2016 (9) TMI 917 - AT - Income Tax

TDS u/s 192 - whether consultant doctors are also salaried employees of the assessee? - relationship of an employer and employee on construction of the terms of agreement entered by the assessee-company with consultant doctors - Held that - As from the terms of contract entered by the assessee with consultant doctors it is clear that remuneration is fixed irrespective of number of patients attended by the consultant doctors. The timings are fixed. Clause 7 of the said agreement also stipulates that consultant doctors are working with hospital for a minimum period of 5 years from the date of joining the organization. Further, it is submitted that in case consultant doctor leaves hospital within a period of 2 years and such doctor is barred from working in Bangalore District for a period of 2 years from the date of leaving. It is further submitted that in case consultant doctor shall not undertake any professional work or assignment in any other hospital without prior consent of the assessee-company. All these conditions go to prove that it is a case of contract of service. It is also clear from clauses of the agreement placed at page 26 of the paper book that there is no independence to the consultant doctors, their working hours and service conditions are under the direct control and superintendence of the assessee. All these circumstances go to prove that the assessee is only making an attempt to camouflage real nature of the transaction by using clever phraseology. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive to determine the nature of transaction. Since consultant doctors were paid fixed remuneration and the working conditions are under supervision and control of the hospital authorities, in our considered opinion, services are rendered in the nature of employee. Hence, payments are subject to tax deduction at source u/s 192 of the Act. The assessee has failed to controvert the findings of the TDS officer that the terms and conditions of consultant doctors are same as that of salaried doctors. The fact that consultant doctors have declared their income under the head professional charges , has no bearing on the issue on hand. Accordingly, the assessee s appeals are dismissed.

Summary

Issues Involved:
1. Whether the relationship between the assessee-company and the consultant doctors constitutes an employer-employee relationship.
2. Whether the remuneration paid to consultant doctors should be subjected to tax deduction at source (TDS) under section 192 or section 194J of the Income-tax Act, 1961.
3. Whether the remuneration paid to visiting doctors should be subjected to TDS under section 192 or section 194J of the Act.

Detailed Analysis:

1. Employer-Employee Relationship with Consultant Doctors:
The primary issue is whether the relationship between the assessee-company and the consultant doctors is that of an employer and employee. The TDS Officer concluded that consultant doctors are salaried employees based on the terms of the agreement, which included fixed working hours, mandatory adherence to company policies, and restrictions on working elsewhere without prior consent. The CIT(A) upheld this view, noting that the terms of the agreement indicated control and supervision by the assessee-company, thus constituting an employer-employee relationship. The Tribunal agreed, citing the jurisdictional High Court's decision in CIT vs. Manipal Health System (P) Ltd., which emphasized the nature of the contract and the degree of control and supervision as key factors in determining the relationship. The Tribunal concluded that the fixed remuneration and the stringent terms of the agreement indicated a contract of service, thereby affirming the CIT(A)'s decision that the consultant doctors are employees.

2. TDS on Remuneration to Consultant Doctors:
Given the determination that the consultant doctors are employees, the Tribunal held that TDS on their remuneration should be deducted under section 192 of the Act, which pertains to salaries. The Tribunal noted that the fixed remuneration, control over working hours, and other employment-like conditions supported this conclusion. The assessee's argument that the consultant doctors were professionals and not employees was rejected, with the Tribunal emphasizing that the substance of the agreement indicated an employer-employee relationship. Consequently, the assessee was held liable for not deducting TDS under section 192 and was deemed in default under sections 201(1) and 201(1A) of the Act.

3. TDS on Remuneration to Visiting Doctors:
The CIT(A) distinguished the case of visiting doctors, holding that they were not subject to the same terms and conditions as the salaried and consultant doctors. The CIT(A) found that visiting doctors were paid based on the number of patients attended and were not bound by the hospital's service rules, indicating a professional relationship rather than an employment relationship. Consequently, TDS on payments to visiting doctors should be deducted under section 194J, which pertains to professional fees. The Tribunal upheld this view, noting that the remuneration to visiting doctors was variable and dependent on the services rendered, consistent with the law laid down by the jurisdictional High Court in Manipal Health System (P) Ltd. and the Bombay High Court in Grant Medical Foundation (Ruby Hall Clinic). The Tribunal found no reason to interfere with the CIT(A)'s order regarding visiting doctors.

Conclusion:
The Tribunal dismissed the appeals filed by both the assessee and the revenue. The assessee's appeal was dismissed on the grounds that the consultant doctors were employees and thus subject to TDS under section 192. The revenue's appeal was dismissed, affirming that visiting doctors were professionals and subject to TDS under section 194J. The Tribunal's decision was pronounced in open court on August 11, 2016.