TaxTMI 
TaxTMI 
2017 (7) TMI 1076
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....anka, N. K. Jain, Sanjay Jhanwar, Prakul Khurana, Archana, Akhil Simlote For the Respondent(s) : R. B. Mathur with K. D. Mathur, Nikhil Simlote, Prateek Kedawat, Tanvi Sahai, Meenal Ghiya & Prabhansh Sharma JUDGMENT K. S. Jhaveri, J. 1. All these appeals arise out of the judgments delivered by the Income Tax Appellate Tribunal. In some of the appeals, the assessee is the appellant and in some of the matters, the Department has come by way of appeals. However, time and again the matter was adjourned and all these appeals are clubbed in view of the fact that questions of law involved in all these appeals are somewhat identical. 2. The basic question which was put forth for our consideration is whether the arrangement which has been worked out between the assessee company and the distributor (Agency) claimed by the Income Tax Department are covered under the provisions of Sections 194 H and/or 194 J of the Income Tax Act. 3. To come out all these appeals, first of all, we will give the questions which were posed in different appeals: 3.1 D.B. Income Tax Appeal No.205/2005 admitted on 30.08.2005. "(i) Whether in the facts and circumstances of the case the ....
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....x at source under Section 194 H of the Act in respect of sales to its distributors, which are on a principal to principal basis and wherein property in the goods is transferred to the distributors? (b) Whether on the facts and circumstances of the case, selective reliance can be validly placed by the Tribunal on the management Information System records and other extraneous records on irrelevant considerations, ignoring statutory financial books of account in arriving at any conclusion with regard to the character of dealings between the Appellant and the distributors? (c) Whether on the facts and in the circumstances of the case the Tribunal erred in law in holding that interest under section 201(1A) of the Act should be levied on the Appellant when the taxes due had already been paid by the distributor(s)?" 3.4 D.B. Income Tax Appeal NO.55/2007 admitted on 26.10.2007. "(i) Whether the facts and circumstances of the case the learned Tribunal was right and justified in holding that assessee was liable to withhold tax at source under section 194H of the Income- tax Act, 1961 amounting to Rs. 19,74,842/ (including interest) in respect of sales of its dis....
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....e, the Tribunal erred in Taw in upholding the order of the CIT (A) treating the appellant as an assessee in default u/s 201(1), for alleged failure to deduct TDS u/s. 194H of the Act in respect of discount. Allowed on pre-paid SIM cards and Talk time sold to pre-paid distributors by the appellant? 2. whether against a deductor who fails to deduct the tax at source, the liability of payment of tax can also be fastened under section 201 apart from Liability of interest and penalty? 3. Whether, according to section 191 read with section 201, a deductor, who fails to deduct tax at source can be deemed to be an assessee in default without adverting to the issue and recording a finding that the assessee who is liable to pay tax directly had not paid tax? 4. Whether on the facts and circumstances of the case, the Tribunal was correct in holding that the CIT(A) has no jurisdiction to set aside/restore the matter to the assessing officer. 5. Whether on the facts & in circumstances of the case, the Tribunal erred in Law in not independently directing the AO to carry out such verification & delete the demand u/s. 201(1) of the Act in relation to income on w....
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...., the Tribunal was correct in holding that the CIT(A) has no jurisdiction to set aside/restore the matter to the assessing officer. 5. Whether on the facts & in circumstances of the case, the Tribunal erred in Law in not independently directing the AO to carry out such verification & delete the demand u/s. 201(1) of the Act in relation to income on which tax had been paid by the prepaid distributors?" 3.11 D.B. Income Tax Appeal NO.4/2014 admitted on 27.01.2014. "1. whether on the facts & in circumstances of the case, the Tribunal erred in Taw in upholding the order of the CIT (A) treating the appellant as an assessee in default u/s 201(1), for alleged failure to deduct TDS u/s. 194H of the Act in respect of discount. Allowed on pre-paid SIM cards and Talk time sold to pre-paid distributors by the appellant? 2. whether against a deductor who fails to deduct the tax at source, the liability of payment of tax can also be fastened under section 201 apart from Liability of interest and penalty? 3. Whether, according to section 191 read with section 201, a deductor, who fails to deduct tax at source can be deemed to be an assessee in default withou....
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....016. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention?" 3.16 D.B. Income Tax Appeal NO.132/2015 admitted on 18.10.2016. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention?" 3.17 D.B. Income Tax Appeal NO.168/2015 admitted on 18.10.2016. "1. Whether in the facts....
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....hether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention?" 3.22 D.B. Income Tax Appeal NO.08/2016 admitted on 18.10.2016. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194-J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/monitored by human intervention?" 3.23 D.B. Income Tax Appeal NO.45/2016 admitted on 18.10.2016. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct ....
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....at of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention?" 3.28 D.B. Income Tax Appeal NO.98/2016 admitted on 18.10.2016. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194-J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/monitored by human intervention?" 3.29 D.B. Income Tax Appeal NO.99/2016 admitted on 20.04.2017. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194H of the IT Act, as the relation between assessee and distributo....
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....01(1) for non deduction of TDS u/s 194H on commission payment to various distributors. 3. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provider as this interconnection is managed/controlled monitored by human intervention. 4. Whether in the facts and circumstances of the case, TDS u/s. 194J is applicable on roaming charges paid for facilities provided by service providers. 5. Whether in the facts and circumstances of the case, the Tribunal has erred in deleting the interest u/s. 201(1A) on the tax demand raised under section 201(1) of the Act. 3.32 D.B. Income Tax Appeal NO.102/2016 admitted on 20.04.2017. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194H of the IT Act, as the relation between assessee and distributor is that of principal to agent. 2. Whether in the facts and circumstances of the case, the Tribunal has erred in law in deleting the demand u/s. 201(1) for non deduction of TDS u/s 194H on commission payment to various distri....
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....vice provider as this interconnection is managed/controlled monitored by human intervention. 4. Whether in the facts and circumstances of the case, TDS u/s. 194J is applicable on roaming charges paid for facilities provided by service providers. 5. Whether in the facts and circumstances of the case, the Tribunal has erred in deleting the interest u/s. 201(1A) on the tax demand raised under section 201(1) of the Act." 3.35 D.B. Income Tax Appeal NO.105/2016 admitted on 20.04.2017. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194H of the IT Act, as the relation between assessee and distributor is that of principal to agent. 2. Whether in the facts and circumstances of the case, the Tribunal has erred in law in deleting the demand u/s. 201(1) for non deduction of TDS u/s 194H on commission payment to various distributors. 3. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provider as this interconnection is managed/controlled monitored by human....
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.... 2. Whether in the facts and circumstances of the case, the Tribunal was justified in law in holding the payment of roaming charges to other telecom operator is not subject to TDS u/s 194J of the Act as fees for technical services, and accordingly holding that assessee is not in default u/s 201 read with section 194J of the Act." 3.40 D.B. Income Tax Appeal NO.200/2016 admitted on 20.04.2017. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s 194H of the IT Act, as the relation between assessee and distributor is that of principal to agent. 2. Whether in the facts and circumstances of the case, the Tribunal has erred in law in deleting the demand u/s 201 (1) for non deduction of TDS u/s 194H on commission payment to various distributors. 3. Whether in the facts and circumstances of the case, TDS u/s 194J is applicable on roaming charges paid for facilities provided by service providers." 3.41 D.B. Income Tax Appeal NO.204/2016 admitted on 20.04.2017. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in hol....
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....ct to TDS u/s. 194J of the Act as fees for technical services, and accordingly holding that assessee is not in default u/s. 201 read with section 194J of the Act. 3. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the provisions of section 194H are not applicable in the case of respondent assessee despite of the fact that the different between the MRP and dealers price is nothing but "Commission". 4. Whether in the facts and circumstances of the case, the Tribunal was justified in law in deleting the order of demand u/s 201 (1)/201 (A) for non deduction of TDS u/s 194H on payment made for commission by the assessee to its dealers channel partners. 5. Whether in the facts and circumstances of the case, the assessee was in default under section 201(1) for non deduction of tax at source u/s 194H in respect of commission payments." Contention of Mr. Ajay Vohra and Mr. Anant Kasliwal appearing on behalf of assessee Hindustan Coca Cola Beverages Pvt. Ltd., and M/s Vodafone Digilink Ltd., Mr. Jhanwar appearing on behalf of M/s Bharti Hexacom Ltd., Mr. N.M. Ranka, senior counsel with Mr. N.K. Jain appearing on beh....
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....agreement of agency nor even ingredients which are defined under Section 182 of the Contract Act. 7. The provisions of Section 194H, Section 194J of the Income Tax Act read as under: 194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of [ten] per cent : Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed two thousand five hundred rupees : [Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business ....
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....sed therein : Provided that no deduction shall be made under this section- (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed- (I) twenty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) twenty thousand rupees, in the case of fees for technical services referred to in [clause (b), or] [(iii)twenty thousand rupees, in the case of royalty referred to in clause (c), or (iv)twenty thousand rupees, in the case of sum referred to in clause (d) :] [Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or ....
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.... Page 209) In the aforesaid decision, the apex court reiterated the principles laid down by it in the earlier decisions as under (see page 48 of 40 STC) : "As a matter of law there is a distinction between a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal and make over either the sale proceeds or the goods to the principal. The essence of a contract of sale is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the "goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will therefore be liable to account for the sale proceeds." (Page 212) A perusal of the aforesaid rules would certainly indicate that there are several restrictions imposed upon the licensed vendors but as laid down by the apex court in Bhopal Sugar Industries Ltd. v. STO [1977] 40 STC 42, "the concept of a sale has, however, undergone a ....
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....nder: "(B at page 216) In view of the above discussion, we uphold the contention urged on behalf of the petitioner's association that the discount made available to the licensed stamp vendors under the provisions of the Gujarat Stamps Supply and Sales Rules, 1987, does not fall within the expression "commission" or "brokerage" under Section 194H of the Income Tax Act, 1961. The impugned communication dated March 14, 2002, from the Income Tax Officer, TDS 4, Ahmedabad, to the Senior Treasury Officer, Ahmedabad, is, therefore, quashed and set aside, and so also the consequential instructions dated March 19, 2002 (annexure "D" to the petition), issued by the Senior Treasury Officer, Ahmedabad, to the secretary of the petitioner's association are quashed and set aside. Rule is made absolute with no order as to costs." 8.1. The judgment of Gujarat High Court has been confirmed by the Supreme Court in CIT Vs. Ahmedabad Stamp Vendors Association, (2012) 348 ITR 378 (SC) which reads as under: "1. Heard learned counsel on both sides. 2. The Respondent in this civil appeal is theAhmedabad Stamp Vendors Association and the members of the said ass....
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.... reason suspend supply of wheat to him and cancel his appointment. 8. The Director may at his uncontrolled discretion and without assigning any reason, terminate the agreement upon giving one month's notice, it may similarly be terminated by the retailer. 9. After cancellation or termination of the agreement, any stock of wheat left can only be dealt with or disposed of according to the direction issued in this behalf of the Director and not otherwise. In favour of the view that it is an agreement for sale: 1. The wheat is obtained by depositing a price of Rs. 14 per maund and sold to consumers at Rs. 15 per maund (annas six per seer). Obviously the difference is the profit to be enjoyed by the retailer, but there is no provision in the agreement for his retention of this sum. It is therefore more consistent with sale than agency. 2. 'Price' has been defined in Section2(10) of the Sale of Goods Act as meaning--"the money consideration for a sale of goods". If it is agency, why should the 'price' have to be deposited and not merely the 'value' of the goods? 3. The retailer is obviously selling to his c....
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....r legal contract, by the accused himself or by some one else which he willingly suffered to do. It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. In the case before us, it is not disputed that If the sum of Rs. 23,100 was paid by P.W. 1 to the appellant by way of illegal gratification to induce the latter to make an allotment of cloth in his favour, there can be no question of entrustment in such payment. The payee would then receive the money on his own behalf and not on behalf of or in trust for anybody else. The criminality of an act of this character would consist in illegal receipt of the money and the question of subsequent misappropriation or conversion of the same would not arise at all." It was held that the evidence showed that the money was received by way of illegal gratification and would, therefore, be not the subject-matter of a breach of trust, there being no entrustment of money ....
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....e misuse by the assessee of the relationship of principal and agent for the purpose of evading tax. The first situation contemplated by the legislature is that covered by clause 2(i) of Explanation III where the agent has sold the goods at one rate and passed on the sale proceeds to its principal at another rate. The second situation is where the agent has purchased the goods at one rate and has passed them on to the principal at another rate. The third situation is where the agent has not accounted to his principal for the entire collections or deductions made by him in the sales or purchases effected by him on behalf of his principal, and the fourth is where it appears that the agent has acted for a fictitious or non-existent principal. It was contended on behalf of the appellant that the State legislature was not competent to convert by a legal fiction a mere entrustment of goods for sale into a sale and to impose a tax thereon. In our opinion, there is no warrant for this argument. The real effect of the third Explanation is to impose the tax only when there was a transfer of title to the goods and not where there is a mere contract of agency. The Explanation says in effect tha....
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....e is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will therefore be liable to account for the sale proceeds. The true relationship of the parties in each case has to be gathered from the nature of the contract, its terms and conditions, and the terminology used by the parties is not decisive of the legal relationship. For instance, in W.T. Lamb and Sons v. Goring Brick Company Limited [1932] K.B. 710 there was an agreement in writing by which certain manufacturers of bricks and other building materials appointed a firm of builders' merchants "sole selling agents of all bricks and other materials manufactured at their works". The agreement was expressed to be for three years and afterwards continuous subject to twelve months' notice by either party. While the agreement was in force the manufacturers informed ....
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....estion is not one which can properly be determined in an application for a writ under Art. 226 of the Constitution. 6. It was also submitted on behalf of the appellant that the third Explanation to s. 2(1)(n) of the Act violated the guarantee under Art. 14 of the Constitution since the classification contemplated, i.e., sales through commission agents who account fully for all collection made and sales through commission agents who do not account for collections, was not made on any intelligible differentia and had no rational relationship to the purpose of the statute. In our opinion, there is no substance in this argument as the classification is based upon an intelligible differentia and it has a rational relationship with the object sought to be achieved by the statute. Counsel for the appellant is therefore unable to make good his submission on this aspect of the case." 13. An endeavour is also made to go through the judgment of Bhopal Sugar Industries Ltd. Vs. Sales Tax Officer, Bhopal, AIR 1977 SC 1275 = [(1977)3SCC147] wherein it has been held as under: "4. We have heard counsel for the parties at very great length and we have also gone through the docu....
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....ortgage, hypothecation, charge or pledge ; Explanation I.-Consumption of motor spirit by a dealer himself or on his behalf shall be deemed to be a 'sale'; Explanation II.-A sale of motor spirit deemed to be a sale inside the State within the meaning of Sub-section (2) of Section 4 of the Central Sales Tax Act, 1956 (74 of 1956), shall also be deemed to be sale inside the State for the purposes of this clause. Thus it would appear that in order to satisfy the conditions of "sale" under the definition of the Act, the following conditions must be satisfied : (i) that there should be a transfer of motor spirit from the seller to the buyer; (ii) that the transfer must be for valuable consideration which may be either cash or deferred payment; and (iii) that the transfer must not be in the nature of a mortgage, hypothecation, charge or pledge. Under explanation I, consumption of motor spirit by a dealer himself or on his behalf shall be deemed to be a sale. But this explanation has already been held to be ultra vires by this Court in the previous Bhopal Sugar Industries Ltd.'s case [1963]14 S.T.C.406. Thus the ess....
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....reement being one of sale. 6. It is well-settled that while interpreting the terms of the agreement, the Court has to look to the substance rather than the form of it. The mere fact that the word "agent" or "agency" is used or the words "buyer" and "seller" are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that the said status would be conferred. Thus the mere formal description of a person as an agent or a buyer is not conclusive, unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent. Learned Counsel for the appellant relied on several circumstances to show that on a proper construction of the agreement it could not, but be, held to be a contract of sale. Learned Counsel strongly relied on a decision of this Court in Sri Tirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry [1968]2SCR476 , where this Court held the transaction to be a sale in almost similar circumstances. Speaking for the court, Ramaswami, J., observed as follows: 'As a matter of law there is a distinction between a c....
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....ter having taken delivery of the same from the company. In these circumstances, therefore, this argument of the learned Counsel for the respondent must be overruled. 22. Another circumstance relied upon by the respondent was the fact that the appellant was under the terms of the agreement to sell the goods at a price fixed and not higher or lower than that. We have already indicated that when a company enters into a distribution agreement it always fixes a particular price in order to protect its goodwill and in order to control the market. Such fixation of the price by itself would not be a restriction which would take away the freedom of contract of sale. Such a stipulation is found in almost all the agreements entered into between the monopolist companies and their distributors. The respondent would not, therefore, be justified in treating this circumstance in order to show that the agreement was one of agency." 24. .......... A perusal of this clause as a whole would show that the use of the words "commission and allowances" is not to indicate agency, but to indicate certain special benefits which the company wanted to confer on its distributors. Furthermore, ....
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.... wagon-load or lorry-load by the said company direct to the consumer, but only provided that the distributor arranged the payment as per the agreement and also took the responsibility to bear entirely the resultant effects and risk from said direct despatches. It is true that the price at which the goods were to be sold to the customers was fixed by the company but that itself does not necessarily lead to the conclusion that the assessee acted merely as an agent of the said company. In fact, it is well settled that the mere fact that the manufacturer fixes the sale price, by itself, cannot lead to the conclusion that the distributor is merely an agent. It is significant that under the agreement what the distributor got is described as a "rebate" and not as "commission", as one would normally expect in an agreement of agency. This is a factor which is by no means conclusive, but to a certain extent indicative of the relationship between the said company and the assessee. What is most important is, however, that the supplies were made to the distributor against payment either immediate or deferred as provided in the agreement, and even when the goods were destined directly to the cus....
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....e agreement with the principles laid down in this decision. We may point out that although we have referred to the assessee being described in the agreement as "distributor" and not as "agent" and to the fact that what they got was described as "rebate" and not "commission", we have not treated these circumstances as in any manner decisive. In our view, however, these descriptions considered in the light of the general tenor of the agreement and the circumstances surrounding the transactions between the parties show that the assesses was not agent, but really a purchaser from the company in respect of the goods in question. 9. We may mention that it was urged by learned Counsel for the respondent, in the alternative, that, although Sub-section 21 of Section 2of the Kerala General Sales Tax Act defines sale in a manner similar to the definition of the said term under the Sale of Goods Act, Explanation 5 to Sub-section 21 of Section provides that two independent sales or purchases shall, for the purposes of that Act, be deemed to have taken place in the circumstances set out in that explanation. A perusal of the said explanation shows that such independent sales or purchases....
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....the Revenue is permitted to levy interest under the provisions of 201(1A) of the Act, even in a case where the person liable to pay the tax has paid the tax on the date due for the payment of the tax, the Revenue would derive undue benefit or advantage by getting interest on the amount of tax which had already been paid on the due date. Such a position, in our opinion, cannot be permitted. 13. In view of the aforesaid reasons, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference is thus answered accordingly and is disposed of with no order as to costs." 16. In the alternative he contended that even the Court is not with the assessee on point of Section 194H, 201 or 201(1A) of the Act, the penalty is not required to be levied in view of the provisions and the judgments which are relied upon. He has also taken us to the judgment of this Court regarding 201(1A) of the Act in the case of CIT Vs. Rajasthan Rajya Vidyut Prasaran Nigam Ltd., (2006) 287 ITR 354 (Raj.) wherein it has been held as under: "2(6). ............ The learned authorised representative had relied upon the decision of CIT v. Rishikesh A....
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....usion that the Tribunal could not have reopened the matter for any further hearing. 9. We have already noticed that the order passed by the Tribunal to reopen the matter for further hearing as regards ground No. 7 has attained its finality. In the circumstances, the High Court could not have interfered with the final order passed by the Income-tax Appellate Tribunal. 10. Be that as it may, the circular No.275/201/95- IT(B) dated 29.1.1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualized under Section 201(1) of the Income- tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deducted-assessee. However, this will not alter the liability to charge interest under Section 201(1A) of the Act till the date of payment of taxes by the deducted-assessee or the liability for penalty under Section 271C of the Income tax Act." 18. In the case of CIT Vs. Eli Lilly & Co. (India) P. Ltd., (2009) 312 ITR 225 (SC) wherein the penalty provisions were considered, the Supreme Court held as under: ....
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....orassessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the 104 cases penalty was leviable under Section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to deduct tax at source." 19. He also relied upon the decision in the case of CIT Vs. Jai Drinks (P) Ltd., (2011) 336 ITR 383 (Delhi) wherein it has been held as under: "8. A perusal of the agreement shows that the Assessee had permitted the distributor to sell its products in a specified area. The distributor was to exclusively deal in the products of Assessee in a specified territory. The products were to be purchased by the distributor from the Assessee against 100% advance payment, though decision rested with the Assessee to give the products on credit to the distributor. The distributor was to maintain at all times the minimum stock and was to deal only in the products of the Assessee. The distributor was to maintain its operational infrastructure including requisite staff under its employment with lia....
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....foresaid rules delineate the clear picture of relationship between the newspaper agencies and advertising agencies. It is useful to refer to certain rules of INS which clearly negate the relationship of principal and agent between the newspaper agency and the advertising agency. Under the heading "Rules and Regulations Governing Accreditation of Advertising Agencies", Rule 10 clearly indicates that there is no control of newspapers agency on the advertising agency whereas in a relationship of principal and agent principal retains full control over the activities of agent. Rule 10(1), 10(b) and 10(c) are quoted below:- 10(a). It is free from control or interference of any business or person who owns or controls any newspaper or other advertising medium or media. (b) Its principal or principals are not the proprietor/partners/salaried employees of any advertiser or publisher of a newspaper or an advertising medium. (c) Any of its Directors, Proprietor, Partnersor Chief Executives do not hold any share or equity in any publication or any other form of advertising media and have no connection financially or otherwise, with any publication or with any firm of ....
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....hs were constructed by the assessee on its own and they were allotted to the concessionaires at its discretion. The milk and other products were sold from these booths by concessionaires during fixed hours of the day. An agreement was entered into between the assessee and the concessionaires. Clause 43 of the agreement provided that the assessee will sell milk and other products to the concessionaires at the sale price fixed by the Dairy from time to time. The concessionaires cannot sell the milk to consumers for any other sale price and if he is found to be indulging in this, the agreement was liable to be terminated. As per Clause 13, the concessionaire did not have any right, title or interest over the booth or the machinery, equipment, furniture etc. which were all to be provided by the Dairy. This Clause also provided that the possession and control of the shop was with the assessee and the looks were also to be provided by the assessee only. The concessionaire will only be given the duplicate keys. According to Clause 17, the concessionaire was required to record the quantity of unsold milk in the prescribed register within 15 minutes of the close of the scheduled vending tim....
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....l the Dairy having given space, machinery and equipment to the concessionaire would naturally like to incorporate clauses in the agreement to ensure that its property is properly maintained by the concessionaire, particularly because milk and the other products are consumed in large quantities by the general public and any defect in the storage facilities which remains unattended can cause serious health hazards. These are only terms included in the agreement to ensure that the system operates safely and smoothly. From the mere existence of these clauses it cannot be said that the relationship between the assessee and the concessionaire is that of a principal and an agent. That question must be decided, as has been rightly decided by the Tribunal, on the basis of the fact as to when and at what point of time the property in the goods passed to the concessionaire. In the cases before us, the concessionaire becomes the owner of the milk and the products on taking delivery of the same from the Dairy. He thus purchased the milk and the products from the Dairy and sold them at the MRP. The difference between the MRP and the price which he pays to the Dairy is his income from business. I....
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....ibunal that the concessionaires only rendered a service to DMS for selling milk to the customers and, therefore, the relationship between DMS and the concessionaires was that of a principal and an agent. This attracted the provisions of Section 194H. This is apart from the fact, as noticed earlier, that the DMS redrafted the agreements and filed them before the CIT(A) and the Tribunal and such redrafted agreements were found to be different from the agreements found during the survey under Section 133A. This Court, on the above facts held that Section 194H was attracted. As already pointed out, the terms of the agreement entered into between the present assessees and their concessionaires are different in crucial aspects. Therefore, the judgment of this Court in the case of DMS(Supra) is not applicable to the present cases. 15. We are, therefore, of the view that no substantial question of law arises from the order of the Tribunal. The appeals of the revenue in ITA No. 1925 and 313/2011 are accordingly dismissed with no order as to costs. 16. In ITA Nos. 310, 319 & 312/2011 in the case of Mother Dairy Food Processing Ltd., the facts are identical. The agreements h....
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.... THIS AGREEMENT is made at Jaipur on this 1st day of January, 2007. BETWEEN Aircel Digilink India Ltd., a company incorporated under the Companies Act, 1956, and having its registered office at C48. okhla Industrial Area, Phase-II, NewDelhi-110020, and one of its office at 5th Floor, Gaurav Towers, Malviya Nagar, Jaipur, Rajasthan ("ADIL") which expression shall, unless it be repugnant or contrary to the contest or meaning thereof be deemed to mean and include its successors and assigns of the FIRST PART; AND The Distributor whose full name and address is set out in full in the Schedule I to this agreement (" the Distributor") which expression shall, unless it be repugnant or contrary to the context or meaning thereof, be deemed to mean and include its successors of the SECOND PART (ADIL and the Distributor are, wherever the context so requires in this Agreement, collectively referred to as "the parties" and individually as the Party"), WHEREAS: (i) ADIL is currently engaged in the business of providing cellular mobile telephone services to its customers throughout Rajastban by virtue of the license granted to it by Department of ....
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....bile telephony service. "Stock" means stock of the Service Tickets (including the SIM cards, the Refill Slips). (a) Words (including the words defined herein) denoting the singular number only shall include the plural and vice versa wherever the context so requires. (b) Unless the context otherwise requires, references to a clause or Schedule is to a Clause of or Schedule of this Agreement. (c) The term "Agreement" referred to herein includes all Schedules/Annexure appended to hereto (including any amendment, modification or alteration of any provision hereof from time to time in accordance with the provisions hereof. 2. APPOINTMENT ADIL hereby appoints the Distributor, and the Distributor hereby agrees to operate as distributor in accordance with the terms and conditions contained herein. The acknowledge that such appointment is non-exclusive and that ADIL may, in its sole discretion, establish other Distributor Associates and appoint such other persons in this behalf 3. SALE AND PURCHASE OF THE SERVICETICKETS 3.1 The sale and purchase of the service Tickets as between ADIL and the Distributor shall be governe....
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....de assistance (on request from the Distributor) to its staff on service knowledge and updates; (g) provide and maintain an up-to-date list of the Service Tickets and/or suppliers from which the Distributor may purchase Stock and/or accessories; 6. TRAINING 6.1 ADIL shall provide training in the use, installation and rendering of after-sale Services in respect of the Service Tickets to the Distributor and its personnel, wherever required. 6.2 Any additional training required by the Distributor shall be provided by ADIL in accordance with is standard scale of charges in force from time to time. 6.3 The Distributor shall offer training in the use of the Service Tickets to all its customers on commercially reasonable terms. 7. CONSIDERATION 7.1 In consideration of the Distributo rfulfilling its obligations contemplated under this agreement, ADIL shall sell to the Distributor, the Service Tickets at rate ('Distributor Price') as may be communicated to the Distributor by ADIL from time to time; 'Distributor Price here means the price of the Service Tickets offered by ADIL to the Distributor, from time to time. ....
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....not done so itself to the satisfaction of ADIL, within 7 days of termination of the Agreement. 10.2 The Distributor shall not be entitled to any compensation or indemnity (whether for loss of distribution rights, goodwill or otherwise) as a result of the termination of this Agreement in accordance with its terms. 10.3 obligations of the parties relating to confidentiality and indemnity as contained in this Agreement shall survive the expiration or terminiation of the Agreement 11. CONFIDENTIALITY The Distributor hereby undertakes that it and each of its affiliates and employees or representatives thereof shall not, at any point of time divulge or communicate in any manner whatsoever, to any third party or any of its customers or use for its own purpose any information about the business and affairs of ADIL or any of its clients which may come to the knowledge of the Distributor pursuant to this Agreement. For the purposes of this clause, confidential information includes (without limitation) subscriber lists, customer information, schemes, operating manuals, data and generated by ADIL and all information received pursuant to online data connectivity of AD....
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....n under this Agreement shall be in writing and shall be delivered personally or by prepaid registered AD mail or certified letter to the respective address of the parties mentioned in this Agreement. 16.2 or such address as may notify the other party in writing and shall be deemed to be served: (A) if it is personally delivered/by courie rat the time of delivery, or acknowledgement taken, or (B) if it is delivered by prepaid registere AD, mail three days after posting thereof 17. No CREATION OF THIRD PARTYOBLIGATIONS 17.1 Notwithstanding anything contrary contained herein, the Distributor shall not, without ADIL prior specific approval/consent in writing, assume or create any obligations on ADIL's behalf or incur any liability on behalf of ADIL or in any way pledge or purport to pledge ADILs credit or accept any contract binding upon ADIL. 17.2 The relationship of the parties is that of seller and buyer and it is hereby expressly agreed and clarified that this Agreement between ADIL and the Distributor is on principal to principal basis and neither party is, nor shall be deemed to be, an agent/partner of the other. Nothing i....
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.... IN WITNESS WHEREOF the parties have set and subscribed their respective hand on the day and year first herein above written." 25. After taking into consideration the agreement, he has mainly contended with regard of the power of CIT(A) where the Tribunal has held that the CIT(A) cannot reverse the finding of Assessing Officer. He has relied on the decision of Supreme Court in the case of Union of India & Others Vs. Umosh Dhaimode(1997) 10 SCC 223 and the decision of this Court in Commissioner of Income Tax, Udaipur Vs. Hindustan Zinc Ltd.- (2012) 209 Taxman 519 (Raj.) wherein it has been held as under: "Head Note: Appeal CIT(A) Where AO's order found contrary to Tribunal's directions, whether in CIT(AS) cannot the order and remand back the same to AO-The assessee's assessment in this case was earlier completed by the AO on 20-1-1983 at nil income. The appeal against this order was decided by the CIT(A) on 8-3-1994. The Assessee's appeal against this order was decided by the Tribunal. In its order, the Tribunal restored essentially two issues to the file of AO for consideration afresh namely, the issue regarding disallowance of the provision for bad debts ....
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....ment passed after remand by the ITAT. The directions in remand order having not been complied with, the course as adopted by the CIT(A) cannot be said to be de hors the powers available to him under the statute. Therefore, it was held that even if the appeal had been filed after amendment to section 251(1)(a), the order as passed by the CIT(A) directing the AO to decide the matter in accordance with the directions of the Tribunal could not be said to be unauthorised." 26. In the case of Commissioner of Income Tax vs. NIIT Ltd. (2009) 318 ITR 289 (Delhi). It has been observed as under: 6. In the facts of the present case, we find that the order of the Tribunal is correct and must be upheld. The relations between the parties in the present case are not of a lessor and lessee as has been sought to be contended by the Revenue. A reference to the Clauses of the agreement which has been placed on record shows that a limited license is granted by the assessee company to Sh. Ashok Arora and Sh. Ashish Bhatia (i.e. the licencee) for use by the licensee of the trademark and trade name of the assessee company for the education centre. The assessee company granted the lice....
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....r the Clauses of the agreement. The details of provisions regarding conduct of the business were stipulated in the franchisee. The dominant intention of the parties of the agreement was to conduct the business not mere letting out of the building, furniture and fixture. The amount to be shared with the Franchisee was variable and it was not fixed. There was no minimum guarantee amount which the assessee was to make. The composite arrangement in the essence of the agreement for conducting the business. The essence of agreement is to conduct the business of running education centre jointly. Mere certain rights of the assessee to protect the business interest stipulated in the agreement would not change the essence of the agreement. The share of the Revenue with the Franchisee is on account of composite services provided by the Franchisee. In view of these facts, we hold that the broad objective of the agreement between the assessee and the Franchisee was to share the revenue and certainly it was not hire the premises provided by the assessee. Therefore, the assessee is not liable to deduct the taxes under Section 194-I of the act in respect of the amount shared by the assessee and re....
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....tancy services". The word "technical" is preceded by the word "managerial" and succeeded by the word "consultancy". Since the expression "technical services" is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on The Interpretation of Statutes (Twelfth Edition) in the following words: Where two or more words which are susceptible of analogous meaning are coupled together, noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. This would mean that the word "technical" would take colour from the words "managerial" and "consultancy", between which it is sandwiched. The word "managerial" has been defined in the Shorter Oxford English Dictionary, Fifth Edition as: of pertaining to, or characteristic of a manager, esp. a professional manager of or within an organization ,business, establishment, etc. The word "manager" has been defined, inter alia, as: a person whose office it is to manage an organization, bus....
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.... human. It would not include any service provided by machines or robots. 28. In the case of CIT vs. Career Launcher India Ltd. (2013) 358 ITR 179 (Delhi), it has been observed as under: 35. Let us examine the real nature of the agreement between the assessee and the franchisees and consider the question whether the agreement or contract is for "carrying out any work" by the franchisee, so as to attract the provisions of section 194C relating to tax deduction at source and consequently the disallowance under Section 40(a)(ia) of the Act. On a careful consideration of the issue, it seems to us that it would not be possible to view the agreement as a contract for carrying out any work by the franchisee. The terms of contract which we have referred to show that the arrangement consists of mutual obligations and rights. It is not a simple case of an agreement under which a person is engaged to carry out any work for the other. The essence of the contract appears to us to be one under which the trade name or reputation or knowhow belonging to the assessee in the business of running learning centres, where students are coached for writing competitive examinations, is permitted....
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....k is undertaken jointly by them for third parties who pay consideration which is shared. Parties do not work for each other. Therefore, the mere fact that the definition of the word "work" is an extended or inclusive definition does not automatically justify the conclusion of the income tax authorities that the activities carried on by the licencees of the assessee in running learning centres amount to the carrying out of any work for the assessee in pursuance of the contract. 29. He has also relied upon the decision in the case of M/S Gujarat State Fertilizers & chemicals Ltd. & Anr. vs. Commissioner of Central Excise Civil Appeal No. 4066-4067/2015 decided on. 22.11.2016, wherein the Supreme Court has held as under: "15. ------ Once these facts are accepted, we find that handling portion and maintenance including incineration facilities is in the nature of joint venture between two of them and the parties have simply agreed to share the expenditure. The payment which is made by GACL to GSFC is the share of GACL which is payable to GSFC. By no stretch of imagination, it can be treated as common 'service' provided by GSFC to GACL for which it is charging GACL. ....
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....ticular mobile subscriber by a mobile Company is a customize based service and therefore, distinguishable and separately identifiable and hence, it can be termed as "technical services"." 31. He has contended that all the questions which are posed for our consideration are required to be answered in favour of the assessee. Contentions raised & Judgments relied upon by Mr. N.M. Ranka appearing on behalf of assessee Tata tele Services Ltd. 32.1. Mr. Ranka, counsel for another assessee, over and above the contentions raised and the decisions which are sought to be relied upon by the counsel for the assessee has taken us to agreement entered into between the parties and the definitions which are covered under the agreement and following decisions. (i) Ahmedabad Stamp Vendors Association Vs. Union of India, 257 ITR 202 (Guj.) (ii) CIT Vs. Mother Dairy India Ltd., (2013) 358 ITR 218 (Delhi) (iii) Bharti Airtel Ltd. Vs. DCIT (2015) 372 ITR 33 (Karnataka) Contentions raised & Judgments relied upon by Mr. Sanjay Jhanwar appearing on behalf of assessee M/s Bharti Hexacom Ltd. 33. Mr. Sanjay Jhanwar, appearing for another assessee has sought to rely u....
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....ble" (by the assessee) mentioned in the earlier part of the section. It is true that Lahore and Delhi High Courts have taken a different view. But the view taken by the Calcutta and Mysore High Courts cannot be said to be untenable view. Hence, particularly in view of the fact that we are interpreting, not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected. Further as seen earlier, the consequences of accepting the interpretation placed by the Revenue may lead to harsh results." (ii) Commissioner of Income Tax Vs. J.K. Hosiery Factory-(1986) 159 ITR 0085 wherein it is held as under: "13. A case converse to the instant case was before the Division Bench of the Bombay High Court in the case of CIT Vs. Estate & Finance Ltd. (1978) 111 ITR 119 (Bom), where the Division Bench observed that when enacting the provision regarding cary forward and set off of unabsorbed depreciation under s.32(2) of the IT Act, 1961, the legislature could have imposed a condition that unabsorbed depreciation could be set off against the profits of a subsequent year only if the business in relation to....
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.... for the services received by them was liable to pay tax within the meaning of Explanation 2 to Section 9(1)(vii) of the Act. 4. However counsel for the petitioner Mr.Jhanwar contended that the issue is concluded in view of the following decisions : 1. Commissioner of Income Tax Vs. BhartiCellular Ltd. (2011) 330 ITR 239 (SC), 2. Union of India Vs. Satish Panalal Shah(2001) 249 ITR 221 (SC), 3. Commissioner of Income Tax Vs. JaipurVidyut Vitran Nigam Ltd. D.B. ITA No. 579/2009, High Court of Judicature for Rajasthan, Jaipur 4. Commissioner of Income Tax Vs BhartiCellular Ltd (2009) 319 ITR 139 (Del.), 5. Skycell Communications Ltd. and Anr. VsDeputy Commissioner of Income Tax and Ors. (2001) 251 ItR 53 (MAD.), 6. M.S. Jewellery Vs. Assistant Commissioner (ASSESSMENT) Agricultural Income Tax and Sales Tax and Anr. (1994) 208 ITR 531 (KER.), 7. CIT vs. Maharashtra State ElectricityDistribution Co. Ltd., (2015) 119 DTR (BOM) 278, 8. Commissioner of Income Tax-II and Ors.Vs Delhi Transport Ltd. Manu/ DE/ 2199/2015. 5. We have heard learned counsel for theparties. 6. In view of the fact th....
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....e course of these surveys were supplied to the assessee along with this show cause notice and were also offered inspection of various documents. 8. The Ao was not satisfied with the arguments of the assessee's counsel because of the following reasons (A) In assessee's own accounts margin of Distributor has been included in gross revenue realization by debiting Distributor commission account and crediting Gross revenue account If the transactions were strictly on principat-to-principal basis, there was no reason to give any effect to the distributor margin in its own books of accounts under any circumstances (B) Assessee has heavily relied upon the sales invoice made by the company and the distributors and corresponding accounting entries to claim that their transactions with the Distributor are principal to principal. However assessee himself has rightly argued that the entries in books of account are not conclusive in determining the real nature of transaction The real nature of transaction is governed by the actual understanding between the two parties and the manner in which the transaction is completed in the reality. In the case of assessee and his distributor....
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....ri Kedar Gupta and question No.4 of Shri Rajesh Kumar (statement dated 15.1.2003) has explained this practice In principal to principal relationship seller can never be responsible for the loss accruing to the purchaser on account of fall in value of goods already sold by him. This practice also destroys the sanctity of sale price mentioned on the sales invoice prepared by the company for its transactions with the Distributor. (e) Loss on account of expiry of sold goods borne by assessee company; If the stock available with the distributor cannot be sold before expiry date, the loss accruing this account is also borne by the company after the claim is submitted by the distributor and is by the company. In response to question No. 10 of Shri and question No.8 of Shri Rajesh Kumar (statement dated 15.1.2003) above fact was confirmed. (f) Control of sales executives over the operations of distributors; Sales executives of the assessee company, regularly monitor the operations of distributors, which is neither possible needed in relationship The non of operation by distributors is see to it that area system is strictly adhered to, at the time of sale....
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....e depriciation on these vehicles is claimed by assessee company. Firstly, if the distributors were independent principals why would company provide them with its own vehicle for the sales made by the distributor, which should be and independent operation of an independent principal. Secondly, if the distribution of goods by distributor would have been independent sales by independent principal, then how the assessee company would claim depreciation on these vehicles, because for making a claim of depreciation in respect of an asset, not only the asset should be owned by the assessee but it should be used by assessee for its own business Thus, it is very clear that in the considered view of assessee company and its management, the distribution of goods by the distributors is an extension of their own business. 26. At the outset on the President demand of the bench, to the Ld. AR to produce the copy of agreement/contract entered into by the assessee and its distributors so that nature of transaction is determined in view of provisions of Indian contract Act and Sale of Goods Act. To the surprise of the bench, it has been categorically denied by the Ld. AR that no such agreem....
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....es invoice prepared by the company for its transactions with the Distributor. (vi) If the stock available with the distributor cannot be sold before expiry date, the loss accruing on this account is also born by the company after the claim is submitted by the distributor and is verified by the company. (vii) Sales executives of the assessee company regularly monitors the operations of distributors, which is neither possible nor needed in principal to principal relationship. They see to it that area of operation by distributors is strictly adhered to, at the time of sale FIFO system is maintained etc. Importantly, sales executives send weekly report of stock with distributors to the company. In distant places like Ratangarh, Auditors of company also audit the records and stock of the distributor on monthly basis. (viii) Once the goods are sold to the distributor, how the goods are sold further by him should be solely his discretion in principal to principal relationship. However, they have no right to appoint any sub distributor. At the same time, company can appoint any sub-distributor and direct distributor to supply goods to such sub distributors. ....
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....py of ledger account of the assessee are available at P.B. 339 to 364 submitted by the Ld. AR and a copy of one page of the Ledger at P.B. 357 is reproduced for clarification as under: ------------------------------------------------------------------- HCCBPL-2002 Distributor commission Ledger Account: 1-Jan-2002 to 31-Dec-2002 Page 2 ------------------------------------------------------------------------------------ Date Particulars Vch Typ Debit Credit Brought Forward 1,27, 93,030.00 26-4-2002 Gross Revenue-Customer J Journal BEING GROSS REVENUE BOOK- ED 114182 C/S FOR THE MONTH OF APRIL 02 FOR SALES MADE FROM UDAIPUR DEPOT AS PER THE ENCLOSED DETAILS 11,61,441.00 24-5-2002 Gross Revenue-Customer J Journal Gross Revenue for the period 27-04-2002 to 24-05-02 (VKIA+KALADERA) 97,35,943.00 Gross Revenue-Customer J Journal being GR booked for 1446-37 cases has been sold during the m.o. may 2002 as per enclosed reconciliation 14,86,999.00 Gross Revenue-Customer J Journal Being rever....
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.... not been brought on record. Without bringing on record any material, a said statement that closing stock belongs to distributor, is of no value. Since it is evident from papers found in survey, the distributor is entitled for commission only and hence his right to collect the money from retailer can not be to retain the same but send the same to the assessee. There is an old section 194-H which is in peri Materia with the present section 194-H. The old section came in statute book w.e.f. 1.10.91 and remained effective upto 31.5.92. In pursuance of which there is a Board circular No.619 dated 4.12.1991, which has also been mentioned by the CIT(A) in his order and the relevant para of the circular reads as under:- "6. A question may raise whether there would be deduction of tax at source under section 194-H where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration. It may be clarified that since the retention of commission by the consignee/agent amounts to constructive payment of the same to him by the consignor/principal, deduction of tax at source is required to be made from the amou....
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....al to principal transaction. 12. The Tribunal has found, as a matter of fact, that the milk booths are owned by the assessed; the assessed has a right to enter the milk booth and take charge thereof any time without assigning any reason or without any intimation to the concessionaires; unsold milk is taken back by the assessed from the concessionaires; cash collection is daily handed over to the assessed by the concessionaires; the concessionaires only render a service to the assessed for selling milk to the customers; and finally ownership of the goods does not pass from the assessed to the concessionaires inasmuch as there is no sale of the milk or milk products to the concessionaires. No material has been brought on record to controvert these findings of fact. 13. We also do not find any perversity in the findings of fact that have been arrived at by the Tribunal on the basis of the agreement entered into between the assessed and the concessionaires and the terms of their appointment. 14. That being the position, we are of the opinion that no substantial question of law arises. 15. The appeal is dismissed. No costs." 37. He has also relied ....
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....ties. Even in the case of an agency, there can be a clause by which an agent is authorized to sell the goods for a price less than the MRP. Even in a case of principal to-principal, there may be a clause that the distributor cannot sell a product for a price less than the MRP unless a consent is given by the manufacturer. The matter of pricing in both the cases, i.e., principal-to-principal and principal to agents can be a matter of mutual consent between the parties and even a matter of negotiation after the execution of the agreement. There are no hard and fast rules of any legal proposition as far as these matters are concerned. 51. It is obvious that a service can only berendered and cannot be sold. The owner of the SIM Cards and recharge coupons is the assessee-company, M/s. Vodafone Essar Cellular Ltd. This is because the assessee company is operating under the right of a licence agreement entered into with the Government of India. Nobody else can be given the right to operate as Cellular telephone service providers. The ultimate service is provided by the assessee company to everyone and everywhere. The SIM card is in the nature of a key to the consumer to have acce....
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....iven only to the ultimate consumer who activates the connection by using the secrete number provided in the SIM Card. 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. This unique situation negates the argument of the assessee-company that once delivery of the SIM Card is taken, it is the absolute property of the distributors. No, this is a mis-conception. 56. In the case of post-paid scheme, the assessee-company is treating the benefits enjoyed by a distributor as commission and deducting tax at source. Where the assessee-company itself admits that it is liable to deduct tax at source under Section 194H in respect of post-paid services rendered through its distributors, it is the duty of the assessee to prove that the services rendered by the assessee through the distributors on pre-paid package is different from the post-paid package so as to qualify the former for exemption from operation of Section 194H. 57. It is beyond any dispute that the essence of service rendered to the pre-paid and post-paid consumers are one and the same. There is no difference. The only d....
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....t that there was no occasion as in the case of M.S. Hameed (supra) has no relevance here. The situation considered by the Hon'ble High Court was different. In that case one party is State Government. Without executing an authority in conformity with the statutory and administrative Rules, no-body can become an Agent of the Government. Further, the Court has considered the subject transaction as that of purchase and sale of goods. But, in the present case, there is no failure of any procedural provisions as apprehended by the assessee-company. 65. We have come to the above conclusion specifically on the following grounds: (1) In the judgment of the Hon'ble High court of Kerala in the case of BPL Mobile Cellular Ltd. (supra) it has been held that in the supply and delivery of SIM Cards and other recharge coupons, there is no sale and purchase of goods, but only of providing services; (2) The Hon'ble Kerala High court in the case of Kerala Stamp Vendors Association(supra) have treated the subject transactions as transaction of purchase and sale of goods; (3) The assessee-company as a service provider is always the owner of the above prod....
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....has relied on the decision of the Gujarat High Court in Ahmedabad Stamp Vendors Association v. Union of India (2002) 176 CTR (Guj) 193 : (2002) 257 ITR 202 (Guj) and a decision of learned Single Judge of this Court in M.S. Hameed and Ors. v. Director of State Lotteries and Ors. (2001) 165 CTR (Ker) 481 : (2001) 249 ITR 186 (Ker) and contended that commission payable cannot be subjected to deduction, we are unable to accept this argument because the case decided by the Gujarat High Court pertains to sale of stamp by the Government to stamp vendors at a discount and the case decided by this Court pertains to sale of lottery tickets to the agents at a discounted price. In both the cases, the purchasers, namely, stamp vendors and lottery agents purchased stamps and lottery tickets respectively at a discounted price and they run the business at their risk. They will get the discount retained by the Government only if stamp paper or lottery ticket is sold and destruction of the stamp paper or lottery ticket before sale in their hands will be a complete loss to them. Therefore the transactions of purchase at discounted price and sale at face value were rightly treated as not agency transa....
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....ch we have held the Assessee liable for recovery of tax at source under Section 194H which is only because we have clearly found that the discount paid to the distributors is for service rendered by them and the same amounts to "commission" within the meaning of that term contained under Expln. (i) to Section 194H of the Act. The impugned orders issued under Sections 201(1) and 201(1A) of the Act are only consequential orders passed on account of default committed by the Assessee under Section 194H and, therefore, those orders were rightly upheld by the Tribunal. We, therefore, dismiss all the appeals filed by the Assessee." 40. He has relied upon a decision of Calcutta High Court in the case of Bharti Cellular Ltd. (now Bharti Airtel Ltd.) Vs. Assistant Commissioner of Income Tax & anr.- (2013) 354 ITR 507 (Cal) wherein it has been held as under: "26. We conclude thus that there has been indirect payment by the assessee to the franchisee of the commission and the same is attractable under section 194H. The decision of the Gujarat High Court in case of Ahmedabad Stamp Vendors Association (supra) is of no assistance in this case as on analysis of fact and interp....
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....f the document and the surrounding circumstances and having regard to the course of dealings between the parties and the statutory provisions and the interpretation placed by Courts in the judgments on the point. 51. From the aforesaid clauses, it is clear that there is no relationship of principal and agency. On the contrary, it is expressly stated that the relationship is that of principal to principal. Secondly the Distributor/Channel Partner has to pay consideration for the Product supplied and it is treated as sale consideration. There is a Clause, which specifically states that after such sale of Products, the Distributor/Channel Partner cannot return the goods to the assessee for whatever reason. It is the Channel Partner and the Distributor who have to insure the products and the godowns at their cost. They are even prevented from making any representation to the retailers unless authorized by the assessee. What is given by the assessee to its Distributor/Channel Partner is a trade discount. It is not commission. 58. In both the aforesaid cases, the Court proceeded on the basis that service cannot be sold. It has to be rendered. But, they did not go into t....
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....ying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands. The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS. Once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent. The terms of the agreement set out supra in unmistakable terms demonstrate that the relationship between the assessee and the distributor is not that of principal and agent but it is that of principal to principal. 63. It was contended by the revenue that, in the event of the assessee deducting the amount and paying into the department, ultimately if the dealer is not liable to tax it is always open to him to seek for refund of the tax and, therefore, it cannot be said that Section 194H is not attracted to the case on hand. As stated earlier, on a proper construction of Section 194H and keeping in mind the object with which Chapter XVII is introduced, the person ....
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....t the rates as per the policy to be adopted by the assessee from time to time. 13. The terms and conditions noticed above leave no manner of doubt that the relationship between Poddar Communications and the assessee appearing from the agreement relied upon by Mr. Khaitan is that of an agent and principal. Poddar Communications appears to have been employed to act on behalf of the assessee for the purpose of feeding the retailers and through them to sell the services to the consumers. 14. The judgments cited by Mr. Khaitan donot really provide any assistance to him in deciding the matter in one way or the other. In the case of Daruvala Bros. (P) Ltd. (Supra), the question for consideration was whether the compensation received by the assessee was a revenue receipt or a capital receipt. The contention was that the compensation had been received by the assessee because the agency was surrendered for some of the territories. In lieu of such surrender, the compensation was paid by the principal. It is in that context, the question was considered and it was held that the sum paid to the assessee did not partake the character of compensation at all. We do not find any ap....
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.... be deducted is a doubtful proposition inasmuch as the Management Information System which has been sought to be relied upon for alleging that expenditure has been claimed could not have been relied upon by the Tribunal or the authorities under the Income Tax Act. (i) The findings which are given by the Tribunal regarding Distributor being Agent in view of the discussion made here-inabove, the arrangement which has been made between the Company and the Distributor is on Principal to Principal basis and the responsibility is on the basis of agreement entered into between the parties. (ii) Regarding MRP, the findings which are arrived at is a price which has been fixed by the assessee company and other expenses, namely; commission given to the retailer and everything is to be managed by the Distributor. In that view of the matter, the restrictions which are put forward will not decide the relation-ship of Principal and Agent. (iii) The Distributor has all rights to reduce his margin. He can increase the margin of retailer and will reduce the margin from 10% to anything between 1% to 10%. There is no restriction by the assessee to give commission am....
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.... 182, Distributor is not an agent, therefore, in our considered opinion, the provisions of Section 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee and against the Department. 49. The second issue which has been raised for our consideration, as discussed hereinabove, the Management Information System was not a part of their books of accounts nor could have been relied upon by the Income Tax Authorities. The basis on which the proceedings were initiated, in our considered opinion, the Statutory Audit Report is final conclusion over the authorities under the Income Tax Act, therefore, the second issue is required to be answered in favour of the assessee. 50. Regarding third issue whether 201A or 201(1A), in view of the decisions of different High Courts, the argument canvassed by counsel for the appellant pre-supposes deduction out of the payment. In our conclusion in issue No.1, the amount was not required to be deducted since they have not made any payment. In that view of the matter any proceedings under Section 201 or 201(1A) are misconceived. In that view of the matter, this issue is also answered in favour of assessee. 51....
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....he counsel for the assessee that the final tax is paid by the Distributor and not by the agent, the revenue is not at loss in any form. 60. In view of above, all the issues in each appeal are answered in tabular form as follows: Sr. No. Appeal No. Ques.1 Ques.2 Ques.3 Ques.4 Ques.5 1. 205/2005 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 2. 206/2005 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 3. 10/2007 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 4. 55/2007 In favour of assessee and against the department In favour of assessee and against the department -- -- -- 5. 6/2008 In favour of assessee and against the department In favour of assessee and against the department -- -- -- 6. 7/2008 In favour of assessee and against the de....
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....ainst the department and In favour of assessee -- -- -- 20. 171/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 21. 195/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 22. 08/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 23. 45/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 24. 48/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 25. 49/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 26. 96/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 27. 97/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 28. 98/....