ACIT Vs Escort heart Institute and Research Centre Ltd (ITAT Delhi)
The appellant during the period under consideration was engaged in the business of providing healthcare services in various fields namely diabetic, renal and ophthalmology. For running its operations, the appellant had engaged doctors in three categories i.e. on-roll, retainers and consultants. The last two categories consisted of independent professionals who rendered services to the appellant, governed by their respective contracts/agreements and payments to them were made after deducting tax at source u/s 194J. The doctors in the first category i.e. on-roll were paid salary after TDS as applicable u/s 192 of the Act.
After verification , the AO held that in so far as the doctors under the categories of consultants/retainers were concerned, there existed an employer- employee relationship and provisions of Section 192 were attracted and of those of Section 194J. The AO passed an order u/s 201(1)/201(1A) of the Act raising a demand of Rs.79,36,269/- which comprised of the shortfall towards TDS and interest thereon.
Chandigarh Bench of the ITAT in one of the group cases namely ACIT vs M/s. Fortis Healthcare Ltd. Mohali reported in (2016) 157 ITD 746, after a detailed analysis of the terms of the agreements of the retainer doctors as well as the salaried doctors and considering the decisions of various Benches of the ITAT and the judgement of the jurisdictional High Court in the case of Ivy Health Life Sciences (P) Ltd. held that the provisions of Section 194J applied to the retainer doctors and not those of Section 192.
In the case of EHIRC Ltd. 404 ITR 344 (Raj) after analyzing the two types of agreements identical to those in the present appeals and referring to judgements of other Hon’ble High Courts held that the retainer doctors attracted the provisions of Section 194J and not those of Section 192.
Having gone through the provisions of section 192, Section 194J, Section 201 of the Income tax Act 1961, facts of the instant case and the judicial pronouncements on the issue involved, we are inclined to hold that the provisions of section 194J of the Act are applicable to the assessee and not those of section 192 of the Income tax Act 1961 therefore, the appellant cannot be treated as an “assessee in default” in so far as the question of deducting tax at source in respect of doctors engaged as retainers and consultants was concerned.
FULL TEXT OF THE ORDER OF ITAT DELHI
** The Revenue filed letter of adjournment signed by the ITO of the Bench which has been rejected owing to the grounds taken up by the assessee.
These appeals by the Revenue are against the separate orders passed by the ld. CIT(A)-41, New Delhi, all dated 29.03.2019, relating to Assessment Years 2010-11, 2016-17 and 2017-18 respectively.
Grounds of appeal of ITA No.5318/Del/2019
1. That on the facts and circumstances of the case the Ld. CIT (A) has erred in holding that appellant cannot be treated as an “ assessee in default” in so far as the question of deducting tax at source in respect of doctors engaged as retainers and consultants was concerned. And that the provisions of the section 194J of the IT Act were applicable and not those of section 192 of the Act.
2. That on the facts and circumstances of the case the Ld. CIT (A) has erred in giving relief to the assessee without appreciating the facts that the terms and clauses of agreements entered into deductor company and retainer doctors/consultants doctors categorically affirm that there existed an evident employee – employer relationship between the deductor company and retainer doctors/ consultants doctors viz. right to select for appointment, right to appoint, right to terminate, right to disciplinary action, right to prescribe condition of service, right to decide nature of duties performed, right to control the employees, manner and method of work, right to issue directions etc. Hence, payment made to consultants doctors and retainer doctors should fall under the head Salary and the assessee hospital/ company was liable to deduct TDS at the rate applicable in the case of salary.
3. That on the facts and circumstances of the case, the Id. CIT (A) has erred in giving relief to assessee in contradiction of judgment of Hon’ble ITAT” F” Bench on the similar issue in the case of St. Stephen’s Hospital vs. Deputy Commissioner of Income- tax, Circle- 51(1) under the Appeal No. 122 (Delhi)” of 2004 (F.Y. 200102) in which the Hon’ble ITAT has held that the consideration of the AO as TDS deductible under section 192B instead of 194 J as found suitable by the deductor is justified based on the clause of the agreement.”
Details have been taken from the order of the Ld.CIT(A)
2. The appellant during the period under consideration was engaged in the business of providing healthcare services in various fields namely diabetic, renal and ophthalmology. For running its operations, the appellant had engaged doctors in three categories i.e. on-roll, retainers and consultants. The last two categories consisted of independent professionals who rendered services to the appellant, governed by their respective contracts/agreements and payments to them were made after deducting tax at source u/s 194J. The doctors in the first category i.e. on-roll were paid salary after TDS as applicable u/s 192 of the Act.
3. After verification , the AO held that in so far as the doctors under the categories of consultants/retainers were concerned, there existed an employer- employee relationship and provisions of Section 192 were attracted and of those of Section 194J. The AO passed an order u/s 201(1)/201(1A) of the Act raising a demand of Rs.79,36,269/- which comprised of the shortfall towards TDS and interest thereon.
4. There is only one issue involved in all the grounds of appeal which relates to contention of the appellant against demand raised by the AO u/s 201(1)/201(1A) of the I.T. Act.
5. The contentions of the assessee as under:-
“ ……….The solitary issue raised in the appeals is whether in the case of doctors appointed on retainership basis in contradistinction to doctors appointed on salary basis would the provisions of section 194J apply or those of section 192 of the Act would be attracted.
