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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI. A. D. JAIN & SHRI B.R.R. KUMAR
PER A.D. JAIN, V.P.: These are assessee’s appeals against a composite order of the ld. CIT(A)-IV, Lucknow dated 26/12/2018 for assessment years 2011-12 to 2013-14, taking the following common grounds: 1. That the learned ITO(TDS) and CIT(A) has erred in law and on facts in issuing joint show cause notice under section 201(1)/201(1A) read with section 194C of the I.T. Act, 1961, dated 28.02.2014 for financial years 2009-10 to 2012-13 and the impugned order is void ab initio. 2. That the learned ITO(TDS) and CIT(A) has erred in law and on facts in passing the joint order under section 201(1)/201(1A of the I.T. Act, 1961 for F.Ys. 2009-10 to 2012-13 and declaring the appellant assesse to be “an assessee in default" in respect of the amount of Rs.18,56,130/- and directing the appellant to pay the sum of Rs.18,56,130/- and the impugned order is illegal as such.
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That the learned ITO(TDS) and CIT(A) has failed to appreciate the fact that the payment made to staff not of contractual nature and thus section 194C is not applicable on such payment. The nature of such payment is such as it will be liable to TDS under section 192 and the payment made is less than the taxable limits mentioned under section 192. 4. That the learned ITO(TDS) and CIT has erred in law and on facts imposing penalty of Rs.4,95,581 under section 201(1) of the I.T Act, 1961, failing to appreciate that the aforesaid section allows to treat the non deductor as assesse in default only and penalty could be levied only under section 221 of the I.T. Act, 1961after being satisfied that deductor has failed to deduct tax without good and sufficient reason and the impugned order is illegal as such.
The ITO(TDS), Lucknow carried out, on 10/10/2013, verification of TDS in the office of the Basic Shiksha Adhikari, Serve Shiksha Abhiyan & District Primary Education Programme, Ayodhya. It was found that the deductor/appellant had short deducted/not deducted tax on payments to teachers/construction work in his jurisdiction of different blocks/Kastoorba Vidyalayas/blocks in the District of Ayodhya. 3. On query, the deductor/appellant submitted that the staff of Kastoorba Gandhi Vidyalayas was managed under payment of remuneration, due to which, section 194C of the Act was not applicable. 4. The Assessing Officer, however, held that the payment to the teachers is a work of contract under section 194C of the Act and so, TDS ought to have been deducted on contract basis; that the fund had been issued from the Central/State Government, to construct new building/additional rooms in the primary schools at different blocks coming directly under the
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Basic Shiksha Adhikari. The deductor/appellant was declared to be an assessee in default in respect of an amount of Rs.18,56,130/-. 5. The ld. CIT(A) confirmed the action of the Assessing Officer with regard to the TDS concerning salary of staff of Kasturba Gandhi Balika Vidyalayas. Aggrieved, the assessee is in appeal before us. 6. Heard. The ld. CIT(A) has confirmed the action of the Assessing Officer in holding the deductor/appellant to be an assessee in default, for non-deduction of tax on salary payment to the teachers, as required under section 194C of the Act. In this regard, as rightly pointed out on behalf of the assessee, the matter stands covered in favour of the assessee. 7. In ‘ACIT(TDS), Chandigarh vs. M/s MCM D.A.V. College for Women, Chandigarh, Sector 36-C, Chandigarh’, vide order dated 12/8/2013 passed by the Chandigarh Bench of the Tribunal in ITA Nos.512 to 514/CHD/2014 for assessment years 2009-10 to 2011-12, it has been held that the relationship between the management and teaching staff involved an obligation to obey orders in the work to be performed; that as such this relationship could not be called a contract for service, since the teaching staff had not undertaken to render any professional or technical service; that since there was a contract of service between the assessee deductor and its teaching staff appointed on ad-hoc basis and the salary paid to them being below the taxable limit, no TDS was required. 8. The issue of relationship of master and servant stands dealt with by the Hon'ble Supreme Court in ‘M/s Dharangadhra Chemical Works Ltd. vs. State of Saurashtra’ AIR 1957 SC 264, wherein, it has been held that prima facie test for the
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determination of relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do, but also the manner in which he shall do his work; that 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 definition; that the correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer; that a person can be a workman even though he is paid not per day, but by the job; that the fact that rules regarding hours of work, etc., 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 such as cannot be regulated by any directions given by the Industrial Tribunal, is no deterrent against holding the persons to be workmen within the meaning of the definition if they fulfill its requirement. 9. ‘M/s MCM D.A.V. College for Women’ (supra) has been followed by the Jaipur (SMC) Bench in ‘Principal Sri Sathya Sai College for Women, Jaipur vs. The ITO, Jaipur’, vide order dated 19/8/2019, passed in ITA No.684 to 686/JP/2018, for assessment years 2013-14 to 2015-16. 10. No decision contrary to ‘M/s MCM D.A.V. College for Women’ (supra) has been cited before us. 11. Accordingly, we hold that the payment in question is not covered by the provisions of section 194C of the Act. Rather, it comes under section 192 of the Act, due to which, the authorities below have erred in holding the deductor/appellant to be an assessee in default.
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In view of the above, the grievance of the assessee for all the three years under consideration is accepted. The orders under appeal are reversed. 13. In the result, all the appeals are allowed. Order pronounced in the open Court on 19/03/2020.
Sd/- Sd/- [B.R.R. KUMAR] VICE PRESIDENT ACCOUNTANT MEMBER [A. D. JAIN] DATED:19/03/2020 JJ:1603 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar