By TIOL News Service

NEW DELHI, FEB 05, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether a coaching institute can be relieved from TDS liability on payments made to its faculty members, in absence of any evidence to establish that faculty members were franchisees and not employees for purpose of Section 194J. NO IS THE ANSWER.

Facts of the case:

The assessee is in the business of providing academic coaching to its students pursuing Chartered Accountancy Course. In pursuence of the same, the assessee had gross profit sharing arrangements with different faculties in the field of accountancy and law. As per the assessee, it had paid 70% of total fees after deducting rent of auditorium and cost of course material to the faculties. The AO was however of the opinion that tax was deductible at source on the payments/sharing of fees to the faculties u/s 194J. Accordingly, he passed orders u/s 201(1)/201(1A) raising a tax demand of Rs. 19,91,446/- and Rs.17,08,022/- for A.Ys 2009-10 and 2010-11 respectively. The AO also raised a demand of Rs. 2,72,337/- and Rs. 1,07,187/- for failure to deduct TDS u/s 194I. On appeal, the CIT(A) accepted the assessee's claim for non-deduction of tax at source u/s 194J, but confirmed the tax payment for non-deduction of tax on rent paid u/s 194I.

Tribunal held that,

++ it is seen that the CIT(A) while deciding the issue in favour of assessee, has not made reference to any document or evidence which enabled him to reach the conclusion that the faculty members were franchisees of the assessee company and not its employees. Although there are numerous judgments wherein it has been held that absence of a written agreement does not ipso facto give a contrary presumption, all the same, there has to be some substantiation of the claim and a mere bald statement without any corroborative evidence cannot serve the purpose of assessee in this regard. The CIT(A) has not examined the issue in proper perspective and the relief has been granted to the assessee only on the basis of written submissions made before him. The issue therefore needs re-examination.

(See 2018-TIOL-201-ITAT-DEL)