1999 (11) TMI 103 - AT - Income Tax

Summary

Issues Involved:
1. Relationship of employer and employee between the Institute and visiting Doctors.
2. Applicability of TDS u/s 192 of the Income-tax Act.
3. Validity of penalty imposed u/s 201(1) and 201(1A) of the Income-tax Act.

Summary:

1. Relationship of Employer and Employee:
The primary issue was whether the visiting Doctors at the Hospital-cum-Nursing Home were employees of the Institute, thereby necessitating the deduction of TDS on their payments. The Institute had two categories of Doctors: regular employees and visiting Doctors. The regular employees were entitled to benefits like Provident Fund and Leave Encashment, indicating an employer-employee relationship. In contrast, the visiting Doctors were engaged on a consultancy basis, attending the Institute twice a week and on emergency calls, without being entitled to such benefits. The Tribunal concluded that there was no master-servant relationship between the Institute and the visiting Doctors, as the latter were independent professionals providing services on a profit-sharing basis.

2. Applicability of TDS u/s 192:
The Assessing Officer had imposed a penalty on the Institute for not deducting TDS u/s 192 on payments made to the visiting Doctors. The CIT (Appeals) had deleted this penalty, observing that the relationship between the Institute and the visiting Doctors did not constitute an employer-employee relationship. The Tribunal upheld this view, noting that the payments to the visiting Doctors were not salary but a share of the fees collected from patients, after deducting 10% as administrative charges. The Tribunal referenced several legal precedents, including CIT v. L.W. Russel and CIT v. Smt. Dipali Goswami, to support the distinction between an employee and an independent contractor.

3. Validity of Penalty u/s 201(1) and 201(1A):
The Tribunal examined whether the penalty imposed by the Assessing Officer u/s 201(1) and 201(1A) was justified. It was argued that the visiting Doctors had already declared their income as professional income in their individual returns, which the department had accepted. The Tribunal found it inconsistent for the department to treat the same income as salary in the Institute's case. Citing the principle that the revenue should not take contradictory positions on the same income, the Tribunal dismissed the department's appeal, affirming that the payments to the visiting Doctors were not subject to TDS u/s 192.

In conclusion, the Tribunal upheld the CIT (Appeals) order, confirming that the visiting Doctors were not employees of the Institute and that the payments made to them were not subject to TDS u/s 192, thereby invalidating the penalties imposed u/s 201(1) and 201(1A).