The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that the hospitals would be deducted with the TDS beneath section 194J of the Income Tax Act, 1961 towards the payments incurred to the doctors who are involved as retainers and consultants since there would be no component of the employer-employee relationship.
The petitioner, M/s Escort heart Institute and Research Centre Ltd, was involved in the business of furnishing healthcare services in several fields like diabetes, renal, and ophthalmology. To run its operations, the petitioner would be involved the doctors in three categories i.e. on-roll, retainers, and consultants. The last two classes pose with the independent professionals who directed the services to the petitioners, controlled via corresponding contracts/agreements, and the payments for them were incurred post deducting the tax at source under section 194J.
Abandoning the taxpayer’s claim, the AO ruled that, the doctors beneath this class of the consultants/retainers were interested, there comes the employer-employee relationship, and provision of section 192 were drawn from section 194J.
Depending on the catena of Judicial decisions, a bench of Sh. A.D. Jain, Vice President Dr B. R. R. Kumar, Accountant Member marked that, the same would be ruled by Courts and various Benches of the ITAT that these clauses do not make 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 stated.
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Tribunal ruled during concluding the order in favour of the taxpayer “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”.
