TaxTMI 
TaxTMI 
2012 (12) TMI 294
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered and no TDS u/s 194H was deducted. In the assessment order the Assessing Officer has observed that upto the financial year 2007-08 the assessee has deducted TDS on amounts paid on sale of recharge coupons by treating the same as commission. Immediately from next year the assessee stopped deducting TDS on the ground that it is not commission but only discount. There were no circumstances warranting such a decision and the Assessing Officer issued a show cause notice to the assessee dt. 15-09-2009 u/s 201/201(1A) of the Act calling for explanation from the assessee for failure to deduct TDS u/s 194H of the Act. It was submitted before the Assessing Officer that the transaction between BSNL and purchase dealer was principal to principal and not principal to agent. Therefore, no TDS is necessary to be deducted. The assessee further submitted that SIM Card supplied by the distributor is still the property of the service provider, i.e. the assessee company. It is only for the ultimate consumer or the assessee company who has the authority to uncover the secret number and bring the card into activation. The Assessing Officer after considering the submissions of the assessee observed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....01/04/2011. The facts in our case on hand are exactly, the same. Elaborate argul1iients were adduced by Id. Counsel of assessee, Shri S.E. Dastur and Niraj Sheth, which were considered by Hon'ble ITAT and then only held that the TDS provisions u/s 194H are applicable for sale of SIM cards and recharge coupons sold by assessee company Le. the differential portion should be treated as "commission" and on these commission payments, tax is to be deducted at source as per sec. 194H of I.T.Act. (c) The assessee company made an argument before this appellate authority, alternatively that TDS provisions to be made applicable only for SIM cards but not recharge coupons because the assessee company is the owner of sim cards whereas for the recharge coupons, they are not the owners, Le. once recharge coupons are sold to franchisees, they don't come back to assessee nor do they have any control over recharge coupons. But, this argument is not correct since there is no independent existence of recharge coupons without sim cards. Unless sim card is issued to a subscriber, recharge coupon cannot be issued ie. they are inter-linked and cannot be separa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....planation 1 of section 194H. It is quite usual for assessees to claim the amount as "discount" and not as "commission", even though it is commission only to come out of section 194H of the LT. Act. I also rely on the decision of Hon'ble Delhi High Court, in this context, CIT Vs Singapore Airlines 319/29 (Del) where the travel agents collected fare from passengers and agents collected fare from passengers and remitted it to airlines subject to deduction of commission due to them and claimed it to be "discount". Even in such cases, where commission is retained by distributors, the Board has clarified in para 16.2 of its Circular No.619 dated 04.12.1991, 193 ITR (St.) 17 that the retained amount is a constructive payment by the principal and required tax deduction at source. In the present case of ours also, the appellant BSNL is selling sim cards/recharge coupons at reduced price to its franchisees and claimed the reduced price as "discount". Applying the above analogy, it is held that the reduced price is treated as' "commission", but not "discount" as claimed by appellant company. I also rely on the decision of Hon'ble Kolkata ITAT's decision ACIT Vs Bharti Cellular Limited 108 TTJ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see company is having all lawful obligations to a prepaid consumer, even though the direct deal is between the distributor and the consumer. This is because the distributor does not have anything to provide 'as service' to the consumer. These are all features of agency relationship. Service cannot be sold or purchased and it can only be provided. The operational features explained by the assessee company are necessary in running a mammoth system of providing mobile telephone services over a large geographical area. The distributors provide essential services to the assessee company in running such a huge operational system. The distributors are linking agents in he chain of delivery of services to consumers. Therefore, the relationship is not of a principal-to-principal, but essentially that of principal to Agent only. Moreover, Circular No.131dated 15/04/2008 issued by Chief General Manager of BSNL, at para 2 clearly states that all the franchisees of BSNL are acting as an.agen1 of BSNL while selling BSNL products and services and the amount paid to franchisees shall be treated as commission expenditure of BSNL. It was further held by Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ong as the law is not changed, the same procedure as per law but not as per books of account is to be followed by assesee company. (i) The assessee company has argued that 80% of the commission given to franchisees should go to retailers and hence, alternately TDS is applicable to 20% of total amount only. This argument is incorrect and not logical. The Act prescribes different rates of TDS for contractors and subcontractors. When the TDS is to be made for a transaction between assessee company and payee, those provisions are only to be reckoned i.e. the moment commission is paid to franchisees, relevant TDS provisions are only applicable but not what will happen subsequent to payment to franchisee. Subsequent TDS payment by franchisee is the issue to be adjudicated in the case of a franchisee and not in this case. For example, if a person awards a contract to one person, Act says that 2% of that amount is to be deducted, even though the contractor again gives it as sub-contractor to other person. When, a contractor gives the same as subcontract 1% of TDS is to be made by him again and the original person who awards the contract cannot ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arge coupon is not the property of the assessee. Therefore on the discount paid on the recharge coupon no TDS is required to be deducted u/s 194H of the Act. Alternatively, it was submitted that at the time of purchase no income has accrued to the assessee. Therefore he is not under obligation to deduct TDS u/s 194H of the Act. 5. On the other hand, the learned DR has submitted that the issue involved in this appeal is already covered by various decisions of the High Courts and I.T.A.T. and the learned CIT(Appeals) by following the same confirmed the order of the Assessing Officer He strongly supported the order passed by the learned CIT(Appeals). 6. We have heard both the sides, perused the records and gone through the orders of the authorities below. The assessee is a cellular company selling SIM cards and recharge coupons. The assessee has deducted TDS on both the sale, i.e. SIM cards as well as recharge coupons upto the financial year 2007-08. Thereafter TDS was deducted only on SIM cards and no TDS was deducted insofar as the recharge coupons are concerned. It was explained before the Assessing Officer that because of change of policy decision TDS was not deducted. The a....