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TMI Blog2017 (10) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... nary parlance presupposes manufacture, processing or industrial activity. In running a medical hospital question of generation of scrap is inconceivable. Therefore provisions of s.206C of the Act, ‘Prima Facie’ are not applicable to the assessee. AO is merely harbouring wrong notion that what is sold out by the assessee is scrap having zero value and such items are not usable. But, assessee is neither a trader nor a manufacturer generating or dealing in resale of scrap generated as waste material or unusable. Secondly, the assessee has sold the product under buy back and useable items i.e. hospital equipments and machinery. In view of the above, we find no infirmity in the order of CIT(A) and hence, the same is affirmed. - Decided against revenue Payments in the nature of Honorium - TDS purview of 192 OR under section 194J - Held that:- The assessee being a hospital, it is expected to maintain its image the reputation and image and this expectation of the hospital cannot be construed as exercising control and supervision over the doctors in their professional activities and thereby cannot lead to the conclusion that an employee-employer' relationship exists. We also find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to the order of CIT(A) holding that the provisions of 194C are applicable, as against the order of AO applying provisions of section 194J of the Act on the maintenance of specialized machines in hospitals for skilled professionals/ technical engineers and thereby charging short deduction of TDS under section 201(1) of the Act and consequential interest under section 201(1A) of the Act. For this Revenue in all the four years have raised identical worded grounds and for the sake of clarity, we are reproducing the ground as raised in AY 2007-08 in ITA No. 5045/Mum/2013 and will decide the issue on the basis of available facts in this year. The relevant grounds read as under: - 1. On the facts and circurnstances of the case and in law, the Id. CIT (A) erred by holding that provisions of sec. 194C are applicable and not the provisions of section 194J as held by the AO without appreciating the fact that the maintenance of specialized machines in hospitals call for skilled professional/technical engineers and cannot be held as single contractual charge and thereby erred in deleting the short deduction u/s. 201(l) and interest u/s. 201(1A). 2. On the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has also relk upon) Question 29: Whether a maintenance contract including supply of spare would be covered under Section 194C or 194J of the AC)? Answer: Routine, normal maintenance contracts which includes supply o spares will be covered tinder Section 194C. However, where technical services are rendered, the provision of Section 1 94J will apply in regard to the deduction at source. 4.7 The appellants claim is also supported by the decision of ITAT, Ahmedabad in the case of Gujarat State Electricity Corporation Ltd. vs. ITO, 3 SOT 468 (Ahd), wherein it was held that the payments made by the assessee company to Gujarat Electricity Board for entire operation and maintenance 6r'Power plant under a comprehensive contract could not be treated as payment 'fees for professional services as contemplated in section 194J but were covered by section 194C of the Act . Further, in another decision dated 30.09.2011 in ITA Nos. 3059 to 3061 3081/Ahd./2009 of Ahmedabad Tribunal in the case of Nuclear Power Corporation Ltd, it has been held that repairs and annual maintenance of computers do not involve services of technical nature so as to be assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised this issue and accepted the position of the assessee. He stated that the practice of AMC and TDS on such payments is established fact that the assessee is deducting TDS u/s 194C of the Act and this position is duly recognized by the Revenue for passed several years. After going through the AMC, filed by assessee in its paper book, we noticed that it is evident that AMC is necessary to keep medical equipments and other hospital equipments in good working condition and this process is normally carried out by skilled mechanics and not any qualified technician. We find that though these AMCs assessee is carry out routine normal maintenance which is covered by the provisions of section 195C and not as if technical services covered u/s 194J of the Act. This issue is covered by the decision of co-ordinate Bench of Mumbai Tribunal in the case of DCIT (TDS)-1(1) vs. Asian Heart Institute Research Centre Pvt. Ltd. in ITA No. 7051 7177/Mum/2012 for the AY 2008-09 and others following the decision of Ahmedabad bench decision in the case of Nuclear Power Corporation Ltd and holding that the annual maintenance charges are payment in the nature of contractual payments and will fall un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices u/s 9(1)(vii) of the Act and hence the assessee was required to deduct TDS 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 medical equipments ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 for the AY 2007-08 : - 3. In the facts and circumstances of the case and in law, the Id. CIT (A) erred by holding that income from sale of scraps being old equipment machinery would not attract provisions of TCS as per section 206C of the Act. 8. Briefly stated facts are that during the course of survey the AO observed that the assessee has shown income on sale of hospital equipments i.e. old equipments sold on the basis of buy back, wherein, according to AO the tax should have been collected u/s 206C of the Act being scrap sale. As the assessee failed to collect TCS the AO treated the assessee in default and charged TCS u/s 206C of the Act and held the assessee in default u/s 201 and consequently charged interest u/s 201(1A) of the Act. Aggrieved, assessee preferred the appeal before CIT(A) who allowed the claim of the assessee by observing in Para 5.5 as under: - 5.5 Since the appellant is a trust (i.e. AOP), it is not covered in the definition of seller given above. Furthermore, the sale of old equipments/machinery has been made by the appellant, either to its own employees or else under a buyback arrangement to its venders against the purchase of new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyer and employee of the assessee appointing its consulting Doctors and subsequently, the payments are in the nature of Honorium does not fall under the purview of 192 of the Act and the assessee has rightly deducted TDS under section 194J of the Act. For this Revenue has raised following ground No.4 in ITA No. 5045/Mum/2013 for the AY 2007-08: - 4. On the facts and circumstances of the case and in law, the Id. CIT (A) erred by holding that there was no relationship of employer - employee between the assessee and its appointed consultant doctors and consequently the payments of honorarium made by the assessee to its consultant doctors does not fall within the purview of section 192 of the LT. Act without properly appreciating the factual and legal matrix of the case as clearly brought out by the A.O in order u/s. 201(1)1201(1.4) of the Income-tax Act, 1961 and thereby erred in deleting the short deduction u/s. 201(l) and interest u/s. 201(IA). 11. Briefly stated facts are that the assessee is a charitable trust running hospital and research centre in Mumbai. The assessee is taking services from two types of doctors (1) Resident Doctors who are as employees of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes or retirement benefits. In these circumstances therefore, it was held by Hon ble Chandigarh ITAT that there was no employer and employee relationship between the assessee and the professional doctors. Hence the assessee had rightly deducted tax at source under section 194J from the payments made to the professional doctors The facts in the case of the appellant are rather more liberal in terms of service conditions of the so-called honorary doctors as discussed above. Hence it is quite clear that there is no employer-employee or master servant relationship between the appellant and the 'honorary doctors'. Thus, it is evident that the AO was not justified in holding the appellant to be an assessee in default. I hold accordingly. The demands of tax and interest raised by the AO under section 201(1)/201(1A) of the Act are hereby deleted Aggrieved, Revenue is in second appeal before Tribunal. 12. Before us the learned Counsel for the assessee, argued that the assessee appointed certain doctors who draw their fees based upon the patients treated by them (physiotherapist etc.) and on other times based upon time spent on the duty which is normally an 8 hourly duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarities in the two which essentially is necessary to draw the point that both are professionals. He chose to ignore assessee's submissions on the comparison between the assessee's employees entitled to provident fund, different categories of leave, gratuity, HRA, etc. benefits which the independent doctors were not entitled to. 14. Apart from the above, we are of the opinion that the real intention of the parties in the present case is appointment of consultants and not to create employer-employee relationship and accordingly TDS is liable to be deducted u/s 194J of the Act. Another aspect in this matter is that the fact that the TDS is liable to be deducted u/s. 194J of the Act on payment to the independent professional doctors, the AO has ignored the excess of TDS amount deducted u/s. 194J of the Act in certain cases, in comparison with the TDS liability determined u/s 192 of the Act, thereby raising a demand u/s 201(1). Further, these doctors have filed their return of income and declared the receipts from the assessee hospital and have paid taxes thereon. Accordingly, interest u/s. 201(1A) is not chargeable. The learned Counsel for the assessee also relied on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings are little curious. The Commissioner referred to the tests in paragraph 9 of the order at running page 62 and at internal page 14 in paragraph 10 the Commissioner concluded that doctors drawing fixed remuneration are full time employees. However, 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. The Leave Rules were held to be applicable in case of Dr Phadke and there were fixed timing and fixed remuneration. Now, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. All that the assessee admitted is the existence of a written contract and with the above terms. Those terms have also been perused by us minutely and carefully. We 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 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 looke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. The findings of fact from paragraph 16 onwards in the Commissioner's 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. In view of the above judgment of Hon ble Jurisdictional High Court and the facts of the case, we confirm the orders of CIT(A) in all the six years and this common issue of Revenue s appeal in all the six years is dismissed. 15. In the result, all these six appeals of Revenue are dismissed. Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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