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TMI Blog2015 (12) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal, Chandigarh Bench 'A', Chandigarh (in short, "the Tribunal") in ITA No.731/CHD/2012 for the assessment year 2009-10. This appeal was admitted on 22.1.2014 by this Court to consider following substantial questions of law:- "i) Whether on the facts and in the circumstances of the case, the learned ITAT has erred in treating chargeability of payments made to doctors who are regular employees of the hospital as per the provisions of Section 194J of the Income Tax Act, 1961 instead of Section 192 of the Income Tax Act, 1961? ii) Whether on the facts and in the circumstances of the case, the learned ITAT is right in law in holding that there does not exist an employer/employee relationship between the doctors and the hospital and the assessee is not liable to make deduction of tax at source under section 192 of the Income Tax Act? iii) Whether on the facts and in the circumstances of the case, the findings recorded by the learned ITAT are perverse and contrary to the material available on record and sustainable in the eyes of law?" 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.142 of 2013 may be noticed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment of patients. There exists no employer employee relationship. The department went in appeal before the Tribunal. Vide order dated 16.10.2012, Annexure A.3, the Tribunal dismissed the appeal. Hence the instant appeal by the revenue. 4. We have heard learned counsel for the parties. 5. Learned counsel for the revenue submitted that it is the nature of receipt in the hands of the doctors and whether relationship of employer and employee existed was required to be seen in order to determine the controversy involved. It was urged that the payment made to the doctors was in the nature of salary and was governed by the provisions of Section 192 of the Act. The claim made by the assessee that the amount which was paid fell under Section 194J of the Act being professional charges and tax at source was to be deducted at the rate provided thereunder, was erroneous. Support was drawn from judgments in CIT vs. Dr. (Mrs.) Usha Verma and others, (2002) 254 ITR 404 (P&H), Ram Prashad vs. CIT, (1972) 86 ITR 122(SC) and Karnataka High Court in CIT vs. M.S.P. Rajes, (1993) 202 ITR 647. It was urged that control test and supervisory test would be applicable in the case of doctors as was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called, other than those on which tax is deductible under section 192, to a director of a company, or (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein : Provided that no deduction shall be made under this section - (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed- (i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) thirty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) thirty thousand rupees, in the case of royalty referred to in clause (c), or (iv) thirty thousand rupees, in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. To resolve the controversy raised in these appeals, necessarily, it will be required to be seen whether the agreement between the assessee and the concerned doctors was a 'contract for service' or a 'contract of service'. In case, it is 'contract for service', the income of the doctors would fall under the head 'income from business or profession' whereas under 'contract of service, it would partake the character of salary which is dependent upon master-servant relationship. It is always a vexed question to determine whether employer-employee relationship exists between the parties or not. There is no strait jacket formula prescribed under any statute or by any pronouncement on the basis of which it could be said that in a given eventuality, it would be characterized as employer-employee relationship. It is dependent upon several factors taken together which would result into such relationship. Besides the control/supervisory test and the organization test, the Apex Court in Workmen of Nilgiri Coop. Marketing Society Limited's case (supra), observed that the question whether the relationship between the parties is one of the employer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e doctors was entitled to provident fund or any terminal benefits. Both were free to carry on their private practice at their own clinic or outside hospitals but beyond the hospital timings. In such circumstances, they were not employees but independent professionals. The amounts paid to them did not amount to salary. Similarly, in relation to other doctors where the remuneration was variable and there was a written contract or no written contract, it was recorded that the amounts paid to them did not amount to salary. It was observed that it will depend upon facts and circumstances of each case after looking to the conditions of engagement whether there is master-servant or employeremployee relationship or not and it cannot be laid down as absolute rule or principle of general application. 13. In Commissioner of Income Tax (TDS) vs. Apollo Hospitals International Limited, (2013) 359 ITR 78 (Guj.), while concurring with the findings recorded by the Tribunal, the Gujarat High Court recorded as under:- "5.1. In the impugned order, the Tribunal has elaborately considered the aspect whether the agreement between the assessee and 15 doctors was a contract of service or it was a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed: "To determine whether an amount received by a person is in the nature of salary or not, it is necessary to examine over all circumstances and primarily the terms and conditions of the employment. We have already scrutinized the terms and conditions and thereupon made certain distinctions as listed hereinabove. On the basis of those distinctions, we hereby hold that the terms and conditions in respect of the impugned doctors who are under FGCs are not akin to the salaried employees. Their relationship with the hospital, thus, cannot be said to be an employer-employee relationship. For this reason the deduction of tax at source ought to have been made as per the provisions of Sec.194J of the Act." 6. Another important aspect was that the consultant doctors had filed their individual returns of their income showing professional fees received from the assessee and on that they had paid tax. The assessing officer directed for payment of interest under section 201 (1A) of the Act. On the issue of charging of interest the fact that those consultant doctors were independently assessed was of signifying relevance inasmuch as since they were paying tax, there was no loss to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. Such is not the position in the present case. The legal principles enunciated in these pronouncements are unexceptionable but keeping in view the facts of the case in hand noticed in succeeding para, they do not advance the case of the revenue. 15. In the present case, it has been categorically recorded by the CIT(A) that the contract for service implies a contract whereby one party undertakes to render services i.e. professional or technical services whereas contract of service implies relationship of master and servant and involves an obligation to obey orders in the work to be performed and also as to its mode and manner of performance. The professional doctors are not entitled for LTC, concession in medical treatment of relatives, PF, leave encashment and retirement benefits like gratuity. They are required to follow some defined procedure to maintain uniformity in action and some administrative discipline but this does not mean that they have become employees of the hospital. Further, the department had not taxed the payments received by any of the doctors from the assessee under the head 'income from salary'. Concurring with the findings recorded by the CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Consequently, AO issued a show cause notice to treat the person responsible (hereinafter referred to as PR) as assessee in default under section 201(1) of the Act for short deduction of tax at source from the payments made to the consultant doctors and charged interest under section 201(1A) of the Act. On appreciation of the written submissions filed by the appellant before the AO, it was concluded by him that there existed employer-employee relationship in the hospital. Consequently, the AO concluded the issue as 'During the financial year 2008- 09, the assessee had deducted tax of Rs. 11,67,399.40 under section 194J of the Act, whereas the tax of Rs. 27,98,169.69 under section 192 of the Act was required to be conducted. Therefore, the assessee is liable to pay a difference of Rs. 16,30,770/- as tax of Rs. 7,40,121/- under section 201(1A) of the Act as per calculation enclosed as Annexure 1 to this order. Accordingly, total payable tax demand comes to Rs. 23,70,891/- for the assessment year 2009-10.' 6. Similarly, for the assessment 2010-11, the AP worked out the total payable tax demand at Rs. 75,60,672/- (difference net tax deducted at Rs. 62,50,560/- and interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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