TaxTMI 
TaxTMI 
2026 (6) TMI 931
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....of appeal as under:- "1. The learned CIT(A) erred in law and on facts in confirming the order of the ITO(TDS) u/s 201(1)/201(1A) treating the appellant as assessee in default for alleged short-deduction of tax u/s 192 on payments made to faculties. 2. The learned CIT(A) grossly erred in upholding the finding that the faculties engaged by the appellant for imparting coaching in NEET. JEE. GATE. etc. are in employer-employee relationship, when in fact they were engaged on hourly basis as independent professionals rendering specialised services u/s 194J. 3. The learned CIT(A) failed to appreciate that there existed no appointment letters. no written contracts, no provident fund, gratuity, ESI or any other statutory employee benefits, which are sine qua non for an employer-employee relationship. 4. The learned CIT(A) erred in placing reliance on the attendance register and the term "salary" used in certain internal formats, which were common for both employees as well as consultants. He failed to appreciate that these were only administrative measures and the payments to the consultant faculties were purely on hourly basis for professional services. ....
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....laben lndravadan Gandhi vs. New India Assurance Co. Ltd. (2020) and other binding precedents on "contract for service" vs. "contract of service". 11. The impugned order of the CIT(A) is bad in law, perverse and liable to be set aside. PRAYER The orders of CIT(A) and ITO(TDS) may be set aside and the demand of 9,48,753 be annulled." 3. The brief facts of the case show that assessee is a coaching institute in Kottayam imparting coaching for medical and engineering aspirants. A survey u/s. 133A (2A) of the Act was conducted on 18 December 2023 at the business premises of Brilliant Study Centre and Brilliant Study Centre Private Limited at its main Branch at Kottayam and other centres located across Kerala. The survey was conducted to verify the compliance towards the tax deduction at source provision for the FY 2018 - 19 to AY 2023 - 24. 4. During the survey, summons u/s. 131 of the Act were also issued to the various teachers and managing director of the company. During the survey it was noted that teachers are paid remuneration under professional services covering tax deduction at source as per provisions of section 194J of the Act instead of salary. Therefor....
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....how cause notice of the AO vide letter dated 14 June 2024. According to the reply of the assessee, all these are administrative measures and assessee does not employ all these teachers but they are recruited as professionals and therefore the tax is rightly deducted u/s. 194J of the Act. 7. The ld.AO considered the explanation of the assessee and thereafter held that as effective control, set working hours, termination procedure, policies, leave rules applicable to all the teachers along with non-compete clause and monthly payment of the remuneration as well as medical insurance and provision of transport services clearly shows that the teachers are the employees of the assessee and therefore the tax should have been deducted by applying the provisions of section 192 of the Act. The ld. AO was further confronted that all these teachers have furnished the return of income disclosing the remuneration received by them paid by the assessee to them as professional fees applying the provisions of section 44ADA of the Act which has been accepted by the revenue. The ld. AO rejected the same, relied upon the several judicial precedent and concluded that there exists an employer-employee ....
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.... vehemently submitted that the facts stated by the ld. AO and confirmed by the learned CIT - A clearly shows that the amount paid by the assessee to the teachers is in the nature of salary as these persons are bound by a contract like an employee and therefore the tax should have been deducted u/s. 192 of the Act. 12. We have carefully considered the rival contention and perused the orders of the learned lower authorities. The only issue involved in this case is that assessee should have deducted tax at source under section 192 of the income tax act or under section 194J of the act. According to the assessee, tax should have been deducted and is deducted by following the provisions of section 194J of the act being the amount paid to the teachers engaged for imparting training were considered as professionals. The learned assessing officer and the learned CIT - A were of the view that assessee has employed the professionals who are teaching at that Institute and therefore payment made to them should have been subject to tax deduction at source under section 192 of the income tax act. The important fact that is to be mentioned here is also the fact that all those persons have file....
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.... be they salaried or otherwise called as a consultant.. 15. [ Same as original] 16. We find that the identical issue arose before the honourable madras High Court in case of Dr. Mathew Cherian vs. Assistant Commissioner of Income-tax [2023] 151 taxmann.com 154 (Madras)/[2023] 450 ITR 568 (Madras)[01-09- 2022] wherein all those decisions relied upon by the learned revenue authorities are considered and decided by the honourable High Court holding that Where agreement between doctors and hospital revealed that doctors were not entitled for any statutory benefits and doctors held full responsibility for their medical decisions without any interference of hospital, it could be said that intention of parties were to engage in a relationship of equals and not one of master-servant and therefore, department was not justified in issuing reassessment notice under section 148A for taxing income returned by assessee's as salary income. The honourable High Court held that:- 34. There are no differences that emanate from a perusal of the impugned orders and the references to the agreements and contracts are in standardized terms. The clauses extracted in WP.No.14515 of 2022....
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.... the hospital. f. The doctors cannot advice the patient have investigations outside KMCH. If any test is not available at KMCH, clinical lab will handle those tests by alternate methods. If there is any need to refer to consult outside, it should be only through permission from Medical Director or from the Chairman's Office. g. If any consultant likes to discontinue his services, at least 3 month's notice should be given. If he/she gives short notice, consultant has to pay three months' remuneration. h. CHAIRMAN is responsible for all consultants directly. Any other matter concerning the hospital administration will be dealt by the Chairman only. Rules and regulations will be modified and changed by the management if deemed necessary.' 35. On the basis of the above clauses, the officer has come to the conclusion that KMCH exercises total control over the doctors in regard to their timings of work, holidays, call duties based on the exigencies of work, termination, entitlement to private practice, increments and other service rules. 36. The key distinction in this regard is between a contract for service and one of service, and depends on....
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.... extent of Rs. 50,000/- or whether it was a contract for service in which case, the liability would be unlimited. 42. The Apex Court discusses several judgments rendered in the context of the Industrial Disputes Act as to whether persons who supplied goods or services in several capacities could be said to 'in the employ' of the employer. 43. In Dharangadhara Chemical Works Ltd. v. State of Saurashtra AIR 1957 SC 264, the Court held that the prima facie test for determination of a master-servant relationship is the right of the master to supervise and control the work done by the servant in the matter of not just in directing what work is to be done but also the manner in which he shall execute the work. 44. So too in the case of Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) Ltd. 1947 AC 1 (HL). To quote Lord Uthwatt, 'The proper test is whether or not the hirer had authority to control the manner of execution of the act in question'. 45. In Chintaman Rao v. State of M.P. AIR 1958 SC 388, the Hon'ble Supreme Court held that Sattedars and their coolies were not workers within the meaning of Section 2(1) of th....
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....r relevant tests. 52. In Slatford case (supra), the Court looked into whether the person concerned was 'part and parcel of the organization' and in the case of Silk (supra), the Court opined that the test was not merely the common law test of 'power of control' where the persons concerned could be said to be employees 'as a matter of economic reality'. 53. The important considerations were degree of control, opportunities of profit or loss, investment in facilities, permanency of relations and the skill required to carry out the operations. 54. The question in Silver Jubilee Tailoring House (supra), was ultimately decided holding that the individuals were employees, since the equipment upon which they sewed were supplied by the shop and supervision was exercised by the employer, who had the right to reject substandard work. 55. In Hussainbhai v. Alath Factory Thozhilali Union [1978] 4 SCC 257, applying the test of economic reality of control of the employer over the workers' subsistence, skill and continued employment, the question was answered holding that the persons were direct employees of the owner. The argument t....
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....(PC), the Court referred to the 'fundamental' test determined by Cooke, J in Market Investigations Ltd v. Minister of Social Security [1969] 2 QB 173, being'..is the person who has engaged himself to perform these services performing them as a person in business on his own account?' If the answer was 'yes', then the contract is a contract for services. If the answer is 'no', then the contract is a contract of service. 61. After a detailed discussion of the above cases, the Apex Court, in the case of Sushilaben Indervandan Gandhi (supra), examined the contract between the deceased and R3 as follows: 34. Looked at in this light, let us now examine the agreement between Dr. Alpesh Gandhi and the Respondent No. 3. The factors which would lead to the contract being one for service may be enumerated as follows: 34.1 The heading of the contract itself states that it is a contract for service. 34.2 The designation of Dr. Gandhi is an Honorary Ophthalmic Surgeon. 34.3 INR 4000 per month is declared to be honorarium as opposed to salary. 34.4 In addition to INR 4000 per month, Dr. Gandhi is paid a percentag....
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....aforesaid factors are weighed in the scales, it is clear that the factors which make the contract one for service outweigh the factors which would point in the opposite direction. First and foremost, the intention of the parties is to be gathered from the terms of the contract. The terms of the contract make it clear that the contract is one for service, and that with effect from the date on which the contract begins, Dr. Gandhi shall no longer remain as a regular employee of the Institute, making it clear that his services are now no longer as a regular employee but as an independent professional. Secondly, the remuneration is described as honorarium, and consistent with the position that Dr. Gandhi is an independent professional working in the Institute in his own right, he gets a share of the spoils as has been pointed out hereinabove. Thirdly, he enters into the agreement on equal terms as the agreement is for three years, extendable only by mutual consent of both the parties. Fourthly, his services cannot be terminated in the usual manner of the other regular employees of the Institute but are terminable on either side by notice. The fact that Dr. Gandhi will devote full-time ....
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....ment benefits: - House Rent Allowance - Education Allowance - Special Allowance - Medical Reimbursement - Leave Travel assistance - Performance linked bonus Consolidated Retainership Fee Also entitled to performance linked bonus N.A. Also entitled to Terminal benefits: - Provident Fund - Gratuity N.A. 3 Exclusively Doctors employed on whole-time basis with the Hospital-complete restriction on any other work for remuneration (part-time/full time) in any other trade or business Partly restricted-Doctors not to engage in employment with other hospitals; however, no restriction on private practice 4 Transfer/Posting Transfer and posting of doctors at the sole discretion of the Hospital N.A. 5 Retirement Retirement Age prescribed under the agreement @ 58 years N.A. 6 Leave Eligible for privilege, sick and casual leaves as applicable for respective category N.A. 7 Intellectual Property rights Any IPR developed by the doctor to be the sole property of the Hospital N.A. 8 Insurance N.A. Profess....
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....er terminal benefits. Considering all these aspects at length a detailed, well reasoned order is passed by the Tribunal on this issue which we may not find fault with.' Several other judgments were also discussed, many that find reference in the judgment of the Supreme Court in Sushilaben's Indravandan Gandhi's case (supra). 68. The Gujarat High Court in Apollo Hospital International Ltd.'s case (supra), considered the nature of remittances made to full-time resident Doctors in Apollo Hospital International Limited. Professional Tax and Provident Fund were being deducted from the payments, and two types of agreements entered into by that hospital, one in the case of Employee Doctors and the second in the case of Consultant Doctors. The distinctions have been summarised in the following terms:- '(a) in the case of 'employee doctors' there is a list of allowances such as Basic, HRA, Trans. Allw. Edu. Allw. B&P Allw. Tel. Allw. Other Allw. On the other hand, in the case of 'consultant doctors' there is a clause of lump sum monthly payment. The consultant doctors, however, are not paid any such allowance. (b) in th....
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....tal management, that facilities provided for investigation, consultation and diagnostics be utilised to the optimum. As regards the incorporation of fixed timings and hours, the Bench opined that such regulations were only a measure of ensuring that the medical practitioner was obliged to devote time and energy wholeheartedly to the hospital. 71. In conclusion, the issue was decided in favour of the hospital, the Court clarifying that their concurrence did not mean that professionals could never be employees or that there could never be a master-servant relationship in the case of a professional. Such a finding would depend upon the attending facts and circumstances, terms and conditions of engagement and on an examination on a case-to-case basis. 72. In the case of CIT (TDS) v. IVY Health and Life Sciences (P) Ltd., [2015] 63 taxmann.com 362/[2016] 236 Taxman 292/380 ITR 342, the Punjab and Haryana High Court considered the taxability of payments to doctors falling within a single category, and who worked on fixed timings. The doctors were not entitled to private practice, attended the hospitals on call and received a fixed salary. They are not entitled for Leave....
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....sations in different fields of medicine and a tabulation of their specialisations is set out below: S.No. W.P.No. CONSULTANT 1. 15268 of 2022 Anaesthesiologist 2. 14592 of 2022 Anaesthetist 3 15289 of 2022 Nephrologist 4. 15304 of 2022 Dental Surgeon 5. 12692 of 2022 Neuro and Cardiovascular Radiologist 6. 15079 of 2022 Dermatologist 7. 14810 of 2022 Pulmonologist 8. 14829 of 2022 Anaesthetist 9. 14897 of 2022 Urologist 10. 14993 of 2022 Radiologist 11. 14979 of 2022 Radiologist 12. 15082 of 2022 Physician 13. 15084 of 2022 Transfusion Medicine 14. 15281 of 2022 General and Laparoscopic Surgeon 15. 15276 of 2022 Paediatrician and Neonatologist 16. 14515 of 2022 Oncologist 17. 15317 of 2022 General Surgery 18. 15365 of 2022 Gastroenterologist 19. 15386 of 2022 Cardiac Anaesthesia 20. 15452 of 2022 Orthopaedic Surgeon 21. 15448 of 2022 Orthopaedic Surgeon 22. 15458 of 2022 Plastic Surgeon 23. 15721 of 2022 Internal Medicine 24. 15995 of 2022 Intensivist 25. ....