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RELATIONSHIP BETWEEN THE PRINCIPAL AND PROFESSIONAL TREATMENT UNDER INCOME TAX PROVISIONS

Income Tax - By: - Mr.M. GOVINDARAJAN - Dated:- 19-10-2016 - Many enterprises engaged professionals such as Engineers, Chartered Accountants, Company Secretary, Cost Accountant etc., for some sort of professional work, for which they used to get remuneration from the principal concerned. The question arises as to whether such professionals should be treated as employees of the Principal or as a contractor or consultant of the Principal for the purpose of tax deduction. The employer is liable to .....

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the consultant or retainer the remuneration given to the professional may not be treated as salary but it shall be considered as professional income in the hands of the professionals. The Principal shall issue Form 16A for the tax deducted at source to the professional concerned. In respect of employee, the employer is responsible to deduct all income tax payable by the employee and to remit the same to the credit of the Central Government. But in case of professionals, the Principal is required .....

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ised as to whether the remuneration received by the professional is whether salary or professional receipt. In this article some case laws are discussed as below: In Piyare Lal Adishwar Lal V. Commissioner of Income Tax - 1960 (4) TMI 4 - SUPREME Court the Supreme Court held that the correct method of approach is whether having regard to the nature of the work there was due control and supervision by the employer. The receipt of remuneration for holding an office does not necessarily gives rise .....

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ply any vocation carried on by an individual or group of individual requiring the predominantly intellectual skills pursuing that vocation, requiring specialized advance education or expertise. In this case it is an admitted fact that the assessee is professional having B.Tech degree and four years experience in advising, guiding and teaching various subjects relevant for preparation of entrance examination for engineering colleges. The Assessing officer concluded that the agreement between the .....

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ng has been given. The consultancy agreement requires providing the consultant services for attracting the new teaching talent as well as for growing the young teachers and guiding of teachers of the Institute for delivery in classes. The Supreme Court held that the agreement clearly shows that the relationship between the assessee and Resonance was not of employee and employer. If the relationship between the assessee and the Institute was of employee and employer, then the length of contract w .....

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Resonance. In Arvind Singh V. Income Tax Officer - 2016 (7) TMI 266 - ITAT JAIPUR the assessee filed his return for the year under consideration on 29.09.2009 declaring total income of ₹ 9,69,450/-. The Assessing Officer observed that during the year under consideration the assessee has derived income from working in the coaching Institute, M/s Resonance, Kota and M/s Bansal Classes Private Limited, Kota which are involved in providing coaching to the students for preparing the IIT examin .....

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compared the case of assessee with other Institutions. He held that all the faculties of Allen Carrier Institute, Kota are doing the identical nature of work and they are showing remuneration as income from salary. The Assessing Officer held that the total receipt is the income from salary. Being aggrieved by the order the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner (Appeals) allowed the appeal partly by considering the comparable case of Shri Bharat .....

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which is not justified; It is a contract for service and not a contract of service; The assessee is not entitled to statutory benefits like PF, ESI, gratuity, bonus or leave encashment; As per terms and conditions the assessee had the sole discretion to decide schedule of teaching hours; The assessee was discharging his duties as a consultant for the subject of maths,however, there is no restriction upon the appellant togive advice and consultancy services to other parties in respect of other su .....

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ons of the agreement. The assessee is a B.Tech from IIT, Guahati, who has expertise in maths and as per the agreement, he had provided professional service for the student of Resonance Institute, who provides coaching for preparation of IIT entrance test. The assessee is provided lump sum receipts on the basis of contract for providing the services to the institutions. The TDS deducted by the Resonance by treating these payments as professional and given TDS certificate in Form No.16A. The asses .....

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