TMI Blog2012 (9) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... een from the appointment order it can be easily said that the doctors are employees of the assessee and being so, the relation between the assessee and the doctor was that of an employer and employee and the remuneration paid to them in terms of the said appointment order was salary which attracted the provisions of section 192 and not 194J - against assessee. - IT Appeal NoS. 985 & 986 (Hyd.) of 2011 - - - Dated:- 2-7-2012 - CHANDRA POOJARI, SMT. ASHA VIJAYARAGHAVAN, JJ. M.S. Rao and P. Peerya for the Appellant. V. Siva Kumar for the Respondent. ORDER Chandra Poojari, Accountant Member The above two appeals by the Revenue are directed against the separate orders of the CIT(A)-II, Hyderabad dated 29.3.2011 for assessment years 2007-08 and 2009-10. Since common issues are involved in these appeals, they are clubbed together, heard together and are being disposed of by this common order for the sake of convenience. 1. The Revenue raised the following grounds of appeal: 1. The learned CIT(A) erred on facts and in law in allowing the appeal. 2. The learned CIT(A) erred in holding that the Assessing Officer was not justified in treating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing facts: (a) They shall act exclusively for Wockhardt as consultants and shall not render similar services directly or indirectly to any person, firm, company, institution and health care engaged in similar business and providing similar services in India without prior written permission of the company. (b) The association is effected for an initial period of five years and further renewable on mutual agreement. (c) They are required to deliver services in accordance with the specified protocols and process and quality standards of the hospital. (d) In consideration of the above, they are offered an all inclusive remuneration per month. (e) After two years apart from the remuneration fee, they will be eligible for 50% of the professional charges or in excess of the remuneration fee. (f) They shall observe and follow all hospital protocol rules and regulations and code of conduct as prescribed by Wockhardt Hospital from time to time. 4. On these facts, the Assessing Officer proposed to the assessee to treat the relationship between the doctor and the hospital as one of employer and employee for the purpose of TDS provisions. In response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws are not applicable to consultants. (l) Age criteria for admission and retirement are applicable to employees whereas no such restriction is applicable to consultants. (m) Termination notice period/notice pay are applicable in or employees whereas no such specification for consultants. (n) In case of medico legal cases, consultants have to bear expenditure in defending themselves whereas employees will be defended at company's cost. 6. The assessee filed another letter before the Assessing Officer on 22-02-2010, the gist of which is as under: In continuation of hearing held on 08.01.2010 and our letter dated 12.12.2010 in connection with proceedings in our case regarding TDS from fees paid to doctors during A.Y. 2007-08, we wish to draw your kind attention to similar proceedings in A.Y. 2008-09 during the curse of which we have filed confirmation letters from various doctors in the effect, that for A.Y. 2007-08 also, the doctors have filed their returns of income and paid taxes due thereon. We are herewith enclosing copies of the said letters for your ready reference. We therefore request to drop the proceedings for the A.Y. 2007-08. We regret tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto an agreement with each one of the full time consultants and he drew our attention to a copy of agreement which is placed on record in the Paper Book. He submitted that the Assessing Officer has brought out certain facts from the agreements signed with these Doctors as below:- (a) The doctors shall act exclusively for Wockhardt Hospitals as consultants in concerned specialty and shall not render similar services directly or indirectly to any person, firm, company, institution or any healthcare facility engaged in similar business and providing similar services in India or elsewhere unless specifically permitted to do so with the prior written permission of the company (emphasis supplied). (b) The association is effective for an initial period of five years and further renewable for another five years on mutually agreed upon terms and conditions after the expiry of the first five years. However, either party cannot terminate this relationship arrangement during the period of five years. (c) The assessee and the doctors will mutually work towards creating an effective delivery of (professional) services. The doctors will be required to carry out the services produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nals are through a structured fee, which assures some fixed sum initially and is enhanced according to the extent of income he generates to the hospital. vi. Doctors, who applied, were allowed have their own private practice or allowed to work for different hospitals of their choice. 12. The learned DR submitted that in point (ii) the contradiction is very visible and clear as in the first sentence no specific working hours are prescribed by the professionals but in the second sentence they are available at hospitals at specific times for consultations. In reality also it is a fact that all these consultant professionals are available at specific times in the hospitals for consultation by the patients who come to their OP Chambers and also the consultant have to attend to the in-patients admitted to the hospitals. Hence clause (ii) clause (iv) are also contradictory to clause (i) and that become irrelevant. When the clause (ii) says the consultants are to be available at specific times, the assessee is trying to mislead by clause (i) (iv). 13. The DR submitted that in point (iii) of assessee's written submissions before the AO an emphasis has been placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Max Mueller Bhavan , In re ( supra ) and Justice Deoki Nandan Agarwala ( supra ). Relying on these decisions, it is submitted that the payments made would fall within the purview of Section 192 of the I.T. Act, thereby it is to be treated as the assessee in default u/s. 201(1) and interest to be levied u/s. 201(1A). According to the DR, the short deduction has been worked out as below: A.Y. Short deduction (Rs.) Interest u/s. 201(1 A) Total (Rs.) 2007-08 1,13,86,339 40,99,082 1,54,85,421 2008-09 95,96,602 3,83,864 99,80,466 2009-10 85,39,064 10,24,688 95,63,752 16. He submitted that while adjudicating on the issue whether there is any employer or employee relationship between consultant Doctors and the assessee hospital, the CIT(Appeals) has decided the issue between the professionals and the assessee is not that of employee and employer relationship but that of clearly profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employee in the material details of how the work is to be performed . 18. The DR submitted that the concept or phrase employment is also undergoing dramatic changes in the world scenario in order to bring in better employee-engagement and productivity and also move away from rule based management to objective based management. The work conditions are being determined as per the convenience of both the parties, i.e. management and workers to minimize the complications and maximize the organizational goals. In the instant case, the assessee company has entered into an agreement with the Doctors. The clauses of the agreement clearly stipulate that the Doctors shall follow rules, regulations, protocols and code of conduct of the assessee hospital as brought out by the Assessing Officer in Page No. 2 of the assessment order. From this, it is very clear that the consultant Doctors are under obligation of rules, regulations, protocols and code of conduct as prescribed by the assessee hospital from time to time. This clearly establishes that this is a case of employment contract only, as coupled with exclusivity clause, this brings in a spectre of tying the doctors to the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to follow the code of conduct enunciated by the Medical Council of India. This is far from truth. Medical Council of India prescribes code of conduct only for the ethics to be followed in medical practice; they do not enter the realm of employment or contracts entered into by the Doctors. Thus, emphasis on this is wrongly placed, with an intention to mislead. Thus, the order of the CIT(Appeals) be quashed and the order of the Assessing Officer be restored. 20. On the other hand, the learned AR relied on the order of the Tribunal in the case of Yashoda Super Speciality Hospital (supra) and also on the order of the CIT(A). 21. We have heard both the parties and perused the material on record. We have carefully gone through the copy of the proforma appointment letter entered by the assessee with the employee which reads as follows: Proforma of appointment letter of employees only Date: Dear This has reference to your application for employment in our Company. We are pleased to appoint you as ...... in the ........ as Trainee at our Hyderabad Hospital, with effect from .......... on the following terms and conditions 1. Your remuneration wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be lower than the norm then the Company shall have the right to take any action as deemed appropriate, including discontinuance of services. 8. During your employment with the Company, the Company may, at any time, at its sole discretion station you in any other location in India. The Company shall also be entitled at any time to transfer you to any of its Affiliates, Subsidiaries or Sister Companies with or without any changes to the terms and conditions and you shall comply with all directions and instructions in that regard. 9. You will keep the Management informed of any change in your residential address. In case of your inability to do so, any communication sent at the address available with the Management will be deemed to have been served on you. 10. You shall devote your whole time and attention to your employment with the company and shall discharge your duties such that you undertake not to engage yourself directly or indirectly with, or without remuneration in any other employment, service or calling of any nature whatsoever without written permission from the Company. 11. You will not at any time without the consent in writing of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth so recorded so as to seek continuation in service or for monetary benefits. 16. It is a condition of your employment with the Company that you will retire from the services of the Company on attaining the age of 58 years, without notices whatsoever from the company in this regard. 17. Upon leaving the employment of the Company, you shall not take with you any properties, formulae, drawing, blue print or other reproduction or any other data, tables, calculations, letters or other documents of any other writing or copy of writing of any nature whatsoever pertaining to the business of the Company. You shall also not retain any copies or reproduction of any documents in physical, electronic or any format relating to the affairs of the Company. 18. It is agreed that it snail be open to the Company from time to time, to add and/or to modify any remuneration, benefit, facility, or perquisite that may have been extended to you, on a review of the Company's functioning, finances and prospects and your performance and that you shall be bound by the Company's decision in this regard. 19. On ceasing to be in the employment of the Company you shall return forthwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d quality standards of the hospital. 4. In consideration of the above, we offer you an all-inclusive remuneration fee of ₹ 7,25,000/- (Rupees seven lacs and twenty five thousand only) per month from Wockhardt Hospitals during the tenure of first 5 (Five) years. 5. However, after two years apart from ₹ 7,25,000/- (Rupees seven lacs and twenty five thousand only) as remuneration fee per month you will be also eligible for 50% of the professional charges earned in excess of the remuneration fees. Professional charges is defined as your charges charged by Wockhardt Hospitals to patients towards inpatient and outpatient consultation, Non-invasive consultation charges and Invasive consultation Charges. 6. It is agreed between the parties that the above remuneration is independent and mutually exclusive of the cost that Wockhardt Hospitals may charge for its services. 7. You acknowledge the fact that Wockhardt Hospitals have an excellent reputation and corporate image recognised widely by the medical profession as well as the public at large and shall not adversely do or caused to be done any act or omission which shall affect the reputation or corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of your acceptance of the above retainership arrangement. Thanking you and looking forward to a long and mutually beneficial association. Yours sincerely, Sd/- Vishal Bali Vice President (Operations) I accept the above terms and conditions Sd/- Dr. Shailender Singh 23. The learned AR submitted that the doctors are consultants and whose remuneration is liable for TDS u/s 194J of the IT Act and there is no employer and employee relationship. The assessee has no intention to employ the doctors on salary basis. Further, he submitted that the recipients of remuneration from the assessee are assessed to tax individually and they have already paid the tax in their respective hands and there is a clear findings by CIT(A) on this issue. He relied on the judgment of Supreme Court in the case of Hindustan Coca Cola Beverages (P.) Ltd. ( supra ). 24. A careful perusal of the appointment order issued to the doctor shows that a fixed monthly amount was paid by the assessee as remuneration and it is no way concerned with the fees received from the patients treated by them. The appointment letter was issued to the concerned doctor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the grantor. If there are grounds appearing from the face of the instrument affording proof of the real intention of the parties, then that intention would prevail against the obvious and ordinary meaning of the words used. In our opinion, the real intention of the parties herein as already discussed with reference to the terms of the appointment letter issued to the doctors in the light of service regulations of the assessee hospital was to have an employer and employee relationship between them and it was not a case of appointment of consultants. In view of this, in our opinion, there was an employer and employee relationship between the assessee and the doctors. Consequently, the remuneration paid to them was chargeable to tax under the head 'salaries' and liable for deduction of tax u/s. 192 of the Act and not under the provisions of section 194J of the Act. However, we make it clear that wherever the assessee issued appointment letter in the manner prescribed above and the doctor's appointment is governed by the service rules of the assessee hospi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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