2019 (3) TMI 597 - HC - Income Tax

TDS on hospital payments to consultants and contractors: payments to doctors treated as non-employee remuneration, not salary.

TDS classification of payments to a pest control agency and to full-time consultant doctors is analysed: payments to the pest control agency were held not ... TDS u/s 194C OR 194J - payment to the pest control agency - HELD THAT:- CIT (Appeals) and the Tribunal have concurrently held that such a payment was not for any technical services provided by the agency. We do not find any error. This question therefore not considered. TDS u/s 192 or 194J - payments made by the assessee to Full Time Consultant Doctors - existence of employer-employee relationship between the assessee company and consultant doctors - categories of doctors had a fixed remuneration and variable pay - categories of doctors had a fixed remuneration and variable paybilateral relationship between the hospital and the doctors - HELD THAT:- As decided in assessee's own case [2015 (2) TMI 457 - BOMBAY HIGH COURT] significant features of the contractual relationship between the doctors and the hospital in the present case were that the hospital would provide support service where a particular patient would be treated by a doctor. The sharing was in the proportion of 15% v/s. 85% between the hospital and the doctors. Contractual tenure of these doctors was for a period of one year which would be renewable depending on the performance of the doctor to be assessed by the Medical Advisory Council of the hospital. These doctors are not entitled to benefits of leave encashment, gratuity, provident fund, superannuation benefits etc. which regular employees of the hospital are. These doctors would on their own obtain indemnity insurance. These are clear indications that the relationship was not one of employer-employee. The Tribunal has correctly applied the decision of this Court in the case of Grant Medical Foundation's case [2015 (2) TMI 457 - BOMBAY HIGH COURT] wherein the Court has laid down the propositions and principles to be applied while testing such a bilateral relationship between the hospital and the doctors. No question of law Issues:1. Application of Section 194C vs. Section 194J for tax deduction from payment towards Annual Maintenance Contracts for hospital equipment.2. Classification of payments to Full Time Consultant Doctors under Section 194J or Section 192 for tax deduction.Analysis:Issue 1:The first issue raised in the judgment concerns the applicability of tax deduction provisions under Section 194C or Section 194J of the Income Tax Act for payments made towards Annual Maintenance Contracts for hospital equipment. The Revenue challenged the decision of the Income Tax Appellate Tribunal (ITAT) which held that Section 194C applied, not Section 194J. The Tribunal and CIT (Appeals) concurred that the payment to the pest control agency was not for technical services, thus rejecting the Revenue's objection. The High Court upheld this decision, stating that there was no error in the Tribunal's findings, and hence, this question was not considered further.Issue 2:The second issue pertains to the classification of payments made to Full Time Consultant Doctors under Section 194J or Section 192 for tax deduction purposes. The Revenue argued that an employer-employee relationship existed between the hospital Trust and the doctors, warranting tax deduction under Section 192 as salary payments. However, the Tribunal ruled in favor of the Trust, stating that no such relationship existed. The High Court referenced a previous case involving the same assessee where similar issues were addressed. The Court analyzed the terms of engagement between the doctors and the Trust, emphasizing factors such as fixed term contracts, absence of employee benefits, freedom to practice outside the hospital, and revenue sharing arrangements. Based on these considerations and the principles outlined in the Grant Medical Foundation case, the Court affirmed the Tribunal's decision, concluding that the relationship was not that of an employer-employee. Therefore, the Court dismissed the Income Tax Appeal, stating that no question of law arose from the case.In conclusion, the High Court's judgment addressed the issues of tax deduction applicability under different sections of the Income Tax Act for maintenance contracts and payments to consultant doctors, emphasizing the contractual terms, nature of services, and relationship dynamics to determine the appropriate tax treatment in each scenario.