ORDER

A.D. Jain, Judicial Member. - This is department's appeal for the assessment year 2004-05. The grounds taken are as under :—

"1. The ld. CIT(A) has erred in law as well as on facts in holding that the payment of fee by the assessee (though collected from patients) to its medical consultants could not be treated as professional fee within the scope of section 194J of the Act. He has failed to appreciate that all such doctors called as fee-for-service-consultants, have been appointed by the assessee as full time or part time senior consultants and hence payment of fee by it to such consultants (whether through collection from patients or otherwise) clearly partakes the character of professional fee.

2. The ld. CIT(A) has erred in law as well as on facts in holding the assessee as not in default ignoring the fact that assessee's claim of collection of fee from patients directly by the doctors has been proved to be incorrect beyond doubt.

3. The ld. CIT(A) has erred in law as well as on facts in holding the assessee as not in default ignoring that fee is being collected by the assessee and paid by it to the doctors after adjustment of certain amounts as borne out from statement of Dr. Rajesh Ahlawat, specifically pointed by the Assessing Officer in his order.

4. In the facts and circumstances of the case as well as in law the ld. CIT(A) has erred in deleting the addition made by the Assessing Officer by treating the assessee as an assessee in default under section 201(1) for failure to deduct tax on payments covered under section 194J of the Act."

2. The assessee company is in the business of running a hospital in the name of 'Apollo Hospital' at Sarita Vihar, Delhi. The Assessing Officer observed that in addition to the salaried doctors, the hospital utilizes the services of number of medical professionals on contract basis; that in respect of medical consultants, TDS was not deducted from the payments being made to them. The assessee submitted before the Assessing Officer, inter alia, that all fees received from the out-patients were collected by the assigned secretarial staff on behalf of the respective consultants; that no part of the said fees was collected on behalf of or for the benefit of the assessee; that the consultants were neither covered under the direct employment of the assessee nor there exist any principal - agent relationship between the hospital and the consultants; that there was no contractual relationship of the service provider and service recipient between the consultants and the hospital, when attending to out-patients; that the attending doctors were merely using the consulting chambers along with the secretarial pool for which, they are paying fixed rent; that the secretarial pool only helped the doctor for arranging appointment to patients, to collect the consultant's fee, issue receipts to the patients and hand over the fee collected to the respective doctors on the same day; that the collection did not represent professional fee payment by the hospital to the respective doctors; that it was a principal to principal transaction between the patients and the respective doctor; that the hospital was merely providing the premises/consultation chambers to facilitate the rendering of professional services by the doctor to the out-patients; that the hospital was only offering secretarial staff along with the chambers only with a view to assist the doctor to render health services more effectively; that the services were being rendered by the doctor directly to the patient and the professional fee was being paid directly by the patient to the doctor; and that, therefore, the provisions of deduction of tax at source were not applicable to the assessee.

3. The Assessing Officer, however, did not find the assessee's stand to be correct. The statements of various doctors were recorded. All these doctors stated that the hospital staff collected the fee from patients at the rate of Rs. 500 per patient in respect of new patient and at the rate of Rs. 400 in respect of old patient; that the collection was handed over to the doctors by the hospital staff, after retaining Rs. 100 per new patient. It was stated by Dr. Rajesh Ahlawat, who was at the time not working with the assessee hospital, that the OPD consultation from the patients was being collected by the receptionist employed by the hospital and the OPD collection was being handed over on a day-to-day basis without deduction of tax. The Assessing Officer observed that thus, it was clear, that the hospital was collecting the consultation fee from the patients and was passing it on to the respective doctors without deduction of tax; that the hospital was providing infrastructure, para-medical staff, supporting staff and machinery and equipment in the OPD chambers, which was required to examine the patients; that as per the Income-tax return of one of the doctors, no separate OPD collections were being shown by the doctors; that the receipts were being shown, which were paid by cheque by the hospital after deducting the TDS; that a number of doctors had been showing additional receipts in respect of their private clinics, which did not indicate the receipts from the OPD conducted in the hospital; and that tax was being avoided by the respective doctors in respect of cash collections received from the OPD. From these observations, the Assessing Officer observed that it stood established that the hospital had been providing services to the patients and the amount collected from the patients was being given to the concerned doctors without deduction of tax; and that as such, the assessee hospital was liable to be treated as the assessee in default.

4. By virtue of the impugned order, the learned CIT(A) allowed the appeal filed by the assessee against the aforesaid assessment order. It was held that there was no scope to treat the assessee hospital as an assessee in default under section 201(1) of the Income-tax Act.

5. Aggrieved, the department has filed the present appeal.

6. The learned DR has contended that the learned CIT(A) has erred in holding that the payment of fee by the assessee to its medical consultants cannot be treated as professional fee within the scope of section 194J of the Act; that failing to appreciate that all such doctors called as 'fee-for-services-consultants', had been appointed by the assessee as full time or part time senior consultants and so, the payment in question clearly partake the character of professional fee; that the ld. CIT(A) has erred in holding the assessee to be not an assessee in default, failed to consider that the assessee's claim of collection of fees from patients directly by the doctors stand proved to be incorrect; and that the ld. CIT(A) has erred in ignoring the fact that the fee in question was being collected by the assessee and paid to the doctors after adjustment of certain amount.

7. The learned counsel for the assessee, on the other hand, has strongly supported the order under appeal. It has been contended that there is no error whatsoever in the order of the ld. CIT(A); that the assessee is a listed public limited company and a joint venture of the NCT, Delhi and the Apollo Hospital Group, engaged in the business of providing health care services; that the assessee has an Indoor Patient Department as well as an Outdoor Patient Department; that the assessee has engaged the services of Resident doctors and full time/part time Senior consultants/consultants for attending the indoor patients; that these doctors/consultants were being paid remuneration for the services provided to the assessee after deduction of tax at source thereon, as per the provisions of the Act; that the said remuneration was debited to the profit and loss account as 'consultation fees paid to doctors' that, however, in respect of outdoor patients, the assessee had a 'fee for services' arrangement with the doctors/consultants; that under this arrangement, chambers in the hospital premises were made available to the doctors/consultants on rent, along with specified secretarial facilities, as per hospital Circular dated 26-8-1996; that there was no contractual relationship with the service provider and service recipients between the consultants and the hospital, when the consultants attended to outdoor patients; that the doctors merely used the consulting chambers along with the Secretarial pool staff, for which they paid fixed rent as per the usage allocated to them, in accordance with the aforesaid Circular; that the fee received from the out-door patients was collected by the assigned secretarial staff on behalf of the doctors/consultants, which was paid over to the respective doctors/consultants at the end of each day; that no part thereof was collected on behalf of or any odd for the benefit of the assessee; that the secretarial pool staff only helped the doctors in arranging appointment with the patients, collecting the consultation fee, issued receipts to the patients and handed over the fee collected to the respective doctors on the same day; that the consultants were permitted to have their own secretarial staff with the prior permission of the Director (Medical Services) and in that case, the services provided by the pool secretarial staff were taken care of by the concerned consultants' own secretarial staff; that once the out-patient was admitted as an in-patient, beyond any other procedure beside consultancy was carried out in the OPD, all receipts from the patients were accounted for by the hospital and tax was duly deducted at source at the time of payment of such professional fee to the doctors attending the indoor patients or the outdoor patients; that the assessee was neither making the payment to the doctors for consultancy services, nor were the services availed by the assessee; neither consultancy fee collected by the secretarial pool from the outdoor patients nor the out-goings in this regard were accounted for by the assessee in its books of account, since the receipt did not belong to the assessee; that the amount was collected on behalf of the doctors and held in trust for them; that the assessee was not retaining any amount from out of the said fee; that the cash receipts issued to the outdoor patients were without the name of the assessee and that clearly stated that the amount had been received on behalf of Doctor/Consultant named therein; that the OPD collection was as per the general rates, i.e., Rs. 500 per new patient and Rs. 400 per repeat patients; that the said rates might have even been allowed, depending on the medical discipline, a sum of Rs. 100 was collected from the secretarial staff being the one time registration fee collected per new patient, to mitigate administrative cost, as the new patient is given a unique identification/file number by the hospital and his medical history like visits made to the hospital, the doctors consulted, etc. is fed in the computer system; that the registration charges of Rs. 100 collected from the new patient was duly accounted for by the assessee in the profit and loss account under the head 'Hospital revenue' that a separate receipt therefor was issued to the patients ; that in their statements, the doctors examined by the Assessing Officer, did not say that they were engaged/employed by the assessee, rather they admitted the arrangement between the assessee and the consultants, that the OPD consultation fee was being collected by the secretarial staff and handed over to the respective doctors on the same day and the doctors were paying a fixed monthly rent to the assessee for the use of chambers along with the secretarial staff; that the provisions of section 194J of the Act do not apply to the facts of the assessee's case, since there was no relationship of service provider and service recipients between the consultants and the assessee; that rather such a relationship existed between the consultants and the patients; that as such, the assessee could not be held as an assessee in default for non-deduction of tax at source under section 194J of the Act regarding the amount collected from out-patients by the assessee on behalf of doctors/consultants; that the learned CIT(A) while passing the order under appeal, duly took all the above facts into consideration and that therefore, there is no error whatsoever in the order under appeal. The learned counsel for the assessee, on the basis of these submissions, has contended that the appeal filed by the department be dismissed.

8. We have heard the parties and have perused the material on record. While passing the order under appeal, the learned CIT(A) has observed, inter alia, that the assessee was engaged in providing and facilitating health care services; that the assessee had engaged the services of Resident doctors and full time/part time Senior Consultant/Consultant for attending the in-patients; that they were being paid remuneration for the services provided to the assessee after deducting tax at source as per the provisions of the Act; that this remuneration was deducted in the profit and loss account of the assessee as consultation fee paid to the doctors; that in respect of each payment, the assessee had a 'fee for services' arrangement with the doctors/consultants whereby chambers in the hospital premises were provided to the doctors/consultants on rent along with specified secretarial facilities as per hospital Circular dated 26-8-1996; that there was thus no contractual relationship with the service provider and the service recipient between the consultants and the assessee when attending to out-patients; that the fees received was acquired by the assigned secretarial staff on behalf of the respective doctors/consultants; that this fee was payable to the respective doctors/consultants on a daily basis and no part thereof was collected on behalf of the assessee; that the secretarial pool staff only helped the doctors in arranging appointment with the patients, collecting consultation fees, issuing receipts to the patients and hand over the fee collected to the respective doctors on the same day; that this meant that the assessee merely acted as a conduit between the consultant and the patient and only facilitates the doctors by providing them infrastructure, para-medical staff, supporting staff and machinery and equipment in the OPD chambers for which the assessee was charging a fixed monthly rent/service charges. The ld. CIT(A) observed that the Assessing Officer had not brought any material on record to the effect that a prescribed fee was retained by the hospital or the doctors had provided services on behalf of the hospital, rather from the submissions of the doctors recorded by the Assessing Officer showed that the doctors were providing medical facilities in the OPD to the patients and the hospital staff collected consultation fee on their behalf, which fee was handed over to them on the same day.

9. The department has not been able to dislodge the aforesaid observations and finding of fact recorded by the CIT(A) after considering the material brought on record.

10. A person can be treated to be an assessee in default - as per section 201 of the Act, who is required to deduct any amount in accordance with the provisions of the Act or referred to in section 192(1A) thereof, being an employer, does not deduct, or does not pay, or after so deducting fails to pay whole or any part of the tax, as required by or under the Act.

11. In the present case, the provisions of section 201(1) of the Act are clearly not attracted. It stands proved that the interaction between the patients and the consultants/doctors engaged by the assessee, is one to one relationship and the assessee merely acts as a conduit/go between. It has been established on record and the department has not been able to unhinge this, that the fee collected by the assessee was on behalf of doctors from the patients. It was paid to the doctors at the end of each day. The statements of doctors, recorded by the Assessing Officer, reiterate this position. These doctors did not state otherwise.

12. Section 194J of the Act is also not attracted. Thereunder, a person is liable to deduct tax at source for any payment in excess of Rs. 20,000 to a resident for availing professional or technical services. There was no relationship of the service provider and the service recipient between the consultants and the assessee. Rather, such relationship existed between the doctors/consultants and the patients. The collection of fee was paid and passed it on to the doctors by the pooled secretarial staff of the assessee hospital. Nothing inured for the benefit of the assessee. Rather, it was the assessee providing services to the doctors by providing them consultation chambers and secretarial staff, and not other way round.

13. In Shalini Hospitals v. Asstt. CIT [2006] 10 SOT 662 (Hyd.) , the penalty levied under section 271B of the Act for non-filing of tax audit report by the assessee was deleted. The assessee therein was a partnership firm running a nursing home. The gross receipts were found to exceed the limit of Rs. 10 lakhs, as prescribed under section 44AB(b) of the Act. The assessee was found not to have got its accounts audited. In the penalty proceedings, it was contended on behalf of the assessee that the receipts of the nursing home consisted of only room rent, theatre rent, pre and post operative nursing care, whereas the professional fee was charged by the Surgeons and doctors treating the patients and the same was not part of the income of the nursing home; that therefore, section 44AB(b) of the Act was not attracted. Penalty was, even so, levied. The Tribunal observed, inter alia, that since the fee for the professional services rendered by the Surgeons and doctors were directly received by them from the patients, what was earned by the assessee firm in the course of business was for letting out the facilities possessed by it as a nursing home and for provision of nursing and other supportive services provided by it to the patients who took treatment from the doctors in the nursing home.

14. The learned CIT(A), with reference to Shalini Hospitals' case (supra), observed that it is a general practice in all the private hospital/nursing home to allow their doctors to do private practice at their premises in the cabins and para-medical facilities and infrastructure is provided by the hospital itself. The hospitals maintain private OPD for the purpose and plays the role of merely a facilitator between the patient and the doctor in his private practice.

15. We do not find anything erroneous with the observations/ findings/conclusions of the learned CIT(A). The department has failed to bring anything on record to show that the prescription fee in question remained with the assessee hospital or that the Doctor/Consultant had provided their specialized services on behalf of the assessee hospital. Therefore, the ld. CIT(A) has correctly held that there was no scope to treat the assessee hospital as an assessee in default under the provisions of section 201(1) of the Act. We hereby uphold the order passed by the ld. CIT(A), rejecting the grievance raised by the department.

16. In the result, the appeal filed by the department is dismissed.