I'm a consultant doctor at a hospital. Can the AO reopen and tax my fees as salary?
Not on this material. The Madras High Court set aside the s.148A(d) order and s.148 notice: the contracts showed professional autonomy, a variable fee tied to patient volume, no statutory employment benefits and freedom to practise privately, so there was no information suggesting escapement of income.
Decided by the High Court (Madras High Court — Dr. Anita Sumanth J (single judge)) on 2022-09-01, reported as [2023] 151 taxmann.com 154 (Madras); [2023] 450 ITR 568 (Madras); also reported at (2022) 219 DTR 2 / 329 CTR 809 (Mad.). It bears on section 28(i), section 2(36), section 15, section 147, section 148, section 148A, section 133A, section 194J, section 192 of the Income Tax Act 1961, in Salary & Perquisites matters.
This answers the reclassification that follows a s.133A survey at a hospital, where seized documents are used to convert professional fees into salary and to reopen the doctors' assessments. It gives you both the merits point - control over the manner of professional work, not workplace rules on timings or premises, is the test - and the jurisdictional point that material which does not establish employment is not information suggesting escapement. The same reasoning travels to other professionals engaged on consultancy terms.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A survey under s.133A was carried out at Kovai Medical Centre and Hospital, Coimbatore, on 22 November 2021. The documents found — an employee confidentiality agreement, revised guidelines for the practice of medicine at the hospital, and joining reports — led the department to conclude that the consultant doctors were employees, so that what they had returned as professional income for assessment year 2018-19 should have been assessed as salary. Show-cause notices under s.148A(b) were issued in March 2022, the doctors replied objecting both on the time allowed and on the merits, and orders under s.148A(d) followed holding it a fit case to issue notice under s.148. Thirty-one doctors, in different specialisations, challenged those orders by a batch of writ petitions; the facts in W.P. No. 14515 of 2022 were taken as representative. The engagement terms provided a fixed amount plus a variable component turning on the number of patients treated, no statutory service benefits, stipulated hours with night call, and private practice permitted on conditions.
The s.148A(d) orders were set aside and the writ petitions allowed. On the agreements the parties had engaged as equals rather than as master and servant: remuneration was variable, no statutory service benefits were payable, private practice was permitted on conditions, professional decisions on diagnosis, treatment and procedure rested wholly with the doctors, and the doctors alone carried professional indemnity and responsibility for their medical decisions. The mere existence of workplace rules and regulations did not make them salaried employees. The Court also rejected the Revenue's objection that the challenge was premature: the officer had recorded that all material relied on had been shared, the findings in the impugned order were clear and conclusive, and only the interpretation of admitted facts was in issue. It followed that the material was not 'information' that could lead to the conclusion that tax had escaped assessment, and the jurisdictional foundation for reassessment was absent.
The Court began with the reassessment framework rather than the employment question. Since 1 April 2021 the officer must have 'information' suggesting escapement, not merely reason to believe; the definition is wide, but not all material in the officer's possession qualifies, and the officer must be able to establish a nexus between the information and probable escapement — the information must have a live and robust link with the alleged escapement, and settled propositions of law are what make that link testable (paras 24 to 32). It is a settled position, under the old regime and the new, that an issue categorically decided by judicial precedent should not be revisited in the guise of reassessment (para 33). On the substance, the Court held that the key distinction is between a contract of service and a contract for service, and that regulation of administrative and logistical functioning is common to every workplace and cannot by itself establish a master-servant relationship; permitting or restricting private practice does not determine the question either (paras 36 and 37). What is vital is that the professional discharges his professional duties independently, without interference by the management (para 38). It then went through Sushilaben Indravadan Gandhi and the High Court decisions on hospital consultants — Escorts, Apollo Hospitals, Grant Medical Foundation, Manipal Health Systems, Yashoda and IVY Health — and found the terms before it closely comparable, describing the precedent as overwhelmingly in favour of the doctors (paras 40 to 76). Applying that to the agreements, the intention of the parties was a relationship of equals, the variable remuneration and the absence of statutory benefits pointed away from employment, the department's point about prescribed brands of medication did not advance its case because clinical decisions rested with the doctors, and the doctors' sole responsibility for their medical decisions was of paramount importance (paras 78 to 81). The Court also invoked Birla Corporation, Kaumudini Narayan Dalal and Kusum Ingots for the proposition that an issue settled in one matter should not be raked up in others on similar facts (para 82).
mere existence of an agreement that indicates some measure of regulation of the service of the doctors, cannot lead to a conclusion that they are salaried employees
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Handle my notice → Ask a CA on WhatsAppNot on this material. The Madras High Court set aside the s.148A(d) order and s.148 notice: the contracts showed professional autonomy, a variable fee tied to patient volume, no statutory employment benefits and freedom to practise privately, so there was no information suggesting escapement of income. This was decided by the High Court (Madras High Court — Dr. Anita Sumanth J (single judge)) and bears on section 28(i), section 2(36), section 15, section 147, section 148, section 148A, section 133A, section 194J, section 192 of the Income Tax Act 1961. It is reported as [2023] 151 taxmann.com 154 (Madras); [2023] 450 ITR 568 (Madras); also reported at (2022) 219 DTR 2 / 329 CTR 809 (Mad.). This answers the reclassification that follows a s.133A survey at a hospital, where seized documents are used to convert professional fees into salary and to reopen the doctors' assessments. It gives you both the merits point - control over the manner of professional work, not workplace rules on timings or premises, is the test - and the jurisdictional point that material which does not establish employment is not information suggesting escapement. The same reasoning travels to other professionals engaged on consultancy terms. If it applies to you, the first step is this: Put the consultancy agreement on record and highlight the variable component linked to patient numbers, the absence of statutory employment benefits and the permission to practise privately.
A survey under s.133A was carried out at Kovai Medical Centre and Hospital, Coimbatore, on 22 November 2021. The documents found — an employee confidentiality agreement, revised guidelines for the practice of medicine at the hospital, and joining reports — led the department to conclude that the consultant doctors were employees, so that what they had returned as professional income for assessment year 2018-19 should have been assessed as salary. Show-cause notices under s.148A(b) were issued in March 2022, the doctors replied objecting both on the time allowed and on the merits, and orders under s.148A(d) followed holding it a fit case to issue notice under s.148. Thirty-one doctors, in different specialisations, challenged those orders by a batch of writ petitions; the facts in W.P. No. 14515 of 2022 were taken as representative. The engagement terms provided a fixed amount plus a variable component turning on the number of patients treated, no statutory service benefits, stipulated hours with night call, and private practice permitted on conditions. The matter was decided on 2022-09-01 by the High Court (Madras High Court — Dr. Anita Sumanth J (single judge)). On those facts the High Court held as follows. The s.148A(d) orders were set aside and the writ petitions allowed. On the agreements the parties had engaged as equals rather than as master and servant: remuneration was variable, no statutory service benefits were payable, private practice was permitted on conditions, professional decisions on diagnosis, treatment and procedure rested wholly with the doctors, and the doctors alone carried professional indemnity and responsibility for their medical decisions. The mere existence of workplace rules and regulations did not make them salaried employees. The Court also rejected the Revenue's objection that the challenge was premature: the officer had recorded that all material relied on had been shared, the findings in the impugned order were clear and conclusive, and only the interpretation of admitted facts was in issue. It followed that the material was not 'information' that could lead to the conclusion that tax had escaped assessment, and the jurisdictional foundation for reassessment was absent.
The Court began with the reassessment framework rather than the employment question. Since 1 April 2021 the officer must have 'information' suggesting escapement, not merely reason to believe; the definition is wide, but not all material in the officer's possession qualifies, and the officer must be able to establish a nexus between the information and probable escapement — the information must have a live and robust link with the alleged escapement, and settled propositions of law are what make that link testable (paras 24 to 32). It is a settled position, under the old regime and the new, that an issue categorically decided by judicial precedent should not be revisited in the guise of reassessment (para 33). On the substance, the Court held that the key distinction is between a contract of service and a contract for service, and that regulation of administrative and logistical functioning is common to every workplace and cannot by itself establish a master-servant relationship; permitting or restricting private practice does not determine the question either (paras 36 and 37). What is vital is that the professional discharges his professional duties independently, without interference by the management (para 38). It then went through Sushilaben Indravadan Gandhi and the High Court decisions on hospital consultants — Escorts, Apollo Hospitals, Grant Medical Foundation, Manipal Health Systems, Yashoda and IVY Health — and found the terms before it closely comparable, describing the precedent as overwhelmingly in favour of the doctors (paras 40 to 76). Applying that to the agreements, the intention of the parties was a relationship of equals, the variable remuneration and the absence of statutory benefits pointed away from employment, the department's point about prescribed brands of medication did not advance its case because clinical decisions rested with the doctors, and the doctors' sole responsibility for their medical decisions was of paramount importance (paras 78 to 81). The Court also invoked Birla Corporation, Kaumudini Narayan Dalal and Kusum Ingots for the proposition that an issue settled in one matter should not be raked up in others on similar facts (para 82). In the words reproduced by the source cited on this page: "mere existence of an agreement that indicates some measure of regulation of the service of the doctors, cannot lead to a conclusion that they are salaried employees" The decision followed or applied Sushilaben Indravadan Gandhi v. New India Assurance Co. Ltd. [2021] 7 SCC 151; Escorts Heart Institute & Research Centre Ltd. v. Dy. CIT [2018] 404 ITR 344 (Raj.); CIT(TDS) v. Apollo Hospitals International Ltd. [2013] 359 ITR 78 (Guj.); CIT(TDS) v. Grant Medical Foundation [2015] 375 ITR 49 (Bom.); CIT v. Manipal Health Systems (P) Ltd. [2015] 375 ITR 509 (Kar.); CIT(TDS) v. Yashoda Super Speciality Hospital [2014] 365 ITR 356 (AP); CIT(TDS) v. IVY Health and Life Sciences (P) Ltd. [2016] 380 ITR 342 (Punj. & Har.); Birla Corpn. Ltd. v. CCE (2005) 6 SCC 951; Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219 (SC); Kusum Ingots and Alloys Ltd. v. Union of India [2004] 6 SCC 254.
It was decided by the High Court on 2022-09-01 and is reported as [2023] 151 taxmann.com 154 (Madras); [2023] 450 ITR 568 (Madras); also reported at (2022) 219 DTR 2 / 329 CTR 809 (Mad.). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 28(i), section 2(36), section 15, section 147, section 148, section 148A, section 133A, section 194J, section 192, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The s.148A(d) orders were set aside and the writ petitions allowed. On the agreements the parties had engaged as equals rather than as master and servant: remuneration was variable, no statutory service benefits were payable, private practice was permitted on conditions, professional decisions on diagnosis, treatment and procedure rested wholly with the doctors, and the doctors alone carried professional indemnity and responsibility for their medical decisions. The mere existence of workplace rules and regulations did not make them salaried employees. The Court also rejected the Revenue's objection that the challenge was premature: the officer had recorded that all material relied on had been shared, the findings in the impugned order were clear and conclusive, and only the interpretation of admitted facts was in issue. It followed that the material was not 'information' that could lead to the conclusion that tax had escaped assessment, and the jurisdictional foundation for reassessment was absent. It arises in Salary & Perquisites matters, on section 28(i), section 2(36), section 15, section 147, section 148, section 148A, section 133A, section 194J, section 192 of the Income Tax Act 1961, and was decided by Madras High Court — Dr. Anita Sumanth J (single judge). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show that clinical decisions and the medical liability rest with the doctor, and that workplace regulations on timings or premises do not by themselves create a master-servant relationship. Take the jurisdictional objection at the s.148A(b) stage rather than waiting for assessment, and ask what in the seized material actually establishes employment. Argue substance over label: the Court looked at what the contract does, not at what it is called.
Still good law. Applied by the Bombay High Court in Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154 taxmann.com 159 / 457 ITR 647 (Bom.), which at para 36 relies on this decision for the proposition that, whether under the old regime of reassessment or the new, issues decided categorically should not be revisited in the guise of reassessment — including issues on which a query was raised in the assessment and the answer accepted. That passage is reproduced in full in Hexaware Technologies Ltd. v. Asstt. CIT [2024] 162 taxmann.com 225 / 464 ITR 430 (Bom.) at para 43, where the Bombay High Court adopted it again. The reliance is on the finality limb of the judgment (its para 33), not on the employment analysis, and the Siemens judgment itself was read only through the passage reproduced in Hexaware. This decision's own report carries no later-treatment note and no case review, and nothing was found either way about an appeal against it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment is a single decision of 1 September 2022 disposing of a batch of thirty-one writ petitions by consultant doctors at one hospital; the DTR/CTR report and the ITR report are the same judgment, not two orders in the same batch. Two points limit how far it travels. First, it turns on the terms of one set of engagement agreements, and the Court itself, quoting the Bombay High Court, records that a professional can be an employee and that the question is one of fact in each case. Second, it is a decision at the s.148A stage: the Court held the material was not 'information' suggesting escapement, and did not adjudicate any assessment. Whether the decision has been carried further on appeal could not be established. Two record-keeping points from the re-verification against the judgment. The date is printed inside the judgment - 'Reserved on 11.08.2022, Pronounced on 01.09.2022' - and indiankanoon's own metadata dates the document 12 April 2022, which is wrong; do not let the site's date displace the one in the judgment. And on the provisions tagged below: the judgment expressly names ss.147, 148, 148A, 133A, 194J, 192 and 260A. It does not mention s.28(i), s.2(36) or s.15 anywhere. Those three are carried here as practice tags - the competing heads of income a reader will search under when asking whether a consultant's receipts are salary or professional income, which is the question the case decides - and not as a claim that the Court cited them. The Court reasons about what a profession is without invoking the definition in s.2(36). No later treatment of this judgment was identified, and it is not established whether the Revenue took it further on appeal. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The s.148A(d) orders were set aside and the writ petitions allowed. On the agreements the parties had engaged as equals rather than as master and servant: remuneration was variable, no statutory service benefits were payable, private practice was permitted on conditions, professional decisions on diagnosis, treatment and procedure rested wholly with the doctors, and the doctors alone carried professional indemnity and responsibility for their medical decisions. The mere existence of workplace rules and regulations did not make them salaried employees. The Court also rejected the Revenue's objection that the challenge was premature: the officer had recorded that all material relied on had been shared, the findings in the impugned order were clear and conclusive, and only the interpretation of admitted facts was in issue. It followed that the material was not 'information' that could lead to the conclusion that tax had escaped assessment, and the jurisdictional foundation for reassessment was absent.
TaxSphere, “Dr Mathew Cherian v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/dr-mathew-cherian-v-acit-consultant-fees-salary/ (validity last checked 2026-08-19)
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