2014 (7) TMI 339 - AT - Income Tax

Tribunal affirms assessee not in default, independent contractor relationship upheld, correct tax deduction under sec 194J.

The Asst. CIT Circle-15(2), Hyderabad Versus M/s. Usha Mullapudi Cardiac Centre, Hyderabad

The Asst. CIT Circle-15(2), Hyderabad Versus M/s. Usha Mullapudi Cardiac Centre, Hyderabad - [2014] 33 ITR (Trib) 72 (ITAT [Hyd]) Issues Involved:1. Whether the CIT(A)-II, Hyderabad erred in allowing the appeal.2. Whether the CIT(A) Hyderabad erred in holding that the Assessing Officer was not justified in treating the assessee as 'assessee in default' in terms of section 201(1)/201(1A) of the Income-tax Act, 1961.3. Whether the relationship between the assessee-deductor and the doctors is that of an employer and employee.4. Whether the CIT(A)-II, Hyderabad failed to appreciate the fact that there is no material on record to show that the doctors in question have filed their returns of income admitting the amounts in question for the year under consideration.5. Whether the Supreme Court's decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226) would apply to the assessee's case.Issue-Wise Detailed Analysis:1. Whether the CIT(A)-II, Hyderabad erred in allowing the appeal:The CIT(A) allowed the appeal based on the precedent set by the Hon'ble ITAT, Hyderabad in the case of M/s Yashoda Super Speciality Hospital for A.Y. 2008-09. The Tribunal had observed that the doctors engaged by the assessee were consultants and not employees, as they were not subject to specific working hours, PF, gratuity, or any other statutory benefits. The CIT(A) followed this decision and held that the assessee had rightly deducted tax at source under section 194J and not under section 192.2. Whether the CIT(A) Hyderabad erred in holding that the Assessing Officer was not justified in treating the assessee as 'assessee in default' in terms of section 201(1)/201(1A) of the Income-tax Act, 1961:The CIT(A) held that the assessee was not in default under section 201(1) and 201(1A) as the doctors were treated as consultants. This was based on the finding that there was no employer-employee relationship, and thus, the tax was correctly deducted under section 194J. The Tribunal upheld this view, confirming that the CIT(A)'s decision was justified.3. Whether the relationship between the assessee-deductor and the doctors is that of an employer and employee:The Tribunal examined the terms of the consultancy agreements and found that the doctors were not employees. Key points included the lack of specific working hours, absence of PF and gratuity benefits, and the freedom of doctors to work outside the hospital. The Tribunal referenced the decision in Yashoda Super Speciality Hospital and other relevant cases, concluding that the relationship was that of independent contractors, not employees.4. Whether the CIT(A)-II, Hyderabad failed to appreciate the fact that there is no material on record to show that the doctors in question have filed their returns of income admitting the amounts in question for the year under consideration:The Tribunal noted that the assessee had provided CA certificates and copies of IT returns for most doctors, showing that the consultancy fees were declared as professional income. For doctors who had left the hospital, the assessee provided PAN details and requested verification from the Income Tax Department. This was deemed sufficient to conclude that the doctors had declared their income, supporting the CIT(A)'s decision.5. Whether the Supreme Court's decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226) would apply to the assessee's case:The Tribunal found that the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. did not apply because the facts were different. The assessee had consistently deducted tax under section 194J, treating the doctors as consultants. The Tribunal upheld the CIT(A)'s view that the professional services rendered by the doctors were correctly classified under section 194J, not section 192.Conclusion:The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision that the assessee was not an 'assessee in default' under section 201(1)/201(1A). The relationship between the assessee and the doctors was that of independent contractors, and the tax was correctly deducted under section 194J. The Tribunal's decision was based on a thorough analysis of the facts and relevant case law, including the precedent set by the Hon'ble ITAT, Hyderabad in the case of M/s Yashoda Super Speciality Hospital.