2014 (8) TMI 1186 - AT - Income Tax

TDS u/s 194J or 192 - payments made to the teachers on adhoc basis - default u/s 201(1)/201(1A) - HELD THAT - Relationship between the management and teaching staff involved an obligation to obey orders in the work to be performed, the said relationship could not be called contract for service since the teaching staff had not undertaken to render any professional or technical service. As there was a contract of service between the assessee deductor and its teaching staff appointed on adhoc basis and the salary paid to them being below the taxable limit, does not warrant deduction of tax at source and such non deduction of tax at source does not invalidate the provisions of Act making the assessee liable for the demand raised under section 201(1)/201(1A) We are in agreement with the observation of the CIT (Appeals) that merely because the assessee had not maintained separate books of account for financially added courses and self financing courses was not relevant, as there was no requirement under the Act and by not maintaining separate books of account, the nature of payment would not get changed. In view of the teaching staff being appointed on adhoc basis, for a short period, there was no entitlement for any other benefits like PF, Gratuit y, HRA, increment, etc. Upholding the order of the CIT (Appeals), we hold that the Assessing Officer was not correct in treating the payments made to the teachers on adhoc basis as professional payments in line with the provisions of section 194J of the Act. The assessee is thus not in default and there is no merit in raising of demand under section 201(1) of the Act and charging of interest under section 201(1A) of the Act. The grounds of appeal raised by the Revenue are thus dismissed.

Summary

Issues:
Liability to deduct tax at source under section 201(1) of the Income Tax Act, 1961 based on the relationship between the deductor and professional teaching staff.

Analysis:
The judgment by the Appellate Tribunal ITAT Chandigarh involved a bunch of appeals filed by the Revenue against two consolidated orders of the Commissioner of Income Tax (Appeals) regarding the liability to deduct tax at source under section 201(1) of the Act. The Revenue contended that there was no employer-employee relationship between the deductor and the professional teaching staff, thus challenging the CIT (Appeals) decision. The case revolved around the deductor, running colleges, availing services of professionals for teaching self-financing courses without deducting TDS under section 194J. The Assessing Officer held the deductor liable under section 201(1) for not deducting TDS, leading to a demand raised against the deductor. However, the CIT (Appeals) deleted the addition, emphasizing the existence of an employer-employee relationship and the salaries being below taxable limits.

The Tribunal considered the arguments presented by both parties. The deductor claimed an employer-employee relationship with the teaching staff, appointed on an adhoc basis, and argued that the payments were in the nature of salary, not professional charges. The CIT (Appeals) supported this view, citing the appointment process and control exercised by the college over the teaching staff. Additionally, the Tribunal referred to specific notifications and legal precedents to determine the relationship between the deductor and the teaching staff. It was established that the payments made were akin to salary, and the deductor was not liable to deduct tax at source under section 194J.

The Tribunal upheld the CIT (Appeals) decision, emphasizing the employer-employee relationship, lack of professional service obligation, and the nature of the payments as salary. It was concluded that the deductor was not in default for failing to deduct TDS, as the payments to the teaching staff were not subject to section 194J. The Tribunal dismissed the Revenue's appeals, stating that the facts and issues across all appeals were identical, and the decision in one appeal applied mutatis mutandis to the others. Consequently, all appeals by the Revenue were dismissed, affirming the CIT (Appeals) decision in favor of the deductor.

In summary, the judgment clarified the crucial aspect of the employer-employee relationship between the deductor and the teaching staff, determining the nature of payments and the applicability of TDS provisions under section 194J. The Tribunal's detailed analysis and reliance on legal principles and notifications led to the dismissal of the Revenue's appeals, providing a comprehensive resolution to the issues at hand.