The ITO,TDS-1, Ahmedabad V. Apollo Hospitals International Ltd., Ahmedabad

ITA 3363/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9151 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-10-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 201(1); 201; 191; 192; 28

Judgement Text

FIT FOR PUBLICATION SD/- SD /- (AM) (JM) IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 10/12/2010 DRAFTED ON: 22/12/2010 ITA NO.3363/AHD/2008 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER TDS-1 AHMEDABAD VS. APOLLO HOSPITALS INTERNATIONAL LTD. BHAT GIDC ESTATE, INDIRA BRIDGE GANDHINAGAR PAN/GIR NO. : AABCA 4150 H ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI ROHIT MEHRA, SR. D.R. RESPONDENT BY: SHRI S.N. SOPARKAR O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-X AHMEDABAD DATED 30/07/2008 PASSED FOR ASSESSMENT YEAR 2007-08 AND T HE ONLY SUBSTANTIVE GROUND WHICH IS ARGUED BEFORE US READS AS UNDER : THE LD. CIT(A) ERRED IN LAW AS WELL AS FACTS OF THE CASE IN DELETING THE ORDER PASSED U/S.201(1) OF RS.24,17,674/- & INTEREST CHARGED U/S.201(1A) OF RS.1,03,880/- OF THE I.T. ACT FOR A.Y. 2007-08 RESPECTIVELY BY THE A.O. ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 2 - 2. AN ORDER U/S 201(1) & 201(1A) OF THE I.T.ACT DATED 28.3.2008 WAS PASSED THROUGH WHICH A SHORT DEDUCTION OF TAX W AS IMPOSED ALLEGED TO BE ON ACCOUNT OF DEFAULT U/S 192 OF THE I.T.ACT ( IN SHORT THE ACT) BY THE ASSESSEE-HOSPITAL IN RESPECT OF ENGAGEMENT OF C ONSULTANT DOCTORS , ON THE OTHER HAND, ASSESSEES CLAIM WAS THAT THERE WAS NO SHORT DEDUCTION OF TAX AS THE TDS WAS DEDUCTED AS PER PROVISIONS OF SE C. 194J OF THE ACT. BARE MINIMUM FACTS ESSENTIAL TO DECIDE THIS APPEAL WERE THAT A SURVEY U/S 133A(1)(B) WAS CARRIED OUT ON 7.9.2007. IT WAS FOUND THAT IN RESPECT OF 15 DOCTORS THE ASSESSEE WAS DEDUCTING THE TAX U/S 194J OF I T ACT. THE PAYMENTS TO THESE DOCTORS WERE TREATED AS A PROFE SSIONAL FEES ON THE GROUND THAT THE PAYMENT WAS IN THE NATURE OF FIXED SALARY & GUARANTEE MONEY TO CONSULTANTS/ DOCTORS . AN ABBREVIATION WAS USED FOR THIS TERM BY THE A.O. AS FGCS; TO BE MENTIONED HEREAFTER. THOSE CONTRACT AGREEMENTS WERE EXAMINED BY THE A.O. AND T HEN IT WAS HELD THAT THE TDS WAS NOT CORRECTLY DEDUCTED. FOR THE F.Y. 2 006-07 TOTAL PAYMENT TO THOSE DOCTORS WAS STATED TO BE AT RS.1, 27,64,050/-.CLAIMED AS PAYMENT OF PROFESSIONAL FEES. ON THE OTHER HAND THE A.O. WAS OF THE VIEW THAT THERE WAS EMPLOYER AND EMPLOYEE RELATIONS HIP BETWEEN THE SAID DOCTORS AND THE HOSPITAL (I.E. ASSESSEE) HENCE THE DEDUCTION SHOULD HAVE BEEN DONE AS PER THE PROVISIONS OF SEC. 192 OF THE ACT . REASONS ASSIGNED BY THE A.O. WERE THAT - (A) AS PER TERMS OF THIS RELATIONSHIP AGREEMENT, THE DOCTORS/CONSULTANTS HAVE TO REMAIN PRESENT IN THE H OSPITAL ON ALL WORKING DAYS AS PER THE TIME FIXED BY THE HO SPITAL. (B) SUCH DOCTORS ARE NOT ALLOWED TO HAVE AN ATTACHMENT WITH ANY OTHER HOSPITAL NOR ARE THEY ALLOWED TO PRACTICE WITHOUT PRIOR PERMISSION OF THE HOSPITAL AUTHORITIES. ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 3 - (C) THE HOSPITAL HAS TO PAY MINIMUM MONTHLY AMOUNT TO T HE FGC DOCTORS. (D) IN SOME OF THE CASES, THE HOSPITAL HAS ALSO UNDERTA KEN TO PROVIDE RESIDENTIAL ACCOMMODATION TO THE DOCTORS. (E) IN THE SOME OF CASES PHOTOCOPIES OF LETTER WERE OBT AINED DURING THE COURSE OF SURVEY. THESE LETTERS ARE VER Y SPECIFICALLY SUPPORTING THE VIEW THAT FGCS ARE IN F ACT, IN THE NATURE OF EMPLOYMENT WITH THE HOSPITAL. (F) THAT THE FGCS ARE NOT PAID ANY EXTRA FEE FOR RENDER ING MANAGEMENT AND ADMINISTRATION RELATED SERVICES. TH ESE ARE THE TYPICAL CHARACTERISTICS OF AN EMPLOYEE-EMPLOYER RELATIONSHIP AND IT OUTLINES CLEARLY THAT IN WHAT M ANNER THE WORK IS TO BE DONE DEPENDS UPON THE EMPLOYER I.E. T HE MANAGEMENTS. (G) IT IS FURTHER NOTICED THAT IN THE CASE OF DR. VIVEK ARYA, DR.DIPAL SHAH, DR. NEHA SHAH, DR. SANDIP SHAH, DR. HIREN TRIVEDI, DR. M.K.KHODA, DR.ANAGHA ZOPE, DR. VINOD KANERIA WHO ARE FGCS; AS PER THE TERMS OF AGREEMENT S, THE HOSPITAL WAS PAYING A FIXED AMOUNT OF RS.1,00,000/- , RS.50,000/-, RS.50,000/-, RS.1,00,000/- RS.1,00,000 /-, RS.2,50,000/-, RS.40,000/- AND RS.5,29,717/- PER MO NTH RESPECTIVELY. 2.1. FURTHER, THE A.O. HAS ALSO MADE AN OBSER VATION THAT THE CONTRACT AGREEMENT WITH ALL FGCS WAS IN THE NATURE OF CONTRACT OF SERVICE AND NOT CONTRACT FOR SERVICE. AS PER A.O. THE RETAINERSHIP AGREEMENT WAS FOR RENDERING SERVICES AND THAT WAS IN THE MANNER O F AN EMPLOYER/ EMPLOYEE RELATIONSHIP BETWEEN THE TWO LIKE A MASTER AND A SERVANT. IT HAS ALSO BEEN COMMENTED BY THE A.O. THAT THERE WAS NO E LEMENT OF EXISTENCE ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 4 - OF AGENCY, BECAUSE THE SAID DOCTORS WERE PERFORMING THEIR DUTIES UNDER DIRECT CONTROL AND SUPERVISION OF THE HOSPITAL. FIN ALLY HE HAS TREATED THE ASSESSEE IN DEFAULT U/S 201 R.W.S. 192 OF THE ACT. A SHORT DEDUCTION WAS COMPUTED VIDE SEC.201(1) OF RS.24,17,674/- AND INTE REST THEREON U/S 201(1A) AT RS.1,03,380/- TOTALING RS.25,21,054/- . BEING AGGRIEVED THE MATTER WAS CARRIED TO THE FIRST APPELLATE AUTHORITY . 2.2. THE LD. CIT (A) HAS CONSIDERED THE SUBMISSIO N AND THEREAFTER ALLOWED THE APPEAL OF THE ASSESSEE BY ASSIGNING FOLLOWING REASONS :- 3.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY AS ALSO THE OBSERVATIONS OF THE A.O. IN THE IMPUGNED ORDER. THE MAIN DISPUTE IS WHETHER THE PAYMENTS TO THE DOCTORS AND CONSULTANTS SHOULD BE CONSIDERED AS PROFESSIONAL FE ES OR SALARY. IT HAS BEEN CONTENDED BY THE APPELLANT THAT THERE I S NO EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE APPELLANT AND THE ABOVE 15 DOCTORS AND NO PROVIDENT FUND, PROFESSIONAL TAX OR ESI HAD BEEN DEDUCTED, THEREFORE, THE PROVISIONS OF SECTION 192 ARE NOT APPLICABLE TO THE ABOVE FGC DOCTORS. APART FROM TH E ABOVE 15 DOCTORS, WHICH HAS BEEN CONSIDERED BY THE A.O., THE HOSPITAL HAS GOT 53 FULL TIME RESIDENT DOCTORS WHO ARE EMPLOYEES FOR WHOM TAX HAS BEEN DEDUCTED AT SOURCE U/S.192 OF THE I.T. ACT AND TAX HAS BEEN DEDUCTED REGULARLY AND PAID TO THE GOVERNMENT ACCOUNT AND IN CASE OF THE 53 DOCTORS, P.F. AND PROFESSIONAL TA X HAVE ALSO BEEN DEDUCTED FROM THEIR SALARY WHEREAS IN THE CASE OF A BOVE 15 DOCTORS FOR WHICH THE A.O. HAS CONCLUDED THAT THERE IS A SH ORT FALL OF TDS, THEY HAVE BEEN NOT TREATED AS EMPLOYEES. IT HAS AL SO BEEN SUBMITTED THAT THESE PROFESSIONAL CONSULTANTS HAVE FILED THEIR INDIVIDUAL RETURNS OF INCOME SHOWING THE PROFESSION AL FEES RECEIVED FROM THE APPELLANT AND THEY HAVE PAID TAX ON THE SAID INCOME AND THEY HAVE FILED RETURNS OF INCOME. AS T HE PAYEES IN THESE CASES HAVE DIRECTLY PAID TAXES TO THE GOVERNM ENT, THE PAYER I.E. THE APPELLANT SHOULD NOT BE TREATED AS AN ASSE SSEE IN DEFAULT IN VIEW OF AMENDMENT TO SECTION 191 OF THE ACT W.E.F. 1-06-2003 BY ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 5 - SUBSTITUTING AMENDED EXPLANATION. IN CASE OF THE C ONSULTANTS WHERE THE PROFESSIONAL RECEIPTS EXCEED RS.10 LAKHS, THEIR ACCOUNTS HAVE BEEN SUBJECTED TO TAX AUDIT U/S.44AB OF THE AC T. FOR EXAMPLE, IN THE CASE OF SHRI SANDEEP RATILAL SHAH THE RECEIP TS ARE OF RS.12.49 LAKHS AND HE HAS FILED TAX AUDIT REPORT AL ONGWITH RETURN OF INCOME, IN THE CASE OF DR.JYOTINDER HARDAYALSING H KAUR, THE RECEIPTS ARE OF RS.12.41 LAKHS AND SHE IS ALSO SUBJ ECT TO TAX AUDIT. SIMILARLY, DR. VIVEK ARYA HAS GOT CONSULTANCY FEES OF RS.9.16 LAKHS. COPIES OF RETURNS OF INCOME AND AUDIT REPOR TS HAVE BEEN FILED IN RESPECT OF THESE PERSONS AS SPECIMENS. I HAVE GONE THROUGH THE TERMS AND CONDITIONS FOR EMPLOYMENT OF THREE EMPLOYEE DOCTORS I.E. DR. JYOTSNA BHATAVDEKAR, DR.R UNOO GHOSH AND DR.MEENAL JAIN AND LETTERS OF ENGAGEMENT OF CON SULTANTS DR.SANDIP RATILAL SHAH AND DR.T.AYYAPPAN. IT IS NO TICED THAT THE EMPLOYEE DOCTORS ARE ELIGIBLE FOR GRATUITY AND COVE RAGE UNDER PROVIDENT FUND SCHEME AND THEY ARE ELIGIBLE FOR CAS UAL LEAVE AND SICK LEAVE AND THEY ARE GOVERNED BY GENERAL SERVICE RULES, REGULATIONS OF THE APPELLANT COMPANY. IN CONTRAST TO THE SAME, THE CONSULTANT DOCTORS ARE NOT ENTITLED TO GRATUITY AND ANY TYPE OF LEAVE AND SERVIC3E RULES OF THE APPELLANT COMPANY A RE NOT APPLICABLE TO THEM, RATHER THEY ARE REQUIRED TO FOL LOW CODE OF CONDUCT AND ETHICS OF DOCTORS. FURTHER THE CONSULT ANT DOCTORS ARE REQUIRED TO TAKE PROFESSIONAL INDEMNITY INSURANCE O N THEIR OWN. CONSIDERING THESE FACTS AND SUBMISSIONS OF THE A.R. , I AGREE WITH THE CONTENTION OF THE LD. A.R. THAT THESE 15 DOCTOR S ARE PROFESSIONAL CONSULTANTS AND ARE NOT EMPLOYEES OF THE APPELLANT AND THEY ARE NOT BOUND BY COMPANYS SERVICE RULES AND THEY ARE N OT ENTITLED TO LEAVE AS THE OTHER EMPLOYEE DOCTORS ARE ENTITLED TO . THEREFORE, THE PAYMENTS MADE TO THEM ARE PROFESSIONAL FEES FOR WHI CH THE APPELLANT HAS RIGHTLY DEDUCTED TAX U/S.194J OF THE ACT . THEREFORE, THERE IS NO SHORT FALL OF TDS AND THEREFORE THE DEM AND RAISED U/S.201(1) AND INTEREST LEVIED U/S.201(1A) OF THE A CT ARE HEREBY DELETED. 3. BEING AGGRIEVED NOW THE REVENUE HAS CHALLENGED THE ABOVE VERDICT. ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 6 - 4. FROM THE SIDE OF THE REVENUE MR. ROHIT MEHRA, SR.DR HAS PLACED VEHEMENT RELIANCE ON THE FINDINGS OF THE A.O. HE H AS REITERATED THAT AS PER THE TERMS OF THE EMPLOYMENT, THE DOCTORS ARE N OT ALLOWED TO JOIN ANY OTHER HOSPITAL WITHOUT PRIOR PERMISSION. THE ASSE SSEE HOSPITAL WAS SUPPOSED TO PAY A FIXED MINIMUM MONTHLY AMOUNT. TH E HOSPITAL HAS ALSO UNDERTAKEN THE RESPONSIBILITY TO PROVIDE RESID ENTIAL ACCOMMODATION TO SUCH DOCTORS. BY REFERRING THE TERMS AND CONDIT IONS IT WAS ARGUED THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THOSE DOC TORS WAS IN THE NATURE OF AN EMPLOYER AND EMPLOYEE THEREFORE THE DEDUCTION OF TAX SHOULD BE MADE U/S 192 OF THE ACT INSTEAD OF U/S 194 , AS WRO NGLY DEDUCTED BY THE ASSESSEE, HENCE RIGHTLY HELD AS ASSESSEE IN DEFAULT BY THE A.O. LD.DR MR.ROHIT MEHRA HAS THUS PLEADED THAT THE ORDER OF THE A.O. DESERVES TO BE AFFIRMED. 5. FROM THE SIDE OF THE RESPONDENT-ASSESSEE MR.S.N .SOPARKAR APPEARED AND SUPPORTED THE ORDER OF LD.CIT(A). HIS MAIN PL ANK OF THE ARGUMENT WAS THAT THE A.O. HAS WRONGLY INTERPRETED THE TERMS AND CONDITIONS OF THE AGREEMENT. HE HAS EXPLAINED THAT THE ASSESSEE HAS TWO TYPES OF AGREEMENT , ONE, WITH THE EMPLOYEE DOCTORS AND THE OTHER WITH THE CONSULTANT DOCTORS. AS PER HIS ARGUMENTS THE DISTINCTION BETWEEN THE TWO AGREEMENTS IS VERY OBVIOUS. IN ALL, THERE ARE 5 3 FULL TIME DOCTORS WHO ARE EMPLOYED WITH THE HOSPITAL AND THEREFORE THEIR SALARY IS SUBJECT TO TAX DEDUCTION U/S 192 OF THE ACT. THEIR SALARY IS ALSO SUBJECT TO P.F., E.S.I AND PROFESSIONAL TAX DEDUCTION. MR. S.N.SOPARKAR,.L D. AR HAS ALSO RAISED A LEGAL ARGUMENT THAT THERE WAS NO DEFAULT I N PAYMENT OF TAX BECAUSE THOSE DOCTORS ARE INDEPENDENTLY SUBJECT TO TAX AND THEREFORE PAID ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 7 - TAXES IN THEIR RESPECTIVE HANDS, HENCE THERE IS NO QUESTION OF SHORT PAYMENT OF TAX FOR WHICH INTEREST COULD BE CHARGED FROM THE ASSESSEE. IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION OF HO N'BLE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LT D. VS. CIT REPORTED AT [2007] 293 ITR 226(SC) AND ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RISHIKESH APART MENTS CO-OP.HOUSING SOCIETY LTD. REPORTED AT [2002] 253 ITR 310 (GUJ.) . 6. BOTH THE SIDES WERE HEARD AT LENGTH. THE CON TROVERSY IS THAT WHETHER AS PER THE TERMS OF THE AGREEMENT WITH THE DOCTORS IN QUESTION THE DEDUCTION OF TAX WAS TO BE MADE AS PRESCRIBED U/S 192 OF THE ACT OR AS PRESCRIBED U/S 194J OF THE ACT. UNDISPUTED FACT IS THAT THERE ARE TWO TYPES OF AGREEMENTS. ONE OF THE COVENANT IS STATED TO BE IN THE NATURE OF EMPLOYER/EMPLOYEE AGREEMENT AND THE OTHER IS STATED TO BE FIXED SALARY & GUARANTEE MONEY TO CONSULTANTS (IN SHORT FGCS) CO NTRACT. BEFORE US THE TERMS & CONDITIONS OF BOTH THE AGREEMENTS WERE RECITED. EVIDENTLY THERE IS A DISTINCTION. THE DISTINCTION AS POINTED BEFORE US CAN BE STREAM LINED IN SHORT AS UNDER : (A) IN CASE OF EMPLOYEE DOCTORS THERE IS A LIST OF ALLOWANCES SUCH AS BASIC , HRA, TRANS. ALLW. EDU.ALLW. B&P ALL W . TEL. ALLW ,OTHER ALLW. ON THE OTHER HAND, IN CASE O F CONSULTANT DOCTORS THERE IS A CLAUSE OF LUMP-SUM MONTHLY PAYMENT. THE CONSULTANT DOCTORS, HOWEVER, ARE NOT P AID ANY SUCH ALLOWANCES. (B) IN CASE OF EMPLOYEE DOCTORS THERE IS A CLAUSE OF ENTITLEMENT OF LEAVE PRESCRIBED FOR A SPECIFIC PERI OD , HOWEVER , THERE IS NO SUCH CONDITION MENTIONED IN C ASE OF AGREEMENT WITH THE CONSULTANT DOCTORS. (C) AN EMPLOYEE DOCTOR IS ENTITLED FOR MEDICAL BENEFIT AND PERSONAL ACCIDENT BENEFIT PROVIDED BY THE ASSESSEE AS PER ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 8 - THE POLICY OF THE HOSPITAL. CONTRARY TO THIS THERE IS NO SUCH BENEFIT GRANTED TO THE CONSULTANT DOCTORS . (D) THERE IS A SPECIFIC MENTION OF GENERAL SERVICE RULES & REGULATION TO GOVERN THE SERVICE MATTERS, BUT IN TH E AGREEMENT OF FGCS THEY ARE NOT GOVERNED BY SUCH RUL ES AND REGULATIONS, RATHER THEY WERE CONFINED WITHIN THE T ERMS OF THE AGREEMENT. (E) FOR EMPLOYEE DOCTORS THE EMPLOYMENT IS FULL-TIME EMPLOYMENT AND THEY ARE NOT ENTITLED FOR ANY OTHER FULL TIME EMPLOYMENT OR PRIVATE PRACTICE. ON THE OTHER HAND CONSULTANT DOCTORS ARE FREE TO DO ANY OTHER JOB. (F) IN CASE OF CONSULTANT DOCTORS, THERE IS A CLAUSE OF FIXED GUARANTEE MONEY PER MONTH, BUT ALONGWITH THIS AMOUNT THERE IS A CLAUSE OF SHARING OF RECEIPTS WITH THE HOSPITAL. THIS CLAUSE OF AGREEMENT STATES THAT THE ARRANGEMEN T IS FEE FOR SERVICE AND THE HOSPITAL IS ENTITLED TO COLLECT THE AMOUNT TO BE SHARED BETWEEN THE TWO. HOWEVER, THERE IS NO SUCH CLAUSE FOR REGULARLY EMPLOYED DOCTORS. (G) THE CONSULTANT DOCTORS WERE REQUIRED TO TAKE PROFESSIONAL INDEMNITY INSURANCE ON THEIR OWN. (H) THE CONSULTANT DOCTORS WERE NOT EMPLOYED BY SERVICE RULES AND REGULATIONS BUT THEY WERE EXPECTED TO FOL LOW THE CODE OF CONDUCT AND ETHICS OF DOCTORS. 7. IN THE LIGHT OF THE ABOVE DISCUSSION, NOW WE HA VE TO SEE WHETHER THE CONDITIONS OF EMPLOYMENT CAN BE SAID TO BE WITH IN THE PARAMETERS OF SECTION 192 OR SECTION 194-J OF THE I.T.ACT, 1961. SECTION 192 PRESCRIBES THAT ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARIES SHALL AT THE TIME OF PAYM ENT DEDUCT INCOME TAX ON THE AMOUNT PAYABLE. AS AGAINST THAT SECTION 194-J PRESCRIBES THAT ANY PERSON WHO IS RESPONSIBLE FOR PAYING TO A RESID ENT ANY SUM BY WAY OF (A) FEES FOR PROFESSIONAL SERVICES , (B) FEES FOR TECHNICAL SERVICES, (C) ROYALTY AND (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28 OF THE I.T.ACT SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF PAYEE ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 9 - DEDUCT AN AMOUNT EQUAL TO 10% OF SUCH SUM AS INCOME -TAX. THE TERM SALARY IS DEFINED IN SECTION 17 OF THE I.T.ACT WHICH IS AN INCLUSIVE DEFINITION. HOWEVER, THIS DEFINITION SAYS THAT WAG ES, GRATUITY, ANNUITY, PENSION, ANY FEES IN ADDITION TO SALARY ARE INCLUSIVE IN THE DEFINITION OF SALARY. THUS IN OUR UNDERSTANDING A FEES IS PART O F THE SALARY IF IT IS RECEIVED IN ADDITION TO THE SALARY, BUT NOT A PART OF THE SALARY IF RECEIVED INDEPENDENTLY. TO DETERMINE WHETHER AN AMOUNT RECEI VED BY A PERSON IS IN THE NATURE OF SALARY OR NOT, IT IS NECESSARY TO EXAMINE OVER ALL CIRCUMSTANCES AND PRIMARILY THE TERMS AND CONDITION S OF THE EMPLOYMENT. WE HAVE ALREADY SCRUTINIZED THE TERMS AND CONDITION S AND THEREUPON MADE CERTAIN DISTINCTIONS AS LISTED HEREINABOVE. O N THE BASIS OF THOSE DISTINCTIONS, WE HEREBY HOLD THAT THE TERMS AND CO NDITIONS IN RESPECT OF THE IMPUGNED DOCTORS WHO ARE UNDER FGCS ARE NOT AKI N TO THE SALARIED EMPLOYEES. THEIR RELATIONSHIP WITH THE HOSPITAL, T HUS, CANNOT BE SAID TO BE AN EMPLOYER-EMPLOYEE RELATIONSHIP. FOR THIS REAS ON THE DEDUCTION OF TAX AT SOURCE OUGHT TO HAVE BEEN MADE AS PER THE PR OVISIONS OF SEC. 194J OF THE ACT. 7.1. AT THIS JUNCTURE, BEFORE WE FURTHER PROCEED, I T IS BETTER TO KNOW THE MEANINGS OF THE TWO PROPOSITIONS, VIZ. OF AND FOR . AS PER THE CHAMBERS 20 TH CENTURY DICTIONARY, THE MEANING OF THE PROPOSITION OF IS FROM, OUT FROM, AMONG, MADE FROM, BELONGING TO, OWING TO OR DERIVED FROM. IF WE USE THESE MEANINGS OF THE PROPOSITION OF , THEN THE TERM CONTRACT OF SERVICE CAN BE SAID TO BE A CONTRACT FROM SERVICE OR A CONTRACT BELONGING TO A SERVICE . IT CAN ALSO BE READ AS A CONTRACT OWNING TO SERVICE . ACCORDING TO US, THE TERMS AND CONDITIONS DO NO T ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 10 - INDICATE THAT THE SAID CONTRACT WITH THE CONSULTANT DOCTORS WAS OWNING TO SERVICE OR BELONGING TO THEIR SERVICE . NEXT IS THE PROPOSITION FOR AND THE SAME IS DEFINED IN THE DICTIONARY AS, WIT H RESPECT TO, IN FAVOUR OF, ON ACCOUNT OF, IN THE PLACE OF OR BY RE ASON OF. IF WE APPLY THESE MEANINGS, THEN THE TERMINOLOGY AS APPLIED IN SECTION 194J OF THE I.T.ACT CAN BE READ AS FEES ON ACCOUNT OF PROFESSIONAL SERVICES . THEREFORE, IT CAN ALSO BE READ THAT FEES WITH RESPECT TO TECHNICAL / PROFESSIONAL SERVICES . LIKEWISE, IN RESPECT OF THE CONTRACT IN QUESTIO N, IT CAN BE READ AS CONTRACT IN RESPECT OF SERVICE OR CONTRACT BY REASON OF SERVICE . THEREFORE, THE DISTINCTION AS PER THE MEANING A SSIGNED IN THE DICTIONARY IN RESPECT OF THESE TWO PROPOSITIONS ARE PERTINENT AND, THEREFORE, THE LANGUAGE OF SECTION 194J OF THE I.T. ACT IS MORE CLOSE TO THE LANGUAGE USED IN THE AGREEMENT, HENCE, REQUIRED TO BE APPLIED TO RESOLVE THE ISSUE. 8. THERE IS ONE MORE REASON TO ARRIVE AT THE CONCLU SION THAT THE DOCTORS IN QUESTION WERE COVERED BY THE PROVISIONS OF SECTION 194-J OF THE I.T.ACT IS THAT THE SECTION IS APPLICABLE IN RE SPECT OF FEES FOR PROFESSIONS SERVICES. THE ASSESSEES CLAIM IS THAT IT WAS FEES FOR PROFESSIONAL SERVICES, ON THE OTHER HAND, THE ASSES SING OFFICERS VIEW WAS THAT IT WAS FEES OF SERVICES. THAT IS WHY THE ASSESSING OFFICER HAS PROCEEDED WITH THE FINDING THAT FGCS ARE IN THE NAT URE OF CONTRACT OF SERVICES. BUT THE ASSESSEE HAS TRIED TO DEMONSTR ATE THAT ONE OF THE CLAUSES IN THE AGREEMENT HAS SPECIFICALLY MENTIONED THAT A CONSULTANT DOCTOR IS ENTITLED FOR FEE FOR SERVICE. THEREFORE , THE ASSESSEES VEHEMENT CONTENTION IS THAT THE ARRANGEMENT WITH THE CONSULTANT DOCTOR WAS ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 11 - CONTRACT FOR SERVICES . ON READING THE VARIOUS CLAUSES OF THE AGREEMENTS IN QUESTION, IT IS VERY MUCH CLEAR THAT THE CONTRACT BETWEEN THE TWO PARTIES CANNOT BE SAID TO BE IN THE NATURE OF A SERVICE CONTRACT BUT A CONTRACT FOR MEDICAL SERVICE FOR WHICH THE RE WAS A SPECIFIC CONDITION OF SHARING OF MEDICAL FEES. BECAUSE OF T HIS REASON, WE ARE UNABLE TO SPELL OUT THAT THE RELATIONSHIP CAN BE SA ID TO BE A EMPLOYER- EMPLOYEE RELATIONSHIP. WHEN THERE IS A SPECIFIC CL AUSE PROVIDED IN THE AGREEMENT FOR PAYMENT AS FEE FOR SERVICES, THEN T HERE IS NO REASON TO READ THE SAID CLAUSE AS FEES OF SERVICES AND THEN THERE SHOULD NOT BE ANY REASON TO TREAT THE SAID PAYMENT BY THE ASSE SSEE AS PAYMENT OF SALARY. BECAUSE OF THIS CONCLUSION, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED TO IMPUTE OR IMPLICATE SU CH A DEFAULT ON THE PART OF THE ASSESSEE FOR FAILURE TO DEDUCT AN ADEQUATE T AX. BEFORE WE CONCLUDE, THERE IS ONE MORE ASPECT OF DEALING WITH THE ISSUE WHICH WAS RAISED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE BY CITING TWO DECISIONS; I.E. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. CIT REPOR TED AT [2007]293 ITR 226(SC) AND ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RISHIKESH APARTMENTS CO-OP.HOUSIN G SOCIETY LTD. REPORTED AT [2002] 253 ITR 310 (GUJ.). THESE TWO DECISIONS OF THE HON'BLE COURTS ARE IN RESPECT OF COMPUTATION OF INT EREST CHARGEABLE U/S.201(1A) OF THE I.T.ACT FOR FAILURE TO DEDUCT TD S. IN THAT CONTEXT, IT WAS HELD THAT IF THE PAYEE HAS PAID ADVANCE TAX O R SELF ASSESSMENT TAX, THEN THERE WAS NO LOSS TO THE REVENUE, HENCE, THERE IS NO JUSTIFICATION FOR CHARGING OF INTEREST ON THE SAID AMOUNT. HOWEVER, THERE IS NO NECESSITY OF ENTERING INTO THIS ASPECT BECAUS E WE HAVE ALREADY TAKEN ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 12 - A DECISION HEREINABOVE IN THIS ORDER THAT THE DEDUC TION WAS RIGHTLY MADE WITHIN THE PROVISIONS OF SECTION 194-J OF THE I.T.A CT. THOUGH, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT ALL THOSE DOCTORS ARE INDEPENDENTLY ASSESSED TO TAX AND RESPECTIVELY PAID THE DUE TAX, BUT AT PRESENT, THERE IS NO NECESSITY TO D EAL WITH THIS ASPECT BECAUSE WE HAVE ALREADY HELD THAT THERE WAS NO SHOR T DEDUCTION OF TAX BY THE ASSESSEE. HENCE, THERE WAS NO QUESTION OF CHAR GING OF INTEREST. WE HOLD ACCORDINGLY. THE REVENUES GROUNDS ARE, THERE FORE, DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 23/ 12 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 23/ 12 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPAR TMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-X, AHMEDABAD 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..22/12/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/12/2010 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 23/12/10 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23/12/10 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . ITA NO.3363/AHD /2008 ITO VS. APOLLO HOSPITALS INTERNATIONAL LTD. ASST.YEAR 2007-08 - 13 - 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER