Commissioner Of Income Tax (Tds-1 v. Asian Heart Institute And Research Centre Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1294 OF 2016ALONG WITH INCOME TAX APPEAL NO.1355 OF 2016 ALONG WITH INCOME TAX APPEAL NO.1423 OF 2016 ALONG WITH INCOME TAX APPEAL NO.1318 OF 2016 Commissioner of Income Tax (TDS-1)versusAsian Heart Institute and ResearchCentre Pvt. Ltd. : Appellant : Respondent Mr. Suresh Kumar for the Appellant. CORAM : AKIL KURESHI &M.S.SANKLECHA, JJ. DATE : 05th MARCH 2019. P.C.: 1 All these Appeals arise in common background, we may therefore record the facts from Income Tax Appeal No.1294 of 2016. 2This Appeal is filed by Revenue to challenge the judgment ofIncome Tax Appellate Tribunal. 3The following questions were pressed for our consideration :- (i) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct inholding that there does not exist employer-employeerelationship between the Assessee and Full TimeConsultant Doctors and the payments made to them bythe assessee come in the prview of Sec.194J whereas asper the terms and conditions of the contract, there existemployer-employee relationship and such paymentscome within the purview of Sec.192 of the I.T. Act,1961? (ii)Whether, on the facts and in the circumstances ofthe case and in law, the Hon'ble ITAT was correct inholding that payments made towards the annualmaintenance contracts in respect of various hospitalequipments come in the purview of Sec.194C whereassuch maintenance charges are in the nature of technicalfee within the meaning of Sec.194J of the I. T. Act,1961?" 4We notice that the Revenue has framed a few additionalquestions, however, those questions nothing but a limbs of above notedquestions and therefore not separately considered. 5The first question relates to the Revenue's contention that theRespondent-Assessee, a trust, running a hospital, had to deduct the tax atsource under Section 192 of the Income Tax Act, 1961 (for short "the Act")while making payment to the doctors discharging their duties at the saidhospital. The contention of the Revenue was that these services of the doctorshave been engaged under a contract executed between the parties, and thatthe doctors are not employees of the hospital. Under the circumstances,according to the Assessee, section 192 of the Act was not applicable. The payments to the doctors were in the nature of professional fee for which taxwas deducted under section 194J at the time of payment. 6The Assessing Officer did not accept such a contention, uponwhich the Assesseee filed an Appeal. The Commissioner (Appeals) who alsorejected the Appeal, upon which the issue reached the Tribunal in an Appealfiled by the Assessee. The Tribunal examined the terms of engagement of thedoctors by the Asseseee Trust and came to a conclusion that the issues weresquarely covered in favour of the Assessee by virtue of the judgment of theDivision Bench of this court in the case of CIT v/s. Grant Medical Foundationreported in 375 ITR 049. Thereupon the Revenue has filed this Appeal. 7In Grant Medical Foundation's case (Supra) this Court examinedat length the issue as to when the engagement of the services of the doctorscan be seen to be in the nature of employment. In this context, after referringto the terms of engagement of the doctors, this Court held and observed asunder :- 7In Grant Medical Foundation's case (Supra) this Court examinedat length the issue as to when the engagement of the services of the doctorscan be seen to be in the nature of employment. In this context, after referringto the terms of engagement of the doctors, this Court held and observed asunder :- 37) In relation to other category of doctors there was adispute. The Assessing Officer and the Commissionerconcluded that though these categories of doctors had afixed remuneration and variable pay but their terms andconditions of employment or service would be crucialand material. In relation to two doctors, namely, DrZirpe and Dr Phadke, the contracts were taken as sampleand scrutinized minutely. Upon such a scrutiny theTribunal noted that it cannot be said that these doctorswere employees. If the first part of the Commissioner’sdispute. The Assessing Officer and the Commissionerconcluded that though these categories of doctors had afixed remuneration and variable pay but their terms andconditions of employment or service would be crucialand material. In relation to two doctors, namely, DrZirpe and Dr Phadke, the contracts were taken as sampleand scrutinized minutely. Upon such a scrutiny theTribunal noted that it cannot be said that these doctorswere employees. If the first part of the Commissioner’s order indicates as to how these persons or doctors werenot treated by the assessee as regular employees forwant of benefits like provident fund, retirementalbenefit, etc., then, merely because they are required tospend certain fixed time at the hospital, treating fixednumber of patients at the hospital, attend them as outpatients and Indoor patients does not mean that aemployer-employee relationship can be culled out orinferred. We do not see how Mr Gupta can fault suchconclusions by relying upon decisions which have beenrendered in cases of doctors having a fixed pay andtenure. In that case, before us, there is no dispute. Eventhe assessee accepts the position that they are theemployees of the assessee trust. order indicates as to how these persons or doctors werenot treated by the assessee as regular employees forwant of benefits like provident fund, retirementalbenefit, etc., then, merely because they are required tospend certain fixed time at the hospital, treating fixednumber of patients at the hospital, attend them as outpatients and Indoor patients does not mean that aemployer-employee relationship can be culled out orinferred. We do not see how Mr Gupta can fault suchconclusions by relying upon decisions which have beenrendered in cases of doctors having a fixed pay andtenure. In that case, before us, there is no dispute. Eventhe assessee accepts the position that they are theemployees of the assessee trust. 38) However, in cases of other doctors the contract wouldhave to be read as a whole. It would have to be read inthe backdrop of the relationship and which was ofengagement for certain purpose and time. The skill ofthe doctors and their expertise were the foundation onwhich an invitation was extended to them to becomepart of the assessee which is a public charitable trust andrendering medical service. If well known doctors and inspecified fields are invited to join such hospitals for a feeor honorarium and there are certain terms drawn so asto understand the relationship, then, in every case suchterms and the attendant circumstances would have to beseen and in their entirety before arriving at a conclusionthat there exists a employeremployee relationship. TheTribunal found that the Commissioner was in error. Wealso agree with the Tribunal because in theCommissioner's order in relation to these two doctors thefindings are little curious. The commissioner referred tothe tests in paragraph 9 of the order at running page 62and at internal page 14 in paragraph 10 theCommissioner concluded that doctors drawing fixedremuneration are full time employees. However, inrelation to the second category of doctors drawing fixedplus variable pay with written contracts the terms andconditions of Dr Zirpe and Dr Phadke have been referredand the Tribunal concluded that neither of the doctorswas entitled to provident fund or any terminal benefits.Both were free to carry on their private practice at theirhave to be read as a whole. It would have to be read inthe backdrop of the relationship and which was ofengagement for certain purpose and time. The skill ofthe doctors and their expertise were the foundation onwhich an invitation was extended to them to becomepart of the assessee which is a public charitable trust andrendering medical service. If well known doctors and inspecified fields are invited to join such hospitals for a feeor honorarium and there are certain terms drawn so asto understand the relationship, then, in every case suchterms and the attendant circumstances would have to beseen and in their entirety before arriving at a conclusionthat there exists a employeremployee relationship. TheTribunal found that the Commissioner was in error. Wealso agree with the Tribunal because in theCommissioner's order in relation to these two doctors thefindings are little curious. The commissioner referred tothe tests in paragraph 9 of the order at running page 62and at internal page 14 in paragraph 10 theCommissioner concluded that doctors drawing fixedremuneration are full time employees. However, inrelation to the second category of doctors drawing fixedplus variable pay with written contracts the terms andconditions of Dr Zirpe and Dr Phadke have been referredand the Tribunal concluded that neither of the doctorswas entitled to provident fund or any terminal benefits.Both were free to carry on their private practice at their own clinic or outside Hospitals but beyond the Hospitaltimings. Both doctors treated their private patients fromthe hospital premises. All of which could be seen asindicators that they were not employees but independentprofessionals ( see paragraph 14). However, they werefound to be sharing a overwhelming number ofattributes of employees. In relation to that the contractseems to have been bifurcated or split up or read in bitsand pieces by the Commissioner. The Leave Rules wereheld to be applicable in case of Dr Phadke and therewere fixed timing and fixed remuneration. Now, it isinconceivable that merely because for a certain period oftime or required number of hours the doctors have to beat Ruby Hall Clinic means they will not be entitled tovisit any other hospital or attend patients at itnecessarily. The anxiety appears is not to inconveniencethe patients visiting and seeking treatment at the RubyHall Clinic. If specialized team of Doctors, Experts andExperienced in the field are part of the Assessee's Clinic,then, their availability at the clinic has to be ensured.Now, the trend is to provide all facilities under one roofso that patients are not compelled to go to several clinicsor Hospitals. Hence, a diagnostic center with laboratoriesand clinics, consultation rooms, rooms with beds forindoor treatment, critical care, treatment for kidney,lever, heart, brain, stomach ailments are facilitiesavailable at clinics and hospitals. The management,therefore, insists that such facilities, which are verycostly and expensive are utilized to the optimum and theinvestment of time, money and infrastructure is notwasted. Hence, fixed timings and required number ofhours and such stipulations are incorporated in contractsso that they are of binding nature. The Doctor or ExpertMedical Practitioner is then obliged to denote his timeand energy to the clinic whole heartedly. If handsomeremuneration, fee is prescribed in return of readymadefacilities even for professionals, then, such insistence isnot necessarily to treat highly qualified professionals asservants. It is a relationship of mutual trust andconfidence for the larger interest of the patient beingserved efficiently. From this contract or any clausetherein no such conclusion could have been arrived at.We do not see how there was any express bar fromworking at any other hospital and if the contracts would have been properly and carefully scrutinized. Merelybecause their income from the hospital is substantialdoes not mean that ten out of the fourteen criteriaevolved by the Commissioner have been satisfied. TheAssessing Officer and the Commissioner, therefore, werein complete error. We have also perused these contractsand copies of which are annexed to the paper book beingpart of the order of the Assessing Officer. We find thatthe communications which have been relied upon,namely, 25th November, 2008 and 14th May, 2009 donot contain any admission by the assessee. All that theassessee admitted is the existence of a written contractand with the above terms. Those terms have also beenperused by us minutely and carefully. We do not findthat any stipulations regarding working hours, academicleave or attachments would reveal that these doctors areemployees of the assessee. In fact, Dr Zirpe wasappointed as a Junior Consultant on three years ofcontract. He was paid emoluments at fixed rates for thepatients seen by him in the OPD. That he would not bepermitted to engage himself in any hospital or nursinghome on pay or emoluments cannot be seen as anisolated term or stipulation. In case of Dr Uday Phadke,we do not find any such stipulation. In thesecircumstances, the only agreement between the partiesbeing that certain private patients or fixed or specifiednumber seen by the consultant could be admitted to theassessee hospital. That would not denote a bindingrelationship or a master servant arrangement. Aattractive or better term to attract talented youngprofessionals and too in a competitive world would notmean tying down the person or restricting his potentialto one set up only. The arrangement must be looked inits entirety and on the touch stone of settled principles.The Tribunal was right in reversing the findings of theAssessing Officer and the Commissioner. There was aclear perversity and contradiction in the findings,particularly pointed out by us hereinabove.” 8Thus, the Court was influenced by certain factors which werepresented on record such as engagement of the doctors for a fixed term under a contract, the fact that the Trust had no liability to pay provident fund orpension or such other post retiral benefits. It was also noted that these doctorswere free to carry on their private practice in their own clinics outside the saidhospital beyond the hospital time. 9In the present case, it has been recorded that the doctors wereentitled to admit, investigate and provide treatment to the patients and thatthe doctors would be responsible for their clinical care. The doctors wereresponsible for supervising the sub-ordinate staff whereas the facilities of thehospital staff, paramedical and nursing staff would be provided by the hospitalalong with the necessary equipment to render services to the patients. 15% ofthe fee collected by the doctors would be deducted by the hospital as its shareand the balance 85% would be paid to the doctors after deduction of tax atsource. In case of fees not being paid by patients, the same would be theliability of the concerned doctors. It was on this basis the Tribunal had cometo the conclusion that the relationship between the hospital and the doctorscannot be treated as one of the employer-employee relationship. It was notedthat the earnings of the doctors would be dependent upon the patients that thedoctors would attract. 10We do not find that the Tribunal has committee any error.Significant features of the contractual relationship between the doctors and the 10We do not find that the Tribunal has committee any error.Significant features of the contractual relationship between the doctors and the hospital in the present case were that the hospital would provide supportservice where a particular patient would be treated by a doctor. The sharingwas in the proportion of 15% v/s. 85% between the hospital and the doctors.Contractual tenure of these doctors was for a period of one year which wouldbe renewable depending on the performance of the doctor to be assessed bythe Medical Advisory Council of the hospital. These doctors are not entitled tobenefits of leave encashment, gratuity, provident fund, superannuationbenefits etc. which regular employees of the hospital are. These doctors wouldon their own obtain indemnity insurance. These are clear indications that therelationship was not one of employer-employee. The Tribunal has correctlyapplied the decision of this Court in the case of Grant Medical Foundation'scase (supra) wherein the Court has laid down the propositions and principlesto be applied while testing such a bilateral relationship between the hospitaland the doctors. 11The second question pertains to the revenue's contention that theRespondent - Assessee while making payment to a contractor providingmaintenance and support services ought to have deducted tax at source underSection 194J of the Act instead of Section 194C under which the Assessee hadmade such deductions. We notice that the CIT (Appeals) and the Tribunal have concurrently held that the contractor was meant to carry out maintenance andthe repair work and therefore his services could not have been categorized asproviding technical services. We do not find any error in such finding. Noquestion of law arises. All the Income Tax Appeals are dismissed. [ M.S.SANKLECHA,J.] [ AKIL KURESHI, J ]