The order of the Bench was delivered by
Asha Vijayaraghavan, J.M.:-The above appeals by the Department are directed different orders of the CIT(A)-II, Hyderabad dated 30.6.2011 for A.Ys. 2007-08 to 2009-10. Since the issues involved are common and all the appeals are pertaining to the same assessee, these appeals are clubbed and heard together and disposed off by this common order for the sake of convenience.
2. The grounds of appeal raised by the Revenue are identical for all the three assessment years which are as follows:
(a) The learned CIT(A)-II, Hyderabad erred on facts and in law in allowing the appeal.
(b) The learned CIT(A) Hyderabad erred in holding that the Assessing Officer was not justified in treating the assessee as 'assessee in default' in terms of section 201(1)/201(1A) of the Income-tax Act, 1961.
(c) The learned CIT(A)-II, Hyderabad erred in holding that the relationship between the assessee-deductor and the doctors is not that of an employer and employee.
(d) The learned CIT(A)-II, Hyderabad failed to appreciate the fact that there is no material on record to show that the doctors in question have failed their returns of income admitting the amounts in question for the year under consideration.
(e) The learned CIT(A)-II, Hyderabad, failed to appreciate the fact that the Supreme Court's decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226) would not apply to the assessee's case in view of the fact that the assessee has not been deducting tax at source under section 192 continuously for all the years.
3. The facts of the case, in brief, are that the assessee is a company engaged in providing health care services, specializing in cardiac related health care services. During the course of a survey u/s 133A conducted at the assessee's premises on 25-3-2008, it was found that the assessee engaged the services of certain doctors and had been making TDS u/s 194J by treating them as consultants instead of u/s 192. Copies of "consultancy agreements" entered into by the hospital with the doctors, obtained during the course of survey, contained certain clauses which read as follows:
(a) The doctors are being paid a minimum assured amount
(b) The period of Agreement is usually 2 years.
(c) The doctors are bound by the guidelines, instructions and orders issued by hospital and shall prevail in the event of conflict between the terms of the Agreement.
(d) The working timings for the doctors are on the basis of completion of consultancy of the allotted patients or as per demand of the work.
(e) The Professional fee for each service, including no fee for certain categories of patients who are treated at below the hospital charges will be determined by the Managing Trustee of Hospital.
(f) The doctors will 'be responsible for providing health care services at Hospital.
(g) The doctors will give his/her full time and attention to the duties as a Medical Professional consultant of the Hospital.
4. The AO, after giving an opportunity to the assessee and considering the explanations offered, held that the terms of the agreements clearly indicated that the consultant doctors are engaged by the assessee for full time and are paid an assured monthly remuneration and that this confirmed existence of employer-employee relationship thereby falling within the purview of section 192 of the IT Act, 1961. The AO, therefore, treated the assessee as an 'assessee in default' as per the provisions of section 201(1) r.w.s. 192 of the Act by passing an order dated 29-1-2010 for A.Y. 2007-08 and by order dated 24.3.2009 for A.Y. 2008-09 and for A.Y. 2009-10 on 29.1.2010 levied short deduction of tax u/s. 201(1) and interest u/s. 201(1A) for all the three years. Aggrieved, the assessee went in appeal before the CIT(A)
5. On appeal, the CIT(A) after considering the statement of facts, grounds of appeal, order passed by the AO u/s 201(1) and u/s 201(lA), the written submissions filed and the arguments advanced by the AR of the assessee company before him, held that on identical facts in assessee's own case for the A.Y. 2008-09, the appeal has been decided by him in assessee's favour which holding as under:
" On identical facts in the case of M/s Yashoda Super Speciality Hospital for the Asst. Year 2008-09, the Hon'ble ITAT, Hyderabad, BBench in its order in ITA No. 212/Hyd/2010 dated 30-6-2010 observed that the assessee has engaged the services of the doctors on the basis of the agreement. There is no time frame for working of the doctors. The doctors are given their choice of time to come to the hospital and treat the patients. Moreover, they are not on the roll of PF as employees of the assessee. From the order of the CIT(A) it appears the assessee collects the fees from the patients and after deducting ? 2500 per month for utilizing the infrastructure facilities and 15% of the surgery fees, the remaining amount was paid to the doctors. The doctors are not entitled to take any gratuity, bonus etc. They will only be paid fees for the services rendered by them, through a structured agreement. As already discussed, no specific working hours are prescribed to the professionals. For the purpose of treating the doctors as employees, they should be given specific assignment. There should be specific working hours, rules and regulations and they should be on the roll for PF as employees. They shall be given leave as per statutory provisions besides gratuity etc. These factual aspects which are essential to treat the doctor as employee are absent in the case before us, therefore in our opinion, the doctors engaged by the assessee are to be treated as consultants, only for rendering professional services. The matter would be entirely different in case the doctors are re-employed as medical officers to work for fixed hours and they are given the facility of leave, PF, gratuity, bonus etc. Since such facilities are not given and what was paid to the doctors is only through a structured arrangement for the services rendered by them for two years, in our opinion, there is no employer and employee relationship existing. Therefore, the CIT (A) has rightly held that tax has to be deducted u/s 194.1 and not u/s 192 of the Act. Therefore, we do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed."
In view of the above, respectfully following the decision of Hon'ble Hyderabad Tribunal, BBench in the case of M/s Yashoda Super Speciality Hospital (supra) for the Asst. Year 2008-09 in ITA No. 212/Hyd/2010 dated 30- 6-2010 that the services rendered by the consultant doctors amounts to professional services, I hold that the assessee company had rightly deducted tax at source u/s 194J and not u/s 192. Accordingly, the order passed u/s 20 I (I) and 20 I (1 A) of the IT Act, 1961 is cancelled."
6. Following his own decision in the assessee's own case for A.Y. 2008-09 in ITA No. 0004/CIT(A)-II, Hyd/2009-10 dated 30-6-2011, he decided the appeal in this year also in favour of the assessee and deleted the tax and interest levied u/s 201(1) and 201(lA). Aggrieved, the Revenue preferred these appeals for the above assessment years before the Tribunal.
7. On appeal before us, the assessee's counsel submitted that the nature of work performed by a doctor is an independent in nature. Hospital receives fees on behalf of the patients and pays the doctor after retaining some amount. Certain conditions observed by Hon'ble Supreme Court for establishing employee-employer relationship are not fulfilled. There is no appointment order. The paymaster is the patient and the hospital only pays a minimum amount which does not make it a pay master. Hospital cannot dismiss a doctor as the agreement is between a Principal and Principal. It is the policy of the hospital to fix the amount of consultancy charges on mutual agreeable terms, irrespective of the number of patients they treat every day. Mere payment of an assured minimum consultancy charges to the consultants cannot create an employer-employee relation between the hospital and the consultant doctors. It is very much essential to have medical consultants at least for a reasonable period continuously to provide better service to the patients in general and cardiac patients in particular. The decease is progressive in nature. A continuous monitoring is required for the patient. Hence the patients keep on visiting the hospital very frequently. The hospital prefers to have the same medical consultants to have better services to the patients. This is the reason as to why the hospital usually specifies a minimum consultancy period of 2 years for all the consultants at the time of their joining. Kindly appreciate the reason of the said 2 years minimum period, and it will no way create employer and employee relationship between the hospital and the consultants. Though the doctors work on consultancy basis for the hospital, they are subject to some regulations of the hospital for the better services, confidentiality, quality and assured services, etc. In this regard we humbly submit that setting some regulations and guidelines for better management and services do not confer to have the relationship of employer and the employee between the consultants and the hospital. It is quite common that any consultant is expected to complete his/her job till the work on hand is exhausted i.e. till the last waiting patient is attended for medical advice. Certainly this type of consultancy can never establish an employer and the employee relationship.
8. The AR further submitted that the consultant can no way be classified as the employees of the hospital due to the following reasons:
i) They are not governed by leave rules, PF etc and other regular terms and conditions which are applicable to the employees.
ii) Unlike the employees, they are free to attend any other work/ profession outside the hospital.
iii) They are not subject to the service rules like gratuity, superannuation benefits etc.
iv) The consultants need not follow/observe the standing orders of the hospital which are applicable to the employees.
9. The AR submitted that the consultant doctors are paid by the hospital out of the fees collected from the patients for the professional service alone. Such an understanding is absent in a master servant relationship. The hospital does not share revenue receipts from the patients where the doctor is not involved. The understanding with the doctors is that they will not treat patients outside the hospital or for any other hospital is in the mutual interest of both the parties as the hospital is assured of continued services of the consultant and the consultant is also assured of full time work. The doctors render professional services to the patients and share the fees charged from them. This understanding has an element of 'professional interest' as distinguished from an interest discernible from employer-employee relationship. The doctor is fully independent in the matter of taking care of the patient and there is no supervision and control over his functioning. The doctor is working in the hospital premises to advance his professional business. The degree of freedom enjoyed by the doctors is inconsistent with any employer-employee relationship. Further, the assessee filed an explanation dated 27.01.2010 the gist of which is as under:
"The hospital accords the privilege for the consulting doctors for treating the patients who come to the hospital. The professional services received [tom the consulting doctors come under the category of 'medical services. which are covered under section 194J of the Incometax Act, 1961. Accordingly, the hospital is deducting 10% of such professional payments made to the consulting doctors, as per the provisions of section 194J.
In the Circular No. 8/2009/dtd 24.11.2009, it was made very clear that when the deducteeassessee had offered the incomes for taxes, demand arising u/s. 201(1) in this situation cannot be enforced for the proposed A.Ys. 2007-08 and 2009-10.
Please note that we have already submitted the CA Certificates/Copies of IT Returns of the consulting doctors to, substantiate that the consultancy amount paid by the hospital to the said doctors was offered as the income under the head 'Income from Business or Profession' by the respective doctors. In respect of some consulting doctor, who have left the hospital, we are unable to locate them and hence could not arrange the CA Certificate/Copy of IT return for their consultancy income earned from the hospital for the A.Ys. 2007-08 and 2009-10. However, we are submitting complete addresses and PAN particulars of the said individuals for your ready information. We request to please ascertain the facts from the Income Tax Departments data bank, whether the said doctors (who could not be located by the hospital) had filed their Return of income and the consultancy fee received from the hospital was reflected in their total income.
10. The Learned DR on the other hand, relied on the orders of the ITAT Hyderabad Coordinate Bench in the case of DCIT, Hyderabad vs. Wockhardt Hospitals Ltd. 24 taxmann.com 190 (Hyd.) wherein the facts are as follows ;
“The assessee company was running hospital with branches. It had engaged services of some doctors and was deducting TDS from payments made to them under section 194J. According to the assessee, the doctors were appointed as consultants whose remuneration was liable for TDS under section 194J and there was no employer and employee relationship. The AO, However, treated the relationship between the doctors and the assessee as one of employer and employee and held that said payments were liable to TDS under section 192. The Commissioner (Appeals) allowed the assessee’s appeal. On the revenue’s appeal :
24. A careful perusal of the appointment order issued to the doctor shows that a fixed monthly amount was paid by the assessee as remuneration and it is no way concerned with the fees received from the patients treated by them. The appointment letter was issued to the concerned doctor on the basis of their application. The doctors are governed by the service rules of the assessee. Their leave entitlement is also in accordance with the assessee's rules. The doctors were under probation period. During the employment of doctors the assessee has discretion to terminate the same. During the employment the doctors shall devote their whole time attention to their employment. The doctors are liable for retirement on attaining the age of 58 years. During the period of employment either side will be able to terminate the employment by giving two months notice in writing or by payment of two months' salary in lieu of such notice to each other. As seen from the appointment order it can be easily said that the doctors are employees of the assessee and being so, the relation between the assessee and the doctor was that of an employer and employee and the remuneration paid to them in terms of the said appointment order was salary which attracted the provisions of section 192 of the Act.
25. Before us the learned AR relied on various caselaw in support his contention to show that there was no employer and employee relationship between the assessee and the doctors and the remuneration paid by the assessee to the said doctor was not "salary" attracting the provisions of section 192. In our opinion, the various case law relied on by the assessee's counsel are on the facts of those cases and on consideration of facts of the present case, in our opinion, those case-law cannot be applied to the case of the assessee. More so, in the present case the doctors are governed by the service rules of the assessee and it was specifically mentioned in the appointment order that it was a contract for employment and the doctors are liable for retirement on attaining the age of 58 years and the monthly payment is not relating to the number of patients treated by them or the amount charged to the assessee.
26. As regards the treatment given by the assessee as well as by the doctors to the remuneration paid in their respective books of account, we are of the opinion that the same is not conclusive to decide the nature of the said remuneration which, as already observed by us on the basis of relation between the assessee and the doctors and not on any other basis. As per the well known cannon of construction of document, the intention generally prevails over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the grantor. If there are grounds appearing from the face of the instrument affording proof of the real intention of the parties, then that intention would prevail against the obvious and ordinary meaning of the words used. In our opinion, the real intention of the parties herein as already discussed with reference to the terms of the appointment letter issued to the doctors in the light of service regulations of the assessee hospital was to have an employer and employee relationship between them and it was not a case of appointment of consultants. In view of this, in our opinion, there was an employer and employee relationship between the assessee and the doctors. Consequently, the remuneration paid to them was chargeable to tax under the head 'salaries' and liable for deduction of tax u/s. 192 of the Act and not under the provisions of section 194J of the Act. However, we make it clear that wherever the assessee issued appointment letter in the manner prescribed above and the doctor’s appointment is governed by the service rules of the assessee hospital, it is to be considered that the relationship between the doctors and the assessee is as employee-employer relationship and the assessee is liable to deduct TDS u/s. 192 of the Act”.
11. The learned DR also relied on the decision of St. Stephens Hospitals vs. DCIT 6 SOT 60 (Del.).
12. We have heard both the parties. We find that in the case of Yashoda Super Speciality Hospital Vs DCIT Circle 15(1), Hyderabad ITA No. 212/Hyd 12010 Asst Year 2008- 09, Order dated 30.6.2010, on similar facts the Hon’ble ITAT has held that tax has to be deducted u/s 194J in the case of Professionals working as Doctors in the hospital. The Hon’ble ITAT in this case has observed as follows:
“11. One of the points which was highlighted by the AO is that the doctor has to work for the assessee and cannot do any private practice. In our opinion, this exclusion cannot be considered to be an agreement to treat the doctors as employee. There is no prohibition in law to engage the services of a professional exclusively for a particular hospital. Merely because the doctors were engaged for two years, it does not mean that they are employees of the assessed hospital. As pointed out the by the CIT (A) the other factor such as PF, Job assignments, working hours, direction and supervision are all the relevant factors to consider the existence of employer and employee relationship.
In our opinion, the agreement between the assessed and doctors are one for providing professional services, and there is no element of employer and employee relationship existing. Therefore in our opinion tax has to be deducted u/s. 194J as fee for professional services and not as salary.
For the purpose of treating the doctors as employees they should be given specific assignment. There should be specific working hours, rules and regulation and they should be on the roll for PF as employees. They shall be given leave as per statutory provisions besides gratuity. These factual aspects which are essential to treat the doctors as employees are absent in the case before us, therefore in our opinion the doctors engaged by the assessed are to be treated as consultants for rendering professional services."
13. Subsequently, the Hon’ble A.P. High Court has confirmed the Order of the Tribunal in the case of CIT vs. M/s Yashoda Super Speciality Hospital, Hyderabad in I.T.T.A. No. 196 of 2013 by order dated 04.07.2013 and has held as follows:
“This appeal is sought to be preferred against the judgment and order of the learned Tribunal dated 30.06.2010 in relation to the assessment year 200882009, on the following suggested questions of law:
Whether on the facts and in the circumstances of the case/ the Appellate Tribunal is justified in setting aside the order passed against the assessee under ss. 201 and 201 (A) of the Income Tax Act?
Whether on the facts and in the circumstances of the case/ the finding of the Appellate Tribunal that there existed no relationship of employer and employee between the assessee and Consultant Doctors/ employed in the Hospital/ can be said to be based on material on record?
The whole issue involved in this matter is whether the doctors are employees of the assessee or not, if so, payment made to the doctors are treated to be salaries so as to attract the provisions of Sec. 192 of the Income Tax Act.
Learned Tribunal as well as the Commissioner of Income Tax (Appeals), on fact and on examining the document - agreement of engagement of the consultant doctors by the assessee, found that there is no relationship of employer and employee. After examining the agreement and various terms and conditions, it was found that the doctors are not administratively controlled or managed by the assessee and they are free to come at any point of time as far as their attendance is concerned and treat the patients. In the agreement, there is no provision for payment of any provident fund and gratuity. The only clause in the agreement is that the doctors cannot take up any other assignment. Reading the agreement as a whole, both the authorities below observed that the existence of one prohibitory clause, as stated above, does not change the basic character of the relationship between the assessee and the doctors concerned. On fact, the Tribunal found that there is no employer and employee relationship and their payment cannot be treated to be salaries and, as such, deduction cannot be made under Sec.192 of the Income Tax Act. We are of the view that the application of law depends upon the appreciation of facts. This court in exercise of the jurisdiction under Sec. 260A of the Income Tax Act, cannot re-appreciate the facts or substitute its own appreciation when depreciation of facts of both the authorities below was found to be rational and possible on given fact. The appreciation reached by both the authorities below has to be accepted by this court. On the given facts, this court can only examine whether the law has been applied properly or not. On careful reading of the impugned judgment and order, we are of the view that the law has been correctly applied. Therefore, we do not find any question of law involved in this matter.
The Appeal is accordingly dismissed. No order as to costs”.
14. We also find that the Chandigarh Bench in the case of IVY Health Life Sciences P. Ltd. vs. Department of Income Tax has elaborately discussed and at para 8 states as follows :
“A bare perusal of the case law, relied upon by the appellant and submissions made in the synopsis reveals that there does not exist employer/employee relationship between the assessee/appellant and the persons providing professional services. On consideration of the agreement in its entirety vis-a-vis the case law relied upon by the assessee/appellant, it is evident that it is not a case of employer/employee relationship between the assessee/appellant and the doctors.
Therefore, having regard to the detailed analysis and findings of the CIT(Appeals) on the issue in question, it cannot be said that findings of the ld. CIT(Appeals) suffer from any infirmity. In view of this, findings of the CIT(Appeals) are upheld.”
15. Having gone through the facts of the case and after having studied the case law on the subject, our opinion is as follows:
16. The provisions of Section 15 impose a tax on the remuneration of an employee arising out of employment. It presupposes the existence of the relationship of employee and employer. The word employment connotes the existence of a plural/dual relationship of master and servant between the employer and the employee. In other words it involves the concept of employment under a 'Contract of Service'. The Learned Assessing officer in his Order while trying to deny the claim of the assessee that there does not exist a Employer and Employee relationship between the Consultants and the Hospital has relied on the case of St. Stephens Hospital vs. DCIT [ITAT, F Bench, Delhi] ( 2006) 6 SOT 60(Del) under Para 7(k) to justify that the relationship between the hospital and consultant doctors was that of" employer and employee". In this regard the we find that the ITAT decision in the case of St. Stephens Hospital vs Deputy Commissioner of Income tax (2006) 6 SOT 60 (Del) cannot be applied to this case as the facts of the case are different from that of the Assessee Company.
17. In the St. Stephens Hospital case the decision of the Hon'ble ITAT was guided by reliance on the Appointment Letters of the Consultants who were being paid a fixed amount as fees. The terms of appointment of the Consultants at St. Stephens Hospital are to be distinguished from the Terms of Service Contract of the Assessee Company. The learned Assessing officer has also referred to the case of Max Mueller Bhavan case (2004) 189 CTR (AAR) 450. It is also to be noted that although the Max Mueller Bhavan case was in favour of the Revenue as the facts are with reference to appointment of part time teachers.
18. The Authority for Advance Rulings has in the case of Max Mueller Bhavan case (2004) 189 CTR (AAR) 450 drawn a clear distinction between a 'Contract of Service' and a 'Contract for Service'. It was stated that – In a 'Contract of Service' the relationship is that of a Master and Servant whereas in a 'Contract for Service' such relationship would not be present. In the case of a 'Contract for Service' the employer not only orders requires what is to be done but also directs as to how it shall be done, whereas in a 'Contract for Service', the master can only require as to what is to be done. The test which is often applied to determine existence of such a relationship is whether the Master has the authority to order or require what is to be done but also how it should be done. An independent Contractor is one who undertakes to produce a given result but in the actual execution of the work he is not under the order or control of the person for whom he does it, and may use his own discretion in things not specified beforehand. The Assessee Company is different from that of the Max Mueller Case on which the Assessing officer has relied upon.
19. Further in the case of Chandi Prasad Singh vs State of UP AIR 1956 SC 149, reference has been made to Halsbury's Laws of England which distinguishes between a Servant and Agent:
"A servant acts under the direct control and supervision of the master, and is bound to conform to all reasonable orders given to him in the course of his work. An agent though bound to exercise his authority in accordance with all lawful instructions which may be given to him from time to time by his principal, is not subject in its exercise to the direct control or supervision of the principal.
20. In the case of CIT vs Deep Nursing Home & Children Hospital (2008) 214 CTR (P&H) 144, it was held by the Hon’ble High Court of Punjab and Haryana that Doctors who were visiting the Assessee Hospital for treatment of Patients were on call and there was no employer - employee relationship and therefore provisions of TDS under Sec 192 are not attracted to the payment of Professional Charges by the Assessee.
21. Hence, we are of the opinion that the ratio laid down in the case of IVY Life Sciences P. Ltd. Chandigarh Bench and also the jurisdictional High Court decision in the case of Yashoda Super Speciality Hospitals are more appropriate to the facts of this case and the ratio of these decisions is to be followed in preference to the other decisions relied on by the Revenue. In the cases relied on by the revenue the terms of appointment of Doctors are different from those of this case. In the present case the terms of appointment clearly indicate appointment of professionals for providing consulting services and not appointment of employee. The Doctors are not precluded from pursuing the professional pursuits elsewhere as long as there is no conflict of interest. Once the Doctors achieve some seniority and standing, their remuneration is a percentage of fees collected from patients consulting him. These are clearly indicative of a contract for service and not contract of service. Explanation (a) to sec 194J defines professional services to mean services rendered by a person in the course of carrying on legal, medical,…..”. Normally the services rendered by a Doctor should be considered as a professional service unless the contracts of service categorically states and the conditions are clearly and indubitably that of employment. In the circumstances on the perusal of the terms of contract for services entered into with the Doctors, we hold that the services rendered by the Doctors are more appropriately classifiable as professional services and therefore Assessee had correctly deducted tax at source from payment to Doctors u/s 196J.
22. The relationship between the assessee-deductor and the Doctors is not that of employer and employee. We are of the view that the doctors or professional consultants working under contract for rendering professional services and the payments made by the assessee company to the professional doctors does not constitute salary and hence, the assessee would not be responsible for deducting tax at source on the said payments treating them as (salaries) in terms of section 192(1) of the I.T. Act. We also understand that the terms of the agreement with the consultants/professionals that there is no master and servant relationship between the consultants/ professionals and that of the assessee and hence, the agreements entered into by the assessee with the professionals as one of “contract for services”. The consultant Doctors do not take directions from the assessee on how a patient is to be treated and clearly there is no employer-employee relationship between the assessee and the professionals. In short, following the decision of jurisdictional High Court in the case Yashoda Super Specialities Hospitals, In the circumstances We agree and confirm the decision of the learned CIT(Appeals) in holding that the assessee was not an “assessee in default” (in terms of section 201(1)/201(1A) of the I.T. Act, 1961).
23. In the result, Revenue appeals in ITA Nos. 1677 to 1679/Hyd/2011 are dismissed.
The order pronounced in the open court on 18th June, 2014.