2023 (11) TMI 395 - AT - Income Tax

TDS obligations clarified for consultant and retainer doctors under section 194J not section 192

DCIT, Central Circle-74 (1), New Delhi Versus Fortis Hospital Ltd.

The ITAT Delhi ruled in favor of the assessee regarding TDS obligations on payments to consultant-doctors and retainer-doctors. The tribunal determined ... TDS u/s 192 or 194J - payment to the consultant-doctors and retainer-doctors - Whether there was employer- employee relation between both the parties? - as per revenue consultant-doctors/ retainer-doctors formed the core of the assessee’s business and their expertise are used to run the company and not just for support to the company - HELD THAT:- Identical facts were examined in past years as well and the judicial consensus is that the provisions of section 194J apply to the retainer-doctors and not those of section 192B of the Act after noting differences between the two types of agreements i.e. salaried doctors and doctors appointed on retainership basis. Certain clauses in contract with retainers which gave the erroneous impression to the Ld. AO of creating an employer-employee relationship has been explained by the assessee that they do not create such a relationship. The explanation of the assessee has unanimously been accepted by various judicial pronouncements. The co-ordinate bench of Delhi Tribunal in its decision rendered on 27.06.2022 in assessee’s own case [2022 (7) TMI 846 - ITAT DELHI] to hold that the provisions of section 194J of the Act are applicable to the assessee and not those of section 192 of the Income tax Act 1961 therefore, the appellant cannot be treated as an 'assessee in default' in so far as the question of deducting tax at source in respect of doctors engaged as retainers and consultants was concerned. Decided in favour of assessee. Issues Involved:1. Whether the assessee can be treated as an 'assessee in default' for not deducting tax at source under section 192 instead of section 194J for payments made to retainer and consultant doctors.2. Whether the relationship between the hospital and the retainer/consultant doctors constitutes an employer-employee relationship.Summary of Judgment:Issue 1: Applicability of Section 192 vs. Section 194J for TDS DeductionThe primary contention of the Revenue was that the assessee hospital should have deducted TDS under section 192 (applicable to salaries) instead of section 194J (applicable to professional fees) for payments made to retainer and consultant doctors. The Ld. Assessing Officer (AO) held that the payment to these doctors fell under the head 'salary,' and thus, the hospital was liable to deduct TDS at the rate applicable to salaries, resulting in a short deduction of TDS. The AO computed a liability of Rs. 2,91,71,684/- under section 192B, whereas the assessee had deducted Rs. 1,10,06,561/-, leading to a shortfall of Rs. 1,81,65,123/-.Issue 2: Employer-Employee RelationshipThe AO argued that the terms and clauses of the agreements between the hospital and the doctors indicated an employer-employee relationship. However, the assessee contended that the doctors were engaged on a retainership basis, not as employees, and thus, section 194J was applicable. The assessee highlighted differences between salaried doctors and retainer doctors, such as the nature of employment, benefits, and the ability to engage in private practice.Appellate Proceedings and Decision:The Ld. Commissioner of Income Tax (Appeals) [CIT(A)] quashed the AO's order, following the precedent in the assessee's own case for previous assessment years (AY 2016-17 and 2017-18), where it was held that section 194J was applicable. The CIT(A) noted that the judicial consensus, including various High Courts and ITAT benches, supported the view that payments to retainer and consultant doctors attract section 194J and not section 192.Tribunal's Findings:The Tribunal observed that the issue was no longer res-integra and had been settled in favor of the assessee in previous years. The Tribunal cited the co-ordinate bench decision in the assessee's own case, which held that the provisions of section 194J apply to retainer and consultant doctors, and thus, the assessee cannot be treated as an 'assessee in default' under section 192.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that section 194J applies to payments made to retainer and consultant doctors, and the assessee hospital cannot be treated as an 'assessee in default' for not deducting TDS under section 192.Order:The appeal of the Revenue is dismissed. Order pronounced in the open court on 6th November, 2023.