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TDS on Payments to Doctors under fixed Salary and Guarantee Money Scheme
ITO (TDS-1), Ahmedabad Vs. Apollo Hospitals International Ltd (2011-TIOL-59-ITAT-MUM)
Facts:
- The assessee engaged doctors on fixed salary and guarantee money scheme (FCG). The AO took the view that these doctors were employees of the assessee in view of the stipulation of the agreements between the assessee and the doctors
- The AO held that the assessee could have deducted TDS on the payments as per the provisions of section 192 . Accordingly,, theAO levied interest u/s 201 (1A).
- No provident fund, profession tax or ESI was deducted from payments to these consultant doctors. Whereas these deductions were made from payments made to the full time resident doctors of the assessee
- Consultant doctors were not eligible for gratuity whereas the resident doctors were eligible for the same
- These doctors filed their individual returns and paid taxes on their income from the assessee. In case of consultants where professional fees exceeded Rs. 10 lakhs, accounts were subject to tax audit
- The AO held that the retainer ship agreement was for rendering services and that was in the manner of an employer/employee relationship. The CIT (A) allowed the appeal of the assessee
Issue:
- Does payment to consultant doctors constitute “salary” or “payment for professional services”?
Decision
- There are two types of agreements. One of the covenant is stated to be in the nature of employer/employee agreement and the other is stated to be FGC contract. The distinction between the two inter alia include:
ü In case of the employee doctors, there is a list of allowances (basic, HRA, etc). The consultant doctors are paid a lump sum fee
ü The employee doctors‟ agreement had a clause for leave entitlement unlike the FGC contract
ü Employee doctors are not entitled for any other full time employment
ü Consultant doctors were not employed by service rules but were expected to follow the code of conduct
- The terms and conditions in respect of the doctors under FGCs are not akin to the salaried employees. Their relationship with the hospital cannot be said to be an employer-employee relationship. Tax ought to have been deducted u/s 194J
- The contract between the two parties cannot be said to be in the nature of a “service contract ”but“ a contract for medical service”
- When there is a specific clause provided in the agreement for payment as “fee for services”, then there is no reason to read the said clause as “fees ofservices” and then there should not be any reason to treat the said payment by the assessee as payment of salary
By - TG TEAM
CAclubindia
