2023 (4) TMI 982 - AT - Income Tax

TDS u/s 194J - non deduction of TDS from payments made to Guest faculties - determination of relationship between master and servant - counsel submitted that there are two types of payment. One is salary paid to regular staff and another payment is made to Guest faculties recorded under the head Professional and Special Services and concerned persons (guest faculty) have given an undertaking that TDS was not to be deducted as their income would be below taxable limit - HELD THAT - While the remuneration paid to the regular faculty staff is drawn from salary head and therefore shown under the head salary for accounting purposes the remuneration paid to Guest Faculty is drawn from contingency/wages head in the light of the order of the Government of Haryana and thus shown under the head Professional and Special Services in its income and expenditure account. Guest Faculties are rendering the identical services and relationship between the management and the teaching faculties involve an obligation to obey orders and the work to be supervised and consequently the said relationship could not be called contract for services since the teaching staff does not render any professional or technical service. The monthly remuneration paid to the Guest Faculties are in the nature of contract of service between the assessee deductor and its teaching staff appointed on adhoc basis and such adhoc salary paid to them being below taxable limit on individual basis does not warrant deduction of tax at source and as such non deduction of tax at source does not trigger default under Section 201(1)/201A). Also as decided in Dharangadhra Chemical Works Ltd. vs. State of Saurashtra 1956 (11) TMI 33 - SUPREME COURT a person can be a workman even though he is paid not per day but by the job. The fact that rules regarding hours of work etc. applicable to other workmen may not be conveniently applied to them and the nature as well as the manner and method of their work would be such as cannot be regulated by any direct ions given by the Industrial Tribunal is no deterrent against holding the persons to be workmen within the meaning of the definition if they fulfil its requirement. Assessee cannot be treated as assessee in default in terms of Section 201(1)/201(1A) where the right in the master exists to supervise and control the work done by the Guest Faculties month after month. The issue in the present case is akin to the factual matrix existing in MCM D.A.V. College for Women - Decided in favour of assessee.

Summary

Issues involved:
Non-deduction of TDS from payments made to Guest faculties under Section 194J of the Income Tax Act, 1961 for AY 2017-18.

Detailed Analysis:

1. Nature of Payments and Applicability of TDS:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding alleged default in non-deduction of TDS from payments made to Guest faculties under Section 194J. The Assessee argued that the payments to Guest Faculties were not subject to TDS as their income was below the taxable limit. They contended that the payments were in the nature of remuneration under Section 192 instead of Section 194J. The Assessee cited a government order and a previous decision by a Coordinate Bench in their favor.

2. Arguments by the Revenue:
The Revenue supported the order of the CIT(A) and argued that payments to professionals for their services fell under Section 194J, justifying the default in TDS deduction on payments to Guest faculties.

3. Consideration of Submissions:
The Tribunal carefully considered the submissions. It noted that the regular faculty staff's remuneration was shown under the head 'salary,' while Guest Faculty's remuneration was categorized under 'Professional and Special Services.' The Tribunal analyzed the nature of services rendered by Guest Faculties and the relationship between the management and teaching staff. It concluded that the remuneration paid to Guest Faculties was akin to a 'contract of service' and not subject to TDS deduction due to being below the taxable limit on an individual basis.

4. Legal Precedents and Decision:
The Tribunal referred to a judgment by the Hon'ble Supreme Court and a decision by a Coordinate Bench, emphasizing the importance of the right to supervise and control the work done by the Guest Faculties. It found substantial merit in the Assessee's plea and concluded that the Assessee could not be treated as in default under Section 201(1)/201(1A). Consequently, the Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the demand under Section 201(1)/201(1A).

5. Final Decision:
The Tribunal allowed the appeal of the Assessee, ruling in their favor and pronouncing the order in the open court on 14/02/2023.