ACIT CIRCLE-74(1), DELHI vs. FORTIS HOSPITALS LTD., DELHI

Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.

The assessee is engaged in the business of providing healthcare services in various fields namely diabetic, rental and ophthalmology. For running its operations, the assessee had engaged doctors in three categories i.e. on-roll, retainer and consultants.

Before us, the ld. DR brought to our notice that the decision of the Co-ordinate Bench of ITAT in the case of DCIT Vs. Wockhardt Hospitals Ltd. in ITA No. 985 & 986/Hyd/2011 vide order dated 02.07.2012. In that case, the revenue could prove the similarities of terms & agreements between the all the three types of doctors engaged by the hospital. The order has been duly considered. In the instant case, the ld. DR submitted that the terms and conditions mentioned above are similar to those in the case of other full time consultant doctors. The distinctive feature of the instant case are as under:

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.

There is a retirement age for the employee doctors whereas the retainer doctors have no retirement age and their services are regulated in accordance with the agreements entered into.

There are other clauses in the agreements with the retainers/consultants, which according to the AO create an employer-employee relationship but which according to the assessee they do not disturb the relationship between a professional and his client. To advert to some of these clauses such as imposing conditions as to time, supervision and the interest of the patients, a clause requiring the retainer/consultant doctors to participate in academic activities conducted by the institution and yet another clause which requires the retainer doctors to develop original concepts, ideas, plans, designs etc. but which as per the agreement were to be treated as the sole and exclusive property of the institution. According to the assessee, there has been near

The issue of TDS on on-roll doctors, retainer doctors and consultant doctors with regard to applicability of Section 194J and Section 192B of the Income Tax Act, 1961 and also Section 201(1A) have been examined in the order passed by the Co- ordinate Bench of Tribunal in the case of Escorts Heart Institute & Research Centre Ltd. in ITA Nos. 5318 to 5320/Del/2019. The relevant portion is as under:

The relevant provisions of the Act are:-

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

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 been noted over and again by the various Benches of the ITAT and the Hon'ble High courts.

To mention a few:-

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.

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

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. Some of these judgements are:

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.

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.