SHIV PRATAP RAGHUVANSHI, Kota V. ACIT, Kota

ITA 551/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5460 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Opportunity of being heard
• Section: 143(3); 37(1); 131; 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 551/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2007-08 . SHIV PRATAP RAGHUVANSHI, PRATAP NAGAR, KOTA. CUKE VS. THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-1, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AFJPR 9909 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI SIDDHARTH RANKA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.02.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 12/02/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE PRESENT APPEAL FILED BY THE ASSESSEE IS ARISIN G FROM THE ORDER DATED 18.02.2013 PASSED BY THE LEARNED CIT (A), KOTA FOR THE A.Y. 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL :- 1. THAT THE LD. LOWER AUTHORITIES HAVE ERRED IN LAW AN D IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE RECEI PTS OF THE ASSESSEE IS INCOME FROM SALARY INSTEAD OF INCOME FRO PROFESS IONAL RECEIPTS. 1.1. THAT THE LD. LOWER AUTHORITIES HAVE ERRED IN LAW AN D IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN REJECTING THE BOOK S OF ACCOUNTS WITHOUT INVOKING PROVISIONS OF SECTION 145(3) OF TH E INCOME TAX ACT, 1961. 2 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT 1.2. THAT THE LD. LOWER AUTHORITIES HAVE ERRED IN LAW AN D IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN DISALLOWING EXPENS ES INCURRED BY THE ASSESSEE OF RS. 1,022,167/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLA NT HAS PASSED OUT AS A ENGINEERING GRADUATE FROM IIT KANPUR AND IS A QUALIFIED B.TECH ENGINEER. IN THE YEAR 2005, THE ASSESSEE EMPLOYED HIMSELF WITH M/S. RESONANCE, KOTA THROUGH ITS PROPRIETOR SHRI R.K. VERMA, ON SALARY BASIS. ON THE BASIS OF HIS EMPLOY MENT WITH M/S. RESONANCE, THE ASSESSEE HAS FILED HIS RETURN OF INCOME. 2005-06 W AS THE FIRST YEAR OF HIS EMPLOYMENT OF THE ASSESSEE WITH RESONANCE. THEREAFTER, THE AS SESSEE FILED RETURN OF INCOME FOR AY 2006-07. HE CLAIMED HIMSELF TO BE A PROFESSIONAL A ND ON 1 ST APRIL, 2006 HE ENTERED INTO A CONSULTANCY AGREEMENT WITH M/S. RESONANCE. THE RE CITAL OF THE SAID AGREEMENT PROVIDES AS UNDER :- WHEREAS THE PARTY OF THE FIRST PART IS ENGAGED IN THE BUSINESS OF IMPARTING COACHING, GUIDANCE AND TUITIONS TO STUDEN TS FOR PREPARING THEM TO APPEAR IN VARIOUS REGULAR AND COMPETITIVE E XAMINATIONS IN INDIA, MORE PARTICULARLY IN IIT JOINT ENTRANCE EXAMIN ATIONS AND IT HAS SUCH STUDY CENTRE AT KOTA, IT IS DESIROUS OF EN GAGING EXPERTS IN PHYSICS/CHEMISTRY/MATHEMATICS TO ADVICE THE INSTITU TE IN PLANNING THE COURSE, PREPARATION OF COURSE MATERIAL, IMPARTI NG NECESSARY COACHING AND GUIDANCE TO THE ASPIRING CANDIDATES FO R EXAMINATIONS AND OTHER ALLIED MATTERS; AND WHEREAS THE PARTY OF THE SECOND PART IS B-TECH QUALI FIED ENGINEER HAVING HIS DEGREE FROM IIT KANPUR AND 4 YEARS EXPER IENCE IN ADVISING, GUIDING AND COACHING STUDENTS FOR SUCH EX AMINATIONS. (THIS PARAGRAPH WILL HAVE TO BE INDIVIDUALLY DRAFTE D TO REFLECT HIS ACADEMIC QUALIFICATION AND TEACHING/COACHING EXPERI ENCE) WHEREAS, AFTER DETAILED DISCUSSIONS AND NEGOTIATIONS , THE FIRST PARTY WISHES TO ENGAGE THE PARTY OF THE SECOND PART AS 3 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT CONSULTANT AND THE SECOND PARTY IS AGREEABLE TO SUC H AN ENGAGEMENT. THE PARA 1.1 AND 1.2 OF THE SAID AGREEMENT PROVIDES THAT THE ASSESSEE WOULD BE DISCHARGING HIS DUTIES AS CONSULTANT FOR CHEMISTRY PART OF RESONANCE INSTITUTE AND THE RELATIONSHIP BETWEEN THE ASSESSEE AND THAT OF THE R ESONANCE WOULD BE OF CONSULTANT AND PRINCIPAL AND NOT THAT OF THE EMPLOYER AND EMPL OYEE. 2.1. AS PER THE CONSULTANCY AGREEMENT, THE CONSULTA NT WAS PROVIDED FREEDOM IN METHODOLOGY AS ALSO SCHEDULING, STRUCTURING AND DEL IVERING. THE CONSULTANT WAS, HOWEVER, REQUIRED, IN TERMS OF THE AGREEMENT TO ENS URE THAT HE COMPLETES THE AGREED/PLANNED PORTION OF HIS SUBJECT WITHIN THE OV ERALL TIME FRAME, AND IF NEED BE BY TAKING CLASSES ON SUNDAYS/HOLIDAYS. THE BROAD DUTIE S OF THE CONSULTANT WERE PROVIDED IN PARA 2.3 OF THE AGREEMENT. THE RELEVANT CLAUSES OF THE DUTIES, AS MENTIONED IN CLAUSES 2.3 ARE REPRODUCED HEREIN BELOW : A) TO ADVISE THE INSTITUTE IN DESIGNING THE COURSE STR UCTURE OF CHEMISTRY FOR THE IIT JEE ASPIRANTS; C) DEVELOPMENT OF ENTRANCE TESTS (SUBJECT : CHEMIST RY) INTO RESONANCE ITSELF; E) SETTING THE OVERALL PACE OF TEACHING CHEMISTRY D EPENDING ON PRIOR PREPAREDNESS OF STUDENTS (CLASS XI, CLASS XII, DROP PERS, ETC.) I) TO ASSIST AND PARTICIPATE IN PSYCHOLOGICAL COUNSELI NG FOR STUDENTS AND ALSO OF THE PARENTS OF THE STUDENTS; K) TO TEACH THOSE TOPICS OF CHEMISTRY TO THE STUDEN TS WHICH ARE GREED TO BE TAUGHT BY THE CONSULTANT FROM TIME TO TIE DEPENDING ON THE NEED OF THE STUDENTS AND THE CONVENIENCE OF THE CONSULTANT SO H OWEVER THE HE WILL TAKE AT LEAST 18 CLASSES IN A WEEK; 4 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT L) PREPARING AND DELIVERING THE SUMMARY OF THEIR LE CTURES AS AND WHEN DELIVERED; M) TO DESIGN AND PREPARE DAILY PRACTICE PROBLEMS (D PP) FOR THEIR PART OF SUBJECT HOWEVER, THE SIZE, DEPTH AND DIFFICULTY L EVEL SHALL BE DECIDED BY THE CONSULTANT BASED ON HIS ASSESSMENT OF PREPAREDNESS OF THE STUDENTS WHOM HE IS GUIDING; N) GUIDING TEACHERS OF THE INSTITUTE FOR EFFECTIVE CONTENT DELIVERY IN CLASSES; O) GROOMING YOUNG TEACHERS TO BE EFFECTIVE EDUCATOR S; P) HELPING THE INSTITUTE IN ATTRACTING NEW TEACHING TALENT AS WELL AS CONDUCTING INTERVIEWS TO IDENTIFY AND HIRE THE BEST AVAILABLE TEACHERS. 2.2. SIMILARLY, THE RESONANCES OBLIGATIONS ARE PRO VIDED IN PARA 3 OF THE AGREEMENT. IN DISCHARGE OF THE DUTIES AS CONSULTANT, THE INSTI TUTE HAS TO PAY THE ANNUAL CONSULTANCY CHARGES OF RS. 26 LACS EXCLUDING THE SE RVICE TAX PAYABLE. THE CLAUSE 4.2 OF THE AGREEMENT IS RELEVANT, WHICH WE ARE REPRODUCING HEREIN BELOW :- 4.2. THE PAYMENT TO THE CONSULTANT SHALL BE MADE MO NTHLY OR QUARTERLY ON SUBMISSION OF APPROPRIATE INVOICE/BILL AND SHALL BE PAID BY THE INSTITUTE, IN ARREARS. THE CONSULTANT HAS BEEN GIVEN THE COPY RIGHT AND IN TELLECTUAL PROPERTY RIGHTS IN RESPECT TO THE STUDY MATERIAL, NOTES, QUESTION PAPERS, TEST PAPERS, MOCK TESTS WHICH ARE PREPARED EXCLUSIVELY BY THE CONSULTANT WITHOUT USIN G THE RESOURCES OF THE INSTITUTE IRRESPECTIVE OF THE FACT WHETHER THEY ARE DISTRIBUT ED AMONGST THE STUDENTS OF THE INSTITUTE OR NOT. THE AGREEMENT HAS ALSO PROVIDED A NON-COMPETE CLAUSE AS UNDER :- 5 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT 8.1. IN CONSIDERATION OF THE MUTUAL COVENANTS AND CONSIDERATIONS CONTAINED IN THIS AGREEMENT, RECEIPT AND ADEQUACY W HEREOF IS ACKNOWLEDGED BY THE PARTY OF THE SECOND PART, IT IS HEREBY AGREED BY THE CONSULTANT THAT, WHILE THIS AGREEMENT IS IN FORCE, HE SHALL NOT : A) ADVISE AND OR GIVE CONSULTANCY TO ANY OTHER PERSON, PARTY, ORGANIZATION OR ENTERPRISE IN RESPECT OF THE SUBJEC T MATTER OF THIS AGREEMENT; B) DIRECTLY OR INDIRECTLY GUIDE, TEACH OR COACH ANY ST UDENT FOR THE COURSES OR EXAMINATIONS FOR WHICH HE MAY, FOR THE T IME BEING, BE RESPONSIBLE UNDER THIS AGREEMENT; C) DIRECTLY OR INDIRECTLY PARTICIPATE, ASSIST OR ADVIS E SETTING UP OF ANY COACHING/TEACHING INSTITUTE, STUDY CENTRE, SETU P OR ENTERPRISE TO CARRY ON THE ACTIVITIES SIGNIFICANTLY SIMILAR TO THE ACTIVITIES OF THE INSTITUTE, WHETHER BY WAY FOR GIV ING DIRECT TUITIONS OR BY WAY OF DISTANT COACHING OR BY CORRES PONDENCE. THE AGREEMENT ALSO PROVIDES THAT ANY OF THE PARTIES CAN TERMINATE THE AGREEMENT AFTER GIVING ONE MONTH NOTICE TO THE OTHER ON ACCOUNT OF REASONS MENTIONED IN PARA 11; OF THE AGREEMENT. 2.3. NOW, AFTER ENTERING INTO AGREEMENT, THE CONSUL TANT ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 DECLARING IN COME OF RS. 14,33,357/- ON 22.10.2007. ON SCRUTINY, NOTICE UNDER SECTION 143( 2) WAS ISSUED BY THE AO. THEREAFTER THE QUERY WAS SENT AND THE LD. A/R OF THE ASSESSEE ATTENDED THE HEARING. THE AO AFTER EXAMINING THE TERMS AND CONDITIONS OF THE CONSULTAN CY AGREEMENT HAS COME TO THE CONCLUSION THAT THE ASSESSEE HAS CONVERTED HIS INCO ME FROM SALARY TO PROFESSION FOR CLAIMING THE EXPENDITURE WHICH IS NOT ALLOWABLE FRO M SALARY. INTERESTINGLY, THE AO HAS NOT ALLOWED THE EXPENSES INCURRED/CLAIMED BY THE AS SESSEE IN THE RETURN OF INCOME,ON THE PRETEXT THAT IF THE ASSESSEE GOT INCOME FROM SA LARY THEN HE COULD NOT CLAIM THE 6 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT EXPENDITURE. THEREFORE, THE AO HAS NOT REJECTED TH E BOOKS OF ACCOUNT AND WITHOUT REJECTING THE BOOKS OF ACCOUNT, THE AO HAS REJECTED THE CLAIM OF EXPENDITURE IN THE RETURN OF INCOME. THE REASONING GIVEN BY THE AO IN CONCLUDING THE ASSESSMENT ORDER, IS MENTIONED IN PARA 10, WHICH IS AS UNDER :- FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT ASSES SEE CONVERTED HIS INCOME FROM SALARY TO PROFESSION FOR CLAIMING EXPEN DITURE WHICH IS NOT ALLOWABLE FROM SALARY. SUCH COLORFUL DEVICES CA N NOT THE PART OF TAX PLANNING AS PER DECISION OF HONBLE SUPREME COU RT IN CASE MCDOWELL & CO. 3. THE ASSESSEE AGGRIEVED BY THE ORDER OF THE AO, H AS CHALLENGED IN APPEAL BEFORE LD. CIT (A) AND THE GROUNDS OF APPEAL TAKEN BEFORE LD. CIT (A) ARE AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED ASSESSING OFFICER HAS GROSSLY ERRED IN MAKING THE ASSESSMENT ORDER U/S 143(3) WITHOUT APPLYING AND COMPLYING THE PROVISIONS OF SE CTION 145(3)/144 OF THE INCOME TAX ACT, THEREFORE THE ORDER IS BAD I N LAW AND VOID AB INITIO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE C ASSESSEE TH E LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN TREATING THE PROFESSIONAL INCOME AMOUNTING RS. 26,00,000/- AS A SALARY INCOME WITHOU T EXAMINING THE BOOKS OF ACCOUNTS OF THE APPELLANT AND WITHOUT VERI FYING THE FACTS OF THE CASE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED ASSESSING OFFICER HAS GROSSLY ERRED IN DISALLOWING ALL THE EX PENDITURE AGGREGATING RS. 1022167/- UNDER VARIOUS HEADS WITHOUT EXAMINING THE BOOKS OF ACCOUNTS OF THE APPELLANT AND WITHOUT VERIFYING THE FACTS OF THE CASE. 7 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT 3.1. THE LD. CIT (A) HAS DECIDED ALL THE GROUNDS AG AINST THE ASSESSEE. HOWEVER, AT THIS JUNCTURE IT IS APT TO REPRODUCE THE FINDING IN RESPECT OF GROUND NO. 1, WHICH IS AS UNDER :- 4.12. THE ASSESSING OFFICER HAS TREATED THE INCO ME OF ASSESSEE AS INCOME UNDER THE HEAD SALARY AND COMPUTED THE INCOM E ON THE BASIS OF DETAILS FURNISHED BY ASSESSEE HIMSELF. MOR EOVER, FACTUALLY NO AMOUNT WAS DISPUTED. THERE WAS NO DISPUTE ON FAC TS THE ONLY ISSUE WAS WHETHER THE RECEIPT FROM RESONANCE COACHI NG INSTITUTE WAS TAXABLE UNDER THE HEAD SALARY OR UNDER THE HEAD BUSINESS AND PROFESSION WHICH WAS A LEGAL ISSUE. THEREFORE, THER E WAS NO NEED TO INVOKE PROVISIONS OF SECTION 145(3)/144. HOWEVER, IN RESPECT OF THE OTHER, THE LD. CIT (A) H AS CONFIRMED THE FINDINGS GIVEN BY THE AO. THE CONCLUSION OF LD. CIT (A) IS GIVEN AT P AGE 11 IN THE FOLLOWING MANNER :- IN THE LIGHT OF THE ABOVE DISCUSSION, I HAVE EXAM INED THE CONTRACT BETWEEN ASSESSEE AND RESONANCE AND I AM CONVINCED T HAT THE CONTRACT IS ONE OF CONTRACT OF SERVICE. THE ASSES SEE WAS WORKING DIRECTLY UNDER THE CONTROL AND SUPERVISION OF THE I NSTITUTE RESONANCE. 4. FEELING AGGRIEVED BY THE ORDER PASSED BY LD. CIT (A), THE ASSESSEE IS BEFORE US. BEFORE US, THE LD. ADVOCATE FOR THE ASSESSEE HAS SU BMITTED AS UNDER :- IF A PERSON WAS EARNING THE SALARY INCOME IN A Y 20 05-06 IT DOES NOT MEAN THAT THE INCOME IN A Y 2007-08 SHOULD ALSO BE TREATED AS SAL ARY INCOME. IT COULD BE A PROFESSIONAL INCOME. FURTHER IF HE ATTEND THE CLASS OF SENIOR FA CULTY THAT DOES NOT CHANGE THE NATURE OF INCOME FROM PROFESSIONAL RECEIPT TO SALARY RECEI PT. 8 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT IF ANY PEOPLE CHANGE HIS TEACHING SUBJECT (PHYSICS TO CHEMISTRY) IT DOES NOT CHANGE THE NATURE OF INCOME. IF ANY PERSON IS AFFILIATED WITH A COACHING INSTITU TE ON FULL TIME BASIS OR PART TIME BASIS, IT IS NOT A CRITERIA OF DECIDING THE NATURE OF INCOME EARNED. IN PRESENT SCENARIO OF COACHING INSTITUTE A PROFESS IONAL IS MUCH RESPONSIBLE FOR HIS DUTIES IN COMPARE TO EMPLOYEE. HENCE THE OBSERVATION OF TH E LEARNED ASSESSING OFFICER THAT CONTROLS WERE EXERCISED BY THE INSTITUTE, TERMS ARE IN THE NATURE OF DUTIES NOT IN THE NATURE OF RIGHT, REMUNERATION IS ON YEARLY BASIS ET C. COMPLETELY SHOWS THAT ASSESSING OFFICER HAS PRE DETERMINED MIND ABOUT THE NATURE OF INCOME. IN THE SIMILAR CASE OF KAMLESH SONI ITAT JAIPUR BEN CH HAS DECIDED THE CASE IN THE FAVOR OF ASSESSEE. RELEVANT PARA IS REPRODUCED HERE IN BELOW : THE ASSESSEE IS AN ENGINEERING PROFESSIONAL HOLDING DEGREE OF B.E. (CIVIL). THE TERMS AND CONDITIONS OF THE AGREEMENT RELEVANT TO T HE NATURE OF RELATION BETWEEN THE TWO PARTIES ARE THAT SCHEDULE OF TEACHI NG HOURS WAS DECIDED BY THE ASSESSEE; QUESTION PAPER AND ANSWER SHEET FOR T EST CONDUCTED BY ACI ARE PREPARED BY THE ASSESSEE WITH THE HELP OF HIS OWN S TAFF; THE ASSESSEE WAS GIVEN A PARTICULAR PORTION OF A PARTICULAR SUBJECT TO TEACH AND TO BE ACCOMPLISHED IN PRESCRIBED TIME; LAST CONTRACT WAS FOR RS. 5 LAC FOR ASST. YR. 2000-01 AND SUBSEQUENTLY IN ASST. YR. 2001-02 THE C ONTRACT AMOUNT INCREASE TO RS. 9 LAC; AND DEARNESS ALLOWANCE, CONVEYANCE ALLOW ANCE, PERQUISITES, PROVIDENT FUND CONTRIBUTION OR OTHER BENEFIT WERE N OT PROVIDED TO THE ASSESSEE. ALL THESE TERMS AND CONDITIONS OF THE AGR EEMENT SUGGEST THAT THERE WAS NO RELATION OF EMPLOYER AND EMPLOYEE BETWEEN AC I AND THE ASSESSEE. THE TERMS AND CONDITION OF THE AGREEMENT BETWEEN THE PA RTIES ARE MORE AKIN TO THE RELATION BETWEEN THE TWO AS A PROFESSIONAL. THE CIT(A) HAS THERE FOR RIGHTLY ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE RECEIPT IN QUESTION WAS PROFESSIONAL INCOME AND NOT A SALARY INCOME. THE CO RRECTNESS OF EXPENSES IS YET TO BE EXAMINED BY AO AS TO WHETHER THESE CLAIM ARE VERIFIABLE OR NOT OR HAVE BEEN SUPPORTED WITH SUFFICIENT EVIDENCE, THOUG H THE ASSESSEE IS ENTITLED FOR PROFESSIONAL EXPENDITURE UNDER SEC. 37(1). THE MATTER IS THUS SET ASIDE TO THE FILE OF AO TO VERIFY THE CORRECTNESS OF CLAIMED AMOUNT IN EXPENDITURE AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO ASSESSEE ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD IN THIS REGARD.-CIT VS. MRS. DURGA KHOTE (1952) 21 ITR 22 (BOM) RELIED ON. 9 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT SIMILAR MATTER WAS DECIDED BY THE HON BLE ITAT BENC H JAIPUR IN THE CASE OF ALLEN CAREER INSTITUTE. THE DETAILED FACTS ARE AS F OLLOWS: THE ISSUE INVOLVED IN THE GROUNDS IS AS TO WHETHER THE ASSESSEE WAS WORKING WITH M/S ALLEN CAREER INSTITUTE AS THEIR EMPLOYEE OR AS A PR OFESSIONAL AND IF HE WAS WORKING AS A PROFESSIONAL AS TO WHETHER HE WAS ENTITLED TO THE C LAIM OF RS. 3,18,328 UNDER SEC. 37 (1) OF THE ACT. THE UNDISPUTED FACTS ARE THAT THE ASSES SEE HAD FURNISHED RETURN OF INCOME DECLARING INCOME UNDER THE HEAD INCOME FROM BUSINE SS / PROFESSION AND INCOME FROM OTHER SOURCES. IT WAS NOTED BY THE AO THAT PRIOR T O JOINING M/S ALLEN CAREER INSTITUTE, THE ASSESSEE WAS EMPLOYEE OF CENTRAL ACADEMY SCHOOL AS A TEACHER OF PHYSICAL FOR RS. 1,200 PER MONTH. BESIDES TEACHING AT CENTRAL ACADEMY SCHO OL, HE WAS ALSO TAKING PRIVATE TUITION RS. 2,400 PER MONTH APPROXIMATELY. IN THE Y EAR 1998 HE JOINED M/S ALLEN CAREER INSTITUTE @ RS. 2,50,000 PER MONTH VIDE A CONTRACT OF SERVICE BETWEEN THE MONTH TWO. AS PER TDS CERTIFICATE IN FORM NO. 16A, TDS WAS DEDUC TED @ 33 PER CENT FOR ALL THE MONTHS IN WHICH THE ASSESSEE TAUGHT STUDENT. THE AO NOTED FURTHER THAT ASSESSEE TRIED TO CATEGORIZE THE SERVICE GIVEN BY HIM AS VOCATION INS TEAD OF SALARY EHILE THE RELATION OF THE ASSESSEE AND THE MANAGEMENT OF THE INSTITUTE WERE T HAT OF PRINCIPAL AND SERVANT. THE AO ACCORDINGLY CONCLUDED THAT THE ASSESSEE HAS WRON GLY CLAIMED INCOME UNDER THE HEAD PROFESSIONAL INCOME INSTEAD OF INCOME UNDER THE SAL ARY. HE ALSO DENIED THE EXPENDITURE CLAIMED BY ASSESSEE ON STATIONERY, NEWSPAPERS AND M AGAZINES, ETC. THE LEARNED CIT(A) HAS HOWEVER ALLOWED THE CLAIM OF THE ASSESSEE DISCU SSING THE TERMS AND CONDITION OF THE CONTRACT BETWEEN THE ASSESSEE AND AND ALLEN CAREER INSTITUTE AS OF PROFESSIONAL. THE SAME HAS BEEN QUESTIONED BY THE REVENUE BEFORE US. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HIMSELF HAD TREATED THE RECEIPT AS SALARY RECEIPT IN VIEW OF TAX DEDUCTION CERTIFICATE ISSUED BY THE EMPLOYER, THE TAX WAS BEING DEDUCTED @ 33 PERCENT TREATING THE PAYMENT AS SALAR Y. THE LEARNED DEPARTMENT REPRESENTATION WHILE PLACING RELIANCE ON ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE IN HIS STATEMENTS RECORDED BY THE AO UNDER SEC. 131 OF THE ACT HAD STATED THAT PRIOR TO JOINING SERVICES AT M/S ALLEN CAREER INSTITUTE, HE WAS EMPLOYEE OF CENTRAL ACADEMY SCHOOL AS A TEACHER AND WAS ALSO DOING PRIVATE TUIT ION. ALL THESE CIRCUMSTANCES SUGGEST THAT ASSESSEE WAS A SALARIED EMPLOYEE OF M/S ALLEN CAREER INSTITUTE AND LEARNED CIT (A) WAS NOT JUSTIFIED IN ALLOWING THE CLAIM OF ASSESSEE OF PROFESSIONAL INCOME AND THE CLAIM 10 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT OF EXPENDITURE INCURRED BY HIM UNDER SEC. 37(1) OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE, ON THE OTHER HAND, JUSTIFIED FIRST APPELLATE ORDER WITH THIS SUBMISSION THAT CERTIFICATE ISSUED BY THE EMPLOYER IN FORM NO. 16A AND THE NATURE OF PAYMENT HAS BEEN SHOWN AS PROFESSIONAL SERVICES. THE ASSESSEEE WAS REGISTERED AS A PROFESSIONAL HOLDING REGISTRATION NO. RPT/2035/E0081 AND HAD PAI D PROFESSIONAL TAX OF RS. 2,400 DURING FINANCIAL YEAR 2000-01 RELEVANT FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION. THUS CTO HAD RECOGNIZED THE ASSESSEE AS A PROFESSIO NAL. PRIOR TO ASST. YR. 2001-02, IN NUMBER OF ASSESSMENT YEAR THE INCOME OF THE ASSESSE E HAS BEEN CHARGED AND ASSESSED BY THE DEPARTMENT IN THE STATUS OF PROFESSIONAL. TH ERE WAS NO RELATION OF EMPLOYER AND EMPLOYEE BETWEEN THE M/S ALLEN CAREER INSTITUTE AND THE ASSESSEE, WHICH IS REQUIRED TO CHARGE THE INCOME UNDER HE HEAD SALARY. THE LEARNED ATHORISED REPRESENTATIVE SUBMITTED THAT THE RATE OF 33 PERCENT INSTEAD OF 5 PERCENT CANNOT BE A BASIS TO TREAT THE PROFESSIONAL INCOME AS SALARY PARTICULARLY WHEN THE TDS RETURNS AND IT RETURN OF M/S ALLEN CAREER INSTITUTE ALSO FALL UNDAR THE JURISDIC TION OF THE SAME AO AND IN THE TDS AS WELL AS IT RETURN OF THE INSTITUTE THE NATURE OF TH E ASSESSEE HAS BEEN SHOWN AS PROFESSIONAL PAYMENT AND THESE RETURN WERE ACCEPTED BY THE DEPARTMENT AS SUCH. HE PLACED RELIANCE ON THE FOLLOWING DECISION: (I) CHINTAMAN RAO VS. STATE OF MP AIR 1958 SC 388,392; (II) SILVER JUBILEE TAILORING HOUSE VS. CHIEF INSPECTOR AIR 1974 SC 37; (III) CIT VS. MRS. DURGA KHOTE (1952) ITR 22 (BOM); (IV) INDIAN MEDICAL ASSOCIATION VS. V.P. SHANTHA 86 COMP CAS 806 (SC). THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED FUR THER IN SIMILAR OTHER CASE LIKE MR. VINOD KUMAWAT ( PAGE NOS. 22 TO 31 OF THE PAPER BO OK), MR. CHINARAO CHAUDHARY ( PAGE NOS. 32 TO 40 OF THE PAPER BOOK) THE DEPARTMENT HA S ACCEPTED THE RECEIPT AS PROFESSIONAL INCOME. THESE PERSONS ARE ALSO ASSOCIA TED WITH THE SAME INSTITUTE. HE ALSO REFERRED PAGE NO. 3 OF THE PAPER BOOK I.E. COPY OF THE CERTIFICATE ISSUED BY M/S ALLEN CAREER INSTITUTE CONFORMING RENDERING OF THE SERVIC E BY THE ASSESSEE IN HIS PROFESSIONAL CAPACITY . HE SUBMITTED FURTHER THAT IN THE CASE OF ASSESSEE WHAT TO DO AND NOT HOW TO 11 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT DO. THE ASSESSEE , A QUALIFIED AND EXPERIENCED PRO FESSIONAL HAD NOT ONLY ACQUIRED SPECIAL QUALIFICATION BUT HAD ALSO EXERCISED INTELLECTUAL S KILL ON THE BASIS OF SPECIAL LEARNING. AFTER CONSIDERING THE ABOVE ARGUMENTS, WE FIND SUBS TANCE IN THE CONTENTIONS OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE NATURE O F RELATIONSHIP BETWEEN THE ASSESSEE AND M/S ALLEN CAREER INSTITUTE CAN BE INFERRED FROM THE TERMS AND CONDITION OF THE AGREEMENT BETWEEN THE TWO UNDER WHICH M/S ALLEN CAR EER INSTITUTE WAS AGREED TO PAY RS. 2,50,000 TO THE ASSESSEE FOR THE SERVICE TO BE RENDERED BY HIM ON THE AGREED TERMS AND CONDITION OF THE AGREEMENT BETWEEN THE TWO. THE ASSESSEE IS AN ENGINEERING PROFESSIONAL HOLDING DEGREE OF BE (CIVIL). THE TERM S AND CONDITION OF THE AGREEMENT RELEVANT TO THE NATURE OF RELATION BETWEEN THE TWO PARTIES ARE THAT SCHEDULE OF TEACHING HOURS WAS DECIDED BY THE ASSESSEE; QUESTION PAPERS AND ANSWER SHEETS FOR TEST CONDUCTED BY M/S ALLEN CAREER INSTITUTE ARE PREPARE D BY THE ASSESSEE WITH THE HELP OF HIS OWN STAFF; THE ASSESSSEE WAS GIVEN A PARTICULAR POR TION OF A PARTICULAR SUBJECT TO TEACH AND TO BE ACCOMPLISHED IN PRESCRIBED TIME; DURING T HE YEAR THE ASSESSEE CLAIME TO HAVE PAID RS. 60,000 TO MR. VIJAY SONI EMPLOYED BY HIM F OR ASSISTING HIM AND PREPARED NOTES FOR STUDENTS ON THE BESIS OF WHICH HE HAD FILED RET URN OF INCOME CHARGING INCOME UNDER THE HEAD SALARY; LAST CONTRACT WAS FOR RS. 5 LAC FO R ASST. YR. 2000-01 AND SUBSEQUENTLY IN ASST. YR. 2001-02 THE CONTRACT AMOUNT INCREASE TO R S. 9 LAC; AND DEARNESS ALLOWANCE, CONVEYANCE ALLOWANCE, PERQUISITES, PROVIDENT FUND C ONTRIBUTION OR OTHER BENEFITS WERE NOT PROVIDED TO THE ASSESSEE. ALL THESE TERMS AND C ONDITIONS OF AGREEMENT SUGGEST THAT THERE WAS NO RELATION OF EMPLOYER AND EMPLOYEE BETW EEN M/S ALLEN CAREER INSTITUTE WERE PREPARED BY THE ASSESSEE WITH THE HELP OF HIS OWN STAFF AND STATIONERY; ASSESSEE WAS GIVEN AN ASSIGNMENT UNDER THE AGREEMENT FOR TEA CHING OF A PARTICULAR PORTION OF A PARTICULAR SUBJECT WITH IN A PRESCRIBED TIME LIMIT AND AFTER COMPLETING THAT ASSIGNMENT THERE WAS NO RELATIONSHIP BETWEEN HIM AND M/S ALLEN CAREER INSTITUTE AND BESIDES OTHERS THE ASSESSEE WAS NOT PROVIDED DEARNESS ALLOWANCE, C ONVEYANCE ALLOWANCE, PERQUISITES, PROVIDENT FUND CONTRIBUTION OR OTHER BENEFITS WHICH ARE GENERALLY PROVIDED TO AN EMPLOYEE BY HIS EMPLOYER. IN THE CASE OF CIT VS. DU RGA KHOTE ( SUPRA), THE HONBLE BOMBAY HIGH COURT WAS PLEASED TO HOLD THAT MERE EST ABLISHEDMENT OF RELATIONSHIP OF MASTER AND SERVANT IS NOT SUFFICIENT WHEN WE ARE DE ALING WITH A PERSON WHO IS PRACTICING A PROFESSION BECAUSE IN THE COURSE OF PRACTICE OF T HAT PROFESSION IT MAY BECOME 12 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT NECESSARY FOR THE PERSON TO GET HIMSELF OR HERSELF ENGAGED TO A PARTICULAR MASTER TEMPORARILY. BUT EVEN WHY HE OR SHE IS SO ENGAGED H E OR SHE IS REALLY PRACTICING HIS OR HER PROFESSION AND THE SERVICE IS MERELY INCIDENTAL TO THAT PROFESSION. THE POSITION IS DIFFERENT WHEN A PROFESSIONAL PERSON PERMANENTLY ACCEPTS AN E MPLOYMENT AND EXCHANGES HIS PROFESSION FOR SERVICE. THERE MAY BE SOME SIMILARIT Y BETWEEN THE SERVICE RENDERED BY AN EMPLOYEE AND BY A PROFESSIONAL IN TERMS OF AN AGREE MENT BUT TOTALITY OF FACTS AND CIRCUMSTANCES ARE TO BE SEEN, WHICH IN OUR VIEW ARE THE EXTENT OF CONTROL OF A PERSON WHO IS TAKING SERVICES FROM OTHER FOR AN AGREED PAYMENT , THE MANNER IN WHICH THE PERSON GETS SERVICES AND THE DURATION OF SERVICE BESIDES T YPE OF FACILITIES PROVIDED BY THE PERSON GETTING THE WORK DONE. IN THE CASE OF AN EMPLOYER A ND EMPLOYEE, THE NATURE OF CONTROL AND ITS MANNER ARE DIFFERENT THAN THOSE IN A CASE D ONE ON CONTRACT BASIS. IN OUR VIEW IN THE PRESENT CASE THE TERM SERVICES USED FOR THE A SSIGNED JOB DONE BY THE ASSESSEE FOR THE INSTITUTE HAVE BEEN TREATED AS THE SERVICES REN DERED BY AN EMPLOYEE IGNORING THE VITAL FACTOR THAT IN A CASE OF EMPLOYER AND EMPLOYE E OVERALL DISCRETION LIES ON THE EMPLOYER AS TO HOW HE WISHES TO GET HIS WORK DONE W HEREAS IN THE CASE OF CONTRACTUAL WORK THE TOTAL DISCRETION AND CONTROL LIES ON THE P ERSON WHO IS ASSIGNED WITH THE PARTICULAR JOB TO BE DONE IN THE AGREED TIME AND IN THE AGREED MANNER WITHOUT ANY FREQUENT INTERFERENCE AND INSTRUCTION BY THE PERSON FOR WHOM WORK IS DONE FOR A CONSIDERED AMOUNT. OF COURSE RELATIONSHIP BETWEEN T HE TWO PARTIES IN A CASE OF AGREEMENT IS GENERALLY SHORTER AND EXTENSION OR REN EWAL THEREOF DEPENDS UPON THE DISCRETION OF EACH OTHER. IN THE PRESENT CASE BEFOR E US, THE TERMS AND CONDITIONS OF THE AGREEMENT BETWEEN THE PARTIES ARE MORE AKIN TO THE RELATION BETWEEN THE TWO AS PROFESSIONAL. THE LEARNED CIT(A) HAS THEREFORE RIGH TLY ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE RECEIPT IN QUESTION WAS PROFESSIONAL INCOM E AND NOT A SALARY INCOME SO FAR AS GROUND NO. 2 IS CONCERNED, WE FIND FROM THE FIRST A PPELLATE ORDER THAT LEARNED CIT(A) HAS ACCEPTED THE CLAIMED PROFESSIONAL EXPENDITURE UNDER SEC. 37(1) OF THE ACT ON THE BASIS THAT ASSESSEE HAD EARNED PROFESSIONAL INCOME ON INC URRING THESE EXPENSES. IN OURVIEW, THE CORRECTNESS OF THESE EXPENSES IS YET TO BE EXAM INED BY THE AO AS TO WHETHER MTHESE CLAIMS ARE VERIFIABLE OR NOT OR HAVE BEEN SUPPORTED WITH SUFFICIENT EVIDENCE, THOUGH WE AGREE ON PRINCIPLE THAT THE ASSESSEE WAS ENTITLED F OR PROFESSIONAL EXPENDITURE UNDER SEC. 37(1) OF THE ACT. THE MATTER IS THUS SET ASIDE TO T HE FILE OF THE AO TO VERIFY THE CORRECTNESS 13 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT OF CLAIMED AMOUNT IN EXPENDITURE AFTER AFFORDING OP PORTUNITY OF BEING HEARD TO THE ASSESSEE ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD IN THIS REGARD. THE ISSUE RAISED IN THE GROUNDS IS THUS DECIDED IN FAVOUR OF THE ASSESSEE SUBJECT TO AFORESAID VERIFICATION SO FAR AS CORRECTNESS OF CLAIMED EXPEN DITURE AMOUNT IS CONCERNED. WE FURTHER SUBMIT THAT AS PER DECIDED CASE OF MCDOW ELL & CO. IN HONBLE SUPREME COURT IT IS STATED THAT IF TAX CAN BE AVOIDED ACCORDING TO RULES AND REGULATIONS OF INCOME TAX AC T THAN IT IS NOT COVERED UNDER CONCEALMENT AND IT IS HANDSOME WAY TO AVOID TAX. THE AGREEMENT BETWEEN THE APPELLANT AND THE COACHIN G INSTITUTE IS ENCLOSED WITH THIS SUBMISSION FOR YOUR READY REFERENCE. THE RELATION O F THE MASTER AND THE SERVANT DOES NOT EXIST BETWEEN THE APPELLANT AND THE COACHING IN STITUTE AND THAT RELATION IS MUST FOR TREATING THE INCOME AS A SALARY INCOME. WE FURTHER SUBMIT THAT COACHING HAS DEDUCTED THE TD S ON THE AMOUNT OF PROFESSIONAL INCOME AND NOT ON SALARY. AND THE SAME HAS BEEN CLA IMED IN THE PROFIT AND LOSS ACCOUNT AS A PROFESSIONAL FEE. IN THE LIGHT OF ABOVE DECISIONS IT IS CLEAR THAT TH E INCOME EARNED DURING THE YEAR UNDER APPEAL WAS/IS OF PROFESSIONAL NATURE INSTEAD OF SAL ARY INCOME. AND ALL THE EXPENDITURE SHOULD BE ALLOWED AS A EXPENDITURE SPENT WHOLLY FOR EARNING PROFESSIONAL INCOME AND THERE IS DIRECT NEXUS BETWEEN THE EXPENSES AND THE PROFESSIONAL INCOME. HENCE ALL THE EXPENDITURES SHOULD BE ALLOWED U/S 37 OF THE INCOME TAX ACT. HENCE IT IS REQUESTED TO YOU TO KINDLY GIVE THE NEC ESSARY DIRECTIONS TO THE AUTHORITIES AND OBLIGE. 4.1. THE LD. D/R FOR THE REVENUE HAS SUPPORTED THE CASE OF REVENUE AND HAS SUBMITTED THAT THE AGREEMENT ENTERED BETWEEN THE AS SESSEE AND THE RESONANCE WAS A SHAM DOCUMENT AND WAS ENTERED BETWEEN THE PARTIES T O EVADE THE TAX. IN FACT, THE REAL 14 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT RELATIONSHIP BETWEEN THE ASSESSEE AND THE RESONANCE WAS OF EMPLOYEE AND EMPLOYER AND NOT OF THE CONSULTANT AND THE PRINCIPAL. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE CONSULTANCY AGREEMENT DATED 1.4.2006 REVEALS THAT T HE APPOINTMENT AS CONSULTANT IS FOR A PERIOD OF ONE YEAR. IT ALSO MENTIONED THAT TH E RELATIONSHIP BETWEEN THE ASSESSEE AND THE RESONANCE WOULD BE GOVERNED BY THE TERMS AN D CONDITIONS OF THE CONTRACT. THE CONSULTANCY FEE, FOR PROVIDING THE CONSULTANCY FOR CHEMISTRY WAS AGREED FOR A SUM OF RS. 26 LACS EXCLUDING THE SERVICE TAX PAYABLE. THE PAYMENT TO THE CONSULTANT WAS TO BE MADE MONTHLY OR QUARTERLY ON SUBMISSION OF APPROPRI ATE BILL/INVOICE. FROM THE PERUSAL OF THE AGREEMENT, IT IS CLEAR THAT THE ASSESSEE WAS NOT ENTITLED TO STATUTORY BENEFIT LIKE PF, ESI, GRATUITY, BONUS OR LEAVE ENCASHMENT. WE WOU LD LIKE TO MENTION THAT THE ASSESSEE WAS ALSO ENTITLED TO GIVE ADVISE AND CONSU LTANCY SERVICE TO OTHER PARTIES, OR ORGANIZATION OR ENTERPRISES IN RESPECT OF SUBJECT M ATTER WHICH ARE NOT PART OF THE AGREEMENT I.E. TO SAY THAT THE AGREEMENT HAS RESTRI CTED THE SUBJECT OF CONSULTANCY TO CHEMISTRY ONLY. WHEREAS AS PER THE CASE OF THE REV ENUE, THE ASSESSEE WAS TEACHING PHYSICS IN THE YEAR 2005-06, THEREFORE, THE CONSULT ANT, IN OUR VIEW WAS FREE TO RENDER THE SERVICES AS CONSULTANT FOR THE SUBJECTS OF PHYS ICS AND MATHS. HOWEVER, PROVIDING THE CONSULTANCY SERVICES IN RESPECT OF THE SUBJECTS PHYSICS AND MATHS OR ANY OTHER SUBJECT SHOULD NOT BE IN CONFLICT IN TERMS OF THE A GREEMENT. 4.3. THE BASIC ISSUE, WHICH IN THE LIGHT OF THE ABO VE, WE ARE REQUIRED TO ADJUDICATE IS WHETHER THE RELATIONSHIP BETWEEN THE ASSESSEE AND T HE RESONANCE WAS OF EMPLOYEE AND EMPLOYER OR CONSULTANT AND PRINCIPAL. THE FUND AMENTAL ASPECT WHICH IS REQUIRED TO 15 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT BE EXAMINED, WE HAVE ILLUSTRATED SOME OF THE FACTS I.E. WHETHER THE CONTRACT BETWEEN THE ASSESSEE AND THE RESONANCE WAS FOR CONTRACT OF SERVICES OR CONTRACT FOR SERVICES. IF THE CONTRACT IS FOR CONTRACT OF SERVICES THEN IT COMES WITHIN THE PURVIEW OF EMPLOYEE AND EMPLOYER RELATIONSHIP. IF IT IS FOR CONTRACT F OR SERVICES, THEN IT IS BETWEEN THE PROFESSIONAL AND THE ENTREPRENEUR. 4.4. ADMITTEDLY, THE ASSESSEE WAS A B-TECH QUALIFIE D ENGINEER AND WAS HAVING 4 YEARS EXPERIENCE IN ADVISING, GUIDING AND COACHING THE STUDENTS FOR SUCH EXAMINATION. THUS THE ASSESSEE BEING THE ENGINEERING GRADUATE FRO M IIT KANPUR HAD 4 YEARS EXPERIENCE AFTER COMPLETING HIS GRADUATION TO PROVI DE CONSULTANCY SERVICES OF COACHING FOR EXAMINATION. THIS FACT IS NOT DISPUTED BY THE REVENUE, RATHER THE REVENUE HAD BUILT UP ITS CASTLE ON THIS CLAUSE. IN OUR READING, THE REVENUE HAS MIS-READ THE RECITAL AND HAS WRONGLY READ THAT 2005-06 WAS THE FIRST YEAR OF EMPLOYMENT OF THE ASSESSEE. THE AGREEMENT CLEARLY SHOWS THAT PRIOR TO 2005-06 OR PR IOR TO THE ENTERING INTO AGREEMENT, THE CONSULTANT NAMELY THE ASSESSEE WAS HAVING 4 YEA RS TEACHING EXPERIENCE AND ALSO HAVING THE EXPERIENCE OF ADVISING AND GUIDING. IN FACT, THE ISSUE OF EMPLOYEE AND EMPLOYER CONTRACT IS NO MORE RES INTEGRA AND THE HO NBLE SUPREME COURT IN THE MATTER OF PYRE LAL ADISHWAR LAL VS. CIT, (1960) 40 ITR 17 (SC) HAS HELD THAT THE CORRECT METHOD OF APPROACH IS WHETHER HAVING REGARD TO THE NATURE OF WORK THERE WAS DUE CONTROL AND SUPERVISION BY THE EMPLOYER. THE RECEI PT OF REMUNERATION FOR HOLDING AN OFFICE DOES NOT NECESSARILY GIVES RISE TO RELATIONS HIP OF MASTER AND SERVANT. WHETHER A PERSON IS A SERVANT OR AN AGENT WOULD BE DETERMINED BY THE DUTIES OF EMPLOYEE, THE NATURE OF BUSINESS, TERMS OF HIS EMPLOYMENT/ENGAGEM ENT AND THE KIND OF SUPERVISORY 16 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT CONTROL OVER HIS WORK. SIMILARLY, IN THE MATTER OF CIT VS. MANMOHAN DAS (1966) 59 ITR 699 (SC) WHILE COMMENTING ON THE PROFESSION, THE HO NBLE SUPREME COURT HAS HELD THAT THE PROVISION REQUIRES PURELY INTELLECTUAL OR MANUA L SKILL. IN OUR OPINION, A PROFESSION WILL IMPLY ANY VOCATION CARRIED ON BY AN INDIVIDUAL OR GROUP OF INDIVIDUALS REQUIRING THE PREDOMINANTLY INTELLECTUAL SKILLS PURSUING THAT VOC ATION, REQUIRING SPECIALIZED ADVANCE EDUCATION OR EXPERTISE. IT IS AN ADMITTED CASE THAT THE ASSESSEE IS A PROFESSIONAL HAVING B-TECH DEGREE AND FOUR YEARS EXPERIENCE IN ADVISING , GUIDING AND TEACHING VARIOUS SUBJECTS RELEVANT FOR PREPARATION OF ENTRANCE EXAMI NATION FOR ENGINEERING COLLEGES. THE CONCLUSION DRAWN BY AO THAT THE AGREEMENT BETWEEN T HE ASSESSEE AND RESONANCE IS A COLORABLE DEVICE, IN OUR VIEW, IS NOT CORRECT AND N OT SUPPORTED BY ANY INVESTIGATION OR REASONING BROUGHT ON RECORD. IN OUR VIEW, THE ASSES SEE WAS GIVEN THE FREEDOM TO TAKE THE CLASSES AND TEACH THE SUBJECT WITHIN THE PARAME TER LAID DOWN BY RESONANCE. THE DAY TO DAY SUPERVISION AND CONTROL IS MISSING. WE O BSERVE THAT THERE IS NO PROVISION FOR MARKING THE ATTENDANCE WHILE COMING TO THE INSTITUT E AND GOING OUT OF THE INSTITUTE. NO FIXED TIMING HAS BEEN GIVEN. IN FACT, IF WE LOOK I NTO THE CONSULTANCY AGREEMENT, THE ASSESSEE WAS REQUIRED TO PROVIDE THE CONSULTANT SER VICES FOR ATTRACTING THE NEW TEACHING TALENT AS WELL AS FOR GROWING THE YOUNG TE ACHERS AND GUIDING OF TEACHERS OF THE INSTITUTE FOR DELIVERY IN CLASSES. THIS CLEARLY SHO WS THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND RESONANCE WAS NOT OF EMPLOYEE AND EMPL OYER. THE CONCLUSION OF THE AO THAT THE ASSESSEE HAS JOINED THE INSTITUTE IN A.Y. 2005-06 AFTER HIS GRADUATION AND AT THE STAGE OF HIS TRAINING IS WITHOUT ANY BASIS AND IS CONTRARY TO RECORD. THE AGREEMENT PROVIDES THAT THE AGREEMENT IN RECITAL MENTIONED TH AT THE ASSESSEE IS B-TECH QUALIFIED 17 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT ENGINEER HAVING HIS DEGREE FROM IIT AND 4 YEARS EXPERIENCE IN ADVISING, GUIDING AND COACHING SUCH STUDENTS FOR EXAMINATION. WE FAIL TO APPRECIATE AS TO HOW THE AO HAS CONCLUDED THAT THE ASSESSEE HAS GRADUATED IMMEDIATE LY BEFORE JOINING THE RESONANCE INSTITUTE IN THE YEAR 2005-06 WHEN THE AGREEMENT IT SELF MENTIONED THAT HE WAS HAVING 4 YEARS EXPERIENCE OF ADVISING, GUIDING AND COACHIN G STUDENTS. IT IS A COMMON KNOWLEDGE AND THE BENCH CAN TAKE THE COURT NOTICE T HAT IF A STUDENT IS STUDYING IN IIT, THEN THE STUDENT WILL NOT HAVE THE EXPERIENCE IN AD VISING, GUIDING AND COACHING THE STUDENTS DURING HIS STUDENT CAREER. HIS CAREER, IN OUR UNDERSTANDING, AS A TEACHER WILL COMMENCE ONLY AFTER COMPLETING THE GRADUATION AND T HEREAFTER HE WILL ACQUIRE THE EXPERIENCE FOR ADVISING, GUIDING AND TEACHING. FURT HER TO SAY THAT THE ASSESSEE WAS TAKING THE CLASSES FROM SHRI R.C. SHARMA AND WAS T O TAKE CLASSES ON SAME PATTERN, IN OUR OPINION, THE SAME DOES NOT HELP THE AO. IT DOES NOT LEAD TO ANY CONCLUSION THAT SHRI R.C. SHARMA WAS A FACULTY OF CHEMISTRY OR PHYSICS O R ANY OTHER SUBJECT. EVERY INSTITUTE, HAS ITS OWN WAY OF CONDUCTING THE CLASSES AND IS RE QUIRED TO TRAIN ITS CONSULTANT/PROFESSION THE ETHICS, PROTOCOL ETC. DUR ING ORIENTATION PROGRAM AND IF THE ASSESSEE HAS ATTENDED THE CLASSES OF SHRI R.C. SHAR MA, THAT IT IS ALONG WITH OTHER INSTANCES REFERRED IN THE ORDER, DO NOT CONSTITUTE THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE RESONANCE AS OF EMPLOYEE AND EMPLOYER. IN FACT, OUR ABOVE SAID VIEW IS SUPPORTED BY THE VARIOUS JUDGMENTS REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE AND MORE PARTICULARLY IN THE MATTER OF KAMLESH SONI, 10 7 TTJ 836 WHEREIN IN THE IDENTICAL FACTS AND CIRCUMSTANCES, THE RELATIONSHIP BETWEEN T HE TEACHER AND THE INSTITUTE WAS HELD TO BE OF CONSULTANT IN NATURE. IN THE LIGHT O F THE ABOVE, WE HAVE NO HESITATION TO 18 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT HOLD THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THAT OF THE RESONANCE WAS OF EMPLOYEE AND EMPLOYER. WE WOULD LIKE TO ADD THAT E VEN IN THE TAX RETURN FILED BY THE RESONANCE, THE TDS WAS DEDUCTED ON ACCOUNT OF PROFE SSIONAL INCOME AND NOT ON ACCOUNT OF SALARY. IF THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE INSTITUTE WAS OF EMPLOYEE AND EMPLOYER, THEN THE LENGTH OF CONTRACT WOULD NOT HAVE BEEN ONE YEAR. SINCE THE TERM OF THE CONTRACT WAS ONLY ONE YEAR TH AT ALSO GOES IN FAVOUR OF THE ASSESSEE TO TREAT HIM AS PROFESSIONAL. IN THE LIGH T OF THE ABOVE, WE HOLD THAT THE ASSESSEE IS A PROFESSIONAL AND WAS NOT AN EMPLOYEE OF RESONANCE. AT THIS STAGE, WE WOULD LIKE TO REFER THAT THE AO RELIED UPON THE JUD GMENT PASSED BY THE HONBLE SUPREME COURT IN THE MATTER OF MCDOWELL & CO. LTD. VS. CIT, 22 TAXMAN 11 (SC) TO SAY THAT TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAME WORK OF LAW. IN OUR VIEW THE JUDGMENT RELIED UPON BY THE AO, IS AGAINST THE REVENUE. IN FACT, RECENTLY IN THE MATTER OF VODAFONE INTERNATIONAL HOLDING VS. UN ION OF INDIA 1 (2012) 17 TAXMANN.COM 202, THE HONBLE SUPREME COURT HAS UPHE LD THE VIEW OF MCDOWELL & CO. LTD. IN OUR VIEW, THE DOCUMENT BEFORE US I.E. CONS ULTANCY AGREEMENT IS NOT COLORFUL DEVICE BUT ONLY AN ADMITTED DOCUMENT AND NO MATERIA L WHATSOEVER HAS BEEN BROUGHT ON RECORD TO SHOW THAT IT IS A COLORFUL DEVICE. NO NOTICE U/S 131 WAS ISSUED TO RESONANCE INSTITUTE TO CONFRONT THAT THE AGREEMENT IS A COLORFUL DEVICE. IN VIEW OF THAT WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND A GAINST THE REVENUE. 4.5. ONCE WE HAVE HELD THAT THE RELATIONSHIP BETWEE N THE ASSESSEE AND THE RESONANCE WAS OF CONSULTANT/PROFESSIONAL, THEREFORE , THE CONSEQUENCES OF BEING PROFESSIONAL ARE REQUIRED TO BE GIVEN TO THE ASSESS EE. AS PER THE LD. CIT (A), THE ONLY 19 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT REASON FOR DENYING THE EXPENSES ETC WAS THAT THE AS SESSEE HAS BEEN TREATED AS A SALARIED EMPLOYEE INSTEAD OF CONSULTANT. ONCE WE H AVE HELD THAT THE ASSESSEE IS A CONSULTANT, THEREFORE, AS A CONSEQUENCE, THE ASSESS EE IS ENTITLED TO BENEFIT UNDER THE ACT. THEREFORE, GROUND NO. 1.1 AND 1.2 ARE ALSO DE CIDED IN FAVOUR OF THE ASSESSEE. NO REASON WHATSOEVER HAS BEEN GIVEN BY THE AUTHORITIES BELOW FOR REJECTING THE BOOKS OF ACCOUNT. THE SOLE REASON GIVEN BY THE AUTHORITIES B ELOW WAS THAT THE ASSESSEE IS A SALARIED EMPLOYEE AND NOT THE PROFESSIONAL. SINCE WE HAVE HELD THAT THE ASSESSEE IS A PROFESSIONAL, THEREFORE, THIS GROUND IS ALSO DECIDE D IN FAVOUR OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/02/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 12/02/2016. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SHIV PRATAP RADHUVANSHI, KOTA. 2. IZR;FKHZ@ THE RESPONDENT-THE ACIT, CIRCLE-1, KOTA. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 551/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 20 ITA NO. 551/JP/2013 A.Y. 2007-08. SHIV PRATAP RAGHUVANSHI VS. ACIT