APPOINTMENT OF RETIRED PROFESSORS, DOCTORS, TEACHING PERSONNEL IN THE UNIVERSITY – PAYMENT MADE TO THEM IS LIABLE TO TDS ?

[Mr. M. GOVINDARAJAN]

In ITO (TDS) HALDWANI, US NAGAR, UTTRAKHAND VERSUS GB PANT UNIVERSITY OF AGRICULTURE & TECHNOLOGY PANTNAGAR - 2017 (5) TMI 1044 - ITAT DELHI, the respondent University had appointed retired professors, doctors, teaching personnel for their University for teaching.  They had been appointed on contract basis and paid according to the terms of contract.  The respondent considered the amount paid to these personnel as salary.  When the limit exceeds in their payment the University deducted tax and remitted to the Department. No PF etc., were not made from their payments.   The Assessing Officer, during the impugned assessment proceedings, observed that the assessee University was not deducting tax on payments made to retired professors, doctors, teaching personnel’s etc. The Assessing Officer observed that these payments did not qualify as salary but professional payments falling within the purview of section 194J.   A notice dated 13.02.2013 was issued to the University directing the University to deduct tax from these persons and remit the same to the Department.  A show cause notice under section 201/201(1A) of the Income Tax Act, 1961 (‘Act’ for short) was also issued to the University.

The Assessee University filed a reply to the said show cause notice.  In the said show cause notice the University submitted that that the retired teachers were paid on pay minus pension and payments were made from salary head.  The doctors were paid at approved rates out of salary head. The teaching personnel and research assistants were paid as per the prescribed rates of ICAR out of respective fund.   However, the Assessing Officer did not accept the contentions of the University and held that these payments did not fall within the ambit of the word ‘Salary’ and also did not qualify as ‘wages’ because it is not manual labor.  The work they required to perform, qualification for the work required clearly established them to be professional services.  The Assessing Officer further observed that the work to be performed by these people require and their qualifications would lead to conclude that the said services amount to professional services and liable to deduct tax @ 10% under Section 194J of the Act.  The Assessing Officer held that the assessee University was liable for tax deduction under section 194J of the Act, which was not done and therefore, the Assessee was declared to be in default under section 201 of the Act. 

The Assessee University filed an appeal before the Commissioner of Income Tax (Appeals) against the order of the Assessing Officer.  The Commissioner of Income Tax (Appeals) observed 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, even managers, commentators, anchors and sports columnists. Therefore, the provisions of Section 194J which includes specified personnel or services and leaves very little scope for reading in between the lines to include professions, such as teaching, at will.  The Commissioner of Income Tax (Appeals) observed that 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 under section 192 of the Act and not 194J of the Act.

The Commissioner of Income Tax (Appeals), in respect of payment fellowship to FRS/SFR observed that the Government of India, Ministry of Science & Technology, Department of Science & Technology has vide Office Memorandum dated March 31, 2010 revised the emoluments and guidelines on service conditions for research personnel, including JRF’s and SRF’s. The stipend is exempt under section 10(16) of the Act. Therefore, it was held that the requirement of deducting tax at source does not arise. The Commissioner of Income Tax (Appeals) allowed the appeal.

Being aggrieved against the order of the Commissioner of Income Tax (Appeals) the Revenue filed the present appeal before the Income Tax Appellate Tribunal (‘ITAT’ for short) on the following grounds-

• The Commissioner of Income Tax (Appeals) has erred in law and on facts in holding that the contractual teaching personnel are not covered under the definition of ‘profession’ for the purpose of Section 194J of the Act ignoring the facts of the case as also the fact that such teaching personnel were highly skilled persons having specialization in their particular field and hence clearly covered under the definition of ‘profession’ for the purpose of Section 194J.
• The Commissioner of Income Tax (Appeals) has erred in law and on facts in holding that payments to FRFs and SRFs is exempt under section 10(16) of the Act ignoring the facts of the case as also the fact that the assessee has failed to establish before the Assessing Officer that the payments made to FRFs and also SRFs were in the nature of scholarship and that the said amount was spent by them to meet the cost of education.
• The Commissioner of Income Tax (Appeals) has erred in law and on facts while holding as above ignoring the fact that engagement of teaching personals is purely of contractual nature and there are no employer - employee relationship between the university and them and therefore any payments made to them was liable for TDS under the provision of the Act.

  The Revenue submitted the following before the ITAT-

• The Assessing Officer has correctly stated that the teaching professionals are kept on contractual basis and payment is made on the basis of lectures delivered with a certain limit, this payment certainly does not fall within the ambit of the word salary.
• The payments under consideration falls within the ambit of 194J of the Act. 

The assessee University submitted the following before the ITAT-

• The Commissioner of Income Tax (Appeals) has given a categorical finding that as per CBDT Notification No. 88/08 dated 21/8/2008, the professionals such as teaching comes under the purview of said notification and payments made to teachers are from their salary head. 
• The Commissioner of Income Tax (Appeals) rightly held that the payments made to GRFs & SRFs are exempt under Section 10(16) of the Act and thus is not liable for TDS.

The ITAT heard the submissions made by both the parties.  The ITAT observed 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.  Therefore, the finding of the Commissioner of Income Tax (Appeals) 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. The payments to such teachers are made from their salary head and the appointments religiously follow the State’s policy on reservation, etc.  The university exercises significant control over the teachers almost at par with regular employees.  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’. The ITAT held that the University’s liability for TDS is under section 192 of the Act and not 194J of the Act.   The ITAT dismissed the appeal filed by the Revenue.