2015 (12) TMI 1063 - HC - Income Tax

High Court deems doctors' payments as professional fees, not salaries, citing tax sections.

The Commissioner of Income Tax (TDS), Chandigarh Versus M/s Ivy Health Life Sciences Pvt. Limited, Mohali, Punjab

The Commissioner of Income Tax (TDS), Chandigarh Versus M/s Ivy Health Life Sciences Pvt. Limited, Mohali, Punjab - [2016] 380 ITR 242 Issues Involved:1. Chargeability of payments made to doctors under Section 194J vs. Section 192 of the Income Tax Act, 1961.2. Existence of employer/employee relationship between the doctors and the hospital.3. Perversity and legality of the findings recorded by the ITAT.Detailed Analysis:1. Chargeability of Payments Made to Doctors under Section 194J vs. Section 192:The primary issue revolves around whether the payments made to doctors should be treated as professional fees under Section 194J or as salaries under Section 192 of the Income Tax Act, 1961. The Assessing Officer concluded that there existed an employer-employee relationship between the respondent company and the doctors, thereby necessitating tax deduction under Section 192. However, the respondent company had deducted tax under Section 194J, treating the payments as professional fees. The CIT(A) and the Tribunal both held that the payments were professional fees, not salaries, as the doctors enjoyed professional freedom and were not subjected to the hospital's control in their treatment of patients.2. Existence of Employer/Employee Relationship:The determination of whether an employer-employee relationship existed required examining whether the agreement between the assessee and the doctors was a 'contract for service' or a 'contract of service.' The CIT(A) observed that the doctors were not entitled to typical employee benefits such as LTC, PF, leave encashment, and retirement benefits. They had professional freedom and were required to follow certain procedures for administrative discipline, which did not amount to an employer-employee relationship. The Tribunal concurred, noting that the doctors were engaged under a 'contract for service,' implying professional or technical services rather than an employer-employee relationship.3. Perversity and Legality of the ITAT's Findings:The revenue argued that the ITAT's findings were perverse and contrary to the material on record. However, the High Court found no illegality or perversity in the findings of the CIT(A) and the Tribunal. The Tribunal's decision was based on a detailed analysis of the agreements and relevant case law, concluding that there was no employer-employee relationship. The High Court upheld these findings, noting that the agreements indicated a professional arrangement rather than an employment relationship.Conclusion:The High Court dismissed the appeals, answering the substantial questions of law in favor of the assessee. It upheld the CIT(A) and Tribunal's findings that the payments made to doctors were professional fees under Section 194J and not salaries under Section 192. The court found no employer-employee relationship between the hospital and the doctors, thus supporting the assessee's method of tax deduction.