Suresh Kumar Hooda v. The Commissioner Of Income Tax, Rohtak And Another

ITA No. 242 of 2011 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 242 of 2011 (O&M) Date of Decision: 2.12.2015 Suresh Kumar Hooda ....Appellant. Versus The Commissioner of Income Tax, Rohtak and another ...Respondents. 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: Ms. Radhika Suri, Senior Advocate with Ms. Rajni Pal, Advocate for the appellant. Mr. Inderpreet Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.Delay of 14 days in refiling the appeal is condoned. 2.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 30.9.2010 (Annexure A-9) passed by the Income TaxAppellate Tribunal, Delhi Bench “G”, New Delhi (hereinafter referred toas “the Tribunal”) in ITA No. 3897/Delhi/2009 for the assessment year2006-07. The appeal was admitted by this Court vide order dated24.7.2012 for determination of the following substantial question of law:- Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal has fallen in errorin holding that the service of an independentcontractor would be taxable as salary contrary to thecontract of service dated 9th February, 2004 and 14thNovember, 2005? 3.The facts, in short, necessary for adjudication of the instantappeal as narrated therein may be noticed. The appellant was engagedas a contractor on contractual basis by South East Marine Engineeringand Construction Ltd. vide letters dated 13.7.2005 (Annexure A-1) anddated 14.11.2005 (Annexure A-2). Vide letter dated 14.2.2006 (AnnexureA-3), the appellant was again re-engaged by the said company. He wasalso engaged by Dolphin Offshore Enterprises vide letter dated 9.2.2004(Annexure A-4) and the said contract was further extended vide letterdated 6.6.2004 (Annexure A-5). The TDS certificate, Annexure A-6, wasissued to the appellant by the said company after deducting the tax atsource under Section 194J of the Act. The appellant filed his return forthe assessment year 2006-07 on 25.8.2006 declaring the income at` 61,377/- which was revised at ` 83,467/-. The assessee disclosedreceipts on account of his technical service from South East Asia MarinEngineering and Construction Ltd. and Dolphin Offshore Enterprise Ltd.as income from business or profession. The Assessing Officer videassessment order dated 5.12.2008 (Annexure A-7) treated the saidreceipts as income from salary. Feeling aggrieved, the assessee filed anappeal before the Commissioner of Income Tax (Appeals) [for brevity“the CIT(A)”]. The CIT(A) vide order dated 29.1.2009 (Annexure A-8)affirmed the order of the Assessing Officer holding that the said receiptswere taxable under Section 17 of the Act as salary. Still dissatisfied, the assessee filed an appeal before the Tribunal who vide order dated30.9.2010 (Annexure A-9) upheld the order of the CIT(A) and dismissedthe appeal. Hence, the present appeal by the assessee. assessee filed an appeal before the Tribunal who vide order dated30.9.2010 (Annexure A-9) upheld the order of the CIT(A) and dismissedthe appeal. Hence, the present appeal by the assessee. 4.Learned counsel for the appellant-assessee submitted thatwhether the agreement between the assessee and South East AsiaMarin Engineering and construction Ltd. (SEAMEC Ltd.) and M/sDolphin Offshore Enterprise Ltd. (DOE Ltd.) was a 'contract for service'or a 'contract of service' would be a question of fact dependent uponappreciation 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 appellant-assessee and SEAMEC Ltd. and DOE Ltd. based on guiding principlesenunciated 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 revenuesupported 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 concerned ITA No. 242 of 2011 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 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. MarketSociety 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 factorswhereas 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 “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 thequestion whether the relationship between the partiesis 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.” ITA No. 242 of 2011 -6- 8.Accordingly, the order dated 30.9.2010 (Annexure A-9) is setaside and the matter is remanded to the Tribunal to decide the sameafresh keeping in view the principles laid down by this Court in M/s IvyHealth Life Sciences Pvt. Ltd., Mohali, Punjab's case (supra) andafter hearing the parties and by passing a speaking order in accordancewith law. Needless to say anything observed hereinbefore shall not betaken to be expression of opinion on the merits of the controversy. (AJAY KUMAR MITTAL) JUDGE December 2, 2015gbs (RAMENDRA JAIN)JUDGE