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2013 (9) TMI 671 - AT - Income TaxTDS u/s 192 or u/s 194J of the Income Tax Act - Payment to professional doctors - Assessee had deducted tax of ₹ 11,67,399.40 under section 194J of the Act, whereas AO demanded the tax of ₹ 27,98,169.69 under section 192 of the Act - Default under section 201(1A) of the Act Held that - There does not exist employer-employee relationship between the assessee-appellant and the persons providing professional services. On consideration of the agreement in its entirety, it is evident that it is not a case of employer-employee relationship between the assessee-appellant and the doctors Deduction u/s 194J is applicable, which has been done by the assessee Decided against the Revenue.
Issues Involved:
1. Whether the assessee-company was required to deduct tax under section 192 of the Act and not under section 194J of the Act from the payments made to the doctors. 2. Whether there existed any employer-employee relationship between the hospital and the professional doctors. 3. Whether the assessee-company can be declared as an assessee in default and therefore the differential tax could be recovered from it along with interest under section 201(1A) of the Act. Issue-wise Detailed Analysis: 1. Tax Deduction under Section 192 vs. 194J: The core issue was whether the payments made to doctors should be treated as salary under section 192 or professional fees under section 194J of the Income-tax Act, 1961. The assessee-company, running a hospital, had engaged professional doctors who shared fees received from patients and whose remuneration was not fixed. The Assessing Officer concluded that there existed an employer-employee relationship, thus tax should have been deducted under section 192. However, the Commissioner of Income-tax (Appeals) found that the doctors were providing professional services and enjoyed complete professional freedom, thus tax was correctly deducted under section 194J. 2. Employer-Employee Relationship: The Assessing Officer argued that the doctors were full-time consultants with fixed working hours and were not allowed to practice privately or with other organizations, indicating an employer-employee relationship. The Commissioner of Income-tax (Appeals) disagreed, noting that the doctors had no fixed remuneration, were available on call, and had a free hand in treating patients. The agreements lacked conditions typically found in employer-employee relationships, such as leave travel concessions, provident fund, and retirement benefits. Thus, the relationship was of professional consultants and not employees. 3. Assessee in Default and Recovery of Differential Tax: The Assessing Officer treated the assessee as in default under section 201(1) for short deduction of tax and charged interest under section 201(1A). The Commissioner of Income-tax (Appeals) ruled that since the doctors' income was assessed as professional fees and not salary, the assessee was not in default. The Tribunal upheld this view, noting that the receipts from the hospital were taxed as professional income in the hands of the doctors, and the hospital had no further liability once the income was correctly offered for tax by the doctors. Conclusion: The Tribunal upheld the findings of the Commissioner of Income-tax (Appeals), concluding that there was no employer-employee relationship between the hospital and the doctors. The tax was correctly deducted under section 194J, and the assessee was not in default. The appeals of the Revenue were dismissed. Order Pronounced: The order was pronounced in the open court on October 16, 2012.
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