TMI Blog2014 (6) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... rking hours or subject to any rules and regulations - there is no employer and employee relationship between the hospital and the consultant Doctors, at least the facts on record do not establish any such relationship, it cannot be said that fees paid to full time consultant Doctors are in the nature of salary - subject to deduction of tax at source as per the provisions of section 192 of the Act – thus, the order of the CIT(A) is set aside - Decided in favour of Assessee. - I.T.A. Nos. 1916, 1917 & 1918/Hyd/2011 - - - Dated:- 6-6-2014 - SHRI CHANDRA POOJARI AND SHRI SAKTIJIT DEY, JJ. For the Appellant : Shri A.V. Raghu Ram For the Respondent : Shri Solgy Jose T. Kottaram ORDER Per: Saktijit Dey: These three appeals preferred by the assessee are directed against separate orders dated 23/09/2011 of CIT(A)-II, Hyderabad for the assessment years 2007-08 to 2009-10. Since issue is common and facts are identical, all these appeals are clubbed together and disposed of in this combined order for the sake of convenience. 2. To dispose of these appeals, we refer to the facts from AY 2007-08 in ITA No. 1916/Hyd/2011. 3. Briefly the facts are, the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any objection and hindrance, whatsoever, can use their name in advertisements, media, communications etc. The hospitals do not have to take permission from the consultants as long as the contract is valid. (g) The agreement is usually for 5 years from the date of agreement. (h) The agreement is terminable by giving three month's notice. The terms and conditions mentioned in the agreements with other consultant-Doctors are similar to the terms and conditions mentioned above. As seen from the terms of the agreements, it is clear that the full time consultant Doctors are governed by the rules and regulations of the assessee company. They are paid a monthly remuneration. This type of arrangement gives rise to employer and employee relationship. Since the relationship between the assessee and the full time consultant Doctors is that of employer and employee, the assessee is required to deduct tax u/s 192 instead of u/s 194J on the payments made to them. However, the assessee is making TDS on the payments made to the Doctors of both categories u/s 194J of the I.T. Act, 1961 only. In other words, the assessee is not deducting TDS on the payments made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opposed to principal and agent: he relationship of master and servant distinctly differs from that of principal and agent. Its distinction may be summed up as follows: A master is one who not only prescribes to the servant the end of his work but directs or at any moment may direct the means also, or as it has been put, retains the power of controlling the work; a servant is a person subject to the command of his master as to the manner in which he shall do his work. An independent contractor, on the other hand is one who undertakes to produce a given result, but so that in the actual execution of the work he is not under the order and control of the person for whom he does it and may use his own discretion in things not specified beforehand. The test of distinction between a servant and an independent contractor is the existence of a right of control over the agent in respect of the manner in which his work is to be done. A servant is an agent, who works under the supervision and direction of his employer; and an independent contractor is one who is his own master. A servant is a person engaged to obey his employer's orders f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, there is no financial responsibility on the Doctors and all the materials used in the work and all the wages paid to the attendant employees are provided by the hospital. The relationship tilts towards that of 'employer-employee'. (g) The Doctors do not raise any bill and they do not collect any fees from the patients. No patient is required to pay to the Doctors. Also the Doctors are not required to submit any bills to the hospital for payment. The hospital recovers its cost directly from the patients. The fee is decided by the hospital. The Doctors do not have the right to decide either the consultation fees or the fees for various tests/investigations. Even the decision whether to collect or not to collect fees from particular patient lies with the hospital. The entire decision is with the management. (h) The patient mayor may not choose the doctor who he wants to visit. A patient who visits the hospital visits the hospital mainly because of the hospital's name. It is difficult to determine whether the patient consults a doctor on account of the name of the institution or the reputation of professional skill of the doctor. But by and large, the patie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. It is not necessary for holding that a person is an employee, that the employer should be proved to have exercised control over his work, that the test of control was not one of universal application and that there were many contracts in which the master could not control the manner in which the work was done . Therefore, it follows that the factor of freedom is not the only guiding factor to decide the nature of relationship between the hospital and Doctors. (m) In the case of St. Stephens Hospital vs DCIT ITAT F Bench, Delhi reported in (2006) 6 SOT 60 (Del), it was held that the relationship between the hospital and the consultant Doctors was that of employer and employee and that the AO was justified in treating the hospital in default when tax was deducted at source u/s 194J and not u/s 192. (n) Reliance is also placed on the decision in the case of Max Mueller Bhavan, IN RE reported in 268 ITR 31, in which the Authority for Advance Rulings, has held that the deductor is required to deduct tax at source u/s 192(1) on the honorarium paid to part time teachers. (0) In the case of C.S. Mathu vs CBDT and Another, the Delhi High Court has held that a C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the professional hereby agrees to render the services to the company subject to the terms and conditions set forth in this Agreement. The company hereby agrees to provide the necessary infrastructure/facilities to the professional for rendering the services for the treatment of the bonafide patients of the hospital. 3. Fee: As consideration for rendering the services to the company during the term of this agreement, the company shall pay to the professional or to the body he is representing, a fee in the manner and of an amount as mentioned in Annexure C to this agreement. 5. Professional's responsibilities: The professional shall not during the term of this agreement accept any payments directly from the patients of the company and shall direct all the patients to conform to the procedure for making payments as prescribed by the Company. The work of estimation, billing, collection of the bills will be done by the Hospital. 11. Term: This Agreement shall remain in force for a period of 5 years from the date of execution hereof, unless terminated by the Company as provided in Clause 13. The parties may at any time before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relation of employer and employee should be of master and servant. A master is one who not only directs what and when a thing is to be done but also how it is to be done, and the servant is one who is bound to carry out the instruction given to him by such master. The servant has no discretion of his own in carrying out the instruction except such minor discretion as may be left to him by his master. In short, the proper approach to decide is whether there is due control and supervision by the employer. For this he relied on the decision in the case of CIT Vs Lakshmipathi Singhania (1973) 92 ITR 598J. 5.3 The CIT(A) observed that the assessee company has two types of Doctors i) full time employee and (ii) specialist professionals and in the case of professionals working in the assessee hospital they are paid fixed remuneration + variable component per month, enjoy enormous freedom in carrying out their work and are not responsible to HOD or tied to fixed time schedule of attending the hospital on all working days, All Heads of Departments are also included in this category, On these facts, it appears that this category of Doctors do not fall into the relationship of employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual payment of tax by the deductees. 6. Aggrieved by the order of the CIT(A), the assessee is in appeal before us for the assessment years under consideration. The grounds raised in these appeals are common, which are as follows: 1. On the facts and in the circumstances of the case, the order of the ld. CIT(A) allowing the appeal of the assessee only partly is erroneous both on facts and in law. The CIT(A) ought to have allowed the appeal in entirety. 2. The Ld. CIT(A) erred in holding that TDS should be made u/s 192 of the I.T. Act in respect of payment to Doctors who are working full time for the assessee on the alleged ground that the services rendered are in the nature of contract of service . 3. The Ld. CIT(A) failed to appreciate that Doctors who are working for the assessee are professionals and that the assessee do not have control over the functions of the Doctors. The CIT(A) failed to appreciate that unlike other professionals viz., chartered accountants, engineers etc., the services of Doctors cannot be controlled or dictated. 4. The ld. CIT(A) failed to appreciate that the Doctors whether full time or part time are engaged only as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs. Yashoda Super Speciality Hospital, [2001] 133 TTJ (Hyd) (UO) 17 while examining identical nature of contract has held that when there is no specific working hours for the consultant Doctors, when rules and regulations of the hospital are not applicable to them and they are not on the roles for PF as employees besides other benefits like leave and gratuity, etc., they cannot be treated as employees of the hospital. The leaned AR submitted that the aforesaid decision of the ITAT Hyderabad Bench has also upheld by the Hon ble AP High Court in judgment dated 04/07/2013 in ITTA No. 196 of 2013. 8. The learned DR, on the other hand, strongly supporting the order of the CIT(A) submitted that the assessee having been given a fixed monthly remuneration besides other facilities has to be treated as an employee of the hospital so as to attract provisions of section 192 of the IT Act. The learned DR submitted that since on examining service agreement, the Assessing Officer as well as the CIT(A) has given categorical finding that the employer and employee relationship exist between hospital and full time consultant Doctors, there is no need to interfere with the order passed by the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice rules of the hospital in respect of PF, Gratuity, Bonus, Leave, etc. 10.2 Nothing has been brought on record to show that these full time consultant Doctors are subject to some service conditions like other in house/ resident Doctors or other full time employees of the hospital. In fact the Assessing Officer in the assessment order itself after examining the service agreement has observed that though the consultant Doctors are not governed by leave rules, PF, Gratuity, superannuation benefits, etc, they are not deciding factors as to whether they are employees of the hospital or not. It is not the case of the Department that these full time consultant Doctors are governed by leave rules, gratuity, PF, superannuation benefits etc. as well as other service conditions of hospital, which are applicable to the resident Doctors or other full time employees of the hospital. In these circumstances, it may not be possible to conclude that an employer and employee relationship exists between the hospital and the full time consultant Doctors. In case of DCIT Vs. Yashodha Super Speciality Hospital (supra), after examining similar nature of contract between hospital and the consultant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We have also carefully gone through the judgment of the apex Court in the case of Ram Prashad (supra). In the case before the apex Court, the assessee paid remuneration and a percentage of gross profits in addition to monthly remuneration to the managing director (MD). In those circumstances, the apex Court while considering the relationship of the company and the managing director, held that the board of directors of the company are to manage the business of the company and they have right to assess the work of the managing director whenever deem it necessary. The power given to the managing director emanates from the articles of association, which prescribes limits of exercise of that power. The power of the assessee was exercised within the terms and limitations prescribed under the articles of association subject to control and supervision of the board of directors. Therefore, the apex Court held that there was a relationship of employer and employee between the assessee and the managing director. In the case before us, the assessee has engaged the services of the Doctors on the basis of the agreement. There is no timeframe for working of the Doctors. The Doctors are g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the present case in the light of the observations made by the coordinate bench as above, it is quite apparent that in the facts of the present case also there is nothing on record to suggest that full time consultant Doctors are either provided with specific working hours or subject to any rules and regulations. It is also not a fact that the full time Consultant Doctors are on the rolls for PF like other employees or are given leave as per statutory provisions besides gratuity etc. In the aforesaid factual position, the decision of the coordinate bench in case of DCIT Vs. Yashodha Super Speciality (supra) fully applies to the case of the assessee. So far as, the decision of the coordinate bench in case of DCIT Vs. M/s Wockhardt Hospitals Ltd., (supra) is concerned, on examining the facts of that case, it is found that the same is factually distinguishable. On perusal of the order passed by the Tribunal in case of DCIT Vs. M/s Wockhardt Hospitals Ltd., (supra) it is to be seen that service agreement entered in case of M/s Wockhardt Hospitals Ltd., clearly establishes an employer and employee relationship since Doctors are governed by the service rules of the hospital a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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