Hospital not liable for consultant fees as professional fees or default assessee. Department appeal dismissed.

The Tribunal upheld the CIT(A)'s decision that the hospital was not liable for treating payments to medical consultants as professional fees under s. 194J or for being an assessee in default under s. 201(1) of the Act. The hospital was found to act as a conduit between patients and doctors, with no contractual relationship with the consultants attending to out-patients. The fees collected were promptly handed over to the doctors, and the hospital did not retain any portion. Consequently, the Department's appeal was dismissed.

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Issues Involved:
1. Whether the payment of fee by the assessee to its medical consultants could be treated as professional fee within the scope of s. 194J of the Act.
2. Whether the assessee could be held as an assessee in default for non-deduction of tax at source under s. 201(1) of the Act.

Summary:

Issue 1: Treatment of Payment as Professional Fee u/s 194J
The Department contended that the payment of fee by the assessee to its medical consultants should be treated as professional fee within the scope of s. 194J of the Act. The assessee argued that the fees collected from out-patients were on behalf of the respective consultants and not for the benefit of the assessee. The hospital merely provided the premises and secretarial staff to facilitate the doctors' services. The CIT(A) held that there was no contractual relationship between the hospital and the consultants when attending to out-patients, and thus, the provisions of s. 194J were not applicable.

Issue 2: Assessee in Default u/s 201(1)
The AO observed that the hospital collected consultation fees from patients and passed it on to the doctors without deducting tax. The CIT(A) found that the hospital acted merely as a conduit between the patients and the doctors, and the fees collected were handed over to the doctors on the same day. The CIT(A) concluded that the assessee could not be treated as an assessee in default under s. 201(1) of the Act, as there was no relationship of service provider and service recipient between the hospital and the consultants.

Conclusion:
The Tribunal upheld the CIT(A)'s order, stating that the Department failed to dislodge the findings that the hospital merely facilitated the doctors by providing infrastructure and secretarial staff. The interaction between the patients and the consultants was a direct relationship, and the hospital did not retain any part of the fees collected. Therefore, the provisions of s. 194J and s. 201(1) were not attracted, and the appeal filed by the Department was dismissed.

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