Suresh Kumar Hooda, Rohtak V. ITO, Rohtak

ITA 3897/DEL/2009

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3904 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 21-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 16-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: US AGGARWAL
• Keywords: Business income; Salary income
• Section: 143(3); 244A; 133A; 234B; 133(6); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 3897/DEL/2009 ASSESSMENT YEAR: 2006-07 SURESH KUMAR HOODA, VS. INCOME TAX OFFICER, H.NO. 1545, SECTOR-3, WARD 1, ROHTAK. ROHTAK (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. U.S. AGGARWAL, ADV. REVENUE BY: SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THE APPEAL AGAINST THE IMPU GNED ORDER DATED 27.08.2009 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK PERTAINING TO ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD. CIT(A) UNDER APPEAL IS AGAINST FACTS AND IS BAD IN LAW. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO IN CONSIDERING THE PAYMENTS FROM M/S SOUTH EAST ASIA MARINE ENGG. & CONSTRUCTION LTD. & M/S DOLPHIN OFFSHORE ENTERPRISES LTD. AMOUNTING TO RS. 11,43,150/- AND RS. 2 2,73,625/- RESPECTIVELY, TOTAL BEING RS. 14,16,775/- AS INCOME FROM SALARY AS AGAINST CONTRACT AMOUNT FOR THE TECHNICAL SERVICES RENDERED TO THE SAID COMPANIES UNDER REGULAR CONTRACTED AGREEMENTS. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO IN CHARGING AND WITHDRAWING INTEREST U/S. 234A, 234B & 244A & 234D. 4. THE APPELLANT CRAVES LEAVE TO AMEND, ADD, ALTER OR FOREGO ANY GROUND OF APPEAL AT THE TIME OF ITS HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED HIS RETURN OF INCOME ON 25.08.2006 DECLARING INCOME OF RS. 61,377 /- UNDER THE HEAD SALARY AND INCOME FROM BUSINESS OR PROFESSION . THE ASSESSEE HAS ALSO SHOWN AGRICULTURAL INCOME OF RS. 49,550/-. AS PER RETURN OF INCOME, ASSESSEE DERIVED INCOME FROM PENSION, INTER EST AND ALSO SO CALLED CONTRACTUAL RECEIPT FROM SOUTH EAST ASIA MAR INE ENGINEERING & CONSTRUCTION LTD., ANDHERI (E), MUMBAI. IN THIS CA SE NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED THE ACT) WAS ISSUED AND DULY SERVED UPON THE ASSESSEE. THE ASSESSEE HAS SHOWN RECEIPTS OF RS. 11,43,150/- FROM SOUTH EAST A SIA MARINE ENGINEERING & CONSTRUCTION LTD. ANDHERI (E), MUMBAI AND DECLARED NET PROFIT AT RS. 91,452/-, WHEREAS HE HAS ALSO RE CEIVED 3 RS. 2,73,625/- FROM THE DOLPHIN OFFSHORE ENTERPRISE S (INDI) LTD., MUMBAI. ACCORDINGLY, THE AO CONSIDERED THE RECEIPTS OF RS. 14,16,775/- (1143150 + 273625) AS PROFESSIONAL RECEIPTS, THE ASSESSEE WAS REQUIRED TO MAINTAIN BOOKS OF ACCOUNT S AS PER PROVISIONS OF SECTION 44AA OF THE INCOME TAX ACT, 1 961 AND FOR FAILURE TO MAINTAIN BOOKS OF ACCOUNTS IS LIABLE T O PENALTY U/S. 271A OF THE INCOME TAX ACT, 1961 AND THEREFORE, AO TREAT ED THE AMOUNT OF RS. 14,16,775/- AS TAXABLE INCOME UNDER THE H EAD SALARY AND COMPLETED THE ASSESSMENT VIDE ORDER DATED 05.12.20 08 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. AGAINST THE ASSESSM ENT ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE H IS IMPUGNED ORDER DATED 27.08.2009 HAS DISMISSED THE APPEAL O F THE ASSESSEE. 3. AGGRIEVED WITH THE AFORESAID IMPUGNED ORDER OF T HE LD. CIT (APPEAL), ROHTAK, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE HAS STATED THAT THE HONBLE HIGH COURT OF PUNJAB & HARY ANA AT CHANDIGARH VIDE ITS ORDER DATED 02.12.2015 IN ITA N O. 242 OF 2011 (O&M) HAS REMANDED THE MATTER BACK TO THE TRIB UNAL TO DECIDE THE APPEAL OF THE ASSESSEE AFRESH, KEEPING I N VIEW THE PRINCIPLES LAID DOWN BY THE HONBLE PUNJAB & HARYAN A HIGH COURT IN M/S IVY HEALTH LIFE SCIENCES PVT. LTD., MO HALI PUNJABS CASE. HE FURTHER STATED THAT THE CONTRACT CARRIED OUT BY THE ASSESSEE WITH THE MARINE COMPANIES ARE CONTRACT FO R SERVICE 4 AND NOT CONTRACT OF SERVICE, HENCE, REQUESTED TO ALLOW THE EXPENDITURE ACCORDINGLY. 5. LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE RE VENUE AUTHORITIES AS WELL AS THE ORDER DATED 02.12.2015 O F THE HONBLE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH IN T HE CASE OF ASSESSEE AND THE DECISION DATED 26.8.2015 IN THE CA SE OF CIT VS M/S IVY HEALTH LIFE SCIENCES PVT. LIMITED IN ITA NO. 142 OF 2013. WE FIND THAT IN THE FIRST ROUND, THE AO VIDE HIS ASSESSMENT ORDER DATED 05.12.2008 TREATED THE RECEI PTS AS INCOME FROM SALARY AND FEELING AGGRIEVED WITH THE S AME, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS ORDER DATED 29.1.2009 AFFIRMED THE ORDER OF THE AO HOLDING THAT THE SAID RECEIPTS WERE TAXABLE UNDER SECTION 1 7 OF THE ACT AS SALARY. AND AGAIN AGGRIEVED WITH THE DECISION OF THE LD. CIT(A), ASSESSEE APPEALED BEFORE THE ITAT AND ITAT VIDE ITS ORDER DATED 30.9.2010 UPHELD THE ORDER OF THE LD. C IT(A) AND DISMISSED THE APPEAL OF THE ASSESSEE. STILL DISSATI SFIED WITH THE ORDER OF THE TRIBUNALS DATED 30.9.2010, ASSESSEE F ILED THE APPEAL BEFORE THE HONBLE HIGH COURT OF PUNJAB AND HARYANA AND THE HONBLE HIGH COURT OF PUNJAB & HARYANA VIDE ITS DECISION DATED 02.12.2015 PASSED IN ASSESSEES OWN CASE HAS 5 SET ASIDE THE TRIBUNALS ORDER DATED 30.9.2010 AND THE MATTER WAS REMANDED BACK TO THE TRIBUNAL TO DECIDE THE SAM E AFRESH KEEPING IN VIEW THE PRINCIPLES LAID DOWN BY THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S IVY HEALTH LIFE SCIENCES PVT. LTD., MOHALI PUNJAB, ITA NO. 142 OF 2 013 DECIDED ON 26.08.2015. ACCORDINGLY, THE APPEAL OF THE ASSE SSEE WAS HEARD. WE FIND THAT HONBLE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH IN THE CASE OF CIT(TDS), CHANDIGARH VS. M/S IVY HEALTH LIFE SCIENCES PVT. LIMITED, MOHALI, PUNJAB PASSED I N ITA NO. 142 OF 2013 (O&M) VIDE ITS ORDER DATED 26.8.2015 IN PARA 15 TO 17 HAS HELD AS UNDER:- 15. IN THE PRESENT CASE, IT HAS BEEN CATEGORICALL Y RECORDED BY THE CIT(A) THAT THE CONTRACT FOR SERVICE IMPLIES A CONTRACT WHEREBY ONE' PARTY UNDERTAKES TO. RENDER SERVICES I.E. PROFESSIONAL OR TECHNICAL SERVICES WHEREAS CONTRACT OF SERVICE IMPLIES RELATIONSHIP OF MASTER AND SERVANT AND INVOLVES AN OBLIGATION TO OBEY ORDERS IN THE WORK T O BE PERFORMED AND ALSO AS TO ITS MODE AND MANNER OF PERFORMANCE. THE PROFESSIONAL DOCTORS ARE NOT ENTITLED FOR LTC, CONCESSION IN MEDICAL TREATMENT O F RELATIVES, PF, LEAVE ENCASHMENT AND RETIREMENT BENEFITS LIKE! GRATUITY. THEY ARE REQUIRED TO FOLLO W 6 SOME, DEFINED PROCEDURE TO MAINTAIN UNIFORMITY IN ACTION AND SOME ADMINISTRATIVE DISCIPLINE BUT THIS DOES NOT MEAN THAT THEY HAVE BECOME EMPLOYEES OF THE HOSPITAL. FURTHER, THE DEPARTMENT HAD NOT TAXED THE PAYMENTS RECEIVED BY ANY OF THE DOCTORS FROM THE ASSESSEE UNDER THE HEAD 'INCOME FROM SALARY'. 'CONCURRING WITH THE FINDINGS RECORDED BY THE CIT(A), IT HAS BEEN HELD BY THE TRIBUNAL THAT THERE DOES NOT EXIST EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE PERSONS PROVIDING PROFESSIONAL SERVICES. IT HAS BEEN FURTHE R RECORDED THAT ON CONSIDERATION OF THE AGREEMENT IN ITS ENTIRETY VIS A VIS THE CASE LAW RELIED UPON BY THE ASSESSEE, IT IS EVIDENT THAT IT IS NOT A CASE OF EMPLOYER-EMPLOYEE' RELATIONSHIP BETWEEN THE ASSESSEE AND THE DOCTORS. IT WAS NOTICED THUS:- 'WE HAVE HEARD THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORDS. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY IS RUNNING A HOSPITAL, KNOWN AS IVY HOSPITAL AT MOHALI. THE DEPARTMENT CONDUCTED A TDS INSPECTION UNDER SECTION 133A OF THE ACT, AT THE BUSINESS PREMISES OF THE ASSESSEE APPELLANT ON 28.9.2011. DURING THE COURSE OF SUCH INSPECTION AND ASSESSMENT PROCEEDINGS UNDER SECTION 201(1)/ 201(IA) OF 7 THE ACT, IT WAS NOTICED BY THE ACIT(TDS) THAT THE HOSPITAL IS RUNNING DIFFERENT OPDS, APART FROM INDOOR PATIENTS TREATMENT. THE PROCEDURE OF TREATING PATIENTS IN OPD IS THAT WHEN A PATIENT COMES FOR THE 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 FOR IT AND THEN HE CONSULTS THE DOCTOR TO WHOM HE WANTS TO CONSULT. THE CONCERNED DOCTOR PRESCRIBES THE TREATMENT ON THE HOSPITAL'S LETTER PAD. IF THE PATIENT IS TO BE ADMITTED IN THE HOSPITAL FOR INDOOR TREATMENT, THEN HE IS ADMITTED UNDER HIS TREATMENT. THE WORKING DAYS AND HOURS OF THE DOCTORS WORKING IN OPD OF THE HOSPITAL, ARE FIXED AND AS PER THE CONTRACT .BETWEEN THESE DOCTORS AND THE HOSPITAL THEY ARE NOT ALLOWED TO DO THEIR OWN PRACTICE OR WORK WITH ANOTHER HOSPITAL. DURING THE PERIOD FOR WHICH THEY ARE ENGAGED ATTENDED THE HOSPITAL ON CALL. HOWEVER, DURING THE COURSE OF TDS INSPECTION, IT WAS NOTICED THAT THE ASSESSEE DEDUCTOR- WAS DEDUCTING THE TAX AT SOURCE OF THE BOTH TYPES DOCTORS UNDER SECTION 194J AS PROFESSIONAL CHARGES, WHEREAS THE PAYMENTS MADE TO DOCTORS WHO ARE REGULARLY ATTACHED WITH THE HOSPITAL, ARE REQUIRED TO BE TREATED AS SALARY AND TAX IS ALSO REQUIRED TO BE DEDUCTED UNDER SECTION 192 OF THE ACT. THE AO WAS OF THE VIEW THAT PAYMENTS MADE TO 8 DOCTORS WERE REGULARLY ATTACHED WITH THE HOSPITAL, WERE REQUIRED TO BE TREATED AS SALARY AND TAXES ARE REQUIRED TO BE DEDUCTED UNDER SECTION 192 OF THE ACT. CONSEQUENTLY, AO ISSUED- A SHOW CAUSE NOTICE TO TREAT THE PERSON RESPONSIBLE (HEREINAFTER REFERRED TO AS PR) AS ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT FOR SHORT DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE TO THE CONSULTANT DOCTORS AND CHARGED INTEREST UNDER SECTION 201(1A) OF THE ACT. ON APPRECIATION OF THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT BEFORE THE AO, IT WAS CONCLUDED BY HIM THAT THERE EXISTED EMPLOYER-EMPLOYEE RELATIONSHIP. IN THE HOSPITAL. CONSEQUENTLY, THE AO CONCLUDED THE ISSUE AS 'DURING THE FINANCIAL YEAR 2008-09, THE ASSESSEE HAD DEDUCTED TAX OF RS. 11,67,399.40 UNDER SECTION 194J OF THE ACT, WHEREAS THE TAX OF RS. 27,98,169.69 UNDER SECTION 192 OF THE ACT WAS REQUIRED TO BE CONDUCTED. THEREFORE, THE ASSESSEE IS LIABLE TO PAY A DIFFERENCE OF 16,30,770/- AS TAX OF RS. 7,40, 121/- UNDER SECTION 20L(1A) OF THE ACT AS PER CALCULATION ENCLOSED AS ANNEXURE 1 TO THIS ORDER. ACCORDINGLY, TOTAL PAYABLE TAX DEMAND COMES TO RS. 23,70,891/- FOR THE ASSESSMENT YEAR 2009-10. 6. SIMILARLY, FOR THE ASSESSMENT 2010-11, THE AP WORKED OUT THE TOTAL PAYABLE TAX DEMAND AT RS. 75,60,672/- (DIFFERENCE NET TAX DEDUCTED AT RS. 62,50,560(- AND INTEREST OF 9 RS. 12,50,112/- 'UNDER SECTION 20 I (1 A) OF THE ACT. 7. LEARNED CIT(APPEALS) ON APPRECIATION OF THE FACTUAL MATRIX OF THE ACT AND CASE LAWS CITED BY THE APPELLANT, ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE APPELLANT, AS PER FOLLOWING FINDING:- '5. I HAVE CONSIDERED THE SUBMISSION FIELD BY THE LEARNED COUNSEL. I HAVE ALSO GONE THROUGH THE MOUS BETWEEN THE APPELLANT COMPANY AND PROFESSIONAL DOCTORS. THE VARIOUS CLAUSES OF THE MOUS NEED TO BE EXAMINED IN THE LIGHT OF THE CRITERIA LAID DOWN BY THE COURTS TO DETERMINE WHETHER THE DOCTORS ATTACHED TO THE APPELLANT HOSPITAL ARE EMPLOYEES OF THE HOSPITAL. THE TEST WHICH IS UNIFORMLY APPLIED IN ORDER TO DETERMINE WHETHER A PARTICULAR RELATIONSHIP AMOUNTS TO EMPLOYER- EMPLOYEE 'RELATIONSHIP IS THE EXISTENCE OF RIGHT OF CONTROL IN RESPECT OF THE MANNER IN WHICH WORK IS TO BE DONE BY THE PERSON EMPLOYED. THE NATURE AND EXTENT OF CONTROL WHICH IS REQUISITE TO ESTABLISH THE RELATIONSHIP OF EMPLOYEE AND EMPLOYER VARIES FROM BUSINESS TO BUSINESS. 8. A BARE PERUSAL OF THE CASE LAW RELIED UPON BY THE APPELLANT AND SUBMISSIONS MADE IN THE SYNOPSIS REVEALS THAT THERE DOES NOT EXIST EMPLOYER 'EMPLOYEE RELATIONSHIP 10 'BETWEEN THE ASSESSEE APPELLANT AND THE PERSONS PROVIDING PROFESSIONAL SERVICES. ON CONSIDERATION OF THE AGREEMENT IN ITS ENTIRETY VIS--VIS THE CASE LAW RELIED UPON BY THE ASSESSEE APPELLANT, ,IT IS EVIDENT THAT IT IS NOT A CASE OF EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE APPELLANT AND THE DOCTORS. THEREFORE, HAVING REGARD TO THE DETAILED ANALYSIS AND FINDINGS OF THE CIT (APPEALS) ON THE ISSUE IN QUESTION, IT CANNOT BE SAID THAT FINDINGS OF THE LEARNED CIT(APPEALS) SUFFER FROM ANY INFIRMITY, IN VIEW OF THIS, FINDINGS OF THE CIT(APPEALS) ARE UPHELD.' 16. ADDITIONALLY, WE MAY NOTICE THE TERMS OF THE AGREEMENT ON THE BASIS OF WHICH THE ASSESSING OFFICER HAD ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE WHICH READ THUS:- 'I) THE SECOND PARTY SHALL BE ASSOCIATED EXCLUSIVEL Y WITH M/S IVY HOSPITAL AS FULL-TIME CONSULTANT AND SHALL NOT ASSOCIATE HIMSELF WITH ANY OTHER HOSPITAL . II) THE SECOND PARTY SHALL BE PAID PROFESSIONAL CHARGES FOR SERVICES RENDERED BY HIM IN IVY HOSPITAL AS UNDER WITH A MINIMUM GUARANTEE OF RS... PER MONTH SUBJECT TO TDS DEDUCTIONS AS PER ACT, THE MINIMUM GUARANTEE AMOUNT SHALL BE PAID TO THE SECOND PARTY FOR A PERIOD OF 12 MONTHS FROM THE DATE OF JOINING. THE SAME SHALL BE REVISED AT THE END OF 12 MONTHS. 11 A) 70% OF THE OPD CHARGES B) VISITING CHARGES IN WARD/PRIVATE ROOM AS MUTUALLY SETTLED BETWEEN THE TWO PARTIES. C) 15% OF THE INVESTIGATION DONE OF IVY HOSPITAL. III) THE SECOND PARTY SHALL NOT DO PRACTICE AT ANY OTHER PLACE AND WOULD BE ASSOCIATED EXCLUSIVELY WITH IVY HOSPITAL. THE SECOND PARTY SHALL NOT OPERATE OR ADMIT PATIENT IN ANY OTHER HOSPITAL EXCEPT AT IVY HOSPITAL. IN OUR OPINION, THE ASSESSING OFFICER WAS NOT RIGHT IN CONCLUDING ON THE COMBINED READING OF THE ABOVE STIPULATIONS THAT THE INCOME OF THE DOCTORS WAS SAL ARY. IT NOWHERE SUGGESTS THAT THERE EXISTS RELATIONSHIP OF EMPLOYER EMPLOYEE BETWEEN THE ASSESSEE AND, THE SAI D DOCTORS, RATHER IT IS A POINTER TO THE CONTRARY. 17. LEARNED COUNSEL FOR THE REVENUE HAS NOT BEEN A BLE TO SHOW ANY ILLEGALITY OR PERVERSITY IN THE FINDING S RECORDED BY THE CIT(A) AS WELL AS THE TRIBUNAL. CONSEQUENTLY, THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED AGAINST THE REVENUE AND IN FAVOUR' OF THE ASSESSEE. THE APPEALS STAND DISMISSED. 7. WE HAVE ALSO PERUSED THE LETTER DATED 06.06.20 04 ISSUED BY M/S DOLPHIN OFFSHORE ENTERPRISES (INDIA) LTD. TO T HE ASSESSEE I.E. SK HOODA FOR CONTRACT FOR DIVING SERVICES. FOR THE SAK E OF CONVENIENCE, 12 THE CONDITIONS OF THE CONTRACT, WHICH WERE ACCEPTED BY THE ASSESSEE ARE REPRODUCED HEREUNDER:- SUB CONTRACT FOR DIVING SERVICES WE ARE PLEASED TO OFFER YOU A SERVICE CONTRACT FOR SERVICES TO BE RENDERED FROM TIME TO TIME AS A E.T. ON SEAMEC-1 DULAM PROJECT UNDER OUR MANAGEMENT, ON THE FOLLOWING TERMS AND CONDITIONS :- 1.0 SCOPE OF WORK 1.1 DURING THIS PERIOD OF THIS SERVICE CONTRACT YOU WILL WORK EXCLUSIVELY FOR THE COMPANY AND WILL NOT TAKE UP EMPLOYMENT/RENDER SERVICES TO ANY OTHER ORGANIZATION WITHOUT THE WRITTEN APPROVAL OF THE COMPANY. 1.2 YOUR SERVICES WILL NORMALLY BE AS PER OUR CLIENTS REQUIREMENT, YOU MAY BE REQUIRED TO DEMOBILISE AT AN EARLY DATE DEPENDING UPON THE CLIENTS. REQUIREMENT AND SCHEDULE OF WORK. IN CASE OF SUCH EARLY DEMOBILISATION, THERE SHALL BE NO ADDITIONAL COMPENSATION PAYABLE. 2.0 DURATION OF CONTRACT 2.1 THIS CONTRACT IS SUBJECT TO YOUR HOLDING THE NECESSARY CERTIFICATION, MEDICAL CLEARANCES, AND YOUR CONTINUED SATISFACTORY PERFORMANCE. 2.2 THIS SERVICE CONTRACT WILL BE AUTOMATICALLY TERMINATED ON THE SAME DATE AS THE COMPANY'S CONTRACT WITH ITS CLIENTS ON WHICH YOUR SERVICES ARE UTILIZED IS TERMINATED UNLESS THE COMPANY TRANSFERS YOUR SERVICES TO ANY 13 OTHER CONTRACT UNDER THE COMPANY'S MANAGEMENT 2.3 THE COMPANY RESERVES THE RIGHT TO TERMINATE THIS CONTRACT AT ANY TIME WITHOUT GIVING ANY NOTICE PERIOD FOR REASONS OF INCOMPETENCE/INDISCIPLINE/BAD BEHAVIOUR ON YOUR PART OR IF THE CLIENT DESIRES YOUR REMOVAL FROM THE WORKSITE. IN SUCH CASES THE COST ASSOCIATED WITH YOUR DEMOBILISATION FROM THE WORKSITE WILL BE BORNE BY YOU ONLY. 2.4 IN THE EVENT OF THE TERMINATION OF THE CONTRACT, THE COMPANY WILL NOT BE LIABLE TO PAY ANY COMPENSATION TO YOU OTHER THAN WHAT YOU ARE PERMITTED IN CLAUSE 3 BELOW. 3.0 REMUNERATION 3.1 DURING THE PERIOD THAT YOU ARE ON BOARD THE VESSEL, YOU WILL BE PAID DAY RATE OF RS. 4200 EACH DAY OF SERVICE. HOWEVER, ON SIGNING ON AND SIGNING OFF DAYS, YOU WILL BE PAID HALF DAY RATE. 3.2 IF, AT ANY TIME, YOU ARE REQUIRED TO WORK IN OUR WORKSHOP / BASE, YOU WILL BE PAID HALF DAY RATE FOR EACH DAY AT WORKSHOP/BASE. YOU WILL BE REQUIRED TO GET THE DAYS CERTIFIED BY THE WORKSHOP MANAGER /SPO WHILE SUBMITTING YOUR CLAIMS. 3.3 IF YOU REPORT TO HELIBASE/DOCK/CLIENTS DESIGNATED MOBILISATION POINT, BUT ARE ENABLE TO BE MOBILISED FOR ANY REASONS NOT ATTRIBUTABLE TO YOU, THEN YOU SHALL BE PAID 25% OF YOUR NORMAL DAY RATE WHILE YOU ARE WAITING TO GET TO THE WORK SITE. 14 3.4 IN ADDITION TO THE ABOVE, YOU WILL BE PAID AN ALLOWANCE OF RS.600 PER ROUND TRIP TO MEET YOUR POCKET EXPENSES, INCLUDING CONVEYANCE. 4.0 TERMS OF PAYMENT 4.1 AT THE TIME OF SIGNING OFF FROM THE VESSEL, YOU WILL SUBMIT YOUR INVOICE FOR YOUR DAY RATE, AND ALLOWANCES, IF ANY. 4.2 THE DAY RATE AMOUNT WILL BE PAID TO YOU WITHIN 15 DAYS OF SIGNING OFF THE VESSEL. THIS PAYMENT WILL BE MADE BY CHEQUE/DEMAND DRAFT, WHICH WILL BE FORWARDED, TO YOUR REGISTERED ADDRESS. 5.0 TAXES 5.1 YOU WILL BE RESPONSIBLE TO PAY YOUR OWN CORPORATE/PERSONAL INCOME TAXES ETC. AND SHALL INDEMNIFY THE COMPANY AGAINST ANY CLAIMS, INTEREST AND 'PENALTIES THAT MAY BE LEVIED ON ACCOUNT OF TAXES ON YOUR EARNINGS. 5.2 AS YOU ARE A PROFESSIONAL, THE COMPANY, AT THE TIME OF MAKING PAYMENT TO YOU, THE COMPANY WILL DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194-J OF THE INCOME-TAX ACT, 1961. AT PRESENT THE RATE OF DEDUCTION OF TAX AT SOURCE IS 5.25%. 6.0 OTHER MISCELLANEOUS CLAUSES 6.1 THE COMPANY RESERVES THE RIGHT TO RECOVER ADDITIONAL COSTS FROM YOU THAT THE COMPANY MAY FACE IF THERE IS ANY DELAY IN YOUR 15 REPORTING TO BASE FOR MOBILIZATION TO WORKSITE AS / SCHEDULE PROGRAMME WITHOUT PRIOR PERMISSION OR VALID REASONS. 6.2. THE RELATIONSHIP BETWEEN THE COMPANY AND YOU WILL BE THAT THAT OF A CONTRACTOR AND SUB-CONTRACTOR. IT IS NOT THE INTENTION OF THE COMPANY OR YOURSELF TO ESTABLISH AN EMPLOYER- EMPLOYEE RELATIONSHIP IN ANY MANNER WHATSOEVER, AND ACCORDINGLY, NONE OF THE ACTS, DEEDS, CORRESPONDENCE OR INTERACTIONS BETWEEN THE TWO PARTIES SHALL IN ANY WAY CONSTRUE A RELATIONSHIP OTHER THAN AS A CONTRACTOR-SUB- CONTRACTOR. 6.3 YOU WILL BE REQUIRED TO FURNISH A COPY OF A VALID MEDICAL CERTIFICATE ISSUED BY A COMPANY APPROVED DOCTOR TO THE OFFICE PRIOR TO YOUR JOINING THE VESSEL FOR THE FIRST TIME AND ANNUALLY THEREAFTER. YOU WILL ALSO NEED TO SUBMIT A MEDICAL CERTIFICATE PRIOR TO REJOINING THE VESSEL I F YOU WERE MEDICALLY EVACUATED FROM THE VESSEL DUE TO SICKNESS OR INJURY. 6.4 MEDICAL COVER WILL BE PROVIDED TO YOU FOR MEDICAL ATTENTION AND HOSPITALISATION AT NOMINATED HOSPITALS IF YOU SUSTAIN AN INJURY/SICKNESS WHILST ON DUTY AS PER THE PROVISIONS OF P&I COVER. IN ADDITION, YOU WILL BE COMPENSATED FOR LOSS OF EARNINGS DURING YOUR HOSPITALISATION PERIOD AS STIPULATED UNDER THE 16 INSURANCE POLICY IN FORCE. HOWEVER, THESE BENEFITS WILL NOT BE AVAILABLE IF YOUR INJURIES ARE SELF-INFLICTED OR SUSTAINED DUE TO NEGLECT OR YOUR OWN FAULT FURTHER, NO COVER WILL BE AVAILABLE FOR ILLNESSES/DISEASES CONTRACTED EARLIER, BUT DETECTED AFTER YOU JOIN THE WORKSITE. 6.5 THE COMPANY WILL TAKE OUT A PERSONAL ACCIDENT INSURANCE POLICY FOR YOU WHICH WILL COVER INJURY OR LOSS OF LIFE DUE TO ACCIDENT WHETHER ON DUTY OR DURING YOUR ENTITLED LEAVE PERIOD. THE AMOUNT OF INSURANCE COVER IS RS. 15 LACS. 6.6 YOU WILL BE REQUIRED TO SUBMIT AN NOC FROM LOCAL POLICE AUTHORITIES WITH 4 PASSPORT PHOTOGRAPHS FOR ISSUE OF SECURITY PASS. YOU WILL BE RESPONSIBLE FOR SAFE CUSTODY OF SECURITY PASS. HOWEVER, THE PASS WILL BE THE PROPERTY OF THE COMPANY AT ALL TIMES. THE PASS WILL BE DEPOSITED WITH THE COMPANY AFTER SIGNING OFF FROM THE VESSEL, BUT PRIOR TO RECEIVING PAYMENT NO PAYMENT WILL BE MADE UNLESS THE PASS IS RETURNED TO THE COMPANY. 17 6.7 DURING THE PERIOD THAT YOU ARE RENDERING SERVICES UNDER THIS CONTRACT YOU SHALL STRICTLY FOLLOW THE COMPANY'S PROCEDURES AND POLICIES ESPECIALLY WITH REGARD TO SAFETY. 6.8 YOU WILL NOT BE ANY TIME, WHETHER DURING THE CURRENCY OF THIS CONTRACT OR ANY TIME THEREAFTER, MAKE PUBLIC OR DISCLOSE TO ANY PERSON ANY INFORMATION REGARDING THE STATUS OF JOBS, BUSINESS DEALING, AFFAIRS OF THE COMPANY OR ANY OTHER INFORMATION WHICH MAY BE PREJUDICIAL TO THE INTERESTS OF THE COMPANY. 7.1 WE HAVE ALSO PERUSED THE LETTER DATED 14.11.200 5 ISSUED BY THE PROJECT MANAGER, SEAMEC-II, M/S SOUTH EAST ASIA MARINE ENGINEERING & CONSTRUCTION LTD. TO THE ASSESSEE OF FERING THEREIN CONTRACT AS ELECTRICAL TECHNICIAN FOR SERVICES. FOR THE SAKE OF CONVENIENCE, THE CONDITIONS OF THE CONTRACT, WHICH WERE ACCEPTED BY THE ASSESSEE, ARE REPRODUCED HEREUNDER:- FURTHER TO YOUR APPLICATION AND DISCUSSIONS HELD I N OUR OFFICE WE ARE PLEASED TO OFFER YOU A CONTRACTUA L BASIS AS ELECTRICAL TECHNICIAN FOR SERVICES ON VESSELS UNDER OUR MANAGEMENT ON FOLLOWING TERMS AND CONDITIONS. 18 1. DAY RATE OF RS. 6000/- PER DAY APPLICABLE ON COMPLETION OF YOUR TENURE. 2. THE PERSON WILL BE COVERED UNDER COMPREHENSIVE INSURANCE OF RS. 15 LAKHS. POLICY NO. (02100/42/05/00556). 3. AIR TICKET ECONOMY CLASS UP/DOWN OR AN AMOUNT EQUIVALENT TO THE ECONOMY CLASS AIR FARE TO THE NEAREST AIRPORT TO HOMETOWN WILL BE PAID FOR PERSON RESIDING OUTSIDE BOMBAY /NEW BOMBAY. 4. TRANSPORTATION OF RS. 750/- PER ROUND TRIP WILL BE PAYABLE FOR REPORTING TO AIRPORT. 5. FOR TRANSIT HALF OUTSTATION CANDIDATE WILL BE PROVIDED FREE ACCOMMODATION TO JOIN THE VESSEL AT BOMBAY AND AN AMOUNT NOT EXCEEDING RS. 500/- PER DAY WILL BE REIMBURSED TOWARDS MEAL CHARGES ON PRODUCTION OF RECEIPT. 6. IN CASE OF NO ACCOMMODATION FOOD ETC. ARE REQUIRED BY SUCH OUTSTATION CANDIDATE HE WILL BE PAID RS. 2250/- PER ROUND TRIP FOR SUCH TRANSIT HALT. 7. THIS CONTRACT IS VALID FOR A PERIOD OF 1 TRIP ONLY W.E.F. 15.11.2005. DURING THIS PERIOD YOU WILL BE 19 PROVIDING SERVICES EXCLUSIVELY TO M/S SOUTH EAST ASIA MARINE ENGINEERING & CONSTRUCTION LTD. 8. ONE BOILER SUIT AND ONE PAIR OF SAFETY SHOES WILL BE PROVIDED PER YEAR. 9. DAY ON / DAY OFF HALF DAY RATE WILL BE APPLICABLE. HOWEVER, IF FOR ANY REASONS AFTER REPORTING AT AIRPORT THE PERSON IS UNABLE TO BOARD THE FLIGHT, THEN QUARTER DAY RATE WILL APPLY. POINT OF MOBILIZATION DEMOBILIZATION FOR WORK OUTSIDE INDIA SHALL BE CONSIDERED TO BE DEPARTURE AIRPORT FOR OVERSEAS TRIP. 10. ALL PAYMENTS UNDER THIS CONTRACT SHALL BE SUBJECT TO TDS A S PER INCOME TAX RULES. 7.2 WE HAVE ALSO PERUSED THE LETTER DATED 19.11.200 7 ISSUED BY CHIEF LEGAL OFFICER & COMPANY SECRETARY, M/S SEAMEC LIMITED WHICH WAS ADDRESSED TO THE ITO/AO, WARD-1, ROHTAK OF THE ASSESSEE FOR FURNISHING INFORMATION CALLED U/S. 133(6) OF THE I. T. ACT, 1961. FOR THE SAKE OF CONVENIENCE, THE CONTENTS OF THE APPLIC ATION DATED 19.11.2007 READ AS UNDER:- SUB: CALLING FOR INFORMATION U/S. 133(6) OF THE I.T. ACT, 1961. THIS IS WITH REFERENCE TO YOUR LETTER NO. ITO, W-1, RTK/11424 DATED 29.10.2007, ADDRESSED TO THE GENERAL MANAGER-DIVING. 20 THE ADDRESS WAS WAY ON TOUR AND HENCE THE DELAY IN RELY, WHICH MAY KINDLY BE EXCUSED. WE GIVE BELOW OUR COMMENTS TO YOUR QUERIES:- 1. SURESH KUMAR HOODA WAS WORKING UNDER CONTRACT AS ELECTRICAL TECHNICIAN DURING THE PERIOD UNDER REVIEW. 2. NATURE OF JOB WAS FOR ELECTRICAL MAINTENANCE ON BOARD OF COMPANYS VESSEL. 3. MR. HOODA WAS RENDERING AFORESAID SERVICES ONBOARD OF OUR VESSEL USING OUR MACHINERY AND TOOLS. 4. MR. HOODAS WORK WAS IN NATURE OF A CONTRACTOR. 5. WE HAVE NO DETAILS OF ANY MACHINERY PURCHASED BY MR. HOODA. 6. WE HAVE NO DETAILS OF ANY EXPENDITURE INCURRED BY MR. HOODA. 7. MR. HOODA WAS GIVEN FOOD WHILE ON BOARD VESSEL. WE HAVE NO DETAILS OF OFFICE RENT, IF ANY, PAID BY HIM. 8. THE DETAILS OF PAYMENTS MADE TO MR. HOODA ARE ENCLOSED ANNEXURE-1. 21 9. THE COPIES OF CONTRACTS DATED 13 TH JULY, 2005, 14 TH NOVEMBER, 2005 AND 14 TH FEBRUARY, 2006 BETWEEN MR. HOODA AND THE COMPANY ARE ENCLOSED. ANNEX.-2. W E HOPE YOU WILL FIND THE ABOVE IN ORDER. 7.3 AFTER CAREFUL CONSIDERATION OF THE DECISION DATED 26.8.2015 IN THE CASE OF CIT VS M/S IVY HEALTH LIFE SCIENCES PVT . LIMITED IN ITA NO. 142 OF 2013 AND LETTER DATED 06.06.2004 ISSUED BY M/S DOLPHIN OFFSHORE ENTERPRISES (INDIA) LTD. TO THE A SSESSEE I.E. SK HOODA FOR CONTRACT FOR DIVING SERVICES; LETTER DAT ED 14.11.2005 ISSUED BY THE PROJECT MANAGER, SEAMEC-II, M/S SOUTH EAST ASIA MARINE ENGINEERING & CONSTRUCTION LTD. TO THE ASSE SSEE OFFERING THEREIN CONTRACT AS ELECTRICAL TECHNICIAN FOR SERVI CES AND LETTER DATED 19.11.2007 ISSUED BY CHIEF LEGAL OFFICER & COMPANY SECRETARY, M/S SEAMEC LIMITED WHICH WAS ADDRESSED TO THE ITO/AO, W ARD-1, ROHTAK OF THE ASSESSEE FOR FURNISHING INFORMATION CALLED U/S. 133(6) OF THE I.T. ACT, 1961, WE FIND THAT THE ASSESSEE IS A RETI RED ELECTRICAL TECHNICIAN FROM THE DEFENSE DEPARTMENT, GOVT. OF IN DIA, & CURRENTLY IS WORKING AS A CONTRACTOR OF ELECTRICAL MAINTENANC E ON BOARD OF DIFFERENT COMPANIES VESSELS. HE HAS MORE THAN 30 YE ARS EXPERIENCE AS ELECTRIC MAINTENANCE ENGINEER WITH INDIAN NAVY A ND PRIVATE VESSELS ON HIGH SEAS. WE FURTHER FIND THAT THE ENTI RE AGREEMENTS EXECUTED BETWEEN THE CONTRACTING COMPANY AND THE AS SESSEE, IT IS 22 CLEARLY EVIDENT THAT THE NATURE OF WORK EXECUTED BY THE ASSESSEE FOR THE MARINE COMPANIES IS IN THE NATURE OF A CONTRACT . THERE IS NO EMPLOYER EMPLOYEE OR MASTER SERVANT RELATIONSHIP. T HERE IS ALSO NO PERMANENT CONTRACT. IT RANGES FROM 6 WEEKS TO 8 WE EKS ONLY. THE CONTRACT AMOUNT IS PAID TO THE ASSESSEE BY THE COMP ANIES ON THE BASIS OF DAY TO DAY WORKING AND NO PAYMENT WAS MADE FOR THE OFF DAYS. THE AGREEMENTS CLEARLY STIPULATES THE WORD C ONTRACT AND NOWHERE THE WORD REMUNERATION OR SALARY OR WAGES I S MENTIONED. THE PAYMENT ON DAY TO DAY BASIS ON FIXED AMOUNT DO ES NOT MEAN THAT THE ASSESSEE IS IN SERVICE OF THE CONTRACTING COMPANY. IN THE AGREEMENT THE COMPANIES MENTIONED THE WORK EXECUTED BY THE ASSESSEE WILL BE ON CONTRACTUAL BASIS AND AT THE TI ME OF MAKING PAYMENT TO THE ASSESSEE, THE COMPANY WILL DEDUCT TA X AT SOURCE. WE ALSO NOTE THAT VIDE LETTER DATED 19.11.2007 ISSUED BY CHIEF LEGAL OFFICER & COMPANY SECRETARY, M/S SEAMEC LIMITED WHI CH WAS ADDRESSED TO THE ITO/AO, WARD-1, ROHTAK OF THE ASSE SSEE FOR FURNISHING INFORMATION CALLED U/S. 133(6) OF THE I. T. ACT, 1961, HAS CLEARLY MENTIONED THAT THE WORK WAS IN THE NATURE O F THE CONTRACTOR. THE PAYMENTS MADE BY THE SAID COMPANIES ARE FOR TEC HNICAL SERVICES RENDERED BY THE ASSESSEE. THE SAID COMPANIES HAVE E NTERED INTO CONTRACT ON DAY RATE BASIS FIXED BY THEM FROM TIME TO TIME. FURTHER, THE A.O. HAS NOT BROUGHT ON RECORD ANY IOTA OF EVID ENCE THAT ASSESSEE HAS ANY OTHER INCOME OTHER THAN BUSINESS O R PROFESSIONAL INCOME. AS THE ASSESSEE HAS TECHNICAL SKILL FOR REN DERING THE 23 INDEPENDENT CONTRACT AND PROFESSIONAL SERVICES AND HAS BEEN RENDERING CONTRACTUAL SERVICES TO THE ABOVE NOTED D IFFERENT COMPANIES. IT IS THEREFORE, HELD THAT THAT THE ASSE SSEE HAS ONLY BUSINESS INCOME AND NOT SALARY INCOME, HENCE, THE P ROFESSIONAL CONTRACTS CARRIED ON BY ASSESSEE ARE TREATED AS CO NTRACT FOR SERVICE AND NOT CONTRACT OF SERVICE, THEREFORE, ACCORDING LY APPROPRIATE EXPENDITURE ARE ALLOWED AND AS A RESULT, THE GROUND S TAKEN BY THE ASSESSEE STAND ALLOWED. OUR AFORESAID VIEW IS FORTI FIED BY THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. IVY HEALTH LIFE SCIENCES PVT. LTD. (SUPRA). 8. IN THE RESULT, THE ASSESSEES APPEAL STANDS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 08-01-2018. SD/- SD/- (L.P. SAHU) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :08-01-2018 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.