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Sir Hurkisondas Nurrotumdas Hospital and Research Centre Versus The DCIT, (TDS) -3 (2) , Mumbai.

2016 (10) TMI 432 - ITAT MUMBAI

TDS u/s 192 or 194J - condition of engagement of doctors vis-a-vis the employee-employer relationship - professional activities - nature of payment - Held that:- Neither the AO nor the ld CIT (A) gave their finding that any of the condition contained in the contract of the Doctors mandate that there was employee-employer relationship between the assessee and them, which specifically may brings the doctors in the category of employee. The AO and the CIT(A) has not bring on record, if the doctors .....

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ctors are in fact independent professional who may be receiving fixed remuneration despite fixed hours of works which may substantially regulating their application for leave and other discipline. With these observations, we hold that the doctors are discharging only professional services and the assessee is not liable to deduct tax u/s 192 of the Act. Thus, the appeal of assessee is allowed. - ITA No.2681/Mum/2015 - Dated:- 26-8-2016 - SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, .....

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e. 2. a) The learned CIT (A) erred in confirming the action of the Assessing Officer (AO) that the appellant has failed to comply with the provisions of section 192 by deducting TDS U/S 194J on payment made to full time consultants causing short deduction of tax at source of ₹ 91,829/-. b) The appellant submits that on the facts and circumstances of the case the TDS was rightly deducted U/S 194J of the Income Tax Act. 3. The learned CIT(A) failed to appreciate that in raising tax demand U/ .....

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evealed that the assessee-company failed to make TDS as per provisions of Chapter XVII B of the Act. During the course of survey and post survey proceedings, the assessee was asked to explain as to why the payments should not be treated as salary and paid to the doctors on which tax is deductible u/s 192 of the Act. The assessee submitted its reply that the doctor engaged by the assessee are rendering services to the Hospital as provided u/s 194J of the Act. There is no employee-employer relatio .....

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appeal before the CIT(A) but without any success. Further, aggrieved by the order of CIT(A), the present appeal is filed before us. 3. Ld. Authorised Representative (AR) of the assessee argued that there is no relationship of employee-employer in between the assessee and the doctors engaged by the assessee. As there was no employee-employer relationship between the assessee and doctors that the provisions of section 192 is not attracted against the assessee. Ld. AR of assessee further argued tha .....

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and tax is being deducted at source u/s 192 of the Incometax Act to RMOs and u/s 194J on the payments to visiting doctors but the tax is deducted u/s 194J in respect of full time consultation. The AO examined the condition of the engagement of the doctors and concluded that the condition of daily attendance into devote his expertise (only to the Hospital) can only be dictated with their employee-employer relationship and whole of the doctors are employee of the assessee-company and TDS has to be .....

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ith the words that these doctors are consultant and are given retainer-ship of the performance of duties assigned to them, infact they are employee on regular basis and there is a term and condition imposed by the employer and doctors are on the pay-role and the employee of the Hospital. 5. We have seen that neither the AO nor the CIT(A) tried to classified the term and condition of engagement of doctors vis-a-vis the employee-employer relationship. The AO and the CIT(A) has not bring on record, .....

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rt in Employees State Insurance Corporation cum Medical Officers Association Vs. Employees State Insurance Corporation and Anr, AIR 2014 Supreme Court, 1259, in the context of question whether medical doctors discharging functions of medical officers treating patients in Employees Insurance Corporation dispensary /hospital are workmen within the meaning of Section 2 (s) of the Industrial Disputes Act, 1947, the Court held as under: "We are of the view that a medical professional treating pa .....

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ive training, study and mastery of the subject, whether it is teaching students, providing legal advice or treating patients or diagnosing diseases. Persons performing such functions cannot be seen as a workman within the meaning of Section 2(s) of the ID Act. We are of the view that the principle laid down by this Court in A. Sundarambal's case (supra) and in Muir Mills's case (supra) squarely applies to such professionals. That being the factual and legal position, we find no reasons t .....

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d Ors reported in AIR 1996 Supreme Court, 550 what was adjudicated by the Court is why doctors and 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 pa .....

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he consequences which would follow if acts of negligence and attributable to doctors and medical professionals 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 .....

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for services'. [See :Halsbury's Laws of England, 4th Edn., Vol. 16, para 501; 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 : O .....

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service" and "contract for services" and has deliberately chosen 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)(o). 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 .....

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ctitioner and a patient carries within it certain degree 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 pa .....

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a fee that the Hon'ble Supreme Court negatived the challenge. 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 could be seen and termed as an employee or servant of the assessee. About the category of doctors and who draw fixed pay without any other benefit but like an ordinary employee entitled to medical and provident fund or .....

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t 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 because they are required to spend certain fixed time at the hospital, treating fixed number of patients at the hospital, attend them as out patients and Indoor patients does not mean that a employer-employee relatio .....

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ent 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 are invited to join such hospitals for a fee or honorarium and there are certain terms drawn so as to understand the relationship, then, in every case such terms and the attendant circumstances would have to be see .....

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ll 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 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. Both doctors treated their private patients from the hospital prem .....

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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 treatment at the Ruby Hall Clinic. If specialized team of Doctors, Experts and Experienced in the field are part of the Assessee's Clinic, then, their availability at the clinic has to be ensured. Now, the trend is to pr .....

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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 clinic whole heartedly. If handsome remuneration, fee is prescribed in return of ready-made facilities even for professionals, then, such insistence is not necessarily to treat highly qualified professionals as servants. It is .....

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n 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 been relied upon, namely, 25th November, 2008 and 14th May, 2009 do not contain any admission by the assessee. All that the assessee admitted is the existence of a written contract and with the above terms. Those terms have also .....

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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. That would not denote a binding relationship or a master servant arrangement. A attractive or better term to attract talented young professionals and too in a competitive world would not mean tying down the person or restricting .....

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ommit 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 been referred only to emphasize the tests which have been evolved from time to time. It is only in the light of such tests and their applicability to individual cases that matters of this nature must be decided. This approach of .....

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ional and visiting the assessee's hospital had been determined.Once again, no general rule can be laid down. Nowadays, Private Medical Care has become imperative. Public Hospitals cannot cater to the increasing population. Hence, Private Hospitals are established and continue to be formed and set up day by day. The quality of care, service, attention, on account of the financial capacity, therein has forced people of ordinary means also to visit them. Since specialists are in demand because .....

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