Professional fee withholding applies to doctor retainers and consultants where no employer-employee relationship is created.

Payments to doctors engaged under retainership and consultancy agreements were treated as professional fees because the arrangements reflected a contract for service rather than a contract of service. The engagement terms did not create a master-servant or employer-employee relationship, and the doctors were engaged on distinct terms from salaried staff. On that basis, tax deduction under section 194J applied and section 192 did not apply. The assessee therefore could not be treated as an assessee in default under section 201 on the footing that salary tax should have been deducted.

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Issues: Whether payments made to doctors engaged as retainers and consultants were liable for deduction of tax under section 192 of the Income-tax Act, 1961, or under section 194J of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default under section 201 of the Income-tax Act, 1961.

Analysis: The dispute turned on the true character of the relationship created by the engagement agreements. The relevant distinction was between a contract of service, which reflects an employer-employee relationship, and a contract for service, which reflects engagement of an independent professional exercising skill and discretion. The record showed that retainer and consultant doctors were engaged on distinct terms from salaried doctors, and the clauses relied upon by the Revenue were found not to create a master-servant relationship. The issue had already been examined in the assessee's own case for earlier years, where the consistent view was that the payments to such doctors fell within the scope of professional fees and not salary.

Conclusion: Section 194J applied to the payments made to retainer and consultant doctors, section 192 did not apply, and the assessee could not be treated as an assessee in default on that basis.

Ratio Decidendi: Payments to doctors engaged under a professional retainership or consultancy arrangement are governed by section 194J, not section 192, where the agreement does not establish an employer-employee relationship.

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