2023 (2) TMI 1370 - AT - Income Tax

TDS u/s 194J - Honorarium/Remuneration paid to the teachers in the Government colleges - nature of fee for professional serves liable to TDS or not? - HELD THAT - While requiring the persons responsible for paying to a resident any fee for professional services to deduct the TDS at a specified rate, by way of explanation it is provided that for such purpose, the professional services shall mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. We are in agreement with the observations of the learned CIT(A) that the words fee for professional services means will not leave any scope for interpretation and the categories mentioned therein as on the date are exhaustive by the explanation itself or by the notification of CBDT and by necessary implication, such an exhaustive definition excludes the payments made to the contract teachers in intermediate colleges. Apart from this, the payment to none of the contract lectures exceeds Rs. 5 lakh and based on the slab rates and rebate under section 87A of the Act there would be no tax liability in the hands of the teachers. We are of the considered opinion that the payments made to the contract teachers do not answer the description of fee for professional services .

Summary

Issues:
Whether honorarium/remuneration paid to teachers in government colleges is in the nature of fee for professional services liable to TDS under section 194J of the Income Tax Act, 1961?

Analysis:

The judgment revolves around the issue of whether the honorarium/remuneration paid to teachers in government colleges qualifies as "fee for professional services" under section 194J of the Income Tax Act, 1961, and is subject to TDS. The Assessees, who are authorities appointed by the State Government to disburse payments to contract teachers, were held as defaulters by the Assessing Officers for not deducting TDS on these payments. The CIT(A) in one case held that the payments do not fall under "fee for professional services," while in another case, a different view was taken due to lack of concrete evidence. The Tribunal decided to address this issue in a common order due to the contradictory views.

The Revenue argued that the contract lecturers are professional teachers, and therefore, the Assessing Officers were correct in treating the Assessees as defaulters. On the contrary, the Assessees contended that the payments do not qualify as "fee for professional services" under section 194J. They relied on a CBDT Notification to support their argument.

The Tribunal analyzed section 194J of the Act, which defines "professional services" as services rendered in specific professions like legal, medical, engineering, accountancy, etc. The Tribunal noted that the exhaustive definition provided in the Act and the CBDT Notification does not cover contract teachers in intermediate colleges. Additionally, none of the contract teachers received payments exceeding Rs. 5 lakh, resulting in no tax liability for them under the Act.

Consequently, the Tribunal concluded that the payments made to contract teachers did not fall under the category of "fee for professional services." The order in favor of one Assessee was upheld, while the order against the other Assessee was reversed. The Assessing Officers were directed to delete the additions made. In conclusion, one appeal was dismissed, and the other appeal was allowed.

In light of the above analysis, the Tribunal clarified the definition of "fee for professional services" under section 194J and ruled in favor of the Assessees, determining that the payments to contract teachers in government colleges were not subject to TDS under the specified section of the Income Tax Act.