TDS ON SALARIES PAID TO DOCTORS OF ALL CATEGORIES ARE TO BE DEDUCTED U/S 194J AND NOT U/S 192: ITAT

The assessee company with the name of Artemis Medicares Services Ltd. is a healthcare company is engaged in the business of establishing, maintaining and running of Hospital and Multi-Speciality healthcare facilities.. Generally, all the healthcare companies follow usual approach of paying their Doctors salaries in the nature of Professional fees.

Income tax department conducted a TDS survey under section 133A at the company’s premises and found that the company is deducting tax under section 194J on all the salary payments made to Doctors. Assessee treated these payments as consultancy payments, whereas AO insisted that these payments should be treated as salary and TDS should be deducted u/s 192. Assessee was facing imposition of interest and differential TDS were to be collected by the assessee company.

Delhi Bench of ITAT heard this matter and allowed cross objections raised by assessee company and dismissed appeals made by revenue.

What does Section 192 and 194J specifies:
Section 192 deals with deduction of tax on the payment of salaries, which are regular payments made by an employer to an employee for services rendered. Section 194J deals with deduction of tax on the payments made for professional or technical services, which could include fees paid to doctors, consultants, engineers, etc., for their specialized expertise or services rendered.

Section 192:
The TDS rates under this section are based on the individual’s income tax slab, as applicable to salary income. No threshold limit is mentioned in this section.

Section 194J:
TDS @10% is applicable if the total amount payable to the service provider exceeds ₹30,000 for a single payment or ₹1,00,000 in aggregate during the financial year.

Issues Involved:
After the Income Tax Department’s TDS survey as per Section 133A, assessee had to face proceedings under section 201(1) and 201(1A) treating him as ‘assessee in default’. Assessee raised cross objections with a condonation request since there was a delay of 15 days in filing cross objections.

CIT(A) held that these payments would attract TDS u/s 194J only as against determined by AO to levy TDS as per section 192.

Facts Explained:
ITAT focused on the finding that same issue had already been decided in favour of the assessee by this Tribunal in ITA No. 4718/Del/2013 for Asst Year 2009-10 dated 15.5.2015 and accordingly held that the payments to doctors would be covered only u/s 194J of the Act and not u/s 192 of the Act. Assessee  submitted that on receipt of actual bills from the concerned vendors, the due tax is deducted at source and payments made to them. Also as on 31st March of the relevant year, the payees are not identifiable and hence the assessee could not be expected to deduct tax at source while making provision for expenses on the same. The case of the assessee is that these are provision made for certain business expenses on actual basis where the services are rendered by the respective parties i.e. Doctors in this case, but the bills were raised by them in the next financial year. Accordingly, the assessee had booked those expenses on provision basis in accordance with mercantile system of accounting regularly followed by the assessee and had reversed the very same expenditure on 1st April of the next financial year. However, upon receipt of actual bills from Doctors , the due tax at source is deducted and payments were made to them. These deducted taxes were also deposited with the Government within the due date.

Conclusion:
Upon reviewing all the submissions made by AO as well as assessee and the CIT(A) , it was decided on the grounds of previous decisions of Tribunal of the similar nature that the payments made to all categories of Doctors are subject to tax u/s 194J and not u/s 192 as salary payments. Appeal of revenue was dismissed and ITAT had allowed cross objections of Assessee.

About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.