Tuesday, September 2, 2014

Fees paid to consultant-doctors under contract for service would attract sec. 194J TDS and not sec. 192 TDS


a)The assessee-company was engaged in the business of running a super specialty hospital. A survey was carried out to ascertain the deduction of tax at source on the amounts paid to doctors engaged as consultants.

b)The assessee-company had been deducting tax at source under section 194J on payment made to doctors by treating them as professionals. The AO applied the provisions of section 192 on payments made to doctors, and raised a demand for an amount under section 201(1) and interest under section 201(1A).

c)On appeal, the CIT(A) set aside the order passed by the AO. The aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)In the instant case, the terms of appointment of doctors clearly indicated the appointment of professionals for providing consulting services and not their appointment as an employees. The doctors were not precluded from pursuing the professional pursuits elsewhere as long as there was no conflict of interest;

2)Once the doctors achieved some seniority and standing, their remuneration was a percentage of fees collected from patients consulting them. These terms clearly indicated a contract for service and not contract of service.

3)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.

4)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).

5)Thus, on perusal of the terms of contract for services entered into with the Doctors, it was to be opined that the services rendered by the them were classifiable as professional services and, therefore, assessee had correctly deducted tax at source from payment to Doctors under section 194J. – DY. CIT V. QUALITY CARE INDIA LTD [2014] 48 taxmann.com 88 (Hyderabad - Trib.)