ITO (TDS-2), Chandigarh V. M/s Northern Institute of Neuro Sciences (P) Ltd., Chandigarh

ITA 16/CHANDI/2015

• Counselvise Citation: 1621514 RSA 2015
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL VERMAN
• Section: 133A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NOS. 16 & 17/CHD/2015 A.Y: 2011-12 & 2012-13 THE ITO (TDS-2), VS THE NORTHERN INSTITUTE OF CHANDIGARH. NEURO SCIENCES (P) LTD., SECTOR 34, CHANDIGARH. PAN: PTLN11003G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL VERMAN RESPONDENT BY : NONE DATE OF HEARING : 30.09.2015 DATE OF PRONOUNCEMENT : 09.10.2015 O R D E R PER BHAVNESH SAINI,JM BOTH THE APPEALS BY REVENUE ARE DIRECTED AGAINST TH E COMMON ORDER OF LD. CIT(APPEALS) CHANDIGARH DATED 17.10.2014 FOR ASSESSMENT YEARS 2011-12 AND 2012-13 UNDER SECTION 201(1)/201(1A) OF THE INCOME TAX ACT ON THE FOLLOWING COMMON GROUNDS OF APPEAL : 1 . WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C1T(A) WAS RIGHT IN DELETING THE DEMAND CREATED U/S 201(1) / 201(1 A) OF THE I.T. ACT, 1961 ON ACCOUNT OF SHORT DEDUCTION OF TAX AT SOURCE (TDS). 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE DIRECTORS OF THE COMP ANY WORKING AS DOCTORS IN THE HOSPITAL RUN BY THE COMPANY ARE NOT EMPLOYEE OF THE COMPANY. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. C1T(A) WAS RIGHT IN DELETING THE DEMAND CREATED U/S 201(1) / 201(1 A) OF THE I.T. ACT, 1961 BY HOLDING THAT PAYMENT MADE BY THE COMPANY HOSPITAL TO ITS DIRECTOR / DOCTORS IS NOT SALARY TAXABLE U/S 192 BUT PROFESSIONAL RECEIPT TAXABLE U/S 194J OF THE I.T. ACT, 1961. 2 2. THE BRIEF FACTS IN BOTH THESE APPEALS ARE THAT A TDS INSPECTION UNDER SECTION 133A OF THE ACT WAS CA RRIED OUT ON 14.02.2013 AT THE PREMISES OF THE ASSESSEE COMPANY, RUNNING A HOSPITAL. DURING THE COURSE OF TDS INSPECTION, IT WAS NOTICED THAT THE PAYMENT TO TWO DIRECTORS (DOCTORS) NAMELY DR. DEEPAK TYAGI AND DR. ANUPAM JINDAL WAS MADE AFTER DEDUCTING TAX AT SOURC E @ 10% BY TREATING THE PAYMENTS AS PROFESSIONAL CHARGE S. THE ASSESSING OFFICER WAS OF THE VIEW THAT PAYMENTS MADE TO THE DOCTORS WHO WERE REGULARLY ATTACHED WITH THE HOSPITAL WERE REQUIRED TO BE TREATED AS SALARY AND TAXES WERE REQUIRED TO BE DEDUCTED UNDER SECTION 192 OF T HE ACT. THE ASSESSEE, IN REPLY TO THE SHOW CAUSE NOTICE SUB MITTED THAT PAYMENTS MADE TO THESE TWO DOCTORS WERE NOT LI ABLE TO TDS UNDER SECTION 192 AS THERE WAS O EMPLOYER- EMPLOYEE RELATIONSHIP BETWEEN THE HOSPITAL AND THE DIRECTORS/DOCTORS. IT WAS SUBMITTED THAT BOTH OF T HEM NOT ONLY VISIT THIS HOSPITAL BUT ALSO VISIT VARIOUS OTHER INSTITUTIONS LIKE GURU NANAK MISSION MEDICAL & EDUC ATION TRUST, M/S BANGA HOSPITAL (P) LTD., OMNI HEALTH CAR E INDIA (P) LTD., CITY CLINIC PVT. LTD., RGS HEALTH C ARE PVT. LTD., M/S FORTIS HEALTH CARE PVT. LTD., IVY HEALTH & LIFE SCIENCE LTD. ETC. AND SO, IT WAS INCORRECT TO SAY T HAT THEY WERE FULL TIME/PART TIME EMPLOYEES OF THE ASSESSEE COMPANY. THE ASSESSEE HAD ALSO CONTENDED THAT THE DOCTORS WERE NOT GOVERNED BY THE SERVICE RULES AND NO APPOINTMENT LETTERS HAVE BEEN ISSUED TO THEM. THER E IS NO RETIRING AGE AND THEY WERE PAID AS PER NUMBER OF 3 PATIENTS TREATED BY THEM IN OPD/IPD AND FOR SURGERI ES CONDUCTED BY THEM. THE ASSESSING OFFICER WAS, HOWEV ER, NOT SATISFIED WITH THE EXPLANATION OF ASSESSEE AND HELD THAT TAX WAS LIABLE TO BE DEDUCTED ON PAYMENTS MADE TO THESE TWO DOCTORS/DIRECTORS UNDER SECTION 192 OF TH E ACT AND NOT UNDER SECTION 194J OF THE ACT. THE DEMAND F OR SHORT DEDUCTION OF TAX WAS ACCORDINGLY CREATED UNDE R SECTION 201(1) ALONGWITH INTEREST UNDER SECTION 201 (1A) OF THE ACT. 3. THE ORDERS OF THE ASSESSING OFFICER WERE CHALLEN GED BEFORE LD. CIT(APPEALS) AND LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND DEC ISIONS RELIED UPON BEFORE HIM OF ITAT TRIBUNAL OF DIFFEREN T BENCHES, ALLOWED THE APPEAL OF THE ASSESSEE. HIS F INDINGS IN PARAS 5 TO 6 OF THE APPELLATE ORDER ARE REPRODUC ED AS UNDER : 5. I HAVE CONSIDERED THE ISSUE INVOLVED IN BOTH OF T HESE CASES, WHICH ARE IDENTICAL ON FACTS. THE TEST WHICH IS UNI FORMLY APPLIED IN ORDER TO DETERMINE WHETHER A PARTICULAR REL ATIONSHIP AMOUNTS TO EMPLOYER- EMPLOYEE RELATIONSHIP IS THE EXISTENCE OF RIGHT OF CONTROL IN RESPECT OF THE MANNER IN WHICH WORK IS TO BE DONE B Y THE PERSON EMPLOYED. THE NATURE AND EXTENT OF CONTROL WHICH IS REQUISITE TO ESTABLISH THE RELATIONSHIP OF EMPLOYEE AND EMPLOYER VARIES FROM BUSINESS TO BUSINESS. 5.1 A DISTINCTION IS ALSO TO BE DRAWN BETWEEN THE 'CONT RACT FOR SERVICE' AND 'CONTRACT OF SERVICE'. IN THE 'CONTRACT FOR S ERVICE', THE MASTER CAN ORDER OR REQUIRE ONLY WHAT IS TO BE DONE, WHILE IN CASE O F 'CONTRACT OF SERVICE', HE CANNOT ONLY ORDER OR REQUIRE WHAT IS TO BE DONE BUT ALSO HOW IT SHALL BE DONE (DHARANGDHRA CHEMICAL WORKS LTD. V. STATE OF S AURASHTRA, AIR 1957 SC 264, 267). THE 'CONTRACT FOR SERVICE' IMPLIES A CONTRACT, WHEREBY ONE 4 PARTY UNDERTAKES TO RENDER SERVICES E.G. PROFESSION AL OR TECHNICAL SERVICES, TO OR FOR ANOTHER IN THE PERFORMANCE OF WHICH HE IS NOT SUBJECT TO DETAILED DIRECTIONS AND CONTROL BUT EXERCISES PROFESSIONAL O R TECHNICAL SKILL AND USES HIS OWN. KNOWLEDGE AND DISCRETION. A 'CONTR ACT 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 I TS MODE AND MANNER OF PERFORMANCE (INDIAN. MEDICAL ASSOCIATION V. V.P. SH ANTHA, 6 SCC651, 673). 5.2 DR, ANUPAM JINDAL AND DR. DEEPAK TYAGI ARE PROMOTERS/ DIRECTORS OF THE APPELLANT COMPANY AND FOR RENDERING THEIR SE RVICES; THEY ARE BEING PAID PROFESSIONAL CHARGES FOR OPD SERVICES/ SURGEO N CHARGES AND IPD CHARGES. THESE TWO DOCTORS ARE PAID A MAJOR PORTIO N OF THE RECEIPTS OF THE HOSPITAL TOWARDS OPD/IPD/SURGEON FEES AS PROFES SIONAL CHARGES AFTER DEDUCTING TAX @ 10%. IT IS NOTEWORTHY THAT THESE A RE PROMOTERS/ DIRECTORS OF THE APPELLANT COMPANY, TO WHOM NO APPOINTMENT LE TTERS WERE ISSUED. THESE PROMOTERS/ DIRECTORS ARE ALSO NOT ELIGIBLE FO R BENEFITS LIKE PROVIDENT FUND, GRATUITY, BONUS, LEAVE FACILITIES, ALLOWANCE FOR MOBILE PHONE, MEDICAL REIMBURSEMENT, ESI, LTC ETC, ALL OTHER EMPLOYEES ARE ELIGIBLE FOR RETIREMENT ON ATTAINING THE AGE OF 60 YEARS WHEREAS NO SUCH RETIREMENT AGE IS FIXED FOR THE PROMOTERS/DIRECTORS. THE REQ UIREMENT OF IN/ OUT TIME DOES NOT APPLY TO PROMOTERS/DIRECTORS AND NO WORKIN G HOURS ARE FIXED FOR THEM. TERMINATION NOTICE PERIOD/NOTICE PAY IS APPLI CABLE FOR OTHER EMPLOYEES, BUT THERE IS NO SUCH SPECIFICATION FOR P ROMOTERS/ DIRECTORS. MOST IMPORTANTLY, IN MEDICO LEGAL CASES, THE PROMOT ERS/ DIRECTORS HAVE TO BEAR THE EXPENSES IN DEFENDING THEMSELVES, WHEREAS THE EMPLOYEES ARE DEFENDED AT THE COMPANY'S COST. 5.3 THE AFORESTATED TWO DOCTORS NOT ONLY VISIT THE APPE LLANT HOSPITAL, BUT ALSO A NUMBER OF OTHER INSTITUTIONS. THEY ARE PA ID AS PER 'NUMBER OF PATIENTS TREATED BY THEM IN OPD/ ISD AND FOR SURGER IES CONDUCTED BY THEM. 5.4 THE ASSESSING OFFICER HAS MENTIONED IN HER ORDER TH AT THE TWO DOCTORS ARE OVERALL IN-CHARGE OF THE HOSPITAL IN EV ERY RESPECT AND SO THERE WAS NO NEED TO GIVE ANY SPECIFIC JOB ASSIGNMENT TO THE DOCTORS IN THE MANNER IN WHICH THEY SHALL RENDER THEIR SERVICES, B UT FOR THIS REASON THE PAYMENT MADE TO THEM CANNOT BE TREATED AS SALARY TA XABLE U/S 192 OF THE ACT. THE ASSESSING OFFICER HAS ALSO MENTIO NED THAT THERE WAS NO CORRELATION BETWEEN THE RECEIPTS OF THE APPE LLANT COMPANY AND THE 5 PAYMENT MADE TO BOTH THE DOCTORS, BUT AGAIN, THAT B Y ITSELF WILL NOT RENDER THE AMOUNTS RECEIVED BY THE TWO DOCTORS AS TAXABLE U/S 192 OF THE ACT. 5.5 THE HON'BLE ITAT, HYDERABAD IN THE CASE OF YASHODA SUPER SPECIALTY HOSPITAL (133 TTJ 17), HAS HELD AS UNDER: 'MERELY BECAUSE THE DOCTORS ARE REQUIRED TO WORK ON LY FOR THE ASSESSEE AND CANNOT DO ANY PRIVATE PRACTICE IS NO REASON TO TREA T THE DOCTORS AS EMPLOYEES - THERE IS NO PROHIBITION IN LAW TO ENGAG E THE SERVICES OF A PROFESSIONAL EXCLUSIVELY FOR A PARTICULAR HOSPITAL - ADMITTEDLY THE DOCTORS ARE NOT ON THE ROLL OF PF PAYMENTS - THEIR WORKING HOUR S ARE NOT DETERMINED BY THE ASSESSEE - THEY ARE FREE TO COME AT ANY TIME AN D TREAT THE PATIENTS - AGREEMENT DOES NOT PROVIDE FOR ANY SUPERVISION OR C ONTROL OVER THE DOCTORS - THEY ARE GOVERNED BY THE RULES AND REGULATIONS OF T HEIR REGULATORY BODY IN THEIR PROFESSIONAL ACTIVITY - AGREEMENT BETWEEN TH E ASSES-SEE AND THE DOCTORS IS ONE FOR PROFESSIONAL SERVICES, AND THERE IS NO ELEMENT OF EMPLOYER EMPLOYEE RELATIONSHIP - ASSESSEE COLLECTS THE FEES FROM THE PATIENTS AND PAYS AMOUNT TO THE DOCTORS AFTER DEDUCTING FIXED AM OUNT FOR UTILIZING INFRASTRUCTURAL FACILITIES AND TOWARDS SURGERY FEES - DOCTORS ARE NOT ENTITLED TO ANY GRATUITY, BONUS, ETC. - THEREFORE, THE DOCTO RS ENGAGED BY THE ASSESSEE ARE TO BE TREATED AS CONSULTANTS, AND TAX HAS TO BE DEDUCTED U/S 194J FROM PAYMENTS MADE TO THEM AND NOT U/S 192.'.. THERE IS NO PROHIBITION IN LAW TO ENGAGE THE SERVICES OF PROFES SIONAL EXCLUSIVELY FOR A PARTICULAR HOSPITAL MERELY BECAUSE THE DOCTORS WERE EXCLUSIVELY ENGAGED, IT DOES NOT MEAN THAT THEY ARE EMPLOYEES OF ASSESSEE H OSPITAL. THE OTHER FACTORS SUCH AS PF, JOB ASSIGNMENTS, WORKING HOURS, DIRECTI ONS AND SUPERVISION ARE THE RELEVANT FACTORS TO CONSIDER THE EXISTENCE OF EMPLO YER AND EMPLOYEE RELATIONSHIP. IN THE CASE BEFORE US IT IS NOT IN DI SPUTE THAT THE DOCTORS ARE NOT IN THE ROLL OF PF PAYMENTS. THEREFORE IT IS OBVIOUS TH AT THE DOCTORS ARE NOT CONSIDERED TO BE EMPLOYED BY THE ASSESSEE AND THEY ARE CONSIDERED ONLY AS CONSULTANT PROFESSIONALS. ADMITTEDLY THE WORKING HO URS ARE NOT DETERMINED BY THE ASSESSEE. THE PROFESSIONALS ARE FREE TO COME AT ANY TIME AND TREAT THE PATIENTS. THE AGREEMENT DOES NOT PROVIDE FOR ANY SU PERVISION OR CONTROL OVER THE DOCTORS. THE DOCTORS AT THEIR OWN DISCRETION TREAT THE PATIENTS AND MAKING THE USE OF INFRASTRUCTURAL FACILITY AND MANPOWER AVAILA BLE IN THE HOSPITAL. THE DOCTORS ARE GOVERNED BY THE RULES AND REGULATIONS O F THEIR REGULATORY BODY I THEIR PROFESSIONAL ACTIVITY AND THE ASSESSEE BEING A HOSPITAL, THEY EXPECTED THE DOCTORS TO MAINTAIN THE REPUTATION AND IMAGE AS A C ORPORATE HOSPITAL. THE EXPECTATIONS OF THE ASSESSEE TO MAINTAIN THE IM AGE AND REPUTATION AS A CORPORATE HOSPITAL CANNOT BE CONSIDERED TO BE EXERC ISING CONTROL AND SUPERVISION OVER THE DOCTORS IN THEIR PROFESSIONAL ACTIVITIES. SO IT WAS HELD THAT THERE IS NO ELEMENT OF EMPLOYER AND EMPLOYEE RELATI ONSHIP EXISTING BETWEEN THE HOSPITAL AND DOCTORS AND THEREFORE THE PROVISIONS O F SECTION 194 J SHALL BE APPLIED IN THE PRESENT CASE. 5.6 HON'BLE ITAT AHEMDABAD BENCH IN THE CASE OF M/ S APOLLO HOSPITALS INTERNATIONAL LTD. IN ITA NO. 3363/AHD/2008 (SUPRA) HAS ALSO HELD AS UNDER: 'CONSULTANT DOCTORS ENGAGED BY ASSESSEE HOSPITAL UN DER FIXED SALARY AND GUARANTEE MONEY AND ARE NOT ENTITLED TO ANY ALLOWAN CE OR BENEFIT UNLIKE 6 EMPLOYEE DOCTORS AND NOT SUBJECT TO HOSPITAL SERVIC E RULES & REGULATION, DO NOT HAVE EMPLOYER - EMPLOYEE RELATIONSHIP WITH THE ASSE SSEE & CONTRACT NOT BEING IN THE NATURE OF SERVICE CONTRACT BUT A CONTRACT FO R MEDICAL SERVICES AS THERE IS SPECIFIC CLAUSE FOR SHARING OF MEDICAL FEE , THE PA YMENT MADE TO CONSULTANT DOCTORS WERE SUBJECT TO TDS UNDER SECTION 194J AND NOT 192.' HON'BLE ITAT, CHANDIGARH HAS ALSO TAKEN THE SAME VI EW IN THE CASE OF M/S IVY HEALTH LIFE SCIENCES (P) LTD (31 TAXMANN.COM 23 6). 5.7 IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT RIGHT IN CONCLUDING THAT THERE EXISTED AN E MPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE HOSPITAL & THESE TWO PROFE SSIONAL DOCTORS AND IN TREATING THE PR AS 'ASSESSEE IN DEFAULT' U/S 201(1) OF THE ACT FOR SHORT DEDUCTION OF TAX AT SOURCE BY TREATING THE AMOUNTS PAID TO THEM TO BE U/S 192 AND NOT U/S 194J AND IN CHARGING INTEREST U/S-2 01(1A) OF THE ACT. THE DEMANDS CREATED U/S 201(1) AND 201(1A) ARE ACCORDIN GLY DELETED IN BOTH THESE YEARS. ALL THE GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE ALLOWED. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWE D. 4. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OF FICER. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE DE SPITE SERVICE OF THE NOTICE THROUGH THE DEPARTMENT. THE SERVICE REPORT IS AVAILABLE ON RECORD. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR IN THE LIGHT OF THE FINDINGS OF THE AUTHORITIES BELOW, WE DO NOT FIND ANY MERIT IN THESE APPEALS OF THE REVENUE. THE ASSESSEE SPECIFICALLY PLEADED BEFORE AUTHORITIES BE LOW THAT THERE IS NO RELATIONSHIP OF EMPLOYER AND EMPLOYEE B ETWEEN THE HOSPITAL AND THE ABOVE DOCTORS. IT WAS ALSO PL EADED THAT BOTH THESE DOCTORS VISIT OTHER HOSPITALS AND T HEY ARE NOT EMPLOYEES OF THE ASSESSEE AND EVEN NO APPOINTME NT LETTERS HAVE BEEN ISSUED TO THEM AND THERE IS NO RE TIRING AGE. PAYMENTS HAVE BEEN MADE TO THEM ON THE BASIS O F NUMBER OF PATIENTS ATTENDED BY THEM. IT WAS, THERE FORE 7 INCUMBENT ON THE PART OF THE ASSESSING OFFICER TO B RING SOME MATERIAL OR EVIDENCE ON RECORD TO PROVE THAT T HERE WAS RELATIONSHIP OF EMPLOYEE AND THE EMPLOYER BETWE EN THE DOCTORS AND THE ASSESSEE COMPANY. NO APPOINTME NT LETTER HAS BEEN BROUGHT ON RECORD AND NOTHING IS BR OUGHT ON RECORD IF THESE TWO DOCTORS WERE ENTITLED FOR SE RVICE BENEFIT. THE LD. CIT(APPEALS), THEREFORE, CONSIDER ING THE ISSUE ON THE BASIS OF THE MATERIAL ON RECORD AND IN THE LIGHT OF DECISIONS OF VARIOUS BENCHES OF THE TRIBUN AL RIGHTLY CAME TO THE CONCLUSION THAT THERE IS NO RELATIONSHIP OF EMPLOYEE AND EMPLOYER BETWEEN THE DOCTORS AND THE HOSPITAL. THESE TWO DOCTORS WERE PROVIDING THEIR PROFESSIONAL SERVICES UPON WHICH AS SESSEE WAS CORRECTLY DEDUCTING THE TAX UNDER SECTION 194C OF THE ACT. THUS, THERE IS NO SHORT DEDUCTION OF TAXES IN THIS CASE. THE LD. CIT(APPEALS), ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD, CORRECTLY ALLOWED THE APPEALS OF THE ASSESSEE. THERE IS NO MERIT IN BOTH THE APPE ALS OF THE REVENUE, THE SAME ARE ACCORDINGLY DISMISSED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09 TH OCT.,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD