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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Sh. A.D. JainDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member: ** 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
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
2 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. 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. 2001- 02) 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)
The appellant during the period under consideration was engaged in the business of providing healthcare services in
3 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. 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.
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.
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.
4 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. • The question of TDS in respect of institutions providing healthcare services and where doctors are appointed on salaried basis and on retainership was at one time a contentious issue between the institutions and the department but not anymore as there is a unanimity of views expressed by Hon'ble High Courts and various Benches of the ITAT across the country that doctors appointed on retainership basis do not attract section 192 but section 194J for purposes of TDS on payments made to them. All these judgements have not been adverted to by the AO.
• It is settled law that issues which have attained finality should not be raked up by examining the same set of facts in a different way. The facts examined by the AO are not different to those that existed in the past years when no such action was taken even after a TDS survey carried out on 19.01.2015. Reliance is placed on CIT vs M/s Escorts Ltd. (2011) 338ITR 435 (Del.).
The relevant provisions of the Act are:-
Section 191
..provides for a direct payment of tax by the deductee and in the eventuality of such payment being made, there is an abatement of liability on the part of the deductor, so that no interest can be levied for non-deduction of tax (pl. see CIT vs Adidas India Marketing P. Ltd. (2007) 288 ITR 379 (Del.). Tax paid directly by the assessee cannot be recovered again from the deductor as there is no provision
5 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. for refund of tax wrongly deducted and deposited. As a result of the explanation inserted by the Fijance Act, 2008 w.e.f. 01.06.2003 the liability to deduct tax gets abated the moment theije is a direct payment.
Section 201
The Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd. vs CIT (2007) 293 ITR 226 (SC) took the view that no demand u/s 201 could be enforced once the deductor had satisfied the AO that the deductee had paid the taxes. The other judgements are Children's Education Society us DCIT (TDS) (2009) 319 ITR 409 (Karl), TRO vs Bharat Hotels Ltd. (2009) 318 ITR (AT) 244 (Bang.), NaiRajdhani Path Pramandal us CIT (2016) 384 ITR 328 (Pat.) and Ghaziabad Development Authority us Union of India (2017) 395 ITR 597 (All.)
The proviso to section 201 inserted by the Finance Act, 2012 w.e.f. 01.07.2012 recognizes the aforesaid legal position and deems the deductor not to be an assessee in default in cases where the deductee has furnished his return of income, taken into account such sum for computing the income and has paid the taxes due on the Income returned. The liability in such cases is restricted to interest u/s 201(1A).
The AO has interpreted the two types of agreements i.e. one for salaried doctors and the other for doctors appointed on retainership basis as identical giving rise to employer- employee relationship missing out the differences which have
6 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. been noted over and again by the various Benches of the ITAT and the Hon'ble High courts.
To mention a few:-
1) In the case of employee doctors, it is a whole time employment not restricted to a fixed term whereas a retainer doctor has a fixed term.
2) The employee doctors draw a salary plus various other benefits whereas the retainer doctor is entitled to a consolidated retainer only.
3) The employee doctors cannot take up any other employment whereas the retainer doctors although not to engage in employment with other hospitals can undertake private practice.
4) There is a retirement age for the employee doctors and payment to them is termed as salary, whereas the payment to the retainer doctors is treated as professional fee and they have no retirement age.
Certain clauses that exist in contracts with retainers lead the AO to treat the contract as one creating an employer- employee relationship and hence attracting Section 192.
clause prohibits the retainer doctor from engaging himself with another institution carrying on the same business but not barring private practice.
clause time, imposes certain conditions about supervision and the interest of the patients.
7 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. clause may be the requirement to participate in academic activities conducted by the institution
clause requiring the retainer doctor to develop original concepts, ideas, plans, designs etc. but as per the contract these creations shall be treated as the sole and exclusive property of the institution.
It was held by Courts and various Benches of the ITAT that such clauses do not create an employer-employee relationship.
Another aspect to which one would refer is the distinction between a "contract for service" and a "Contract of service" the former implying a contract whereby one party undertakes to render service to another in the performance of which he is not subject to detailed directions and control but exercises professional skill using his own knowledge and discretion and the latter implying relationship of master and servant with an obligation to obey orders in the work to be performed. It was held that the former does not create a master servant relationship.
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
8 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. 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. Some of these judgements are:
CIT vs Appollo Hospitals Int Ltd (2013) 359 ITR 78 (Guj) 2. CIT vs Grant Medical Foundation (2015) 375 ITR 49 (Bom) 3. CIT vs Ivy Health Life Sciences Pvt Ltd. (2016) 380 ITR 242 (P&H) 4. CIT vs Manipal Health Systems P Ltd. (2015) 375 ITR 509 (Karn)
Further we also find that the AO has charged interest a/s 201(1A) up to the date of the order whereas the said proviso was inserted by the Finance Act 2012 w.e.f. 01.07.2012 which provides that the interest shall be payable from the date on which the tax was deductible up to the date of furnishing of return of income by the deductee.
The AO has duly noted that direct payments made by the retainer doctors by perusing their ITR's and Form 26AS but overlooked the judgements and the statutory provisions.
9 ITA Nos.5318 to 5320/Del/2019 M/s Escorts Heart Institute Research Centre Ltd. 18. 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.
In the result, all the appeals of the Revenue are dismissed.
Order pronounced in the open court on 27/06/2022.
Sd/- Sd/- (A.D. Jain) (Dr. B. R. R. Kumar) Vice President Accountant Member Dated: 27/06/2022 f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR