FEES PAID TO CONSULTANT DOCTORS - SALARY?

[Mr. M. GOVINDARAJAN]

It is used to appoint doctors who are specialized in certain medicinal subjects in the hospitals as part time doctors or consultant.  They will not be treated as regular doctors.  The regular doctors are given salaries and other benefits where as the part time doctors are given the fees for their rendering of services in a particular day.  The differences which have been noted over and again by the various Benches of the Income Tax Appellate Tribunal (‘ITAT’ for short) and the High courts are as detailed below-

• In the case of employee doctors, it is a whole time employment not restricted to a fixed term whereas a retainer doctor has a fixed term
• The employee doctors draw a salary plus various other benefits whereas the retainer doctor is entitled to a consolidated retainership fee only
• The employee doctors cannot take up any other employment whereas the retainer doctors although not to engage in employment with other hospitals can undertake private practice.
• There is a retirement age for the employee doctors and payment to them is termed as salary, whereas the payment to the retainer doctors is treated as professional fee and they have no retirement age.

In DCIT, CENTRAL CIRCLE-74 (1) , NEW DELHI VERSUS FORTIS HOSPITAL LTD. - 2023 (11) TMI 395 - ITAT DELHI, held that the consultant doctor is not a regular employee of the hospital and liable to be deducted tax under Section 194J of the Act and not under section 192 of the Act.

In the above case, the assessee is a hospital, leading integrated healthcare delivery service provider in India.  The healthcare verticals of the company primarily comprise hospitals, diagnostics and day care specialty facilities.  The headquarters is at Gurugram.  The assessee has various hospitals at various places across the country.

The Revenue conducted a TDS survey under Section 133A (2A) of the Income Tax Act, 1961 (‘Act’ for short) in the premises of the hospitals of the assessee on 23.01.2018.  The survey is for verification of compliance of TDS provision under section 201(1)/201(1A) of the Act.   During the survey the Revenue Authorities obtained a statement from Senior Taxation Officer.  In his statement the Officer stated that doctors are mainly employed at different hospital units under various arrangements i.e. on roll, retainership and consultant basis and tax at source is deducted under section 192B for on roll doctors and 194J for retainer and consultant doctors for all such payments made to them.

The Revenue called for the agreements entered into by the assessee with regular doctors and consultant doctors.  The Revenue was of the view that the agreements entered into by the Assessee and the doctors show that the consultant doctors are regular doctors of the assessee and the tax is liable to be deducted at source.  The Department, therefore, issued show cause notices to the specialist doctors as to why not they are treated as regular employee of the assessee.  The assessee filed a reply to the show cause notice on 01.03.2019.  The same was not at all considered by the Assessing Officer.  The Assessing Officer considered that the consultant-doctors/ retainer-doctors formed the core of the assessee’s business and their expertise is used to run the company and not just for support to the company.   The Assessing Officer held that the payment to the consultant-doctors and retainer-doctors fall under the head ‘salary’ and the assessee was liable to deduct TDS from the payment to consultant doctors and retainer-doctors as well along with the on-roll doctors at the rate applicable in the case of salary.   As per the Assessing Officer the liability of the assessee under section 192B of the Act is Rs. 2,91,71,684/-.  The assessee deducted tax at source Rs. 1,10,06,561/-.  The Assessing Officer held that the assessee company is ‘an assessee in default’ and liable to pay Rs. 1,81,65,123/-  The said order was passed by the Assessing Officer on 28.03.2019 under sections 201(1)/ 201(1A) of the Act.

Being aggrieved against the order of Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals).  Before the appellate authority the assessee pointed out that in previous years’ case (2016 - 17 and 2017 - 18) the Commissioner of Income Tax Appeals decided the appeal filed by the assessee company in favor of the assessee.  The Revenue filed appeal against the said order before ITAT.  The ITAT dismissed the appeal filed by the Revenue. 

The appellant assessee submitted the following before the Commissioner of Income Tax (Appeals)-

• High Courts and various Benches of the ITAT across the country held  that doctors attract section 192 but section 194 for purposes of TDS on payments made to them.
• The issues which have attained finality should not be raked up by examining the same set of facts in a different way. 
• The Assessing Officer has passed the order impugned which is to of raising a demand which is to say the least factually and legally incorrect, and aimed at reflecting a huge only for the purpose demand for statistical purposes.
• The Assessing Officer in passing the orders impugned has overlooked relevant provisions of the Act which if considered would have avoided the present litigation. 

The Commissioner of Income Tax (Appeals), following the decision of his predecessor in assessee’s own case on identical issue quashed the impugned order of the Assessing Officer. 

Against this order the Revenue filed appeal before the ITAT.  The Revenue has taken the following grounds in their appeal-

• The Commissioner of Income Tax (Appeals) has erred in holding that 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. And that the provisions of the section 194J of the Act were applicable and not those of section 192 of the Act.
• The Commissioner of Income Tax (Appeals) has erred in giving relief to the assessee without appreciating the facts that the terms and clauses of agreements entered into by the deductor company and retainer doctors/consultant doctors categorically affirm that there existed an evident employee-employer relationship between the deductor company and retainer doctors/consultant doctors and hence payment made to consultant 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.

The ITAT heard both the parties and considered the facts of the case and records submitted by the parties.  The ITAT observed that the issue involved in the present appeal before us is no longer res-integra. It is submitted by the Ld. AR that in the case of the assesee company TDS survey was carried out on 19.01.2015 also. Identical facts were examined in past years as well and the judicial consensus is that the provisions of section 194J apply to the retainer-doctors and not those of section 192B of the Act after noting differences between the two types of agreements i.e. salaried doctors and doctors appointed on retainership basis.   Certain clauses in contract with retainers which gave the erroneous impression to the Ld. AO of creating an employer-employee relationship has been explained by the assessee that they do not create such a relationship.   The co-ordinate bench of Delhi Tribunal in its decision rendered on 27.06.2022 in assessee’s own case held that 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. 

The ITAT did not find any substance in the appeal of the Revenue and dismissed the same.