TaxTMI 
TaxTMI 
2018 (3) TMI 433
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.... 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 officer as bad in law in so far it seeks to recover tax demand under section 201 of the Act in contradiction to the settled principle enunciated by Allahabad High Court in the case of Jagran Prakashan Limited (supra) that the payer cannot be held liable for payment of the tax demand in cases involving non-deduction of tax at source and only interest liability under section 201(1 A) of the Act, if any, can be levied in such cases. 2. Ground No. 2 - The Appellant is not liable to deduct tax on discount extended to its pre-paid distributors on distribution of pre-paid SIM cards/ talktime 2.1 On the facts and circumstances of the case and in law, the ....
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.... be used inter-changeably. 3. Ground No. 3- The appellant is not liable to deduct tax at source under section 194J of the Act on roaming charges paid to other telecom operators 3.1 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in upholding the order of the learned TDS officer that the Appellant was required to deduct tax under section 194J of the Act on roaming charges paid/payable by the Appellant to other telecom operators, during the subject financial year. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that roaming facility is a standard automated facility which cannot be construed as Fee for Technical Services ('FTS') for the purposes of the Act and hence, section 194J of the Act is not applicable. 3.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that no human intervention, which is sine qua non for a service to qualify as technical service, is involved in provision of roaming services and therefore, roaming charges cannot be construed as FTS for the purposes of the Act. ....
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.... of the Permanent Account Numbers of the payees furnished by the assessee. 5. Ground No. 5- No Interest under section 201(1A) of the Act can be charged 5.1 On the facts and in the circumstances of the case and in law, the learned TDS officer has erred in charging interest under section 201(1 A) of the Act. 5.2 Without prejudice to Ground No. 5.1, on the facts and circumstances of the case and in law, consequential interest under section 201(1 A) of the Act should be computed from the due date of payment of withholding tax by the Appellant to the date of payment of taxes by the payee/recipient of such income. All the above grounds are without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case." 2. Ground No. 1 is general in nature and does not require any specific adjudication. Ground No. 2 is regarding applicability of section 194H in respect of discount allowed....
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....is, 'whether in 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 S. 194H of the Income Tax Act, 1961 amounting to Rs. 19,74,842/- (including interest) in respect of sales to its distributors, which are on principal to principal basis and wherein property in the goods is transferred to the distributor'. 45. Taking into account the provisions of Section 182 of the Contract Act and the arrangement which has been entered into between the company and the distributor and taking into account the provisions of Section 194H, the Tribunal while considering the evidence on record, in our considered opinion, has misdirected itself in considering the case from an angle other than the angle which was required to be considered by the Tribunal under the Income Tax Act. The Tribunal has travelled beyond the provisions of Section 194H where the condition precedent is that the payment is to be made by the assessee and thereafter he is to make payment. In spite of our specific query to the counsel for the department, it was not pointed out that any amount was paid by the assessee compan....
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....nly 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 criteria will not be of area of operation but agreement entered into between the parties. (v) Regarding the change in price it is always between the assessee or the company and the Distributor to decide who will absorb the loss. In that view of the matter, the findings arrived at by the Tribunal is erroneous. (vi) Regarding the return of goods after expiry date, it is always the understanding between the manufacturer and company that the product is not for preparation or consumed before expiry date, the consumed items cannot be allowed otherwise manufacturer will invite criminal liability. To avoid any criminal liability or any criminal act is done for taking back the goods, will not deter the relation-ship of Principal to Principal basis. (vii) Regarding supervision, it is always for the manufacturer and the company to look into the matter that his Distributor or Sub- Distributor or Retailer will not induct in mal practice. (viii) Regarding goods sold to the Distributor, it is al....
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.... observing as under- "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 hand. For ready reference, we are hereby reproducing the facts mentioned in para 3 of the order passed by the AO TDS. The same are as under :- " The assessee has relied on the decision of Hon'ble Delhi High Court in the case of Bharti Cellular Ltd. - On the basis of which the Hon'ble Apex Court has remanded the matter to the AO for fresh adjudication. Firstly, the matter is pending before the AO and thus the issue has not reached finality in that case. Secondly, the facts of this case are entirely different from the present case. The issue under....
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....nical 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 systems, i.e. VLR. * Visiting network automatically contacts home network of Hexacom subscriber, i.e. HLR and gets service information about roaming device using IMSI number-IMSI number is a unique subscriber identity number granted to the customer at the time of subscription. * Visiting network maintains temporary subscriber record for the said mobile device and provides an internal temporary phone number from backend system to the mobile device which is not visible to human. * Home network also updates its register to....
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.... 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 technical or otherwise. The ld CIT(A) partly accepted that roaming process is technical because it uses various instruments such as MSC (Mobile Switching Centre), VLR (Visitor Location Register), Radio network, towers, BTC etc. but the system is operated/managed by the Highly skilled professionals. The assessee's argument was that the roaming service is managed automatically by machines and payment for roaming charges are not fees for technical services. In case of fault in a breakdown of a system, the....
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....e 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 other operators are not fees for technical services. The ld AR further relied on the decision in the case of iGATE Computer Systems Ltd. Vs. DCIT in ITA No. 1301 to 1303& 1616/PN/2013 for A.Y. 2007-08 to 2010-11 wherein the Hon'ble Pune Bench of ITAT had considered whether any human intervention is required for providing the data link services and are liable to be deducted TDS U/s 194J of the Act and held that payments made for utilizing such services was not in the nature of technical services go....
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.... 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 roaming charges charged between the operators from Mr. Kapoor Singh Guliani. The appellant also taken opinion from Former Chief Justice of India Mr. Kapadia on IUC post technical examination, cross examined and reexamination. Who also opined that Hon'ble Supreme Court decision dated 12/08/2010 is an order not judgment as the principle of law was not res-integra. The word technical services have got to be read in narrow since as held by the various Hon'ble High Courts and the Tribunal by applying....
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.... 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's grounds are allowed." By respectfully following our own decision on similar fact, we reverse the order of the ld CIT(A) and allow the appeal of the assessee on this ground." 3.3. In the light of above, respectfully following the decision of Coordinate Bench in the matter of M/s. Bharti Hexacom Ltd. for the assessment year 2009-10, we hereby reverse the order of ld. CIT (A) and allow the appeals o....