air-fare, etc., for attending the regional conferences or scientific conferences were required to be treated as the “commission” received or receivable as contemplated under section 194H of the said Act.
- The Explanation to Section 194H of the said Act cannot be interpreted so widely as to include any payment receivable, directly or indirectly for the services in the course of buying or selling of goods. Therefore, to fall within the explanation to Section 194H, the commission payment must have been received by a person who is acting on behalf of the assessee.
The doctors could not be said to have acted as the agent of the assessee. In absence of the existence of the element of agency between the assessee and the doctors, the provisions contained in Section 194H of the Act could not be invoked. The Court does not find any illegality or infirmity in the impugned order passed by the Tribunal.