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2015 (5) TMI 931 - ITAT DELHI

2015 (5) TMI 931 - ITAT DELHI - [2015] 41 ITR (Trib) 361 (ITAT [Del]) - Tds liability - assessee is a hospital and has doctors working in it by virtue of employment as well as certain agreement entered between - whether payment made by the assessee to the doctors is covered u/s 194J in respect of 3rd and 4th category of Doctors (Doctors on Revenue share with Minimum Guarantee and Senior Doctors on minimum Guarantee consultancy fees) instead of section 192 being TDS on salary as per the AO - Held .....

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ir professional activity (MCA) and the assessee being a hospital they expected the doctors to conduct themselves as per its policy while discharging their profession. This expectation of the assessee is nothing but for maintaining discipline by the said consultant doctors by abiding to the code of conduct of assessee hospital, cannot be considered to be exercising control and supervision over the doctors in their independent professional activity. We find that clause dealing with indemnity insur .....

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rightly considered only as consultant professionals.So, in our opinion, the agreement between the assessee and the doctors is one for providing professional services, and there is no element of employer and employee relationship existing. Therefore, in our opinion, tax has to be deducted under s. 194J of the Act as fee for professional services and not as salary. -Decided in favour of assesse

5th category doctors 'Junior Doctors' on minimum guarantee consultancy fees" - whether are e .....

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consultation fees in their income tax returns from year to year and paid tax accordingly. This indicates concurrence of intention and motive of both the parties to the agreement which is also reflected in their conduct and actions to form the relationship on principal to principal basis. Thus these consultant doctors (5th category consultant) also are independent professionals and the assessee hospital rightly treated them so, and has rightly deducted tax at source u/s 194J of the Act. - Decide .....

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rief facts of the case are that the assessee is a hospital by the name of M/s Artemis Medicare Services Pvt. Ltd. And it's case was picked up by ACIT (TDS), for verification in respect to deduction of tax in compliance to chapter XVIIB of the Income Tax Act 1961(herein after the Act). In response to the notice issued by AO, the assessee submitted that the assessee, Artemis Medicare Services Ltd was formerly known as Artemis Medicare Services Pvt. Ltd and is engaged in the business of managin .....

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urce u/s 192 of the Act in respect of employees including employee doctors; as well as deduction u/s 194J of the Act in respect of medical consultants treating them as independent professionals. 3. The assessee hospital has submitted before the AO, (ACIT (TDS), New Delhi), the details of consultancy fees paid to consultants aggregating to ₹ 29,48,82,714/- in the financial year 2009-10. The assessee hospital further categorized the doctors under five categories of consultants on the basis o .....

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sultants F.Y.2009-10 (Rs.) 1 Visiting Consultants (Doctors) 24,576,144 2 Doctors at Revenue Share Only 42,21,348 3 Doctors on Revenue Share with Minimum Guarantee 14,85,48,44 4 Senior Doctors on Minimum Guarantee Consultancy 6,50,62,933 5 Junior Doctors on Minimum Guarantee Consultancy Fees 5,24,73,845 TOTAL 2,948,82,714 4. According to the assessee, TDS has been deducted on the aforesaid payments u/s 194J of the Act. Further, the assessee brought to the knowledge of the AO that there are 18 doc .....

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ere is no such stipulation in the consultancy agreements with the hospital that these consultants by virtue of the agreements between the assessee and them from where it can be inferred that these consultant doctors are whole time devoted to the work of the hospital. According to the assessee the consultants, while rendering professional services to the hospital, are not subject to supervision and control of the hospital as to diagnosis, line of treatment and in patient health care to be adopted .....

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pted the stand of the assessee with regard to the first two categories of consultants as independent professionals however the AO was not impressed by the submission of the assessee, in respect to other three categories i.e. 3,4 and 5 (Supra) from the chart. 6. So the AO upheld the action of the assessee hospital to deduct TDS of the following consultant doctors u/s 194J of the Act. (A) Visiting consultants: Professional fees paid ₹ 2,45,76,144/- (B) Doctors at revenue share only Professio .....

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2,933/- 3. Junior Doctors on Minimum Guarantee Consultancy Fees 5,24,73,845/- Total 26,60,85,223/- 8. The AO has referred to in Para 5 of his order the basic four factors namely masters right of selection, payment of remuneration, right to control the method of work, right to suspend or dismiss for deciding the issue whether consultants are employees of the hospital. The AO has recorded his findings in para 6.3 as under: "The discussion in the above Para clearly and categorically reflects t .....

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s for part time/ full time employees or any such category may suggest only irrelevant categories so long as it stands the test of employer-employee relationship as has been concluded from the documents furnished by the assessee. Whatever name be given to the contract between the consultant doctors and the hospital there exists a clear master-servant relationships the contract is clearly "of service", 9. The AO treated the payments to the aforesaid three categories of consultants aggreg .....

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to tax consultancy fees paid to them, claimed credit for TDS deducted and deposited balance tax payable by them if any. In support a certificate of the Chartered accountant dated 5.6.2012 has also been furnished before the AO. The AO accepted the contention of the assessee that in cases where doctors have filed their income tax returns and offered to tax consultancy fees paid to them, and deposited the balance tax payable by them, if any, no default u/s 201/201 (1A)would be deemed to have been .....

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educed to ₹ 1,90,90,371/-. 10. Aggrieved by the said order of the AO, the assessee preferred an appeal before the ld CIT(A) who was pleased to partly allow the appeal. 11. Against the said order of the ld CIT(A), the Revenue has filed the appeal and the assessee has filed the cross-objection. 12. We have heard Sr. Advocate Shri Ajay Vohra on behalf of the assessee and ld DR, Dr. Salini Verma on behalf of the revenue and perused of the records and case laws cited before us. The assessee is .....

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um Guarantee 4 Senior Doctors on Minimum Guarantee Consultancy Fees 5. Junior Doctors on Minimum Guarantee Consultancy Fees 13. We note that AO had no issue with the first and second category of Doctors stated above and has accepted the view of the assessee. However AO disagreed with the assessee's contention in respect of third, fourth and fifth category doctors stated above. Here we would like to again mention that the assessee hospital had doctors on its employment role that is who were p .....

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inst finding of the ld CIT(A) in the impugned order in respect of 3rd and 4th category of Doctors (Supra) and the assessee in its cross-objection against the impugned order in respect to the ld CIT(A) impugned finding in respect category '5' doctors (Supra) 14. Apropos ground No.3 and 4 of the Revenue which we will deal first, i.e. in respect to the question whether payment made by the assessee to the doctors is covered u/s 194J of the Act in respect of 3rd and 4th category of Doctors (D .....

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Act. 16. Learned Departmental Representative Smt. Dr. Shalini Verma submitted that the assessee is a private ltd company engaging the services of doctors in its hospital and treated them as consultants for the purpose of TDS under s. 194J of the Act. According to the learned Departmental Representative as per the agreement between the assessee and the doctors they have to work for the hospital exclusively as a full-time employee consultant. They are also prohibited from being engaged in similar .....

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192 of the Act. The learned Departmental Representative pointed out that the assessee was expected to deduct tax under s. 192 of the Act and not under s. 194J of the Act. The learned Departmental Representative further pointed out that a perusal of the agreements will reveal that there is an employer and employee relationship between the assessee and the consultant doctors in the aforesaid 3rd and 4th category of doctors. Dr Shalini the ld DR further pointed out that the assessee collected the e .....

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he impugned order need to be reversed. 17. On the other hand. Shri Ajay Vohra, ld Sr. counsel for the assessee submitted that the assessee is a company which is running hospitals and multi speciality health care facilities and for which engaging the services of professional doctors for rendering their services to the patients is required. According to the ld Sr. counsel these are agreements for rendering professional services for three years which is extendable with mutual consent. According to .....

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t was pointed out by the Sr. Counsel that the doctors are not employees for the purpose of provident fund and other statutory benefits conferred upon the employees. According to him a perusal of the agreement will reveal that there are no fixed hours of working for the said doctors. The doctors enjoys their freedom to select their own period of working in the manner in which they like. Therefore, according to him there was no control or direction by the assessee to the consultant doctors. 18. Ac .....

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nd the members of the team. This is again the most telling manifestation of intention of the hospital authorities as well as the consultants to constitute relationship of principal to principal and not master and servant. 19. According to the ld Sr. counsel the remuneration paid to the consultants by the hospital has been debited in the books as fees for professional services from year to year. The consultants have also accounted for the fees as income from profession. The consultants have consi .....

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Medical Research 107 Taxman 250 (Cal) and Or Shanti Sarup Jain v First Income Tax Officer 21 ITO 494 (Bom). 20. In view of the above, according to the ld Sr. counsel there was no employer and employee relationship. Therefore, the doctors referred to the 3rd and 4th category have to be treated as consultant for professional services rendered. Accordingly, s. 194J would be applicable and not s. 192 of the Act. Thus the payment made by the assessee, according to the ld Sr. counsel is for contract f .....

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ces of doctors for providing treatment to the patients. The question before us is whether the payment made to the doctors described and categorized on 3rd and 4th consultant doctors by the assessee hospital is salary or else is it only the professional charges so as to attract the provisions of s. 194J of the Act. The contention of the assessee is that the payment made by it to the said consultant doctors is only professional charges and, therefore, tax has to be deducted under s. 194J of the Ac .....

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stion, as to how to determine whether the relationship between parties are of the nature of employers and employee; and let us examine as to who qualifies to be called employees; and principles of employer- employee relationship how established; and thereafter we can proceed to adjudicate the issue before us. 22. The Hon'ble Supreme Court in the case of Workmen of Nilgiri Cooperative Marketing Society Ltd Vs. State of Tamil Nadu, 2004) 3 SCC 514 has laid down as follows:- "32. Determina .....

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ld to be the determinative factor for determining the jural relationship of employer and employee. 33. There are cases arising on the borderline between what is clearly an employer-employee relation and what is clearly an independent entrepreneurial dealing. 34. This Court beginning from Shivnandan Sharma v. Punjab National Bank Ltd.) and Dharang adhra Chemical Works Ltd. v. State of Saurashtra- observed that supervision and control test is the prima facie test for determining the relationship o .....

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onship of employer and employee has come into being only because some persons had been more or less continuously working in a particular premises inasmuch as even in relation thereto the actual nature of work done by them coupled with other circumstances would have a role to play. 36. In V.P. Gopala Rao v. Public Prosecutor; A.P3 this Court said that it is a question of fact in each case whether the relationship of master and servant exists between the management and the workmen and there is no .....

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several factors which would have a bearing on the result: (a) who is the appointing authority; (b) who is the paymaster; (c)who can dismiss; (d) how long alternative service lasts; (e) the extent of control and supervision; (j) the nature of the job e.g. whether it is professional or skilled work; (g) nature of establishment; (h) the right to reject. 38. With a view to find out reasonable solution in a problematic case of this nature, what is needed is an integrated approach meaning thereby inte .....

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be difficult to apply. Historically, the solution lay ill applying the 'control' test i.e. could the employer control not just what the person was to do, but also the manner of his doing it - if so, that person was his employee. In the context in which it mainly arose in the nineteenth century, of domestic, agricultural and manual workers, this test had much to commend it, but with the increased sophistication of industrial processes and the greater numbers of professional and skilled p .....

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grated into the employer's concern, or remained apart from and independent of it. Once again, this is not now viewed as a sufficient test in itself, but rather as a potential factor (which may be useful in allowing a court to take a wider and more realistic view). The modern approach a has been to abandon the search for a single test, and instead to take a multiple or 'pragmatic' approach, weighing upon all the factors for and against a contract of employment and determining on which .....

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39;in business on his own account'). A further development in the recent case-law (particularly concerning atypical employments) has been the idea of 'mutuality of obligations' as a possible factor i.e. whether the course of dealings between the parties demonstrates sufficient such mutuality for there to be an overall employment relationship." (See also Ram Singh v. Union Territory, Chandigarh) (2004) 1SCC 126: 2004 SCC (L&S) 14: IT (2003) 8 SC 345 40. In Mersey Docks and Ha .....

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that the most satisfactory, by which to ascertain who is the employer at any particular time is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged," 41. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kiqd of contract and the person doing the work will not be a servant. [See Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance] ( .....

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efore, the question before us poses intricate question having regard to the facts and circumstances of the case in hand. So in our endeavour to find out an answer, let us at the first instance look at the terms of agreement between the assessee and the said category doctors (i.e. consultant doctors on revenue share with minimum guarantee fees) as noted by the ld CIT(A). (i) DOCTORS ON REVENUE SHARE WITH MINIMUMGUARANTEE CONSULTANCY FEES Sample agreement in this category entered with Dr. Deepak S .....

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Rakesh R. Sapra in this category has been placed at pages 102 to 106 PB. Clause 4 deals with the financial terms and provides for minimum guarantee of ₹ 5,00,000/- per month plus 50% consultant share. This agreement is also on similar lines as in the case of above categories and from the second year, the retainership decreases consultancy share increase. It agreement is also similar to that of the above said category of doctors. 23. The issue before us is whether the aforesaid two categor .....

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R 31, the AAR after relying on the decision of the Hon'ble Supreme Court in the case of Shivnandan Sharma Vs. Punjab National Bank AIR 1955 SC 404 and in the case of Ram Prasad vs. CIT 1972 CTR (SC) 97 : (1972) 86 ITR 122 (SC) has held as follows:- "it is obvious that certain employee acts under direct control and supervision of the master. However, an agent or a professional exercises his discretion in carrying out the work and is not under the direct control or supervision of the empl .....

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the AO and the Authorized Representative of the appellant have been carefully considered by me. Before adverting to the legal principles governing jural relationship - master and servant as well as principal and independent contractor, it would be useful to analyse the consultancy agreements concerning the engagement of the consultants by the appellant hospital. It needs to be noted here that for deciding the issue whether the agreements in question establish relationship of employer-employee or .....

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e sharing basis have been accepted by her as independent professionals covered under section 194J whereas the remaining three categories of consultants namely consultants with revenue sharing subject to minimum guarantee, senior doctors with minimum guarantee and junior doctors with minimum guarantee are treated by her as employees without analysis of the clauses of the respective agreements. 24. On going through the compilations of consultancy agreements entered in to by the appellant, availabl .....

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imum guarantee (iii) senior doctors with minimum guarantee. It is rather intriguing that the AO has accepted revenue sharing consultants as independent professionals and with regard to the remaining two categories the AO has rejected the claim of the appellant and treated them as employees ignoring the crucial and decisive fact that the format of the three categories are similar, and various clauses are identical and the only difference is basis of payment. During the course of hearing of appeal .....

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conclusion that the consultants falling in the last three categories are employees, only for the reason that the consultants in these categories are getting minimum guarantee fee. I have examined the various clauses forming part of the agreements with all the 5 categories of the medical consultants and am inclined to agree with the contention of the AR of the appellant that the clauses in these agreements are identically worded except in the fifth category of Junior Doctors with Minimum Guarant .....

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ee Fee) should also be accepted, on principle of consistency, as being covered u/s 194J. No discrimination should be made by the revenue by treating the professionals in the 3rd & 4th category of Doctors on revenue share with Minimum Guarantee & Senior Doctors on Minimum Guarantee Fee as employees of the hospital. I, therefore hold that the 3rd & 4th categories of doctors i.e. Doctors on revenue share with Minimum Guarantee & Senior) Doctors on Minimum Guarantee Fee as independen .....

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which were highlighted by the AO is that the doctor has to work for the assessee and cannot do any private practice. We cannot agree to this because of the simple fact that there is no prohibition for the said consultant doctors to do private practise and the only restriction is that the assessee hospital should be taken in to confidence before doing it. We find that in Para 15 of the AO's order itself he has taken note of the fact that the assessee hospital has granted permission to few doc .....

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red to see the existence of employer and employee relationship. In the case before us, it is not in dispute that the consultant doctors in question are not in the roll of PF payments etc. 25. Admittedly, the working hours were flexible and determined mutually by the assessee and the doctor. The consultant doctors are free to come at their convenience and treat the patients. The agreement does not provide for any supervision or control over the doctor. The doctors at their own discretion treat th .....

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ee hospital, cannot be considered to be exercising control and supervision over the doctors in their independent professional activity. We find that clause dealing with indemnity insurance payable by the consultant in case of any liabilities for any act of medical malpractice arising under Consumer Protection Act clearly takes the assessee hospital out of any vicarious liability which again goes on to show that there is no master-servant relation between them. We find that consultants are not go .....

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Act as fee for professional services and not as salary. 28. Hence we find force in the contention of the ld Sr. counsel for assessee that the agreement with the 3rd and 4th category cannot be termed as that of an employer employee contract and so ld CIT(A) rightly held so after analysing the said agreements. The ld Sr. Counsel has placed before us order of the Hon'ble Bombay High court wherein the Hon'ble High Court held in a similar case where facts are similar and having considered the .....

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d medical professionals were brought within the purview of the Consumer Protection Act, 1986 and in relation to the services rendered by them. The argument was that the Consumer Protection Act defines the term "service" in Section 2(1)(o) of the Consumer Protection Act, 1986. A doctor patient relationship is of mutual trust and confidence. A doctor cannot be said to be a servant of the patient. Neither the patient can be termed as his master. This peculiar relationship would, therefore .....

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ofessionals are not brought within the purview of the Act that the Hon'ble Supreme Court upheld its validity and negatived the challenge. In doing that the Hon'ble Supreme Court referred to the well settled tests which could enable a Court to distinguish between a contract of service (a master servant relationship) and contract for service being services rendered as a professional. In that context, paragraphs 41 and 42 of the decision read as under: "41. Shri Salve has urged that th .....

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Dharangadhara Chemical Works Ltd v. State of Saurashtra, 1957 SCR 152 at p. 157]. 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 exercises professional or technical skill and uses his own knowledge and discretion. [See : Oxford Companion to Law, P. 1134]. A 'contract of service' implies relati .....

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osen the expression 'contract of service' instead of the expression 'contract for services', in the exclusionary part of the definition of 'service' in Section 2(1)(0). The reason being that an employer cannot be regarded as a consumer in respect of the services rendered by his employee in pursuance of a contract of employment. By affixing the adjective 'personal' to the word "service" the nature of the contracts which are excluded is not altered. The sa .....

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ee of mutual confidence and trust and, therefore, the services rendered by the medical practitioner can be regarded as services of personal nature but since there is no relationship of master and servant between the doctor and the patient the contract between the medical practitioner and his patient cannot be treated as a contract of personal service but is a contract-for services and the service rendered by the medical practitioner to his patient under such a contract is not covered by the excl .....

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llenge. 30. Further the Hon'ble Bombay High court held in respect to the doctors who had a fixed remuneration and variable payment (in the case in hand consultant doctors on revenue share with minimum guarantee fee-identical) the Hon'ble High Court held as under:- "36) However, we are in agreement with. Mr Bajpai that the foundation or basis on which the Revenue and the Assessing Officer proceeded was whether the categories of doctors and which were before the Assessing Officer coul .....

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ent or service would be crucial and material. In relation to two doctors, namely, Or Zirpe and Dr Phadke, the contracts were taken as sample and scrutinized minutely. Upon such a scrutiny the Tribunal noted that it cannot be said that these doctors were employees. If the first part of the Commissioner's order indicates as to how these persons or doctors were not treated by the assessee as regular employees for want of benefits like provident fund, retiremental benefit, etc., then, merely bec .....

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are the employees of the assessee trust. 38) However, in cases of other doctors the contract would have to be read as a whole. It would have to be read in the backdrop of the relationship and which was of engagement for certain purpose and time. The skill of the doctors and their expertise were the foundation on which an invitation was extended to them to become part of the assessee which is a public charitable trust and rendering medical service. If well known doctors and in specified fields ar .....

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; little curious. The commissioner referred to the tests in paragraph 9 of the order at running page 62 and at internal page 14 in paragraph 10 the Commissioner concluded that doctors drawing fixed remuneration are full time employees. However, in relation to the second category of doctors drawing fixed plus variable pay with written contracts the terms and conditions of Dr. Zirpe and Dr Phadke have been referred and the Tribunal concluded that neither of the doctors was entitled to provident fu .....

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split up or read in bits and pieces by the Commissioner. The Leave Rules were held to be applicable in case of Dr Phadke and there were fixed timing and fixed remuneration. Now it is inconceivable that merely because for a certain period of time or required number of hours the doctors have to be at Ruby Hall Clinic means they will not be entitled to visit any other hospital or attend patients at it necessarily. The anxiety appears is not to inconvenience the patients visiting and seeking treatm .....

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brain, stomach ailments are facilities available at clinics and hospitals. The management, therefore, insists that such facilities, which are very costly and expensive are utilized to the optimum and the investment of time, money and infrastructure is not wasted. Hence, fixed timings and required number of hours and such stipulations are, incorporated in contracts so that they are of binding nature. The Doctor or Expert Medical Practitioner is then obliged to denote his time and energy to the cl .....

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al and if the contracts would have been properly and carefully scrutinized. Merely because their income from the hospital is substantial does not mean that ten out of the fourteen criteria evolved by the Commissioner have been satisfied. The Assessing Officer and the Commissioner, therefore, were in complete error. We have also perused these contracts and copies of which are annexed to the paper book being part of the order of the Assessing Officer. We find that the communications which have bee .....

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ontract. He was paid emoluments at fixed rates for the patients seen by him in the OPD. That he would not be permitted to engage himself in any hospital or nursing home on pay or emoluments cannot be seen as an isolated term or stipulation. In case of Dr Uday Phadke, we do not find any such stipulation. In these circumstances, the only agreement between the parties being that certain private patients or fixed or specified number seen by the consultant could be admitted to the assessee hospital. .....

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in the findings, particularly pointed out by us hereinabove. 39) In relation to other doctors where the remuneration was variable and there was a written contract or no written contract the commissioner and the Tribunal did not commit any error at all. Both have referred extensively to the materials on record. We are not in agreement with Mr Gupta that the Tribunal's order is in any way incomplete or sketchy or cryptic. The settled principles and rendered in co-ordinate Bench decisions have .....

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nteed a fixed monthly payment. That would not make him an employee of the hospital. This cannot be seen as a standalone term. There are other terms and conditions based on which the entire relationship of a consultant or professional and visiting the assessee's hospital had been determined. Once again, no general rule be laid down. Nowadays, Private Medical Care has become imperative. Public Hospitals cannot cater to the increasing population. Hence, Private Hospitals are established and con .....

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circumstances, we do not think that the Tribunal committed any error of law apparent on the face of the record in confirming' the findings rendered by the first Appellate Authority. The findings of fact from paragraph 16 onwards in the Commissioner's order on ground no.2 and from paragraph 20 onwards on ground no.3 do not suffer from any serious legal infirmity. The appreciation and appraisal of the factual materials is not such as would enable us to interfere in our limited jurisdictio .....

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against, the Revenue and in favour of the Assessee. 41) Consequently, the appeal fails and is, dismissed with no order as to costs. 42) The only argument that is seriously canvassed by Mr Gupta is that confirmation of the findings rendered by the Tribunal would mean concurrence with its conclusion that professionals can never be appointed as employees or there can never be master servant relationship. This is apprehended by the Revenue because several eminent professionals are rendering full tim .....

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a master servant or an employer-employee relationship. It can be arrived at in cases where it is found by the Income-Tax Authorities that though there is not a regular process of recruitment and appointment but the contract would indicate that the doctor/professional was appointed as an employee and on regular basis. All such and other courses in law are always open. With this additional clarification, we dismiss this appeal." 31. After going though the aforesaid judgement of Bombay High C .....

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o the said appeals of the revenue is dismissed. 32. Coming to Ground Nos.1and 2 of the revenue is concerned we find that the revenue is aggrieved by the decision of the AO in reducing the demand while adjudicating an application filed by the assessee hospital u/s 154 of the Act, and the impugned direction of the ld CIT(A) to the AO, wherein he directed him to verify the tax details of the assessee, since AO (TDS) was handicapped and does not have access to verify the payment from ITD system. In .....

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ant claiming that doctors have filed their income tax returns and offered to tax consultancy fees paid to them, claimed credit for TDS deducted and deposited balance tax payable by them if any. In support a certificate of the Chartered accountant dated 5.6.2012 has also been furnished to the AO. The AO accepted the contention of the appellant that in cases where doctors have filed their income tax returns and offered to tax consultancy fees paid to them, claimed credit for TDS paid and deposited .....

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for furnishing a chartered accountant's certificate. AO passed the rectification order dated 18.7.2012 after the present appeal has been filed in April 2012 before me. The total demand of tax and interest has thus been reduced to ₹ 1,90,90,371/-. A copy of the said rectification order passed by the AO has been filed before me." 33. Further we find from the records that the ld CIT(A) exercising his powers which are co-extensive to that of the AO wrote to the Director of Income Tax .....

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the case to member of CBDT on 16.11.2012 after consulting the matter with you. The appellant had won the case from Punjab and Haryana High Court on a petition filed by the appellant where TDS demand was raised by AO. of CIT (TDS) Delhi as well as AO. ACIT (TDS) Gurgaon for the F.Y. 2009-10 & 2010-11. The Hon'ble High Court had directed that the AO, CIT(TDS) Delhi will have jurisdiction .over the case for the F. Y. 2009-10 only and A O. ACIT (TDS) Gurgaon jurisdiction for the FY 2010-11.1 .....

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0 which jurisdiction lies with me now as per Punjab and Haryana High Court direction. Therefore, I need your co-operation in this regard so that the tax demand can be quantified scientifically on the basis of information in our server. Yours faithfully, (Durga Charan Das) Commissioner of Income Tax (Appeal)-XXX. New Delhi Copy to :1) Commissioner of Income Tax (TDS) Gurgaon. 2) Artemis Medicare Services Limited, Deihi 3) Commissioner of Income Tax (TDS) - I & II. Delhi 34. Pursuant to the af .....

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ed. 36. Coming to the CO filed by the assessee, in respect of the impugned order in which it was held by the ld CIT(A) that 5th category doctors categorized under the heading 'Junior Doctors' on minimum guarantee consultancy fees" are employees and therefore TDS ought to have been deducted u/s 192 of the Act, mainly due to absence of indemnity bond and that they are subject to leave rules /conduct rules. On this ground of the assessee, the ld CIT(A), held as follows:- "Under th .....

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ntly and agreements in such class/category are placed on record by the appellant. A bare reading of the various clauseswould indicate that the consultants in this category have been engaged asemployees. The clauses are structured in a different manner as compared with the earlier cases described above, however the sum and substance emerging from a composite reading of the agreement is that this is an agreement for engagement of consultant as an employee of the appellant hospital and not as indep .....

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t rung of their professional career with limited experience and expertise, would not clinch the issue against the appellant for invoking section 192 for the purposes of TDS. According to the appellant this clause by itself cannot be read in isolation for adjudicating the issue whether the doctor has been engaged as an employee or as an independent professional. It is further contended that thevarious characteristic features of the agreement in question namely shortduration of engagement, non pro .....

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IT Act. The clauserelating to leave rules is not an isolated stipulation in the agreement. The junior doctors are subject to conduct rules framed by the hospital for its employees. The telling feature which eloquently demonstrate the intention of the parties to establish employer-employee relationship is the conspicuous absence of indemnity insurance clause and also the clause relating to denial of employeremployee relationship. Such clauses are included in the other consultancy agreements but .....

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ted for engagement of consultants is indicative of engagement of independent professionals and not recruitment of salaried employees. It is the Artemis hospital which has "sought the services of the consultant" and not the other way round when a candidate seeks employment by filing application for recruitment. Further it was submitted by the ld sr. counsel that there is no relationship of master and servant and these are contracts for specific services to be rendered by the consultants .....

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ng to him, there is no requirement that the consultant should perform a particular number of operations or he should attend a particular number of patients in the consulting room and the hospital has not reserved any right to regulate the work of doctors in any particular manner. The ld Sr. counsel pointed out that no perquisites or allowances like dearness allowance, provident fund or gratuity etc which are the normal incidents of employment are provided by the hospital to the consultant. 40. A .....

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ltants are not restrained from private practice or from running their own clinics. The relationship envisaged in the agreement is principal to principal. There is no outright ban on the consultants to take up consultancy with other hospitals. Of course the consultants have not been permitted to work in a rival hospital in Gurgaon so as to avoid conflict of interest. He further submitted that the consultants are allowed to bring their own equipments and instruments for their consultation services .....

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their income tax returns from year to year and paid tax accordingly. This indicates concurrence of intention and motive of both the parties to the agreement which is also reflected in their conduct and actions to form the relationship on principal to principal basis. Reliance is placed on the decisions in the case of CIT v Bhojraj Hari Chand 14 ITR 277 (Lahore); Sri Nilkantha Narayan Singh v CIT 20 ITR 8 (Patna); Income tax officer v Calcutta Medical Research 107 Taxman 250 (Cal) and Or Shanti S .....

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gage medical consultants on temporary basis as independent professionals and the consultation agreements of Artemis with consultants is in conformity with the said practice and the ld CIT(A) erred in not allowing its appeal and so prayed that the impugned order be set-aside. 42. The ld DR, Dr. Shalini Verma reiterated the observation of the ld CIT(A) and the AO and does not want us to interfere in the order. 43. We have heard both the parties and perused the records and we take note that at Page .....

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hly retainership of ₹ 38,800/- reveals that the said 5th category doctors engagement is that of a temporary period (i.e. 12 months) which is renewable whereas for employee doctors retirement age of 58 years is there in clause g at Page 113 of Paper Book. 44. Distinguishing features between the employee doctors and the 5th category doctors need to be noted. As per the agreement with employee doctors it is evident that apart from the basic salary, the doctors are entitled to flexible benefit .....

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f 58 years. Whereas in the consultancy agreement the period of engagement is one year and there is no element of permanency. Another important feature which needs to be noted is that the management has the authority to transfer the doctor employee, as it may consider necessary, to any place in India. We find that there is no such provision for transfer and posting in the case of a consultant. If the consultant is to be shifted to another hospital outside NCR, it has to be with the mutual consent .....

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t after mutual consultation and mutual convenience. We take note that the employee doctor may be assigned any work in any department unit of the company. He is devoted to attend to the business of the company and jobs as assigned by the management. In the case of the consultants no such command and control can be seen from a reading of the agreement. We also take note of difference in the procedure of appointment of the employee doctors, to appoint them first they apply for it and there are ther .....

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s to abide by the rules of the company as well as orders issued by the company from time to time. No such omnibus stipulation is included in the consultation agreement. The only requirement to be followed by the consultants is to abide by the code of the medical ethics, the underlying rationale being compliance by the consultants with the behavioural norms fixed by Medical Council as well as compliance by assessee hospital with the accreditations requirements of National Accreditation Board for .....

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in employment agreements with doctor employees that the employee doctor would be entitled to more beneficial of the benefit either conferred in the agreement or similar benefit conferred under the statute. However since such employment legislations are not applicable to consultants of assessee hospital, we find that no such clause is included in consultation agreements. Further we find that agreements with doctor employees specifically ensure compliance by the employee with the statutory require .....

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hospital with independent professional doctors. 47. Further an analysis of the agreement annexed at Page 107 to 110 PB of Dr. Khallung, title of which reads that it is a "consultancy agreement" and we find that as per clause 1, the consultancy was on a temporary basis i.e. for a period of 12 months. It appears that it was renewable from time to time. The retainer fee is ₹ 38,500/- per month. The question whether the said agreement between the assessee with that of these Doctors c .....

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ld like to reproduce clause 4 at Page 107 of Paper Book reads "4. For the above serves rendered, you will be paid a consolidated retainership fee for ₹ 38,500/- (Rupees Thirty Eight Thousand and Five Hundred and Five Hundred only) per month subject to deductions as per income tax act & rules, towards professional charges. 49. From a reading of the said clause it is agreed by the assessee that the Doctor/ Consultant Medical Officer shall be paid a consolidated retainership fee for .....

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greed between the parties as stated in clause 4 (supra). 50. Clause 6 of the agreement entails the consultant doctor to practise outside with prior permission which is another important factor to indicate that they cannot be called employee doctors. We note that the consultant is not entitled to participate in any welfare benefit plans dispersed to employee doctors. And as per clause 19 the junior consultant/ Medical Officer on retainership has been offered co-ownership for any technology, techn .....

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nth notice to assessee, likewise the assessee too can terminate the contract by giving one month notice to the said class of doctors or in lieu of payment of one month pay, then notice is not required whereas an employee can be fired at will which is one of the distinguishing feature among others of an employer-employee/ master-servant relationship. We find that ld CIT(A) erred in giving undue weightage to absence of indemnity bond etc in their agreement, to term these doctor as employee, which .....

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ltant/ medical officer. It is common knowledge that getting admission in a medical college and its study are very competitive and the best of the best in the country passes out with flying colours; and thereafter also getting PG and super specialisation etc are uphill task and very few seats are there in medical colleges. So when a doctor who accepts to discharge professional services to the assessee for a retainership of ₹ 38,800/- per month is loaded with indemnity bond for which substan .....

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consultants i.e. the consultant doctors belonging to 1st, 2nd 3rd and 4th category their remuneration is linked to revenue sharing also, so if they come less to the assessee hospital their revenue share will be less, so there is no such restriction on leave etc for that class of consultants. But that cannot be the case of these junior consultants, who have been engaged on a retainer fee and so the reasonable restriction of the assessee hospital in respect to availability of leave cannot be taken .....

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ason as stated above. 54. The material fact is that there is no covenant in the agreement which expressly or impliedly confer on the assessee hospital control and supervision over the professional work done by the doctor. In the instant case, the doctors have been engaged as independent professionals on temporary basis for professional medical services and not as salaried servants or doctors of the hospital. Consultancy agreement as stated above do not envisage that the doctors have exchanged th .....

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ributions, gratuity and allowances like leave travel assistance, house rent and insurance etc. are conspicuous by their absence in the consultancy agreements for the obvious reason that doctors are rendering professional services to the assessee hospital in the field of their specialization and expertise as independent professionals and not as salaried employees. 56. In CIT v Govindaswaminathan 233 ITR 264 (Mad) it has been held by the Madras High Court that retainer fee received by the Advocate .....

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in the books as fees for professional services from year to year. The consultants have also accounted for the fees as income from profession. The consultants have consistently and regularly disclosed consultation fees in their income tax returns from year to year and paid tax accordingly. This indicates concurrence of intention and motive of both the parties to the agreement which is also reflected in their conduct and actions to form the relationship on principal to principal basis. Reliance i .....

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