Whether a "Pathology Laboratory" run by qualified medical person is Business or Profession for the purpose of Section 44AB of the Income Tax Act ? The said laboratory is undertaking medical test of persons referred by other doctors and also walk in patients.
I have perused explanation and guidance given by Hon. SC in the case of Dr. Devendra Surti [1969] 34 FJR 376 / AIR 1969 SC 63 on what is profession and Commerce. Also this is relied upon by the Gujarat High Court in the case of CIT Vs. Dr. K. K. Shah [1982] 135 ITR 146 (Guj). Further, Guidance Note published by ICAI at page No. 18 and 19 clarifies as under:
" 4.4 The following have been listed out as professions in section 44AA and notified thereunder (Notifications No. SO-18(E) dated 12.1.77, No. SO 2675 dated 25.9.1992 and No. SO 385(E), dated 4.5.2001):
(i) Accountancy (ii) Architectural (iii) Authorised Representative (iv) Company Secretary (v) Engineering (vi) Film Artists/Actors, Cameraman, Director, Singer, Story-writer, editor, singer, lyricist, dress designer etc. (vii) Interior Decoration (viii) Legal (ix) Medical (x) Technical Consultancy (xi) Information Technology
4.5. The following activities have been held to be business :
(i) Advertising agent (ii) Clearing, forwarding and shipping agents - CIT v. Jeevanlal Lallubhai & Co. [1994] 206 ITR 548 (Bom). (iii) Couriers (iv) Insurance agent (v) Nursing home (vi) Stock and share broking and dealing in shares and securities - CIT v.Lallubhai Nagardas & Sons [1993] 204 ITR 93 (Bom). (vii) Travel agent.
From the above it seems that "Medical" is included where as "Nursing Home" is excluded based on the above referred two judgments as Nursing Homes generally treats the patients from outside referring doctors apart from their own.
In case of my clients viz; Pathology Laboratory all their patients are referred by other doctors and also treats walk-in customers; all these patients are treated for income to earn profit and not for service.
Kindly review the position whether it is a business or profession ? Also please confirm from all possible sources how this being treated for Section 44AB in trade.
Your response and valuable advice will help me a lot.
27 May 2014
It would be covered as Profession as it is branch of medical science. Pathologist providing services is in nature of investigation services pertaining to blood,urine,stool and hormone tests which can not be provided ordinary business person. It requires specialised skills to provides such services thus it would be covered as profession u/s 44AB and tax audit would be applicable accordingly.
27 May 2014
Thanks for your clear opinion and advice. Further to this, if my client opt for One Man Company or Pvt. Ltd. Co. status then what will be the scenario? Whether it will be Business or a Profession. As per my understanding in all cases professional should be natural person. Whereas in this case, the proposed company will not be a natural person and hence can not be treated as Professional. Further, the prime objective of the company is earn profit and not to render service. Therefore, it should be a business in the case of non-natural person or artificial persons.
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