TaxTMI 
TaxTMI 
2014 (6) TMI 778
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....e assessee engaged the services of some Doctors and has been deducting tax at source u/s 194J by treating them as consultants instead of u/s 192 of the Act. However, it was found that the Doctors are divided into two categories such as "full time consultants" and "honorary consultants". In respect of "full time consultants" the Doctors are assured of a fixed minimum guarantee monthly amount and in respect of the honorary consultants", payment is made on the basis of case-wise collection. From a perusal of the order appealed against, it is seen that the assessing officer found the following facts emerging from the copy of agreement dated 29-8-2003 entered in by the assessee with Dr. Ghokhale (Consultant-Cardio Thoracic and Vascular Surgery) and copy of agreement dated 1-10-2003 entered into by the assessee with Dr. Vemula Sreekanth (Consul tant-Neurology) : "(a) The Hospital, from time to time, may request the consultants to provide specialized services at other places with which the Hospital may have strategic business alliances/interest. In such a situation the consultants shall provide such services as a part of the contractual obligation.; &n....
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...., the assessee is to be treated as an "assessee in default" as per the provisions of section 201 (1) r.w.s.192 of the Income Tax Act, 1961." 3.1. Thus, after giving an opportunity to the assessee and after taking into consideration the contentions of the assessee, the assessing officer concluded that there existed an employer and employee relationship between the assessee company and the Doctors and that the payments made to "full time consultant Doctors" are within the purview of section 192 of the I.T. Act for the following reasons: "(a) As seen from the assessee's explanation, it is not the case of the assessee that "the full time consultant Doctors" are free to attend any patient in a hospital other than the assessee hospital situated in Chennai, Bangalore, Hyderabad etc. (b) Equating the services of the full time consultant Doctors in the assessee hospital with those of Chartered Accountants who are free to attend any other assignments is not acceptable. (c) The assessee's contention that the periodical payments made to the Doctors in question can be treated as advance payment of professional fees is not ....
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....pervision and direction of his employer; and an independent contractor is one who is his own master. A servant is a person engaged to obey his employer's orders from time to time and an independent contractor is a person engaged to do certain work, but to exercise his own discretion as to the mode and time of doing it. He is bound by his contract, but not by his employer's order. (ii) Distinction between employment and profession: If the services rendered by a professional are merely incidental to the practicing of the profession and the professional is completely free to offer services to others, his income cannot be considered as salary income as the same arise out of the practicing of profession. But, when a professional occupies a post or an office he is said to be in employment. Thus, if a doctor accepts an employment permanently or for a considerable period of time and exchanges his profession for service, his remuneration would be assessable under the Salaries. (f) On a plain reading of the agreement as mentioned above in para 2, i....
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....ctor who he wants to visit. A patient who visits the hospital visits the hospital mainly because of the hospital's name. It is difficult to determine whether the patient consults a doctor on account of the name of the institution or the reputation of professional skill of the doctor. But by and large, the patient chooses the hospital for its name. The Doctors are required to be present as and when the hospital feels so. In that sense, the Doctors are working for the hospital in the interests of the hospital and as per the ethics of the hospital. Normally, this is there in the case of "employer-employee relationship". (i) An indirect control does not exist on the Doctors. They are required to be present during specified period. They are also required to be punctual and regular. They are whole time consultants. They are to intimate well in advance about their absence. Any erratic behaviour would not be acceptable to the hospital and it would not hesitate to terminate the agreement. This too, suggests of "employer-employee relationship" j) The condition that the Doctors are not governed by leave rules, PF, gratuity, superannuation benefi....
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....was deducted at source u/s 194J and not u/s 192. (n) Reliance is also placed on the decision in the case of Max Mueller Bhavan, IN RE reported in 268 ITR 31, in which the Authority for Advance Rulings, has held that the deductor is required to deduct tax at source u/s 192(1) on the honorarium paid to part time teachers. (0) In the case of C.S. Mathu vs CBDT and Another, the Delhi High Court has held that a C.A. having agreed to render his consultancy services though not employed on full time basis in the sense of creating master servant relationship, would be deemed to have been employed. (p) In the case of Justice Deoki Nandan Agarwala v Union of India (1999) 237 ITR 872 (SC), the Supreme Court. has held that salary of judges and other constitutional functionaries is also taxable under the head Salary. It was under the Constitution the amount received by them is salary. This decision leads to the proposition that what is relevant is employment and not so much the presence of an employer as understood in the conventional sense. 3.2 For the above reasons, the assessing officer held that the payments made to "full t....
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....p; 5. Professional's responsibilities: The professional shall not during the term of this agreement accept any payments directly from the patients of the company and shall direct all the patients to conform to the procedure for making payments as prescribed by the Company. The work of estimation, billing, collection of the bills will be done by the Hospital. 11. Term: This Agreement shall remain in force for a period of 5 years from the date of execution hereof, unless terminated by the Company as provided in Clause 13. The parties may at any time before the expiry of this Agreement mutually extend and renew the term of this agreement in writing. Relationship: None of the provisions of this agreement shall be deemed to constitute a partnership between the parties hereto and neither party shall have any authority to bind or shall be deemed to be the agent of the other in any way. The relationship is from principal to principal basis. Annexure C 1. The party of the first part hereby gurantee the....
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....upervision by the employer. For this he relied on the decision in the case of CIT Vs Lakshmipathi Singhania (1973) 92 ITR 598J. 5.3 The CIT(A) observed that the assessee company has two types of Doctors i) full time employee and (ii) specialist professionals and in the case of professionals working in the assessee hospital they are paid fixed remuneration + variable component per month, enjoy enormous freedom in carrying out their work and are not responsible to HOD or tied to fixed time schedule of attending the hospital on all working days, All Heads of Departments are also included in this category, On these facts, it appears that this category of Doctors do not fall into the relationship of employer-employee. As such, it is to be held that the assessee was right in deducting tax at source on payments to this category of Doctors u/s.194J treating the payments as professional fee. 5.4 The CIT(A) further observed that in respect of the other category of full time Doctors, it is seen that they are paid all inclusive monthly consultancy fees, required to attend the hospital on all working days, directly responsible to the HOD and bound by all instructions, guidelines and order....
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....l in entirety. 2. The Ld. CIT(A) erred in holding that TDS should be made u/s 192 of the I.T. Act in respect of payment to Doctors who are working full time for the assessee on the alleged ground that the services rendered are in the nature of 'contract of service'. 3. The Ld. CIT(A) failed to appreciate that Doctors who are working for the assessee are professionals and that the assessee do not have control over the functions of the Doctors. The CIT(A) failed to appreciate that unlike other professionals viz., chartered accountants, engineers etc., the services of Doctors cannot be controlled or dictated. 4. The ld. CIT(A) failed to appreciate that the Doctors whether full time or part time are engaged only as consultants and there is no employer and employee relation between the assessee and Doctors. The assessee has no control over the services rendered by the Doctors and therefore treating them as employees is incorrect and legally untenable." 7. The learned AR reiterating the stand taken before the departmental authorities submitted that the assessee engages Doctors under two categories i) resident/in-house D....
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....the hospital. The leaned AR submitted that the aforesaid decision of the ITAT Hyderabad Bench has also upheld by the Hon'ble AP High Court in judgment dated 04/07/2013 in ITTA No. 196 of 2013. 8. The learned DR, on the other hand, strongly supporting the order of the CIT(A) submitted that the assessee having been given a fixed monthly remuneration besides other facilities has to be treated as an employee of the hospital so as to attract provisions of section 192 of the IT Act. The learned DR submitted that since on examining service agreement, the Assessing Officer as well as the CIT(A) has given categorical finding that the employer and employee relationship exist between hospital and full time consultant Doctors, there is no need to interfere with the order passed by the CIT(A). The learned DR submitted that the ITAT while considering similar nature of case in ITA Nos, 985 & 986/Hyd/2011, in case of DCIT Vs. M/s Wockhardt Hospitals Ltd., dated 02/07/2012 has held that TDS provisions u/s 192 of the IT Act would be applicable to the Doctors working in hospital. 9. In rejoinder, the learned AR submitted that decision in case of DCIT Vs. M/s M/s Wockhardt Hospitals Ltd., (supra....
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.... the assessment order itself after examining the service agreement has observed that though the consultant Doctors are not governed by leave rules, PF, Gratuity, superannuation benefits, etc, they are not deciding factors as to whether they are employees of the hospital or not. It is not the case of the Department that these full time consultant Doctors are governed by leave rules, gratuity, PF, superannuation benefits etc. as well as other service conditions of hospital, which are applicable to the resident Doctors or other full time employees of the hospital. In these circumstances, it may not be possible to conclude that an employer and employee relationship exists between the hospital and the full time consultant Doctors. In case of DCIT Vs. Yashodha Super Speciality Hospital (supra), after examining similar nature of contract between hospital and the consultant Doctors and on careful analysis of various judicial precedents, the coordinate bench of this Tribunal has held as under: "7. Let us examine the present case in the light of the case law and discussion made by the AAR Doctors. Both the AO as well as the CIT(A) extracted the relevant clause of the ag....
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....cumstances, the apex Court while considering the relationship of the company and the managing director, held that the board of directors of the company are to manage the business of the company and they have right to assess the work of the managing director whenever deem it necessary. The power given to the managing director emanates from the articles of association, which prescribes limits of exercise of that power. The power of the assessee was exercised within the terms and limitations prescribed under the articles of association subject to control and supervision of the board of directors. Therefore, the apex Court held that there was a relationship of employer and employee between the assessee and the managing director. In the case before us, the assessee has engaged the services of the Doctors on the basis of the agreement. There is no timeframe for working of the Doctors. The Doctors are given their choice of time to come to the hospital and treat the patients. Moreover, they are not in the roll of PF as employees of the assessee. From the order of the CIT(A) it appears that the assessee collects the fees from the patients and after deducting Rs. 2,500 per month for utilizin....
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.... any rules and regulations. It is also not a fact that the full time Consultant Doctors are on the rolls for PF like other employees or are given leave as per statutory provisions besides gratuity etc. In the aforesaid factual position, the decision of the coordinate bench in case of DCIT Vs. Yashodha Super Speciality (supra) fully applies to the case of the assessee. So far as, the decision of the coordinate bench in case of DCIT Vs. M/s Wockhardt Hospitals Ltd., (supra) is concerned, on examining the facts of that case, it is found that the same is factually distinguishable. On perusal of the order passed by the Tribunal in case of DCIT Vs. M/s Wockhardt Hospitals Ltd., (supra) it is to be seen that service agreement entered in case of M/s Wockhardt Hospitals Ltd., clearly establishes an employer and employee relationship since Doctors are governed by the service rules of the hospital and the Doctors are liable for retirement on attaining the age of 58 years. Further, monthly payment is not relating to the number of patients treated by them whereas in case of the assessee before us neither there is any age of retirement for the full time consultant Doctors nor they are governed b....