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TMI Blog2015 (10) TMI 2252X X X X Extracts X X X X X X X X Extracts X X X X ..... le Bombay High Court in the case of Grant Medical Foundation (2015 (2) TMI 457 - BOMBAY HIGH COURT), it has to be held that no employer-employee relationship subsist between assessee hospital and the FTCs Doctors. Thus lower authorities have erred in treating the assessee as an assessee in default within the meaning of section 201(1) of the Act qua the payment of professional fee to FTCs Doctors. - Decided in favour of assessee. Payment made by the assessee towards annual maintenance of the machineries - TDS u/s 194C OR 194J - Held that:- Annual Maintenance Contracts (AMC) of medicale quipments machines etc. is not in the nature of professional or technical services as construed under the provisions of Section 194J of the Act - Tax has been rightly deducted by assessee on the annual maintenance charges u/s 194C of the Act. Consequently, it is held that the assessee cannot be deemed to be an "assessee in default" within the meaning of section 201(1) of the Act. Consequently, no interest under section 201(1A) of the I.T. Act is leviable.- Decided in favour of assessee. Tax deductible at source on payments made for pest control expenses - TDS u/s 194C OR 194J - Held that:- CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njoy any independent status of a Consultant, but they act as an employee of the assessee company. The Assessing Officer concluded that in respect of the remuneration paid to the FTCs, there was an employer-employee relationship and thus, assessee was required to deduct tax at source in terms of the provisions of section 192 of the Act. In other words, as per the Assessing Officer the payments made by the assessee company to such FTCs were in the nature of 'salary' and hence tax was required to be deducted under section 192 of the Act. As a consequence of the aforesaid, the Assessing Officer held that assessee had short deducted the tax at source on payment of remuneration to FTCs and accordingly, he held the assessee in default within the meaning of section 201(1) of the Act and such shortfall was determined at ₹ 4,61,25,376/- and the related interest chargeable under section 201(1A) of the Act was determined at ₹ 2,21,40,180/- in relation to the assessment year 2008-09. 3.1 In appeal before CIT(A) assessee contended that there was no employer-employee relationship between FTCs Doctors and the assessee and the distinction between the two was sought to be canv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of information/results of clinical research outside assessee's hospital; and, that a notice of three months was required to terminate the arrangement between the assessee and the Doctors. As per the CIT(A), in the appointment letter of FTCs Doctors there was a standard clause which stated that the Doctor was to be governed by the bye-laws and the general rules and regulations of the appellant hospital. In this manner, the CIT(A) concluded that the relationship between the assessee and the FTCs Doctors was purely that of an employer and employee and the remuneration paid to them as a result of said relationship was in the nature of 'salary', which would attract the provisions of section 192 of the Act. In this manner the CIT(A) has affirmed the action of the Assessing Officer against which assessee is in appeal before us. 3.2 Against the aforesaid stand of the lower authorities the Ld. Representative for the assessee vehemently pointed out that the remuneration paid by the assessee to the FTCs Doctors was not in the nature of salary to be considered under section 192 of the Act and, rather it was in the nature of professional fee on which tax was liable to be deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following judgments to support his plea that the payments to the FTCS was in the nature of professional fee on which tax is liable to be deducted in terms of section 194J of the Act:- 1. CIT vs. Grant Medical Foundation , 375 ITR 049 2. CIT (TDS) v. Apollo Hospitals International Ltd., 359 ITR 78 (Guj) 3. CIT vs. Manipal Health System Limited, 375 ITR 509(Kar). 4. CIT(TDS) vs. Yashoda Super Speciality Hospital, 365 ITR 356(AP) 4. On the other hand, Ld. Departmental Representative has referred to the reasoning advanced by the lower authorities in their respective orders, which we have already adverted to in the earlier partof this order and is not being repeated for the sake of brevity. 5. We have carefully considered the rival submissions. The crux of the controversy is as to whether as per the terms of agreement with the FTCs Doctors, the tax was liable to be deducted as per section 194J of the Act or as per section 192 of the Act. The case set up by the Revenue is that the terms of appointment of the FTCs Doctors reflects that there is a relationship of employer-employee between assessee and the Doctors and, therefore, tax is liable to be deducted under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreements envisage engagement of the expertise and skill of the Doctors which would be utilized by the assessee hospital in rendering services to its patients. Factually speaking, the terms of agreement do not show that such Doctors were treated by the assessee as regular employees because the employee-benefits like provident fund, superannuation benefits, leave encashment, etc. were not extended to them. At this stage we may also refer to a somewhat similar situation considered by the Hon'ble Bombay High Court in the case of Grant Medical Foundation (supra). In the said case also, the assessee hospital had engaged Doctors for a tenure on a variable remuneration. The Assessing Officer interpreted the conditions of engagement as to mean that there was an employer- employee relationship, whereas assessee had contended that it was a case of payment of professional fee. The following discussion in the order of the Hon'ble High Court is worth of notice:- 37. In relation to other category of doctors there was a dispute. The Assessing Officer and the Commissioner of Income tax (Appeals) concluded that though these categories of doctors had a fixed remuneration and variab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, in relation to the second category of doctors drawing fixed plus variable pay with written contracts, the terms and conditions of Dr. Zirpe and Dr. Phadke have been referred and the Tribunal concluded that neither of the doctors was entitled to provident fund or any terminal benefits. Both were free to carry on their private practice at their own clinic or outside hospitals but beyond the hospital timings. Both doctors treated their private patients from the hospital premises. All of which could be seen as indicators that they were not employees but independent professionals (see paragraph 14). However, they were found to be sharing a overwhelming number of attributes of employees. In relation to that the contract seems to have been bifurcated or split up or read in bits and pieces by the Commissioner of Income-tax (Appeals). The Leave Rules were held to be applicable in the case of Dr. Phadke and there were fixed timing and fixed remuneration. Now, it is inconceivable that merely because for a certain period of time or required number of hours the doctors have to be at Ruby Hall Clinic means they will not be entitled to visit any other hospital or attend patients at it nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not find that any stipulations regarding working hours, academic leave or attachments would reveal that these doctors are employees of the assessee. In fact, Dr. Zirpe was appointed as a junior consultant on three years of contract. He was paid emoluments at fixed rates for the patients seen by him in the OPD. That he would not be permitted to engage himself in any hospital or nursing home on pay or emoluments cannot be seen as an isolated term or stipulation. In the case of Dr. Uday Phadke, we do not find any such stipulation. In these circumstances, the only agreement between the parties being that certain private patients or fixed or specified number seen by the consultant could be admitted to the assessee-hospital. That would not denote a binding relationship or a master-servant arrangement. A attractive or better term to attract talented young professionals and too in a competitive world would not mean tying down the person or restricting his potential to one set up only. The arrangement must be looked in its entirety and on the touch stone of settled principles. The Tribunal was right in reversing the findings of the Assessing Officer and the Commissioner of Income-tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals) order on ground No. 2 and from paragraph 20 onwards on ground No. 3 do not suffer from any serious legal infirmity. The appreciation and appraisal of the factual materials is not such as would enable us to interfere in our limited jurisdiction. Our further appellate jurisdiction is limited. 40. As a result of the above discussion, we need not advert to the entire case law in the field. Suffice it to note that the Revenue relied on the judgments which were rendered in cases where the terms and conditions denoting employee and employer relationship included a fixed pay or monthly remuneration only. For all these reasons we are of the opinion that the questions of law termed as substantial and framed as above would have to be answered against the Revenue and in favour of the assessee. 8. Similarly, the Hon'ble Karnataka High Court in the case of Manipal Health System Limited(supra) has held as under:- 13. To decide 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 tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the Consultants, namely gratuity, provident fund, leave encashment, etc. 10. At the time of hearing the Ld. Representative for the assessee also made a statement at Bar that the recipient FTCs Doctors have filed their individual returns of income showing the income received from the assessee as professional income, and the same has been accepted by the Department. There is no contravention by the Revenue to the aforesaid. 11. Considering the entirety of facts and circumstances emerging from the material on record, we hold that the payments made to the FTCs Doctors are in the nature of professional fees liable for deduction of tax at source in terms of section 194J of the Act and that there does not exist any employer-employee relationship so as to invoke the provisions of section 192 of the Act. Consequently, on this aspect assessee has to succeed. 12. Before parting, we may refer to the decision of the Hon'ble Delhi High Court in the case of St.Stephens Hospital vs. DCIT, 6 SOT 60 (Del), which has been relied upon by the Revenue before us. We have perused the said decision and find that the same is inapplicable to the facts before us. In the case of St. Stephen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer held the assessee as an assessee in default within the meaning of section 201(1) of the Act and such shortfall was determined at ₹ 3,25,569/- and the related interest chargeable under section 201(1A) of the Act was determined at ₹ 1,56,273/- 16. On this aspect, CIT(A) has accepted the stand of the assessee that payments in terms of the contract for annual maintenance of the machines was liable to be subject to deduction of tax at source under section 194C of the Act. Accordingly, Revenue is in appeal before us. 17. Another aspect raised in the appeal of the Revenue is with regard to the tax deductible at source on payments made for pest control expenses. The assessee deducted tax at source on such payments by invoking section 194C of the Act, whereas the Assessing Officer held that the tax was liable to be deducted under section 194J of the Act. The assessee was held as an assessee in default under section 201(1) of the Act on this aspect and the interest chargeable under section 201(1A) was determined at ₹ 52,377/- and ₹ 25,141/- respectively. On this aspect also the CIT(A) concurred with the assessee and accordingly the Revenue is in appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 194C of the Act and not under Section 194J of the Act. The Hon'b1e ITAT has in this regard followed the decision of Hon'b1e Madras High Court in the case of Skycell Communications Ltd, 251 ITR 53 (where it was held that the installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision of technical service to the customer for a fee). The decision in the case of Ultra Entertainment Solutions Ltd. (supra) cited by the AO is not applicable to the issue at hand because in that case, the question was regarding the nature of payments made by the assessee to another person 'P' who was engaged by the assessee is to carry out all operations connected with the selling of online lottery tickets on behalf of the assessee. 4.6 In view of above discussion therefore and respectfully following the above two decisions of Hon'ble Ahmedabad Tribunal, I hold that the expenditure on account of Annual Maintenance Contracts (AMC) of medicalequipments machines etc. is not in the nature of professional or technical services as construed und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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