DCIT, New Delhi V. M/s. Consulting Engineering Services (India) Pvt. Ltd., New Delhi

ITA 3454/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96914 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-07-2015
• Assessment Year: misc
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings
• Section: 80C; 201(1)

Judgement Text

ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3454/DEL/2013 ASSESSMENT YEAR : 2007-08 I.T.A.NO.3455/DEL/2013 ASSESSMENT YEAR : 2007-08 DCIT, VS CONSULTING ENGINEERING SERVICES (I NDIA) PVT. LTD., CIRCLE-49(1), 5 TH FLOOR, MANJUSHA BUIDLING, NEW DELHI. 57, NEHRU PLACE, NEW DELHI. (PAN: DELCO6077B) (APPELLANT) (RESPONDENT) APPELLANT B Y: SMT. PARWINDER KAUR, SR. DR RESPONDENT BY : DR. RAKESH GUPTA, ADV., S H. SOMIL AGARWAL, ADV. O R D E R PER CHANDRAMOHAN GARG, J.M. THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINS T THE CONSOLIDATED ORDER OF CIT(A)-XXX, NEW DELHI DATED 5.3.2013 IN AP PEAL NO. 1782/2011-12 FOR FY 2007-08 AND 2008-09 PERTAINING TO AY 2007-08 . THE REVENUE HAS RAISED SIMILARLY WORDED GROUNDS IN BOTH THE APPEALS WHICH READ AS UNDER:- 1. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN HOL DING THAT THE TAXES HAVE BEEN CORRECTLY DEDUCTED U/S 194 J OF THE LT. ACT, EVEN THOUGH THERE WAS EMPLOYER- EMPLOYEE RELAT IONSHIP BETWEEN PAYER AND PAYEE OF THE SUM LIABLE FOR DEDUC TION AT SOURCE. ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 2 2. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE LIABILITY OF THE DEDUCTOR U/S 201( 1) OF THE LT. ACT CEASE AFTER 4 YEARS. 2. WE HAVE HEARD ARGUMENT OF BOTH THE SIDES AND CAR EFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. LD. DR ELABORA TING THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY SUBMITTED THAT THE ASSESSEE IS ENGAGED IN PROVIDING TECHNICAL AND PROFESSIONAL CONSULTANCY FOR ENGINEER ING PROJECT. LD. DR FURTHER SUBMITTED THAT ON 21.1.2011, A SURVEY WAS CARRIED O UT BY THE DEPARTMENT FOR VERIFICATION OF COMPLIANCE OF TDS PROVISIONS WHEREI N IT WAS OBSERVED THAT THE ASSESSEE HAD A LARGE NUMBER OF EMPLOYEES WHO WERE T ERMED AS CONSULTANTS AND TAX ON THEIR REMUNERATION WAS DEDUCTED U/S 194J INS TEAD OF SECTION 192 OF THE ACT. THE AO AFTER DETAILED DISCUSSION WITH THE ASS ESSEES REPRESENTATIVE RE- CHARACTERISED THE CONSULTANT ARRANGEMENT INTO EMPLO YER-EMPLOYEE RELATIONSHIP AND HELD THAT THE ASSESSEE IS AN ASSESSEE IN DEFAUL T U/S 201(1)/201(1A) FOR DEDUCTING TAX U/S 194J AND NOT U/S 192 OF THE ACT. FINALLY, THE AO RAISED A DEMAND OF RS.2,05,94,240 U/S 201(1)/201(1A) FOR BOT H THE FINANCIAL YEARS NAMELY FY 2007-08 AND 2008-09, BEING THE DIFFERENCE IN TAX DEDUCTIBLE U/S 192 AND 194J ON PAYMENTS MADE TO CONSULTANTS. THE ASSE SSEE CARRIED THE MATTER TO THE CIT(A) CHALLENGING THE RE-CHARACTERISATION OF T HE ARRANGEMENT BETWEEN THE COMPANY AND CONSULTANTS AS EMPLOYER-EMPLOYEE IN PLA CE OF CONSULTANT ARRANGEMENT BETWEEN THE ASSESSEE ENTITY AND THE SAI D CONSULTANTS. THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE AND DIRECTED THE AO TO DELETE THE IMPUGNED ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 3 DEMAND FOR BOTH THE FYS. NOW, THE AGGRIEVED REVENU E IS BEFORE THIS TRIBUNAL IN THESE APPEALS WITH THE SIMILARLY WORDED GROUNDS AS REPRODUCED HEREINABOVE. 3. LD. DR SUPPORTED THE ACTION OF THE AO AND SUBMIT TED THAT THE RELATIONSHIP BETWEEN THE COMPANY AND THESE CONSULTA NTS OF THE ASSESSEE COMPANY WAS MORE OF AN EMPLOYER EMPLOYEE AND THEREF ORE, THE REMUNERATION PAID TO THEM WAS CHARGEABLE TO TAX UNDER THE HEAD O F SALARIES AND THE SAID PAYMENTS THUS ARE SUBJECT TO DEDUCTION OF TAX AS PE R PROVISIONS OF SECTION 192 OF THE ACT AND NOT AS PER PROVISIONS OF SECTION 194J O F THE ACT. LD. DR SUBMITTED THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE ON INCORRECT PREMISE AND WITHOUT ANY JUSTIFIED REASONING, THEREFORE, THE IMPUGNED OR DER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 4. REPLYING TO THE ABOVE, LD. COUNSEL OF THE ASSESS EE STRENUOUSLY SUPPORTED THE IMPUGNED ORDER OF THE FIRST APPELLATE AUTHORITY AND SUBMITTED THAT THERE WAS NO RELATION OF EMPLOYER AND EMPLOYEE BETWEEN THE CO NSULTANT AND THE ASSESSEE COMPANY AND THEREFORE, THE ASSESSEE COMPANY RIGHTLY DEDUCTED TDS U/S 194J OF THE ACT WHICH WAS ALSO ON THE HIGHER SIDE IN COMPAR ISON TO DEDUCTION U/S 192 OF THE ACT. LD. COUNSEL FURTHER TOOK US THROUGH CHART S FILED ALONG WITH APPEAL SHOWING ANALYSIS FROM RETURN OF INCOME FILED BY THE CONSULTANTS ON SAMPLE BASIS OF 9 CONSULTANTS OUT OF 25 CONSULTANTS FOR FY 2007- 08 AND THE SAME ANALYSIS OF 11 CONSULTANTS OUT OF 40 CONSULTANTS FOR FY 2008-09 AND SUBMITTED THAT THE ASSESSEE DEDUCTED TDS U/S 194J OF THE ACT ON THE HI GHER SIDE AND IF THE ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 4 DEDUCTION AS PROPOSED BY THE AO WAS DEDUCTED U/S 19 2 OF THE ACT, THEN ALSO THE AMOUNT OF TDS DEDUCTED BY THE ASSESSEE U/S 194J OF THE ACT WAS HIGHER THAN THE TDS DEDUCTIBLE U/S 192 OF THE ACT AT THE AVERAG E APPLICABLE RATES. LD. COUNSEL VEHEMENTLY CONTENDED THAT IT WAS NOT POSSIB LE FOR THE ASSESSEE COMPANY TO ENGAGE ON A CONTINUOUS FULL TIME BASIS S UCH HIGHLY QUALIFIED AND EXPERIENCED PROFESSIONALS AT THEIR PRE OR POST SUPE RANNUATION AGE BECAUSE THERE WOULD BE HIGH EMPLOYMENT COST, SERVICE OF SUCH TECH NOCRATS NOT BEING REQUIRED CONTINUALLY ON A FULL TIME BASIS AND THE TECHNOCRAT S THEMSELVES BEING AVERSE TO WORK ON FULL TIME BASIS WITH ONE COMPANY, THEREFORE , THE ASSESSEE COMPANY HAD TO ENGAGE AND TAP THE EXPERIENCE AND KNOWLEDGE OF S UCH TECHNOCRATS AS CONSULTANTS ON PART TIME AND TEMPORARY BASIS. LD. COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS CIT (2007) 293 ITR 2 26(SC) AND SUBMITTED THAT WHERE THE PAYEE HAS ALREADY PAID TAXES DUE ON THE PAYMENTS RECEIVED BY IT FROM THE ASSESSEE, THEN RECOVERY OF TAX CANNOT BE M ADE ONCE AGAIN FOR THE TAX DEDUCTOR. LD. COUNSEL ALSO PLACED RELIANCE ON THE DECISION OF ITAT CHANDIGARH A BENCH IN THE CASE OF DCIT(TDS) CHANDIGARH VS IV Y HEALTH LIFE SCIENCES (P) LTD. AND SUBMITTED THAT WHERE THE ASSESSEE HOSP ITAL UNDER AN AGREEMENT WAS AVAILING SERVICES OF DOCTORS WHO FIXED THEIR OWN OP D HOURS AND THERE WAS NO CONTROL OF HOSPITAL BY WAY OF DIRECTION TO DOCTORS ON TREATMENT OF PATIENTS, IT COULD BE SAID THAT DOCTORS WERE WORKING IN THEIR PR OFESSIONAL CAPACITY AND THERE WAS NO EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN H OSPITAL AND PROFESSIONAL ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 5 DOCTORS AND THEREFORE, TDS WAS TO BE DEDUCTED U/S 1 94J OF THE ACT AND NOT U/S 192 OF THE ACT. 5. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D FROM BARE READING OF THE IMPUGNED ORDER, WE NOTE THAT THE CIT(A) GRANTED RELIEF WITH FOLLOWING OBSERVATIONS AND CONCLUSION:- I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN SUBMI SSIONS OF THE AR AND DISCUSSED THE MATTER WITH THEM VERY C AREFULLY. FROM THE LIST OF AGE OF CONSULTANTS, IT IS OBSERVED THAT ALL THE CONSULTANT ARE ABOVE 60 YEARS OF AGE. IT APPEARS TH AT THEY TAKE UP THIS ASSIGNMENT AFTER THEIR RETIREMENT FROM GOVT/PS U/PRIVATE SECTOR JOB. WE ARE IN F.Y. 2007-08 & 2008-09. APPLY ING THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD., 293 ITR 226 (SE), IT WILL BE FOUND THAT OVER ALL TAXES HAVE BEE N PAID BY DEDUCTEES IN THEIR PERSONAL INCOME RETURNS, BUT THE Y DO NOT WANT TO DISCLOSE THEIR INCOME. THE ARS REPLIED THAT THEY CANNOT FORCE OLD CONSULTANTS TO DISCLOSE THEIR INCOME/ITRS, BUT THEY NEED THE SERVICES OF CONSULTANTS ANYHOW THE AO(TDS) CAN ASK FOR PAN OF SUCH DEDUCTEES AND VERIFY THEIR RETURN STATUS FROM ITD APPLICATION. HENCE THE LIABILITY OF DEDUCTOR U/S 20 1 (1) CEASES AFTER 4 YEARS OF END OF F. Y. 2007-08 AND 2008-09. AS PER THE AVERAGE RATE OF TDS TO TOTAL TILL DISBURSEMENT ANAL YSIS, IT AGAIN APPEARS THAT THE DEDUCTOR COMPANY HAD DEDUCTED MORE TDS THAN SUGGESTED BY AO (TDS) TREATING ALL CONSULTANTS AS E MPLOYEES. THE A.O. (TDS) CALCULATES TAX RATE @30% WITHOUT GIV ING EFFECT OF SLABS AND DIFFERENT TAX RATES FOR DIFFERENT SLAB S AND DOES NOT GIVE 80C DEDUCTIONS. THE ROLE OF AO IS TO GUARD THE REVENUE BY ENFORCING THE TAX COMPLIANCE AND ALSO TO ENSURE THAT ANY TAX LEAKAGE DOES NOT ARISE. THEY SHOULD LOOK AHEAD AND NOT LOOK BACK. TH EY SHOULD NOT ENCOURAGE THE AVOIDABLE AND UNNECESSARY LITIGATION BY RAISING THE UNSUSTAINABLE DEMANDS LIKE THAT OF THE PRESENT CASE. CONSIDERING THE OVERALL SITUATION, IT WILL BE SEEN THAT THE APPELLANT DEDUCTOR HAD DEDUCTED MORE TAX (TDS) THAN IS REQUIRED AS PER AO (TDS) IF PROPER TAX RATES AND DEDUCTIONS UNDER CHAPTER VIA ARE GIVEN. ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 6 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D OBSERVATIONS OF THE CIT(A), AT THE VERY OUTSET, WE NOTE THAT THE MAIN G RIEVANCE OF THE DEPARTMENT IS THAT THE RELATIONSHIP OF ASSESSEE COMPANY AND THE C ONSULTANTS/TECHNOCRATS WAS OF EMPLOYER AND EMPLOYEE AND, THEREFORE, THE TDS WAS T O BE DEDUCTED U/S 192 OF THE ACT AND NOT U/S 194J OF THE ACT AS DEDUCTED BY THE ASSESSEE COMPANY. WE MAY FURTHER POINT OUT THAT LD. DR COULD NOT DEMOLIS H THE ANALYSIS SUBMITTED BY THE ASSESSEE FROM THE RETURN OF INCOME FILED BY THE CONSULTANTS ON SAMPLE BASIS FOR BOTH THE FYS WHICH CLEARLY SHOWS THAT THE AMOUN T OF TDS DEDUCTED BY THE ASSESSEE COMPANY U/S 194J OF THE ACT IS ON THE HIGH ER SIDE IN COMPARISON TO TDS DEDUCTIBLE U/S 192 OF THE ACT AT AVERAGE RATES. WE FURTHER OBSERVE THAT AS PER DETAILS OF CONSULTANTS/TECHNOCRATS SUBMITTED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, IT IS VIVID THAT THE AGE OF ALL CONSULTANTS/TECHNOCRATS IS MORE THAN 60 YEARS AND IN A NUMBER OF CASES, THE AGE IS 70 AND 80 PLUS WHICH CLEARLY SHOWS THAT THESE PERSONS ARE HIGHLY EXPERIENCED AND KNOWLEDGEABLE TECHNOCRATS WHO ARE RENDERING THEIR SERVICE TO THE ASSESSEE COM PANY AS A SPECIALIST TECHNOCRAT AND NOT AS AN EMPLOYEE. ALTHOUGH FROM T HE ORDER OF THE AO WE NOTE THAT THE AO DISMISSED SUBMISSIONS AND CONTENTIONS O F THE ASSESSEE AND RE- CHARACTERISED THE TRANSACTION BETWEEN THE ASSESSEE COMPANY AND THE SAID CONSULTANTS/TECHNOCRATS AS EMPLOYER OR EMPLOYEE REL ATIONSHIP BUT THIS RE- CHARACTERISATION CANNOT BE HELD AS JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. WE FURTHER NOTE THAT THE AMOUNT OF TDS DEDUCTED BY THE ASSESSEE COMPANY U/S 194J OF THE ACT SHOWS THAT THE ASSESSEE WAS CAUTIOUS ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 7 ABOUT THE PROVISIONS OF THE TDS AND HE DEDUCTED HIG HER AMOUNT UNDER THE SAID PROVISION IN COMPARISON TO THE EXPECTATION OF THE A O WHEREIN THE AO ALLEGED THAT THE ASSESSEE COMPANY SHOULD HAVE DEDUCTED TDS FROM THESE PAYMENTS U/S 192 OF THE ACT. AT THE SAME TIME, WE FURTHER NOTE THAT FROM THE ANALYSIS SUBMITTED BY THE ASSESSEE, IT IS ALSO CLEAR THAT TH E PAYEE CONSULTANTS/TECHNOCRATS HAVE ALREADY PAID TAXES ON THE INCOME, THEN EVEN IF THERE WAS A SHORT DEDUCTION OF TAX AT SOURCE, FURTHER RECOVERY OF TAX CANNOT BE MADE ONCE AGAIN FROM THE TAX DEDUCTOR. 7. NOW, WE PROCEED TO CONSIDER THE RATIO RELIED BY THE CIT(A) WHILE GRANTING RELIEF FOR THE ASSESSEE IN THE CASE OF HIN DUSTAN COCA COLA BEVERAGE (P) LTD. VS CIT (SUPRA) WHEREIN THEIR LORDSHIPS SPEAKIN G FOR THE APEX COURT ON THIS ISSUE HELD AS UNDER:- 7. THE TRIBUNAL UPON REHEARING THE APPEAL HELD THA T THOUGH THE APPELLANT-ASSESSEE WAS RIGHTLY HELD TO B E AN 'ASSESSEE IN DEFAULT', THERE COULD BE NO RECOVERY OF THE TAX ALLEGED TO BE IN DEFAULT ONCE AGAIN FROM THE APPELLANT CONSIDERING T HAT PRADEEP OIL CORPORATION HAD ALREADY PAID TAXES ON THE AMOUN T RECEIVED FROM THE APPELLANT. IT IS REQUIRED TO NOTE THAT THE DEPARTMENT CONCEDED BEFORE THE TRIBUNAL THAT THE RECOVERY COUL D NOT ONCE AGAIN BE MADE FROM THE TAX DEDUCTOR WHERE THE PAYEE INCLUDED THE INCOME ON WHICH TAX WAS ALLEGED TO HAVE BEEN SH ORT DEDUCTED IN ITS TAXABLE INCOME AND PAID TAXES THEREON. THERE IS NO DISPUTE WHATSOEVER THAT PRADEEP OIL CORPORATION HAD ALREADY PAID THE TAXES DUE ON ITS INCOME RECEIVED FROM THE APPELLANT AND HAD RECEIVED REFUND FROM THE TAX DEPARTMENT. THE TRIBUN AL CAME TO THE RIGHT CONCLUSION THAT THE TAX ONCE AGAIN COULD NOT BE RECOVERED FROM THE APPELLANT (DEDUCTOR-ASSESSEE) SI NCE THE TAX HAS ALREADY BEEN PAID BY THE RECIPIENT OF INCOME. ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 8 8. THE HIGH COURT INTERFERED WITH THE ORDER PASSED BY THE TRIBUNAL ON THE GROUND THAT THE ORDER DATED JULY 12 ,2002, OF THE INCOME-TAX APPELLATE TRIBUNAL HAS ATTAINED ITS FINA LITY SINCE THE APPEAL FILED AGAINST THE SAME BY THE APPELLANT WAS DISMISSED BY THE HIGH COURT ON MAY 21, 2004 ; THE POINT BASED ON GROUND NO.7 WAS NOT TAKEN UP IN THE APPEAL PREFERRED BY TH E APPELLANT IN THE HIGH COURT. THE HIGH COURT FURTHER HELD THAT TH E INCOME-TAX APPELLATE TRIBUNAL'S ORDER DATED JULY 12, 2002, GOT ITSELF MERGED INTO THE ORDER PASSED BY IT ON MAY 21,2004, DISMISS ING THE APPEAL OF THE APPELLANT HEREIN. THE HIGH COURT CAME TO THE CONCLUSION THAT THE TRIBUNAL COULD NOT HAVE REOPENE D THE MATTER FOR ANY FURTHER HEARING. 9. WE HAVE ALREADY NOTICED THAT THE ORDER PASSED B Y THE TRIBUNAL TO REOPEN THE MATTER FOR FURTHER HEARING A S REGARDS GROUND NO.7 HAS ATTAINED ITS FINALITY. IN THE CIRCU MSTANCES, THE HIGH COURT COULD NOT HAVE INTERFERED WITH THE FINAL ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL. 10. BE THAT AS IT MAY, CIRCULAR NO. 275/201/95-IT( B) DATED JANUARY 29, 1997, ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IN OUR CONSIDERED OPINION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES 'NO DEMAND VISUA LIZED UNDER SECTION 201(1) OF THE INCOME- TAX ACT SHOULD BE ENF ORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE. HOWEVE R, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST UNDER SE CTION 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DE DUCTEE-ASSESSEE OR THE LIABILITY FOR PENALTY UNDER SECTION 271C OF THE INCOME-TAX ACT'. 11. IN THE INSTANT CASE, THE APPELLANT HAD PAID THE INTEREST UNDER SECTION 201(1A) OF THE ACT AND THERE IS NO DI SPUTE THAT THE TAX DUE HAD BEEN PAID BY THE DEDUCTEE-ASSESSEE (M/S . PRADEEP OIL CORPORATION). IT IS NOT DISPUTED BEFORE US THAT THE CIRCULAR IS APPLICABLE TO THE FACTS SITUATION ON HAND. 8. WHEN WE CONSIDER THE RATIO LAID DOWN BY ITAT CHA NDIGARH IN THE CASE OF DCIT(TDS), CHANDIGARH VS IVY HEALTH LIFE SCIENCES ( P) LTD. (SUPRA), WE NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE C ASE OF PAYMENT OF CONSULTANTS BY A HOSPITAL HELD AS UNDER:- ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 9 4. LAKSHMINARAYAN RAM GOPAL AND SON LTD. V.GOVERNMENT OF HYDERABAD |1954| 25 ITR 449-(SC) THE DISTINCTION BETWEEN A SERVANT AND AN AGENT IS THUS INDICATED IN POWELL'S LAW OF AGENCY, AT PAGE ' (A) GENERALLY A M ASTER CAN TELL HIS SERVANT WHAT TO DO AND HOW-TO DO IT. (B) GENERALLY A PRINCIPAL CANNOT TELL HIS AGENT HOW TO CARRY OUT HIS INSTRUCTIONS. (C) A SERVANT IS UNDER MORE COMPLETE CONTROL THAN A N AGENT, 'AND ALSO AT PAGE 20 :- ' (A) GENERALLY, A SERVANT IS A PERSON WHO NOT ONLY RECEIVES INSTRUCTIONS FROM HIS MASTER BUT IS SUBJECT TO HIS MASTER'S RIGHT TO CONTROL THE MANNER IN WHICH HE CARRIES OUT THOSE IN STRUCTIONS. AN AGENT RECEIVES HIS PRINCIPAL'S INSTRUCTIONS BUT IS GENERALLY FREE TO CARRYOUT THOSE INSTRUCTIONS ACCORDING TO HIS OWN DI SCRETION. (B) GENERALLY, A SERVANT, QUA SERVANT, HAS NO AUTHO RITY TO MAKE CONTRACTS ON BEHALF OF HIS MASTER. GENERALLY, THE P URPOSE OF EMPLOYING AN AGENT IS TO AUTHORIZE HIM TO MAKE CONT RACTS ON BEHALF OF HIS PRINCIPAL. (C) GENERALLY, AN AGENT IS PAID B)' COMMISSION UPON EFFECTING THE RESULT WHICH HE HAS BEEN INSTRUCTED BY HIS PRINCIPA L TO ACHIEVE. GENE-RALLY, A SERVANT IS PAID BY WAGES OR SALARY. ' THE STATEMENT OF THE LAW CONTAINED IN HALSBURY'S LA WS OF ENG- LAND-HAILSHAM EDITION-VOL. 22, PAGE 1 13, PARA. I 9 2 MAY BE REFERRED TO IN THIS CONNECTION:- ' THE DIFFERENCE BETWEEN THE RELATIONS OF MASTER AN D SERVANT AND OF PRINCIPAL AND AGENT MAY BE SAID TO BE THIS : A P RINCIPAL HAS THE RIGHT TO DIRECT WHAT WORK THE AGENT HAS TO DO : BUT A MASTER HAS (HE FURTHER RIGHT TO DIRECT HOW THE WORK IS TO BE D ONE. ' THE POSITION IS FURTHER CLARIFIED IN HALSBURY'S LAW S OF ENGLAND- HAILSHAM EDITION-VOL. 1, AT PAGE 193. ART. 345 , WHERE THE POSITIONS OF AN AGENT, A SERVANT AND INDEPENDENT CO NTRACTOR ARE THUS DISTINGUISHED:- ' AN AGENT IS TO BE DISTINGUISHED ON THE ONE HAND F ROM A SERVANT AND ON THE OTHER FROM AN INDEPENDENT CONTRACTOR. A SERVANT ACTS UNDER THE DIRECT CONTROL AND SUPERVISION OF HIS MAS TER, AND IS BOUND TO CONFORM TO ALL REASONABLE ORDERS GIVEN HIM IN THE COURSE OF HIS WORK ; AN INDEPENDENT CONTRACTOR, ON THE OTHER HAND, IS ENTIRELY INDEPENDENT OF ANY CONTROL OR INT ERFERENCE AND MERELY UNDERTAKES TO PRODUCE A SPECIFIED RESULT, EM PLOYING HIS OWN MEANS TO PRODUCE THAT RESULT. AN AGENT, THOUGH BOUND TO ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 10 EXERCISE HIS AUTHORITY IN ACCORDANCE WITH ALL LAWFU L INSTRUCTIONS WHICH MAY BE GIVEN TO HIM FROM TIME TO TIME BY HIS PRINCIPAL, IS NOT SUBJECT IN ITS EXERCISE TO THE DIRECT CONTROL O R SUPERVISION OF THE PRINCIPAL. AN AGENT AS SUCH IS NOT A SERVANT, B UT A SERVANT IS GENERALLY FOR SOME PURPOSES HIS MASTER'S IMPLIED AG ENT, THE EXTENT OF THE AGENCY DEPENDING UPON THE DUTIES OR P OSITION OF THE SERVANT. ' 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, FACTS OF TH E CASE AND THE RELEVANT RECORDS. THE BRIEF FACTS OF THE CASE ARE T HAT THE APPELLANT COMPANY IS RUNNING A HOSPITAL, KNOWN AS IVY HOSPITA L AT MOHALI. THE DEPARTMENT CONDUCTED A TDS INSPECTION U/S 133 A OF THE ACT , AT THE BUSINESS PREMISES OF THE ASSESSEE APPELLANT ON 28.09.2011. DURING THE COURSE OF SUCH INSPECTION AND ASSESSMENT PROCEEDINGS U/S 201(1)/201(1 A) OF THE ACT , IT WAS NOTICED BY THE ACIT (TDS) THAT THE HOSPITAL IS RUNNING DIFFERENT O PDS, APART FROM INDOOR PATIENTS' TREATMENT. THE PROCEDURE OF T REATING PATIENTS IN OPD IS THAT WHEN A PATIENT COMES FOR TH E TREATMENT IN HOSPITAL'S OPD, HE DEPOSITS A CONSULTATION FEE FOR THE PARTICULAR MEDICAL DEPARTMENT IN WHICH HE WANTS TO CONSULT, AT THE CASH; COUNTER OF THE HOSPITAL AND HE IS GIVEN A RECEIPT F OR IT AND THEN HE CONSULTS THE DOCTOR TO WHOM HE WANTS TO CONSULT. TH E CONCERNED DOCTOR PRESCRIBES THE TREATMENT ON THE HOSPITAL'S L ETTER PAD. IF THE PATIENT IS TO BE ADMITTED IN THE HOSPITAL FOR INDOO R TREATMENT, THEN HE IS ADMITTED UNDER HIS TREATMENT. THE WORKING DAY S AND HOURS OF THE DOCTORS WORKING IN OPD OF THE HOSPITAL, ARE FIXED AND AS PER THE CONTRACT BETWEEN THESE DOCTORS AND THE HOSP ITAL THEY ARE NOT ALLOWED TO DO THEIR OWN PRACTICE OR WORK WITH A NOTHER HOSPITAL DURING THE PERIOD FOR WHICH THEY ARE ENGAG ED ATTENDED THE HOSPITAL ON CALL. HOWEVER, DURING THE COURSE OF TDS INSPECTION, IT WAS NOTICED THAT THE ASSESSEE DEDUCT OR WAS DEDUCTING THE TAX AT SOURCE OF THE BOTH TYPES OF DO CTORS U/S 194J AS PROFESSIONAL CHARGES, WHEREAS THE PAYMENTS MADE TO DOCTORS WHO ARE REGULARLY ATTACHED WITH HOSPITAL, ARE REQUI RED TO BE TREATED AS SALARY AND TAX IS ALSO REQUIRED TO BE DE DUCTED U/S 192 OF THE ACT. THE AO WAS OF THE VIEW THAT PAYMENTS MA DE TO DOCTORS WERE REGULARLY ATTACHED WITH THE HOSPITAL, WERE REQUIRED TO BE TREATED AS SALARY AND TAXES WERE REQUIRED TO BE DEDUCTED U/S 192 OF THE ACT. CONSEQUENTLY, AO ISSUED A SHOW CAUSE NOTICE TO TREAT THE 'PERSON RESPONSIBLE' (HEREINAFTER REFE RRED TO AS 'PR') AS ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT FOR SH ORT DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE TO THE CONSULT ANT DOCTORS AND CHARGED INTEREST U/S 201(1 A) OF THE ACT . ON APPRECIATION OF ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 11 THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT BEFO RE THE AO, IT WAS CONCLUDED BY HIM THAT THERE EXISTED EMPLOYER-EM PLOYEE RELATIONSHIP IN THE HOSPITAL. CONSEQUENTLY, THE AO CONCLUDED THE ISSUE AS 'DURING THE FINANCIAL YEAR 2008-09, THE AS SESSEE HAD DEDUCTED TAX OF RS.11,67,399.40 U/S 194J OF THE ACT , WHEREAS THE TAX OF RS.27,98,169.69 U/S 192 OF THE ACT, WAS REQU IRED TO BE CONDUCTED. THEREFORE, THE ASSESSEE IS LIABLE TO PAY A DIFFERENCE OF RS.16,30,770/- AS TAX OF RS.7,40,121/- U/S 201(1 A) OF THE ACT . AS PER CALCULATION ENCLOSED AS ANNEXURE-1 TO THIS ORDE R. ACCORDINGLY, TOTAL PAYABLE TAX DEMAND COMES TO RS.2 3,70,891/- FOR THE ASSESSMENT YEAR 2009-10.' 6. SIMILARLY, FOR THE ASSESSMENT YEAR 2010-11, THE AO WORKED OUT THE TOTAL PAYABLE TAX DEMAND AT RS.75,60,672/- (DIF FERENCE NET TAX DEDUCTED AT RS.62,50,560/- AND INTEREST OF RS.12,50 ,112/- U/S 201(1 A) OF THE ACT . 7. LD CI T(APPEALS), ON APPRECIATION OF THE FACTUAL MATRIX OF THE ACT AND CASE LAWS CITED BY THE APPELLANT, ADJUDICAT ED THE ISSUE IN FAVOUR OF THE ASSESSEE APPELLANT, AS PER FOLLOWING FINDING : '5. I HAVE CONSIDERED THE SUBMISSION FILED BY THE L D. COUNSELS. I HAVE ALSO GONE THROUGH THE MOUS BETWEEN THE APPELLA NT COMPANY AND PROFESSIONAL DOCTORS. THE VARIOUS CLAUS ES OF THE MOUS NEED TO BE EXAMINED IN THE LIGHT OF THE CRITER IA LAID DOWN BY THE COURTS TO DETERMINE WHETHER THE DOCTORS ATTA CHED TO THE APPELLANT HOSPITAL ARE EMPLOYEES OF THE HOSPITAL. T HE TEST WHICH IS UNIFORMLY APPLIED IN ORDER TO DETERMINE WHETHER A PARTICULAR RELATIONSHIP AMOUNTS TO EMPLOYER-EMPLOYEE RELATIONS HIP IS THE EXISTENCE OF A RIGHT OF CONTROL IN RESPECT OF THE M ANNER IN WHICH WORK IS TO BE DONE BY THE PERSON EMPLOYED. THE NATU RE AND EXTENT OF CONTROL WHICH IS REQUISITE TO ESTABLISH THE RELA TIONSHIP OF EMPLOYEE AND EMPLOYER VARIES FROM BUSINESS TO BUSIN ESS.' 8. A BARE PERUSAL OF THE CASE LAW, RELIED UPON BY T HE APPELLANT AND SUBMISSIONS MADE IN THE SYNOPSIS REVEALS THAT T HERE DOES NOT EXIST EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE AS SESSEE APPELLANT AND THE PERSONS PROVIDING PROFESSIONAL SE RVICES. ON CONSIDERATION OF THE AGREEMENT IN ITS ENTIRETY VIS- -VIS THE CASE LAW RELIED UPON BY THE ASSESSEE APPELLANT, IT IS EV IDENT THAT IT IS NOT A CASE OF EMPLOYER-EMPLOYEE RELATIONSHIP BETWEE N THE ASSESSEE APPELLANT AND THE DOCTORS. THEREFORE, HAVI NG REGARD TO THE DETAILED ANALYSIS AND FINDINGS OF THE CIT(APPEA LS) ON THE ISSUE IN QUESTION, IT CANNOT BE SAID THAT FINDINGS OF THE LD ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 12 CIT(APPEALS) SUFFER FROM ANY INFIRMITY. IN VIEW OF THIS, FINDINGS OF THE CI T(APPEALS) ARE UPHELD. 9. WHEN WE CONSIDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE INCLINED TO HOLD THAT THE AO RE-CHARACTERISED THE R ELATION BETWEEN THE ASSESSEE COMPANY AND THE CONSULTANT/TECHNOCRAT AND RELATION OF EMPLOYER AND EMPLOYEE BUT WE ARE UNABLE TO SEE ANY BASIS OR ALLEGATION SU PPORTING THIS RE- CHARACTERISATION AND ACTION OF THE AO TO TREAT THE PAYMENTS BY THE ASSESSEE COMPANY TO THESE CONSULTANTS/TECHNOCRATS AS SALARY INSTEAD OF REMUNERATION/CONSULTATION FEE AND EXPECTING THE ASS ESSEE TO DEDUCT TDS U/S 192 OF THE ACT INSTEAD OF REMUNERATION/CONSULTATION FE E AND EXPECTING THE ASSESSE TO DEDUCT TDS U/S 192 OF THE ACT INSTEAD OF 194J OF TH E ACT. PER CONTRA, FROM THE EXPLANATION, DETAILS AND EVIDENCE SUBMITTED BY THE ASSESSEE, WE ARE SATISFIED THAT THE PAYMENTS MADE BY THE ASSESSEE COMPANY WAS NOT S ALARY AND THE SAME WAS REMUNERATION/CONSULTATION FEE PAID TO THE HIGHLY EX PERIENCED TECHNOCRATS/CONSULTANTS WHICH COULD NOT BE ENGAGED ON FULL TIME BASIS AS REGULAR EMPLOYEES DUE TO HIGH REMUNERATION AND TEMPORARY RE QUIREMENT OF THE ASSESSEE COMPANY. WE CANNOT IGNORE THIS FACT THAT ALL TECHN OCRATS AND CONSULTANTS ARE MORE THAN 60 YEARS OF AGE AND ARE IN POST RETIREMEN T/SUPERANNUATION LIFE CYCLE AND WE CANNOT EXPECT THEM TO WORK AS REGULAR EMPLOY EES UNLESS THERE IS AN EXCEPTIONAL CASE. WE MAY FURTHER NOTE THAT THE AO HAS NOT DEMOLISHED THIS CONTENTION OF THE ASSESSEE THAT THE SAID CONSULTANT /TECHNOCRAT HAD FILED THEIR INCOME TAX RETURN WITH THE DEPARTMENT WHICH WERE AL SO SUBMITTED BEFORE THE AO ITA NO.3454 & 3455/DEL/2013 ASSTT.YEAR: 2007-08 13 AND THEY HAVE PAID TAX THEREON, THEREFORE, RESPECTF ULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF HI NDUSTAN COCA COLA (SUPRA), THERE WAS NO NEED OF EXPECTING THE ASSESSE E DEDUCTEE TO AGAIN PAY THE TAX ON THE SAID PAYMENT ON ACCOUNT OF SHORT DEDUCTI ON OF TDS, SPECIALLY WHEN THE TDS DEDUCTED BY THE ASSESSEE COMPANY U/S 194J O F THE ACT WAS ON THE HIGHER SIDE AS DEDUCTIBLE U/S 192 OF THE ACT. 10. IN VIEW OF ABOVE, WE ARE UNABLE TO SEE ANY INFI RMITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE ORDER OF T HE CIT(A). 11. IN THE RESULT, THE APPEALS ARE OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5.8.2015. SD/- SD/- (N.K. SAINI) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 5TH AUGUST 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR