Secret reference fees paid by diagnostic centre to Doctors is liable to TDS

These appeals at the instance of the assessee are directed against the consolidated order of the CIT(A) dated 17/06/2016, in relation to the assessment years 2005-06,2006-07 and 2007-08. The order of the CIT(A) arise out of the orders passed u/s. 201 and 201(1A) of the I.T. Act.

2. Since common issue is raised in these appeals, they were heard together and disposed of by this consolidated order.

3. Grounds raised are identical in all the assessment years, hence grounds pertaining to assessment year 2005-06 are reproduced below:

1. The order of the learned Commissioner of Income Tax(Appeals) in T.A. No. 108/RI/CIT/CLT/2008-09 dated 17-06-2016, partly allowing the appeal filed by the appellant for the assessment year 2005-06 is infirm in law and contrary to facts and circumstances ofthe case.

2. The lower authorities ought to have found that the business promotion expenses are not liable for tax deduction at source and as such, there is no justification to create the demand u/s. 201(1) r.w.s. 194H and 201(1A) ofthe I.T. Act, 1961.

3. The first appellate authority ought to have found that the expenses incurred by the appellant are on principal to principal basis between the payer and the payee and as such, the provisions of Sec. 194H is not application to the appellant.

4. For the above and other grounds that may be urged at the time of hearing, the appellant humbly prays that the Hon’ble Income Tax Appellate Tribunal, Cochin Bench, Cochin-16, may be pleased to cancel the order and allow appropriate reliefand render justice to the appellant.

4. The brief facts of the case are as follows:

The assessee is a company engaged in the business of running a diagnostic centre with CT and MRI scan facilities. For the assessment years 2005-06 to 2007-08, the assessee had debited in its P&L account a sum of Rs.34,29,556, Rs.19,33,632/- and Rs.39,21,576/- respectively as business promotion expenses. During the course of proceedings u/s. 143(3) of the Act, it was noticed by the Assessing Officer that the assessee had not maintained proper vouchers in respect of these expenses and treated the entire business promotion expenses During the course of proceedings u/s. 143(3) of the Act, it was noticed by the Assessing Officer that the assessee had not maintained proper vouchers in respect of these expenses and treated the entire business promotion expenses as commission payments to the doctors who referred the cases to the assessee for scanning and other medical examinations. The Assessing Officer was of the opinion that the assessee ought to have deducted tax at source u/s. 194H of the Act, since these payments made to the doctors were in the nature of commission and since no deduction of tax at source was made by the assessee, the Assessing Officer passed orders u/s. 201 and 201(1A) of the Act. The details of the amounts for which the assessee is made liable u/s. 201 and 201(1A) of the Act in respect of the assessment years 2005-06 to 2007-08 read as under: