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

Facts:

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.)

Sum paid to foreign co. for production of 2D and 3D animated films wasn’t fees for technical service

No element of any technical services was involved in production of animation films, thus, provisions of section 9(1)(vii), would not apply to payments made by assessee to foreign sub-contractors for production of animated films.

Facts:

a)The assessee was engaged in production of 2D and 3D animation films. It had outsourced part of its project on sub-contract to foreign sub-contractors.

b)The assessee had made payments to foreign companies as per agreement, named as 'Outsourcing Facilities Agreement'. The Assessing Officer (‘AO’) held that the payments made to foreign companies were 'fees for technical services' and, thus, said payments were taxable in India.

c)Since the assessee had not made TDS before making aforesaid payments, it was to be treated as assessee-in-default under section 201 and 201(1A). On appeal, the CIT(A), set aside the order of AO. The aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of assessee:

1)There was no element of any technical services involved in the production of animation films to attract the provision of section 9(1)(vii), read with section 5(2)(b).

2)It is possible that job undertaken by one party for the other party' of supply of any goods or services may involve utilization of the knowledge, information and expertise of the party undertaking the said job.

3)However, just because such expertise, knowledge, technology and experience are possessed by the said party and the same have been utilized for rendering the services, it cannot be said that the services so rendered are in the nature of technical and consultancy services without making any technology available to the other party.

4)Thus, the impugned payment made by the assessee could not be treated as 'fees for technical services'.

5)The foreign parties had not done any activity in India nor they had any permanent establishment in India. As there was no liability to deduct tax on the impugned payments under section 195, the AO was not justified in raising demand on assessee. Thus, the appeal of revenue was to be dismissed.- ADIT (INTERNATIONAL TAXATION) V. DQ ENTERTAINMENT (INTERNATIONAL) (P.) LTD [2014] 45 taxmann.com 17 (Hyderabad - Trib.)