2014 (6) TMI 526 - AT - Income Tax

TDS deducted u/s 194J instead u/s 192 of the Act Doctors treated as consultants Assessee in default u/s 201(1) and 201(1A) of the Act - Held that - Following Deputy Commissioner of Income-tax Versus Yashoda Super Speciality Hospital 2010 (6) TMI 642 - ITAT HYDERABAD - the assessee has engaged the services of the doctors on the basis of the agreement - There is no timeframe for working of the doctors - The doctors are given their choice of time to come to the hospital and treat the patients - they are not in the roll of PF as employees of the assessee - the assessee collects the fees from the patients and after deducting Rs.2, 500 per month for utilising the infrastructure facilities and Rs.1, 500 of the survey fees the remaining amount was paid to the doctors - The doctors are not entitled to take any gratuity bonus etc. -They will only be paid fees for the services rendered by them through a structured agreement. No specific working hours are prescribed to the professionals - For the purpose of treating the doctors as employees they should be given specific assignment - There should be specific working hours rules and regulations and they should be on the roll for PF as employees - They shall be given leave as per statutory provisions besides gratuity etc. - These factual aspects which are essential to treat the doctors as employees are absent thus the doctors engaged by the assessee are to be treated as consultants only for rendering professional services - there is no employer and employee relationship existing - CIT (A) has rightly held that tax has to be deducted u/s 194J and not u/s 192 of the Act thus there is no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues:
Appeals against orders of CIT (A) for assessment years 2007-08 and 2009-10 regarding treatment of remuneration paid to doctors as salary and applicability of TDS under section 192 or 194J of the Income Tax Act.

Analysis:
The appeals involved the issue of whether the remuneration paid to doctors by a multi-speciality hospital should be treated as salary necessitating TDS under section 192 or as professional fees attracting TDS under section 194J. The hospital contended that the doctors were engaged as consultants under a contract for services, not as employees under a contract of services. The Assessing Officer (AO) treated the hospital as in default for not deducting TDS under section 192, relying on an interpretation that an employer-employee relationship existed. The CIT (A) found in favor of the hospital, citing a previous ITAT decision in the hospital's own case for the assessment year 2008-09.

The ITAT, Hyderabad Bench analyzed the facts and held that the doctors were to be treated as consultants, not employees. They distinguished the case from a Supreme Court judgment involving a managing director, emphasizing that the doctors had flexibility in working hours, were not on the PF roll, and were paid fees for services rendered without entitlement to gratuity or bonuses. The absence of specific working hours, rules, regulations, and employee benefits led the ITAT to conclude that no employer-employee relationship existed. Therefore, the ITAT confirmed the CIT (A)'s decision to apply TDS under section 194J instead of section 192.

The ITAT's decision was based on the absence of essential elements required to treat the doctors as employees, such as specific assignments, working hours, employee benefits, and being on the PF roll. The structured arrangement for payment and lack of employee-like entitlements supported the classification of the doctors as consultants. By following the precedent set in the hospital's previous case, the ITAT rejected the Revenue's grounds and dismissed the appeals, upholding the CIT (A)'s decision.

In conclusion, the ITAT's detailed analysis and application of legal principles established that the remuneration paid to doctors by the hospital should be treated as professional fees subject to TDS under section 194J, not as salary attracting TDS under section 192. The decision emphasized the absence of employer-employee relationship indicators and the structured nature of the payment arrangement, leading to the rejection of the Revenue's appeals.