ITAT: Hospitals Must Deduct TDS On Doctor Fees Under Section 194J

ITAT: Hospitals Must Deduct TDS On Doctor Fees Under Section 194J

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), presided over by M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member), has ruled that payments made to doctors by hospitals fall under the purview of Section 194J of the Income Tax Act, not Section 192.

Section 194J of the Income Tax Act deals with Tax Deducted at Source (TDS) for fees for professional or technical services. It mandates any entity (excluding individuals or Hindu Undivided Families) to deduct TDS at a rate of 10 per cent or 2 per cent (depending on the nature of services) when making such payments to a resident.

On the other hand, Section 192 pertains to TDS on salary. It holds the person responsible for paying income (i.e., the TDS deductor) accountable for providing accurate details of any perks or benefits given to an employee in lieu of salary.

An assessee company, operating hospitals and multispecialty healthcare facilities underwent a TDS survey under Section 133A in August 2011. The survey team discovered that the company made consultancy fee payments to doctors and deducted TDS under Section 194J.

However, the survey team and the Assessing Officer (AO) contended that these payments should be treated as salaries, making Section 192 applicable for TDS deduction. Consequently, proceedings were initiated under Section 201(1)/201(1A) to recover the "differential rate of TDS" from the assessee, treating them as an "assessee in default" along with interest under Section 201(1A).

The assessee challenged this decision, arguing that payments to doctors fell under Section 194J only. The Commissioner of Income Tax (Appeals) (CIT(A)) sided with the assessee, citing a previous favourable tribunal ruling on the same issue.

The key question before the ITAT was whether payments to all categories of doctors should be considered under Section 194J instead of Section 192 (salary TDS).

The ITAT upheld CIT(A)'s order, affirming that payments to doctors by hospitals are subject to TDS provisions under Section 194J, not Section 192 of the Income Tax Act.