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2015 (8) TMI 361 - ITAT DELHI

2015 (8) TMI 361 - ITAT DELHI - [2015] 42 ITR (Trib) 604 (ITAT [Del]) - TDS u/s 194J OR u/s 192 - remuneration to consultants - re-characterisation of the arrangement between the company and consultants as employer-employee in place of consultant arrangement between the assessee entity and the said consultants - AO raised a demand being the difference in tax deductible u/s 192 and 194J on payments made to consultants - CIT(A) deleted demand - Held that:- AO re-characterised the relation between .....

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of the Act. Per contra, from the explanation, details and evidence submitted by the assessee, we are satisfied that the payments made by the assessee company was not salary and the same was remuneration/consultation fee paid to the highly experienced technocrats/consultants which could not be engaged on full time basis as regular employees due to high remuneration and temporary requirement of the assessee company.

We cannot ignore this fact that all technocrats and consultants are mo .....

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the case of Hindustan Coca Cola (2007 (8) TMI 12 - SUPREME COURT OF INDIA ), there was no need of expecting the assessee deductee to again pay the tax on the said payment on account of short deduction of TDS, specially when the TDS deducted by the assessee company u/s 194J of the Act was on the higher side as deductible u/s 192 of the Act. - Decided against revenue. - I.T.A.No.3454/Del/2013, I.T.A.No.3455/Del/2013 - Dated:- 5-8-2015 - SHRI N.K. SAINI AND SHRI CHANDRA MOHAN GARG, JJ. For The Appe .....

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been correctly deducted u/s 194J of the LT. Act, even though there was employer- employee relationship between payer and payee of the sum liable for deduction at source. 2. The Ld. CIT (A) erred on facts and in law in holding that the liability of the deductor u/s 201(1) of the LT. Act cease after 4 years. 2. We have heard argument of both the sides and carefully perused the relevant material placed on record. Ld. DR elaborating the functional profile of the assessee company submitted that the a .....

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terised the consultant arrangement into employer-employee relationship and held that the assessee is an assessee in default u/s 201(1)/201(1A) for deducting tax u/s 194J and not u/s 192 of the Act. Finally, the AO raised a demand of ₹ 2,05,94,240 u/s 201(1)/201(1A) for both the financial years namely FY 2007-08 and 2008-09, being the difference in tax deductible u/s 192 and 194J on payments made to consultants. The assessee carried the matter to the CIT(A) challenging the re-characterisati .....

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pany and these consultants of the assessee company was more of an employer employee and therefore, the remuneration paid to them was chargeable to tax under the head of salaries and the said payments thus are subject to deduction of tax as per provisions of section 192 of the Act and not as per provisions of section 194J of the Act. Ld. DR submitted that the CIT(A) granted relief for the assessee on incorrect premise and without any justified reasoning, therefore, the impugned order may be set a .....

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showing analysis from return of income filed by the consultants on sample basis of 9 consultants out of 25 consultants for FY 2007-08 and the same analysis of 11 consultants out of 40 consultants for FY 2008-09 and submitted that the assessee deducted TDS u/s 194J of the Act on the higher side and if the deduction as proposed by the AO was deducted u/s 192 of the Act, then also the amount of TDS deducted by the assessee u/s 194J of the Act was higher than the TDS deductible u/s 192 of the Act a .....

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o engage and tap the experience and knowledge of such technocrats as consultants on part time and temporary basis. Ld. Counsel further placed reliance on the decision of Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. Vs CIT (2007) 293 ITR 226(SC) and submitted that where the payee has already paid taxes due on the payments received by it from the assessee, then recovery of tax cannot be made once again for the tax deductor. Ld. Counsel also placed reliance on the deci .....

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therefore, TDS was to be deducted u/s 194J of the Act and not u/s 192 of the Act. 5. On careful consideration of above submissions and from bare reading of the impugned order, we note that the CIT(A) granted relief with following observations and conclusion:- I have perused the assessment order, written submissions of the AR and discussed the matter with them very carefully. From the list of age of consultants, it is observed that all the consultant are above 60 years of age. It appears that the .....

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for PAN of such deductees and verify their return status from ITD application. Hence the liability of deductor u/s 201 (1) ceases after 4 years of end of F. Y. 2007-08 and 2008-09. As per the average rate of TDS to total till disbursement analysis, it again appears that the deductor company had deducted more TDS than suggested by AO (TDS) treating all consultants as employees. The A.O. (TDS) calculates tax rate @30% without giving effect of slabs and different tax rates for different slabs and .....

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ductions under chapter VIA are given. 6. On careful consideration of above submissions and observations of the CIT(A), at the very outset, we note that the main grievance of the department is that the relationship of assessee company and the consultants/technocrats was of employer and employee and, therefore, the TDS was to be deducted u/s 192 of the Act and not u/s 194J of the Act as deducted by the assessee company. We may further point out that ld. DR could not demolish the analysis submitted .....

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ber of cases, the age is 70 and 80 plus which clearly shows that these persons are highly experienced and knowledgeable technocrats who are rendering their service to the assessee company as a specialist technocrat and not as an employee. Although from the order of the AO we note that the AO dismissed submissions and contentions of the assessee and recharacterised the transaction between the assessee company and the said consultants/technocrats as employer or employee relationship but this recha .....

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ote that from the analysis submitted by the assessee, it is also clear that the payee consultants/technocrats have already paid taxes on the income, then even if there was a short deduction of tax at source, further recovery of tax cannot be made once again from the tax deductor. 7. Now, we proceed to consider the ratio relied by the CIT(A) while granting relief for the assessee in the case of Hindustan Coca Cola Beverage (P) Ltd. vs CIT (supra) wherein their lordships speaking for the apex cour .....

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tax deductor where the payee included the income on which tax was alleged to have been short deducted in its taxable income and paid taxes thereon. There is no dispute whatsoever that Pradeep Oil Corporation had already paid the taxes due on its income received from the appellant and had received refund from the tax Department. The Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (deductor-assessee) since the tax has already been paid by th .....

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d July 12, 2002, got itself merged into the order passed by it on May 21,2004, dismissing the appeal of the appellant herein. The High Court came to the conclusion that the Tribunal could not have reopened the matter for any further hearing. 9. We have already noticed that the order passed by the Tribunal to reopen the matter for further hearing as regards ground No.7 has attained its finality. In the circumstances, the High Court could not have interfered with the final order passed by the Inco .....

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e interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under section 271C of the Income-tax Act". 11. In the instant case, the appellant had paid the interest under section 201(1A) of the Act and there is no dispute that the tax due had been paid by the deductee-assessee (M/s. Pradeep Oil Corporation). It is not disputed before us that the circular is applicable to the facts situation on hand. 8. When we consider t .....

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ow-to do it. (b) Generally a principal cannot tell his agent how to carry out his instructions. (c) A servant is under more complete control than an agent, "and also at page 20 :- " (a) Generally, a servant is a person who not only receives instructions from his master but is subject to his master's right to control the manner in which he carries out those instructions. An agent receives his principal's instructions but is generally free to carryout those instructions according .....

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sham Edition-Vol. 22, page 1 13, Para. I 92 may be referred to in this connection:- " The difference between the relations of master and servant and of principal and agent may be said to be this : a principal has the right to direct what work the agent has to do : but a master has (he further right to direct how the work is to be done. " The position is further clarified in Halsbury's Laws of England- Hailsham Edition-Vol. 1, at page 193. Art. 345, where the positions of an agent, .....

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ng his own means to produce that result. An agent, though bound to exercise his authority in accordance with all lawful instructions which may be given to him from time to time by his principal, is not subject in its exercise to the direct control or supervision of the principal. An agent as such is not a servant, but a servant is generally for some purposes his master's implied agent, the extent of the agency depending upon the duties or position of the servant. " 5. We have heard the .....

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tients' treatment. The procedure of treating patients in OPD is that when a patient comes for the treatment in Hospital's OPD, he deposits a consultation fee for the particular Medical Department in which he wants to consult, at the cash; counter of the hospital and he is given a receipt for it and then he consults the Doctor to whom he wants to consult. The concerned Doctor prescribes the treatment on the hospital's letter pad. If the patient is to be admitted in the hospital for in .....

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tors u/s 194J as professional charges, whereas the payments made to doctors who are regularly attached with hospital, are required to be treated as salary and tax is also required to be deducted u/s 192 of the Act. The AO was of the view that payments made to doctors were regularly attached with the hospital, were required to be treated as salary and taxes were required to be deducted u/s 192 of the Act. Consequently, AO issued a show cause notice to treat the 'Person Responsible' (herei .....

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f ₹ 11,67,399.40 u/s 194J of the Act, whereas the tax of ₹ 27,98,169.69 u/s 192 of the Act, was required to be conducted. Therefore, the assessee is liable to pay a difference of ₹ 16,30,770/- as tax of ₹ 7,40,121/- u/s 201(1A) of the Act. As per calculation enclosed as Annexure-1 to this order. Accordingly, total payable tax demand comes to ₹ 23,70,891/- for the assessment year 2009-10." 6. Similarly, for the assessment year 2010-11, the AO worked out the tota .....

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doctors. The various clauses of the MOUs need to be examined in the light of the criteria laid down by the Courts to determine whether the doctors attached to the appellant hospital are employees of the hospital. The test which is uniformly applied in order to determine whether a particular relationship amounts to employer-employee relationship is the existence of a right of control in respect of the manner in which work is to be done by the person employed. The nature and extent of control whic .....

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not a case of employer-employee relationship between the assessee appellant and the doctors. Therefore, having regard to the detailed analysis and findings of the CIT(Appeals) on the issue in question, it cannot be said that findings of the ld CIT(Appeals) suffer from any infirmity. In view of this, findings of the CI T(Appeals) are upheld. 9. When we consider the facts and circumstances of the present case, we are inclined to hold that the AO re-characterised the relation between the assessee .....

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