IT APPEAL NO. 704 (BANG.) OF 2014 
C.O. NO. 100 (BANG.) OF 2014
[ASSESSMENT YEAR 2012-13]

N.V. VASUDEVAN, JUDICIAL MEMBER 
AND JASON P. BOAZ, ACCOUNTANT MEMBER

Dr. P.K. Srihari for the Appellant. 
Sudheendra, CA for the Respondent.

ORDER

N.V. Vasudevan, Judicial Member - I.T.A. No. 704/B/14 is an appeal by the Revenue against the common order dated October 21, 2013 of the Commissioner of Income-tax (Appeals), Mysore relating to the assessment year 2012-13, allowing the appeal of the assessee against the order dated February 12, 2013 of the Assessing Officer passed under section 201(1) and 201(1A) of the Income-tax Act, 1961. The assessee has filed cross-objection against the very same order of the Commissioner of Income-tax (Appeals).

2. The assessee is a company engaged in the business of providing teleradiology services to hospitals and imaging and diagnostic centres around the globe. In order to run its business, the assessee engaged services of radiologists, i.e., doctors with skill sets required for medical consultation to the clients of the assessee. The services of doctors are availed of under a contract for services after testing their medical skills. The doctors are required to provide services round the clock and throughout the year. The assessee accordingly fixes time schedule for various doctors to ensure their availability at any point of time. The doctors, according to the assessee, provide services independently by exercising their skill sets, experience and expertise. The manner in which they study x-ray, CT scans, etc., and write their analysis and findings is not controlled by the assessee. These are matters in which the individual skill and experience and knowledge of the professional is allowed to be exercised. Based on the above features, the stand of the assessee was that the doctors are not employees of the assessee and that there is no relationship of a master and servant between the assessee and the doctors, therefore, the provisions of section 192 of the Act are not attracted and the assessee is not liable to deduct tax at source on payments made to doctors considering the payment as "salary". It is not in dispute before us that the assessee had deducted tax at source under section 194J of the Act on the payment made to the doctors treating the payment as "fees for professional or technical services".

3. According to the Revenue, the payment made by the assessee to doctors was in the nature of "salary" and therefore the assessee ought to have deducted tax at a higher rate than what the assessee had deducted treating the payment as "fees for professional or technical services" rendered and therefore there was short deduction of tax at source by the assessee.

4. The Commissioner of Income-tax (Appeals) in the impugned order has found that the facts of the assessee's case were identical to the facts of the case which was subject-matter of the decision by the Bangalore Bench of the Tribunal in the case of ITO (TDS) v. Elbit Diagnostics Ltd. [I.T. Appeal Nos. 500 to 504 (Bang) of 2008, dated November 26, 2008]. In the aforesaid decision, the Tribunal took the view that the payment made to doctors were not in the nature of fees for technical services. The Commissioner of Income-tax (Appeals) also found that the decision of the Tribunal has been confirmed by the hon'ble High Court of Karnataka in I.T.A. Nos. 168 of 2009 and 170 of 2009 by its judgment dated February 4, 2010. The Commissioner of Income-tax (Appeals) therefore held that the assessee could not be treated as an assessee-in-default and cancelled the order passed under section 201(1) and 201(1A) of the Act.

5. The facts of the assessee's case and the facts as it prevailed in the case of Elbit Diagnostics Ltd.(supra) have been tabulated in paragraph 5.1 of the Commissioner of Income-tax (Appeals)'s order. In the present appeal by the Revenue, though in ground No. 5, the Revenue has stated that the terms and conditions of employment in the case of the assessee and the case decided by the Tribunal in Elbit Diagnostics Ltd. (supra) are different, the points of difference could not be pointed out before us. Therefore facts of the case of the assessee and the case decided by the Tribunal in Elbit Diagnostics Ltd.(supra), in our view, are identical, as can be seen from a perusal of the chart given in para 5.1 of the impugned order of the Commissioner of Income-tax (Appeals). In our view, the issue is squarely covered by the decision rendered by this Tribunal in the case of Elbit Diagnostics Ltd. (supra).

6. In the case of Elbit Diagnostics Ltd. (supra), this Tribunal took the following view :

"6. After going through the rival submissions and the material on record, we find that the assessee is a company engaged in the business of medical diagnosis under the name and style M/s. Elbit Medical Diagnostics Ltd. The assessee-company engaged skilled people as radiologists, consultants, physicians, nuclear medicines, etc. The company requires the services of qualified doctors in these fields of radiology, pathology and cardiology, nuclear medicine, etc., who can render the service of interpreting the data and rendering the report of the diagnostic tests carried out by the assessee. The gist of the terms and conditions in the contract entered are as under :

7. Dr. Vinod P. Joseph's appointment order reveals that the appointment is only contractual for a period of three years. It also mentions the relationship between the company and the doctor are governed by the terms of contract entered into between the assessee-company and skilled persons including doctors as indicated above. The consultancy fees is fixed at Rs. 40,000 per month subject to deduction of tax at source. The applicant will not be entitled to statutory benefits like provident fund, employees' State insurance, gratuity, bonus, and leave encashment, etc., the doctor is free to render services to other concerns at such time which is not in conflict with the terms of contract, 20 days leave allowed per year. Basically, the issue is with regards to deduction of tax at source in respect of eleven doctors in-house doctors who are appointed on contractual basis on consolidated gross payment per month as stated above. Whether they should be treated as employee and there exists employee-employer relationship to attract deduction under section 192 on the payments made to them and treating the same as salary. The fundamental aspect for deciding the employee-employer relationship depends on fact, whether there exist the contract of service or contract for service. In contract for service the master can order only what is to be done, whereas in contract of service master decides not only what has to be done but also how it has to be done. The following variables not only decide employee-employer relationship but these are also the main ingredients for contract of service and master servant relationship. The abovementioned skilled persons are engaged by the assessee-company, but they conduct the skilled work at the strength of their specialised knowledge on subject. The assessee-company simply follow the conclusion arrived by them on the basis of data/material brought to their knowledge. It is difficult to lay down any one test to distinguish the relationship of master servant from that of an employer and independent contractor. In many cases, the test laid down is that in case of master servant relation, master can order or require what is to be done and how it has to be done. But in case of independent contractor an employer can only suggest that what is to be done but not how it shall be done. The hon'ble Supreme Court in case of Piyare Lal Adishwar Lal v.CIT reported in [1960] 40 ITR 17 (SC) relying on Dharangadhara Chemical Works Ltd. v. State of Saurashtra [1957] SCR 152 held that in all cases the correct method of approach is whether having regard to the nature of work there was due control and supervision by the employer. The receipt of remuneration for holding an office does not necessarily gives rise to relationship of master and servant between the holder of office and the person who pays the remuneration. Whether a person is a servant or an agent would be determined by the duties of employee, the nature of business, terms of his employment/engagement and kind of supervisory control over his work. A person who is engaged to manage the business may be servant or agent, according to the nature of his service and authority of his employment. The profession involves occupation required purely intellectual or manual skill, as held by the hon'ble Supreme Court in the case of CIT v. Manmohan Das [1966] 59 ITR 699 (SC). The profession in general term involves the idea of an occupation requiring either purely intellectual skill, or if any material skill, as in painting and sculpture or surgery, controlled by intellectual skill of operator, as distinguished from an occupation which is substantially production or sale or arrangement for production or sale, of commodities. A profession will imply any vocation carried on by an individual or group of individual requiring the predominantly intellectual skills, depending on individual characteristics of persons pursuing that vocation, requiring specialised advance education or expertise. The "professional service", which are termed as "independent personal service" in the phraseology employed in tax treaties are, however, not defined in text treaties or even official commentaries on UN and OED model conventions. The meaning of this term is illustrated by some examples of typical liberal professions, and this enumeration of professions has only an explanatory character. The 'Law Lexicon' edited by Y.V. Chandrachud (1997 edition) defines 'profession', inter alia, as involving 'the idea of an occupation requiring either purely intellectual skill or, if any, manual skill, as in painting and sculpture or surgery, skill controlled by intellectual skill of operator, as distinguished from occupation which is substantially the production or sale or arrangement for the production or sale of commodities'. Black's Law Dictionary (5th edition) defines profession as a vocation or occupation requiring special, usually advanced, education and skill ; e.g., law or medical professions and observes that the labor and skill involved in a profession is predominantly mental or intellectual, rather than physical or manual.

8. The school of thought, thus emerging from this deliberation is that broadly speaking a profession will imply any vocation carried on by an individual, or group of individuals, requiring predominantly intellectual skill, dependant on individual characteristics of the person(s) pursuing that vocation, requiring specialised and advanced education or expertise. In the instant case the company is running a diagnostic centre. The engagement and nature of work of specialised person including doctors are not controlled by the assessee-company. They are even allowed to engage themselves in private practice subject, to no conflict with contractual arrangement entered between the assessee and the abovementioned specialised skilled persons. They purely render skilled services to the assessee on the basis of contract entered by them with the assessee-company. They reach to certain intellectual conclusion on the basis of analysis of data put forward before them. During the analysis and intellectual conclusion arrived by them is based on their specialised skill. The assessee-company has no interference in their diagnostics arrived at. These specialists are governed by their specialised knowledge in their field. The payment made, in lieu of their work, are nothing but as good as consultation fees. There is nothing on record to suggest that the doctors in question are given statutory benefits. Certain benefits such as leave, maternity leave are granted to ensure the smooth functioning of the institution. As stated above, all the eleven doctors are at liberty to engage themselves in other assignments, which are not in conflict with the contractual obligation entered by them with the assessee. This shows that there is no control of the assessee over doctors/specialist mentioned above, with regards to specialised service rendered by them to the assessee at the strength of specialised knowledge. This is only a contract for rendering the specialised service and there is no employer-employee relationship. The nature of service of doctors are different from other employees because, the method of work of doctors/specialists are not controlled by the assessee in any way. The control of method of activity is the essence of employment of work or employment for work. The ratio of St. Stephen's Hospital v. Deputy CIT ITAT 'F' Bench, Delhi reported in [2006] 6 SOT 60 (Delhi), is not applicable to the facts of the assessee's case, because in the aforesaid case the issue is with regard to full time doctors of the hospital while in case before us experts/doctor are engaged in only technical services as discussed above. These doctors/experts are at liberty to do the works other than the assessee's contractual engagements but without contradicting the terms and conditions of contract entered between the assessee-company and the said doctors/specialists as mentioned above. In view of the above, there is no employer-employee relationship between the assessee and eleven doctors discussed above. So, the provision of TDS under section 192 and interest under section 201 and 201(1A) of the Income-tax Act is not attracted. Accordingly, the appeal filed by the Revenue are dismissed."

7. Considering the similarity of facts of the present case and the facts of the case decided by the Tribunal in the case of Elbit Diagnostics Ltd. (supra), we are of the view that the order of the Commissioner of Income-tax (Appeals) does not call for any interference.

8. The grounds raised in the cross-objection are with regard to the stand of the assessee that the recipients of payments from the assessee have paid taxes on such payments and therefore the assessee could not be treated as assessee-in-default. Since the appeal of the Revenue is being dismissed on merits, we are of the view that no adjudication of the cross-objection is necessary and the same is therefore dismissed.

9. In the result, the appeal by the Revenue and the cross-objection by the assessee is dismissed.