ITO (TDS), UTTRAKHAND vs. G B PANT UNIVERSITY OF AGRICULTURE & TECHNOLOGY, UTTRAKHAND

This appeal is filed by the Revenue against the order dated 30/7/2013 passed by CIT(A)-II, Dehradun.

2. The grounds of appeal are as under:-

“1. The Ld.CIT(A) has erred in law and on facts in holding that the contractual teaching personnel are not covered under the definition of “profession” for the purpose of Section 194J of the I T Act ignoring the facts of the case as also the fact that such teaching personnel were highly skilled persons having specialization in their particular field and hence clearly covered under the definition of “profession” for the purpose of Section 194J.

3. The Ld.CIT(A) has erred in law and on facts while holding as above ignoring the fact that engagement of teaching personals is purely of contractual nature and there is no employers employee relationship between the university and them therefore any payments made to them was liable for TDS under the provision of the I T Act.

During the assessment proceedings it was observed by the Assessing Officer that Assessee was not deducting tax on payments made to retired professors, doctors, teaching personnel’s etc. On being asked to explain the discrepancy, it was explained that since payment is made under the head salary, tax is deducted in cases where it exceeds the taxable limit. Perusal of the records of the assessee revealed that payments were made at fixed amount as remuneration. There were no deductions of GPF etc. More over teaching personnel’s were kept on contractual basis and Doctors were also paid a fixed remuneration. Considering this, the Assessing Officer observed that these payments did not qualify as salary but professional payments falling within the purview of section 194J. A letter was issued to the Assessee on 13-02- 2013 communicating the default and asking to deduct the tax accordingly. Further a show cause notice under section 201/201(1A) of the Income- Tax Act-1961 was issued. The Assessee submitted the reply that retired teachers were on pay minus pension and payments are made from salary head. Similarly doctors are also paid at approved rates out of salary head. Teaching personnel and research assistants are paid as per the prescribed rates of ICAR out of respective fund. The Assessing Officer held that these payment did not fall within the ambit of the word Salary and also did not qualify as wages because it is not manual labour. The Assessing Officer further observed that work they required to perform, qualification for the work required clearly establishes it to be professional services. Hence, the Assessing Officer held that these payments fall within the ambit of Section 194J and assessee is required to deduct tax @ 10% .Similarly other professionals such as Doctors, Retired professors, SRFs are paid fixed remuneration. They do not posses any PF numbers and no deductions are made on this account they are also not entitled to other allowances like other regular employees. Simply paying the remuneration out of salary head does not qualify it to be defined as “SALARY” as per income tax act-1961. Hence, the contention of the assessee that the payments under consideration amounts to salary was not accepted by the Assessing Officer. Thus, the Assessing Officer held that the payments under consideration fall within the ambit of section 194J of the I T Act-1961 and assessee was liable for tax deduction under section 194J of the I T Act-1961, which was not done and therefore, the Assessee was declared to be in default under section 201 of the I T Act-1961.

“3.3 The findings of Ld. AO and the averments of Ld. AR have been considered. This issue needs to be examined from the angle of the mandate u/s 194J and the peculiar facts of this case. Firstly, the professionals described in 194J are persons carrying on legal medical, engineering or architectural profession, or the profession of accountancy, technical consultancy, interior decoration, advertising or profession to be specified by CBDT. As per Notification no. 88/2008 dated 21.08.2008 the professions notified are: sports persons, umpires and referees, coaches and trainers, team physicians and physiotherapists, even managers, commentators, anchors and sports columnists. Thus, it is clear that the scope of this section includes specified personnel or services and leaves very little scope for reading in between the lines to include professions, such as teaching, at will. Secondly, in the case of this Appellant University the payments to such teachers are made from their salary head and the appointments religiously follow the State’s policy on reservation, etc. Also the university exercises significant control over the teachers almost at par with regular employees. These facts also bring this case somewhat near to the case of Max Muller Bhawan, New Delhi reported in 268 ITR 31 (AAR) wherein it has been ruled that such engagements are covered u/s 192 for the purposes of TDS. Also the relationship between the teachers so employed and the employer is seen to have the rigidity of “contract of employment” and not the flexibility seen in “contracts for employment.” Thus it is held that the University’s liability for TDS is u/s 192 of the Act and not 194J of the Act. These grounds are accordingly allowed.

4.0. Ground No. 5 protests the TDS liability on FRFs on SRFs. The Ld. A.O is seen to not have discussed this issue in the body of the impugned order specifically. However, the Ld. AR has averred as under on this point:- “In respect of payment fellowship to FRS/SFR, it is submitted that the same is in the nature of stipend, eligible for exemption u/s 10(16). The Government of India, Ministry of Science & Technology, Department of Science & Technology has vide Office Memorandum dated March 31, 2010 revised the emoluments and guidelines on service conditions for research personnel, including JRF’s and SRF’s . The OM clearly specifies that the stipend is exempt u/s 10(16) of the Income Tax Act, 1961. Therefore the requirement of deducting tax at source does not arise. In this regard, a copy of the aforementioned circular is attached herewith.” 4.1. The facts and the position of law have been considered. There is no hesitation in holding that the payments to FRFs and SRFs is exempt u/s 10(16) of the Act and thus there can be no liability for TDS on this account.

5.0. In result, this appeal is allowed.

Order pronounced in the Open Court on 15th May, 2017.