TaxTMI 
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2017 (7) TMI 1076
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....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 learned Tribunal was right and justified in holding that asses....
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....rincipal 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 distributors, which are on a principal to principal basis and where property in the goods is transferred to the distributors? (ii) Whethe....
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....count. 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 which tax had been paid by the prepaid distributors?" 3.9 D.B. Income Tax Appeal NO.2/2014 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 th....
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....he 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 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....
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....ity 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 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/ ....
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.... 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 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?" 3.24 D.B. Income Tax Appeal NO.48/2016 admitted on 18.10.2016. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that ....
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....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 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 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 prov....
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....ed 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 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." 3.33 D.B. Income Tax Appeal NO.103/2016 admitted on 20.04.2017. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding t....
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....red 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 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." 3.36 D.B. Income Tax Appeal NO.106/2016 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. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection ....
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....plicable 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 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 dsitributors. 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." 3.42 D.B. Income Tax Appeal NO.209/2016 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 de....
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....link 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 behalf of Tata Teleservices Ltd. and Mr. Akhil Simlote on behalf of assessee Idea Cellular Ltd. 4. Counsel for the assessee has pointed out that while framing the questions of law, a mistake has occurred in reproduction of agreement that question regarding penalty which was required to be framed has been framed in the substantive appeal No.7/2008 which is a quantum matter where the question of penalty has been framed in Appeal No.55/2007 is not substantive, therefore, the same being interchangeable be read as it is. 5. The basic contention of counsel for the assessee is that transaction which has taken place is on principal to principal basis and is not covered under the provisions of the Indian Contract Act as claimed by the Department that it is the property of agency as defined under Section 182 of the Contract Act which reads as under: "182. "Agent" and "principal" defined - An "agent" is a person employed to do any act for another, or to represent another in dealing with third persons. The person for whom such act is done, or who is so rep....
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....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 commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section:] [Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees.] Explanation.-For the purposes of this section,- (i) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (ii) the expression "professional services" means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession o....
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....s is credited or paid, shall be liable to deduct income-tax under this section :] [Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.] (2) [***] (3) [***] Explanation.-For the purposes of this section,- (a) "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b)"fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; 25[(ba)"royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) where any sum referred to in subsection (1) is credited to any account, whether called "suspense account" or by any other n....
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....e expanding needs of the society, which has made a departure from the doctrine of laissez faire by including a transaction within the fold of a sale even though the seller may by virtue of an agreement impose a number of restrictions on the buyer, e.g., fixation of price, submission of accounts, selling in a particular area or territory and so on. These restrictions per se would not convert a contract of sale into one of agency, because in spite of these restrictions the transaction would still be a sale and subject to all the incidents of a sale." Hence without being swayed by the aforesaid restrictions imposed by the rules regarding the manner in which the licensed stamp vendors are to carry on their business, we have to examine whether the licensed stamp vendor is an agent of the State Government. (D at page 213) There is no dispute about the fact that the licensed vendor has to pay the price of the stamp papers less the discount at the rates provided in Appendix III to the Rules, which rates vary from 0.5 per cent to 4 per cent It is not that the stamp vendor collects the stamp papers from the Government, sells them to the retail customers and then deposits the sale proceeds ....
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....is for purchasing the stamps in bulk quantity and the said discount is in the nature of cash discount. 4. In the circumstances, we concur with the impugned judgment that the impugned transaction is a sale. Consequently, Section 194H of the Income-tax Act, 1961, has no application. 5.The civil appeal filed by the Department is dismissed with no order as to costs." 9. In that view of the matter, he contended that the view taken by the Gujarat High Court is required to be considered in the case of the appellant. 10. He has also relied upon the Calcutta High Court judgment in Ghasiram Agarwalla Vs. State, AIR 1967 Calcutta 568 and more particularly the observations which are made as under: "6. ...... In favour of the view that it is an agreement for agency: 1. The agreement is entitled, "Agreement for distribution of wheat through Fair Price Shops" and not an agreement for sale. 2. The retailer is "appointed" a retail dealer. A purchaser cannot be 'appointed'. An 'appointment' which can be cancelled (Clause 15) is more consistent with agency than with a transaction of sale and purchase. 3. The price of wheat is to be" deposited'' by the retailer an....
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....notice a number of decisions cited by the parties The first case cited is the Supreme Court decision, Narayan Ittirvi Nambudiri v. State of Travancore Cochin. AIR1953SC478 . The facts in that case were as follows: Two receivers including, the appellant were appointed Receivers of a textile mill, by the High Court of Travancore Cochin. At the time that the appellant was appointed Receiver, the prices of textile goods were controlled. Thereafter, by the end of April, 1948, controls were lifted, although by a sort of a gentleman's agreement between the members of the South Indian Mill Owners' Association, the old practice of selling at prices stamped on each piece of cloth was continued. One Vaidyanath Aver was a dealer holding a quota from the mill. When he approached the Receivers for his quota, he was asked to pay a sum of Rs. 10,000 which was later on increased to Rs. 23,100 The Receivers were prosecuted. At the trial, the prosecution abandoned the case of illegal gratification but the charge pursued was a charge of criminal breach of trust under Section 389 of the Penal Code of Travancore Cochin, corresponding to Section 409 of the Indian Penal Code. The original court ac....
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....e of this circle Section 194H question has been raised in Government of Madras Vs. Simpson & Co. Ltd.- (1968) 21 STC 21 (SC) wherein the Supreme Court has held as under: "(Page 24-25) In our opinion, these cases are distinguishable. In present case the assessee does not manufacture or fabricate Perkins Engines. The learned Advocate General brought to our notice a sample of the bills made out by the assessee. This bill reads: "TO cost of supplying and fitting to your Dodge 192" WB Bus MDB. 1021, one new Perkins P6V Exh. Type engine S. No. 3161322 CAV Pump no. R261 BU complete with one set Dodge 48/51 model conversion kit and flywheel including labour and batteries 9,50500 Less 5% discount on engine price of Rs. 7,215 36100 9,14400 This bill, in our view, evidences an agreement to sell a particular diesel engine, the price of which is separately mentioned in the bill, and to fit it in the customer's Dodge bus. In other words, this engine was contracted to be delivered as an engine and afterwards affixed to the customer's Dodge bus. The case of State of Gujarat v. Kailash Engineering Co. (Pvt.) Ltd. also does not assist the assessee. In that case this ....
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.... say that the Explanation enlarges the scope of the main section. It was pointed out by this Court in The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. : 9 S.T.C. 353 that the expression "sale of goods" in Entry 48 in List II of Sch. VII of the Government of India Act, 1935, cannot be construed in its popular sense but must be interpreted in its legal sense and should be given the same meaning which it has in the Sale of Goods Act, 1930. It is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In other words, it is necessary for constituting a sale that there should be an agreement between the parties for the purpose of transferring title in the goods, that the agreement must be supported by money consideration and that as a result of the transaction the title to the property must actually pass in the goods. As we have already pointed out, the third Explanation to s. 2(1)(n) of the Act must be interpreted to mean that where there is in reality a transfer of property in the goods by the principle to the agent and by the agent in his turn to the buyer, there are two transactions o....
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....ich there was a contract between the defendant and E, which in its terms purported to be one of guarantee or agency; that is to say, the defendant guaranteed the sale of E's property in whole or by lots at a fixed price, E giving the defendant a power of attorney to deal with the property as he thought fit, and agreeing that he should receive any surplus over and above the fixed price as his commission on and recompense for the said guarantee. It was held by the Judicial Committee, upon a construction of the agreement, that the transaction was really a sale and that the defendant was liable to pay duty on his purchase-money under Act II of 1863. At page 313 of the Report, Sir Robert P. Collier, who delivered the opinion of the Board, stated as follows : "Under these circumstances it appears to their Lordships that the Chief Justice was justified in saying that the effect of the transaction was to give Ekstein every right which a vendor could legally claim, and to confer upon the defendant every right which a purchaser could legally demand. Does it make any difference that the parties have called this transaction by the name of a guarantee ? It appears to their Lordships that ....
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....n other words, if it is held that as a result of the agreement between the Caltex and the appellant and the transactions following thereupon the title to the diesel or petrol passed to the appellant by the delivery of these articles, then from that date the appellant became the owner of these articles and was entitled to use them as he liked, because he had already paid the price of the diesel and petrol received by it. If this be the position, then it is manifestly clear that the user by the appellant for its own purposes may not amount to a sale which had already taken place at a point of time when the goods were delivered by the Caltex Company to the appellant. On the other hand, if it is held that the appellant was a mere agent under the agreement and was selling the articles on behalf of its principal-the Caltex Company--then any user of these articles or properties may amount to a sale so as to be exigible to sales tax. We may add that even then it was contended for the appellant that it would not amount to sale, but it did not press this contention later. 5. The question, therefore, will have to be determined having regard to the terms and recitals of the agreement, the in....
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.... the doctrine of laissez faire by including a transaction within the fold of a sale even though the seller may by virtue of an agreement impose a number of restrictions on the buyer, e. g., fixation of price, submission of accounts, selling in a particular area or territory and so on. These restrictions per se would not convert a contract of sale into one of agency, because in spite of these restrictions the transaction would still be a sale and subject to all the incidents of a sale. A contract of agency, however, differs essentially from a contract of sale inasmuch as an agent after taking delivery of the property does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Furthermore, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal. This is yet another dominant factor which distinguishes an agent from a buyer-pure and simple. In Halsbury's Laws of England, Vol. 1, 4th Edn., in para 807, at page 485, the following observations are made: "The relation of principal and agent raises by implication a contract on the part of the pri....
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....oods 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.' It is clear from the observations made by this Court that the true relationship of the parties in such a 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 said relationship. This Court relied on a decision in W. T. Lamb and Sons v. Goring Brick Co. Ltd. [1932] 1 K.B. 710 , where despite the fact that the buyer was designated as sole selling agent, the Court held that it was a contract of sale. Lord Scrutton, with whom other Lords agreed, observed as follows : "Now it is well-known that in certain trades the word 'agent' is often used without any reference to the law of principal and agent. The motor trade offers an obvious example, where persons described as 'agents' are not agents in respect of any principal, but are purchasers who buy from manufacturers and sell independently of them; and many difficulties have arisen from this habit of describing a purchaser, so....
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.... contains some elements of agency also, but the main question which has to be determined in this case is whether or not at the point of time when the appellant was consuming the Hispeedol or petrol for its own purposes it was acting as an owner of the goods or as agent of the seller-company. From the facts and circumstances discussed above, we have shown that the appellant, after taking delivery of the goods, was the owner of the goods and if it consumed the same for its own purposes it was not doing so as agent but as owner which it was fully entitled to do. In this view of the matter, the quantities of petrol consumed by the appellant for its own purposes would not constitute a sale so as to be exigible to sales tax. We have carefully perused the order of the Commissioner and find that the Commissioner has taken an erroneous view of the law and has drawn legally wrong inferences from the various stipulations contained in the agreement. The Commissioner has also not given effect to well-established legal principles in interpreting the agreement." 14. In the case of Alwaye Agencies Vs Dy. Commissioner of Agriculatual Income Tax and Sales-tax, Ernakulam- AIR 1988 SC 1250 = [(1988) ....
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....hat in respect of the goods dispatched under orders placed by the distributors, the distributors really acted as purchasers of the goods which they in turn sold to the customers and did not merely act as agents of the said company. In respect of the goods in question which were despatched through public carriers, although the invoices were prepared in the names of the consumers of the goods, and the goods were consigned to the destination through public carrier booked to self, as pointed by the Tribunal and the bills were endorsed and handed over to the assessee. When considered in the light of the agreement, these circumstances clearly shows that in respect of these transactions the property in the goods dispatched passed to the distributor on the bills being endorsed and handed over to the distributors. 7. Our attention was drawn by Shri Krishnamurthy lyer, learned Counsel for the assessee (appellant) to the decision of this Court in The Bhopal Sugar Industries Ltd. v. Sales Tax Officer Bhopal [1977]3SCR578 where the question was whether the contract was one of agency or sale. this Court held that the question will have to be determined having regard to the terms and recitals o....
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....he said company to the appellant was liable to be included in the taxable turnover of the assessee. In our view, it is not necessary to consider this submission, because, according to us, in view of the said agreement, considered in the light of the surrounding circumstances, the assessee as distributor was not an agent of the said company in respect of the transaction in question, but was the purchaser and hence the transactions were liable to be included in the turnover of the assessee." 15. Another decision of Gujarat High Court in CIT Vs. Rishikesh Apartments Co-operative Housing Society Ltd., (2002) 253 ITR 310 (Guj.) which has also been sought to be relied in the aforesaid judgment wherein it has been observed as under: "12. From the legal provisions discussed hereinabove, it is crystal clear that in the instant case Ravi Builder, on whose behalf the tax was to be paid by the assessee, had duly paid its tax and was not required to pay any tax to the Revenue in respect of the income earned by it from the assessee. If the tax was duly paid and that too at the time when it had become due, it would not be proper on the part of the Revenue to levy any interest under Section 201....
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....ncome had claimed refund, which had arisen due to tax deducted at source. Therefore, we find no infirmity in the order of the learned Commissioner of Income Tax (Appeals) and the same is hereby sustained. 3 When the assessee has paid more tax than the tax payable and refund is due, even tax deducted at source is counted, in such case, there is no justification for charging of interest under Section 201(1A). 4 The appeal stands dismissed at the admission stage." 17. Counsel for the appellant has also taken us to the judgment of the Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd. Vs. Commissioner of Income Tax, (2007) 293 ITR 226 (SC) where while considering the question of 201(1A), the Supreme Court observed as under: "7. .......... There is no dispute whatsoever that Pradeep Oil Corporation had already paid the taxes due on its income received from the appellant and had received refund from the tax department. The Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (dedicator- assessee) since the tax has already been paid by the recipient of income. 8. The High Court interfered with the order passed by t....
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....as enacted that penalty shall not be imposed in cases falling thereunder. Section 271C falls in the category of such cases. Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. In each of the 104 cases before us, we find that non-deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head "Salaries" being exigible to deduction of tax at source under Section 192 was a nascent issue. It has not be considered by this Court before. Further, in most of these cases, the tax- deductor assessee has not claimed deduction under Secti....
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....artments or authorities were to be obtained by the distributor." 20. He has also relied upon decision of Allahabad High Court in the case of Jagran Prakashan Ltd. Vs. Deputy Commissioner of Income Tax (TDS), (2012) 345 ITR 288 (All) wherein after considering the observations of the Supreme Court, the Allahabad High Court held as under: "42. The petitioner has brought on the record Rules governing accreditation of advertising agencies and the proforma of the agreement which is entered between the advertising agencies and the INS. The aforesaid rules have also been referred to in the assessment order. On the basis of Rules of INS of which petitioner is also a member and with whom the advertising agency enters into an agreement, the department has concluded that there is implicit contract between the petitioner and the advertising agencies from which relationship of principal-agent can be found out. The assessment order also refers to Standard of Practice for Advertising Agencies as approved by the Advertising Agencies Association of India, Bombay. Apart from abovesaid two materials, no other material has been referred to in the order impugned. The proposition is well settled that ....
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....it and Vegetable Ltd. The main objects of the assessee are to act as selling agents, sale organizers and advisors and to undertake activities in connection with procurement, processing, storage and marketing including retail, sale of milk and other products. On 9.12.2004 there was a survey under Section 133A of the Act in the business premises of Ms/ Mother Dairy Food Processing Ltd., which is the other assessee in the appeals before us, at Patparganj, Delhi. In the course of the survey it was found that tax was not being deducted at source on the payment of commission to agents/concessionaires, who sold milk and other products of the assessee from the booths owned by the assessee. According to the revenue, the assessee ought to have deducted tax under Section 194H of the Act from the payments made to the concessionaires, on the footing that the payment represented commission within the meaning of Explanation (i) below the Section. According to the Explanation commission includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the case of buying ....
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....pal or relationship of principal to agent. On a fair reading of all the clauses of the agreement as have been referred to in the orders of the Tribunal as well as those of the income tax authorities, we are unable to say that the view taken by the Tribunal is erroneous. It is a well-settled proposition that if the property in the goods is transferred and gets vested in the concessionaire at the time of the delivery then he is thereafter liable for the same and would be dealing with them in his own right as a principal and not as an agent of the Dairy. The clauses of the agreements show that there is an actual sale, and not mere delivery of the milk and the other products to the concessionaire. The concessionaire purchases the milk from the Dairy. The Dairy raises a bill on the concessionaire and the amount is paid for. The Dairy merely fixed the MRP at which the concessionaire can sell the milk. Under the agreement the concessionaire cannot return the milk under any circumstance, which is another clear indication that the relationship was that of principal to principal. Even if the milk gets spoiled for any reason after delivery is taken, that is to the account of the concessionair....
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....rd to the sale of the milk and other products. They were licensees of the premises and were permitted the use of the equipment and furniture for the purpose of selling the milk and other products. But so far as the milk and the other products are concerned, these items became their property the moment they took delivery of them. They were selling the milk and the other products in their own right as owners. These are two separate legal relationships. The income-tax authorities were not justified or correct in law in mixing up the two distinct relationships or telescoping one into the other to hold that because the concessionaires were selling the milk and other products from the booths owned by the Diary and were using the equipment and furniture in the course of the sale of the milk and other products, they were carrying on the business only as agents of the Diary. 14. We may refer to the judgment of this Court in the case of Delhi Milk Scheme vs. CIT (Supra.) In that case the facts were different. Under the terms of agreement entered into between DMS and its concessionaires, the milk and other products did not become the property of the concessionaires on delivery. The unsold m....
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....to pay the tax gets discharged. If the tax is not deducted, it remains payable by the Assessee direct as provided under Section 191 of the Act. Further, the liability to pay interest under Section 201(1A) is on the person who fails to deduct the tax at source is absolute and is upon the person responsible for deducting tax at source till the date it was actually paid." "89. In view of the foregoing discussions, we are of the considered opinion that in a case where tax has not been deducted at source, the short deducted tax cannot be realised from the deductor and the liability to pay such tax shall continue to be with the assessee direct, whose income is to be charged and a person who fails to deduct the tax at source, at best is liable for interest and penalty only. The above issues thus, are decided in favour of the petitioner." 22.2. After considering the same, he has contended that the questions which are posed for consideration are required to be answered in favour of the assessee. 23. Mr. Vohra has also taken us to the provisions of Explanation to Section 194J and Section 201 of the Act and contended that the view taken by the Kerala High Court in the case of Kerala Stamp....
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....nexaure-I hereto) prescribed by ADIL from time to time for the purpose of maintaining and improving the image of its Brand and quality of the Service Tickets "eStock" means value of the Refill in electronic form used for Refilling/Recharging Prepaid card through eTopup. "eTopup" means facility of Refilling Prepaid Card through electronic mode. "Intellectual property rights" means patents, trademarks, service marks, registered designs, applications for any of the foregoing, copyright, design rights, know-how, confidential information, trade and business names and any other similar Protected rights in any country. "Prepaid cards" means card used for accessing or availing cellular mobile telephony service of ADIL. "Service Tickets" includes the Prepaid SIM Cards of ADIL for providing cellular mobile telephony services, the Refill Slips and such other products & services as the Parties may agree in writing from time to time. "Refill or Recharge" means loading (Refilling or recharging) of cellular mobile telephony service in the Prepaid Card through a secret code printed on the Refill slip or through the eTopup. "Refill Slip" means ADIL's product in case of physical form....
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....n undertaking to ADIL in such format, and manner as ADIL may prescribe from time to time with regard to due compliance with the rules, regulations and directions of Department of Telecommunications(DoT) and/or any other authority (Central State/Local) in respect of verification of identity of customers (end users of the Prepaid cards) 5. ADIL'S OBLIGATIONS ADIL shall: (a) provide the Distributor with such marketing and technical assistance as ADIL may in its discretion consider necessary to assist the Distributor for the promotion of the Service Tickets; (b) Endeavour to answer as soon as possible all technical queries raised by the Distributor or its customers concerning the use or application of the Service Tickets; (c) provide the Distributor with adequate quantities of instruction manuals, technical and promotional literature and other information relating to the Service Tickets; (d) provide the Distributor with all information and assistance necessary to enable the Distributor to perform its obligations here under in respect of any modified or enhanced versions of Service Tickets. (e) Provide its expertise end to guide and assist the Distributor in the vari....
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....tributor without informing ADIL and without ADIL's prior written approval; (d) the bankruptcy, dissolution or winding up of the Distributor or in the event of any attachment, distress or warrant being issued against the Distributor and not discharged or stayed within 14 days; or (e) the Distributor (and/or any of its proprietors/partners/ directors/ managers is found involved in any criminal case/illegal activities; or (f) The Distributor commits any breach or omits to observe any of its obligations or undertakings under this Agreement (other than failure to pay any amount due under this Agreement) and fails to remedy such breach or omission 30 days of ADIL's notification to do so. 10 Effect of termination 10.1 The parties agree that upon termination of this Agreement for any reason the Distributor will return all equipment and furniture supplied by ADIL forthwith upon request and remove all ADIL signage and all other items indicating that the Premises were operated as an ADIL Distributor. The Distributor hereby agrees to grant an irrevocable license to ADIL and its designated employees to enter the premises and remove all ADIL signage if Distributor has not done so its....
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....in writing expressly referring to this Agreement and signed by the parties. 15. INDEMNITTY a "The Distributor agrees to fully indemnify and keep ADIL harmless and indemnified at all times, from and against any and all claims actions, cost and consequences, demands, losses by ADIL or a third party and/or assertions of liability of any kind of nature whatsoever resulting from: (a) any breach of the representations and conditions or other terms any of the, covenants and conditions or other provisions hereof or any action or omission hereunder, (b) any failure in complying with all applicable legislation, statutes, ordinances, regulations administrative rulings or requirements of law. (C) any misuse/tampering of on-line data connectivity by the Distributor its staff agents, employees, consultant, etc or by a third party who may have got access to the same on account of any act/omission of the Distributor, its agents, staff, agents employees, consultants, etc. 16. NOTICES 16.1 All notices, requests or other communication made or required to be given under this Agreement shall be in writing and shall be delivered personally or by prepaid registered AD mail or certified lett....
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.... property rights therein or relating thereto and will assist ADIL (at ADIL's expense) in taking all steps necessary to defend ADIL's rights therein. 18.3 The provisions of this Clause shall survive the termination of this Agreement. 19. GOVERNING LAW 19.1 This Agreement shall be governed b yand construed in accordance with the laws of India. 19.2 All or any dispute, difference, misunderstanding between the parties arising out of or in relation to this Agreement or any provision hereof (including interpretation of any provision hereof) shall, unless otherwise resolved by the parties amicably, be referred to an arbitration as per the provisions of the Arbitration and Conciliation Act, 1996 (including any amendment or re enactment thereof. The proceedings of such arbitration shall be in English language and be ADIL at Jaipur alone. 19.3 Subject to the above, the parties submit to the exclusive jurisdiction of competent courts of Jaipur. 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 CI....
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....en the CIT(A) was hearing the appeal against an order of assessment passed after the directions of Tribunal, his power to annul the assessment order if found contrary to the Tribunals directions and directing the AO to carry out the requirements of the order of Tribunal ITAT could not be denied. Even if the amendment in the aforesaid clause (a) of section 251(1) has been made so as to provide that the Commissioner (Appeals) may not set aside the assessment and refer the case back to the AO for making fresh assessment with a view to help bringing an early finalisation of the assessment, it could not be assumed that the CIT(A) was divested of the power to annul the assessment and then to pass appropriate consequential order. In the present case, as observed hereinbefore the fact aspect has been that the order as passed by the AO which was subject of appeal before the CIT(A), was not an original order of assessment but was an order of assessment 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 i....
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....posite agreement cannot be broken up as is sought to be done and contended by the Revenue. The provision of Section 194I cannot be read to break up composite contracts and when that is not the intention of the parties themselves. If, the interpretation of the Revenue is accepted then, in a case where there is a partnership and one of the partner brings in his capital in the form of his premises from where the partnership business is carried on, then, payment made to such partner by the firm can be stretched to be included in the definition of rent under Section 194I, and which surely cannot be the intention of the legislature. 8. We find that the Tribunal has given the following valid finding and which we uphold: The appellant is entered into the agreement with the Franchisees for running the education centre at various Metro Cities. The fees was shared between the assessee and the Franchisee as per 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 ....
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...., the asses sees/respondents are required to pay interconnection, access charges and port charges. As per the policy document of TRAI, interconnection has been understood to mean the commercial and technical arrangements under which service providers connect their equipments, networks and services to enable their customers to have access to the customers, services and networks of other service providers. Interconnection charges are paid by the interconnection seeker to the interconnection provider. ------ 13. We have already pointed out that the expression "fees for technical services" as appearing in Section 194J of the said Act has the same meaning as given to the expression in Explanation 2 to Section 9(1) (vii) of the said Act. In the said Explanation the expression "fees for technical services" means any consideration for rendering of any "managerial, technical or consultancy 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 Statut....
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....se that it involves sophisticated technology. The facility may even be construed as a `service' in the broader sense such as a `communication service'. But, when we are required to interpret the expression `technical service', the individual meaning of the words `technical' and `service' have to be shed. And, only the meaning of the whole expression `technical services' has to be seen. Moreover, the expression `technical service' is not to be construed in the abstract and general sense but in the narrower sense as circumscribed by the expressions `managerial service' and `consultancy service' as appearing in Explanation 2 to Section 9(1)(vii) of the said Act. Considered in this light, the expression `technical service' would have reference to only technical service rendered by a 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....
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....aid by the franchisee. It is essentially a case of the assessee permitting its goodwill/knowhow/trade name to be utilized by the franchisees. 38. A perusal of the extended definition of the word "work" shows that it covers a simple case of engaging a person to render services of the kind mentioned in the definition. Otherwise every composite transaction which also has an element of work will be covered. Clause (e) is illustrative that this is not the intention of the legislature. A case of an arrangement under which both sides have joined together by mutual arrangement and to share the profits of the joint enterprise carried on by them is not covered by the definition. They mutually undertake the profit making activity with a stipulation to divide the gains of their collective efforts. The work 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 centre....
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....o not find that the aforesaid decision in the case of Bharti Cellular Limited, would be of any help to the appellants - Revenue. 10. In the another decision of the Apex Court, in the case of Kotak Securities Limited, the matter was pertaining to the charges of the Stock Exchange and the Apex Court, ultimately, found that no TDS on such payment was deductible under Section 194J of the Act. But the learned Counsel for the appellants - Revenue attempted to contend that in paragraphs 7 and 8 of the above referred decision of the Apex Court, it has been observed that if a distinguishable and identifiable service is provided, then it can be said as a "technical services". Therefore, he submitted that in the present case, roaming services to be provided to a particular 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 Ser....
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....geable under the provisions of this Act. and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date. 10. But the difficulty in this case is, as mentioned earlier the expression used is not "tax" but "the tax". That expression can be reasonably understood as referring to the expression earlier used in the provision namely "the amount of the tax, if any payable" by the assessee. At any rate, the provision in question is capable of more than one reasonable interpretation. Two High Courts namely Calcutta and Mysore have taken the view that the expression "the tax" in Section 271(1)(a)(i) refers to "the tax, if any, payable" (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 consequence....
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....rtion of Expln.III is not applicable to gtransport contracts, i.e., contracts for carriage of goods. For the aforesaid reasons the appeal is allowed, the impugned circular to the extent it relates to transport contracts is quashed. The parties are left to bear their own costs." (iv) One of the judgment of this Court in Ajmer Vidyut Vitran Nigam Ltd. Vs. Authority for Advance & Ors. D.B. Civil Writ Petition No.20195/2012 decided on 19.10.2016 where while considering the question of 194J of the Act, this Court has considered the question and has held as under: "3. The assessee was bound to deduct TDS in lieu of services received by them and 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. Commi....
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....us 133(A) were carried out on three of its distributors and statements of relevant persons were recorded during survey. The name of the distributors and persons whose statements were recorded are as follows: 1. Sh. Rajesh Kumar Khandewla Prop. M/s.Om Prakash Rajesh Kumar, Amer 2. Sh. Kedar Pd. Gupta, Prop M/s. R.R.Enterprises, Bassi. 3. Sh. Purusottam Lal Sindhi Prop. M/s. DilipKumar Agency, Ratangarh The assessee was given show cause notice and also copies of statements of relevant persons recorded during the 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 invoic....
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....ated 15.1.2003) have categorically stated this fact. In fact, the sales executive of the assessee company ensures that above conditions are strictly adhered to. (d) Loss on stock due to price fall borne by assessee company; If assessee company reduces the MRP which has been done recently, then it is compensating the distributors for the loss on the value of stock available with them In response to question No.10 of Shri Purushottam, question No. of Shri 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 N....
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....r and retailer. (question No.3 of statement of Shri Rajesh Khandelwal and question No.14 Purshottam Sindhi) (i) Providing vehicles to the Distributors: It was also found that assessee company had provided vehicles to some of the distributors for carrying out their distribution operations. Thus, some vehicles owned by assessee company are used by the distributors and the 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....
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....ating the distributors for the loss on the value of stock available with them. In principal to principal relationship seller can never be responsible for the loss accruing to the purchaser on account of all 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. (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....
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.... these circumstances. The assessee himself has shown commission as expenditure which is being fixed and paid to distributors by the assessee apart from various expenses borne by the assessee and control maintained by the assessee itself. The copy 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 cas....
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.... distributor have their own warehouses or godowns and sells them as an owner has also 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 consig....
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....is a principal to agent transaction and not a principal 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." ....
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.... 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 access to the te....
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....timate 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 difference is technical. The diffe....
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....ase 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 products which is meant only as devices to have access to the Mobile pho....
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....ndia (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 transactions by the Courts. On the other hand, in this case, on facts and based on terms of agreements between ....
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.... 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 interpreting the various provision of law it could be found in that case that it was a transaction of principal to principal and no elem....
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....aced 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 the question whether right to service can be sold. "62. In the appeals before us, the assessees sell prepaid cards/vouchers to the distributors. At the time of the assessee selling....
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....me 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 paying should be in possession of an income which is chargeable to tax under the Act and which belongs to the payee. A statutory obligation is cast on the payer to deduct the tax at source and remit the....
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....y 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 applicability of this judgment to the issue before us." 43. We have heard learned counsel for the parties. 44. Now, the first question which has come up for our consideration is, 'whether in the facts and circumstances of the case the learned Tribunal was right and justifie....
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....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 amount to the retailer. (iv) Regarding area of operation, it is the business policy of the assessee to give Distributor-ship for a particular area. Only on that basis, it will be erroneous to held that it is on Principal to Principal basis. For deciding the relation-ship on Principal to Principal basis, the cri....
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....oks 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. Contention regarding provisions of Section 271 of the Act,in view of our answer in favour of assessee, this issue is also required to be answered in favour of assessee. Even otherwise as rightly held by the Supreme Court in CIT Vs. Eli Lilly & Co. (India) P. Ltd.(supra), the penalty could not have been levied in all the appeals filed by assessee Coca Cola. M/s Bharti Hexacom Lt....
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....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 department In favour of assessee and against the department -- -- -- 7. 540/2009 In favour of assessee and against the department In favour of assessee and against the department -- -- -- 8. 1/2014 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department 9. 2/2014 In favour of assessee and ....
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.... -- -- 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. 98/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 29. 99/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 30. 100/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 31. 101/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of as....