Sri.P.T.Varkey, Chengannur V. JTCIT, Thiruvalla

ITA 11/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68943 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR CI; S MT S VIJAYAPRABHA
• Assessee Lawyers: C B M WARRIER
• Keywords: Business income; Salary income
• Section: 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N. R.S.GANESAN, JM AND B.R.BASKARAN , AM I .T.A. NO S . 10 & 11 /COCH/201 3 ASSESSMENT YEAR S : 2008 - 09 & 2009 - 10 SHRI P.T. VARKEY, POIKAYIL PUTHEN BUNGALOW, THITTAMAL, CHENGANNUR. [PAN: ABPT 5075H] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1, THIRUVALLA. ( ASSESSEE - APPELLANT) ( REVENUE - R ESPONDENT) ASSESSEE BY SHRI C.B.M. WARRIER, FCA REVENUE BY SMT. S MT. S. VIJAYAPRABHA, JR. DR & SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 01 / 0 7 / 2013 DATE OF PRONOUNCEMENT 05 / 0 9 /201 3 O R D E R PER B.R.BASKARAN , A CCOUNTANT M EMBER : THE APPEALS FILED BY THE ASSESSEE ARE DI RECTED AGAINST THE ORDER S PASSED BY THE LD. CIT(A) , TRIVANDRUM AND THEY RELATE TO THE ASSESSMENT YEAR S 2008 - 09 AND 2009 - 10. 2. SINCE IDENTICAL ISSUES ARE UR GED IN BOTH THE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE FOLLOWING TWO ISSUES ARE URGED IN BOTH THE APPEALS: (A) WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ASSESSMENT OF CONSULTANCY RECEIPTS UNDER THE HEAD INCOME FROM SALARY REJECTING THE CLAIM OF THE ASSESSEE THAT THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS . (B) WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE PROTECTIVE ASSESSMENT OF INC OME ALREADY ASSESSED UNDER THE HEAD INCOME FROM SALARY . I.T.A. NOS. 10 & 11/COCH/2013 2 4 . THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. IN THE RETURNS FILED BY THE ASSESSEE, THE ASSESSEE DECLARED CONSULTANCY CHARGES RECEIVED FROM M/S ABAN LOYD CHILES OFFSHORE LTD , (HEREINAFTE R ABAN LLOYD) UNDER THE HEAD INCOME FROM BUSINESS AND CLAIMED EXPENSES UNDER VARIOUS HEADS. THE ASSESSING OFFICER, AFTER CONSIDERING THE TERMS OF AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE ABOVE SAID COMPANY, CAME TO THE CONCLUSION THAT THERE EXISTE D EMPLOYER - EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE ABOVE SAID COMPANY. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE CONTRACT FOR CONSULTANCY SERVICES ENTERED BETWEEN THE ASSESSEE AND M/S. ABAN LOYD IS A COLOURABLE DEVICE MEANT TO EVADE TAX. HE ALSO HELD THAT THE SAID CONTRACT CAN BE CONSIDERED ONLY AS WITHIN THE CONTRACT OF SERVICE AND NOT CONTRACT FOR SERVICE. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE CONSULTANCY RECEIPTS ISSUED FROM M/S. ABAN LOYD HAVE TO BE ASSESSED UNDER THE HEA D INCOME FROM SALARY AND ACCORDINGLY ASSESSED THE SAME IN BOTH THE YEARS UNDER CONSIDERATION . 5. HAVING HELD SO , THE ASSESSING OFFICER ALSO PROCEEDED TO ASSESS THE NET CONSULTANCY CHARGES UNDER THE HEAD INCOME FROM BUSINESS ALSO ON PROTECTIVE BASIS IN BOTH THE YEARS . IN THAT PROCESS, THE ASSESSING OFFICER EXAMINED VARIOUS TYPES OF EXPENSES CLAIMED BY THE ASSESSEE AND MADE DISALLOWANCE S RANGING FROM 3/4 TH T O 100% IN RESPECT OF VARIOUS EXPENSES . ACCORDINGLY, HE DETERMINED THE INCOME FROM PROFESSION AT RS.41,95,094/ - FOR ASSESSMENT YEAR 2008 - 09 AND AT RS.59,41,138/ - FOR ASSESSMENT YEAR 2009 - 10 AND ASSESSED THE SAME ON PROTECTIVE BASIS IN THOSE YEARS . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEALS BEFORE THE LD. CIT(A) FOR B OTH THE YEARS UNDER CONSIDERATION, BUT COULD NOT SUCCEED. HENCE THE ASSESSEE HAS FILED THESE APPEALS BEFORE US . 6 . THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WAS WRONG IN PRESUMING THAT THERE EXISTED EMPLOYER EMPLOYEE RELATIONS HIP BETWEEN M/S. ABAN LOYD AND THE ASSESSEE. ADVERTING OUR ATTENTION TO THE COPY OF THE CONTRACT ENTERED BETWEEN THE ASSESSEE AND M/S. ABAN LOYD, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE IS AN ENGINEER HAVING VAST EXPERIENCE IN OIL - WELL DRILLING PROJEC TS. HENCE, M/S. ABAN LOYD HAS TAKEN HIM AS A CONSULTANT. THE ASSESSEE IS NOT ENTITLED TO ANY BENEFIT WHICH I.T.A. NOS. 10 & 11/COCH/2013 3 ARE NORMALLY EXTENDED TO THE REGULAR EMPLOYEES SUCH AS P.F., MEDICAL BENEFIT, LTA, BONUS ETC. AS PER THE AGREEMENT, T HE ASSESSEE SHALL BE PAID A FI XED AMOUNT FOR EACH DAY OF WORK WHILE ON RIG AND 50% THEREOF WHEN THE ASSESSEE IS REQUIRED TO WORK IN BASE OFFICE. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE IS NOT REQUIRED TO ATTEND OFFICE OF M/S. ABAN LOYD EVERYDAY WHICH IS COMPULSORY FOR EMPLOYEES. T HE WORK INVOLVES PROCESSING SECRET INFORMATION AND HENCE, THE ASSESSEE WAS CONSTRAINED TO DO WORK ONLY FOR M/S. ABAN LOYD . SINCE BECAUSE THE ASSESSEE WAS OFFERING SERVICES TO M/S. ABAN LOYD ONLY, IT CANNOT BE CONSIDERED THAT THE ASSESSEE DID NOT CARRY ON ANY PROFESSION. 7 . THE LD. COUNSEL SUBMITTED THAT THE DIFFERENCE IN TERMS BETWEEN AN EMPLOYEE AND A CONSULTANT WAS EXPLAINED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ST. STEPHENS HOSPITAL VS. DCIT (2006) 6 SOT 60 ( DELHI ) AS UNDER: - INCOME TAX APPELLATE TRIBUNAL DELHI ST. STHEPHENS HOSPITAL VS. DEPUTY COMMISSIONER OF INCOME TAX ON 21 OCTOBER 2005 EQUIVALENT CITATIONS : 2006 6 SOT 60 DELHI PAGE NO. 2 & 3 PARA 5 EMPLOYEE CONSULTANT 1. ENTITLED TO PAY IN THE APPROPRIATE SCALE 1. NOT ENTITLED TO ANY PAY. MONTHLY AT A LEVEL DETERMINED BY THE SELECTION FEES OR A RETAINER IS DETERMINED ON THE COMMITTEE BASIS OF NEGOTIATION. 2. ENTITLED TO ANNUAL INCREMENTS AS PER 2. NOT ENTITLED TO ANNUAL INCREMENTS SCALE OF PAY 3. PROHIBITED FROM DOING PRIVATE PRACTICE 3. IS FREE TO DO PRIVATE SERVICE. 4. IS PAID NON - PRACTICING ALLOWANCE 4. NOT ELIGIBLE FOR PAYMENT OF NON - PRACTI S ING ALLOWANC E. 5. IS ENTITLED TO CONTRIBUTION TO PF. 5. NOT ENTITLED TO CONTRIBUTION TO PF. 6. ELIGIBLE FOR GRATUITY AND PENSION. 6. NOT ENTITLED TO GRATUITY OR PENSION. I.T.A. NOS. 10 & 11/COCH/2013 4 7. THE RETIREMENT AGE IS 60 7. THERE IS NO RETIREMENT AGE. THE ENGAGEMENT IS GENERALLY FOR A PERIOD OF ONE OR TWO YEARS AT A TIM E. 8. ELIGIBLE FOR DEARNESS 8. NOT ELIGIBLE FOR DEARNESS ALLOWANCE. ALLOWANCE AS DETERMINED FROM TIME TO TIME 9. ELIGIBLE FOR LEAVE TRAVEL CONCESSION 9. NOT ELIGIBLE FOR LEAVE TRAVEL ASSISTANCE. 10. MASTER - SERVANT RELATIONSHIP SUBSISTS 10. IS NOT A SERVANT OF THE EMPLOYER. BETWEEN EMPLOYER AND EMPLOYEE THE LD A.R SUBMITTED THAT THE ASSESSEE WAS GETTING CONSULT ANCY CHARGES ONLY FOR THE DAY S HE WORKED FOR M/S ABAN LLOYD AND FURTHER HE WAS NOT ENTITLED TO BENEFITS LIKE PF, LTA ETC. WHICH ARE NORMALLY GIVEN TO THE EMPLOYEES. M/S ABAN LLOYD HAS ALSO DEDUCTED TAX AT SOURCE ON THE PAYMENTS GIVEN TO THE ASSESSEE ONLY AT THE RATES APPLICABLE TO PROFESSIONAL FEE. HENCE, THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ASSESSMENT OF CONSULTANCY CHARGES AS SALARY INCOME. THE LD. COUNSEL FURTHER SUBMITTED THAT THERE IS NO RATIONALE IN COMPUTING THE BUSINESS INCOME ON PR OTECTIVE BASIS ONLY AND IN THAT PROCESS MAKING DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE, WHEN THE ASSESSING OFFICER HAS ALREADY CONCLUDED THAT THE CONSULTANCY CHARGES ARE ASSESSABLE AS SALARY INCOME. HE SUBMITTED THAT NORMALLY SUBSTANTIVE ASSESSME NT IS MADE ONE PERSON AND PROTECTIVE ASSESSMENT IS MADE ON SOME OTHER PERSON IN ORDER TO PROTECT THE INTERESTS OF REVENUE. 8 . ON THE CONTRARY, T HE LD. DR SUBMITTED THAT THE TERMS OF AGREEMENT CLEARLY SHOW THAT THERE EXISTED EMPLOYEE EMPLOYER RELATIONSHIP BETWEEN M/S. ABAN LOYD AND THE ASSESSEE. THE LD. DR SUBMITTED THAT THE CONTRACT ENTERED BETWEEN THE ASSESSEE AND M/S ABAN LOYD IS A GENERAL ONE AND IT SIMPLY SAYS THAT THE ASSESSEE WILL WORK IN A PARTICULAR OIL RIG. THE LD D.R FURHER SUBMITTED THAT A CO NTRACT ENTERED FOR AVAILING PROFESSIONAL SERVICES SHALL ALWAYS BE VERY SPECIFIC ABOUT THE NATURE OF WORK. INVITING OUR ATTENTION TO C LAUSE 9 OF THE CONTRACT, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS TAKEN WHOLE TIME ASSIGNMENT WITH THE COMPANY AND FURTH ER T HE ASSESSEE SHALL DEVOTE EXCLUSIVELY TO THE BUSINESS OF THE COMPANY. FURTHER, HE SHALL NOT TAKE ANY OTHER WORK I.T.A. NOS. 10 & 11/COCH/2013 5 FOR REMUNERATION (PART TIME OR OTHERWISE ) OR WORK ON ADVISORY CAPACITY OR BE INTERESTED DIRECTLY OR INDIRECTLY IN ANY TRADE OR BUSINESS DURI NG THIS ASSIGNMENT WITH THE COMPANY. THE LD. DR SUBMITTED THAT AS PER THIS CLAUSE, THE ASSESSEE CANNOT OFFER HIS SERVICES TO ANY OTHER PERSON AND ALSO THE ASSESSEE IS DEBARRED FROM CARRYING ON ANY OTHER TRADE OR BUSINESS. THE LD. DR SUBMITTED THAT THIS C LAUSE CLEARLY PROVES THAT THE ASSESSEE WAS UNDER EMPLOYMENT WITH M/S. ABAN LOYD UNDER THE GARB OF CONSULTANCY ASSIGNMENT. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE IN HIS LETTER DATED 14.09.2010, HAS SUBMITTED THAT HE HAS TO UNDERGO TRAINING AND THE SAME IS SPONSORED BY M/S. ABAN LOYD. IF THE ASSESSEE IS A PROFESSIONAL AS CLAIMED BY HIM , T HE RE IS NO REQUIREMENT OF UNDERGOING T RAINING UNDER THE PROGRAM CONDUCTED BY M/S. ABAN LOYD , AS THE ASSESSEE WOULD BE CONSIDERED AS A TECHNICAL EXPERT OFFERING PROF ESSIONAL SERVICES . FURTHER THE AO HAS ALSO NOTICED THAT T HE ASSESSEE DID NOT RAISE ANY BILL OR COLLECTED ANY SERVICE TAX FOR THE ALLEGED CLAIM OF OFFERING OF PROFESSIONAL SERVICES. LD D.R FURTHER SUBMITTED THAT T HE ASSESSEE HAS BEEN RECEIV ING FIXED AMOUN T EVERY MONTH AND THE SAME WAS CREDITED IN THE BANK ACCOUNT AS SALARY ONLY. 9 . AS REGARD TO THE PROTECTIVE ASSESSMENT, THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS ALREADY CONFIRMED THE ASSESSMENT OF RECEIPTS AS SALARY INCOME AND FURTHER, THE LD. CIT(A) HAS HELD THAT NONE OF THE EXPENSES CLAIMED BY THE ASSESSEE IS ALLOWABLE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE CONSULTANCY CONTRACT ENTERED BETWEEN THE ASSESSEE AND M/S ABAN LLOYD FRO M TIME TO TIME. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW RELEVANT PORTION S OF THE SAID CONTRACT : - THIS HAS REFERENCE TO YOUR APPLICATION FOR THE POSITION OF CONSULTANT BARGE ENGINEER , ABAN - II, OFFSHORE OIL WELL DRILLING PROJECT AND SUBSEQUENT DI SCUSSION YOU HAD WITH US. WE ARE PLEASED TO OFFER YOU AN ASSIGNMENT OF CONSULTANT BARGE ENGINEER IN ABAN OFFSHORE LIMITED (COMPANY). THIS OFFER IS ON CONTRACTUAL BASIS AND SUBJECT INTER ALIA TO THE FOLLOWING TERMS AND CONDITIONS: - I.T.A. NOS. 10 & 11/COCH/2013 6 1. SCOPE OF EMPL OYMENT 1. 1 THE CONSULTANCY ASSIGNMENT IS FOR OPERATIONS OF RIG ABAN - II IN THE OFFSHORE OIL WELL DRILLING PROJECT, EAST COAST OF INDIA, UNDER THE CONTRACT FROM OIL & NATURAL GAS CORPORATION OF INDIA LIMITED. 1.2 AS CONSULTANT BARGE ENGINEER YOUR PRI MARY BUT NOT EXCLUSIVE, DUTIES WILL BE TO WORK WITH UTMOST SINCERITY, LOYALTY, INTEGRITY AND DILIGENCE ON ABAN - II. 1.3 THE DUTIES AND RESPONSIBILITIES MAY BE AMENDED, MODIFIED AND VARIED AT ANY TIME BY THE COMPANY. YOUR PLACE OF WORK FOR THE PURPOSE OF THIS ASSIGNMENT SHALL BE EAST COAST OF INDIA. 1.4 DURING THE TERMS OF ASSIGNMENT, YOU SHALL UNDERGO SUCH TRAINING AS THE COMPANY MAY SPONSOR FROM TIME TO TIME. 2. WORK SCHEDULE YOU SHALL WORK AS PER THE SCHEDULE GIVEN TO YOU BY OUR BASE OFFICE. 3 . EMOLUMENTS 3.1.... 3.2 YOU SHALL NOT BE ENTITLED TO ANY BENEFIT WHICH COMPANY IS EXTENDING TO THE REGULAR EMPLOYEES I.E. PF, SAF, MEDICAL, LTA, BONUS ETC. 4. TRAVEL & TRANSIT ACCOMMODATION Y OU SHALL BE RESPONSIBLE TO MAKE NECESSARY ARRANGEMENTS FOR YOUR TRAVEL TO REACH THE WORK SITE AS STATED BY THE COMPANY. EXPENSES TOWARDS HOTEL ACCOMMODATION, IF ANY, DURING TRANSIT WILL HAVE TO BE BORNE BY YOU. 5. INSURANCE ..... 6. PERIOD OF EMPLOYMENT 6.1 THE PRIMARY TERM OF THIS CONTRACT OF CONSULTANC Y IS FOR THREE YEARS. HOWEVER, THE SAME WILL BE RENEWED IN EVERY FINANCIAL YEAR. THIS CONTRACT SHALL COMMENCE FROM THE DATE OF YOUR REPORTING TO ABAN - II. I.T.A. NOS. 10 & 11/COCH/2013 7 7. TERMINATION OF EMPLOYMENT 7 .1 THIS CONSULTANCY ASSIGNMENT CAN BE TERMINATED BY EITHER SIDE BY GIVING CLEARLY 30 (THIRTY) DAYS NOTICE. 7.2 IN CASE OF COMMISSION OF ANY MISCONDUCT BY YOU, YOUR ASSIGNMENT CAN BE TERMINATED BY THE COMPANY WITHOUT ANY NOTICE OR SALARY IN LIEU THEREOF. 7.3 WITHOUT PREJUDICE TO SUB - PARAS 7.1 AND 7.2 ABOVE, I T IS CLEARLY UNDERSTOOD AND AGREED BY THE PARTIES THAT THIS CONSULTANCY ASSIGNMENT SHALL STAND AUTOMATICALLY TERMINATED WITHOUT ANY NOTICE OR SALARY IN LIEU THEREOF ON COMPLETION OF YOUR TERM OF ASSIGNMENT AT THE RIG.... OR ON EXPIRY/SUSPENSION/EARLIER TER MINATION, AS THE CASE MAY BE, OF COMPANYS ACTIVITY AT RIG...... 8. JURISDICTION ........ 9. OTHER WORK Y OUR POSITION IS A WHOLE TIME ASSIGNMENT WITH THE COMPANY. YOU SHALL DEVOTE YOURSELF EXCLUSIVELY TO THE BUSINESS OF THE COMPANY. YOU SHALL NOT T AKE UP ANY OTHER WORK FOR REMUNERATION (PART TIME OR OTHERWISE) OR WORK ON ADVISORY CAPACITY OR BE INTERESTED DIRECTLY OR INDIRECTLY (EXCEPT AS A SHARE HOLDER OR DEBENTURE HOLDER) IN ANY OTHER TRADE OR BUSINESS DURING THIS ASSIGNMENT WITH THE COMPANY. 10. CONFIDENTIAL INFORMATION Y OU WILL NOT AT ANY TIME, WITHOUT THE CONSENT OF THE COMPANY, DISCLOSE OR DIVULGE OR MAKE PUBLIC EXCEPT ON LEGAL OBLIGATION ANY INFORMATION REGARDING THE COMPANYS AFFAIRS OR ADMINISTRATION OR RESEARCH CARRIED OUT WHETHER THE SA ME MAY BE CONFIDED TO YOU OR BECOME KNOWN TO YOU IN COURSE OF YOUR SERVICE OR OTHERWISE. 11. PAST RECORD IF ANY DECLARATION GIVEN OR INFORMATION FURNISHED BY YOU TO THE COMPANY PROVES TO BE FALSE OR IF YOU ARE FOUND TO HAVE WILFULLY SUPPRESSED ANY MATER IAL INFORMATION, IN SUCH CASE, THIS ASSIGNMENT IS LIABLE TO BE TERMINATED WITHOUT ANY NOTICE. I.T.A. NOS. 10 & 11/COCH/2013 8 12. SEPARATION ON ACCEPTANCE OF SEPARATION NOTICE, YOU WILL IMMEDIATELY GIVE UP TO THE COMPANY ALL CORRESPONDENCES, DOCUMENTS, RECORDS, TOOLS, PROPERTIES AND MATERIALS OF THE COMPANY AND SHALL NOT MAKE OR RETAIN ANY COPIES THEREOF. 13. CHANGES OR AMENDMENTS THE COMPANY RESERVES THE RIGHT TO CHANGE OR AMEND THE TERMS AND CONDITIONS CONTAINED HEREIN OR ANY OF THE SCHEMES REFERRED TO HEREIN. 14. MEDICAL FITNESS THIS OFFER IS SUBJECT TO YOUR UNDERGOING MEDICAL CHECK UP AND TESTS BY A MEDICAL PRACTITIONER SPECIFIED BY THE COMPANY AND YOU BEING DECLARED MEDICALLY FIT BY THE SAID MEDICAL PRACTIONER. IF THIS OFFER AND THE TERMS AND CONDITIONS SET FORTH HEREI N ARE ACCEPTABLE, KINDLY SIGN AND RETURN A COPY OF THIS LETTER IN TOKEN OF YOUR ACCEPTANCE. 11. WE NOTICE THAT THE AO AS WELL AS LD CIT(A) HAS GIVEN THOUGHTFUL CONSIDERATION TO THE VARIOUS CLAUSES MENTIONED IN THE CONTRACT AND HAVE COME TO THE CONCLU SION THAT THERE EXISTS EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE M/S ABAN LLOYD AND THE ASSESSEE HEREIN. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OBSERVATIONS MADE BY LD CIT(A) IN THIS REGARD: - 11. IN ORDER TO ASCERTAIN WHETHER THE APPELLANT WA S HIRED UNDER A CONTRACT OF SERVICE OR CONTRACT FOR SERVICE, THE ESSENTIAL INGREDIENTS OF THE CONTRACTS ARE TO BE SEEN. THE CONTRACT OF SERVICE OR EMPLOYER - EMPLOYEE RELATIONS HIP GENERALLY EXITS WHEN WORKER AGREES TO WORK FOR AN EMPLOYER ON A FULL TIME OR PART TIME BASIS IN RETURN OF HIS SALARY . THE EMPLOYER HAS A RIGHT TO DECIDE WHERE, WHEN AND HOW THE WORK IS TO BE DONE. THE MOST IMPORTANT TEST TO FIND OUT WHETHER THE WORKER IS AN EMPLOYEE UNDER CONTRACT OF SERVICE AND SELF EMPLOYED UNDER A CONTRACT FOR SERVICE IS, THEREFORE, THE CONTROL TEST. 12. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HAS CLEARLY BROUGHT OUT THE FACT THAT THE SAID COMPANY DIRECTLY CONTROLLED THE WAY THE WORK IS REQUIRED TO BE DONE AND THE WORK METHODS USED. AS PER CLAUS E 1.3 OF THE AGREEMENT BETWEEN THE APPELLANT AND SAID COMPANY, THE COMPANY HAS RIGHT TO AMEND, MODIFY AND VARY THE DUTIES AND RESPONSIBILITIES OF THE APPELLANT AT ANY TIME. EVEN THE PLACE OF WORK OF APPELLANT HAS ALSO BEEN FIXED AS EAST CO A ST OF INDIA. FU RTHER AS PER CLAUSE 2, THE APPELLANT IS REQUIRED TO WORK AS PER SCHEDULE GIVEN BY THE SAID COMPANY. THESE CLAUSES CLEARLY SHOW THAT THE COMPANY EXERCISES FULL CONTROL THE WAY THE WORK IS TO BE DONE AND THE WORK METHODS USED. IT IS GIVEN IN I.T.A. NOS. 10 & 11/COCH/2013 9 CLAUSE 1.4 OF TH E SAID AGREEMENT THAT THE APPELLANT SHALL UNDERGO SUCH TRAINING AS THE COMPANY MAY SPONSOR FROM TIME TO TIME. TRAINING IS NOT GENERALLY GIVEN TO AN INDEPENDENT CONSULTANT AS HE IS SUPPOSED TO BE AN EXPERT IN THE FIELD IN WHICH HIS SERVICES ARE TAKEN BUT ON LY TO AN EMPLOYEE. 13. THE OTHER TEST IS THE CHANCE OF PROFIT/RISK OF LOSS TO THE PERSON EMPLOYED. IF AN EMPLOYER - EMPLOYEE RELATIONSHIP EXISTS, THE EMPLOYER ALONE ASSUMES THE RISK OF LOSS. THE EMPLOYER ALSO GENERALLY COVERS OPERATING COSTS, WHICH MAY INC LUDE OFFICE EXPENSES, EMPLOYEE WAGES AND BENEFITS, INSURANCE PREMIUMS, AND DELIVERY AND SHIPPING COSTS. THE EMPLOYEE ASSUMES LITTLE OR NO FINANCIAL RISK AND IS ENTITLED TO HIS OR HER FULL SALARY OR WAGES REGARDLESS OF THE FINANCIAL HEALTH OF THE BUSINESS. THERE IS NOTHING IN THE AGREEMENT WHICH SHOWS THAT APPELLANT COULD INCUR ANY LOSS ON ACCOUNT OF THE WORK TAKEN. AS PER THE AGREEMENT, THE APPELLANT IS TO BE PAID AT A FIXED AMOUNT ON A PER DAY BASIS. 14. COMING TO THE CONTENTIONS MADE BY THE APPELLANT IN HEARING NOTE, IT IS SEEN THAT THE FACT THAT THE APPELLANT WAS WORKING ONLY FOR THE COMPANY IS ONE OF THE FACTS ONLY OUT OF THE OTHER REASONS MENTIONED BY THE AO IN THE ASSESSMENT ORDER FOR REACHING CONCLUSION THAT AN EMPLOYER - EMPLOYEE RELATION SHIP EXISTS I N THIS CASE. IT IS NOT NECESSARY THAT AN EX - EMPLOYEE CAN BE EMPLOYED ONLY BY AN AGREEMENT OF EXTENSION OF SERVICE AFTER HIS RETIREMENT. HE CAN BE EMPLOYED AS AN EMPLOYEE ON TERMS AND CONDITIONS OTHER THAN THOSE HE WAS EMPLOYED UP TO THE DATE OF RETIREMENT. THE OTHER ARGUMENTS OF THE APPELLANT ALSO FAIL IN VIEW OF SPECIFIC PROVISIONS IN THE AGREEMENT MENTIONED ABOVE WHICH CLEARLY SHOWS EXISTENCE OF AN EMPLOYER - EMPLOYEE RELATIONSHIP. 15. CONSIDERING THE FACTS IN TOTALLY, IT IS HELD THAT AN EMPLOYER - EMPLOYEE RELATIONSHIP EXISTS IN THIS CASE, AND THEREFORE, THE AO WAS RIGHT IN ASSESSING THE INCOME RECEIVED BY THE APPELLANT FROM THE SAID COMPANY UNDER THE HEAD INCOME FROM SALARY. 12. THE QUESTION WHETHER THERE EXISTS EMPLOYER - EMPLOYEE RELATIONSHIP IS ESSENT IALLY A QUESTION OF FACT AND THE SAME HAS TO BE DECIDED ON THE BASIS OF CONDUCT OF PARTIES. ON GOING THROUGH VARIOUS CLAUSES OF THE CONTRACT, WE ARE ALSO INCLINED TO ACCEPT THE VIEW EXPRESSED BY THE LD CIT(A) FOR THE FOLLOWING REASONS. (A) WE NOTICE THA T THE ASSESSEE HEREIN HAS APPLIED FOR THE POSITION CONSULTANT BARGE ENGINEER . (B) THE CLAUSE 1 OF CONTRACT SPECIFIES SCOPE OF EMPLOYMENT , M EANING THEREBY, BOTH THE PARTIES HAVE UNDERSTOOD AS EMPLOYMENT. FURTHER CLAUSE 1.2 STATES THAT THE ASSESSEE IS REQUIRED TO WORK WITH UTMOST SINCERITY, LOYALTY ETC. CLAUSE 1.4 STATES ABOUT THE TRAINING. THESE CLAUSES FURTHER REINFORCE THE VIEW THAT THE OFFER WAS EMPLOYMENT ONLY. I.T.A. NOS. 10 & 11/COCH/2013 10 (C) CLAUSE 6 OF CONTRACT SPECIFIES PERIOD OF EMPLOYMENT , WHICH AGAIN STRENGTH ENS THE VIEW MENTIONED ABOVE. (D) CLAUSE 7 REGARDING TERMINATION OF EMPLOYMENT FUR THER CLARIFIES THAT THE SCOPE OF ARRANGEMENT IS ONLY EMPLOYER - EMPLOYEE RELATIONSHIP ONLY. (E) CLAUSE 9 REGARDING OTHER WORK MAKES IT CRYSTAL CLEAR THAT THERE EXI STS ONLY EMPLOYER - EMPLOYEE RELATIONSHIP BETWEEN M/S ABAN LLOYD AND THE ASSESSEE. A PROFESSIONAL CONSULTANT ALWAYS PERFORM ONLY ADVISORY ROLE TO ALL HIS CLIENTS. CLAUSE 9 PROHIBITS THE ASSESSEE TO WORK ON ADVISORY CAPACITY FOR OTHERS. FURTHER THE ASSESS EE IS PROHIBITED FROM TAKING UP WORK FOR REMUNERATION AND ALSO PROHIBITED FROM CARRYING ON ANY TRADE OR BUSINESS DURING THE ASSIGNMENT WITH M/S ABON LLOYD. SUCH KIND OF RESTRICTIONS IS NOT/COULD NOT BE PLACED ON PROFESSIONALS BY A CLIENT. (F) CLAUSE 12 TALKS ABOUT SEPARATION AND SUCH KIND OF CLAUSE IS PLACED ONLY IN THE CONTRACT OF EMPLOYMENT. 13. IN OUR VIEW, THE CONDUCT OF THE PARTIES AND THE UNDERSTANDING OF THE ARRANGEMENT SHOULD BE CONSIDERED PRIMARILY IN ORDER TO DECIDE THE NATURE OF RELATIO NSHIP. IN OUR VIEW, THE DEDUCTION OF TAX AT SOURCE AT THE RATES APPLICABLE FOR PROFESSIONAL PAYMENTS, NON - AVAILABILITY OF PF, LTC, MEDICAL BENEFITS ETC. ARE NOT D ECIDING FACTORS; THROUGH THEY MAY BE CONSIDERED AS ONE OF THE FACTORS TO DECIDE ABOUT THE REL ATIONSHIP. ON A TOTALITY OF FACTS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE VIEW OF THE AO THAT THERE EXISTED EMPLOYER - EMPLOYEE RELATIONSHIP BETWEEN M/S ABAN LLOYD AND THE ASSESSEE. CONSEQUENTLY, THE AO WAS JUSTIFIED IN ASSESS ING THE CONSULTANCY CHARGES UNDER THE HEAD INCOME FROM SALARY. 14. THE AO HAD ALSO ASSESSED THE CONSULTANCY CHARGES AFTER ALLOWING DEDUCTION OF A PORTION OF EXPENSES UNDER THE HEAD INCOME FROM BUSINESS ON PROTECTIVE BASIS. SINCE WE HAVE ALREADY CONFI RMED THE ASSESSMENT UNDER THE HEAD INCOME FROM SALARY, WE DIRECT THE AO TO DELETE THE PROTECTIVE ASSESSMENT MADE. I.T.A. NOS. 10 & 11/COCH/2013 11 15. IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 05 - 0 9 - 2013 . SD/ - SD/ - ( N. R.S.GANESAN ) ( B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 5 TH , SEPTEMBER , 2 013 RAJ* COPY TO: 1. SHRI P.T. VARKEY, POIKAYIL PUTHEN BUNGALOW, THITTAMAL, CHENGANNUR. 2. THE DEPUTY COMMISSIONER OF INCOME - T AX, CIRCLE - 1, THIRUVALLA. 3 . THE COMMISSIONER OF INCOME - TAX (APPEALS) , TRIVANDRUM. . 4 . THE COMMISSIONER OF INCOME - TAX , TRIVAND RUM. 5 . D.R. , I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN I.T.A. NOS. 10 & 11/COCH/2013 12