No employer-employee relationship exists if doctors were paid on basis of number of patients attended: ITAT

Case Details:  DCIT v. Sir Hurkisondas Nurrotumdas Hospital & Research Centre - [2021] 130 taxmann.com 324 (Mumbai - Trib.)

Judiciary and Counsel Details

• • Justice P.P. Bhatt, President and Manoj Kumar Aggarwal, Accountant Member
  • Nimesh Vora, Ld. AR for the Appellant. T.S. Khalsa, Ld. Sr. DR. for the Respondent.

Facts of the Case

Assessee-hospital had engaged various medical professionals comprising different specialists for providing medical treatment to the patients by using the infrastructural facilities set up by it. Some of these professionals were full-time employees, whereas some specialist doctors were engaged as consultants to whom professional fees were paid.

The doctors’ fees so collected would be paid to the consultant doctors after deduction of tax at source (TDS) under section 194J. The Assessing Officer opined that the services of the doctors were utilized only for the purpose of patients coming to the hospital. These doctors were expected to serve the patients on all days and expected to work as per the rules and regulations of the hospital. They were barred from working in any other hospital or conducting private practice. Thus, there was the employer-employee relationship, and accordingly, assessee was liable to deduct tax under section 192 as applicable to Salary Payments.

ITAT Held

On appeal, the CIT(A) reversed the order of AO and held that there was no employer-employee relationship. Aggrieved-revenue filed the instant appeal before the Tribunal.
The Mumbai Tribunal held that the terms of the arrangement with consultant Doctors were different from employee-doctors. The consultant doctors were paid based on the services rendered by them and on the basis of doctors’ fees collected by the hospital from the patients. The same is evident from the fact that the payment made to these doctors vary each month significantly.

Further, there was no specific timing and attendance record maintained by the hospital with respect to consultant doctors. They were also not eligible for any leave, provident fund, gratuity, bonus, etc., and were not subject to admission or retirement from services.
All these facts and features would bolster the assessee’s claim that there was no employer-employee relationship between the assessee and consultant doctors. Therefore, the tax was rightfully deducted under section 194J.

List of Cases Referred to

• • Sir Hurkisondas Nurrotumdas Hospital & Research Centre v. Dy. CIT (TDS) [IT Appeal No 2681 (Mum) of 2015, dated 26-8-2016] (para 2)
  • Lakshmin Narayan Ram Gopal & Son Ltd. v. Govt. of Hyderabad [1954] 25 ITR 449 (SC) (para 4.2)
  • Ram Prashad v. CIT [1972] 86 ITR 122 (SC) (para 4.2)
  • CIT (TDS) v. Grant Medical Foundation [2015] 55 taxmann.com 75/375 ITR 49 (Bom.) (para 4.3)
  • Jaslok Hospital & Research Centre v. Dy. CIT (TDS) [IT Appeal No. 4043 (Mum.) of 2015, dated 23-8-2017] (para 4.4).