The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the hospitals shall deduct TDS under section 194J of the Income Tax Act, 1961 in respect of the payments made to doctors engaged as retainers and consultants since there is no element of employer-employee relationship.
The appellant, M/s Escort heart Institute and Research Centre Ltd, was engaged in the business of providing healthcare services in various fields namely diabetic, renal, and ophthalmology. For running its operations, the appellant had engaged doctors in three categories i.e. on-roll, retainers and consultants. The last two categories consisted of independent professionals who rendered services to the appellant, governed by their respective contracts/agreements and payments to them were made after deducting tax at source u/s 194J.
Rejecting the claim of the assessee, the AO held that in so far as the doctors under the categories of consultants/retainers were concerned, there existed an employer- employee relationship and provisions of Section 192 were attracted and of those of Section 194J.
Relying on a catena of judicial decisions, a bench of Sh. A.D. Jain, Vice President Dr. B. R. R. Kumar, Accountant Member observed that it was held by Courts and various Benches of the ITAT that such clauses do not create an employer-employee relationship.
“Another aspect to which one would refer is the distinction between a “contract for service” and a “Contract of service” the former implying a contract whereby one party undertakes to render service to another in the performance of which he is not subject to detailed directions and control but exercises professional skill using his own knowledge and discretion and the latter implying a relationship of master and servant with an obligation to obey orders in the work to be performed. It was held that the former does not create a master-servant relationship,” the Tribunal said.
While concluding the order in favour of the assessee, the Tribunal held that “Having gone through the provisions of section 192, Section 194J, Section 201 of the Income tax Act 1961, facts of the instant case and the judicial pronouncements on the issue involved, we are inclined to hold that the provisions of section 194J of the Act are applicable to the assessee and not those of section 192 of the Income tax Act 1961 therefore, the appellant cannot be treated as an “assessee in de fault” in so far as the question of deducting tax at source in respect of doctors engaged as retainers and consultants was concerned.”
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