Ita/12/2014 Of Shri. P.t.varkey v. Deputy Commissioner Of Income Tax, Circle-1

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE THURSDAY, THE 6TH DAY OF MARCH 2014/15TH PHALGUNA, 1935 ITA.No. 12 of 2014 () ---------------------- ITA.NO.10/COCH/2013 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH -------------------------- APPELLANT : ------------------------ SHRI. P.T.VARKEY, POIKAYIL PUTHEN BUNGALOW, THITTAMAL, CHENGANNUR (PAN: ABPT 5075H). BY ADVS.SRI.ANIL D. NAIR SRI.R.SREEJITH SMT.SULEKHA BEEVI C.S. RESPONDENT : ---------------------------- THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1,THIRUVALLA.PIN-689 101 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06-03-2014, ALONG WITH ITA.NO. 13/2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: sts I.T.A.NO.12/2014 APPENDIX PETITIONER'S ANNEXURES: ANNEX ACOPY OF THE ORDER OF ASSESSMENT FOR YEAR 2008-09 ISSUED TOTHE APPELLANT ANNEX BCOPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ANNEX CCOPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 5/9/2013. RESPONDENT'S ANNEXURES: NIL /TRUE COPY/ P.S.TO.JUDGE MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J. ---------------------------------------------- I.T.A. Nos. 12 of 2014 and 13 of 2014 ---------------------------------------------- Dated this the 6[th] March, 2014 JUDGMENT Manjula Chellur, C.J. Heard learned counsel for the appellant as well as theStanding Counsel for the Revenue on merits. The substantialquestions of law that arise for consideration are as under: “i) In the facts and circumstances of the case,ought not the Tribunal have held that theappellant was a consultant and was thereforeentitled to deduction on expenses? ii) In the facts and circumstances of the case,ought not the Tribunal have held thatassessment of the appellant's income as incomefrom salary was bad in law? Iii) In the facts and circumstances of the case,ought not the Tribunal have held that theassessment of the appellant ought to havebeen completed under the head of income frombusiness?”. I.T.A. Nos. 12 of 2014and13 of 2014 2. The appellant herein, an Engineer by profession is beforeus, aggrieved by the orders of first appellate authority andIncome-tax Appellate Tribunal rejecting his claim that theincome earned by him by rendering service to a Companycalled 'Aban - II' (M/s.Aban Loyd Chiles Offshore Ltd.) amountsto income from consultancy only and not salary. All the threeauthorities after referring to various terms of contract oragreement entered into between the appellant-assessee and thesaid Aban Loyd Chiles Offshore Limited opined that the incomeearned by the appellant-assessee amounts to salary as theterms and conditions clearly indicate that the assessee is aservant of the said company as there is master and servantrelationship between the parties. In other words the appellant-assessee is not enjoying any privileges like any otherconsultant who enjoys his freedom to work for any other personat his option. The authorities also found that the terms ofcontract restricts the employment or consultancy in a particularrig and further there is no specific task to be achieved by theappellant-assessee through his so called professional activity(consultancy). Therefore, he has to be treated as an I.T.A. Nos. 12 of 2014and13 of 2014 employee and not a professional who was engaged to beconsultant on account of his expertise in a particular field. I.T.A. Nos. 12 of 2014and13 of 2014 employee and not a professional who was engaged to beconsultant on account of his expertise in a particular field. 3. In order to understand whether a particular servicerendered by assessee is a service like normal employee or as aprofessional consultancy. One or two terms of agreementcannot be read at random and the entire contract has to beread as a whole and then decide whether it amounts toprofessional consultancy/service or rendering service like anemployee. It is well settled so far as the concept of employmenthow one evolves a particular service as a contract employment.In order to opine that a particular service is an employment,one has to see whether relationship of employer and employeeexists and whether the contract of employment indicates anyrestriction so far as the professional or expert work. In theabsence of any control or supervision, so far as the expertiseof the professional one may conclude that he is only aconsultant and not an employee. Once his service is subject tocontrol and supervision of the person who seeks his service,irrespective of nomenclature of the document under which theterms and conditions are reduced to writing, the real intentionfrom the terms and conditions have to be read out. The fact I.T.A. Nos. 12 of 2014and13 of 2014 4 that no specific nature of task is assigned to the appellant-assessee which can be termed as consultancy and the fact thathe was restricted to work only in one rig would indicate thescope of his work is controlled by the management. Further, hewas also directed not to use his so-called expertise as aconsultant/Barge Engineer for other than the person whoengaged his services clearly indicates apart from control,there is a supervision of his work as well. 4. Learned counsel for the appellant relies upon thedecision reported in Chintaman Rao v. State of M.P. (AIR 1958SC 388). In the above said case the issue that arose forconsideration was what are the ingredients of employment withreference to concept of employment under Factories Act. Factsinvolved in this case are totally different from the facts of thepresent case. 5. In the light of above reasoning, authorities concernedwere justified in opining that the income earned by renderingservices by the appellant-assessee amounts to salary and notconsultancy fee. I.T.A. Nos. 12 of 2014and13 of 2014 5 Accordingly the appeals are dismissed. Sd/- MANJULA CHELLUR, CHIEF JUSTICE Sd/- A.M.SHAFFIQUE, JUDGE rka 10.3.14 /true copy/