Payment made to Independent Consultants is liable for deduction u/s 194J and not 192

Brief Facts of the Assessee:

• Appeal filed by Assessee – The Assessee is a company incorporated under the provisions of Companies Act, 1956 and is engaged in running a Super Specialty Cardiac hospital. The assessee employs two types of Doctors, viz. Full time Consultants (herewith “FTCs) and Panel Doctors. FTCs were paid professional fee, on which assessee deducted tax at source in terms of the provisions of section 194J of the Income Tax Act, 1961. The Assessing Officer (herewith “the AO”) analyzed terms of employment of the FTCs and observed that assessee company exercised such control over these consultants that they did not enjoy any independent status of a Consultant, but they act as an employee of the assessee company. The AO concluded that assessee was required to deduct tax at source in terms of the provisions of section 192 of the Act. The AO also held the Assessee as Assessee in default as per section 201(1)/201(1A) of the Act for short deduction of tax at source. Such shortfall of tax was determined at Rs. 4,61,25,376/- and the related interest chargeable under section 201(1A) of the Act was determined at Rs. 2,21,40,180/-.
• Cross Appeal filed by Revenue – The issue relates to payment made by Assessee towards Annual Maintanance of Machineries and payments made for pest control expenses. In both the type of payments, the assesse withheld taxes by invoking section 194C of the Act. Whereas the AO held that such payments were liable to TDS u/s 194J and not 194C of the Act.

 Held by CIT (A):