By TIOL News Service

JAIPUR, OCT 30, 2017: THE issue before the Bench is - Whether payment made by a hospital to retainer doctors, for their honorary service, does not fall within ambit of Section 192. YES is the verdict.

Facts of the case:

The Assessee company is running a hospital namely Escorts Heart Institute & Research Centre Ltd. at Jawarhar Lal Nehru Marg, Jaipur now known as Fortis Hospital and having its registered office at Okhla Road, New Delhi. The Assessee entered into several agreements/contracts for running this hospital, such as agreement for providing medicines to in-patients, providing facilities for various treatments, cleaning, gardening, manpower at the hospital etc. The hospital also engaged doctors in the category of empanelled doctors and retainers in different specialities for providing expertise professional services. During the subject year, a TDS survery was carried out in Assessee's case, which resulted in declaring the "Assessee as in default" as per provisions of Sec.191. On appeal, the ITAT however held that the provisions of Section 192 were applicable in the case of retainer doctors.

High Court held that,

++ it will not be out of place to mention that the assessee is running a hospital within State of Rajasthan and they have entered agreement with three different doctors. The question which came up for our consideration is whether benefit of 194J and 192 is to be given, where TDS is required to deducted. Counsel for Assessee rightly contended that in the agreement which was entered between the parties, there is no restriction of private practice, whereas in case of service/ appointment order, there is prohibition for grant of benefit which are required to be given under the law and are granted to the employees, whereas in the case of retainership it is only an honorary or professional agreement is entered between the parties which may be analogous to the major service conditions but both the contract are different. One is contract as an employee and the other contract is service for honorary or expert service not as a employee which was entered between the parties. Therefore, question which came for our consideration is whether payment which was made to the professional is salary or professional fees;

++ taking into consideration the case law which has been cited by both the sides, the judgment of Karnataka High Court which has been relied upon by the counsel for Assessee and after taking into consideration that all the judgments and the rulings cited by both the sides were considered in the said judgment and the issue was decided as: "....The contention of the learned counsel appearing for the assessee that CIT had issued an order u/s 10(23C)(via), by virtue of which the assessee is not liable to deduct TDS u/s 194-I as the recipient itself is exempted from levy of tax, is not acceptable for the reasons that the said order was issued by the CIT, Panaji for the assessments year 2005-06 to 2007-08 subject to the compliance of conditions (i) to (vi) specified therein. The said conditional order shall not absolve the assessee from the deduction of TDS liability. The compliance/non-compliance of the exemption conditions by the recipient in advance cannot be foreseen in advance by the assessee- Company. Moreover, TDS liability u/s 194-I is not dependent on the tax liability/entitlement to exemption of the recipient. Irrespective of the tax exemption/tax liability of the recipient the assessee has to discharge the TDS liability u/s 194(1). No certificate u/s 197 is furnished by the assessee to establish that the recipient is exempted from the tax liability....";

++ again same question came up for consideration in other decision of Karnataka High Court where after considering the judgment in Elbit Medical Diagnostics Ltd., the court has come to the conclusion that retainer in service are professional service and issue was answered in favour of the assessee. Taking into consideration the evidence on record, only one view can be taken and since the view taken by the tribunal is also contrary, if two views are possible, the view which in favour of assessee is to be taken and in view thereof in the present case, the issues are answered in favour of the assessee.

(See 2017-TIOL-2260-HC-RAJ-IT)