2007 (10) TMI 632 - HC - Income Tax

Summary

Issues involved:
1. Whether payments to doctors should be treated as professional charges or salary.
2. Whether the payments made to doctors are liable for tax deduction under Section 192(1) of the Income-tax Act, 1961.

Issue 1:
The case involved a dispute regarding the nature of payments made by the assessee to various doctors, whether they should be considered as professional charges or salary. The Assessing Officer contended that the payments should be treated as salary due to the absence of bills and work details, assuming the doctors were part-time employees. However, the assessee argued that the doctors were specialists who visited the hospital for limited hours, providing medical treatment independently without an employer-employee relationship. The CIT (A) reversed the Assessing Officer's decision, stating that the doctors were not employees and could be considered as receiving salary only if an employer-employee relationship existed. The Tribunal upheld this view, emphasizing the lack of evidence supporting an employer-employee relationship and the doctors' independent professional status.

Issue 2:
The second issue revolved around the tax deduction liability under Section 192(1) of the Income-tax Act, 1961, for the payments made to the doctors. The Assessing Officer demanded TDS and interest under Section 201 and 201(1A) of the Act, totaling &8377; 19,82,247. However, the CIT (A) ruled in favor of the assessee, stating that no TDS was required as there was no employer-employee relationship established. The Tribunal concurred with this decision, noting that the doctors operated independently, were not exclusive to one hospital, and their income was assessed under 'income from business/profession'. The Tribunal found no justification for treating the doctors' professional income as constituting salary, thereby dismissing the appeal by the revenue.

In conclusion, the High Court dismissed the appeal, emphasizing that the existence of an employer-employee relationship is a question of fact. The court upheld the findings that the visiting doctors were not employees but independent professionals, free to work at multiple hospitals. Citing the judgment of the Calcutta High Court, the court ruled that the provisions of the Income-tax Act concerning TDS and interest under Section 201(1A) were not applicable in this case due to the absence of evidence supporting an employer-employee relationship.