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TMI Blog2013 (9) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... mployee relationship between the hospital and the professional doctors and in treating the person responsible as the assessee in default under section 201(1) of the Act for short deduction of tax at source by taking the amounts to be under section 192 and not under section 194J and in charging interest under section 201(1A) of the Act, on the following grounds : "(i) The learned Commissioner of Income-tax (Appeals), Chandigarh, has relied upon the following case law given by counsel of the assessee : (a) Deputy CIT v. Yashoda Super Speciality Hospital [2010] 133 TTJ (Hyd) 17 (UO), Income-tax Appellate Tribunal, Hyderabad Bench, "B" ; (b) CIT v. Deep Nursing Home and Children Hospital [2008] 169 Taxman 189 (P&H) ; (c) ITO v. Calcutta Medical Research Institute [2000] 75 ITD 484 (Cal) in the Income-tax Appellate Tribunal Calcutta Bench "E" ; and (d) ITO v. Apollo Hospitals International Ltd. I. T. A. No. 3363/ Ahd/2008-assessment year 2007-08. (ii) The facts of the case laws cited by the assessee are different from the present case, as the doctors engaged in the above hospitals were part-time consultants whereas the doctors in the present case were full time consultants e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether there existed any employer and employee relationship between hospital and the professional doctors. 3. Whether the assessee-company can be declared as an assessee in default and therefore the differential tax (between TDS worked out on the basis of section 192 of the Act and TDS deducted from payments made to the doctors under section 194J of the Act) could be recovered from it along with interest under section 201(1A) of the Act. Facts The assessee-company is running hospital under the name 'Ivy Hospital' at Mohali. Survey under section 133A of the Act was carried out by TDS units of the Department. The assessee-company engaged certain professional doctors to provide full time services to the patients as per contract for service entered with them. The professional doctors shared fees received from the patients, their remuneration was not fixed and they were free to render service to the patients as they considered appropriate in terms of time or duration. The assessee-company deducted tax under section 194J from the payments made to them treating the payments as professional fees. The learned Assessing Officer however, inferred that there existed an emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hospital is restricted to appoint or hire alternative doctors/consultants, which condition is not found in cases where there is employer-employee relationship. (5) The doctors are not entitled to leave travel concession, concession in medical treatment of relatives, provident fund, leave encashment and retirement benefits like gratuity. The professional doctors are required to follow some defined procedure to maintain uniformity in action and some administrative discipline but this does not mean they are employees of the hospital. (6) The Assessing Officer has mentioned that doctors were entitled to annual increment and there is a minimum guaranteed amount but in most of the cases there is no clause of annual increment. Moreover, where minimum guarantee amount is prescribed the doctors have received over and above the minimum amount. (7) The entire receipt, whether minimum guarantee amount or more, is taxed by the Department in the hands of the doctors as professional fee and not as income from salary. (8) The doctors are entitled to share profit and loss of departments or share fees received from patients. (9) The learned Commissioner of Income-tax (Appeals) relied on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployee about the manner and method of the work; and (g) It is his right to determine the source from which wages or salary is paid. (2) The doctors have entered into 'contract for service' and not 'contract of service'. The 'contract for service' implies a contract whereby one party undertakes to render services to or for another in the performance, for which he is not subject to detailed direction and control but exercises professional or technical skill and uses his own knowledge on the subject. On the other hand 'contract of service' implies relationship of master and servant and involves an obligation to obey orders in the work to be performed and as to its mode and manner of performance. (3) Various agreements with the doctors would reveal that : (a) Doctors are not subject to control about mode and manner of performance of professional duties. (b) A doctor may work part time with a hospital or devote his entire time for a particular hospital. This requirement does not make him an employee of the hospital, if he is not subject to such other conditions applicable to employees which have been detailed above.(c) They have a free-hand to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head 'Income from business and profession' and assessments having been completed, no further tax can be recovered from the hospital as it is not possible to adjust the differential tax against any tax demand of the doctors whose assessments are final. Once receipt from hospital is offered for tax and assessed, the deductor has no further liability. (10) For explaining employer-employee relationship we rely on the following authorities : (i) CIT v. Lakshmipati Singhania [1973] 92 ITR 598 (All) ; (ii) Piyare Lal Adishwar Lal v. CIT [1996] 40 ITR 17 (SC) ; (iii) CIT v. Manmohan Das [1966] 59 ITR 699 (SC) ; and (iv) Lakshminarayan Ram Gopal and Son Ltd. v. Government of Hyderabad [1954] 25 ITR 449 (SC), Advance Law Lexicon a gist of the aforesaid judgments is enclosed as Annexure "A". (11) For the proposition that once assessments of deductee are completed, tax cannot be recovered from the deductor and he cannot be declared as assessee in default, we rely on the following authorities: (i) CIT v. New India Assurance Co. Ltd. [1983] 140 ITR 818 (MP) (ii) CIT (Asst.) v. Indraprastha Medical Corpn. Ltd. [2009] 33 SOT 261 (Delhi) (iii) Jagran Prakashan Ltd. v. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice to each other. (vii) The real intention of the parties, apparent from the appointment letter issued to the doctors was to have an employer and employee relationship between them and it was not a case of appointment of consultants. Annexure "A" A contract for service and a contract of service In the case of a contract for service, the master can order or require only what is to be done, while in the case of contract of service he cannot only order or require what is to be done but also how itself it shall be done (see, Dharangadhra Chemicals Works Ltd. v. State of Saurashtra, AIR 1957 SC 264 ; Collins v. Hertfordshire County Council [1947] KB 598, 615)). There is a well-recognised distinction between a 'contract of service' and a 'contract for services'. A 'contract for services' implies a contract whereby one party undertakes to render services, e.g., professional or technical services, to or for another in the performance of which he is not subject to detailed direction and control but exercise professional or technical skill and uses his own knowledge and discretion. A 'contract of service' implies relationship of master and serva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad [1954] 25 ITR 449 (SC) The distinction between a servant and an agent is thus indicated in Powell's Law of Agency, at page 16 (a) Generally a master can tell his servant what to do and how to do it. (b) Generally a principal cannot tell his agent how to carry out his instructions. (c) A servant is under more complete control than an agent, and also at page 20: "(a) Generally, a servant is a person who not only receives instructions from his master but is subject to his master's right to control the manner in which he carries out those instructions. An agent receives his principal's instructions but is generally free to carryout those instructions according to his own discretion. (b) Generally, a servant, qua servant, has no authority to make contracts on behalf of his master. Generally, the purpose of employing an agent is to authorise him to make contracts on behalf of his principal. (c) Generally, an agent is paid by commission upon effecting the result which he has been instructed by his principal to achieve. Generally, a servant is paid by wages or salary." The statement of the law contained in Halsbury's Laws of England-Hailsham Edition, volum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned doctor prescribes the treatment on the hospital's letter pad. If the patient is to be admitted in the hospital for indoor treatment, then he is admitted under his treatment. The working days and hours of the doctors working in OPD of the hospital, are fixed and as per the contract between these doctors and the hospital they are not allowed to do their own practice or work with another hospital during the period for which they are engaged on attended the hospital on call. However, during the course of TDS inspection, it was noticed that the assesse-deductor was deducting the tax at source of both types of doctors under section 194J as professional charges, whereas the payments made to doctors who are regularly attached with hospital, are required to be treated as salary and tax is also required to be deducted under section 192 of the Act. The Assessing Officer was of the view that payments made to doctors, who were regularly attached with the hospital, were required to be treated as salary and taxes were required to be deducted under section 192 of the Act. Consequently, the Assessing Officer issued a show cause notice to treat the "person responsible" (hereinafter ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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