AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2018 (2) TMI 1513
X X X X Extracts X X X X
X X X X Extracts X X X X
....No. 15134/2017 against the order of this Tribunal dated 09/12/2014 refusing to grant stay against the outstanding demand. While disposing off the writ petition vide order dated 22nd September, 2017, the Hon'ble Jurisdictional High Court directed the Tribunal to decide the appeal within a period of ten (10) working days from the date of presentation of the certified copy of the order of the Hon'ble High Court. After receipt of the orders of the Hon'ble High Court, the hearing of the appeals was preponded to 23/11/2017. However, the appeal files were not available at Jaipur Benches as the same were already sent to the Head office of the Tribunal at Mumbai for constitution of Special Bench. Accordingly, after directions of the Hon'ble High Court, the appeal files were called back for hearing and disposal of the appeals and finally these appeals were heard on 17/01/2018. 4. In the assessee's appeal i.e. ITA 68/JP/2015 for the A.Y. 2012-13, the assessee has raised following grounds of appeal: "1. Ground No. 1 - The order passed by the learned TDS officer is bad in law 1.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has er....
X X X X Extracts X X X X
X X X X Extracts X X X X
....without taking cognizance of the fact that the Appellant is not responsible to make any payment/ credit to the prepaid distributors towards the discount extended to them and responsibility/ obligation to make payment/ credit is a condition precedent for application of section 194H of the Act, which is absent in the present case. 2.4 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that discount allowed by the Appellant is not income in the hands of its distributors and that income, if any, arises only when the pre-paid SIM cards/ talktime is further distributed by the distributors. 2.5 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in not appreciating the fact that there is no flow of monies from the Appellant to the distributor of prepaid SIM card/ talktime but rather from the distributor to the Appellant, and hence, the provisions of section 194H of the Act fail to apply. 2.6 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in not appreciating the difference between a SIM card and a pre-paid recharge voucher since while a SIM ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ely on a conservative basis and does not alter the nature of roaming charges and thus, does not lead to a conclusion that such charges qualify as FTS. 4. Ground No. 4- No demand under section 201(1) of the Act can be recovered from the Appellant 4.1 Without prejudice to Ground Nos. 1 to 3 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has failed to appreciate that no demand can be raised under section 201(1) of the Act since taxes would have been paid by the recipient parties and such an action of the learned TDS officer has resulted in double recovery of taxes, which is against the rules of taxation principles. 4.2 Without prejudice to Ground No. 4.1, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in not directing the learned TDS officer to verify the aforesaid fact relating to payment of taxes by the payees basis the details of payees (viz Permanent Account Number, address) submitted by the Appellant. 4.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in ignoring the ruling of the Mumbai bench of ITAT in the case of Vodafone Essar L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts 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." While deciding the above said questions of law, the Hon'ble High Court has held in para 43 to 48 as under: "43. We have heard learned counsel for the par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 amount to the retailer. (iv) Regarding area of operation, it is the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the provisions of Section 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee and against the Department. Respectfully following the decision of the Hon'ble Jurisdictional High Court in assessee's own case for the A.Y. 2007-08 to 2009-10, we decide this issue in favour of the assessee and consequently set aside the orders of the authorities below qua this issue. 8. The ground No. 3 of the appeal is regarding the liability of the assessee to deduct TDS U/s 194J of the Act in respect of the roaming charges paid by the assessee. 9. We have heard the ld AR and ld. CIT DR and considered the relevant material on record. At the outset, we note that an identical issue was considered by this Tribunal in assessee's own case for the A.Y. 2004-05 to 2010-11 in ITA No. 75 to 81/JP/2013 vide order dated 05/2/2016. The findings of this Tribunal is as under: "3.2. We have heard the rival contentions and perused the material available on record. The facts of the present appeal and as that of the appeal bearing no. 656/JP/2010 are same and, therefore, the judgment passed by the Coordinate Bench is equally applicable to the cases in han....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omatic. But it is fully supported by services of personnel and requires human application of mind along with technical equipments." The facts mentioned in the order of the Tribunal in ITA No. 656/JP/2010 at para 9 are to the following effect :- " 9. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the revenues proposition is that thogh the roaming happens automatically but because equipment is used to render the roaming service, because technical manpower is needed to operate and maintain the technical equipment therefore, roaming per se is rendering of technical services and therefore, the amount paid for roaming is technical fee in terms of Section 194J read with Explanation 2 to Section 9(1)(vii) of the Act. The ld AR explained the roaming service and submitted that Hexacom subscriber in Jaipur travels of Mumbai switches on his mobile device after reaching Mumbai. Where the subscriber travels by land he automatically receives a message transferring to the roaming network on visiting another telecom, circle. * Visiting network (e.g. Airtel in Mumbai) locates mobile device and identifies that it is not registered with its s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....criber and not to Hexacom. The subscriber of Hexacom uses the network set up by the visiting circle and instead of amount being recovered from the roaming subscriber, the visiting circle sends the air minutes to be recovered from the roaming subscriber to the Home circle for recovery from the subscriber who had visited the visiting circle. Technical fees * It is an accepted fact that technical service can be said to have been rendered if there is an involvement of human element or there have been use of cerebral faculties in the provision of technical services by the recipient of fee. * This is so because the word "technical" comes in between the words "managerial and consultancy services". Based upon the principles of "nositur a sociis" there has to be an element of manual intervention at the time when the service is being rendered. * Technical services should have a fact situation of imparting technical knowledge involving or concerning applied and industrial science. The ld AR further argued that finding of the ld CIT(A) are based on contract between two operators but contract has no relevancy on the nature of the service whether tech....
X X X X Extracts X X X X
X X X X Extracts X X X X
....subscribe is not a technical service. Deduction of tax at source need not to be made from subscriptions U/s 194J of the Act. He further relied on the decision in the case of Jaipur Vidyut Vitran Limited Vs. DCIT (2009) 123 TTJ 888 (JP Trib) wherein it has been held that Section 194J would have application only when the technology or technical knowledge of person is made available to other and not where by using technical systems, services are rendered to others. Rendering of services by allowing use of technical system is different from charging fees for tendering technical services. The applicability of Section 194J would come into effect only when by making payment of fee for technical services, assessee acquires certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Therefore, he argued that in roaming charges paid by the assessee to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....charges to BSNL/MTNL, the question whether the cellular provider has rendered technical services and has to deduct tax at source, depended on whether the charges were for technical services, and this involved determination of whether any human intervention was involved, which could not be determined without technical assistance. Decision of the Delhi High Court in CIT v. BHARTI CELLULAR LTD. [2009] 319 ITR 139 set aside and matter remanded to the Assessing Officer with directions. After this decision, the ld Assessing Officer examined the technical expert of the C-DOT on 29/09/2010 in respect of IUC and which were cross examined on 04/10/2010 by M/s Bharti Cellular Limited, Delhi. The technical experts reexamined on 04/10/2010 on this issue and admitted that roaming services does not require any human intervention, it operates automatically. The ld AR also drawn our attention on independent opinion taken from Director CMAI, Ex- Director (C&M), BSNL, Ex-Member Telecom Commission on 24/12/2010 and admitted that whole interconnected uses process, no manual intervention is required. He further drawn our attention on page No. 651 to 652 for postpaid as well as prepaid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... previous Delhi and Kerala High Court judgment against the assessee and is latest comprehensive adjudication on the issue. Even if it is held that there exist divergence of judicial opinion a view favourable to the assessee is to be adopted as held by Hon'ble Supreme Court in Vegetable Products Ltd. And Vatika township case (supra). From this angle also in these facts and circumstances Hon'ble Karnataka High Court judgment is applicable to the assessee's case. Respectfully following the same we hold that: a. The relationship between assessee and its distributors qua the sale of impugned products is on principal to principal basis; the consideration received by assessee is sale price simpliciter. b. There is no relationship of Principal and agent between assessee and distributors as held by authorities below their orders are reversed. c. Looking at the transaction being of Sale/Purchase and relationship being of principal to principal the discount does not amount to commission in terms of sec. 194H, the same is not applicable to these transactions. Therefore, assessee cannot be held in default; impugned demand raised applying sec. 194H is quashed. Assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the appeal, therefore, stands adjudicated in terms of grounds No. 2 and 3. 11. In the assessee's appeal i.e. ITA 69/JP/2015 for the A.Y. 2013-14, the assessee has raised following grounds of appeal: "1. Ground No. 1 - The order passed by the learned TDS officer is bad in law. 1.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not holding that the order passed by the TDS officer is bad-in-law. 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not holding that the order of the learned TDS Officer treating the Appellant as 'assessee in default' is bad in law in view of the provisions of sec. 201(1) read with section 191 of the Act and the judgement of Jagran Prakashan Limited Vs DCIT(TDS) (21 Taxman.com 489) (Allahabad High Court), as there is no finding by the learned TDS officer with respect to the failure of deductees to pay taxes directly, which is a jurisdictional pre-requisite. 1.3 Without prejudice to Ground No 1.2 above, on the facts and circumstances of the case and in law, the learned CIT(A) has erred in not holding the order of the learned TDS offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from the Appellant to the distributor of prepaid SIM card/ talktime but rather from the distributor to the Appellant, and hence, the provisions of section 194H of the Act fail to apply. 2.6 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in not appreciating the difference between a SIM card and a pre-paid recharge voucher since while a SIM card enables a subscriber to get connected to the network of the telecom service provider, a pre-paid recharge voucher entitles the holder to receive telecom services equivalent to the value embedded in it, and hence, the terms 'SIM card' and 'prepaid recharge voucher' cannot be used inter-changeably. 3. Ground No. 3- No demand under Section 201(1) of the Act can be recovered from the Appellant 3.1 Without prejudice to Ground Nos. 1 to 2 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has failed to appreciate that no demand can be raised under section 201(1) of the Act since taxes would have been paid by the recipient parties and such an action of the learned TDS officer has resulted in double recovery of taxes, which is against the rules of t....