ITAT Quashes ₹9.48 Lakh TDS Demand Against Coaching Institute

The Income Tax Appellate Tribunal (ITAT), Cochin Bench, has quashed a ₹9.48 lakh tax demand against Kerala-based Brilliant Study Centre Pvt. Ltd., ruling that requiring teachers to follow attendance and working hours does not make them employees.

The dispute began with a TDS survey under Section 133A in December 2023. The Income Tax Department found that the coaching institute had deducted tax under Section 194J, which applies to professional fees, rather than Section 192, which covers salaries. The department argued the teachers were employees because they had fixed working hours, monitored attendance, leave approval rules, a non-compete clause, and annual increments. Based on those factors, it treated the institute as an assessee in default under Sections 201(1) and 201(1A), issuing the demand. The Commissioner (Appeals) upheld that view.

The tribunal overturned the lower authorities. The decisive test, the ITAT said, is not administrative control but whether the institution controls how professionals perform their work. The teachers were free to teach in their own manner, subject only to the prescribed curriculum. There were no formal appointment letters or employment contracts. The teachers were not entitled to statutory benefits such as provident fund, gratuity, ESI or leave encashment. These factors pointed to a professional engagement, not an employment relationship.