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THE COMMISSIONER OF INCOME TAX TDS, BANGALORE AND THE INCOME TAX OFFICER TDS, BANGALORE Versus M/s TELERADIOLOGY SOLUTIONS PVT LTD

2016 (4) TMI 217 - KARNATAKA HIGH COURT

TDS u/s 194J - ITAT held that the amounts paid to the doctors is not in the nature of "salary" and liable for deduction of tax at source as required under section 194J as "Professional fees" - Held that:- Tribunal was justified in law in holding that the amounts paid to the doctors is not in the nature of "salary" and liable for deduction of tax at source as required under section 194J as "Professional fees" even when assessee engaged the doctors as consultants and as per the agreements, these c .....

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remuneration. Whether a person is a servant or an agent would be determined by the duties of employee, the nature of business, terms of his employment/engagement and kind of supervisory control over his work. A person who is engaged to manage the business may be servant or agent, according to the nature of his service and authority of his employment. The profession involves occupation required purely intellectual or manual skill, as held by the Hon'ble Supreme Court in the case of CIT Vs Mohanda .....

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e or worthwhile reason made out to accept the submissions or to interfere with such finding. - Decided against revenue - ITA NO.425/2015 AND ITA NO.643/2015 - Dated:- 26-2-2016 - MR. JAYANT PATEL AND MRS. S SUJATHA, JJ. FOR THE APPELLANT : SRI K V ARAVIND, ADVOCATE JUDGMENT As in both the appeals, common questions arise for consideration, they are being considered simultaneously. 2. The Revenue has preferred the present appeals by raising the following substantial question of law: Whether, on th .....

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n employee-employer relationship? 3. It appears after the order of Assessment Officer when the matter was carried before the Commissioner of Income-Tax (Appeals) at paragraph-5, after considering the earlier decision of the Tribunal in case of M/s.Elbit Diagnostics Ltd., the following comparative chart in tabular form is reflected on p ara- 5.1 which reads as under: Sl. No. Facts of the present case Facts in the case of M/s Elbit Medical Diagnostics Ltd 1. Assessee Company engaged in the busines .....

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rated appendix and such life threatening conditions, where the service is extremely critical and cannot afford to be interrupted. Engaged in providing medical diagnosis services in the fields of radiology, pathology, cardiology, nuclear medicine etc. [Page 4 - para 6 of the ITAT order] 3. Assessee entails the services of radiologists under a 'contract for service' Assessee required the services of qualified doctors in the fields of radiology, pathology, cardiology and nuclear medicine et .....

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od of one year. Contract for service i.e., the agreements are entered into with the doctors for a period of three years [Page 4 - para 6 of the ITAT order] 6. After the expiry of one year, the appellant Company is free to enter into a new agreement with the doctor or not to enter into such new agreement. On conclusion of 3 years, the contract shall be subject further extension on such mutually agreed terms and conditions for such period as might be agreed upon. [Page 5 of ITAT order] 7. The doct .....

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onal knowledge, skills and expertise. [page 6 of ITAT order] 9. The appellant Company merely transmits back the diagnosis of the consultant doctor to the service recipient who may be a patient, doctor, hospital etc. The assessee-Company simply follow the conclusion arrived by them on the basis of data/material brought to their knowledge. [page 6 of ITAT order] 10. The Company does not in manner direct / control / supervise the services provided by the doctors or the manner in which such services .....

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There is no control of assessee over doctors / specialists service rendered by them to assesssee-company at the strength of specialized knowledge. [pages 8 and 9 of ITAT order] 11. It is understood and agreed that the relationship between the parties is on a principal to principal basis. The agreement into with the doctors does not constitute a relationship of employment and the doctors cannot make any claim to employment or employment related benefits with the Company. The engagement of doctors .....

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er teleradiology Company as this would be in direct competition to the Company. In fact, some of the consultant doctors are actually engaged in their private practice without violating the conditions as mentioned above. Some of the doctors also provide similar professional services to other associated concerns of the assessee-Company. Doctors are free to render services to other concerns and individuals as long as it is not in conflict with their contractual obligations with the assessee-Company .....

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enefits such as PF, ESI, Gratuity, Bonus, Leave encashment etc which are available to other employees of the assessee-Company. [page 5 of ITAT order] 14. The doctors does not have any power or authority in respect of signing any matters / documents connected with the Company which an employee of a Company can do normally. The doctors cannot hire other consultant doctor or delegate their work to other doctors which powers are generally given to an employee. 15. The consultant doctors are free to .....

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e to install the paraphernalia on their own cost for providing services to the Company. 16. Other aspects such as fixed amount of payment every month, performance based incentive, leave facility, working hours, selection of doctors through interviews, availability of doctors through a pre-determined time schedule etc are only measures to ensure that there would be no interruption in provision of medical services to patients, hospitals etc. The method of sanctioning leave, giving certain incentiv .....

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4. Thereafter Commissioner of Income Tax (Appeals) found that the said matter is covered by the decision of the Tribunal in case of M/s.Elbit Medical Diagnostics Ltd., and further confirmed by this Court, the appeal was allowed. 5. When the matter was carried before the Tribunal by the Revenue, the Tribunal at para-7 has observed thus: "7. Dr. Vinod P Joseph's appointment order reveals that the appointment is only contractual for a period of three years. It also mentions the relationsh .....

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f contract, 20 days leave allowed per year. Basically, the issue is with regards to deduction of tax at source in respect of eleven doctors in-house doctors who are appointed on contractual basis on consolidated gross payment per month as stated above. Whether they should be treated as employee and there exists employee-employer relationship to attract deduction u/s 192 on the payments made to them and treating the same as salary. The fundamental aspect for deciding the employee-employer relatio .....

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company, but they conduct the skilled work at the strength of their specialised knowledge on subject. The assessee company simply follow the conclusion arrived by them on the basis of data/material brought to their knowledge. It is difficult to lay down any one test to distinguish the relationship of master servant from that of an employer and independent contractor. In many cases, the test laid down is that in case of master servant relation, master can order or require what is to be done and .....

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ding an office does not necessarily gives rise to relationship of master and servant between the holder of office and the person who pays the remuneration. Whether a person is a servant or an agent would be determined by the duties of employee, the nature of business, terms of his employment/engagement and kind of supervisory control over his work. A person who is engaged to manage the business may be servant or agent, according to the nature of his service and authority of his employment. The p .....

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on or sale, of commodities. A profession will imply any vocation carried on by an individual or group of individual requiring the predominantly intellectual skills, depending on individual characteristics of persons pursuing that vocation, requiring specialized advance education or expertise. The 'professional service', which are termed as 'independent personal service' in the phraseology employed in tax treaties are, however, not defined in text treaties or even official comment .....

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