2023 (5) TMI 1205 - AT - Income Tax

TDS u/s 194C or 192 - short deduction of TDS u/s. 201(1) and interest thereon u/s. 201(1A) - remuneration paid to the consultant doctors - existence of employer and employee relationship - when the engagement of the services of the doctors can be seen to be in the nature of employment? - survey team observed that there exists an employer and employee relationship between consultant doctors and the appellant and thus, the assessee should have deducted TDS u/s. 192 for payment made to the consultant doctors - HELD THAT - AO grossly misunderstood the model employed by the assessee for employing employee doctors and consultant doctors and took one sample report of an employee doctor and observed that even consultant doctors are governed by said report - fact remains that as per details filed by the assessee, consultant doctors are not governed by said rules and are independent. AO is completely erred in coming to the conclusion that there is an employer and employee relationship between consultant doctors and appellant company and remuneration paid to said doctors is salary which attracts provisions of section 192. As there is absence of employer and employee relationship. Therefore, opined that the department does not have individual materials to reassess the income of consultant doctors. As in CIT v/s. Grant Medical Foundation 2015 (2) TMI 457 - BOMBAY HIGH COURT examined at length the issue as to when the engagement of the services of the doctors can be seen to be in the nature of employment. In this case also the Hon'ble High Court held the relationship between Professional Doctor consultant and the Hospital cannot be treated as Employer Employee relationship, unless there exist the specific Rules and Provisions in the contract of appointment between the consultant and Hospital. There is no error in the reasons given by the CIT(A) to delete additions made towards short deduction of TDS u/s. 201(1) and interest thereon u/s. 201(1A) in respect of payment made to consultant doctors. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. Short deduction of TDS - payment to annual maintenance charges for maintenance of medical equipment u/s. 194J OR 194C - HELD THAT - AMC charges paid by the appellant to various contractors is a simpliciter works contract charges paid for repair and maintenance of medical equipment, which cannot be considered as fees for technical services as defined u/s. 194J of the Act, because said services does not parse required specialized technical knowledge. As decided in case of M/s. Saifee Hospital 2019 (4) TMI 710 - BOMBAY HIGH COURT payment for services rendered towards maintenance of medical equipment, is payment for work contract covered u/s. 194C and the same does not involve any technical service, which would require deduction of tax at source u/s. 194J of the Act. CBDT Circular No. 715 dated 08.08.1995, has also clarified the applicability of TDS provisions in respect of payment made to AMC provider by way of question no. 29 and answered that routine, normal maintenance contract which includes supply of spares will be covered u/s. 194C - there is no error in the reasons given by the CIT(A) to delete additions made towards short deduction of TDS on payment made to AMC charges u/s. 201(1) and interest thereon u/s. 201(1A) - Decided against revenue.

Summary

Issues Involved:
1. Whether the CIT(A) erred in allowing the appeal.
2. Whether the CIT(A) erred in holding that the assessee was not an 'assessee in default' under sections 201(1) and 201(1A) of the Income-tax Act, 1961.
3. Whether the CIT(A) erred in determining the relationship between the assessee-deductor and the doctors as not that of an employer and employee.
4. Whether the CIT(A) failed to appreciate the relationship between the assessee-deductor and the doctors as that of 'employer and employee'.
5. Whether the CIT(A) failed to appreciate the lack of material evidence showing that the doctors filed their returns of income.
6. Whether the CIT(A) failed to appreciate that AMC for medical equipment is a fee for technical services.

Summary:

Issue 1 & 2: Allowing the Appeal and 'Assessee in Default'
The CIT(A) ruled in favor of the assessee, holding that the assessee was not an 'assessee in default' under sections 201(1) and 201(1A) of the Income-tax Act, 1961. The Tribunal upheld this decision, noting that the CIT(A) considered all relevant facts and submissions.

Issue 3 & 4: Employer-Employee Relationship
The CIT(A) concluded that the relationship between the assessee-deductor (a multispecialty hospital) and the consultant doctors was not that of an employer and employee. The Tribunal agreed, noting that the consultant doctors were independent professionals who could practice privately and were not governed by employment laws applicable to employees, such as provident fund, ESI, gratuity, etc. The Tribunal cited various judicial precedents, including the Hon'ble Bombay High Court's decision in CIT(TDS-1) Mumbai vs Asian Heart and Institute Research Center Private Limited, which supported the view that consultant doctors are not employees of the hospital.

Issue 5: Lack of Material Evidence
The CIT(A) observed that there was no material evidence to show that the doctors in question had filed their returns of income. The Tribunal found that the CIT(A) had rightly considered this aspect and upheld the CIT(A)'s decision.

Issue 6: AMC for Medical Equipment
The CIT(A) held that payments made to AMC providers for the maintenance of medical equipment were not fees for technical services but were covered under section 194C of the Act as works contracts. The Tribunal upheld this view, referring to the Hon'ble Bombay High Court's decision in CIT vs Grant Medical Foundation, which clarified that AMC charges for hospital equipment are not fees for technical services and should be treated as works contracts.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order, which found no employer-employee relationship between the hospital and consultant doctors and held that AMC payments were correctly categorized under section 194C of the Act. The Tribunal's decision was pronounced on 12th April 2023 in Chennai.