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TMI Blog2012 (9) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the assessee-deductor and the doctors is not that of an employer and employee. 4. The learned CIT(A) failed to appreciate that the relationship between the assessee-deductor and the doctors is that of 'employer and employee'. 5. The learned CIT(A) failed to appreciate the fact that there is no material on record to show that the doctors in question have filed their returns of income admitting the amounts in question for the year under consideration. 6. The learned CIT(A) failed to appreciate the fact that the Supreme Court's decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226) would not apply to the assessee's case in view of the fact that the assessee has not been deducting tax at source under section 192 continuously for all the years whereby the provisions of Chapter XVII-B of the Income-tax Act, 1961 would be redundant. 2. The facts of the case are that the assessee company is running a hospital in the name & style as Kamineni Wockhardt Hospitals with branches at King. Koti and L.B. Nagar. In both the branches, the company engaged the services of doctors. In order to verify its compliance towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssionals in the manner in which the professions shall render his services. 2. No specific working at specific times for consultation as per their convenience. 3. These professionals are not eligible for provident fund, gratuity and bonus. 4. Their attendance to hospitals is not enforced. 5. The payment terms to the professionals are through a structured fee, which assures some fixed sum initially and is enhanced according to the extent of income he generates to the hospitals. 6. Doctors, who applied, were allowed to have their own private practice or allowed to work for different hospitals of their choice. 5. Further the terms of contract and the actual working reflects the following: (a) Employees are eligible for PF whereas consultants are not eligible for the said benefit. (b) Employees are eligible for gratuity as per Gratuity Act whereas consultants are not eligible for the said benefit. (c) Employees are eligible for bonus/variable pay whereas consultants are not eligible for such payment. (d) Medical insurance is provided to all employees whereas consultants are not provided with su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 7. After considering the assessee's explanation, the Assessing Officer rejected the assessee's contention and held the payments made by the hospital to the doctors as salary u/s 192 and treated the assessee as the assessee in default u/s 201(1) insofar as the short deduction in computation between the amounts treated as salary and professional fees and completed the assessment relying on the following decisions: 1. St. Stephens Hospital v. Dy. CIT [2006] 6 SOT 60 (Delhi) 2. Max Mueller Bhavan, In re [2004] 268 ITR 31/138 Taxman 113 (AAR -New Delhi) 3. C.S. Mathur v. CBDT [1998] 99 Taxman 142 (Delhi) 4. Justice Deoki Nandan Agarwala v. Union of India [1999] 237 ITR 872 (SC) 8. The CIT(A) considering the argument of the assessee's counsel allowed the appeal of the assessee while placing reliance on the order of the Tribunal in the case of Dy. CIT v. Yashoda Super Speciality Hospital [2010] 133 TTJ 17/[2011] 44 SOT 87 (Hyd.)(URO) wherein it was held that assessee hospital having engaged the services of doctors on the basis of agreements whereby the doctors are free to treat the patients at the hospital at their own d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis supplied). (d) In consideration of the above, the doctors are offered an all inclusive remuneration fee of Rs. 1,75,000/- per month from the assessee during the tenure of the first five years. (e) However, after two years apart from Rs. 1,75,000/- as remuneration fee per month, the doctors will also be eligible for 50% of the professional charges earned in excess of the remuneration fees. Professional charges is defined as the doctors charges, charged by the assessee to patients and invasive consultation charges. (f) The doctors shall observe and follow all hospital protocol rules regulations and code of conduct as prescribed by the assessee from time to time (emphasis supplied). 10. The DR further submitted that the terms and conditions mentioned above are similar to those in the case of other full time consultant doctors. As seen from the terms of the above mentioned retainer ship appointments/ arrangement letters, it is clear that the "Full time consultant doctors" are governed by the rules and. regulations of the assessee. They are paid a monthly remuneration. This type of arrangement gives rise to "Employer and Employee" relationship. Since the relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorized as perquisites under the Income Tax Act are individual components governed by separate Statutes making the employer to fulfil these statutory conditions "on demand by the employee". Merely because the employee does not demand especially when a substantial remuneration is paid mostly per month or per annum, the emphasis on absence of such things becomes irrelevant. There are many types of employments which are vogue without the above benefits to the employees such as temporary employees. Even Gratuity is payable to employees in the Government only after completing a minimum period of 20 years, and thus and lack of Gratuity payment before 20 years does not take back the character of contract as employee. 14. The DR submitted that in clause (vi) it has been mentioned that Doctors who applied, were allowed to have their own private practice or allowed to work for different hospitals of their choice. In this regard, the assessee has furnished evidence of permission to practice some Doctors before the CIT(A). However, the Assessing Officer has not been privileged to such piece of evidence either during the original proceedings or by virtue of Rule 46A(3). Hence this piece o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal at Page No. 10 has given a finding that some senior Doctors were allowed to have their own private practice or worked for different hospitals of their choice. He submitted that for such a stand, necessary evidence was not placed before the Assessing Officer. Thus, this amounts to admitting additional evidence by the CIT (Appeals) without following the obligatory opportunity extended to the Assessing Officer under Rule 46A(3). The order of the CIT (Appeals) is also incomplete in not giving a clear cut finding as to whether the relationship between consultants and hospital is that of employer and employee or otherwise but instead the CIT (Appeals) has diverted the matter to the decision of Apex Court in Hindustan Coco-cola Beverages (P.) Ltd. v. CIT [2007] 293 ITR 226/163 Taxman 355 . 17. According to the learned DR the order of the CIT (Appeals) is bad in law for not giving a clear cut finding as arising from the submissions furnished before him but merely accepted the submissions of the assessee without going into the merits or calling out the relevant facts. In the process, he has also admitted additional evidence without giving opportunity to the Assessing Officer. Hence, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors are not made available for specific hours, the huge remuneration paid to them is charity. However, absence of such perquisites do not categorize the consultant Doctors or does it take away core of employment as the contract signed bind the doctors to rules, regulations, protocol and code of conduct. Further, if a few Doctors are permitted to undertake or setup private practice on their own, this does not take central character of exclusivity in employment as laid down in the clauses of agreement. He submitted that reference may be taken to the service conditions of Doctors working in Govt. Hospitals who are allowed to setup their private practice outside the hospital hours. If a few Doctors are permitted to setup private practice outside the clause of exclusivity, this does not alter the nature of contract. 19. The DR submitted that in the case of St. Stephen's Hospital (supra), the key factor pointed out by the Tribunal for determining the nature of the contract is as emerging from the clauses of the contract. The relevant extract of the head note of the contract is given here. Thus, the under lying implication of the agreement is material factor for determining the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company rules applicable from time to time. 5. You shall abide and be bound by the establishment's Service Rules, as these Service Rules shall form part of this contract of employment. You will also carry out and abide by any instruction, House Rules and Office Orders issued by the Management from time to time. Your appointment and continuation in service is subject to satisfactory verification of our credentials, testimonials, etc., and not having concealed any material information from us or having given false particulars in your application. 6. You will be on probation for a period of Twelve Months from the date of your appointment which if deemed necessary may be extended. During the period of probation, either side will be entitled to terminate the employment relationship without assigning any reason, by giving one month's notice in writing or by payment of one month's salary in lieu of such notice to other side. On successful completion of your probation period, you shall be eligible for confirmation in the service of the Company and the same shall be communicated in writing to you. In case you do not receive this written communication, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s written or otherwise, of any work with which you may be associated. It is, however, mutually agreed that this undertaking shall in no way affect your right to make use of the general knowledge and skill, which you have acquired in the service of the Company. 12. If you or your dependant family members currently and during the tenure of employment have a financial/gainful interest in any business with WOCKHARDT GROUP OF COMPANIES, then it would be obligatory on your part to make a written declaration to this effect to the Management. In future, if you or your dependent family members enter into any such business, the same may be informed immediately to the Company. 13. If at any time you shall, by your conduct, render yourself incompetent to perform your duties or if you should be dishonest, disobedient, intemperate, irregular in attendance, commit, any act subversive of discipline and good conduct or an act unbecoming of an employee, any breach of the terms of your appointment or any of its stipulations herein contained, the Company shall, without prejudice to any of its rights under the terms herein be entitled to terminate your employment forthwith without notice or payment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s will be liable to be terminated on that count. You are requested to please signify your acceptance of the terms and conditions hereinabove by signing and returning to us the duplicate copy of this letter. We look forward to a long and mutually beneficial association. Yours cordially, for Wockhardt Hospitals Limited, GENERAL MANAGER. I accept the above terms and conditions, Signature: ________ Date: ________ " 22. We have also carefully gone through the offer letter issued to Dr. Shailender Singh which is as under: "25.06.2005 Dr. Shailender Singh H.No. 6-3-668/10/16 Durganagar Colony, Punjagutta Hyderabad Dear Dr. Shailender Singh, Further to our discussions, we take great pleasure in offering you as Consultant for the Cardiology services with Wockhardt Hospitals in Hyderabad on retainership basis. The terms of retainership are as follows: 1. You shall act exclusively for Wockhardt Hospitals as Consultant in Cardiology and shall not render similar services directly or indirectly to any person, firm, Company, Institution or any healthcare facility engaged in similar business and providing similar services in India or elsewhere unless specifically permitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same to occur. 10. You shall also not disclose, use, disseminate or publish any technical, clinical and commercial information with which you become acquainted or of which you become aware during the course of this retainership or use the same in any public forum including seminars/conferences without the prior written consent of Wockhardt Hospitals. 11. You shall observe and follow all hospital protocols, rules, regulations and code of conduct as prescribed by Wockhardt Hospitals from time to time. 12. Upon termination of this retainership arrangement, you shall return. to Wockhardt Hospital the property, assets, tools, equipments and materials entrusted to you or in your possession at the time of such termination. You shall also not retain any copies or reproduction of any documents in physical, electronic, or any format relating to the affairs of Wockhardt Hospital. 13. This arrangement shall not give rise to any relationship of employer and employee between Wockhardt Hospital and you and this engagement is solely on retainership basis for execution of specific responsibilities as stipulated herein and as mutually discussed and agreed from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo months' salary in lieu of such notice to each other. As seen from the appointment order it can be easily said that the doctors are employees of the assessee and being so, the relation between the assessee and the doctor was that of an employer and employee and the remuneration paid to them in terms of the said appointment order was salary which attracted the provisions of section 192 of the Act. 25. Before us the learned AR relied on various case-law in support his contention to show that there was no employer and employee relationship between the assessee and the doctors and the remuneration paid by the assessee to the said doctor was not "salary" attracting the provisions of section 192. In our opinion, the various case law relied on by the assessee's counsel are on the facts of those cases and on consideration of facts of the present case, in our opinion, those case-law cannot be applied to the case of the assessee. More so, in the present case the doctors are governed by the service rules of the assessee and it was specifically mentioned in the appointment order that it was a contract for employment and the doctors are liable for retirement on attaining the age of 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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