Discount to prepaid mobile distributors is not commission or brokerage, so no tax deduction is required under Section 194H.

Discount allowed to distributors on prepaid mobile services was held not to be commission or brokerage within the meaning of Section 194H of the Income-tax Act, 1961, so no tax was required to be deducted at source on that component. The HC applied the binding Supreme Court ruling that the income or profit element arising from sale or transfer of prepaid coupons or starter-kits to distributors does not create a TDS obligation under Section 194H. The Tribunal's view that the provision was inapplicable was affirmed, and the issue was decided in favour of the assessee.

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Issues: Whether the discount allowed to distributors on prepaid mobile services constituted commission or brokerage so as to attract deduction of tax at source under Section 194H of the Income-tax Act, 1961.

Analysis: The dispute was covered by the binding Supreme Court ruling that the income or profit component arising from sale or transfer of prepaid coupons or starter-kits to distributors does not give rise to a legal obligation to deduct tax at source under Section 194H. The order under challenge of the Tribunal, which had held the provision inapplicable, was affirmed.

Conclusion: The discount to the distributors was not commission or brokerage within the meaning of Section 194H, and the issue was decided in favour of the assessee.

Ratio Decidendi: Discount allowed to distributors on prepaid mobile services does not amount to commission or brokerage attracting tax deduction at source under Section 194H of the Income-tax Act, 1961.

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