2016 (10) TMI 432 - AT - Income Tax

Tribunal rules doctors as independent professionals for tax purposes, TDS under Section 194J.

Sir Hurkisondas Nurrotumdas Hospital and Research Centre Versus The DCIT, (TDS) -3 (2), Mumbai.

The tribunal allowed the appeal, determining that the full-time consultants (doctors) engaged by the hospital were independent professionals, not ... TDS u/s 192 or 194J - condition of engagement of doctors vis-a-vis the employee-employer relationship - professional activities - nature of payment - Held that:- Neither the AO nor the ld CIT (A) gave their finding that any of the condition contained in the contract of the Doctors mandate that there was employee-employer relationship between the assessee and them, which specifically may brings the doctors in the category of employee. The AO and the CIT(A) has not bring on record, if the doctors are subject to the payment of Provident Fund or other retiremental benefit, the AO has applied his own notion for arriving at the conclusion that there is employee-employer relationship and concluded that their existing relationship of employee-employer. We respectfully following the decision of jurisdictional High Court in case of Grant Medical Foundation (2015 (2) TMI 457 - BOMBAY HIGH COURT) held that Doctors have no relationship of employee-employer with the assessee’s Hospital. The doctors are in fact independent professional who may be receiving fixed remuneration despite fixed hours of works which may substantially regulating their application for leave and other discipline. With these observations, we hold that the doctors are discharging only professional services and the assessee is not liable to deduct tax u/s 192 of the Act. Thus, the appeal of assessee is allowed. Issues Involved:1. Legality of the CIT(A)'s order.2. Applicability of Section 192 vs. Section 194J for TDS on payments to full-time consultants.3. Raising tax demand under Section 201(1) when the deductee has paid due taxes.Detailed Analysis:Issue 1: Legality of the CIT(A)'s OrderThe assessee contended that the order passed by the CIT(A) was 'illegal, bad in law, ultra vires and contrary to the provisions of law and facts of the case.' The tribunal considered the arguments but primarily focused on the other substantive issues raised.Issue 2: Applicability of Section 192 vs. Section 194J for TDS on Payments to Full-Time ConsultantsThe core issue was whether payments made to full-time consultants (doctors) should be treated as salary, requiring TDS under Section 192, or as professional fees, requiring TDS under Section 194J. The assessee argued that there was no employer-employee relationship between the hospital and the doctors, asserting that the doctors were independent professionals rendering services under Section 194J. The AO and CIT(A) disagreed, concluding that the doctors were employees based on the terms of their engagement, which included daily attendance and exclusive devotion of their expertise to the hospital.The tribunal examined the conditions of engagement and noted that neither the AO nor the CIT(A) provided evidence of an employee-employer relationship, such as payment of Provident Fund or other retirement benefits. The tribunal referenced the jurisdictional High Court's decision in CIT vs. Grant Medical Foundation, which emphasized the distinction between a 'contract of service' (employee) and a 'contract for services' (independent professional). The High Court had ruled that doctors with fixed remuneration and specific working hours did not necessarily indicate an employer-employee relationship.The tribunal concluded that the doctors were independent professionals, not employees, and thus the assessee was not liable to deduct tax under Section 192. The payments should be treated under Section 194J.Issue 3: Raising Tax Demand Under Section 201(1)The assessee argued that no tax demand under Section 201(1) could be raised if the deductee (doctors) had already paid the due taxes to the government. The tribunal agreed with this view, reinforcing that the tax liability of the deductor should not arise if the deductees had fulfilled their tax obligations.Conclusion:The tribunal allowed the appeal filed by the assessee, holding that the doctors engaged by the hospital were independent professionals and not employees, thus TDS should be deducted under Section 194J and not Section 192. Consequently, the tax demand under Section 201(1) was also not justified as the deductees had paid the due taxes.Order:The appeal filed by the assessee was allowed, and the order was pronounced in the open court on August 26, 2016.