Relationship Between Consultant Doctor And The Hospital Can't Be seen As Employer Employee : ITAT Deletes Addition

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made towards short deduction of TDS and held that the relationship between a Professional Doctor consultant and the Hospital cannot be treated as an Employer-Employee relationship unless there exist specific Rules and Provisions in the contract of appointment between the consultant and Hospital.

The bench of Mahavir Singh (Vice President) and Manjunatha. G, (Accountant Member) has observed that there was no error in the reasons given by the CIT(A) to delete additions made towards short deduction of TDS under section 201(1) and interest thereon under section 201(1A) in respect of payment made to consultant doctors.

The respondent/assessee company is running a multispecialty hospital and providing health care service. In addition, the assessee company had branches for health care at City Centre Coimbatore, Erode, Sulur, and Kovilpalayam. A survey was conducted on the business premises of the assessee. During the course of the survey, it was noticed that TDS has been deducted from the remuneration paid to the consultant doctors.

The AO held that payment made to AMC providers is nothing but fees for technical services as defined u/s. 194J and on it, the assessee should have deducted 10% TDS but not 2% as applicable to the works contract.

The CIT(A) held that the consultant doctors working at the appellant hospital have covered themselves for professional indemnity by way of an insurance policy at their own cost. There is an absence of employer-employee relationship and thus, remuneration paid to consultant doctors cannot be treated as salary for the purpose of TDS.

The assessee contended that the doctors appointed as consultant doctors have been paid fixed monthly remuneration with variable components depending on the number of patients treated. The doctors are not entitled to any statutory benefits and also point to the absence of an employer-and-employee relationship.

The ITAT held that in order to treat remuneration paid

to consultant doctors under the head salary, there should be employer an employee relationship. But, there is an absence of employer and employee relationships. Therefore, opined that the department does not have individual materials to reassess the income of consultant doctors.

Case Title: Deputy Commissioner of Income Tax Versus M/s. Kovai Medical Centre and Hospital Limited

Case No.: ITA No.: 1004/Chny/2022

Date: 12.04.2023

Counsel For Appellant: M. Rajan

Counsel For Respondent: Vikram Vijayaraghavan

Click Here To Read The Order