2015 (9) TMI 1236 - AT - Income Tax

Hospital consultant relationship not employer-employee, Section 194J applies. Tribunal upholds tax deduction decision.

Asst. Commissioner of Income tax Versus M/s Reliance Medicare Limited

The Tribunal determined that the relationship between the hospital (assessee) and Dr. Kulbhushan S. Dagar was that of a consultant, not an ... TDS liability - u/s 194J or 192 - whether employer and employee relationship exists between deductor and the deductee? - Held that:- , Dr. Kulbhushan S. Dagar was paid an amount of ₹ 10 Lakhs for his services rendered in the month of February 2008 and March 2008 (Rs. 5 Lakhs p.m.). Dr. Kulbhushan S. Dagar has filed his return of income for the AY. 2008-09 showing the said amount of ₹ 10 Lakhs as 'income from profession'. Therefore, it clearly indicates that Dr. Kulbhushan S. Dagar received consultation fee from the assessee. No infirmity in the orders passed by the Ld. CIT(A) holding that Dr. Kulbhushan S. Dagar was a consultant with assessee-hospital and tax was deducted at source U/s. 194J of the Act for the year under consideration. Therefore, this appeal is liable to be dismissed. See DEPUTY COMMISSIONER OF INCOME TAX Versus M/s QUALITY CARE INDIA LTD [2014 (6) TMI 608 - ITAT HYDERABAD ] - Decided in favour of assessee. Issues Involved:1. Whether the TDS provisions of Section 194J or Section 192 of the Income Tax Act, 1961 are applicable.2. Determination of the relationship between the assessee and Dr. Kulbhushan S. Dagar - whether it is of an employer-employee or a consultant.Detailed Analysis:1. Applicability of TDS Provisions:The primary issue in this case is whether the TDS provisions under Section 194J (applicable for professional or technical services) or Section 192 (applicable for salaries) of the Income Tax Act, 1961, should be applied. The Revenue argued that the relationship between the assessee (a hospital) and Dr. Kulbhushan S. Dagar was that of employer and employee, thus necessitating the application of Section 192. The Revenue contended that the fixed monthly remuneration and the nature of duties performed by Dr. Dagar indicated an employer-employee relationship. Conversely, the assessee maintained that Dr. Dagar was a consultant, and the payments made to him were consultancy fees, thus falling under Section 194J.2. Determination of Relationship:To resolve the issue, the Tribunal examined whether the relationship between the assessee and Dr. Dagar was that of an employer-employee or a consultant. The Tribunal considered several factors:- Payment of Remuneration: The Tribunal noted that Dr. Dagar was paid a fixed amount, but this alone does not determine the nature of the relationship.- Control and Supervision: The Tribunal found no evidence of employer control over Dr. Dagar's work. The attendance register did not indicate fixed timings or control by the hospital.- Master-Servant Relationship: The Tribunal observed that there were no deductions for professional tax or provident fund from Dr. Dagar's remuneration. Additionally, there were no terminal benefits or leave encashment benefits, which are typically associated with an employer-employee relationship.The Tribunal also noted that Dr. Dagar had filed his return of income, showing the amount received as consultancy fees and not as salary. Furthermore, there was no written agreement or appointment letter confirming Dr. Dagar's employment status, and he was free to take other assignments.Judgment:The Tribunal concluded that the relationship between the assessee and Dr. Dagar was not that of an employer-employee but rather that of a consultant. Consequently, the provisions of Section 194J were applicable, and the tax was correctly deducted at source under this section. The Tribunal dismissed the Revenue's appeal, upholding the order of the CIT(A).Significant Observations:- The Tribunal emphasized the absence of control and supervision by the hospital over Dr. Dagar's work.- The Tribunal distinguished the facts of this case from the Wockhardt Hospitals case, where the doctors were governed by service rules and had leave entitlements, indicating an employer-employee relationship.- The Tribunal relied on the decision in the case of Quality Care India Ltd., which held that consultant doctors are not akin to salaried employees and do not have an employer-employee relationship.Conclusion:The appeal by the Revenue was dismissed, and it was held that Dr. Kulbhushan S. Dagar was a consultant, and the TDS was correctly deducted under Section 194J of the Income Tax Act, 1961. The judgment underscores the importance of examining the nature of the relationship and the specific terms of engagement to determine the applicable TDS provisions.