The Commissioner Of Income Tax (Tds-1), Mumbai ]R v. Asian Heart Institute And Researchcentre Private Limitedgn Block, Bandra Kurla Complex, Bandra (East), Mumbai

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.676 OF 2018 The Commissioner of Income Tax (TDS-1), Mumbai ]R.No.900-B, Smt. K. G. Mittal Ayurvedic Hospital]Building, Charni Road (W), Mumbai - 400 002 ]].... Appellant. versus Asian Heart Institute and ResearchCentre Private LimitedGN Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051A.Y. 2012-2013PAN : AAACC8811CTAN : MUMA22003C ]]]]]]].... Respondent. Mr. P C Chhotaray for the Appellant. CORAM : AKIL KURESHI & M.S.SANKLECHA, JJ. DATE : 05th MARCH 2019. P.C.: 1This Appeal has filed by Revenue to challenge the judgment of the Income Tax Appellate Tribunal raising following questions of law for ourconsideration :- "(i)Whether, on the facts and in thecircumstances of the case and in law, the Hon'bleITAT was justified in holding that provisions ofSection 194C are applicable, and not the provisionsof section 194J as held by the Assessing Officer, fordeduction of tax at source from payment towards Annual Maintenance Contracts in respect of varioushospital equipments, without appreciating that themaintenance of specialized machines in hospitalscalls for skilled professional/technical engineers,and hence such maintenance charges are in thenature of fees for technical services within themeaning of section 194J of the Act? (ii) Whether, on the facts and in thecircumstances of the case and in law, the Hon'bleITAT was justified in holding that the paymentsmade by the assessee to Full Time ConsultantDoctors fall within the purview of section 194J, andnot under section 192 of the Act as held by theAssessing Officer, for the purpose of deduction oftax at source, without appreciating that there existsemployer-employee relationship between theassessee company and these consultant doctors andthe payment is in the nature of salary and the tax isdeductible under section 192 of the Act?" 2We notice that the revenue has presented additional questions,however, these questions are limbs of the above noted two questions andtherefore not separately considered. 3Question No.(i) pertains to the revenue's objection to the assesseededucting tax at source under Section 194C of the Income Tax Act, 1961 (forshort "the Act") while making payment to the pest control agency instead ofSection 194J of the Act. The CIT (Appeals) and the Tribunal have concurrentlyheld that such a payment was not for any technical services provided by theagency. We do not find any error . This question therefore not considered. 4Question No.(ii) arises out of the revenue's contention that theRespondent Trust, running a hospital, while availing the services of doctors,had entered into employer-employee relationship, and therefore, deduction oftax at source while making payments to the doctors had to be on the basis thatthe same was the salary paid by the employer to the employee. The Tribunalheld that there was no employer-employee relationship between the hospitaland the doctors. 5An identical issue came up for consideration before us in the caseof revenue's appeal against this very assessee. While dismissing the Revenue'sAppeal No.1294 of 2016, in this respect, we had made the followingobservations :- 6The Assessing Officer did not accept such acontention, upon which the Assesseee filed an Appeal.The Commissioner (Appeals) who also rejected theAppeal, upon which the issue reached the Tribunal in anAppeal filed by the Assessee. The Tribunal examined theterms of engagement of the doctors by the AsseseeeTrust and came to a conclusion that the issues weresquarely covered in favour of the Assessee by virtue ofthe judgment of the Division Bench of this court in thecase of CIT v/s. Grant Medical Foundation reported in375 ITR 049. Thereupon the Revenue has filed thisAppeal. 6The Assessing Officer did not accept such acontention, upon which the Assesseee filed an Appeal.The Commissioner (Appeals) who also rejected theAppeal, upon which the issue reached the Tribunal in anAppeal filed by the Assessee. The Tribunal examined theterms of engagement of the doctors by the AsseseeeTrust and came to a conclusion that the issues weresquarely covered in favour of the Assessee by virtue ofthe judgment of the Division Bench of this court in thecase of CIT v/s. Grant Medical Foundation reported in375 ITR 049. Thereupon the Revenue has filed thisAppeal. 7In Grant Medical Foundation's case (Supra)this Court examined at length the issue as to when theengagement of the services of the doctors can be seen tobe in the nature of employment. In this context, afterreferring to the terms of engagement of the doctors, thisCourt held and observed as under :- 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’sorder 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.dispute. 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’sorder 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 tohave 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 to the 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 theirown 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 time and 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 wouldhave 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 certainfactors which were presented on record such asengagement of the doctors for a fixed term under acontract, the fact that the Trust had no liability to payprovident fund or pension or such other post retiralbenefits. It was also noted that these doctors were freeto carry on their private practice in their own clinicsoutside the said hospital beyond the hospital time. 9In the present case, it has been recordedthat the doctors were entitled to admit, investigate andprovide treatment to the patients and that the doctorswould be responsible for their clinical care. The doctorswere responsible for supervising the sub-ordinate staffwhereas the facilities of the hospital staff, paramedicaland nursing staff would be provided by the hospitalalong with the necessary equipment to render servicesto the patients. 15% of the fee collected by the doctorswould be deducted by the hospital as its share and thebalance 85% would be paid to the doctors afterdeduction of tax at source. In case of fees not beingpaid by patients, the same would be the liability of theconcerned doctors. It was on this basis the Tribunal hadcome to the conclusion that the relationship betweenthe hospital and the doctors cannot be treated as one ofthe employer-employee relationship. It was noted thatthe earnings of the doctors would be dependent uponthe patients that the doctors would attract. 10We do not find that the Tribunal hascommittee any error. Significant features of thecontractual relationship between the doctors and thehospital in the present case were that the hospitalwould provide support service where a particularpatient would be treated by a doctor. The sharing wasin the proportion of 15% v/s. 85% between the hospitaland the doctors. Contractual tenure of these doctorswas for a period of one year which would be renewable depending on the performance of the doctor to beassessed by the Medical Advisory Council of thehospital. These doctors are not entitled to benefits ofleave encashment, gratuity, provident fund,superannuation benefits etc. which regular employees ofthe hospital are. These doctors would on their ownobtain indemnity insurance. These are clear indicationsthat the relationship was not one of employer-employee. The Tribunal has correctly applied thedecision of this Court in the case of Grant MedicalFoundation's case (supra) wherein the Court has laiddown the propositions and principles to be appliedwhile testing such a bilateral relationship between thehospital and the doctors. 6In the result no question of law arises. Income Tax Appeal isdismissed. [ M.S.SANKLECHA,J.] [ AKIL KURESHI, J ]