|A. T. Varkey (JM), S. V. Mehrotra (AM)
|fees for professional services, salary
|May 15, 2015 (Date of pronouncement)
|May 26, 2015 (Date of publication)
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|S. 192 vs/ 194-J: Tests to determine whether there is an employer-employee relationship explained
The assessee, a medical center, engaged the services of doctors. On payment to the doctors, the assessee deducted TDS u/s 194-J on the ground that it was paying “fees for professional services”. However, the AO held that the said doctors were the “employees” of the assessee and that the assessee ought to have deducted TDS u/s 193. The CIT(A) ruled in favour of the assessee. On appeal, the Tribunal had to consider whether there is an employer-employee relation between the said consultant Doctors and the assessee. HELD by the Tribunal:
(i) Determination of the vexed questions as to whether a contract is a contract of service or contract for service and whether the employees concerned are employees of the contractors has never been an easy task. No decision of this Court has laid down any hard-and-fast rule nor is it possible to do so. The question in each case has to be answered having regard to the fact involved therein. No single test – be it control test, be it organisation or any other test – has been held to be the determinative factor for determining the jural relationship of employer and employee;
(ii) One of the points which were highlighted by the AO is that the doctor has to work for the assessee and cannot do any private practice. We cannot agree to this because of the simple fact that there is no prohibition for the said consultant doctors to do private practise and the only restriction is that the assessee hospital should be taken in to confidence before doing it. We find that in Para 15 of the AO’s order itself he has taken note of the fact that the assessee hospital has granted permission to few doctors who desired to practise privately. And further we should point out that there is no prohibition in law to engage the services of a professional exclusively for a particular hospital. Merely because the doctors were exclusively engaged for three years, it does not mean that they are employees of the assessee hospital. As pointed out by the Sr. Counsel, the other factors such as PF, job assignments, working hours, direction and supervision are all the relevant factors which need to be considered to see the existence of employer and employee relationship. In the case before us, it is not in dispute that the consultant doctors in question are not in the roll of PF payments etc.
(iii) Admittedly, the working hours were flexible and determined mutually by the assessee and the doctor. The consultant doctors are free to come at their convenience and treat the patients. The agreement does not provide for any supervision or control over the doctor. The doctors at their own discretion treat the patients by making use of the infrastructural facilities and manpower available in the hospital. The doctors are governed by the rules and regulations of their regulatory body in their professional activity (MCA) and the assessee being a hospital they expected the doctors to conduct themselves as per its policy while discharging their profession. This expectation of the assessee is nothing but for maintaining discipline by the said consultant doctors by abiding to the code of conduct of assessee hospital, cannot be considered to be exercising control and supervision over the doctors in their independent professional activity. We find that clause dealing with indemnity insurance payable by the consultant in case of any liabilities for any act of medical malpractice arising under Consumer Protection Act clearly takes the assessee hospital out of any vicarious liability which again goes on to show that there is no master-servant relation between them. We find that consultants are not governed by the service rules and leave rules which are applicable to employees. Therefore, it is obvious that the, doctors are not considered to be employed by the assessee and they are rightly considered only as consultant professionals.
(iv) So, in our opinion, the agreement between the assessee and the doctors is one for providing professional services, and there is no element of employer and employee relationship existing. Therefore, in our opinion, tax has to be deducted under s. 194J of the Act as fee for professional services and not as salary.