DCIT Vs Fortis Hospital Ltd (ITAT Delhi)
Conclusion: No TDS under Section 192B on payments made to consultant doctors and retainer doctors as the provisions of section 194J applied to the retainer-doctors and not those of section 192B after noting differences between the two types of agreements i.e. salaried doctors and doctors appointed on retainership basis and the certain clauses in contract with retainers which gave the erroneous impression to AO of creating an employer-employee relationship had been explained by assessee that they did not create such a relationship.
Held: In the case of assessee-doctor, TDS survey under Section 133A(2A) was conducted at the premises of M/s. Fortis Group for verification of compliance with the TDS provision under Section 201(1)/201(1A). AO held that the payment to the consultant doctors and retainer doctors fell under the head “salary” and assessee was liable to deduct TDS from the payment to consultant doctors and retainer-doctors as well along with the on-roll doctors at the rate applicable in the case of salary. Since there was liability of Rs. 2,91,71,684/- under Section 192B and assessee had deducted tax at source of Rs. 1,10,06,561/-, assessee-company was held to be an ‘assessee in default’ for failure to deduct tax at source of Rs. 1,81,65,123/- passed by the Assistant Commissioner of Income Tax (ACIT) New Delhi under Section 201(1)/ 201(1A) of the Income Tax Act. It was held that the identical facts were examined in past years as well and the judicial consensus was that the provisions of section 194J apply to the retainer-doctors and not those of section 192B after noting differences between the two types of agreements i.e. salaried doctors and doctors appointed on retainership basis. Certain clauses in contract with retainers which gave the erroneous impression to AO of creating an employer-employee relationship had been explained by assessee that they did not create such a relationship. The explanation of assessee had unanimously been accepted by various judicial pronouncements. Thus, the appeal of the revenue was rejected.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal filed by the Revenue is directed against the order dated 31.10.2022 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi (“CIT(A)”) pertaining to Assessment Year (“AY”) 2012-13.
2. The Revenue has taken the following grounds of appeal:-
“1. That on the facts and in the circumstances of the case, the Ld. CTT(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 IT Act.
2. That on the facts and in the 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 by the deductor company and retainer doctors/consultant doctors categorically affirm that there existed an evident employee-employer relationship between the deductor company and retainer doctors/consultant doctors and hence payment made to consultant 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. Briefly stated, the assessee is a hospital, leading integrated healthcare delivery service provider in India. The healthcare verticals of the company primarily comprise hospitals, diagnostics and day care specialty The company operates from its headquarters office situated at Sector-41, Gurugram, Haryana and has many of its hospitals in different regions across the country. In the case of the assessee TDS survey under section 133A(2A) of the Income Tax Act, 1961 (the “Act”) was conducted at the premises of M/s. Fortis Group on 23.01.2018 for verification of compliance of TDS provision under section 201(1)/201(1A) of the Act. During the course of survey proceedings, statement of Shri N.L. Gandhi, Sr. Taxation Officer was recorded in which he stated that doctors are mainly employed at different hospital units under various arrangements i.e. on roll, retainership and consultant basis and tax at source is deducted under section 192B for on roll doctors and 194J for retainer and consultant doctors for all such payments made to them. It seems that agreements of the doctors were called for and perused and it was the view of the Revenue that clauses in the agreement with retainer-doctors and consultant-doctors indicated that there was employer-employee relation between both the parties. The assessee was show caused why retainer-doctors and consultant-doctors be not treated as employees of the hospital. The assessee company made submission dated 01.03.2019 which was not considered satisfactory for the reason that consultant-doctors/ retainer-doctors formed the core of the assessee’s business and their expertise are used to run the company and not just for support to the company.
3.1 Accordingly, the Ld. Assessing Officer (“AO”) held that the payment to the consultant-doctors and retainer-doctors fall under the head “salary” and the assessee was liable to deduct TDS from the payment to consultant- doctors and retainer-doctors as well along with the on-roll doctors at the rate applicable in the case of On this basis short deduction of TDS was computed in FY 2011-12 relevant to AY 2012-13 as under:-
