KOLKATA, JUNE 10, 2013: THE issues before the Bench are - Whether salaries paid to part time teachers can be professional fees for the purpose of invoking the provision of section 194J when a perusal of Form NO.16 clearly shows that what was paid by the assessee was only salary and Whether settlement amount paid to Microsoft for violation of copyright can be termed as penalty. And the verdict goes in favour of assessee.
Facts of the case
The AO pointed out that though the assessee had paid Rs.34,95,441/- to the faculty members being professionals for their services but the TDS had not been deducted u/s 194J. The CIT(A) held that what was paid to the faculty members was salary and the TDS was not liable to be deducted u/s 194J.The assessee had paid Rs.5 lakhs as assessee’s share of the legal settlement due to Microsoft for violation of copyright Act. The AO has disallowed the same. The CIT(A) treated the payment as business expenditure.
On Appeal before the Tribunal the DR submitted that the CIT(A) erred in holding that what was paid to the faculty members was salary and the TDS was not liable to be deducted u/s 194J.The AR submitted that even Form No.16 issued to the employees clearly show that the amounts have been paid towards the salary. Secondly the TDS was not liable to be deducted u/s 194J.In respect of legal settlement with Microsoft the AR submitted that the compromise petition clearly show that the amounts paid was a compromise and was not a penalty at all.
Having heard the parties, the Tribunal held that,
++ a perusal of Form NO.16 clearly shows that what is paid by the assessee is only salary. Once it is shown that the assessee has only paid salaries to the person just because the teachers, are part time teachers, the same cannot be termed as professional fees for the purpose of invoking the provision of section 194J;
++ the payment of Rs.5 lakhs to Microsoft, is a compromise in respect of the contractual liability and the compromise is in no way on account of penalty. In any case this payment of Rs.5 lakhs has been made to Microsoft and obviously Microsoft under no circumstances can levy penalty on the assessee. The finding of the CIT(A) on this issue deleting this addition is on the right footing and does not call for any interference.
The AO pointed out that though the assessee had paid Rs.34,95,441/- to the faculty members being professionals for their services but the TDS had not been deducted u/s 194J. The CIT(A) held that what was paid to the faculty members was salary and the TDS was not liable to be deducted u/s 194J.The assessee had paid Rs.5 lakhs as assessee’s share of the legal settlement due to Microsoft for violation of copyright Act. The AO has disallowed the same. The CIT(A) treated the payment as business expenditure.
On Appeal before the Tribunal the DR submitted that the CIT(A) erred in holding that what was paid to the faculty members was salary and the TDS was not liable to be deducted u/s 194J.The AR submitted that even Form No.16 issued to the employees clearly show that the amounts have been paid towards the salary. Secondly the TDS was not liable to be deducted u/s 194J.In respect of legal settlement with Microsoft the AR submitted that the compromise petition clearly show that the amounts paid was a compromise and was not a penalty at all.
Having heard the parties, the Tribunal held that,
++ a perusal of Form NO.16 clearly shows that what is paid by the assessee is only salary. Once it is shown that the assessee has only paid salaries to the person just because the teachers, are part time teachers, the same cannot be termed as professional fees for the purpose of invoking the provision of section 194J;
++ the payment of Rs.5 lakhs to Microsoft, is a compromise in respect of the contractual liability and the compromise is in no way on account of penalty. In any case this payment of Rs.5 lakhs has been made to Microsoft and obviously Microsoft under no circumstances can levy penalty on the assessee. The finding of the CIT(A) on this issue deleting this addition is on the right footing and does not call for any interference.
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