The Bombay High Court has held that the sharing of receipts received from patients with consultant doctors in the fixed ratio was liable for Tax Deduction at Source ( TDS ) under Section 194J of the Income Tax Act, 1961 as the same would constitute professional fees.
Justice Akil Kureshi and Justice M S Sanklecha also held that the payment towards Annual Maintenance Contract in respect of various specialized hospital equipment by assessee hospital would not be in nature of fees for technical services within the meaning of section 194J but would fall under section 194C of the Act as payment to the contractor.
The respondent-Assessee is a trust, running a hospital. The assessee had to deduct the tax at source under Section 192 of the Income Tax Act while making payment to the doctors discharging their duties at the said hospital.
The Revenue contended that these services of the doctors have been engaged under a contract executed between the parties and that the doctors are not employees of the hospital.
The assessee, on the other hand, argued that section 192 of the Act was not applicable.
The bench noted that the doctors were entitled to admit, investigate and provide treatment to the patients and that the doctors would be responsible for their clinical care.
It was observed that 15% of the fee collected by the doctors would be deducted by the hospital as its share and the balance 85% would be paid to the doctors after deduction of tax at source.
“In case of fees not being paid by patients, the same would be the liability of the concerned doctors. It was on this basis the Tribunal had come to the conclusion that the relationship between the hospital and the doctors cannot be treated as one of the employer-employee relationships. It was noted that the earnings of the doctors would be dependent upon the patients that the doctors would attract,” the bench said.
“The sharing was in the proportion of 15% v/s. 85% between the hospital and the doctors. Contractual tenure of these doctors was for a period of one year which would be renewable depending on the performance of the doctor to be assessed by the Medical Advisory Council of the hospital. These doctors are not entitled to benefits of leave encashment, gratuity, provident fund, superannuation benefits etc. which regular employees of the hospital are. These doctors would on their own obtain indemnity insurance. These are clear indications that the relationship was not one of employer-employee. The Tribunal has correctly applied the decision of this Court in the case of Grant Medical Foundation’s case (supra) wherein the Court has laid down the propositions and principles to be applied while testing such a bilateral relationship between the hospital and the doctors,” the bench added.
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