2017 (10) TMI 310 - AT - Income Tax

TDS liability on Payment to consultant doctors - employer-employee relationship - payments are salary so as to bring into effect of section 192 or section 194J - assessee is a domestic company, engaged in providing health care services, operates a hospital - payments made to consultant doctors attached to the hospital - Held that - This issue is squarely covered in favour of the assessee by the decision of this Tribunal in assessee s own case for AY 2011-12 held that these Consulting Doctors are generally well skilled and knowledgeable in their area of specialization and hence, attract patients on their own strength and goodwill and do not depend upon the hospitals for a continuous flow of patients. Further the Consulting Doctors are free to treat and manage their patients as they feel fit and in the course of the treatment, the Consulting Doctors use the infrastructure of the hospital to which they are attached. In return for being permitted to use the infrastructure of the hospital, the Consulting Doctors pay a certain percentage of their fees towards costs. The fee to be charged to the patient is determined after mutual consultation understanding between Hospital and Doctor. However, for the administrative, commercial and accounting ease, the hospital collects the fees from the patients and remits the same to the Consulting Doctor after retaining its share as agreed upon. These Doctors merely use the infrastructure and facilities of the hospital and pay for the usage out of the fees collected from the patients. Since the Consulting Doctors retain their independent status, they take their own professional indemnity insurance, which means in the event of any negligence, they are accountable to compensate the patients. These aspects are sufficient to prove that the consultant doctors are very much different from the regular employees doctor of the assessee. We find no infirmity with the findings of Ld. CIT(A) and, therefore, we hold that the payments made to the consultants doctors are not salary, and, therefore, tax is not deductible u/s.192 of the Act. Hence, the relief granted to the assessee is sustained - Decided against revenue

Summary

Issues Involved:
Whether consultant doctors have an employer-employee relationship with the hospital for tax purposes.

Detailed Analysis:

Issue 1: Existence of Employer-Employee Relationship
The appeal was filed by the revenue against the order of Ld. CIT(A)-24, Kolkata for AY 2012-13, questioning whether consultant doctors working at the hospital were in an employer-employee relationship with the hospital. The revenue contended that the payments made to these doctors should be considered as salary under section 192 of the Income-tax Act, instead of being subjected to TDS under section 194J of the Act.

Analysis: The AO asserted that the doctors were salaried employees of the hospital, and thus, payments to them should be taxed under section 192. However, the Ld. CIT(A) and the Tribunal found that there was no employer-employee relationship between the hospital and the consultant doctors. The Tribunal emphasized that the doctors were independent professionals who used the hospital's infrastructure and facilities for which they paid a percentage of their fees. The doctors retained their independent status, managed their patients independently, and carried their own professional indemnity insurance, indicating a lack of control and supervision typical in an employer-employee relationship.

Judgment: The Tribunal upheld that the consultant doctors were not employees of the hospital, and therefore, the payments made to them were not considered as salary under section 192 of the Act. The decision was based on the fact that the doctors operated independently, utilized the hospital's resources for a fee, and retained their professional autonomy. The Tribunal dismissed the revenue's appeal, citing that the issue and facts were similar to a previous case where the relief was granted to the assessee based on the same grounds.

Conclusion:
The judgment clarified that consultant doctors working at the hospital did not have an employer-employee relationship with the hospital, and therefore, the payments made to them were not subject to tax deduction under section 192 of the Income-tax Act. The decision was based on the independent nature of the doctors' practice, their use of hospital facilities for a fee, and their professional autonomy, which distinguished them from regular salaried employees.