The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, has recently, in an appeal filed before it, held that payment to contract teachers does not amount to ‘Fee for Professional Services’, and therefore that TDS u/s 194J, is not Applicable.
The aforesaid observation was made by the Hyderabad ITAT, when appeals were preferred before it by assessees, with the common question involved as to 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 assessees in both the appeals being authorities appointed by and working under the directions of State Government with their main function being disbursing the Honorarium/Remuneration to the teachers with whom the colleges had entered into an agreement to perform the teaching work entrusted by the college committee in accordance with the curriculum of intermediate syllabus, such teachers were paid a fixed monthly Honorarium/Remuneration, not exceeding Rs. 5 lakhs.
However, it so happened that the 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 Income Tax Act and accordingly, for non-deduction of TDS on the payments made by the assessees to the contract teachers, thereby held the assessees as assessees in default under section 201(1) of the Income Tax Act , along with further making them liable for simple interest on the tax.
Being aggrieved by the same, the assessees preferred appeals, wherein, in the 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 that, they cannot be held as ‘assessee in default’ for not deducting the tax at source under section 194J of the Income Tax Act.
However, in the case of the assessee, in ITA No. 726/Hyd/2022, the view taken was that, for want of concrete pieces of evidence and full facts of the case, the order of the Assessing Officer be upheld. And, it is with regard to this common question as to the deciding the nature of Honorarium/Remuneration paid to the teachers in the Government colleges, as well as liable of the same to TDS under section 194J of the of the Income Tax Act, 1961, that the present appeal had been preferred by the assesses, before the Hyderabad ITAT.
With Shri Kumar Aditya, the DR contenting that the assessees are neither individuals nor Hindu Undivided Families, that the contract lecturers are professional in teaching and, therefore, that the Assessing Officers were right in their approach to hold the assessees as ‘assessees in default’, he further added that on this premise, he found fault with the first appellate order in ITA No. 32/Hyd/2023, thereby supporting the order in ITA No. 726/Hyd/2022.
Per contra, it was the submission of Shri Darshan Jakharia, the AR on behalf of the assesses, that the section 194J of the Income Tax Act, by way of explanation, qualifies the expression ‘fee for professional services’, thus adding to his contention that, viewed from that angle, the payments made in the present case, therefore, are not for ‘fee for professional services’, placing his reliance on the CBDT Notification No. 88/2008 dated 28/01/2008.
Hearing the opposing contentions of either sides, and thereby perusing the materials available on record, the ITAT Bench observed:
“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.”
Referring and explaining the provisions of Section 194J, it further commented:
“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.”
“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.”, the ITAT coram comprising of Rama Kanta Panta, the Accounting Member, along with K Narasimha Chary, the Judicial Member, added.
Thus, dismissing the appeal in ITA No. 32/Hyd/2023 and allowing the appeal in ITA No. 726/Hyd/2022, the Hyderabad ITAT, held:
“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.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
