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TMI Blog2015 (3) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... a detailed, well reasoned order is passed by the Tribunal on this issue which we may not find fault with. It is also pertinent to note that the doctors have filed their return of income for the relevant assessment years showing the income received from the assesseee-Company as professional income and the same is said to have been accepted by the department. As decided in CIT (TDS) vs APOLLO HOSPITALS INTERNATIONAL LTD. reported in (2012 (8) TMI 459 - GUJARAT HIGH COURT ) the consultant doctors were not getting salary, but the payment to them was in the nature of professional fees liable to deduction under Section 194J and Section 192 of the Act had no application.- Decided in favour of assessee. Lease rent paid to Medical Relief Society of South Canara under the guise of repayment of loan taken by the lessor under a supplementary agreement - whether would not attract TDS u/s 194-I and tax at source need not be deducted when the said arrangement was external to deductions at source? - ITAT deleted tds levy - Held that:- Contention of the learned counsel appearing for the assessee that CIT had issued an order under Section 10(23- C)(via) of the Act, by virtue of which the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sor under a supplementary agreement would not attract section 194-I of the Act and tax at source need not be deducted when the said arrangement was external to deductions at source? 2. Facts in brief are: - A survey under Section 133-A of the Act was conducted at the business premises of the assessee on 26.9.2007 by the competent authority in order to ascertain the TDS compliance with respect to Section 192 of the Act on two issues i.e., (i) Issue of consultant doctors (ii) Issue of rent 3. The Assessing Officer(AO) found that there were three categories of doctors viz., A, B and C appointed by the assessee-Company and the assessee has made the TDS on the sum paid to the doctors under Section 194(J) of the Act which deals with the TDS on payment of fee for professional or technical services. The AO held that there existed a relationship of employer and employee between the assessee Company and the doctors engaged by the Company, and applying the provisions of Section 192 of the Act computed the TDS liability under Section 201(1) and 201(A) of the Act. As far as the issue of the rent, the AO noticed that the assessee - company has entered into a memorandum of agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of its claim that the recipient was exempted from payment of tax under Section 10(23)(c) of the Act. 8. Per contra, learned Counsel appearing for the respondent Sri Parthasarthy contended that Section 194(I) of the Act, contemplates TDS liability only in two circumstances i.e., (a) use of any machinery or plant or equipment (b) use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings. The Memorandum of Agreement dated 01.04.2005 entered into between the assessee Company and the MRS specifically stipulates that MRS has granted the right to manage, administer and control the hospitals to the assessee Company on and from 1st April 2005, such management, administration and control of the hospital cannot be construed as use of any machinery or plant or equipment or use of any land or building as provided under Section 194(I) of the Act and thus, the provisions of Section 194(I) are not applicable to the present case. Further, it was argued that clause 2.1(b) of the said memorandum of agreement dated 01.04.2005 was amended by an agreement dated 29.05.2006 and as per the said amended agreement, lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relationship of employer and employee we have to examine whether the contract entered into between the parties is a 'contract for service' or a 'contract of service'. There are multi-factor tests to decide this question. Independence test, control test, intention test are some of the tests normally adopted to distinguish between 'contract for service' and 'contract of service'. Finally, it depends on the provisions of the contract. Intention also plays a role in deciding the factor of contract. The intention of the parties can also determine or alter a contract from its original shape and status if both parties have mutual agreement. In the instant case, the terms of contract ipso facto proves that the contract between the assessee-Company and the doctors is of 'contract for service' not a 'contract of service'. The remuneration paid to the doctors depends on the treatment to the patients. If the number of patients is more, remuneration would be on a higher side or if no patients, no remuneration. The income of the doctors varies, depending on the patients and their treatment. All these factors establish that there is no relations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment years showing the income received from the assesseee-Company as professional income and the same is said to have been accepted by the department. 18. High Court of Gujarat, in the case of CIT (TDS) vs APOLLO HOSPITALS INTERNATIONAL LTD. reported in (2013 (359) ITR 78) (Gujarat) has taken a similar view that the consultant doctors were not getting salary, but the payment to them was in the nature of professional fees liable to deduction under Section 194G and Section 192 of the Act had no application. 19. We are in agreement with the findings of the Tribunal on this issue. Accordingly, we answer the first substantial question of law in favour of the assessee and against the revenue. Regarding question no.2: The AO has relied on the memorandum of agreement dated 1.4.2005 entered into between the assessee-company and MRS. Clauses 1 and 2 of the said agreement reads thus: MRS hereby grants to MHS the right to manage, administer and control the Hospitals on and from 1 April, 2005. On and from that date the management administration, day-to-day operations and financial control of the Hospitals and of all the properties of the Hospitals (including of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GE Capital Service Rs.1,529.07 lakhs ICICI ₹ 400.00 lakhs Wipro GE Medical systems ₹ 86.94 lakhs TATA Honeywell ₹ 194.20 lakhs MAHE ₹ 62.20 lakhs Total Rs.2,272.41 lakhs 2.1 (b)(i) The Loan along with interest thereon shall be re-paid by MHS for and on behalf of MRS. The said Loan shall be accounted as receivable from MRS by MHS in its books of accounts and shall be accounted as payable to MHS by MRS in its books of account. 2.1(b)(ii) The loan of ₹ 1,666.67 Lakhs taken by MRS for setting up Post Graduate Medical Education Programme shall be paid off by MRS from the revenues that accrue to MRS from the said Post Graduate Medical Education Programme 20. As per the said covenant stipulated in the said agreements, the assessee-company undertook to pay an amount of ₹ 5,00,00,000/- (Rupees Five crores only) per annum to MRS and further undertook to pay interest and principal in respect of the loan of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or by any other mode, shall be liable to deduct income tax. Further, for the purposes of this Section, the word rent is defined under the explanation. This definition clarifies that, rent means any payment by whatever name called under any lease, sublease, tenancy or any other agreement or arrangement for the use of (a) to (h) provided in Explanation to Section 194-I of the Income Tax Act. The terms of agreement to make the payment towards 'consideration' for using the land, building with infrastructure squarely falls under Section 194(I) though styled as lease towards right to manage, administer and control the hospitals, which undoubtedly includes building and infrastructure, is not disputed by the assessee. 23. In the case of CIT vs PANBARI TEA COMPANY LTD. (1965(56) ITR (sh.N.)30.), the Apex Court held as follows: The real test of a salami or premium is whether the amount paid, in a lump sum or in instalments, is the consideration paid by the tenant for being let into possession. When the interest of the lessor is parted with for a price, the price paid in premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irtue of which the assessee is not liable to deduct TDS under Section 194-I as the recipient itself is exempted from levy of tax, is not acceptable for the reasons that the said order was issued by the CIT, Panaji for the assessments year 2005-06 to 2007-08 subject to the compliance of conditions (i) to (vi) specified therein. The said conditional order shall not absolve the assessee from the deduction of TDS liability. The compliance/non-compliance of the exemption conditions by the recipient in advance cannot be foreseen in advance by the assessee-Company. Moreover, TDS liability under Section 194-I is not dependent on the tax liability/entitlement to exemption of the recipient. Irrespective of the tax exemption/tax liability of the recipient the assessee has to discharge the TDS liability under Section 194(1). No certificate under Section 197 of the Act is furnished by the assessee to establish that the recipient is exempted from the tax liability. 27. For the foregoing reasons, we hold that the payment made towards consideration is in the nature of 'rent' as provided under Section 194(I) of the Act. Section 194(I) of the Act shall be applicable for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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