Commissioner Of Income Tax (Tds) Chandigarh v. Dav College, Sector-10, Chandigarh

ITA No. 120 of 2015 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 120 of 2015 Date of Decision: 3.12.2015 Commissioner of Income Tax (TDS) Chandigarh Versus ....Appellant. DAV College, Sector-10, Chandigarh ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. Mr. Maninder Arora, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of a bunch of three appeals bearingITA Nos. 120, 122 and 123 of 2015 as according to learned counsel forthe parties, the identical questions of law and facts are involved therein.For brevity, the facts are being extracted from ITA No. 120 of 2015. 2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 8.8.2014 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 353/CHD/2014 for theassessment year 2010-11, claiming the following substantial questions of law:- (i)Whether on the facts and circumstances of the (ii) (iii) (iv) -2- case and in law, the Ld. ITAT was justified inholding that the relation with Guest Faculty(professional teaching staff) is equivalent innature to an employer/employee relationshipwhen there was no agreement/appointment oremployer-employee relationship between theparties and that the Guest Faculties weremerely professionals and therefore Section194J of the Act was applicable? Whether on the facts and in the circumstancesof the case, the learned ITAT has erred inrecognizing the payments made to GuestFaculty, who rendered professional services tothe college, as per the provisions of Section 192of the Income Tax Act, 1961 instead of Section194J of the Income Tax Act, 1961? Whether on the facts and in the circumstancesof the case, the Ld. ITAT is right in law inholding that there existed an employer-employee relationship between the GuestFaculty teachers and the College and theassessee-college is not liable to makededuction of tax at source u/s 194J of theIncome Tax Act, 1961?Whether on the facts and in the circumstancesof the case the findings recorded by the Ld.ITAT are perverse and contrary to the material ITA No. 120 of 2015 available on record and not sustainable in the eyes of law? Whether on the facts and in the circumstancesof the case, the Ld. ITAT is right in law inholding that there existed an employer-employee relationship between the GuestFaculty teachers and the College and theassessee-college is not liable to makededuction of tax at source u/s 194J of theIncome Tax Act, 1961?Whether on the facts and in the circumstancesof the case the findings recorded by the Ld.ITAT are perverse and contrary to the material ITA No. 120 of 2015 available on record and not sustainable in the eyes of law? 3.A few facts necessary for adjudication of the instant appealas narrated therein may be noticed. The assessee is a college, impartingeducation in various subjects and fields. Part of fields and subjects arefinancially aided by the Government and others are not aided by theGovernment. The services of teaching staff (guest faculty) for the selffinancing scheme courses is engaged on need basis. A survey underSection 133A of the Act was conducted on the premises of the assesseeon 9.9.2011. During the course of inspection, it was found that theassessee had engaged the professional teaching staff (guest faculty) forrendering professional services for teaching self-financing and otherprofessional courses run by the assessee. The payment to guest facultywas made on the basis of lectures delivered by the guest faculty and notthe pay scales as in the case of regular employees. Since the paymentsmade were exceeding ` 20,000/-, the assessee was required to deductthe tax at source as envisaged under Section 194J of the Act.Accordingly, a show cause notice dated 28.2.2012 was issued to theassessee treating it as person-in-default under Section 201(1)/201(1A)of the Act. The Assessing Officer vide order dated 24.12.2012 (AnnexureA-1) passed under Section 201(1)/201(1A) of the Act created a demandof ` 8,96,763/- and also initiated penalty proceedings under Section271C of the Act. Feeling aggrieved, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]pleading that the tax at source was not required to be deducted underSection 194J of the Act on the payments made to the guest facultiesbecause there existed a relationship of employer and employee and the ITA No. 120 of 2015 payment made to the guest faculty is a salary and also below the taxablelimit. The CIT(A) vide a consolidated order dated 31.1.2014 (AnnexureA-2) for the assessment years 2009-10, 2010-11 and 2011-12 allowedthe appeals holding that the Assessing Officer was not right in treatingthe assessee in default under Section 201(1)/201(1A) of the Act for notdeducting tax at source under Section 194J of the Act. Against theorder, Annexure A-2, the revenue filed appeals before the Tribunalpleading that the CIT(A) without any finding held that there is relationshipof employer and employee and the college had not availed theprofessional services of the guest faculties for teaching self-financingand other courses whereas the payments made were exceeding` 20,000/- and deduction of tax at source was required to be made underSection 194J of the Act as the college engaged the professional servicesof the guest faculty. The Tribunal vide order dated 8.8.2014 (AnnexureA-3) affirmed the order of the CIT(A) and dismissed the appeals. Hence,the present appeals by the revenue. 4.Learned counsel for the appellant-revenue submitted thatwhether the agreement between the respondent-assessee and the guestfaculty lecturers engaged by the college-assessee was a 'contract forservice' or a 'contract of service' would be a question of fact dependentupon appreciation of various factors enunciated by this Court in TheCommissioner of Income Tax (TDS), Chandigarh v. M/s Ivy HealthLife Services Pvt. Ltd., Mohali, Punjab, ITA No. 142 of 2013 decidedon 26.8.2015. It was urged that the Tribunal who is the final fact findingauthority has not recorded any such clear finding of fact regarding'contract of service' or 'contract for service' between the respondent-assessee and the guest faculty lecturers based on guiding principles ITA No. 120 of 2015 -5- enunciated in M/s Ivy Health Life Services Pvt. Ltd.'s case (supra).Itwas, thus, contended that in such circumstances it would be just andappropriate that the matter is remitted back to the Tribunal to decideafresh keeping in view the principles of law laid down in M/s Ivy Health Life Services Pvt. Ltd.'s case (supra). 5.On the other hand, learned counsel for the respondent-assessee supported the order passed by the Tribunal. 6.We have heard learned counsel for the parties and findforce in the submissions of learned counsel for the appellant. 7.This Court in M/s Ivy Health Life Services Pvt. Ltd.,Mohali, Punjab's case (supra) held that it was required to be seenwhether the agreement between the assessee and the concerneddoctors was a 'contract for service' or a 'contract of service'. In case, it is'contract for service', the income of the doctors would fall under the head'income from business or profession' whereas under 'contract of service,it would partake the character of salary which is dependent upon master-servant relationship. It is always a vexed question to determine whetheremployer-employee relationship exists between the parties or not. Thereis no strait jacket formula prescribed under any statute or by anypronouncement on the basis of which it could be said that in a giveneventuality, it would be characterized as employer-employeerelationship. Such relationship depends upon several factors takentogether. Even the Apex Court in Workmen of Nilgiri Coop. Market Society Limited v. State of Tamil Nadu and others, 2004(2) RSJ 466(SC) observed that the question whether the relationship between theparties is one of the employer and employee is a pure question of fact.The control test and the organization test are not the only factors whereas several other factors viz. who is the appointing authority; who ispay master; who can dismiss; how long alternative service lasts; theextent of control and supervision; the nature of the job e.g. Whether it isprofessional or skilled work; nature of establishment and the right toreject, are also required to be scanned before arriving at the conclusionof the employer-employee relations. This Court had recorded as under:- Society Limited v. State of Tamil Nadu and others, 2004(2) RSJ 466(SC) observed that the question whether the relationship between theparties is one of the employer and employee is a pure question of fact.The control test and the organization test are not the only factors whereas several other factors viz. who is the appointing authority; who ispay master; who can dismiss; how long alternative service lasts; theextent of control and supervision; the nature of the job e.g. Whether it isprofessional or skilled work; nature of establishment and the right toreject, are also required to be scanned before arriving at the conclusionof the employer-employee relations. This Court had recorded as under:- “9. To resolve the controversy raised in theseappeals, necessarily, it will be required to be seenwhether the agreement between the assessee andthe concerned doctors was a 'contract for service' or a'contract of service'. In case, it is 'contract for service',the income of the doctors would fall under the head'income from business or profession' whereas under'contract of service, it would partake the character ofsalary which is dependent upon master-servantrelationship. It is always a vexed question todetermine whether employer-employee relationshipexists between the parties or not. There is no straitjacket formula prescribed under any statute or by anypronouncement on the basis of which it could be saidthat in a given eventuality, it would be characterizedas employer-employee relationship. It is dependentupon several factors taken together which wouldresult into such relationship. Besides thecontrol/supervisory test and the organization test, theApex Court in Workmen of Nilgiri Coop. MarketingSociety Limited's case (supra), observed that the -7- question whether the relationship between the parties is one of the employer and employee is a purequestion of fact. It was also noticed that control testand the organization test are not the only factorswhereas several other factors such as (a) who is theappointing authority; (b) who is pay master; (c) whocan dismiss; (d) how long alternative service lasts; (e)the extent of control and supervision; (f) the nature ofthe job e.g. whether it is professional or skilled work;(g) nature of establishment; (h) the right to reject, arealso required to be scanned before arriving at theconclusion of employer-employee relationship.” 8.Accordingly, the impugned orders are set aside and thematter is remanded to the Tribunal to decide the same afresh keeping inview the principles laid down by this Court in M/s Ivy Health LifeSciences Pvt. Ltd., Mohali, Punjab's case (supra) and after hearingthe parties and by passing a speaking order in accordance with law.Needless to say anything observed hereinbefore shall not be taken to beexpression of opinion on the merits of the controversy. (AJAY KUMAR MITTAL) JUDGE December 3, 2015 gbs (RAMENDRA JAIN) JUDGE