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2015 (9) TMI 1236 - ITAT HYDERABAD

2015 (9) TMI 1236 - ITAT HYDERABAD - TMI - TDS liability - u/s 194J or 192 - whether employer and employee relationship exists between deductor and the deductee? - Held that:- , Dr. Kulbhushan S. Dagar was paid an amount of ₹ 10 Lakhs for his services rendered in the month of February 2008 and March 2008 (Rs. 5 Lakhs p.m.). Dr. Kulbhushan S. Dagar has filed his return of income for the AY. 2008-09 showing the said amount of ₹ 10 Lakhs as 'income from profession'. Therefore, it clearl .....

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o. 1193/Hyd/2013 - Dated:- 9-9-2015 - P. Madhavi Devi, JM And Inturi Rama Rao, AM, JJ. For the Petitioner : Shri Rama Krishna, Bandi, DR For the Respondent : Shri K C Devdas, AR ORDER Per Smt. P. Madhavi Devi, JM. This appeal filed by Revenue is directed against the orders of the Ld. Commissioner of Income Tax (Appeals)-II, Hyderabad dated 08-05-2013 for the AY. 2009-10 on the following Grounds: "1. The order of the Ld.CIT(Appeal) is erroneous and prejudicial to the interest of the Revenue. .....

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for care of children from new born to pediatric age group. The hospital provides both inpatient and out-patient care. The Chief Executive Officer Dr. V.S.V. Prasad and his wife Dr. V. Hema Maili as working Director over see day to day activities of the hospital. A survey operation U/s. 133A of the Income Tax Act, 1961 [herein after referred as 'Act'] was conducted on 19-01-2010 to verify the compliance to various TDS provisions of the Act. During the course of survey proceedings, it was .....

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very month and paid him a monthly salary of ₹ 3.50 Lakhs. However, when he requested his employer for TDS certificate, they did not supply the correct TDS certificate. Instead of actual TDS deducted of ₹ 18 Lakhs, he was supplied TDS certificate for ₹ 4.20 Lakhs only. 3. After verifying all the details, the Assessing Officer (AO) held that Dr. Kulbhushan S. Dagar was paid salary of ₹ 5 Lakhs per month and not professional fee for services rendered on the ground that Dr. K .....

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nary powers exercised by him are not enjoyed by a doctor who is just rendering professional consultancy services to a hospital and is not a full time employee. The AO directed the assessee to remit TDS of ₹ 13,07,400/- on salary paid to Dr. Kulbhushan S. Dagar into Government account along with interest of ₹ 2,60,154/- U/s. 201(1A) of the Act. Aggrieved by the above order, the assessee filed the appeal before the Ld.CIT(A) by raising the following grounds: "a) Dr. Kulbhushan S. .....

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ever issued and all the documents clearly suggest that Dr. Dagar was only a consultant. c) Normally an employee cannot commence working for any organization without having a formal appointment letter. The fact that Dr. Kulbhushan S. Dagar was associated with the Hospital for about fifteen months without a formal appointment letter clearly shows that he was taken in as a consultant only. Letter issued by the Hospital reducing his consultancy fees from ₹ 5,00,000/- to ₹ 3,50,000/- per .....

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truction given to him by the 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. It is the doctor who decides the mode of treatment to a patient and the Hospital has no say in it nor can they influence the doctor to provide any specific treatment to the patient. e) Unlike regular employees, Dr. Kulbhushan S. Dagar is not governed by the terms of employment, leave, terminal benefits and more importantly .....

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ation and also the patient. The hospital house keeping records confirm the same. g) There are no specific job assignments given to the professionals in the manner in which the professional shall render the service. h) Unlike regular employees, Dr. Khulbhush S. Dagar does not have any restrictions on taking any other assignment. i) Termination notice period/notice pay are applicable in respect of employees where as no such thing is there for the consultant doctors. j) Some of the other doctors wh .....

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ruary 2008 and when he wrote to deduct tax at source @ 30% they have deducted ₹ 1 ,50,000/- as tax and paid the balance amount of ₹ 3.5 lakhs per month. At the end of the financial year he was given a TDS certificate and the return was filed accordingly. On perusal of the TDS certificate, it is noted that the nature of payment was mentioned as 'fee for professional or technical services' u] s.194J of IT Act. The assessee's AR during the course of proceedings has filed a c .....

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ee company Dr Dagar was employed elsewhere and received salary of ₹ 40,03,455/- out of that he claimed deductions on account of gratuity, conveyance allowance and earned leave amounting to ₹ 6,58,000/- whereas for the period for February & March 2008 he claimed fees for professional or technical services and the deductions which are associated with employment as a regular employee such as gratuity, PF and earned leave etc., were not claimed in fact various other expenses which ar .....

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'08. This corroborates the contention of the assessee company that they have deducted taxes at 30% at his instance in the month of March". 3) In the order sheet noting dated 12.10.2011, the AO has clearly stated that the assessee was asked to produce the attendance register of the Lotus Hospital from February '08 to May '09 in order to verify whether Dr Dagar was on rolls or not. The AO in the remand report stated that the attendance register of the assessee company was requisit .....

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n as professional and consultancy charges has been accepted by the Dr Dagar and filed the return of income for the relevant year enclosing the said certificate which reflected the amount received from the assessee company as consultancy charges. The contention of the Addl. CIT that the payment being fixed in nature leads to the conclusion that it is salary is also not convincing because the characteristic of salary is not just fixed remuneration, it should also have other elements such as employ .....

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y/dispute. 5.2 It may also be noted that the letters/correspondence filed by both the parties are self serving documents and neither of them has been confirmed/acknowledged by either party. In view of the fact that the AO has not commented on the attendance register which he requisitioned to verify whether Dr. Dagar was on the rolls of the assessee company, the return of income filed by Dr. Dagar showing salary and professional services separately coupled with the fact that despite being given o .....

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ve in respect of the remuneration received from the assessee hospital, the assessee's contention that the relationship between them and Dr. Dagar was not of employment and it is only a contract for services appears to have some merit. After taking all the other factors and the conduct of Dr. Dagar and the evidences available on record into consideration, it is held that Dr. Dagar was a consultant with the assessee company and tax was deducted at source correctly u/s.194J of I.T. Act, 1961 fo .....

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Wockhardt Hospitals in ITA No. 985 & 986/H/2011 dt. 02-07-2012. 6. We have heard the arguments of Ld. DR and Ld. Counsel for assessee. Ld. DR submits that assessee-company has appointed Dr. Kulbhushan S. Dagar as an employee and assessee was to pay an amount of ₹ 5 Lakhs as salary and from the nature of duties performed by Dr. Kulbhushan S. Dagar, Director of Pediatric Cardiac Program at Lotus Children's Hospital, it is clear that he was incharge of surgeons and other medical and n .....

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8 onwards and made TDS at 10% on ₹ 3,50,000/-. He argued that Dr. Kulbhushan S. Dagar also filed a complaint before CIT(TDS) that he was paid salary of ₹ 5,00,000/- per month and that he had requested the assessee to make TDS @ 30% on his salary of ₹ 5,00,000/-. Accordingly, the deductor deducted an amount of ₹ 1,50,000/- tax of every month and paid to him a monthly salary of ₹ 3,50,000/- Therefore, there was an existence of employer and employee relationship betwee .....

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han S. Dagar before CIT(TDS). He further submits that there was no written agreement between the assessee and Dr. Kulbhushan S. Dagar to say that it is a salary and not consultancy fee. He argued further that there is no employer and employee relationship between the deductor and deductee, all the doctors including Dr. Kulbhushan S. Dagar, who were working in the assessee-hospital are only consulting doctors and that the AO has not brought on record any evidence what-so-ever to establish that th .....

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letter to Dr. Kulbhushan S. Dagar confirming the consultancy fee of ₹ 3.5 Lakhs per month. Therefore, the question of payment of ₹ 5 Lakhs as salary does not arise and the payment from April, 2008 onwards was only ₹ 3.5 Lakhs. He further submits that as per the hospital records, Dr. Kulbhushan S. Dagar is not covered by the terms of employment. He further submits that from the payments made to Dr. Kulbhushan S. Dagar, no deduction is made towards 'professional tax and PF .....

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on before us is whether there was any relationship of employer and employee between the assessee and Dr. Kulbhushan S. Dagar. Admittedly, there was no written agreement between the assessee and Dr. Kulbhushan S. Dagar. To decide the relationship of employer and employee, we have to examine whether the contract entered into between the parties is a contract for service or a contract of service. In order to ascertain such relationship, we have to examine the following aspects: i. Payment of remune .....

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a contract from its original shape and status. In the present case, admittedly, the assessee produced the attendance register of the hospital but there is no comment by the AO on the attendance register which he questioned to verify whether Dr. Kulbhushan S. Dagar was on the rolls of the assessee-hospital. Therefore, it clearly indicates that there was no fixed timings and also there was no control of the employer. Admittedly, there was no deduction of professional tax or provident fund from th .....

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ed leave in the case of consultant doctors and also they are not governed by the general service rules and regulations. Therefore, after considering the above said facts and circumstances, we have no hesitation to come to a conclusion that consultant doctors are not akin to the salaried employees and do not have employer and employee relationship. In the present case also Dr. Kulbhushan S. Dagar is only a consultant doctor. 11. The Ld. DR relied on the decision of the Hon'ble ITAT in the cas .....

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their application. The doctors are governed by the service rules of the assessee. Their leave entitlement is also in accordance with the assessee's rules. The doctors were under probation period. During the employment of doctors the assessee has discretion to terminate the same. During the employment the doctors shall devote their whole time attention to their employment. The doctors are liable for retirement on attaining the age of 58 years. During the period of employment either side will .....

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uot;. 12. Upon perusal of the above said judgment in the case of Wockhardt Hospitals (supra), the doctors therein were governed by the service rules and leave entitlement. Moreover, they were under probation period and also they are liable for retirement on attaining the age of 58 years. Admittedly, these terms and conditions are not applicable to Dr. Kulbhushan S. Dagar. Hence, we have no hesitation to come to a conclusion that the facts of Wockhardt Hospitals (supra) are not applicable to the .....

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