The classification of payments as salaries or professional fees hinges on the nature of the relationship, with independent professionals being taxable under Section 194J.

ORDER

Per Rahul Chaudhary, Judicial Member:

1. The present appeal preferred by the Revenue is directed against the order, dated 22/05/2025, passed by the Additional/Joint Commissioner of Income Tax (Appeals), Panchkula [hereinafter referred to as ‘the CI T(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had allowed the appeal against the Assessment Order, dated 31/07/2021, passed under Section 201 (1) & 201(1A) of the Act for the Assessment Year 2018-2019.

2. The Assessee has raised following grounds of appeal :

“1. The order of the AddI.CIT/ JCIT(Appeal), Panchakula in appeal order No. ITBA/APL/S/250/2025-26/1076365456(1)dated 22/05/2025 is opposed to law, facts and evidence of the case.

2. The learned JCIT(A) has erred in concluding that the doctors had not employer-employee relationship with deductor and the subject to deduction u/s 194] of the Income Tax Act, 1961 instead of 192 of the Act in spite of the facts that the doctors were paid monthly remuneration, professional tax was deducted, duty time is generally from 8.30 am to 5.30 pm.

3. The JCIT(A) ought to have appreciated the fact that:

(i) As per the terms and conditions of the instant case which indicate employer-employee relationship and facts of the instant case discussed at Para 5 to 12 of the AO's were not considered by the Hon'ble Tribunals/Courts.

(ii) Also the decision relied on by the JCIT(A) are not that of Hon'ble jurisdictional ITAT/High Court.

(iii) There is no denying facts that the aforesaid case laws relied on by the deductor, various Hon'ble courts have decided the issue of remuneration paid to the doctors as professional fee deductible u/s 1943 which is in favour of few hospital, but under different facts and circumstances.

(iv) The 50 doctors are working exclusively for deductor hospital, the doctors are working as per the time fixed by the deductor hospital shows administrative control over the doctors and the deductor hospital had been paying monthly remuneration and professional tax is deducted on their salary.

(v) The self employed doctors/individuals have to remit professional tax directly to the concerned local authorities. However, in this case The deductor has deducted professional tax from remuneration paid to doctors. Hence, it is clear that there is an employer - employee relation between the doctors and deductor hospital.

4. For these and other grounds that may be urged at the time of hearing, it is requested that order of the Addl.CIT/ JCIT(Appeals) may be set aside and that of the Assessing officer restored.”

3. The short issue involved in the present appeal is whether the payments made by the Assessee-hospital to the Doctors were subject to withholding the tax at source under section 194 of the Act applicable to payment of ‘professional fee’ or section 192 of the Act applicable to payment of ‘salaries’.

4. Vide order dated 31/07/2021 passed under section 201(1) & 201(1A) of the Act, the Assessing Officer [hereinafter referred to as ‘AO’] concluded that the payments made by the Assessee to the Doctors were subject to withholding the tax under section 194(2) of the Act. Since the Assessee had failed to deduct tax under the said section, the Assessee has been treated as ‘Assessee is in default’ and was directed to pay INR.1,52,13,509/- under section 201(1) and interest of INR.69,98,214/- under section 201(1A) of the Act.

5. Being aggrieved, the Assessee preferred appeal before the Ld. CIT(A) challenging the demand raised upon the Assessee. Vide order dated 22/05/2025, the Ld. CIT(A) overturned the decision of the Assessing Officer and deleted the demand raised. The Ld. CIT(A) concl