Government Polytechnic Education Society , Rohtak Haryana V. ITO, TDS, Rohtak

ITA 1850/DEL/2021

AI Insights

The case involves the Government Polytechnic Education Society, which appealed against the order of the Commissioner of Income Tax (Appeals) concerning an assessment order that imposed a demand for non-deduction of TDS on payments made to guest faculties under Section 194J of the Income Tax Act, 1961, for the assessment year 2017-18. The appellant argued that the payments were made from the contingency/wages head and were below the taxable limit, thus not requiring TDS deduction. The Tribunal considered the nature of the payments and the relationship between the institution and the guest faculties, referencing a similar case (ACIT (TDS) Chandigarh vs. MCM D.A.V. College for Women) and relevant Supreme Court judgment (Dharangadhra Chemical Works Ltd. vs. State of Saurashtra) to conclude that the relationship constituted a 'contract of service' rather than a 'contract for service', and thus Section 192, not Section 194J, should apply.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121726 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 02-12-2021
• Other Referred Cases: ACIT (TDS) Chandigarh vs. MCM D.A.V. College for Women
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROTATIONAL DUTY
• Assessee Lawyers: NAVEEN KUMAR GOYAL
• Keywords: TDS
• Section: 2; 201; 192; 194J

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H” DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.1850/DEL/2021 Assessment Year 2017-18 Government Polytechnic Education Society, Sampla, NH-10, Delhi Road, Sampla, Rohtak. Vs. ITO (TDS), Rohtak. TAN/PAN: RTKG08173E (Appellant) (Respondent) Appellant by: Shri Naveen Kumar Goyal, CA Respondent by: Shri R.K. Jain, Sr.DR (Rotational Duty) Date of hearing: 07 02 2023 Date of pronouncement: 14 02 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capti oned app eal has b ee n f il ed b y the A sse ssee a gainst the order of t he C o mmi ss ione r of Income Tax (A ppeals), National Facel ess A ppeal Cent re [‘ CIT (A )’ in short] dated 29. 10. 20 21 ar isi ng from th e assess ment order da ted 02. 02.2 021 pa s sed b y the A ssessi ng Of fice r (A O) under Sec t io n 20 1(1) /201( 1A ) for a llege d de fa ult t ow ards n on deduct ion of T DS from pa yme nts made to G uest fac ul ties w it h re ference t o Secti on 194J o f the Income T ax A ct, 1961 ( the A ct) conce rni ng A Y 2017 -18. 2. When the ma tte r w as cal led f or he ar ing, th e l d. cou nsel submit ted t hat the re are tw o t ypes o f pa ymen t. One is s alar y pai d to reg ula r staf f and anot he r pa yme nt is ma de t o G uest faculti es reco rded under t he head ‘P rofes si ona l and S pecia l Se rvices ’. The I.T.A. No.1850/Del/2021 2 ld. couns el fu rt her sub mi tt ed t ha t concer ned pe rs ons (guest facu lt y) ha ve gi ven an und er ta king t ha t TD S w as not t o b e deduc te d as t he ir inc ome w ould be bel ow t axab le li mit. T he l d. counse l further a dve rted to list of re mu nerati on pai d t o G ues t Faculties for t he Financ ial Y ea r 2016-17 as t abu lated a t p age no. 33 of t he paper bo ok to j ust if y that the rece ipts in the hands of G uest Fa cult ies ag gregating to Rs. 24 ,94, 090/ - w ere bel ow ta xable limit w he n se en at individua l bas is. T he ld. co uns el ne xt referred to o rder da te d 04. 12. 2019 issued by ‘G over nme nt of Haryana Techni ca l Educa tion ’ w he re in the H ar ya na G ove rnment has fixed the no rms/ gui del ines for util iza ti on o f services of facu lt y a nd Sta ff / G uest Facult y / G ues t I ns truc to r in educational activit ies and payme nt of m onthl y re munerati on to s uch G uest Facult ies / G uest Ins t ruct ors. A dvert ing to par agraph 4 of t he order, it w as pointed out t hat t he month ly remunera t ion as a ppr oved b y the G ove rnment i n respec t of Guest Fa cul t y/ G uest Inst ructors w ill b e paid f rom the c ont inge nc y/wa ges h ead as t he ir enga ge me nt is agains t teaching load and not ag ai nst the sanct ioned pos t. It w as thus cont ende d that such pa yme nts are i n ef fect, payment of re munerat ion to s uch Gues t Facul t y and therefore, Sect ion 192 w ill a ppl y instea d of Sect ion 1 94J incorrectl y applied b y the A ssessi ng O fficer. It was th us submi t ted t hat w hen t he payme nt t o G uest F acu lties a re seen on the t ouchs tone of Sec tion 192, no de fa ult for non de duct ion of T DS coul d be reckoned a nd the refore, the p rovisi ons of Section 2 01/ 201 (1A ) is a compl ete non s tarte r. To butt re ss, t he plea that no defaul t for non deducti on of T DS tow ard s mont hl y re munera t io n pai d to Gu est Fac ul ti es can be vis ua li zed, the ld. couns el r eferred to the decis ion of t he C o- ord inate Be nc h i n ITA No.5 12 t o 514/ CH D /2014 & Ors or der I.T.A. No.1850/Del/2021 3 date d 1 2. 08. 2014 i n t he c ase of A C IT (TD S) C handi gar h vs. MC M D .A . V. College f or Wom e n and submi t ted tha t t he C o-o rdi nate Bench of ITA T has adjudica ted the i dentical s it ua tion i n favour of the assesse e. The ld. couns el thus urg ed for ca nce llat ion o f the de ma nd ra ise d under Sect ion 201( 1)/ 201 (1A ) a mounti ng to Rs. 6, 74, 633/ - on account of non ded ucti on of T D S for a mont hl y re munerat ion paid t o s evera l G ues t Fa cu lt ies aggre gati ng t o Rs. 24, 94,090/-. 3. T he ld. D R for the Revenue, on the ot he r ha nd, supported the order of the C IT (A ) and co ntended tha t t he pa yme nt ma de to the pro fessionals for obtaining the i r ser vices are c overe d by Se ct ion 194J an d t he re for e def au lt has been r ightl y a ttri buted to the assessee f or non deduc ti on of TD S on pa yme nt s t o such G uest Facult y re nde ri ng pro fess ional services. 4. We ha ve ca re ful ly conside re d t he rival su bmiss i ons. The assessee s ociet y i s run ning an e ducationa l ins t itute at Sampla D ist ri ct R oh ta k H ar ya na. 5. It is the cas e of the ass essee t ha t whil e the remu ner ati on paid to the reg ul ar fac ult y staff is drawn fr om sala ry head and ther ef ore, s hown under t he he ad ‘sal ar y’ for acc ounti ng purpos es, the re mu nerati on pa id to G ues t Facult y is draw n from cont ingenc y/w ages head i n t he li ght o f th e ord er o f the G ove rnment o f H arya na a nd t hus s how n unde r the hea d ‘P ro fess i onal a nd Spec ial Se rvices ’ i n i ts inco me and e xpenditure account. H ow ever, the G ues t Faculti es ar e r en der in g t he identical ser vi ces an d re lati ons hip betw ee n t he ma na gement and th e teach ing fac ulties i nvol ve an o bli gatio n to o be y orders and the w ork t o be s upe rvis ed a nd co nseq uentl y the sai d relationship I.T.A. No.1850/Del/2021 4 coul d n ot be cal led ‘ contract fo r se rvic es ’ si nce the teach ing st aff doe s not rende r any profes si onal or techni cal s erv ice. T he mont hl y re munerat ion paid to t he Guest F acul ties a re i n the na ture of ‘c ont ract of s ervice ’ betwe en the assessee deduct or and its teach ing s taff a ppoi nt ed on adhoc bas is a nd such adhoc salar y paid to the m b ei ng bel ow taxable li mi t on indi vidual basis, does not w a rrant deduc t io n of tax at sourc e an d as suc h non deducti on of ta x at s ourc e does not trig ge r default un der Secti on 201(1)/201A ) of the Ac t. We s imultane ousl y f ind that the assess me nt w as c omple ted under Se cti on 143(3 ) vi de order da te d 09. 07.2019. T he a ssess men t w as car ri ed o ut w i thout ma ki ng a ny adjus tment t o the r eturned income. 6. We also note t ha t in t he i dentical fact s ituati on t he C o- ord inate B enc h of Tri bu nal has t ake n note of the judgment re ndered b y t he H on’bl e Supreme C ourt in D har angad hr a Chem ical Works L td. vs. St at e of Sauras htra, (A IR 1957 SC 264) w hich he ld as unde r: “ T h e p ri m a f ac i e t e st f o r th e d e t e r m in at i on o f r el at i o ns h i p be t w e e n m a st e r a n d se r v an t i s t h e e x i s t e n c e o f th e r i gh t i n t he m a st e r t o su pe r v i se an d c on t rol t he wo r k do ne b y t he se r v a n t n o t on l y i n t h e m a t t e r o f di r e c ti n g w ha t w o r k t he se r v an t is t o d o b ut al so t h e m an ne r i n w hi c h h e sh al l do hi s w or k . T h e n at u r e o r ex t e n t of c o n t ro l w h i c h i s r e q u i si t e t o e s t a bl i sh th e r el a ti o ns h i p of e m p l o ye r a nd e m pl o y e e m u s t n e ce s s a ri l y va r y f ro m b us i n e s s t o bu si n e s s a n d is b y i t s v e r y n a t u r e i n c a p a bl e o f p r ec i se d e fi n i t i o n. T he c or r e c t m e t h o d of a p p r o a c h , t h e r e f o r e , w ou l d be t o c o n s i d e r wh et h e r ha v i n g r e g a r d t o t h e n at u re o f t h e w o rk t h ere w a s d u e co n t ro l an d s up e r v i s i o n by t h e e m p l o y e r. A p e r s on can b e a wo r k m an e v e n t ho u gh h e i s pa i d no t p e r d a y b ut b y th e j o b . T he fa c t t h a t r ul e s r e g a rd i n g ho ur s o f w o rk , e t c. , a pp li c a b l e t o o t h e r wo r k m en m a y n ot b e c on ve n i en t l y a pp l i e d t o th e m an d t he n a t u r e as w el l a s th e m an n e r a nd m e t h od of t h e i r wo r k wo uld b e s uc h a s ca n n o t b e re gu l a t e d b y a ny di re c t i on s g i v e n b y t h e I n d u s t r i al T ri bu na l , i s n o de t e r re nt a g ai n st ho l d i n g t h e p e r s on s t o be wo r k m en w i t h i n t h e m e an in g o f t h e d e f i ni t i o n i f t hey f ul f i ll i t s I.T.A. No.1850/Del/2021 5 re qu ir e m e n t . ” 7. T he C o-o rdi na te B enc h t hus c oncl uded that a ssesse e cannot be treated as assessee in de faul t in te rms of Section 201(1)/201(1A ) w he re t he r ig ht i n t he mas te r exis ts t o s up er vise and c ont rol the w ork done b y the G uest Fac ul ti es mon th after mon th. The iss ue i n the pr ese nt cas e is akin t o t he f actual matri x exist ing i n MCM D . A.V. C olle ge for Wo me n (s upra ). Thus, in consona nce t he re of, w e see n s ub sta nt ia l me ri t i n t he pl ea advan ced on beha l f of the assessee. 8. We th us set as ide t he order of t he C IT (A ) and dire ct th e A ssessi ng O ffic er to de le te t he i mp ugne d de ma nd under Se ct ion 201(1)/201(1A ) o f the A ct. 9. In the res ul t, the appeal of t he asses see is allow e d. Order pronounced in the open Court on 14/02/2023. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /02/2023 Prabhat Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar