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TMI Blog2013 (9) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 (in short the Act ) for the financial years 2008-09 and 2009-10. As the grounds of appeal and the issues involved, in both appeals are identical, the same are disposed of by way of single consolidated order for the sake of convenience. As the grounds of appeal raised in both these appeals are similar, the grounds of appeal as raised in I. T. A. No. 731/Chd/2012 are reproduced hereunder as illustrative case : (i) The learned Commissioner of Income-tax (Appeals), Chandigarh has erred in law in deleting the addition made by the Assessing Officer on the ground that the Assessing Officer was not right in concluding that there existed an employer-employee relationship between the hospital and the professional doctors and in treating the person responsible as the assessee in default under section 201(1) of the Act for short deduction of tax at source by taking the amounts to be under section 192 and not under section 194J and in charging interest under section 201(1A) of the Act, on the following grounds : (i) The learned Commissioner of Income-tax (Appeals), Chandigarh, has relied upon the following case law given by counsel of the assessee : (a) Deputy CIT v. Yashoda S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant agreement(s) clearly reveals that there does not exist employer-employee relationship. The doctors are just providing professional services and he supported the order passed by the Commissioner of Income-tax (Appeals). However, the learned authorised representative filed brief synopsis for both assessment years, which is reproduced as under : Brief synopsis (on behalf of the assessee) Issues 1. Whether the assessee-company was required to deduct the tax under section 192 of the Act and not under section 194J of the Act from the payments made to the doctors, who worked with the hospital as consultants and shared the fee received from patients. 2. Whether there existed any employer and employee relationship between hospital and the professional doctors. 3. Whether the assessee-company can be declared as an assessee in default and therefore the differential tax (between TDS worked out on the basis of section 192 of the Act and TDS deducted from payments made to the doctors under section 194J of the Act) could be recovered from it along with interest under section 201(1A) of the Act. Facts The assessee-company is running hospital under the name ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is absent. (v) Doctors have agreed to share the discount offered to patients. (2) The doctors enjoy complete professional freedom, they define working protocol, have a free hand in treatment of patients and there is no control of the hospital by way of any direction to the doctors on the treatment of patients. (3) Doctors fix their own OPD hours and are available on call in case of emergency. They are working in their professional capacity and not as employees. (4) Mere fixing hours for availability of the doctors and not permitting them to work with other organisation does not create an employer-employee relationship. There is a condition in some of the agreements whereby hospital is restricted to appoint or hire alternative doctors/consultants, which condition is not found in cases where there is employer-employee relationship. (5) The doctors are not entitled to leave travel concession, concession in medical treatment of relatives, provident fund, leave encashment and retirement benefits like gratuity. The professional doctors are required to follow some defined procedure to maintain uniformity in action and some administrative discipline but this does not mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) A master has the superior choice for control and direction of the servant. The servant represents master's will in ultimate result of the work and also in the details. (vii) The indicia of contract of the service are : (a) Master's power of selection of the servant ; (b) The payment of wages or other remunerations ; (c) Master's right to control the method of doing the work ; (d) Master's right of suspension or dismissal of the employee ; (e) It is the master's right to terminate the employment, to take disciplinary action, to describe the conditions of the service and the nature of the duties performed by the employee ; (f) Master's right to issue directions to the employee about the manner and method of the work; and (g) It is his right to determine the source from which wages or salary is paid. (2) The doctors have entered into 'contract for service' and not 'contract of service'. The 'contract for service' implies a contract whereby one party undertakes to render services to or for another in the performance, for which he is not subject to detailed direction and control but exercises professional or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only in connection with promotion of the nature of their work. This aspect also does not bring them in the category of an employee. The consultant is not entitled to participate in any welfare benefit plan and programme maintained by the hospital for other employees. (7) The doctors were never under the employment of the hospital and therefore any consultation fees received could not take the character of salary. (8) Mere holding of an office does not create a relationship of employer-employee. In the present case relationship between doctors and the hospital is essentially that of a professional consultant and a client. (9) Where doctors have filed the return of income, declared the receipts from the hospital under the head 'Income from business and profession' and assessments having been completed, no further tax can be recovered from the hospital as it is not possible to adjust the differential tax against any tax demand of the doctors whose assessments are final. Once receipt from hospital is offered for tax and assessed, the deductor has no further liability. (10) For explaining employer-employee relationship we rely on the following authorities : (i) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration. (ii) The monthly payment was not related to the number of patients treated by them or the amount charged to the assessee. (iii) The doctors were governed by the service rules of the assessee. Their leave entitlement was also in accordance with the assessee's rules. The doctors were under probation period. (iv) That assessee had discretion to terminate the appointment. (v) 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 58 years. (vi) During the period of employment, either side will be able to terminate the employment by giving two months' notice in writing or by payment of two months' salary in lieu of such notice to each other. (vii) The real intention of the parties, apparent from the appointment letter issued to the doctors was to have an employer and employee relationship between them and it was not a case of appointment of consultants. Annexure A A contract for service and a contract of service In the case of a contract for service, the master can order or require only what is to be done, while in the case of contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relationship of an employer and an employee, it all depends upon the contract under which the individual who receives the remuneration is employed. In employment, there are certain basic concepts: (i) A servant does the work for the master and not for himself; (ii) The servant acts according to the liking of the master and is subject to the master's control and supervision. (iii) The servant works for remuneration which may be paid in a lump sum or on commission basis, or partly in one and partly in the other irrespective of profits in the work ; (iv) The servant is restricted in delegating the work to another ; and the person for whom the work is done provides the tool and equipment. 4. Lakshminarayan Ram Gopal and Son Ltd. v. Government of Hyderabad [1954] 25 ITR 449 (SC) The distinction between a servant and an agent is thus indicated in Powell's Law of Agency, at page 16 (a) Generally a master can tell his servant what to do and how to do it. (b) Generally a principal cannot tell his agent how to carry out his instructions. (c) A servant is under more complete control than an agent, and also at page 20: (a) Generally, a servant is a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospital, known as Ivy Hospital at Mohali. The Department conducted a TDS inspection under section 133A of the Act, at the business premises of the assessee-appellant on September 28, 2011. During the course of such inspection and assessment proceedings under section 201(1)/201(1A) of the Act, it was noticed by the Assistant Commissioner of Income-tax (TDS) that the hospital is running different OPDs, apart from indoor patients' treatment. The procedure of treating patients in OPD is that when a patient comes for the treatment in hospital's OPD, he deposits a consultation fee for the particular medical department in which he wants to consult, at the cash counter of the hospital and he is given a receipt for it and then he consults the doctor to whom he wants to consult. The concerned doctor prescribes the treatment on the hospital's letter pad. If the patient is to be admitted in the hospital for indoor treatment, then he is admitted under his treatment. The working days and hours of the doctors working in OPD of the hospital, are fixed and as per the contract between these doctors and the hospital they are not allowed to do their own practice or work with another hospit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and professional doctors. The various clauses of the memorandum of understandings need to be examined in the light of the criteria laid down by the courts to determine whether the doctors attached to the appellant hospital are employees of the hospital. The test which is uniformly applied in order to determine whether a particular relationship amounts to employer-employee relationship is the existence of a right of control in respect of the manner in which work is to be done by the person employed. The nature and extent of control which is requisite to establish the relationship of employee and employer varies from business to business. A bare perusal of the case law relied upon by the appellant and submissions made in the synopsis reveals that there does not exist employeremployee relationship between the assessee-appellant and the persons providing professional services. On consideration of the agreement in its entirety vis-a-vis the case law relied upon by the assessee-appellant, it is evident that it is not a case of employer-employee relationship between the assessee-appellant and the doctors. Therefore, having regard to the detailed analysis and findings of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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