S. 194H: Tests to determine “Principal-Agent” Relationship Explained

SRL Ranbaxy Ltd vs. ACIT (ITAT Delhi)

The assessee entered into agreements with hospitals etc (“collection centres“) in accordance with which the centres collected samples from patients seeking laboratory tests and forwarded it to the assessee. The centres raised a bill on the patient, retained their “discount” and paid the balance to the assessee. The assessee claimed that it had rendered “professional services” & that the centres had rightly deducted TDS u/s 194J. The AO held that in collecting the sample and forwarding it to the assessee, the centres acted as an “agent” of the assessee and that the “discount” retained by it was “commission” and that the assessee ought to have deducted TDS u/s 194H. He consequently disallowed the “discount” u/s 40(a)(