P.M. Jagtap, Accountant Member. - (1.) THIS appeal by the assessee is directed against the order of learned Commissioner (Appeals)-XXX, New Delhi dated 12-1-2004 whereby he upheld the order of the assessing officer passed under section 201 (1) treating the assessee as in default for short deduction of tax at source from the payments made to consultant doctors employed in the hospital.
(2.) The assessee in the present case is a trust which is running a hospital in New Delhi. During the course of verification of the TDS return filed by it for financial year 2001-02, it was noticed by the assessing officer that the assessee had deducted TDS at the rate of 5 per cent from the remuneration paid to the consultant doctors employed in the hospital treating the same as 'fees for professional services'. According to the assessing officer, the remuneration paid to the consultant doctors was chargeable to tax under the head Income from salary'and the same should have been subjected to TDS as per the provisions of section 192 and not as per section 194J as was done by the assessee. He, therefore, required the assessee to explain its stand in the matter. In reply filed vide its letter dated 24-4-2003, it was explained by the assessee that medical profession is covered in the category of profession even under the Income Tax Act and since remuneration paid to the consultant doctors comprised of share in the fees collected from the patients and some minimum amount agreed to be paid to them, their total remuneration was not fixed but was dependent on receipts from patients treated by them. It was also pointed out that the said consultant doctors were free to do private practice outside the hospital and non-practising allowance was not paid to them. It was further explained that the consultant doctors were being appointed as per the requirement of the hospital when their services were needed. It was, therefore, contended that there was no employer-employee relationship between the assessee and the consultant doctors and the remuneration paid to them was not in the nature of salary but was a professional fees paid towards consultancy services. The assessing officer, however, perused the appointment letters issued by the assessee to the consultant doctors and found the following points as emerging from the said appointment letters : "1. The hospital itself has titled the remuneration paid to the consultant as 'salary' and the same is paid on monthly basis. 2. There is a clear mention in the appointment letter that the appointee shall abide by the existing service regulations. There is also a clause which provides for the entitlement of various types of leaves to the appointees.
(3.) IT also provides that the decision of the Director shall be final in all the matters." 3. Keeping in view the aforesaid points borne out from the appointment letters issued by the assessee to the consultant doctors, he inferred that the contract between the assessee and the consultant doctors was that of service and there existed the employer-employee relationship between them. Accordingly, he held that the assessee should have deducted tax at source from the payments made to the consultant doctors at the rates applicable in the case of salary and worked out the short deduction of tax in respect of such payments excluding the payments made to Dr. P.N. Seth and Dr. R.K. Sandhir who were found to have been paid only the share in the fees and no fix remuneration at Rs. 6,81,422 as per the details given in Annexure A to his order. He, therefore, treated the assessee to be in default for such short deduction of tax under section 201(1) and also charged interest under section 201(1 A). 4. Aggrieved by the order of the assessing officer passed under section 201(1)/201(1A), an appeal was preferred by the assessee before the learned Commissioner (Appeals) and it was submitted on its behalf before him that apart from full-time employee doctors numbering 178 on the pay roll of the hospital, there were also 20 consultants engaged by it for rendering consultancy services. The following basic features concerning full-time employee doctors and consultant doctors were brought to the notice of the learned Commissioner (Appeals) by the assessee :- "An employee doctor is entitled to the scale of pay appropriate to his category with increments as provided for in the scale, whereas in the case of the consultant, he is not entitled to any particular grade of pay or increments. The appointment of an employee doctor is made by due process of selection and he is fitted in the scale of pay appropriate to his qualifications and experience. He cannot bargain for special benefits. However, a consultant is engaged depending upon his standing in his particular field of speciality. The amount payable to him is negotiated in advance and settled. He could ask for a higher amount than that paid to a full-time employee of the Hospital. While it is the Hospital's policy to engage professionals as far as possible as full-time employees, because of the situation prevailing in different fields of specialization it is not always that a suitable full-time employee can be found and if found, is willing to work as a full-time employee. The engagement of consultants is not peculiar to St. Stephen's Hospital. IT is widely prevalent. A few other hospitals that engage consultants are Sir Ganga Ram Hospital, Moolchand Hospital and Apollo Hospital.';