By TIOL News Service

NEW DELHI, JULY 14, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether professional payments made to retired teachers warrants TDS liability u/s 192, when the relationship between teachers and the University have the rigidity of "contract of employment". YES is the answer.

Facts of the case:

During the assessment proceedings it was observed by AO 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 was made under the head salary, tax was 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. Moreover, 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 communicating the default and asking to deduct the tax accordingly. Further a show cause notice u/s 201/201(1A) was also issued. After considering the reply of assessee, the AO observed that qualification for the work required clearly establishes it to be professional services. Hence, the AO held that these payments fall within the ambit of Section 194J and assessee was required to deduct tax @ 10%.

On appeal, the ITAT held that,

++ it is pertinent to note that 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, event managers, commentators, anchors and sports columnists. Thus, the finding of the CIT(A) is just and proper that the scope of section 192 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 the assessee 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 - 2004-TII-06-ARA-INTL 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.

(See 2017-TIOL-1029-ITAT-DEL)