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of <h1>Assessees Not Required to Deduct Tax at Source on Agent Commissions, Apex Court Rules Under Income Tax Act.</h1> <h3>The Commissioner of Income Tax (TDS) Versus M/s Idea Cellular Ltd.</h3> The Commissioner of Income Tax (TDS) Versus M/s Idea Cellular Ltd. - TMI Issues Involved:Liability to deduct tax at source under Section 194H of the Income Tax Act, 1961 on commission payable to agents under franchise/distributorship agreements.Detailed Analysis:1. Issue of Liability to Deduct Tax at Source:The main issue in this appeal under Section 260-A of the Income Tax Act, 1961 pertains to the liability to deduct tax at source under Section 194H on commission payable to agents under franchise/distributorship agreements. The assessee argued that they are not paying commission or brokerage to the franchisees/distributors, nor do they consider the franchisees/distributors as their agents. This issue had conflicting decisions from different High Courts, with Delhi and Calcutta holding the assessees liable to deduct tax at source under Section 194H, while Rajasthan, Karnataka, and Bombay High Courts ruling otherwise.2. Previous Court Decisions and Apex Court Ruling:Some assessees had previously approached the Apex Court in a related case (Civil Appeal No. 7257/2011). The Apex Court, in its judgment dated 28.02.2024, concluded that the assessees are not legally obligated to deduct tax at source on the income/profit component in payments received by distributors/franchisees from third parties/customers. The Court clarified that Section 194H is not applicable to the circumstances of the case. Consequently, the appeals filed by the assessees challenging the judgments of Delhi and Calcutta High Courts were allowed, and those filed by the Revenue challenging the judgments of Rajasthan, Karnataka, and Bombay High Courts were dismissed.3. Final Disposition:As a result of the Apex Court's ruling, the High Court found that nothing remained for adjudication in the appeal filed by the Revenue. Therefore, the appeal was disposed of accordingly, in line with the Apex Court's decision, bringing an end to the matter under consideration.
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