That the learned ITO(TDS) and CIT(A) has failed to appreciate the fact that the payment made to staff not of contractual nature and thus section 194C is not applicable on such payment. The nature of such payment is such as it will be liable to TDS under section 192 and the payment made is less than the taxable limits mentioned under section 192.
The issue of relationship of master and servant stands dealt with by the Hon'ble Supreme Court in ‘M/s Dharangadhra Chemical Works Ltd. vs. State of Saurashtra’ AIR 1957 SC 264, wherein, it has been held that prima facie test for the determination of relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do, but also the manner in which he shall do his work; that the nature or extent of control which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature, incapable of precise definition; that the correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer; that a person can be a workman even though he is paid not per day, but by the job; that the fact that rules regarding hours of work, etc., applicable to other workmen may not be conveniently applied to them and the nature as well as the manner and method of their work would be such as cannot be regulated by any directions given by the Industrial Tribunal, is no deterrent against holding the persons to be workmen within the meaning of the definition if they fulfill its requirement...
In view of the above, the grievance of the assessee for all the three years under consideration is accepted. The orders under appeal are reversed.
Sec. 192 & 194C of Income Tax Act, 1961— TDS — The relationship between the management and teaching staff involved an obligation to obey orders in the work to be performed; that as such this relationship could not be called a contract for service, since the teaching staff had not undertaken to render any professional or technical service; that since there was a contract of service between the assessee deductor and its teaching staff appointed on ad-hoc basis and the salary paid to them being below the taxable limit, no TDS was required. Appeal of the assessee allowed.
BASIC SHIKSHA Vs. ITO
 23 ITCD Online 116 (LUCKNOW)