Case Law Details
Rangaswamy Jeevanantham Vs Superintendent (Madras High Court)
The Madras High Court recently addressed the dispute in the case of Rangaswamy Jeevanantham vs Superintendent, focusing on GST liability and the alleged erroneous TDS deduction under section 194H of the Income Tax Act. The court ordered a statutory appeal in response to the petitioner’s challenge against the TDS deduction.
In the judgment delivered on 01.09.2023, the court noted the petitioner’s claim that he was an employee of Smart Way India Enterprises LLP, Coimbatore, and argued that the TDS deductions made on payments for services rendered were inc+orrect under section 194H of the Income Tax Act, 1961 (the I-T Act). The petitioner contended that he was wrongly classified as an agent, subjecting him to TDS.
The petitioner’s counsel referred to the appointment letter dated 12.11.2015, emphasizing that tax liabilities, including those under the I-T Act, were to be borne by the limited liability partnership. Therefore, the petitioner asserted his status as an employee entitled to variable remuneration, rather than an agent.
However, the respondent, represented by Mr. Ramesh Kutty, senior standing counsel, argued that the petitioner was indeed an agent of the limited liability partnership and was liable for GST on a forward charge basis for the commission received. Consequently, the respondent opposed any interference in the matter.
The court examined the impugned order, which confirmed the tax demand along with interest and penalty, noting that Form 16A was filed regarding TDS for the petitioner. The order was issued after due process, including the issuance of intimation and show cause notice, and providing the petitioner with an opportunity to be heard.
Considering the circumstances, the court declined to exercise discretionary jurisdiction in favor of the petitioner. However, recognizing the petitioner’s right to appeal, the court directed the petitioner to file a statutory appeal within two weeks from the date of receipt of the order. The appellate authority was instructed to receive and dispose of the appeal on merits, without considering the question of limitation.
In conclusion, the Madras High Court’s decision in the Rangaswamy Jeevanantham vs Superintendent case underscores the importance of proper classification for tax deductions. While the court did not intervene in the initial order, it granted the petitioner the opportunity to seek redress through a statutory appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 01.09.2023 is the subject of challenge in this writ petition. The petitioner asserts that he was an employee of Smart Way India Enterprises LLP, Coimbatore and that the payments received towards services provided by him as an employee of the said entity were erroneously subject to TDS under Section 194H of the Income Tax Act, 1961 (the I-T Act). Since the impugned order was issued on the assumption that the petitioner was an agent and had received commission, such order is challenged.
2. Learned counsel for the petitioner referred to the appointment letter dated 12.11.2015 and pointed out that tax liability, including under the I-T Act, was agreed to be borne by the limited liability partnership. He therefore submits that the petitioner was actually an employee entitled to variable remuneration and not an agent. He also submits that the expression agent’ was used loosely although the relationship was that of employer and employee.
3. Mr. Ramesh Kutty, learned senior standing counsel, accepts notice for the respondent. He submits that the petitioner was admittedly an agent of the limited liability partnership and was liable for GST on forward charge basis on the commission received from the entity for services provided by him. Therefore, he submits that no case is made out for interference.
4. On examining the impugned order, it appears that the respondent noticed that Form 16A was filed in respect of the petitioner with regard to TDS. In those circumstances, the tax demand was confirmed along with interest and penalty.
5. The impugned order was preceded by an intimation and show cause notice. The petitioner was also provided an opportunity of being heard. Hence, there was no breach of principles of natural justice and the order was issued after considering the petitioner’s reply to the show cause notice. In these circumstances, I am not inclined to exercise discretionary jurisdiction in favour of the petitioner.
6. The petitioner filed this writ petition on 09.02.2024. The period of limitation for filing an appeal expired in December 2023 and the condonable period expired in January 2024. Since the writ petition was filed in earlier February 2024, the period of delay in filing a statutory appeal is limited if the period of pendency of the writ petition is excluded. Therefore, if the petitioner files a statutory appeal along with requisite pre-deposit within two weeks from the date of receipt of a copy of this order, the appellate authority is directed to receive and dispose of such appeal on merits without going into the question of limitation.
7. W.P.No.7356 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.No.8251 of 2024 is closed.
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