Case Law Details
Dist. Intermediate Educational Office Vs Income Tax Officer (TDS) (ITAT Hyderabad)
ITAT Hyderabad held that payment to contract teachers doesn’t qualify as ‘fee for professional services’ and accordingly TDS under section 194J of the Income Tax Act not deductible.
Facts- The common question that arises in both these appeals is whether the Honorarium/Remuneration paid to the teachers in the Government colleges is in the nature of fee for professional serves liable to TDS under section 194J of the of the Income Tax Act, 1961 (‘the Act’)?
Conclusion- It is, therefore, clear that while requiring the persons responsible for paying to a resident any ‘fee for professional services’ to deduct the TDS at a specified rate, by way of explanation it is provided that for such purpose, the “professional services” shall mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. Learned CIT(A) in the order in ITA No. 32/Hyd/2023 rightly referred to the Notification No. 88/2008 dated 28/01/2008 issued by CBDT notifying ‘such other profession’ in the explanation, as sports persons, umpires and referrers, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists. Either in the explanation to section 194J of the Act or in the notification issued thereunder, the contract teachers, referred to as teaching professionals by the learned DR are not covered.
Held that we are of the considered opinion that the payments made to the contract teachers do not answer the description of ‘fee for professional services’ and the impugned order in ITA No. 32/Hyd/2023 does not require any interference. On the same analogy, we find it difficult to sustain the impugned order in ITA No. 726/Hyd/2022 is liable to be reversed. Respective learned Assessing Officers are directed to delete the said additions.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The common question that arises in both these appeals is whether the Honorarium/Remuneration paid to the teachers in the Government colleges is in the nature of fee for professional serves liable to TDS under section 194J of the of the Income Tax Act, 1961 (‘the Act’)?
2. Assessees in both the appeals are the authorities appointed by and working under the directions of State G Government with their main function to disburse the Honorarium/Remuneration to the teachers with whom the colleges enter into an agreement to perform the teaching work entrusted by the college committee in accordance with the curriculum of intermediate syllabus. Such teachers are paid a fixed monthly Honorarium/Remuneration which does not exceed Rs. 5 lakh.
3. Learned Assessing Officers took the view for the assessment year 2020-21 that the payments made to such contract teachers fall within the definition of the expression ‘fee for professional services’ under section 194J of the Act and accordingly, for non deduction of TDS on the payments made by the assessees to the contract teachers, the assessees are assessees in default under section 201(1) of the Act and also further liable for simple interest on the tax.
4. Assessees preferred appeals. In case of the assessee in ITA No. 32/Hyd/2023, the CIT(A), NFAC-Delhi took the view that the payments made by the assessee to the contract teachers for teaching in intermediate colleges do not fall in the definition of ‘fee for professional services’ and, therefore, they cannot be held as ‘assessee in default’, for not deducting the tax at source under section 194J of the Act; whereas in the case of the assessee, in ITA No. 726/Hyd/2022, a view is taken that for want of concrete pieces of evidence and full facts of the case, the order of the learned Assessing Officer had to be upheld. Inasmuch as contrary views are taken on the same aspect under similar circumstances for the same assessment year, we deem it just and proper to answer the issue in this common order.
5. According to the learned DR, the assessees are neither individuals nor Hindu Undivided Families and the contract lecturers are professional in teaching and, therefore, the learned Assessing Officers are right in their approach to hold the assessees as ‘assessees in default’. On this premise, he found fault with the first appellate order in ITA No. 32/Hyd/2023 and supported the order in ITA No. 726/Hyd/2022.
6. Per contra, it is the submission on behalf of the assessees that section 194J of the Act, by way of explanation ualifies the expression ‘fee for professional services’ and viewed from that angle, the payments made in this case are not for ‘fee for professional services’. Reliance is placed on CBDT Notification No. 88/2008 dated 28/01/2008.
7. We have gone through the record in the light of the submissions made on either side. For a comprehensive understanding of the definition of ‘fee for professional services’, we deem it just and necessary to refer to the provisions under section 194J of the Act, which reads as under,-
‘194J. Fees for professional or technical services.—(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—
(a) fees for professional services, or
(b) fees for technical services,
shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent. of such sum as income-tax on income comprised therein:
Provided that no deduction shall be made under this section—
(A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or
(B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed—
(i) twenty thousand rupees, in the case of fees for professional services referred to in clause (a), or
(ii) twenty thousand rupees, in the case of fees for technical services referred to in clause (b).
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Explanation.—For the purposes of this section,—
(a) “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section;
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8. It is, therefore, clear that while requiring the persons responsible for paying to a resident any ‘fee for professional services’ to deduct the TDS at a specified rate, by way of explanation it is provided that for such purpose, the “professional services” shall mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. Learned CIT(A) in the order in ITA No. 32/Hyd/2023 rightly referred to the Notification No. 88/2008 dated 28/01/2008 issued by CBDT notifying ‘such other profession’ in the explanation, as sports persons, umpires and referrers, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists. Either in the explanation to section 194J of the Act or in the notification issued thereunder, the contract teachers, referred to as teaching professionals by the learned DR are not covered.
9. We are in agreement with the observations of the learned CIT(A) in ITA No. 32/Hyd/2023 that the words ‘fee for professional services means’ will not leave any scope for interpretation and the categories mentioned therein as on the date are exhaustive by the explanation itself or by the notification of CBDT and by necessary implication, such an exhaustive definition excludes the payments made to the contract teachers in intermediate colleges. Apart from this, the payment to none of the contract lectures exceeds Rs. 5 lakh and based on the slab rates and rebate under section 87A of the Act there would be no tax liability in the hands of the teachers.
10. In these circumstances, we are of the considered opinion that the payments made to the contract teachers do not answer the description of ‘fee for professional services’ and the impugned order in ITA No. 32/Hyd/2023 does not require any interference. On the same analogy, we find it difficult to sustain the impugned order in ITA No. 726/Hyd/2022 is liable to be reversed. Respective learned Assessing Officers are directed to delete the said additions.
11. In the result, appeal in ITA No. 32/Hyd/2023 is dismissed and appeal in ITA No. 726/Hyd/2022 is allowed.
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