M/s Hosmat Hospital Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 575/BANG/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9495 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-07-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 29-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUN IL KUMAR AGARWALJ
• Assessee Lawyers: S ANNAMALAI
• Section: 201(1); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO S . 572, 575 & 576/ BANG/20 1 4 (ASSESSMENT YEAR S : 20 11 - 12, 2012 - 13 & 2013 - 14 ) M/S.HOSMAT HOSPITAL PVT . LTD., NO.45, MAGRATH ROAD, BANGALORE - 560025. PA NO. BLRD 01116D VS. APPELLANT ASST. COMMISSIONER OF INCOME - TAX (TDS), CIRCLE 18(1), BANGALORE. RESPONDENT AND ITA NO S . 879, 880 & 881 / BANG/20 14 (ASSESSMENT YEAR S : 2011 - 12, 20 12 - 13 & 2013 - 14 ) ASST. COMMISSIONER OF INCOME - TAX (TDS), CIRCLE 18(1), BANGALORE - . VS. APPELLANT M/S.HOSMAT HOSPITAL PVT. LTD., BANGALORE. RESPONDENT ASSESSEE BY : SHRI S.ANNAMALAI, ADVOCATE. RE VENUE BY : SHRI SUNIL KUMAR AGARWAL, JCIT(DR) DATE OF HEARING : 13/07/2016 DATE OF PRONOUNCEMENT : 11 /08/2016 O R D E R PER BENCH : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE - COMPANY AS WELL AS THE REVENUE AGAINST THE CONSOLIDATED ORDER OF THE ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 2 OF 13 CIT(A ) V, BANGALORE, DATED 14/02/2014 FOR THE ASSESSMENT YEARS 2011 - 12 , 2012 - 13 AND 2013 - 14 ARISING OUT OF ORDERS PASSED BY THE ASST. CIT(TDS), CIRCLE 18(1), BANGALORE [HEREINAFTER REFERRED TO AS TDS OFFICER ] U/S 201(1) AND 201(1A) OF THE INCOME - TAX ACT, 196 1 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. 2. BRIEFLY, FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF HEALTH - CARE. THE TDS OFFICER CONDUCTED SURVEY OPERATIONS ON 25/ 0 2/2013 UNDER THE PROVISIONS OF SEC.133A O F THE ACT WITH THE INTENTION OF VERIFYING TDS COMPLIANCE BY THE ASSESSEE - COMPANY. DURING THE COURSE OF SUCH SURVEY OPERATIONS, IT WAS FOUND THAT THE ASSESSEE - COMPANY IS EMPLOYING THREE CATEGORIES OF DOCTORS VIZ., SALARIED DOCTORS, IN - HOUSE CONSULTANTS AND VISITING CONSULTANTS. IT WAS ALSO FOUND THAT THE ASSESSEE - COMPANY HAS BEEN DEDUCTING TAX AT SOURCE IN RESPECT OF IN - HOUSE CONSULTANTS AND VISITING CONSULTANTS UNDER THE PROVISIONS OF SEC.194J OF THE ACT. THE TDS OFFICER ALSO FOUND AGREEMENTS ENTERED INT O BY THE ASSESSEE - COMPANY WITH THE CONSULTANT DOCTORS. THE TDS OFFICER, THEREAFTER, NOTICING THE FOLLOWING CLAUSES IN AGREEMENTS HAD COME TO CONCLUSION THAT TDS IS REQUIRED TO BE DEDUCTED U/S 192 OF THE ACT : ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 3 OF 13 THE TDS OFFICER ALSO FOUND THAT THE AG REEMENTS ENTERED INTO WITH SALARIED DOCTORS BY THE ASSESSEE - COMPANY , ALSO CONTAINED SIMILAR TERMS AND CONDITIONS WHICH GOVERN THE EMPLOYMENT OF CONSULTANT DOCTORS. THEREFORE, HE CONCLUDED THAT CONSULTANT DOCTORS ARE ALSO SALARIED EMPLOYEES OF THE ASSESSEE - ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 4 OF 13 COMPANY AND THUS HELD THE ASSESSEE - COMPANY IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE U/S 192 OF THE ACT. THE TDS OFFICER ALSO CHARGED INTEREST UNDER THE PROVISIONS OF SEC TION 201(1A) OF THE ACT APART FROM TAX LIABILITY U/S 201(1) OF THE ACT. HE, THUS P ASSED AN ORDER DEMANDING THE ASSESSEE - COMPANY TO PAY TAX AS UNDER: 3. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(A), WHO, AFTER CONSIDERING THE FOLLOWING CLAUSE OF THE SAID AGREEMENT, CONCLUDED THAT CONSULTANT DOCTORS ARE THE EMPLOYEES OF THE ASSESSEE - COMPANY AS UNDER: ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 5 OF 13 HOWEVER, IN RESPECT OF VISITING DOCTORS, THE CIT(A) HELD THAT PROFESSIONAL FEES PAID TO THEM IS LIABLE FOR DEDUCTION OF TAX AT SOURCE ONLY UNDER THE PROVISIONS OF SEC.194J OF THE ACT BY HOLDING AS UNDER: ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 6 OF 13 4. BEING AGGRIEVED BY THE DECISION OF THE CIT(A) THAT REMUNERATION PAID TO VISITING DOCTORS IS LIABLE FOR DEDUCTION OF TAX AT SOURCE ONLY UNDER SEC.194J, THE REVENUE IS IN APPEAL BEFORE US IN ITA NOS. 879, 880 & 881 /BANG/2014. 5. BEING AGGRIEVED BY THE DECISION OF THE CIT(A) THAT CONSULTANT DOCTORS ARE SALARIED EMPLOYEES, THE ASSESSEE IS IN APPEAL IN ITA NOS. 572, 575 & 576/ BANG/20 14. THE ASSESSEE RAISED THE FOLLOWING COMMON GROUNDS OF APPEALS: ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 7 OF 13 ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 8 OF 13 ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 9 OF 13 6. THE ISSUE TO BE ADJUDICATED IN THE APPEALS OF THE ASSESSEE - COMPANY IS WHETHER THERE IS A RELATIONSHIP OF AN EMPLOYER AND EMPLOYEE ON CONSTRUCTION OF THE TERMS OF AGREEMENT ENTERED BY THE ASSESSEE - COMPANY WITH CONSULTANT DOCTORS. 7. TO DECIDE THE RELATIONSHIP OF EMPLOYER AND EMPLOYE E, IT IS TO BE EXAMINED WHETHER THE CONTRACT ENTERED INTO BETWEEN THE PARTIES IS CONTRACT FOR SERVICE OR CONTRACT OF SERVICE . THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANIPAL HEALTH SYSTEM (P) LTD. (375 ITR 509) VIDE PARA.13 OF THE JUDGMENT HELD AS FOLLOWS: 13. TO DECIDE THE RELATIONSHIP OF EMPLOYER AND EMPLOYEE WE HAVE TO EXAMINE WHETHER THE CONTRACT ENTERED INTO BETWEEN THE PARTIES IS A CONTRACT FOR SERVICE OR A CONTRACT OF SERVICE . THERE ARE MULTI - FACTOR TESTS TO DECIDE THI S QUESTION. INDEPENDENCE TEST, CONTROL TEST, INTENTION TEST ARE SOME OF THE TESTS NORMALLY ADOPTED TO DISTINGUISH BETWEEN CONTRACT FOR SERVICE AND CONTRACT OF SERVICE . FINALLY, IT DEPENDS ON THE PROVISIONS OF THE CONTRACT. INTENTION ALSO PLAYS A ROLE I N DECIDING THE FACTOR OF CONTRACT. THE INTENTION OF THE PARTIES CAN ALSO DETERMINE OR ALTER A CONTRACT FROM ITS ORIGINAL SHAPE AND STATUS IF BOTH PARTIES HAVE MUTUAL AGREEMENT. IN THE INSTANT CASE, THE TERMS OF CONTRACT IPSO FACTO PROVES THAT THE CONTRACT BETWEEN THE ASSESSEE - COMPANY AND THE DOCTORS IS ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 10 OF 13 OF CONTRACT FOR SERVICE NOT A CONTRACT OF SERVICE . THE REMUNERATION PAID TO THE DOCTORS DEPENDS ON THE TREATMENT TO THE PATIENTS. IF THE NUMBER OF PATIENTS IS MORE, REMUNERATION WOULD BE ON A HIGHER SIDE OR IF NO PATIENTS, NO REMUNERATION. THE INCOME OF THE DOCTORS VARIES, DEPENDING ON THE PATIENTS AND THEIR TREATMENT. ALL THESE FACTORS ESTABLISH THAT THERE IS NO RELATIONSHIP OF EMPLOYER AND EMPLOYEE BETWEEN THE ASSESSEE - COMPANY AND THE DOCTORS. APPLYIN G THE ABOVE LAW TO THE FACTS OF THE PRESENT CASE FROM THE TERMS OF CONTRACT ENTERED BY THE ASSESSEE WITH CONSULTANT DOCTORS IT IS CLEAR THAT REMUNERATION I S FIXED IRRESPECTIVE OF NUMBER OF PATIENTS ATTENDED BY THE CONSULTANT DOCTORS. THE TIMINGS ARE FIXED . CLAUSE 7 OF THE SAID AGREEMENT ALSO STIPULATES THAT CONSULTANT DOCTORS ARE WORKING WITH HOSPITAL FOR A MINIMUM PERIOD OF 5 YEARS FROM THE DATE OF JOINING THE ORGANIZATION. FURTHER, IT IS SUBMITTED THAT IN CASE CONSULTANT DOCTOR LEAVES HOSPITAL WITHIN A PERIOD OF 2 YEARS AND SUCH DOCTOR IS BARRED FROM WORKING IN BANGALORE DISTRICT FOR A PERIOD OF 2 YEARS FROM THE DATE OF LEAVING. IT IS FURTHER SUBMITTED THAT IN CASE CONSULTANT DOCTOR SHALL NOT UNDERTAKE ANY PROFESSIONAL WORK OR ASSIGNMENT IN ANY OTHER H OSPITAL WITHOUT PRIOR CONSENT OF THE ASSESSEE - COMPANY. ALL THESE CONDITIONS GO TO PROVE THAT IT IS A CASE OF CONTRACT OF SERVICE. IT IS ALSO CLEAR FROM CLAUSES OF THE AGREEMENT PLACED AT PAGE 26 OF THE PAPER BOOK THAT THERE IS NO INDEPENDENCE TO THE CONS ULTANT DOCTORS, THEIR WORKING HOURS AND SERVICE CONDITIONS ARE UNDER THE DIRECT CONTROL AND SUPERINTENDENCE OF THE ASSESSEE. ALL THESE CIRCUMSTANCES GO TO PROVE THAT THE ASSESSEE IS ONLY MAKING AN ATTEMPT TO CAMOUFLAGE REAL NATURE OF THE TRANSACTION BY US ING ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 11 OF 13 CLEVER PHRASEOLOGY. IT IS NOT THE FORM BUT THE SUBSTANCE OF THE TRANSACTION THAT MATTERS. THE NOMENCLATURE USED MAY NOT BE DECISIVE OR CONCLUSIVE TO DETERMINE THE NATURE OF TRANSACTION. THE INTENTION OF THE PARTIES IS TO BE ASCERTAINED WITH REFERENC E TO TERMS OF CONDITIONS CONTAINED IN THE AGREEMENT. AS CITED SUPRA, FROM THE TERMS OF CONTRACT, IT IS VERY CLEAR THAT THE INTENTION BETWEEN PARTIES IS ONLY A CONTRACT OF SERVICE. FURTHERMORE, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANIPAL HEA LTH SYSTEM (P) LTD. (SUPRA) HELD THAT THE CONTRACT OF SERVICE ARE NOT IN THE NATURE OF EMPLOYER AND EMPLOYEE RELATIONSHIP AS THE REMUNERATION DRAWN IS DEPENDENT UPON THE PATIENTS ATTENDED BY THE CONSULTANT DOCTOR. SIMILARLY, HON BLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC) (375 ITR 49), HELD THAT IN A CASE WHERE DOCTORS ARE PAID FIXED REMUNERATION AND TENURE THE AMOUNT PAID TO SUCH DOCTORS CONSTITUTES SALARIES. THUS, HAVING REGARD TO THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANIPAL HEALTH SYSTEM (P) LTD. (SUPRA) AS WELL AS THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC) (SUPRA) IN THE INSTANT CASE ALSO SINCE CONSULTANT DOCTORS WERE PAID FIXED REMUNERATION AND THE WORKING CONDITIONS ARE UNDER SUPERVISION AND CONTROL OF THE HOSPITAL AUTHORITIES, IN OUR CONSIDERED OPINION, SERVICES ARE RENDERED IN THE NATURE OF EMPLOYEE. HENCE, PAYMENTS ARE SUBJECT TO TAX DEDUCTION AT SOURCE U/S 192 OF THE ACT. THE ASSESSEE HAS FAILED TO CONTROVERT ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 12 OF 13 THE FINDINGS OF THE TDS OFFICER THAT THE TERMS AND CONDITIONS OF CONSULTANT DOCTORS ARE SAME AS THAT OF SALARIED DOCTORS. THE FACT THAT CONSULTANT DOCTORS HAVE DECLARED THEIR INCOME UNDER THE HEAD PROFESSIONAL CHARGES , HA S NO BEARING ON THE ISSUE ON HAND. ACCORDINGLY, THE ASSESSEE S APPEALS ARE DISMISSED. 8. AS REGARDS THE REVENUE S APPEALS, THE REVENUE IS IN APPEAL BEFORE US BEING AGGRIEVED BY THE DIRECTION OF THE FINDING OF THE CIT(A) THAT REMUNERATION PAID TO VISITING DOCTORS ARE SUBJECT TO DEDUCTION ONLY UNDER THE PROVISIONS OF SEC.194J OF THE ACT. THE REVENUE RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL: 9. THE FINDINGS OF THE CIT(A) ARE BASED ON THE FACT THAT REMUNERATION PAID TO VISITING DOCTORS I S VARIABLE WITH NUMBER OF PATIENTS ATTENDED BY HIM IS IN CONSONANCE WITH LAW LAID DOWN BY ITA NO S . 572 TO 576 & 879 TO 881/BANG/2014 PAGE 13 OF 13 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANIPAL HEALTH SYSTEM (P) LTD. (SUPRA) AND THE HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF GRANT MEDICAL FO UNDATION (RUBY HALL CLINIC) (SUPRA) . THUS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 10 . IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH AUGUST, 201 6 SD/ - SD/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE D A T E D : 11/08/2016 SRINIVASULU, SPS COPY TO : 1 APPELLA NT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TA X APPELLATE TRIBUNAL BANGALORE