TMI Blog2016 (3) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... to benefit under the Act. Therefore, ground no. 1.1 and 1.2 are also decided in favour of the assessee. No reason whatsoever has been given by the authorities below for rejecting the books of account. The sole reason given by the authorities below was that the assessee is a salaried employee and not the professional. Since we have held that the assessee is a professional, therefore, this ground is also decided in favour of the assessee. - ITA Nos. 551/JP/2013 - - - Dated:- 12-2-2016 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM For The Assessee : Shri Siddharth Ranka (Advocate) For The Revenue : Shri Ajay Malik (Addl.CIT) ORDER PER SHRI LALIET KUMAR, J.M. The present appeal filed by the assessee is arising from the order dated 18.02.2013 passed by the learned CIT (A), Kota for the A.Y. 2007-08. The assessee has raised the following ground of appeal :- 1. That the ld. Lower authorities have erred in law and in the facts and circumstances of the case in holding that the receipts of the assessee is income from salary instead of income fro professional receipts. 1.1. That the ld. Lower authorities have erred in law and in the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultancy Agreement, the consultant was provided freedom in methodology as also scheduling, structuring and delivering. The consultant was, however, required, in terms of the Agreement to ensure that he completes the agreed/planned portion of his subject within the overall time frame, and if need be by taking classes on Sundays/holidays. The broad duties of the consultant were provided in para 2.3 of the agreement. The relevant clauses of the duties, as mentioned in clauses 2.3 are reproduced herein below : a) To advise the Institute in designing the Course structure of Chemistry for the IIT JEE aspirants; c) Development of entrance tests (subject : Chemistry) into Resonance itself; e) Setting the overall pace of teaching Chemistry depending on prior preparedness of students (class XI, class XII, droppers, etc.) i) To assist and participate in psychological counseling for students and also of the parents of the students; k) To teach those topics of Chemistry to the students which are greed to be taught by the Consultant from time to tie depending on the need of the students and the convenience of the consultant so however the he will take at least 18 classes in a week ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ching or by correspondence. The agreement also provides that any of the parties can terminate the agreement after giving one month notice to the other on account of reasons mentioned in para 11; of the Agreement. 2.3. Now, after entering into agreement, the consultant assessee filed the return of income for the assessment year 2007-08 declaring income of ₹ 14,33,357/- on 22.10.2007. On scrutiny, notice under section 143(2) was issued by the AO. Thereafter the query was sent and the ld. A/R of the assessee attended the hearing. The AO after examining the terms and conditions of the consultancy agreement has come to the conclusion that the assessee has converted his income from salary to profession for claiming the expenditure which is not allowable from salary. Interestingly, the AO has not allowed the expenses incurred/claimed by the assessee in the return of income,on the pretext that if the assessee got income from salary then he could not claim the expenditure. Therefore, the AO has not rejected the books of account and without rejecting the books of account, the AO has rejected the claim of expenditure in the return of income. The reasoning given by the AO in concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service . The assessee was working directly under the control and supervision of the institute Resonance . 4. Feeling aggrieved by the order passed by ld. CIT (A), the assessee is before us. Before us, the ld. Advocate for the assessee has submitted as under :- If a person was earning the salary income in A Y 2005-06 it does not mean that the income in A Y 2007-08 should also be treated as salary income. It could be a professional income. Further if he attend the class of Senior faculty that does not change the nature of income from professional receipt to salary receipt. If any people change his teaching subject (Physics to chemistry) it does not change the nature of income. If any person is affiliated with a coaching institute on full time basis or part time basis, it is not a criteria of deciding the nature of income earned. In present scenario of coaching institute a professional is much responsible for his duties in compare to employee. Hence the observation of the learned assessing officer that controls were exercised by the institute, terms are in the nature of duties not in the nature of right, remuneration is on yearly basis etc. completely shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed return of income declaring income under the head Income from business / profession and Income from other sources . It was noted by the AO that prior to joining M/s Allen Career Institute, the assessee was employee of Central Academy School as a teacher of physical for ₹ 1,200 per month. Besides teaching at Central Academy School, he was also taking private tuition ₹ 2,400 per month approximately. In the year 1998 he joined M/s Allen Career Institute @ ₹ 2,50,000 per month vide a contract of service between the month two. As per TDS certificate in Form No. 16A, TDS was deducted @ 33 per cent for all the months in which the assessee taught student. The AO noted further that assessee tried to categorize the service given by him as vocation instead of salary ehile the relation of the assessee and the management of the institute were that of principal and servant. The AO accordingly concluded that the assessee has wrongly claimed income under the head professional income instead of income under the salary. He also denied the expenditure claimed by assessee on stationery, newspapers and magazines, etc. The learned CIT(A) has however allowed the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rao vs. State of MP AIR 1958 SC 388,392; (ii) Silver Jubilee tailoring house vs. Chief Inspector AIR 1974 SC 37; (iii) CIT vs. Mrs. Durga Khote (1952) ITR 22 (Bom); (iv) Indian Medical Association vs. v.p. Shantha 86 comp cas 806 (SC). The learned Authorised Representative submitted further in similar other case like Mr. Vinod Kumawat ( page Nos. 22 to 31 of the paper book), Mr. Chinarao Chaudhary ( page nos. 32 to 40 of the paper book) the Department has accepted the receipt as professional income. These persons are also associated with the same institute. He also referred page No. 3 of the paper book i.e. copy of the certificate issued by M/s Allen Career Institute conforming rendering of the service by the assessee in his professional capacity . He submitted further that in the case of assessee what to do and not how to do . The assessee , a qualified and experienced professional had not only acquired special qualification but had also exercised intellectual skill on the basis of special learning. After considering the above arguments, we find substance in the contentions of the learned Authorised Representative that the nature of relationship be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular master temporarily. But even why he or she is so engaged he or she is really practicing his or her profession and the service is merely incidental to that profession. The position is different when a professional person permanently accepts an employment and exchanges his profession for service. There may be some similarity between the service rendered by an employee and by a professional in terms of an agreement but totality of facts and circumstances are to be seen, which in our view are the extent of control of a person who is taking services from other for an agreed payment, the manner in which the person gets services and the duration of service besides type of facilities provided by the person getting the work done. In the case of an employer and employee, the nature of control and its manner are different than those in a case done on contract basis. In our view in the present case the term services used for the assigned job done by the assessee for the institute have been treated as the services rendered by an employee ignoring the vital factor that in a case of employer and employee overall discretion lies on the employer as to how he wishes to get his work do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and not on salary. And the same has been claimed in the profit and loss account as a professional fee. In the light of above decisions it is clear that the income earned during the year under appeal was/is of professional nature instead of salary income. And all the expenditure should be allowed as a expenditure spent wholly for earning professional income and there is direct nexus between the expenses and the professional income. Hence all the expenditures should be allowed u/s 37 of the income tax act. Hence it is requested to you to kindly give the necessary directions to the authorities and oblige. 4.1. The ld. D/R for the Revenue has supported the case of revenue and has submitted that the agreement entered between the assessee and the Resonance was a sham document and was entered between the parties to evade the tax. In fact, the real relationship between the assessee and the Resonance was of employee and employer and not of the consultant and the principal. 4.2. We have heard the rival submissions and perused the material on record. The consultancy agreement dated 1.4.2006 reveals that the appointment as Consultant is for a period of one year. It also ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -06 was the first year of employment of the assessee. The agreement clearly shows that prior to 2005-06 or prior to the entering into Agreement, the consultant namely the assessee was having 4 years teaching experience and also having the experience of advising and guiding. In fact, the issue of employee and employer contract is no more res integra and the Hon ble Supreme Court in the matter of Pyre Lal Adishwar lal vs. CIT, (1960) 40 ITR 17 (SC) has held that the correct method of approach is whether having regard to the nature of work there was due control and supervision by the employer. The receipt of remuneration for holding an office does not necessarily gives rise to relationship of master and servant. Whether a person is a servant or an agent would be determined by the duties of employee, the nature of business, terms of his employment/engagement and the kind of supervisory control over his work. Similarly, in the matter of CIT vs. Manmohan Das (1966) 59 ITR 699 (SC) while commenting on the profession, the Hon ble Supreme Court has held that the provision requires purely intellectual or manual skill. In our opinion, a profession will imply any vocation carried on by an indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to say that the assessee was taking the classes from Shri R.C. Sharma and was to take classes on same pattern, in our opinion, the same does not help the AO. It does not lead to any conclusion that Shri R.C. Sharma was a faculty of Chemistry or Physics or any other subject. Every institute, has its own way of conducting the classes and is required to train its consultant/profession the ethics, protocol etc. during orientation program and if the assessee has attended the classes of Shri R.C. Sharma, that it is along with other instances referred in the order, do not constitute the relationship between the assessee and the Resonance as of employee and employer. In fact, our above said view is supported by the various judgments referred by the ld. Counsel for the assessee and more particularly in the matter of Kamlesh Soni, 107 TTJ 836 wherein in the identical facts and circumstances, the relationship between the teacher and the Institute was held to be of consultant in nature. In the light of the above, we have no hesitation to hold that the relationship between the assessee and that of the Resonance was of employee and employer. We would like to add that even in the tax return fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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