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TMI Blog2023 (5) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... and remuneration paid to said doctors is salary which attracts provisions of section 192. As there is absence of employer and employee relationship. Therefore, opined that the department does not have individual materials to reassess the income of consultant doctors. As in CIT v/s. Grant Medical Foundation [ 2015 (2) TMI 457 - BOMBAY HIGH COURT] examined at length the issue as to when the engagement of the services of the doctors can be seen to be in the nature of employment. In this case also the Hon'ble High Court held the relationship between Professional Doctor consultant and the Hospital cannot be treated as Employer Employee relationship, unless there exist the specific Rules and Provisions in the contract of appointment between the consultant and Hospital. There is no error in the reasons given by the CIT(A) to delete additions made towards short deduction of TDS u/s. 201(1) and interest thereon u/s. 201(1A) in respect of payment made to consultant doctors. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. Short deduction of TDS - payment to annual maintenance charges for maintenance of medical equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. Whether 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. Whether the Learned CIT(A) failed to appreciate the fact that AMC for medical equipments is fee for technical services. Leave for adding / amending/ deleting the grounds during the hearing is sought. 3. The brief facts of the case are that the assessee company, M/s. Kovai Medical Centre and Hospital Limited is running a multispecialty hospital and providing health care service. In addition, the assessee company had branches for health care at City Centre Coimbatore, Erode, Sulur and Kovilpalayam. A survey u/s. 133A (2A) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) was conducted on 22.11.2021 in the business premises of the assessee. During the course of survey, it was noticed that TDS has been deducted u/s. 194J of the Act, towards the remuneration paid to the consultant doctors. The survey team observed that there exists an employer and employee relationship between consultant doctors and the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to these consultant doctors. However, fact remains that these doctors are independent consultants, and can have their private practice outside KMCH and also not governed by various other laws applicable to employee. Therefore, it cannot be said that payment made to consultant doctors would be subjected to TDS u/s. 192 of the Act. The assessee had also negated observations with regard to the payment made to AMC providers and argued that agreement between assessee and AMC providers is a simpliciter works contract for providing various repair and maintenance services, but does not involve any kind of managerial and professional services to make TDS u/s. 194J of the Act. The assessee had also argued that TCS provisions is applicable only to manufacturing entities and since the appellant is a service industry, believed that it is not liable to collect TCS on scrap sales. 5. The AO, after considering relevant submissions and also taken note of relevant evidences collected during the course of survey u/s. 132(2A) of the Act dated 22.11.2021, observed that the assessee has categorized consultant doctors as full time consultant, visiting consultant and special consultants. The full time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviders towards maintenance of medical equipment, the assessee has made payment to various AMC providers and has deducted TDS @ 2% as applicable to works contractors in terms of provisions of section 194C of the Act. The AO, held that payment made to AMC providers is nothing but fees for technical services as defined u/s. 194J of the Act and on it, the assessee should have deducted TDS @10% but not 2% as applicable to works contract. Therefore, rejected arguments of the assessee and computed short deduction of TDS u/s. 201(1) of the Act at Rs. 40,71,233/- and interest thereon u/s. 201(1A) of the Act at Rs. 34,91,836/- in all total of Rs. 74,91,069/-. The AO had also computed short deduction of TCS @ 1% on total scrap sales and computed on TCS at Rs. 21,635/- and interest thereon at Rs. 18,173/- in all total of Rs. 39,808/-. 7. Being aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has filed detailed written submissions on the issue in light of certain judicial precedence and argued that in health care industry, a unique model is employed by all hospitals, where two types of doctors are employed. The first categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applicable for the consultant doctors. The ld. CIT(A), observed that from the terms and conditions as GFP at point V, it is apparent that the doctors working at KMCH are permitted to do private practice albeit subject to certain conditions. The appearance of such Clause in GFP is a clear indication of the independence of doctor thereby the absence of Employer-employee relationship. The CIT(A), further observed that para 2.13 of the order, the AO observed that the consultant doctors governed by working hours, leave and fees has been fixed by the KMCH and also they are barred from private practice, but fact remains that the selection policy of any professions by any company would definitely involve the assessment of credentials, skill and knowledge of that professional by way of conducting interview. Similarly, the specified working hours and leave rules appears to be more for the purpose of ensuring the presence of the doctors in the hospital for a particular time period to attend the patients. The manner of fees fixation as appearing in point VI clause 6 of GFP, and of private practice as appearing in point V of GFP are more indicative towards the independence of consultant doct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctors is akin to employee doctors and thus, the assessee should have deducted TDS u/s. 192 of the Act. The ld. DR, on the issue of short deduction of TDS on AMC charges submitted that AMC contract for specialized medical equipment required specialized skill and knowledge which includes technical knowledge. Therefore, any payment made to said contractor is nothing but fees for technical services, which attracts provisions of section 194J of the Act. The ld. CIT(A), without appreciating relevant facts simply held that AMC contract is nothing but works contract and assessee has rightly deducted TDS u/s. 194C of the Act. 11. The ld. Counsel for the assessee, on the other hand supporting the order of the ld. CIT(A) submitted that the appellant is following a unique model where two kinds of doctors have been employed in the hospital. The appellant appointed employee doctors who are governed by various laws including leave, bonus, superannuation benefits etc. Whereas, the consultant doctors are employed for fixed monthly remuneration without any benefits like leave, bonus, leave encashment, superannuation etc. The assessee has deducted TDS on payment made to doctors u/s. 194J of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of CIT vs Grant Medical Foundation (Supra), where the issue has been decided as per which AMC charges paid for maintenance of specialized medical equipment is a simpliciter works contract and TDS u/s. 194C is applicable. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the AO and their order should be upheld. 13. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The sole basis for the Assessing Officer to compute short deduction of TDS u/s. 201(1) and interest thereon u/s. 201(1A) of the Act is survey conducted u/s. 133A(2A) of the Act on 22.11.2021, in the business premises of the appellant company. During the course of survey, on the basis of certain evidences including joining report, appointment letter, employees confidentiality agreement and revised guidelines for practice of medicine at KMCH, the AO opined that the payment made to consultant doctors is akin to salary, on which the appellant should have deducted TDS u/s. 192 of the Act. The AO has discussed the issue at length and came to the conclusion that consultant doctors works throughout the day in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the question of staying them in hospital does not arise, because they have been called as and when requirement arises. From the above, it is very clear that although all those consultant doctors including three types of doctors are a professionals, who are governed by their professional laws registered under various medical counsels by respective State/Central laws. Although, these doctors have been paid fixed remuneration per month, along with variable pay depending upon their performance, but said payment cannot be considered as salary because there is absence of employer and employee relationship between these consultant doctors and appellant company. A very crucial and critical criteria for determination of employer and employee relationship in a contract of service, is the work related mandatory laws, such as provident fund, ESI, gratuity, attendance, leave encashment, LTA, bonus, superannuation etc and said laws are not applicable for the consultant doctors, whereas an employee is governed by all these laws. Therefore, to distinguish an employee and consultant these parameters are very important and crucial. In this case, there is no dispute with regard to the fact that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer proves that these doctors are employees of appellant company, and governed by various laws applicable to employees. Further, specified working hours and leave rules appears to be more for the purpose of ensuring the presence of the doctors in the hospital for a time period to attend the patients and in case a consultant doctor wish to avail leave, then the rule of prior permission will facilitate to make alternate arrangement for the smooth functioning of hospital. Therefore, on that basis alone, it cannot be concluded that there exists a employer and employee relationship. Further, the doctors are independent and also proved by the fact that many doctors working at KMCH had covered themselves for professional indemnity by way of an insurance policy at their own cost. Similarly, Clause 6 of revised guidelines for practice of medicine at KMCH also specifies the responsibility of doctor to decide cross consultation fee, which an important indication towards the independence of doctors. 16. In so far as observations of the AO, in light of joining report of Dr. Vijay, we find that no doubt in hand written it was written as salary , however, the appellant has clarified tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, opined that the department does not have individual materials to reassess the income of consultant doctors. 18. The assessee had also relied upon the decision of Hon ble Karnataka High Court in the case of CIT vs Manipal Health Systems P Ltd [2015] 375 ITR 509 (kar). The Hon ble High Court has considered a similar issue in light of survey conducted and assessment order passed u/s. 201(1) and 201(1A) of the Act, and after considering relevant facts held that mere providing of non-competition clause in agreement should not invalidate nature of profession. The relevant facts of the High Court are held as under: 13. 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 relationship of employer and employee between the assessee- Company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 19. The appellant had also relied upon the decision of Hon ble Bombay High Court in the case of CIT (TDS-1) Mumbai vs Asian Heart and Institute Center Private Limited, (Supra) wherein the Hon ble High Court held as under: Question No (ii) arises out of the revenue s contention that the Respondent Trust, running a hospital, while availing the services of doctors, had entered into employer-employee relationship, and therefore, deduction of tax at Source while making payments to the doctors had to be on the basis that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4J of the Act, because said services does not parse required specialized technical knowledge. Further, this issue is also covered in favour of assessee by the decision of the Hon ble Bombay High Court in the case of CIT vs Grant Medical Foundation (Supra), where it has been clearly held that annual maintenance contract in respect of various specialized hospital equipment is not be in nature of fees for technical services. Hence, deduction of tax at source as contractor is held to be proper. Similar view has been taken by the Hon ble Bombay High Court in other case of CIT vs M/s. Saifee Hospital reported in 262 Taxman 343 (Bom), wherein the Hon ble High Court held that payment for services rendered towards maintenance of medical equipment, is payment for work contract covered u/s. 194C of the Act and the same does not involve any technical service, which would require deduction of tax at source u/s. 194J of the Act. The CBDT Circular No. 715 dated 08.08.1995, has also clarified the applicability of TDS provisions in respect of payment made to AMC provider by way of question no. 29 and answered that routine, normal maintenance contract which includes supply of spares will be covered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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