Dr.George Andrews, Trivandrum V. The ITO, Trivandrum

ITA 484/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8561 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 28-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Salary income
• Section: 143(3); 6; 263; 63; 12; 2

Judgement Text

ITA NO . 484/C/2015 & SP NO.68/C/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN (SMC) BEFORE SHRI B P JAIN , ACCOUNTANT MEMBER ITA NO . 484/COCH/2015 (A SST YEAR 2007 - 08 ) & STAY PETITION NO.68/COCH/2015 DR GEPRGE ANDREWS TC 5/2535 - 3 GOLD LINKS ROAD KAWDIAR TRIVANDRUM 3 VS THE INCOME TAX OFFICER WARD 1(4), TRIVANDRUM ( APPELLANT) (RESPONDENT) PAN NO. ACFPA0013Q ASSESSEE BY SH T M SREEDHARAN, SR ADV. REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 21 ST JUNE 2016 DATE OF PRONOUNCEMENT 2 1 ST JUNE 2016 ORDER PER B P JAIN, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28.7.2015 OF THE CIT(A), TRIVANDRAUM FOR THE AY 2007 - 08. THE ASSESSEE HAS ALSO FIELD A STAY PETITION SEEKING STAY OF RECOVERY OF DEMAND OF TRS. 9,96,180/ - . 2 FIRST, I S HALL TAKE UP FOR ADJUDICATION THE APPEAL IN ITA NO.484/COCH/2015. THE ASSESSEE HAS RAISED AS MANY AS 9 GROUNDS OF APPEAL; BUT THE SOLITARY ISSUE FOR MY CONSIDERATION IS WHETHER THE INCOME RECEIVED FROM JUBILEE MEMORIAL HOSPITAL IS A PROFESSIONAL INCOME OR A SALARY. ITA NO . 484/C/2015 & SP NO.68/C/2015 2 3 BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A C O NSU L TANT O R THOP E DIC SURGEON WORKING WITH JUBILEE MEMOR I A L HOS P ITA L, TRIVAN D R UM AND F ILED RE T URN F OR THE ASSESSMENT Y E AR UNDER CONSIDERAT I O N O N 31 . 10 . 2 007 DISCLOSING IN C O M E OF R S.69,829/ - . THE SAID RETURN WAS PROC E SS E D AND T H EREAFT E R TAKEN UP FOR SCRUT I NY AND THEN ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3 ) AC CEPTING THE INCOME RETURNED. SUBSEQUENTLY, NOTICING THAT THE AMOUNT OF RS.31 , 47 , 4 8 1 / - REC EI VED BY T HE ASSESSEE FROM THE JUBILEE MEMO RI AL HOSPITAL WAS TR EATED AS I NC OM E FROM PROFESS I ON A N D CR E DITED THE SAME IN THE P ROF IT & L OS S A C COUNT WHICH IN TURN S HOWS SOME L EVEL OF C ONTRO L BY THE HOSP IT AL OVE R THE ASSESSEE 'S PROFESSION AN D HIS EMPLOYMENT C R E A TE S A RELATIONSHI P O F MA S T ER AND SERVANT, TH E COMMISS I ONER OF INC O ME TA X, TR I VANDRU M V I DE O R D E R PA SS ED U /S 26 3 O F T HE ACT O N 06.0 2 . 20 1 2 HAS IS SU E D DIRE C T I O N T O THE AS SESSI N G O FFICE R T O A S S E SS THE A SSESSEE 'S PROF ES SI ONAL I N C OM E R E C E IV E D FR OM TH E SA I D HO SP I TA L UNDER T H E HEA D INCOME FROM SA LAR Y A N D A LSO NOT T O S ET OFF THE LOSS OF RS . 5 , 954/ - WORKED ' OUT FR O M T H E P R OF ES SIONAL I NCOME AGA I NST THE INCOME FROM SALAR Y . WHIL E ISSUING T H E DIRECTION , T H E COMM I SS I ON E R OF INCOME T AX HAS RELIED O N TH E DE CISION OF THE HON'BLE S UPREM E CO U RT I N TH E CAS E O F R A M PRASHAD V S CIT R E PORTED IN 86 I TR 1 2 2 W HEREIN I T WAS O B SER VED T HAT 'A D OC TO R MAY BE EM PLOYE D A S MED I C A L OFF ICER A ND T H OU GH NO ' C ONTROL IS EXE RC ISED OV E R HI M IN RESPECT OF TH E MANNER H E S H O U L D DO THE W O R K O R I N RESPEC T OF TH E DA Y T O DAY WOR K HE IS RE QUI R E D TO DO, HE MAY NO NETH E LES S BE A S ERVANT I F HIS EM P LO Y MENT CR EA TES A REL A T IONSHIP OF THE MA STER AND S E R V A N T '. TH U S , O R DER UNDE R S EC T I ON 14 3( 3) R WS 2 6 3 W A S P A S S ED BR I NG IN G T O ITA NO . 484/C/2015 & SP NO.68/C/2015 3 TAX TH E EN TIR E A MOU N T OF RS . 31 , 47 , 4 81/ - R ECE I VED FR OM T HE J UBI L EE M E M O RIAL HO SP I T AL A S INCOME F R OM S A L ARY W H I LE RE J ECT I NG T HE SE T OFF O F L O SS TH E APP EL LA NT - HAD CL AIMED . AGGRIEVED, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4 IT WAS ARGUED BY THE SR LD COUNSEL SHR I T M SREEDHARAN, THAT THE ASSESSEE IS A MEMBER OF THE AMERICAN ACADEMY OF ORTHOPEDIC SURGEONS, AMERICAN COLLEGE OF SURGEONS AND AN ACTIVE MEMBER OF THE ARTHROSCOPY ASSOCIATION OF NORTH AMERICA. IT WAS SUBMITTED THAT THE ASSESSEE BROUGHT SOPHISTICATED MED ICAL EQUIPMENTS, WHICH ARE NOT AVAILABLE IN KERALA, TO DO COMPLICATED SURGICAL PROCEDURES FROM HIS OWN FUNDS. THE MAINTENANCE AND SERVICING ETC, ARE DONE BY THE ASSESSEE FROM HIS OWN COST FOR SUCH SERVICES, HE CHARGED PROFESSIONAL FEE IN THE FORM OF INSTRU MENT FEE FROM THE PATIENTS, AND A CERTIFICATE TO THAT EFFECT HAS BEEN SUBMITTED BY THE JUBILEE MEMORIAL HOSPITAL. IT WAS FURTHER SUBMITTED THAT THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS RUNNING HIS OWN HOSPITAL IN THE NAME OF TKE MEDICAL CENTRE WHICH DOES NOT MEAN THAT THE ASSESSEE BECOMES THE EMPLOYEE OF THE JUBILEE MEMORIAL HOSPITAL. IT IS THE NORMAL PRACTICE FOR ALL THE DOCTORS AS A CONSULTANT ARE VISITING HOSPITALS AND ARE USED THEIR OWN EQUIPMENTS THEREOF . IN THE PRESENT CASE, THE ASSESSEE VISITS HOSPITAL I.E. JUBILEE MEMORIAL HOSPITAL FOR TWO HOURS APPROXIMATELY PER DAY AND USING HIS OWN MACHINERY WHICH ARE NOT AVAILABLE IN THE STATE OF KERALA. THESE ARE SOPHISTICATED MEDICAL EQUIPMENTS WHICH ARE NOT AVAILABLE ELSEWHERE. ITA NO . 484/C/2015 & SP NO.68/C/2015 4 KEEPING THE MACH INES AND USING THE SAME DOES NOT PROVE THE EMPLOYER AND EMPLOYEE RELATIONSHIP OF JUBILEE MEMORIAL HOSPITAL AND THAT OF THE ASSESSEE. 4.1 THE LD SR COUNSEL FURTHER ARGUED THAT IT IS THE FIRST YEAR THE ASSESSEE HAS BEEN TREATED HAVING BEEN RECEIVED THE P ROFESSIONAL INCOME IN THE RELATIONSHIP OF EMPLOYER AND EMPLOYEE WHEREAS FOR THE LAST MANY Y EARS, THE ASSESSEE HAD BEEN TREATED BY THE INCOME TAX AUTHORITIES ONLY AN INDIVIDUAL PERSON AND HIS INCOME HAS BEEN ASSESSED AS PROFESSIONAL INCOME AND THE RECEIPT OF THE INCOME WAS SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT. IN THE IMPUGNED YEAR AS WELL THE ASSESSEES PROFESSIONAL INCOME HAS BEEN DEDUCTED AT SOURCE U/S 194J IS NOT UNDER DISPUTE. THE LD SR COUNSEL INVITED OUR ATTENTION TO THE ASSESSME NT ORDER FOR THE AY 2007 - 08 PLACED AT PAGE 29 AND 30 OF THE PAPER BOOK FILED BY THE ASSESSEE. WHERE IN THE ASSESSEE HAS BEEN TREATED AS A DOCTOR WORKING AS CONSULTANT ORTHOPEDIC SURGEON AT JUBILEE MEMORIAL HOSPITAL AND ALSO IN RECEIPT OF REMUNERATION CON SISTS OF CONSULTATION CHARGE, OPERATION CHARGES, INSTRUMENT CHARGES AND PROFESSIONAL CHARGES ETC., FROM JUBILEE HOSPITAL , IT IS ALSO MENTIONED THAT THE ASSESSEE OWNED A HOSPITAL CALLED TEK MEDICAL CENTRE CONSTRUCTED FROM HIS FUNDS EARNED WHILE WORKING AT ABROAD. THE SR LD COUNSEL ALSO INVITED OUR ATTENTION TO THE ASSESSMENT ORDER COMPLETED U/S 143(3)/147 OF THE ACT FOR THE AY 2006 - 07 PLACED AT PAGE 20 OF THE PAPER BOOK FILED BY THE ASSESSEE WHEREIN THE ASSESSEE HAD BEEN TREATED AS DOCTOR WORKING IN T HE JUBILEE HOSPITAL, TRIVANDRUM WHERE HE GET REMUNERATION AS ITA NO . 484/C/2015 & SP NO.68/C/2015 5 CONSULTATION FEE, INSTRUMENTS CHARGES AND PROCEDURAL FEES ETC. AND ALSO IT HAS BEEN MENTIONED THAT THE ASSESSEE HAD CONSTRUCTED A HOSPITAL FROM HIS OWN FUNDS ACCUMULATED WHILE WORKING ABROAD AN D THE CASH FLOW STATEMENT, BOOKS OF ACCOUNTS BILL FOR PURCHASE OF FIXED ASSETS WERE PRODUCED. THE INCOME OF THE ASSESSEE HAS BEEN TREATED AS PROFESSIONAL INCOME AND NOT AS A SALARY INCOME. THEREFORE, THE LD SR COUNSEL ARGUED THAT CONSISTENCY SHOULD BE FL OWED BY THE DEPARTMENT AND PICK AND CHOOSE SHOULD NOT BE FOLLOWED. I N SUPPORT OF HIS ARGUMENTS, HE RELIED ON THE JUDGMENT OF THE HON;BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS APOLLO HOSPITALS INTERNATIONAL LTD REPORTED IN (2013) 359 ITR 0078(GUJ) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAM PRASAD VS CIT REPORTED IN (1972) 86 ITR 0122 . 5 THE LD DR, ON THE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS MEMBER OF THE AMERICAN ACADEMY OF ORTHOPEDIC SURGEONS, AS MENTIONED IN THE ARGUMENTS OF THE SR LD COUNSEL HEREIN ABOVE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE, WHILE HE RETURNED TO INDIA IN 1992 BROUGHT SOPHISTICATED MEDICAL EQUIPMENTS WHICH ARE NOT AVAILABLE IN THE STATE OF KERALA TO DO COMPLICATED SURGICAL PROCEDURES AND HE IS THE FIRST DOCTOR TO OFFER ADVANCED ARTHROSCOPIC SURGERY AND TOTAL JOINT ARTHOROPLASTIES TO PATIENTS IN KERALA. THE SAID MACHINERY HAD BEEN BROUGHT BY ITA NO . 484/C/2015 & SP NO.68/C/2015 6 THE ASSESSEE FROM HIS OWN FUNDS AND THE MAINTENANCE I S ALSO DONE FROM HIS OWN FUNDS AND NOT EVEN A SINGLE PENNY HAS BEEN SPENT BY JUBILEE MEMORIAL HOSPITAL IN THE PROCESS OF PURCHASE OF MACHINERY OR FOR THE MAINTENANC E SINCE BEGINNING. THE ASSESSEE HAS BEEN ASSESSED AS A PROFESSIONAL WHERE HE HAD BEEN DECLARING PROFESSIONAL INCOME SINCE BEGINNING TILL THE IMPUGNED ASSESSMENT YEAR. IT IS EVIDENT FROM THE ASSESSMENT ORDERS MADE U/S 143(3) IN THE IMMEDIATE PROCEEDING YEA R I.E. AY 2006 - 07. THE ASSESSEES INCOME HAS BEEN SUBJECTED TO DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT FOR THE IMPUGNED YEAR AS IN THE PRECEDING YEARS. THERE IS NO CHANGE OF METHOD OF ACCOUNTING DURING THE YEAR AND IT IS ONLY THE FIRST YEAR THE ASS ESSEE HAS BEEN TREATED BY THE AO AS WELL AS THE CIT(A) OUGHT TO HAVE BEEN EARNED IDENTICAL INCOME IN THE RELATIONSHIP OF EMPLOYER AND EMPLOYEE, WHICH IS NOT A CORRECT VIEW. DOCTRINE OF CONSISTENCY DEMANDS THAT INCOME TAX DEPARTMENT ON IDENTICAL SITUATION SHOULD FOLLOW THEIR OWN ORDERS IN THE PRECEDING YEARS WHEN THERE IS IDENTICAL SITUATION AND IDENTICAL INCOME AND THERE IS NO CHANGE OF CIRCUMSTANCES OF WHATSOEVER OF ANY KIND. CHANGE THE STANDARD DURING THE IMPUGNED YEAR IS GOING AGAINST THE DOCTRINE OF CO NSISTENCY, WHICH IS NOT PERMITTED. THE ASSESSEE IS FOLLOWING REGULAR BOOKS OF ACCOUNT, INCOME AND EXPENDITURE OF THE PRECEDING YEAR AS WELL AS IN THE IMPUGNED YEAR. THEREFORE , IN ALL CIRCUMSTANCES, THE ASSESSEE DOES NOT ENJOY ANY EMPLOYER AND EMPLOYEE RELA TIONSHIP AND NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THE SAME. THE LD SR COUNSEL HAS RELIED ON THE ITA NO . 484/C/2015 & SP NO.68/C/2015 7 DECISION OF THE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF APOLLO HOSPITALS INTERNATIONAL LTD (SUPRA). THE RELEVANT HEAD - NOTES ARE REPRODUCED HEREIN B ELOW: TDS SERVICES RENDERED BY CONSULTANT DOCTORS IN HOSPITALS - SALARY U/S 192 OR PROFESSIONAL FEES COVERED U/S 194J PURSUANT TO SURVEY IN PREMISES OF ASSESSEE, AO BROUGHT DOCTORS RENDERING CONSULTANT SER VICES IN ASSESSEES HOSPITAL U/S 192 ON GROUND S THAT THERE EXISTED A RELATIONSHIP OF EMPLOYER AND EMPLOYEE AND PAYMENTS MADE TO CONSULTANT DOC TORS WERE IN NATURE OF FIXED SALARY AND GUARANTEED MONEY - AO RAISED DEMAND AND INTEREST THEREOF ASSESSEE CLAIMED THAT HE HAD DEDUCTED TAX U/S 194J BY TREATIN G PAYMENTS MADE TO CONSULTANT DOCTORS AS PROFESSIONAL FEES CIT(A) HELD THAT PAYMENT MADE TO CONSULTANT DOCTORS WAS PROFESSIONAL FEES COVERED U/S 194J AND SECTION 192 WOULD NOT BE APPLICABLE APPELLATE TRIBUNAL UPHELD CIT(A)S ORDER .HELD CIT(A) AND T RIBUNAL HAD CLEARLY HELD THAT CONSULTANT DOCTORS WERE NOT ENTITLED TO SERVICE BENEFITS AS COMPARED TO EMPLOYEE DOCTORS ALSO , CONSULTANT DOCTORS WERE REQUIRED TO TAKE PROFESSIONAL INDEMNITY INSURANCE ON THEIR OWN CONSULTANT DOCTORS WERE PROFESSIONAL C ONSULTANTS WHO COULD NOT BE TREATED AS EMPLOYEES OF HOSPITAL AND THUS PAYMENTS TO DOCTORS WERE PROFESSIONAL FEES COVERED U/S 194J TRIBUNAL HAD APPRECIATED ALL EVIDENCES ON RECORD TO HOLD THAT CONSULTANT DOCTORS WERE NOT GETTING SALARY, BUT PAYMENT TO THE M WAS IN NATURE OF PROFESSIONAL FEES ALSO CONTRACT BETWEEN ASSESSEE AND CONCERNED CONSULTANT DOCTORS WAS ONE OF CONTRACT FOR SERVICE AND NOT OF SERVICE TDS WAS RIGHTLY DEDUCTED U/S 194J AND SECTION 192 HAD NO APPLICATION SINCE CONSULTANT DOCTORS WERE INDEPENDENTLY ASSESSED AND NO LOSS WAS CAUSED TO REVENUE NO INTEREST WOULD BE CHARGEABLE FROM ASSESSEE NO INTERFERENCE WITH ORDER OF TRIBUNAL WAS WARRANTED REVENUES APPEAL DISMISSED. 7 THE SR LD COUNSEL ALSO RELIED ON THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF RAM PRA SHAD (SUPRA). THE RELEVANT HEAD - NOTES ARE REPROACHED HEREIN BELOW: SALARY EMPLOYER EMPLOYEE RELATIONSHIP MANAGING DIRECTOR OF COMPANY RECEIVING 10 PERCENT OF GROSS PROFITS BESIDES FIXED MONTHLY REMUNERATION N ATURE OF HIS EMPLOYMENT HAS TO BE DETERMINED BY ARTICLES OF ASSOCIATION OF COMPANY AND THE TERMS OF HIS EMPLOYMENT HE COULD DO ADDITIONAL WORK AS AN AGENT OR MANAGER ON SUCH TERMS AND CONDITIONS ITA NO . 484/C/2015 & SP NO.68/C/2015 8 AND REMUNERATION AS AGREED UPON BETWEEN HIM AND THE DIRECTO RS OF THE COMPANY SEVERAL CLAUSES OF THE ARTICLES SPECIFICALLY EMPOWER THE BOARD OF DIRECTORS TO EXERCISE CONTROL OVER MANAGING DIRECTOR HE CAN BE REMOVED WITHIN THE PERIOD OF 20 YEARS FOR NOT DISCHARGING THE WORK DILIGENTLY HE HAS TO EXERCISE POWERS WITHIN THE TERMS AND LIMITATIONS PRESCRIBED UNDER ARTICLES OF ASSOCIATION AND CONTROL AND SUPERVISION OF DIRECTOR INDICATES THAT HE IS EMPLOYED AS A SERVANT OF COMPANY REMUNERATION PAYABLE TO HIM IS SALARY. 8 IN VIEW OF THE ABOVE FACTS AND CIRCUMST ANCES OF THE CASE AND THE DECISIONS RELIED UPON BY THE SR LD COUNSEL FOR THE ASSESSEE, THE ASSESSEE DOES NOT HAVE ANY EMPLOYER AND EMPLOYEE RELATIONSHIP AND ENJOY THE PROFESSIONAL INCOME , WHICH HAS BEEN DECLARED AS SUCH DURING THE IMPUGNED YEAR FOLLOWING T HE CONSISTENCY METHOD FOR THE IMPUGNED YEAR AND THEREFORE, THE TREATMENT GIVEN BY THE DEPARTMENT, AS EMPLOYER AND EMPLOYEE RELATION SHIP, IS NOT CORRECT VIEW AND THE SAM E IS DIRECTED TO THE REVERSED AND THE AO IS DIRECTED TO TREAT THE INCOME AS PROFESSIONAL INCOME AND ALLOW THE SET OFF OF LOSS AS WELL AS CLAIMED AS PER LAW. ACCORDINGLY, THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED. 9 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. STAY PETITION NO. 89/COCH/2015 10 SINCE THE APPEAL FILED BY TH E ASSESSEE IS DECIDED IN FAVOUR OF THE ASSESSEE, THE STAY PETITION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS; AND THEREFORE , THE SAME IS DISMISSED. ITA NO . 484/C/2015 & SP NO.68/C/2015 9 11 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED WHEREAS THE STAY PETITION FILED BY THE ASS ESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST , DAY OF JUNE 2016 SD/ - ( B P JAIN ) ACCOUNTANT MEMBER COCHIN: DATED 21 ST JUNE 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN