TDS on payment to doctors working in hospital under section 192 or 194J?

Citation of the case: The Commissioner of Income Tax vs Grant Medical Foundation (Mumbai High Court), Appeal Number-140 of 2013, Date of the decision-22-01-2015.

Brief facts of the case: Doctors were working in the hospital named Ruby hall clinic and were giving services in the hospital .Hospital has hired them and were paid on monthly basis for the services they render.

While making payment to doctors hospital deducts TDS @10 % U/s 194J as they consider that they are rendering services because they were having freedom to do their practice also and open their clinics. Moreover they were not binding by any contract with the hospital.

AO had put the case into scrutiny and announced the assessee as assessee in default for lower deduction of TDS taking into consideration that the doctors are employees of the hospital so the TDS should be deducted u/s 192 .So he had raised a demand for the same plus interest there on.

When aggrieved by the order of the AO, asssessee appealed with CIT (A) who set aside the order of the AO, and decide that TDS should be deducted u/s 194J.

Then aggrieved by the decision of CIT (A) ld counsel of revenue filed an appeal with ITAT who also confirmed the decision of CIT(A).

At last revenue field an appeal with Hon’ble High Court of which we are concerned in this case law.

Citiation of the assessee/Respondent: The hospital had hired the doctors i.e professionals for their expertise, experience, and skill in the profession and requests them to be associated with the hospital, then their engagement cannot be said to be of employer-employee relationship.

Moreover the doctors were to carry their private practice either in the hospital premises or elsewhere. Even there was no prohibition when they were associated with other hospitals. There is no restriction on the nature of the work that they perform and they carry out in the hospital.

The contact in which the doctors were been entered could be dismissed at anytime by either of the parties. The ld. counsel of the assessee gave the reference of judgment given in the case of the CIT V/s Apollo Hospitals International Ltd.

Contention of the revenue/Appellant: The revenue contended that the entire foundation on which tribunal proceeded was erroneous in nature. Inviting our attention to Sections 16 and 17 of the I.T. Act together with Section 192 thereof, revenue would submit that the term “salary” has been defined in the I.T. Act in inclusive manner. That term does not necessarily postulate existence of an employer employee or master servant relationship. That also includes fees and which have been paid for services namely professional. In that regard he invites our attention to Section 17 (1)(iv) of the I.T.Act. He, therefore, submits that the basis on which the Tribunal proceeded and equally the Commissioner is erroneous in law.

Revenue concluded that the working hours of the consultants are fixed. They are remunerated on monthly basis. There is a clause in the agreement which binds them and regarding prescribed number of private patients to be admitted. There is a clause about applicability of hospital rules. There is a clause prohibiting an outer limit on medical facilities. The clause of confidentiality, rendering the decision of the Hospital management in case of any dispute final and reviewing of performance periodically would reveal that this category of doctors receive salary and therefore, would be governed by the provisions of Section 192 of the IT Act.

Held by Bombay High court: Suffice it to note that the Revenue relied on the judgments which were rendered in cases where the terms and conditions denoting employee and employer relationship included a fixed pay or monthly remuneration only. For all these reasons we are of the opinion that the questions of law termed as substantial and framed as above would have to be answered against the Revenue and in favour of the Assessee.