TaxTMI 
TaxTMI 
2013 (7) TMI 874
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....s raised in these appeals are identical in nature, they were heard together and are being disposed of by this common order for the sake of convenience. 3. The solitary issue involved in these appeals is whether the learned Commissioner of Income-tax (Appeals) was justified in holding that the relationship between the assessee-company and its distributor is that of "principal agency" relationship and consequently the discount paid to the distributors constitute "commission payment" exigible for deduction of tax at source under section 194H of the Income-tax Act, 1961. 3.1. The facts relevant for the issue under consideration are stated in brief: The assessee is a cellular operator under the brand name "AIRTEL" and it has appointed dist....
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....liable for deduction of tax at source under section 194H of the Act. For this proposition, the Assessing Officer placed reliance on the following cases : (i) Asst. CIT v. Bharati Cellular Ltd. [2007] 294 ITR (AT) 283 (Kol). (ii) Vodafone Essar Cellular Ltd. v. Asst. CIT [2009] 317 ITR (AT) 234 (Cochin). Since the assessee did not deduct tax at source, the Assessing Officer raised a demand under section 201(1) of the Act and also levied interest under section 201(1A) of the Act. 6. The Commissioner (Appeals) noticed that an identical issue has been considered by the hon'ble jurisdictional High Court of Kerala in the case of Vodafone Essar Cellular Ltd. [2011] 332 ITR 255 (Ker) wherein it was held that the discount constitute ....
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....afone Essar Cellular Ltd. [2011] 332 ITR 255 (Ker) on similar set of facts had observed as under : The assessee, a mobile cellular operator, carried on business through distributors, and offered the 'post-paid scheme' and the 'pre paid scheme' to its customers. The assessee paid charges to the dis tributors for services rendered. While the charges paid in respect of the 'post-paid services' was treated as 'commission' and liable to TDS under section 194H, payments made for services rendered under the 'pre-paid scheme' were treated as a sale of SIM card at a discounted value and not as 'commission'. The Assessing Officer, the Commis sioner of Income-tax (Appeals) and the Tribunal treated the....
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....e of sale of SIM cards or recharge coupons by the assessee to the di tributors is a payment for services rendered to the assessee and falls within section 194H. (ii) The contention that discount is not paid by the assessee to the distributor but is reduced from the price and so deduction under section 194H is not possible is not acceptable because the assessee should have given discount net of the tax amount or given full discount and recovered tax amount thereon from the distributors. 12. While considering identical grounds as in the case of the appellant, the observations made by the hon'ble High Court of Kerala cannot be le....