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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Dr. B. R. R. KumarSh. Yogesh Kumar US
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the Revenue against the orders of ld. CIT(A)-41, New Delhi dated 29.03.2019.
Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.
3. 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 & 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: to 5330/Del/2019 3 Fortis Hospitals & C-Doc Healthcare Ltd. 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 doctors are entitled to a consolidated amount only.
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 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 to 5330/Del/2019 4 Fortis Hospitals & C-Doc Healthcare Ltd. unanimity in the views expressed by the Hon'ble High Courts and different Benches of the ITAT that such clauses do not create an employer- employee relationship.
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 to 5320/Del/2019. The relevant portion is as under:
“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.
• 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. to 5330/Del/2019 5 Fortis Hospitals & C-Doc Healthcare Ltd. • 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.).
6. 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 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
7. 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 to 5330/Del/2019 6 Fortis Hospitals & C-Doc Healthcare Ltd. 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.)
8. 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:-
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 to 5330/Del/2019 7 Fortis Hospitals & C-Doc Healthcare Ltd. 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.
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 to 5330/Del/2019 8 Fortis Hospitals & C-Doc Healthcare Ltd. 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 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)
to 5330/Del/2019 9 Fortis Hospitals & C-Doc Healthcare Ltd. 4. CIT vs Manipal Health Systems P Ltd. (2015) 375 ITR 509 (Karn) 16. 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.
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.