2017 (5) TMI 1044 - AT - Income Tax

TDS u/s 194J - payments made to retired professors, doctors, teaching personnel s etc. - whether the contractual teaching personnel are not covered under the definition of profession for the purpose of Section 194J ? - existence of employers employee relationship - CIT(A) held that the payments made to GRFs & SRFs are exempt u/s 10(16) - Held that - As per Notification no. 88/2008 dated 21.08.2008 the professions notified are sports persons, umpires and referees, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists. Thus, the finding of the CIT(A) is just and proper that the scope of this section includes specified personnel or services and leaves very little scope for reading in between the lines to include professions, such as teaching, at will. Secondly, in the case of the assessee University the payments to such teachers are made from their salary head and the appointments religiously follow the State s policy on reservation, etc. Also the university exercises significant control over the teachers almost at par with regular employees. See case of Max Muller Bhawan, New Delhi (2004 (5) TMI 61 - AUTHORITY FOR ADVANCE RULINGS) wherein it has been ruled that such engagements are covered u/s 192 for the purposes of TDS. Also the relationship between the teachers so employed and the employer is seen to have the rigidity of contract of employment and not the flexibility seen in contracts for employment. Thus it is held that the University s liability for TDS is u/s 192 of the Act and not 194J of the Act. The CIT(A) has rightly arrived at the conclusion and allowed the appeal of the assessee.

Summary

Issues:
1. Whether contractual teaching personnel are covered under the definition of "profession" for the purpose of Section 194J of the IT Act.
2. Whether payments to FRFs and SRFs are exempt under section 10(16) of the IT Act.
3. Whether payments made to teaching personnel are liable for TDS under the provisions of the IT Act.

Issue 1:
The Revenue filed an appeal against the order passed by CIT(A)-II, Dehradun, arguing that the contractual teaching personnel should be considered as professionals falling under the definition of "profession" for the purpose of Section 194J of the IT Act. The Assessing Officer contended that these payments did not qualify as salary but as professional payments under Section 194J. However, the CIT(A) disagreed, stating that the scope of Section 194J includes specified personnel or services and does not easily encompass professions like teaching. The CIT(A) further noted that the university exercised significant control over the teachers, akin to regular employees, and held that the liability for TDS is under Section 192, not Section 194J. The appeal was allowed in favor of the assessee.

Issue 2:
Regarding payments to FRFs and SRFs, the Assessing Officer did not discuss this issue specifically. The Assessee argued that these payments were in the nature of stipends and eligible for exemption under section 10(16) of the IT Act. The CIT(A) agreed, stating that payments to FRFs and SRFs are indeed exempt under section 10(16), and therefore, there is no liability for TDS on this account. The appeal was allowed in favor of the assessee.

Issue 3:
The Assessing Officer held that payments made to teaching personnel were liable for TDS under the IT Act, as they were on a contractual basis and did not qualify as salary. The Revenue contended that the payments fell within the ambit of Section 194J. However, the CIT(A) found that the relationship between the teachers and the university resembled a "contract of employment," leading to the conclusion that the university's liability for TDS is under Section 192, not Section 194J. The CIT(A) upheld the appeal of the assessee, stating that there was no need to interfere with their findings. Consequently, the Revenue's appeals were dismissed.

In summary, the judgment addressed the issues related to the classification of contractual teaching personnel under the definition of "profession" for TDS purposes, the exemption of payments to FRFs and SRFs under section 10(16) of the IT Act, and the liability for TDS on payments made to teaching personnel. The CIT(A) ruled in favor of the assessee on all counts, emphasizing the specific provisions of the IT Act and the nature of the relationships involved in each case.