TDS treatment of payments to medical consultants as salary or professional fees confirmed; payer not an assessee in default.

Characterisation of payments to medical consultants as salary or professional fees was determined by analysing consultancy agreements and actual working arrangements. The tribunal accepted that consultants operated on a principaltoprincipal basis, exercised discretion over manner of service, and were bound only by contract terms; supervisory conditions and restricted hours did not convert a contract for service into a contract of service. Where consultants had declared professional income in their returns, the payer could not be treated as an assessee in default under the proviso to section 201, and the revenue appeal was dismissed.

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Issues: (i) Whether payments made to retained/consultant doctors were salary liable to TDS under Section 192 or professional fees liable to TDS under Section 194J; (ii) Whether the Assessing Officer was correct in treating the payer as an assessee in default under Section 201 for failure to deduct TDS at salary rates.

Issue (i): Whether payments to consultant/retainer doctors amounted to salary (TDS under Section 192) or were payments for professional services (TDS under Section 194J).

Analysis: The consultancy agreements establish a contractual relationship for provision of professional services with parties operating on a principal-to-principal basis; consultants retained discretion in manner of providing services and billed patients directly. Administrative controls such as reporting hours, leave rules, and limited supervision were contractual measures for discipline and performance and do not by themselves convert an independent professional engagement into an employer-employee relationship. Relevant authority and remand report were considered in reaching this conclusion.

Conclusion: Payments were for professional services and correctly liable to TDS under Section 194J, not under Section 192.

Issue (ii): Whether the Assessing Officer was justified in holding the payer an assessee in default under Section 201 for not deducting TDS at salary rates.

Analysis: Consultants had declared and offered the professional income in their returns; the Proviso to Section 201 was applicable to the facts. In light of the contractual characterisation and the consultants' tax compliance, treating the payer as an assessee in default was not warranted.

Conclusion: The Assessing Officer's treatment of the payer as an assessee in default under Section 201 was not justified; the demand is unsustainable.

Final Conclusion: The appeal by the revenue is dismissed and the order confirming correctness of TDS deduction under Section 194J is upheld; the demand and default finding under Section 201 are set aside.

Ratio Decidendi: A contractual engagement governed by consultancy agreements where the service provider retains professional autonomy and billing rights, and where administrative supervision is limited to discipline and performance, constitutes a contract for professional services (principal-to-principal) and does not convert the relationship into employer-employee for the purpose of TDS; consequently TDS obligation falls under Section 194J and not Section 192, and a payer is not an assessee in default under Section 201 where consultants have offered such income to tax.

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