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Payments to Doctors Subject to TDS Provisions Under Section 194J, Not 192: ITAT Rules

In a recent ruling, the Delhi Bench of Income Tax Appellate Tribunal (ITAT), led by M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member), clarified that payments made to doctors fall under the purview of TDS provisions outlined in Section 194J of the Income Tax Act, rather than Section 192.

Section 194J of the Income Tax Act pertains to fees for professional or technical services. It mandates that any entity, apart from individuals or Hindu Undivided families, making payments to a resident for such services must deduct TDS at rates of either 10% or 2%, depending on the nature of the services rendered.

Contrastingly, Section 192 focuses on the responsibility of accurately disclosing perquisites or profits in lieu of salary given to employees, placing the onus on the entity responsible for deducting tax at source.

The case in question involved an assessee company operating in the healthcare sector, specifically running hospitals and multispecialty healthcare facilities. During a TDS Survey conducted on the company’s premises, it was revealed that consultancy charges were being paid to doctors, with TDS deductions made under Section 194J.

However, both the Survey Team and the Assessing Officer (AO) contended that these payments should be treated as salary, necessitating tax deductions under Section 192. Consequently, proceedings under sections 201(1) and 201(1A) were initiated against the assessee, seeking to collect differential TDS rates and interest.

The AO’s stance was consistent with previous years, wherein similar treatment was accorded to the assessee, resulting in tax and interest levies.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] noted a precedent set by the Tribunal, ruling in favour of the assessee and affirming that payments to doctors should be governed solely by Section 194J.

The crux of the matter was whether payments to doctors should be categorised under Section 194J for TDS purposes, as opposed to Section 192 pertaining to salary deductions.

Ultimately, the tribunal upheld the CIT(A)’s decision, bringing clarity to the matter and reinforcing the applicability of Section 194J in such scenarios.

Monika Shanmugam