Diagnostic Labs to deduct TDS on discount given to hospitals/laboratories U/s. 194H

Brief of the case:

In the case of M/s DDRC SRL Diagnostic P Ltd. Vs. ITO Mumbai Bench of ITAT have held that If the hospitals/laboratories act as mere link between the assessee and patients, then the discount given by the assessee would definitely fall under the category of “Commission” liable for deduction u/s 194H of the Act. Assessee is engaged in the business of running diagnostic laboratories. ITAT further held that If any of the laboratories is dedicated only for the assessee, then the discount paid to such kind of laboratories would fall in the category of “Commission” only, since the patients should be approaching them to get their tests conducted through the assessee.

Facts of the case:

• The appellant is engaged in the business of running diagnostic laboratories in Kerala. It provides clinical and corporate health check-up services to its clients.
• During the year under consideration assessee has earned income of Rs.24,41,09,507/- from pathological and pre-employment check-up services.
• A survey operation under section 133A of the Act was carried out on 23/09/2011 at the appellant’s premises by the officer, having jurisdiction under section 143(3) over the assessee.
• During survey discrepancies in respect of TDS was found. Accordingly ACIT, Circle 6(1), Mumbai made additions u/s 40 (a) (ia).
• Subsequently, on the basis of information received from ACIT, Circle-6(1), Mumbai, the TDS Officer (i.e.’the AO’) initiated proceedings under section 201(1)/201(1A) of the Act.
• Assessee was asked to show cause as to why the tax was not deducted under section 194H in respect of the discount/commission paid to various persons/institutions in respect of the diagnostic pathological testing charges received by the assessee.
• Assessee was also asked as to why the tax was not deducted under section 194J in respect of annual maintenance charges paid in respect of the appellant’s scientific instruments.
• Finally after considering the submissions of the assessee AO held that assesse in default in respect of discount/commission of Rs.5,85,16,322/- and AMC charges of Rs.38,94,056/- paid to various parties.
• Since, the appellant had deducted tax at source under section 194C of the Act in some cases, the AO has computed the net demand of tax and interest at Rs.81,17,861/- as per demand notice issued by him.

Contention of the assessee: