DCIT (TDS) 2(3), MUMBAI vs. NATIONAL HEALTH EDUCATION SOCIETY, MUMBAI

PER S.S.GODARA (J.M): This Revenue’s appeal for A.Y.2012-13 arises from Mumbai’s order of Commissioner of Income Tax (Appeals)-60, in case No.CIT(A)-60/IT-10102/ACIT(TDS)-(2)2/2014-15 dated 18/03/2019, in proceedings u/s.201(1) r.w.s.(1A) of the Income Tax Act, 1961 [hereinafter referred to as Act].

Heard both the parties.

2. The Revenue’s sole substantive grievance pleaded in the instant appeal seeks to challenge correctness of the CIT(A)’s action

M/s. National Health Education Society reversing the assessment findings treating the assessee to be an assessee in default for not having deducted TDS on payments made to Hospital Based Consultants (HBCs). We find from a perusal of the case file that the Assessing Officer’s corresponding order dated 28/03/2014 held that an employer-employee relationship existed between the assessee and its hospital based consultants and therefore, the payments made to the latter were in the nature of salary requiring TDS deduction u/s 192 of the Act failure of which at the former’s part had made it as the assessee in default.

3. We notice that the CIT(A) findings under challenge place reliance on hon’ble jurisdictional high court’s decision declining Revenue’s arguments on the same issue as under:-

Ground No.1 & 2:-

1. 1. The Assistant Commissioner of Income-tax (TDS)-2(2) (“AO”) on the facts and in the circumstances of the case and in alw, erred in holding that based on the letter appointment of Hospital Based Consultants (HBCs), ‘employer-employee’ relationship exists between the appellant & the HBC's and thereby further holding that TDS should have been deducted u/s. 192 & not u/s. 194J.

2. Without prejudice to the merits of the above, the AO has also erred in holding the appellant as assessee in default in terms of Sec. 201(1) & 201(1A) by working out short deduction u/s. 201(1) at Rs. 16,42,66,732/- and interest on short deduction u/s. 201(1A) at Rs. 1,97,12,0087- aggregating to Rs. 18,39,78,740/- holding that appellant should have deducted tax u/s. 192 instead of 194J. Appellant Submission:- During the course of appellate proceedings, written submissions were filed along with Paper Book, the relevant part of which is summarized as under:- The appeal is against the order of AO to treat the amounts paid to the consulting Doctors as salaries thereby attracting the provisions of section 192 of the Income Tax Act 1961 as against our contention that these payment are the consulting doctors' share as per the agreements, in the fees collected from the visiting patients. The appellant has deducted tax at source on these payments @ 10% as tax payable on professional fees under the provisions of Section 194 J of the Income Tax Act.

M/s. National Health Education Society

This issue was raised by AO during the last 8 assessment years namely AY 2004-05 to 2011-12. In all these assessment years, the decisions of CIT (A) and ITAT are in our favour. Both CIT( A ) and ITAT have upheld our contention that the professional fees paid to the Hospital Based Consultants (HBCs) fall under the ambit of Section 194 J of the Income Tax Act 1962 and hence the assessee has correctly deducted the TDS and paid the same. Since there is no demand for the short deduction of TDS, there cannot be any demand for the payment of interest under section 201 (1)/201(1 A) of the Act. As suggested by you, we are enclosing the copies of ITAT orders and AO orders nullifying the demand based on ITAT orders for the 8 AYs namely AY 2004-05 to 2011-12 which are self-explanatory. We would like to summarize our contention based on the contracts for the engagement with HBCs for the professional services as under:-

1. 1. The professional fees generated from the patients bills are shared between the Hospital and the HBCs in a predetermined ratio based on the contract of engagement.

2. Unlike employees, HBCs do not have Sick leave, Privilege Leave 3. HBCs do not have the fixed timings of work.

4. HBCs are not entitled for PF, ESIC and gratuity 5. Hospital does not provide any insurance cover to HBCs. For Physicians the Insurance Cover is Rs.15 lacs and for surgeons it is Rs 25 lacs and the HBCs have to pay the insurance premium themselves and Hospital does not pay the premium.

6. Certain % of professional fees is earmarked for attending medical conferences, academic work 7. Some HBCs are allowed to work at other attachments as well. It will be thus clear that these are the contracts for service and not of service. Secondly a comparative chart showing terms and conditions of the engagement/appointment of HBCs and other employees was submitted by the AR's of the appellant on 08.03.2017 the same is referred below:- No Particulars House Based Consultants Other Employees

M/s. National Health Education Society

5. Regulation of time for Timings and days are Fixed time and days the services in the hospital mentioned for the convenience of work. of the patients. HBCs are free to come at any time to treat the patients

8. Overtime No Applicable to certain categories

Note: These facts are the same as in earlier years. From the chart above stated it is clearly seen that there is immense difference between regular employees and HBCS working in the Hospital. The HBCs are professional working at the Hospital.

M/s. National Health Education Society

Furthermore, a Paper Book filed on 16.02.2017 comprising of orders of Assessing Officer and Hon'ble ITAT for Assessment years 2004-05 to 2011-12 wherein the ITAT has decided the issue of HBCs in the favour of the appellant. For example, the relevant paragraph for A.Y. 2009-10 is stated as under- "7.a. Analysis of the above referred two judgment lead to the conclusion that to decide the issue of 192/194J controversy following factors should be considered i) Administrative control ii)Regulation o the time for service in the hospital iii)Eligibility for gratuity and cover under the provident fund scheme iv)Benefit of causal leave and sick leave v) Applicability of general service rules framed by the hospital Besides, prohibition from taking any other assignment does both justify the inference that the payment to them id salary. One of the other important factor is filing of return by HBCs and showing the sum received by them from the hospitals it has to be seen whether they are showing the receipt from the hospital under the head salary or under the head professional income. In addition to it one of the important factors is insurance taken by the HBCs. If they are not covered by the insurance provided by the hospital and they take the indemnity insurance for themselves, it indicates that they might not be the employee of the organization. Broadly, these are the some of the basic Parameters.

M/s. National Health Education Society

The assessee has now submitted vide letter dated 23rd February, 2019, the decision of the Hon'ble Bombay High Court, dated 22.02.2019, nullifying the demand for the last 6 years, i.e. from A.Y. 2006-07 to A.Y. 2011-12. Following are the relevant excerpts from the order of the Hon'ble Bombay High Court, pertaining the assessee's contention: " Question (a) "Whether on the facts and in the circumstances of the case and in law, the ITAT was correct in not treating the Hospital Based Consultants (HBCs) as employees and therefore provisions of Section 192 is not applicable?" "As far as Question (a) is concerned, we find considerable force in the argument canvassed by Mr. Tiwari that the same is squarely covered by a Division Bench decision of this Court. We find that a Division Bench of this Court in the case of Commissioner of Income-tax (TDS Pune) (ITXA No.140 of 2013) (supra) and to which one of us was a party (S. C. Dharmadhikari, J), was considering whether the Tribunal was correct in holding that there exists no relationship of employer and employee between the assessee - Grant Medical Foundation (Ruby Hall Clinic) and the Consultant doctors employed in the hospital. After perusing the law on the subject, this Court answered the aforesaid question in favour of the assessee and against the revenue. We find that as far as Question (a) is concerned, the same has been answered against the revenue and in favour of the assessee as per the judgment delivered by this Court in the case of Commissioner of Income-tax (TDS Pune) (ITXA No.140 of 2013) (supra). In fact, when judgment was brought to the notice of Mr. Suresh Kumar, he fairly conceded that Question (a) would be covered by this decision. This being the case, in our opinion, (a) does not give rise to any substantial question of law."" Decision: 1 have gone through the assessment order, the grounds of appeal and the appellant's submission on the grounds of appeal. There are all together 7 grounds but the main ground is with regard to the treatment given by the AO to hospital based consultant (HBCs). The assessing officer has treated the relationship between the assessee and the hospital based consultant Doctors is purely that of' employer and employee1 and remuneration paid to them in terms of the said relationship is 'salary' which attracted the provision of section 192 of the IT Act 1961, against which the assessee is in appeal. The appellant submitted the copies of the Hon'ble ITAT orders for Assessment years 2004-05 to 2011-12 in his own case wherein the ITAT has decided the issue of HBCs in the favour of the appellant. Further, the appellant submitted vide letter dated 23rd February, 2019, the decision of the Hon'ble Bombay High Court, dated 22.02.2019, nullifying the demand for the last 6 years, i.e. from A.Y. 2006-07 to A.Y. 2011-12. Since the Jurisdictional High Court has given an order in his favour in his own case for the previous years, respectfully following that order, the decision of the AO is annulled and the appeal is decided in the favour of appellant. In sum, the appeal is allowed.

M/s. National Health Education Society

4. There is no distinctions on facts or law pointed out at the Revenue’s behest during the course of hearing. We thus adopt judicial consistency in the given facts and circumstances to affirm the CIT(A) action under challenge deleting the section 201(1) r.w.s. 1(A) TDS demand in issue.

Order pronounced in the open court on this 14/10 /2020