By Aparna. M – On May 8, 2023 1:00 pm – 3 mins read
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) recently held that the remuneration paid to consultant doctors is not salary, hence Tax Deduction at Source (TDS) is not applicable.
The aforesaid appeal was filed by the revenue against the order of CIT(A).
The facts leading to the appeal were that the assessee, M/s. Kovai Medical Centre and Hospital Limited, is running a multispecialty hospital and providing healthcare services. The assessee company has various branches in Tamil Nadu.
When a survey was conducted at the premises of the assessee, it was noticed that TDS had been deducted under Section 194J of the Act towards the remuneration paid to the consultant doctors.
The survey team observed that there exists an employer and employee relationship between consultant doctors and the assessee, and thus the assessee should have deducted TDS under Section 192 of the Act for payment made to the consultant doctors.
Accordingly, proceedings under Section 201(1) & 201(1A) of the Act were initiated for the recovery of short deduction of TDS, and the Assessing Officer processed that the payment made to consultant doctors would be in the nature of salary, on which TDS under Section 192 of the Act should have been deducted.
Aggrieved by the order, the assessee filed an appeal before the CIT(A). The CIT(A) allowed the appeal filed by the assessee and observed that тАЬpayment made to consultant doctors does not come under the provisions of Section 192 of the Act, because a crucial and critical criteria for determination of employer and employee relationship is a contract of services, and the fact that the work related mandatory laws, such as provident fund, ESI, gratuity, attendance, leave encashment, LTA, bonus, superannuation etc., are not applicable for the consultant doctors.тАЭ
Against the order, the revenue filed an appeal before the tribunal.
Before the bench, M. Rajan, counsel for the revenue, submitted that service conditions and remuneration paid to said doctors is akin to employee doctors, and thus the assessee should have deducted TDS under Section 192 of the Income Tax Act.
Vikram Vijayaraghavan, counsel appearing for the assessee, submitted that two kinds of doctors have been employed in the assesseeтАЩs hospital. The assessee appointed employee doctors who are governed by various laws, including leave, bonus, superannuation benefits, etc.
Whereas, the consultant doctors are employed for fixed monthly remuneration without any benefits like leave, bonus, leave encashment, superannuation, etc. The assessee has deducted TDS on payment made to doctors under Section 194J of the Income Tax Act.
Wherever those doctors are appointed as consultant doctors, but when it comes to employee doctors TDS has been rightly deducted under Section 192 of the Income Tax Act.
The tribunal, while considering the submission of both parties, observed that in order to treat consultant doctors as employees, there should exist an employer and employee relationship. In the present case, there was an absence of any employer and employee relationship, so the remuneration paid to consultant doctors could not be treated as salary, and provisions of section 192 of the Act cannot be applied.
Accordingly, the tribunal of Mahavir Singh, Vice President, and Manjunatha. G, Accountant Member deleted additions made towards short deduction of TDS under Section 201(1) and interest thereon under Section 201(1A) of the Act in respect of payment made to consultant doctors.To Read the full text of the Order CLICK HERE
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Deputy Commissioner of Income tax vs M/s. Kovai Medical Centre and Hospital Limited
CITATION: 2023 TAXSCAN (ITAT) 930
Counsel for Appellant: Shri. M. Rajan
Counsel for Respondent: Shri. Vikram Vijayaraghavan
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