2010 (6) TMI 642 - AT - Income Tax

TDS on amount as paid/payable to doctor - tds u/s 192 or 194J - assessee is a partnership firm engaging the services of doctors - Whether the payment made to the doctors is salary or else it is only the professional charges so as to attract u/s 194J? - HELD THAT - After examining the agreement we found that agreement does not provide for any supervision or control over the doctor. The doctors at their own discretion treat, the patients by making use of the infrastructural facilities and manpower available in the hospital. The doctors are governed by the rules and regulations other regulatory body in their professional activity and the assessee being a hospital they expected the doctors to maintain the reputation and image as a corporate hospital. This expectation of the assessee to maintain the image and reputation as a corporate hospital cannot be considered to be exercising control and supervision over the doctors in their professional activity. In our opinion, the agreement between the assessee and the doctors is one for providing professional services, and there is no element of employer and employee relationship existing. CIT(A) has rightly held that tax has to be deducted u/s 194J and not u/s 192. The doctors engaged by the assessee are to be treated as consultants, only for rendering professional services. The matter would be entirely different in case the doctors are re-employed as medical officers to work for fixed hours and they are given the facility of leave, PF, gratuity, bonus etc. Since such facilities are not given and what was paid to the doctors is only through a structured arrangement for the services rendered by them for two years, in our opinion, there is no employer and employee relationship existing. Therefore, the CIT(A) has rightly held that tax has to be deducted under section 194J and not under section 192 In the result, appeal of the revenue is dismissed.

Summary

Issues:
Deduction of tax when the amount was paid/payable to a doctor.

Analysis:

1. Nature of Payment:
The main issue in this case is whether the payment made to the doctors by the assessee should be considered as salary or professional charges. The Department argued that the doctors were employees and tax should be deducted under section 192 of the Income-tax Act. On the other hand, the assessee contended that the doctors were consultants, and tax should be deducted under section 194J.

2. Employer-Employee Relationship:
The Department claimed an employer-employee relationship existed between the assessee and the doctors, citing that the doctors were bound to work exclusively for the hospital. However, the assessee argued that there was no such relationship as the doctors had professional autonomy, were not bound by specific working hours, and were not treated as employees for provident fund or other statutory rules.

3. Legal Precedents and Interpretation:
The Tribunal examined previous judgments, such as the St. Stephen's Hospital case, which found an employer-employee relationship, and the Indraprastha Medical Corpn. Ltd. case, which determined a professional relationship. The Tribunal emphasized that the nature of the relationship depended on the terms of the contract between the parties.

4. Agreement Analysis:
The Tribunal carefully analyzed the agreement between the assessee and the doctors. It noted that the doctors were not on the roll for provident fund payments, had flexibility in working hours, and were not under direct supervision or control by the assessee. The agreement focused on professional services, and the doctors were expected to maintain professional ethics.

5. Comparison with Legal Precedents:
The Tribunal compared the present case with the Max Mueller Bhavan case, where tax was to be deducted as salary due to direct control and supervision. However, in the current case, the doctors exercised discretion in their work, indicating a consultant relationship rather than an employer-employee one.

6. Final Decision:
After thorough analysis, the Tribunal concluded that the doctors were to be treated as consultants for providing professional services. As there was no employer-employee relationship based on the agreement terms and lack of specific employment benefits, tax deduction under section 194J was appropriate. The Tribunal upheld the decision of the lower authority, dismissing the revenue's appeal.

In conclusion, the judgment clarified the distinction between an employer-employee relationship and a consultant-professional relationship based on the specific terms of the agreement and the nature of control and supervision exercised.