Asstt.Commissioner of Income Tax (TDS), Chandigarh V. M/S GGSAS College, Chandigarh

ITA 515/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80805 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: AMRINDER SINGH
• Section: 133A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS.512 TO 514/CHD/2014 ASSESSMENT YEARS : 2009-10 TO 2011-12 THE A.C.I.T.(TDS), VS. M/S MCM D.A.V. COLLEGE FO R WOMEN, CHANDIGARH. SECTOR 36-C, CHANDIGARH. PAN: PTLM12826C AND ITA NOS.515 TO 517/CHD/2014 ASSESSMENT YEARS : 2009-10 TO 2011-12 THE A.C.I.T.(TDS), VS. M/S GGDSD COLLEGE, CHANDIGARH. SECTOR 32-C, CHANDIGARH. PAN: PTLG12451F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI AMRINDER SINGH DATE OF HEARING : 04.08.2014 DATE OF PRONOUNCEMENT : 12.08.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE BUNCH OF SIX APPEALS FILED BY THE REVENUE ARE AGAINST THE TWO SEPARATE CONSOLIDATED ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS), CHANDIGARH DATED EACH 4.3.2014 AGAIN ST THE ORDER PASSED UNDER SECTION 201(1)/201(1A) OF INCOME TAX ACT, 196 1 (IN SHORT THE ACT). 2. THE REVENUE HAS RAISED FOLLOWING COMMON GROUNDS OF APPEAL IN ALL THE APPEALS: 2 THE OBSERVATION OF THE LD. CIT(A) CHANDIGARH IS NOT ACCEPTABLE DUE TO THE FOLLOWING FACTS: - (1) THE LD. QT(A), CHANDIGARH HAS NOT FULLY APPRECIATED THE FACTS OF THE CASE AND IGNORED THE FINDING OF THE AO ON THE B ASIS OF WHICH HE HAS REACHED AT THE CONCLUSION THAT IN VIEW OF TERMS OF EMPLOYMENT, THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE DEDUCTOR AND PROFESSIONAL TEACHING STAFF (GUEST FAC ULTY). (2) THAT DURING THE RELEVANT PERIOD, THOUGH THE DEDUCTO R HAS AVAILED SERVICES OF PROFESSIONALS FOR TEACHING SELF FINANCI NG AND OTHER COURSES RUN BY THE DEDUCTOR, YET NO TDS HAS BEEN DEDUCTED BY THE DEDUCTOR. AS A MATTER OF FACT, THE DEDUCTOR HAS T REATED THEM AS EMPLOYEES AND AS PER SECTION 192 AND THEIR SALARIES WERE BELOW THE TAXABLE LIMITS. WHEREAS, THE DEDUCTOR WAS STATUTORI LY REQUIRED TO DEDUCT TDS ON THE PAYMENTS MADE TO THE PROFESSIONAL TEACHI NG STAFF, AS REQUIRED U/S 194J OF THE I.T. ACT, 1961, WHICH HE HAS FAILED TO DO. (3) THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY GROUNDS OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. THIS BUNCH OF APPEALS RELATING TO THE TWO DIFFER ENT ASSESSEES ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 4. ALL THE APPEALS FILED BY THE REVENUE ARE IN RELA TION TO THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER SECTION 201 (1) OF THE ACT. THE FACTS AND CIRCUMSTANCES OF ALL THE APPEALS ARE IDENTICAL. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS IN IT A NO.512/CHD/2014 TO ADJUDICATE THE ISSUE. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE TDS INS PECTION/SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT TH E PREMISES OF THE ASSESSEE ON 19.9.2011. THE ASSESSEES WERE RUN NING COLLEGES IN THE NAMES OF MCM DAV COLLEGE FOR WOMEN, SECTOR 3 6-A, CHANDIGARH AND GGDSD COLLEGE, SECTOR 32-C, CHANDIGA RH. DURING THE COURSE OF TDS INSPECTION AND ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 201(1)/201(1A) OF THE ACT, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE DEDUCTOR HAD AVAILED SERVICES OF VARIOUS PROFESSIONALS FOR TEACHING-SELF FINANCING A ND OTHER COURSES 3 RUNNING BY THE COLLEGE AND HAD MADE PAYMENTS UNDER THE HEAD TEACHING STAFF (GUEST FACULTY). FURTHER IT WAS NOTED THAT NO TAX AT SOURCE WAS DEDUCTED BY THE DEDUCTOR OUT OF THE S AID PAYMENTS MADE TO THE TEACHING STAFF (GUEST FACULTY) UNDER SE CTION 194J OF THE ACT. THE ASSESSEE WAS ISSUED SHOW CAUSE NOTIC E WHICH IS REPRODUCED UNDER PARA 2 AT PAGES 1 TO 3 OF THE ASSE SSMENT ORDER. THE REPLY OF THE ASSESSEE IS REPRODUCED UNDER PARA 3 AT PAGES 3 TO 7 OF THE ASSESSMENT ORDER. THE PLEA OF THE ASSESS EE BEFORE THE ASSESSING OFFICER WAS THAT IT HAD APPOINTED ADHOC T EACHING STAFF ON SALARY BASIS ONLY. THE COPY OF ONE OF THE SALA RY BILL WAS FILED BEFORE THE ASSESSING OFFICER, WHICH DEPICTS THAT TH E SALARY HAD BEEN PAID BY THE COLLEGE AS EMPLOYER TO THE TEACHIN G STAFF, WHO WERE THE EMPLOYEES. AS PER THE ASSESSEE, THERE WA S EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE COLLEGE AND THE T EACHING STAFF EMPLOYED ON CONTRACTUAL BASIS. FURTHER THE SAID PE RSONS ERE EMPLOYED TO TEACH IN THE COLLEGE AND TO FOLLOW THE RFULS AND REGULATIONS PREVALENT IN THE COLLEGE. THE ASSESSEE FURTHER CLARIFIED THAT THE PROVISIONS OF SECTION 194C OR 19 4J OF THE ACT WERE NOT APPLICABLE AND WAS NOT LIABLE TO DEDUCT TH E TAX AT SOURCE AS THE AMOUNT PAID AS SALARY WAS BELOW THE TAXABLE LIMIT. HOWEVER, THE ASSESSING OFFICER REJECTED THE PLEA OF THE ASSESSEE AS THE SERVICES OF THE SAID GUEST FACULTY WERE AVAILED FOR A VERY SHORT SPAN OF TIME I.E. ALMOST 5 TO 6 MONTHS. THE ASSES SEE HAD FURNISHED COPY OF ONE OF THE SALARY BILL TO PROVE I TS CASE THAT THERE EXISTED RELATIONSHIP OF EMPLOYER AND EMPLOYEE BETWE EN THE ASSESSEE. ANOTHER PLEA RAISED BY THE ASSESSEE WAS THE SAID TEACHERS WERE APPOINTED ON ADHOC BASIS. THE ASSESS ING OFFICER FURTHER OBSERVED THAT NO FACULTY MEMBER WAS ENTITLE D FOR FIXED ANNUAL INCREMENT, PROVIDENT FUND, GRATUITY AND/OR L EAVE 4 ENCASHMENT OR HRA, T.A. & D.A., ETC. AS PER THE ASSESSING OFFICER THERE WAS NO ELEMENT OF EMPLOYER AND EMPLOY EE RELATIONSHIP AND THEIR SERVICES WERE UTILIZED FOR I MPARTING PROFESSIONAL/TECHNICAL EDUCATION. THE ASSESSING O FFICER THUS HELD THAT THE PAYMENTS MADE TO THE GUEST FACULTY WERE PR OFESSIONAL CHARGES AND LIABLE TO DEDUCTION OF TAX AT SOURCE UN DER SECTION 194J OF THE ACT. AS THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE, IT WAS HELD LIABLE UNDER SECTION 201(1) OF THE ACT AND DEMAND OF RS.5,24,127/- WAS RAISED UNDER SECTION 201(1) OF TH E ACT AND RS.1,88,686/- WAS CHARGED AS INTEREST UNDER SECTION 201(1A) OF THE ACT FOR THE ASSESSMENT YEAR 2009-10. 6. THE CIT (APPEALS) DELETED THE ADDITION OBSERVING THAT THE PAYMENTS MADE TO THE SAID PERSONS WERE NOT COVERED UNDER SECTION 194J OF THE ACT AS THERE WAS EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE COLLEGE AND TEACHING STAFF AND IN VIEW OF THE SALARY DRAWN BY THE SAID PERSONS THE ASSESSING OFFICER WAS NOT RIGHT IN TREATING THE ASSESSEE IN DEFAULT AND RAISING DEMAND UNDER SECTION 201(1) AND 201(1A) OF THE ACT. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS). THE PLEA RAISED BY THE REVENUE WAS THAT IN THE ABSENCE OF ANY EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN T HE DEDUCTOR AND PROFESSIONAL TEACHING STAFF, THERE WAS NO MERIT IN THE ORDER OF THE CIT (APPEALS). 8. SHRI AMRINDER SINGH APPEARED FOR THE ASSESSEE AN D SHRI MANJIT SINGH GUPTA PUT IN APPEARANCE ON BEHALF OF THE REVE NUE AND PUT FORWARD THEIR CONTENTIONS. 5 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DEDUCTOR WAS RUNNING COLLEGE IN THE NAME A ND STYLE OF M/S MCM DAV COLLEGE AT SECTOR 36-A, CHANDIGARH. THE TDS INSPECTION/SURVEY WAS CARRIED OUT AT THE PREMISES O F THE ASSESSEE UNDER SECTION 133A OF THE ACT ON 19.9.2011. THE S URVEY TEAM NOTED THAT THE ASSESSEE DEDUCTOR HAD AVAILED THE SE RVICES OF VARIOUS PROFESSIONALS FOR TEACHING SELF FINANCING A ND OTHER COURSES RUN BY THE COLLEGE AND THE PAYMENT MADE TO THE SAID TEACHING STAFF WHO WAS GUEST FACULTY WAS LIABLE TO DEDUCT TAX AT S OURCE BEING PROFESSIONAL PAYMENT UNDER SECTION 194J OF THE ACT. 10. ON THE OTHER HAND, THE PLEA OF THE ASSESSEE WAS THAT IT HAD APPOINTED THE TEACHERS ON ADHOC BASIS FOR TEACHING THE STUDENTS OF THOSE PROFESSIONAL COURSES AND THERE EXISTED THE RE LATIONSHIP OF EMPLOYER AND EMPLOYEE BETWEEN THE ASSESSEE DEDUCTOR AND ITS TEACHING STAFF AND THE PAYMENTS MADE TO THEM IN THE NATURE OF SALARY AND NOT PROFESSIONAL CHARGES. THE CIT (APP EALS) VIDE PARA 5 HAS GIVEN FOLLOWING FINDINGS IN THIS REGARD: 5. I HAVE CONSIDERED THE FACTS OF THE CASE. THE A DHOC TEACHING STAFF (GUEST FACULTY) WAS MAINLY APPOINTED FOR SELF FINANCING CO URSES. THESE TEACHERS ARE APPOINTED BY THE SELECTION COMMITTEE AND THE PROCEE DINGS REGARDING THEIR APPOINTMENTS ARE DULY RECORDED. 11. THE LEARNED D.R. FOR THE REVENUE HAS FAILED TO CONTROVERT THE SAID FINDING OF THE CIT (APPEALS) AND IN THE ABSENC E OF THE SAME, WE REJECT THE PLEA OF THE REVENUE. 12. THE NEXT PLEA OF THE ASSESSEE WAS THAT AS THERE WAS RELATIONSHIP OF EMPLOYER AND EMPLOYEE BETWEEN THE A SSESSEE DEDUCTOR AND ITS TEACHERS APPOINTED ON ADHOC BASIS, THERE WAS NO 6 MERIT IN THE ORDER OF THE ASSESSING OFFICER IN TREA TING THE PAYMENT MADE TO THEM AS PROFESSIONAL CHARGES LIABLE TO DEDU CTION OF TAX UNDER SECTION 194J OF THE ACT. 13. THE CIT (APPEALS) VIDE PARAS 5.1 TO 5.5 HELD AS UNDER: 5.1 THE ASSESSING OFFICER HAS TREATED THE PAYMENTS MADE TO THE ADHOC TEACHING STAFF U/S 194J OF THE ACT. AT THE OUTSET, IT MAY BE MENTIONED THAT AS PER THE NOTIFICATION NO. S.O. 2085(E) DATED 21.08.2008, ISS UED BY THE CENTRAL BOARD OF DIRECT TAXES, PAYMENTS MADE TO TEACHERS IS NOT COVERED BY SECTION 194J OF THE ACT. THE VIEW OF THE ASSESSING OFFICER THAT THE AP PELLANT HAS APPOINTED HIGHLY QUALIFIED TEACHERS FOR TEACHING PROFESSIONAL COURSE AND SO THESE PAYMENTS ARE COVERED BY SECTION 194J, IS NOT CORRECT IN VIEW OF THE SPECIFIC NOTIFICATION IN THIS REGARD. 5.2 THE TEST TO BE APPLIED FOR DETERMINING THE RELA TIONSHIP HAS BEEN ENUMERATED BY HONTDLE SUPREME COURT IN THE CASE OF M/S DHARANGADHRA CHEMICAL WORKS LTD VS. STATE OF SAURASHTRA (AIR 195 7 SC 264, 267) AS UNDER: 'THE PRIMA FACIE TEST FOR THE DETERMINATION OF RELA TIONSHIP BETWEEN MASTER AND SERVANT IS THE EXISTENCE OF THE RIGHT IN THE MA STER TO SUPERVISE AND CONTROL THE WORK DONE BY THE SERVANT NOT ONLY IN TH E MATTER OF DIRECTING WHAT WORK THE SERVANT IS TO DO BUT ALSO THE MANNER IN WH ICH HE SHALL DO HIS WORK. THE NATURE OR EXTENT OF CONTROL WHICH IS REQUISITE TO ESTABLISH THE RELATIONSHIP OF EMPLOYER AND EMPLOYEE MUST NECESSARILY VARY FROM BUSINESS TO BUSINESS AND IS BY ITS VERY NATURE INCAPABLE OF PRECISE DEFI NITION. THE CORRECT METHOD OF APPROACH, THEREFORE, WOULD BE TO CONSIDER WHETHE R HAVING REGARD TO THE NATURE OF THE WORK THERE WAS DUE CONTROL AND SUPERV ISION BY THE EMPLOYER. A PERSON CAN BE A WORKMAN EVEN THOUGH HE IS PAID NO T PER DAY BUT BY THE JOB. THE FACT THAT RULES REGARDING HOURS OF WORK, E TC., APPLICABLE TO OTHER WORKMEN MAY NOT BE CONVENIENTLY APPLIED TO THEM AND THE NATURE AS WELL AS THE MANNER AND METHOD OF THEIR WORK WOULD BE SUC H AS CANNOT BE REGULATED BY ANY DIRECTIONS GIVEN BY THE INDUSTRIAL TRIBUNAL, IS NO DETERRENT AGAINST HOLDING THE PERSONS TO BE WORKMEN WITHIN TH E MEANING OF THE DEFINITION IF THEY FULFIL ITS REQUIREMENT.' 5.3 THE EXISTENCE OF RIGHT OF CONTROL IN RESPECT OF THE MANNER IN WHICH WORK IS TO BE DONE IS THE MOST IMPORTANT FACTOR TO DETERMIN E THE RELATIONSHIP. THE TERMS OF EMPLOYMENT WERE FIXED BY THE COLLEGE MANAG EMENT IN THIS CASE AND THEY HAD COMPLETE CONTROL OVER THE TEACHERS WHO WER E ENGAGED AS TEACHING STAFF (GUEST FACULTY). THERE WAS AN EMPLOYER, AN EM PLOYEE AND THE EMPLOYMENT AND SO IT CANNOT BE SAID THAT THE RELATI ONSHIP BETWEEN THE COLLEGE AND TEACHING STAFF WAS ANYTHING ELSE, OTHER THAN TH AT OF EMPLOYER-EMPLOYEE. 7 5.4 THE PAYMENTS MADE TO THE TEACHING STAFF ARE, IN FACT, IN THE NATURE OF SALARY IN VIEW OF THE CONCEPT OF EMPLOYMENT DULY EX PLAINED BY HONBLE DELHI HIGH COURT IN THE CASE OF C.S. MATHUR VS. CBDT & ANR; (147 CTR 75) AS UNDER: 'THEIR LORDSHIPS QUOTED THEIR OWN OBSERVATION IN CH INTAMAN RAO V. STATE OF M.P., AIR 1958 SC 388 AND HELD : THE CONCEPT OF EMPLOYMENT INVOLVES THREE INGREDIENT S : (1) EMPLOYER, (2) EMPLOYEE, AND (3) THE CONTRACT OF EMPLOYMENT. THE E MPLOYER IS ONE WHO EMPLOYS, I.E., ONE WHO ENGAGES THE SERVICES OF OTHE R PERSONS. THE EMPLOYEE IS ONE WHO WORKS FOR ANOTHER FOR HIRE. THE EMPLOYMENT IS THE CONTRACT OF SERVICE BETWEEN THE EMPLOYER AND THE EM PLOYEE WHEREUNDER THE EMPLOYEE AGREES TO SERVE THE EMPLOYER SUBJECT TO HI S CONTROL AND SUPERVISION.' 5.5 THE RATIO OF THE FINDING IN THE CASE OF MAX MUELLER BHAVAN (268 ITR 31)(AAR) IS SQUARELY APPLICABLE IN THE INSTANT CASE . 14. WE ARE IN CONFORMITY WITH THE FINDINGS OF THE C IT (APPEALS) IN THIS REGARD THAT IN VIEW OF VARIOUS RATIO LAID D OWN BY THE HON'BLE SUPREME COURT AND THE HON'BLE DELHI HIGH CO URT AND IN VIEW OF THE FINDINGS OF THE CIT (APPEALS) VIDE PARA 5.6 THAT THE RELATIONSHIP BETWEEN THE MANAGEMENT AND TEACHING ST AFF INVOLVED AN OBLIGATION TO OBEY ORDERS IN THE WORK TO BE PERF ORMED, THE SAID RELATIONSHIP COULD NOT BE CALLED CONTRACT FOR SERVI CE SINCE THE TEACHING STAFF HAD NOT UNDERTAKEN TO RENDER ANY PRO FESSIONAL OR TECHNICAL SERVICE. AS THERE WAS A CONTRACT OF SER VICE BETWEEN THE ASSESSEE DEDUCTOR AND ITS TEACHING STAFF APPOINTED ON ADHOC BASIS AND THE SALARY PAID TO THEM BEING BELOW THE TAXABLE LIMIT, DOES NOT WARRANT DEDUCTION OF TAX AT SOURCE AND SUCH NON DED UCTION OF TAX AT SOURCE DOES NOT INVALIDATE THE PROVISIONS OF ACT MAKING THE ASSESSEE LIABLE FOR THE DEMAND RAISED UNDER SECTION 201(1)/201(1A) OF THE ACT. WE ARE IN AGREEMENT WITH THE OBSERVAT ION OF THE CIT (APPEALS) THAT MERELY BECAUSE THE ASSESSEE HAD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR FINANCIALLY ADDED COU RSES AND SELF FINANCING COURSES WAS NOT RELEVANT, AS THERE WAS NO REQUIREMENT 8 UNDER THE ACT AND BY NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT, THE NATURE OF PAYMENT WOULD NOT GET CHANGED. FURT HER IN VIEW OF THE TEACHING STAFF BEING APPOINTED ON ADHOC BASIS, FOR A SHORT PERIOD, THERE WAS NO ENTITLEMENT FOR ANY OTHER BENE FITS LIKE PF, GRATUITY, HRA, INCREMENT, ETC. UPHOLDING THE ORDE R OF THE CIT (APPEALS), WE HOLD THAT THE ASSESSING OFFICER WAS N OT CORRECT IN TREATING THE PAYMENTS MADE TO THE TEACHERS ON ADHOC BASIS AS PROFESSIONAL PAYMENTS IN LINE WITH THE PROVISIONS O F SECTION 194J OF THE ACT. THE ASSESSEE IS THUS NOT IN DEFAULT A ND THERE IS NO MERIT IN RAISING OF DEMAND UNDER SECTION 201(1) OF THE ACT AND CHARGING OF INTEREST UNDER SECTION 201(1A) OF THE A CT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS DI SMISSED. 15. THE FACTS, CIRCUMSTANCES AND ISSUES IN ITA NOS. 513 TO 517/CHD/2014 ARE IDENTICAL TO THE FACTS IN ITA NO.5 12/CHD/2014 AND OUR DECISION IN ITA NO.512/CHD/2014 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.513 TO 517 /CHD/2014. 16. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF AUGUST, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 TH AUGUST, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9