2022 (6) TMI 1244 - AT - Income Tax

TDS u/s 192 or 194J - payment in respect of doctors engaged as retainers and consultants - demand raised by the AO u/s 201(1)/201(1A) - Scope of employer-employee relationship - distinction between a contract for service and a Contract of service - scope of terms and clauses of agreements entered into deductor company and retainer doctors/consultants doctors categorically affirm that there existed an evident employee employer relationship between the deductor company and retainer doctors/ consultants doctors - whether payment made to consultants doctors and retainer doctors should fall under the head Salary and the assessee hospital/ company was liable to deduct TDS at the rate applicable in the case of salary? - HELD THAT - Chandigarh Bench of the ITAT in one of the group cases namely ACIT vs M/s. Fortis Healthcare Ltd. Mohali ( 2016 (3) TMI 629 - ITAT CHANDIGARH ) after a detailed analysis of the terms of the agreements of the retainer doctors as well as the salaried doctors and considering the decisions of various Benches of the ITAT and the judgement of the jurisdictional High Court in the case of Ivy Health Life Sciences (P) Ltd. 2015 (12) TMI 1063 - PUNJAB AND HARYANA HIGH COURT held that the provisions of Section 194J applied to the retainer doctors and not those of Section 192. In the case of EHIRC Ltd. 2017 (9) TMI 1660 - RAJASTHAN HIGH COURT after analyzing the two types of agreements identical to those in the present appeals and referring to judgements of other Hon'ble High Courts held that the retainer doctors attracted the provisions of Section 194J and not those of Section 192. Having gone through the provisions of section 192, Section 194J, Section 201 of the Income tax Act 1961, facts of the instant case and the judicial pronouncements on the issue involved, we are inclined to hold that the provisions of section 194J of the Act are applicable to the assessee and not those of section 192 of the Income tax Act 1961 therefore, the appellant cannot be treated as an assessee in default in so far as the question of deducting tax at source in respect of doctors engaged as retainers and consultants was concerned. - Decided against revenue.

Summary

Issues:
1. Whether the appellant can be treated as an "assessee in default" for not deducting tax at source in respect of doctors engaged as retainers and consultants.
2. Whether the provisions of section 194J or section 192 of the Income Tax Act are applicable to payments made to doctors engaged as retainers and consultants.
3. Whether the judgments of Hon'ble ITAT and the distinction between a "contract for service" and a "contract of service" support the contention of the appellant against the demand raised by the Assessing Officer under section 201(1)/201(1A) of the Act.

Analysis:
1. The Revenue filed appeals against orders passed by the CIT(A) related to Assessment Years 2010-11, 2016-17, and 2017-18. The main issue was the demand raised by the AO under section 201(1)/201(1A) of the Act for not deducting tax at source from payments to doctors engaged as retainers and consultants.
2. The appellant argued that doctors appointed on retainership basis are subject to section 194J for TDS, not section 192, as settled by various High Courts and ITAT benches. The AO's interpretation of the agreements as creating an employer-employee relationship was disputed based on past judgments and legal provisions.
3. The distinction between "contract for service" and "contract of service" was highlighted to show that retainership agreements do not establish an employer-employee relationship. Previous decisions by ITAT and High Courts supported applying section 194J to retainers. The AO's application of interest under section 201(1A) beyond the statutory provision was also criticized.
4. After analyzing the provisions of section 192, section 194J, and section 201 of the Income Tax Act, along with judicial pronouncements, the Tribunal held that section 194J applied to the appellant for payments to retainers and consultants. Consequently, the appeals by the Revenue were dismissed.

Conclusion:
The judgment clarified the applicability of TDS provisions to payments made to doctors engaged as retainers and consultants, emphasizing the distinction between sections 192 and 194J. It relied on legal precedents and statutory provisions to support the appellant's position and dismissed the Revenue's appeals based on the established legal interpretations and factual analysis.