LILAVATI KIRTILAL MEHTA MEDICAL TRUST, MUMBAI V. ITO (TDS) 2(4), MUMBAI

ITA 6724/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0888 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Opportunity of being heard; Prejudicial to interest
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH , JUDICIAL MEMBER ITA NOS. 6722 TO 6727/MUM/2014 : A.YS : 2004 - 05 TO 2009 - 10 LILAVATI KIRTILAL MEHTA MEDICAL TRUST, A - 791, BANDRA RECLAMATION, BANDRA (WEST), MUMBAI 400 050. PAN : AAATL1398Q (APPELLANT) VS. ITO (TDS) - 2(4), MUMBAI (RESPONDENT) APPELLANT BY : SHRI AJAY SINGH & MS. APURVA SHAH RESPONDENT BY : SHRI M.C. OMI NINGSHEN DATE OF HEARING : 18/01/2018 DATE OF PRONOUNCEMENT : 25 /01/2018 O R D E R PER G.S. PANNU , AM : THE CAPTIONED ARE SIX APPEALS FILED BY THE SAME ASSESSEE FOR DIFFERENT ASSESSMENT YEARS AND INVOLVE CERTAIN COMMON ISSUES, THEREFORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSO LIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE CAPTIONED APPEALS ARE DIRECTED AGAINST A COMMON ORDER OF CIT(A) - 14 , MUMBAI DATED 2 1.0 8 .201 4 , PERTAINING TO THE ASSESSMENT YEAR S 200 4 - 0 5 2 ITA NOS. 6722 TO 6727/MUM/2014 LILAVATI KIRTILAL MEHTA MEDICAL TRUST TO 2009 - 10 , WHICH IN TURN HA S ARISEN FROM SEPARATE ORDER S DATED 28.03.2011 PASSED BY THE ASSESSING OFFICER, MUMBAI U/S 201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR EACH OF THE ASSESSMENT YEARS . 3. ONE COMMON ISSUE IN ALL THE APPEALS RELATE S TO THE ACTION OF T HE INCOME - TAX AUTHORITIES IN TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT FOR SHORT DEDUCTION OF TAX AT SOURCE (TDS) IN RESPECT OF PAYMENTS MADE TO C ONSULT ANT DOCTORS BY HOLDING THAT THE TAX OUGHT TO HAVE BEEN DEDUCTED AT SOURCE U/S 192 OF THE ACT INSTEAD OF U/S 194J OF THE ACT. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A LEADING HOSPITAL ENGAGED IN THE ACTIVITY OF PROVIDING HEALTHCARE SERVICES AND ALSO UNDERTAKING MEDICAL RESEARCH. IN THE COURSE OF A SURV EY ACTION IT WAS NOTED THAT ASSESSEE HAD ENGAGED FULL - TIME CONSULTANT DOCTORS AND THE REMUNERATION/FEE PAID TO SUCH DOCTORS WAS BEING SUBJECTED TO TDS BY THE ASSESSEE IN TERMS OF SEC. 194J OF THE ACT AS PROFESSIONAL FEE. THE ASSESSING OFFICER EXAMINED T HE TERMS OF APPOINTMENT OF THE FULL - TIME CONSULTANT DOCTORS AND NOTED THAT THEY WERE BEING PAID MONTHLY REMUNERATION/RETAINERSHIP, WERE ENTITLED TO FIXED NUMBER OF LEAVES, WERE IN ENGAGEMENT FOR A LONG DURATION AND WERE IN CONTROL OF THE HOSPITAL AUTHORITI ES. THE ASSESSING OFFICER ALSO NOTED THAT THE CONSULTANT DOCTORS WERE ASSIGNED DUTY HOURS AS PER THE SCHEDULE DRAWN BY THE HOSPITAL AUTHORITIES AND WERE ALSO AVAILABLE ON CALL. THE ASSESSING OFFICER ALSO NOTED THAT THE TERMS OF ENGAGEMENT PROVIDED THAT T HE CONSULTANT DOCTORS WERE BARRED FROM TAKING - UP EMPLOYMENT WITH OTHER HOSPITALS . CONSIDERING THE TYPE OF ARRANGEMENT, THE ASSESSING OFFICER 3 ITA NOS. 6722 TO 6727/MUM/2014 LILAVATI KIRTILAL MEHTA MEDICAL TRUST CONCLUDED THAT THERE EXISTED AN EMPLOYER/EMPLOYEE RELATIONSHIP AND THUS, THE REMUNERATION PAID TO THEM WAS IN THE NATURE OF SALARY AND SAME WAS LIABLE FOR TDS U/S 192 OF THE ACT. IN EACH OF THE ASSESSMENT YEARS, THE ASSESSING OFFICER CALCULATED THE SHORTFALL IN DEDUCTION OF TAX AND HELD THE ASSESSEE TO BE DEFAULT U/S 201(1) OF THE ACT. THIS ASPECT HAS ALSO BEEN UPHE LD BY THE CIT(A) INSPITE OF VARIOUS ARGUMENTS SET - UP BY THE ASSESSEE. 5. PER CONTRA , THE ARGUMENTS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US IS TO THE EFFECT THAT THE TERMS OF ARRANGEMENT BETWEEN THE ASSESSEE AND THE CONSULTANT DOCTORS HAVE BEEN WRONGLY INTERPRETED BY THE LOWER AUTHORITIES INASMUCH AS ASSESSEE DOES NOT EXTEN D ANY EMPLOYEE BENEFITS TO SUCH CONSULTANT S, NAMELY, PROVIDENT FUND, GRATUITY, BONUS, REIMBURSEMENT OF TRAVELLING EXPENSES, ETC. MOREOVER, IT IS SOUGHT TO B E POINTED OUT THAT THE TERMS OF ENGAGEMENT PROVIDED THAT THE CONSULTANT S ARE APPOINTED ON A RETAINERSHIP BASIS FOR A FIXED PERIOD, WHICH IS UNLIKE HIRING OF EMPLOYEES. IT IS ALSO SOUGHT TO BE POINTED OUT THAT THE CONSULTANT S ARE REQUIRED TO TAKE PROFESSIO NAL INDEMNITY INSURANCE, WHICH IS NOT REIMBURSED BY THE HOSPITAL, A FEATURE NOT PRESENT IN THE CASE OF AN EMPLOYER/EMPLOYEE RELATIONSHIP. THE LEARNED REPRESENTATIVE POINTED OUT THAT IN MOST OF THE CASES THE PERIOD OF ENGAGEMENT OF CONSULTANT S IS ONE YEAR, WHICH IS GENERALLY RENEWED, BUT THERE IS NO GUARANTEE OF RENEWAL UNLIKE IN THE CASE OF EMPLOYMENT WHICH IS A CONTINUOUS ARRANGEMENT . WITH REGARD TO THE POINT RAISED BY THE LOWER AUTHORITIES THAT THE CONSULTANT S ARE DEBARRED FROM TAKING EMPLOYMENT IN OTHE R HOSPITALS AND INSTITUTIONS , THE LEARNED REPRESENTATIVE POINTED OUT THAT THE SAME IS A REASONABLE RESTRICTION WHICH THE HOSPITAL PUTS WITH A VIEW TO AVOID ANY CONFLICT OF INTEREST. IN ANY 4 ITA NOS. 6722 TO 6727/MUM/2014 LILAVATI KIRTILAL MEHTA MEDICAL TRUST CASE, IT IS POINTED OUT THAT THE CONSULTANT S ARE NOT PROHIBITED FR OM RENDERING PROFESSIONAL SERVICES TO OTHER USERS, BUT THE ONLY PROHIBITION IS THAT THEY ARE DEBARRED FROM WORKING WITH OTHER HOSPITAL S , WHICH IS WITH THE OBJECT OF MAINTAINING CONFIDENTIALITY OF THE WORKING OF THE ASSESSEE HOSPITAL. THE LEARNED REPRESENT ATIVE POINTED OUT THAT ALL SUCH ASPECTS HAVE NOW BEEN ADJUDICATED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT (TDS) VS. GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC), 375 ITR 49 (BOM) AND ALSO THEREAFTER BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF DCIT VS. ASIAN HEART INSTITUTE & RESEARCH CENTRE (P) LTD., ITA NOS. 7051 TO 7054/MUM/2012 DATED 30.09.2015 . IT WAS ALSO CONTENDED THAT THE ASSESSEE WOULD BE SATISFIED IF THE ASSESSING OFFICER IS DIRECTED TO REVISIT THE CONTROVERSY IN THE LIGHT OF THE AFORESAID RULINGS OF THE HON'BLE BOMBAY HIGH COURT AND THE TRIBUNAL. 6. ON THE OTHER HAND, THE LD. DR APPEARING FOR THE REVENUE CONTENDED THAT HE HAD NO OBJECTION IF THE MATTER IS SET - ASIDE TO THE FILE OF THE ASSESSING OFFICER, SO, HOWEVER, HE POINTED OUT THAT THE POINT S MADE OUT BY THE ASSESSING OFFICER DOES INDICATE THAT IT IS A CASE OF EMPLOYER/EMPLOYEE RELATIONSHIP AND NOT MERE LY PAYMENT OF PROFESSIONAL FEE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. FACTUALLY, THE ISSUE BEFORE US RELA TES TO THE MANNER OF ENGAGEMENT OF CONSULTANT DOCTORS BY THE HOSPITAL. AS PER THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC) (SUPRA) , THERE IS NO ABSOLUTE OR GENERAL PRINCIPLE WHICH CAN BE LAID DOWN TO DETERMINE W HETHER THE PAYMENT S MADE TO THE DOCTORS WORKING IN A HOSPITAL CONSTITUTES SALARY OR NOT. AS PER THE 5 ITA NOS. 6722 TO 6727/MUM/2014 LILAVATI KIRTILAL MEHTA MEDICAL TRUST HONBLE COURT, IT WOULD HAVE TO BE DECIDED IN THE LIGHT OF THE ATTENDANT FACTS AND CIRCUMSTANCES AND THE TERMS AND CONDITIONS OF ENGAGEMENT, AND ONLY THERE AFTER THE CONCLUSION CAN BE REACHED AS TO WHETHER THERE EXISTS AN EMPLOYER/EMPLOYEE RELATIONSHIP OR NOT. IT IS IN SIMILAR LIGHT THAT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ASIAN HEART INSTITUTE & RESEARCH CENTRE (P) LTD. (SUPRA) ALSO CAME TO A FI NDING THAT THE PAYMENTS MADE THEREIN TO THE CONSULTANT DOCTORS WERE IN THE NATURE OF PROFESSIONAL RECEIPT LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT AND NOT IN THE NATURE OF SALARY AS THERE DID NOT EXIST ANY EMPLOYER/EMPLOYEE RELATIONSHIP. IN THE AFORESAID BACKGROUND, WE DEEM IT FIT AND PROPER TO SET - ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO REVISIT THE CONTROVERSY HAVING REGARD TO THE PRINCIPLES LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC) (SUPRA) AND ONLY THEREAFTER HE SHALL PASS AN ORDER DETERMINING THE CHARACTER OF THE PAYMENT BEING RECEIVED BY THE FULL - TIME CONSULTANT DOCTORS. NO DOUBT, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT, AS PER LAW. THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 8. THE ONLY OTHER ISSUE IN CAPTIONED APPEALS IS WITH REGARD TO DEDUCTION OF TAX AT SOURCE ON PAYMENT S MADE FOR AN NUAL MAINTENANCE CONTRACTS . THIS CONTROVERSY IS IN RELATION TO APPEALS FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 ONLY . ON THIS ASPECT, THE POINT OF DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE IS THAT AS PER THE ASSESSEE, THE PAYMENTS MADE TOWARDS ANNU AL MAINTENANCE CONTRACTS ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT AS WORKS CONTRACT WHEREAS AS PER THE REVENUE, SUCH AMOUNTS ARE 6 ITA NOS. 6722 TO 6727/MUM/2014 LILAVATI KIRTILAL MEHTA MEDICAL TRUST LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT BEING PAYMENTS MADE FOR TECHNICAL AND PROFESSIONAL SERVICES . THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 4 OF HIS ORDER FOR ASSESSMENT YEAR 2008 - 09. IN PARA 4.1 OF HIS ORDER, THE ASSESSING OFFICER REFERS TO THE FINDINGS OF THE SURVEY TO THE EFFECT THAT PAYMENTS HAVE BEEN MADE ON A CCOUNT OF ANNUAL MAINTENANCE CONTRACTS FOR X - RAY MACHINES, HD DIALOG DIALYSIS MACHINE, CT SCANNER, ETC. AND OTHER SOPHISTICATED MEDICAL EQUIPMENT. APART THEREFROM, IT WAS NOTICED THAT THE ANNUAL MAINTENANCE CONTRACTS WERE AWARDED FOR MAINTAINING OF SERVER S, COMPUTER SYSTEMS, WEB MAINTENANCE, ETC. BASED ON SUCH DISCUSSION, THE ASSESSING OFFICER HELD THAT THE CONTRACTS WERE FOR ENGAGEMENT OF TECHNICAL AND PROFESSIONAL SERVICES AND, THUS, LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT. THE CIT(A) , IN PARA 3.23 OF HER ORDER, HAS UPHELD THE STAND OF THE ASSESSING OFFICER BY PRIMARILY NOTING THAT THE ASSESSEE HAD FAILED TO FILE COPY OF ANY OF THE CONTRACTS TO JUSTIFY THAT IT WAS MERELY A CASE OF WORKS CONTRACT LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. IN THE ABSENCE OF THE CONTENTS OF CONTRACTS, THE CIT(A) UPHELD THE STAND OF THE ASSESSING OFFICER ON THE GROUND THAT BEING A HOSPITAL, IT COULD BE PRESUMED THAT THE CONTRACT FOR ANNUAL MAINTENANCE OF SPECIALISED MEDICAL EQUIPMENT WOUL D INVOLVE RENDERING OF PROFESSIONAL SERVICES , WHICH INVITED SEC. 194J OF THE ACT . 9. IN THIS BACKGROUND, AT THE TIME OF HEARING , WHEN THE FINDINGS OF CIT(A) IN PARA 3.23 OF HER ORDER W ERE PUT TO THE LEARNED REPRESENTATIVE, IT WAS FAIRLY CONCEDED THAT ASSE SSEE HAS NOT BEEN ABLE TO PROVIDE COP IES OF THE CONTRACTS SO AS TO JUSTIFY THAT THE AMOUNTS WERE LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT AND NOT U/S 194J OF THE ACT . IN THIS VIEW OF THE MATTER, 7 ITA NOS. 6722 TO 6727/MUM/2014 LILAVATI KIRTILAL MEHTA MEDICAL TRUST WE FIND NO REASON TO DISTRACT FROM THE FINDINGS OF THE CIT(A), WHICH ARE HEREBY AFFIRM ED . THUS, ON THIS ASPECT, ASSESSEE FAILS. 10. IN THE RESULT, SO FAR AS APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2004 - 05 TO 2007 - 08 ARE CONCERNED, THE SAME ARE ALLOW ED FOR STATISTICAL PURPOSES AND SO FAR AS APPEALS FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 ARE CONCERNED, THE SAME ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 T H JANUARY, 2018. SD/ - SD/ - (PAWAN SINGH) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 2 5 T H JANUARY, 2018 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI