AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 703
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...."A. That the Ld. CIT (A) grossly erred in holding that the Appellant was duty bound to deduct tax at source under section 194H from the discounts allowed to its distributors on bulk sale of starter kits and recharge vouchers (RCVs) under section 194H of the Income- tax Act, 1961 ('IT Act') and consequently hold it to be an assessee in default under section 201 of the Act. i. That the Ld CIT (A) grossly erred in not appreciating that the provisions of Section 194H of the Act would apply only at the time of payment/credit to payee's account and that the discount allowed is not payment/credit made to the Channel partners account; ii. That the Ld. CIT (A) grossly erred in not appreciating that Section 194H would not apply as the discount allowed does not qualify as income chargeable to tax under the Act in the hands of the payee in the facts and circumstances of present case; iii. That the Ld CIT (A) erroneously classified the discount given by the Applicant to its Channel Partners at the time of bulk sale of Starter Kits and RCVs as commission/brokerage; iv That the Ld. CIT (A) completely erred in holding that the principal-agent relatio....
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....iable to deduct TDS on the discounts offered to the Channel Partners. D. That the Ld. CIT (A) grossly erred in passing the impugned order in violation of the principles of natural justice by not granting an opportunity to the Appellant to independently cross examine the technical expert's opinion on interconnect usage charges, if any, as directed by the Honourable Supreme Court in case of Bharti Cellular Limited E. That the Ld CIT (A) erred in construing and relying on the crossexamination in the case of Vodafone West Ltd. F. That the Ld. CIT (A) erred in not appreciating that as per the decision in CIT vs Bharti Cellular [2011] 330 ITR 239, examination and cross examination of expert had to be conducted in the facts/case of the Appellant and that the Appellant was to be granted an opportunity to adduce its evidence; G. That the Ld, CIT (A) has grossly erred in ignoring the C.A. certificates available in respect of MTNL, Hutchison Essar and Tata Communication. H. That the Ld. CIT (A) grossly erred in levying interest under section 201(1A) of the Act; I. That the Ld. CIT (A) grossly erred in not considering the contentions an....
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....er dated 30.03.2011. 5. Further, the Assessing Officer noticed that the assessee has paid roaming charges to other operators for using their network, but no TDS was deducted on such interconnect usage charges (IUC), being the fee for technical services, as per section 194J of the Act. The details of such payments, on which no TDS was made by assessee are as under : Sl. No. Name of operator Amount of IUC paid 1. Hutchison Essar 12,06,69,183 2. MTNL 19,67,57,060 3. Reliance Communication 15,62,20,843 The Assessing Officer relying on the decision of Hon'ble Supreme Court in the case of Vodafone Essar Mobile Services Ltd., in Civil Appeal No. 6692 dated 12.08.2010, considering the detailed contentions of the assessee, extensive exercise carried out by Assessing Officer in assessment proceedings for F.Y. 2002-03 with the help of experts and the circular of CBDT on alternate plea of assessee, treated the assessee in default for not deducting TDS u/s. 194J of the IT Act on the impugned IUC and calculated the tax liability and interest on above payments made for IUC at Rs. 6,41,33,290/- vide assessment order. 6. The assessee assailed the order o....
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....l partner purchase appellant products on bulk and generates his income from further sale of these products to its retailers / customers. The very fundamental requirement of 194H in the transaction between the appellant and the distributors is missing as the discount cannot be equated as income in the hands of the distributors. Distributors make its income on further sale of these products in the market. The services that have been rendered by the channel partners are those which are the terms of license conditions to be adhered by any operator under the license agreement issued by the department of telecommunication. For these services the channel partners are remunerated in the form of commission / incentives / credits on which' the appellant has been deducting TDS appropriately as required under the Act" 6.3 The appellant has quoted the judgment of Hon'ble Gujarat High Court in the case of Ahmedabad Stamp Vendors Associates Vs. Union of India (2002) 124 Taxman 628 (Guj) and Mother Dairy India Ltd. Vs. ITO (Delhi) (2009) 28 SOT 43 (Delhi), and has stated that "there is sale of the products inbuilt for which upfront payment is made and accordingly an agreed discoun....
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....such income in cash or by the issue of a cheque or draft of by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent: Provided Provided Provided 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) ............... (iii) ............... (iv)............. 6.7 The provisions of Section 194H suggests that except for a situation which is encompassed by the second proviso, it applies to all persons other than an individual or an HUF who is responsible for paying on or after 01.06.2001 to a resident any income by way of commission to deduct tax at source at the time of credit of such income to the account of the payee, that is, the recipient or at the time of payment of such income in cash or by issue of c....
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....d with the authority or capacity to create a legal relationship between person referred to as a principal and an outside third party. Therefore, the basic and essential requisites of an agency ordinarily would be that: (i) The agent makes the principal answerable to third persons whereby the principal can sue third parties directly and renders himself, that is, the principal, liable to be sued directly by the third parties. (Reference: Varsha Engineering Pvt. Ltd vs Vijay Traders & Ors AIR 1983 Guj 166 at pages 168-169, para 5). (ii) The person who purports to enter into a transaction on behalf of the principal would have the power to create, modify or terminate contractual relationship between his principal, that is, the person whom he represents, and the third parties. (Reference: P. Krishna Bhatta & Ors. Vs. Mundila Ganapathi Bhatta (died) & Ors. AIR 1955 Mad 648 at page 651, para 36). (iii) An agent, though bound by instructions given to him by the principal does not work under the direct control and supervision of the principal, The agent thus uses his own discretion to act on behalf of the principal subject to the limits to his authority prescribed ....
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.... (Clause 9). (x) TTSL shall have the exclusive right to terminate the business arrangement by written notice to Channel Partners and then the Channel Partners shall return to TTSL all information of customers/subscribers and other material pertaining to products and services (clause 14.1 (ii), (iii), (iv), (v), (vi)) 6.13 It is also relevant to point out that the agreement that the appellant has entered into with its Channel Partners are in relation to both products and ancillary services. A particular Channel Partners is marketing & distributing both. Moreover the discounts are offered on purchase of products i.e. SIM Cards/Recharge vouchers, for further distribution. 6.14 The ownership/legal and equitable title and interest in SIM Cards/Recharge vouchers remains with the appellant. The distributors are supposed to store the SIM Cards/Recharge Coupons in such a way as to clearly indicate at all times that these are owned by TTSL and is not allowed to remove, obscure, delete any mark placed on the SIM Cards. The distributor is also not free to sell the similar products offered by competitors company. 6.15 Also the owner of the SIM Cards/Recharge Coupons i....
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....phone user or authorized retailers. It is also evident from a reading of clauses 1(h), 8.4, 13.1 and 18,1 of the agreement, that the cell phone connection or recharge coupons and other product at all times, remain the property of TTSL. 6.20 TTSL also reserves the right to appoint one or more distributors in a given area and can review the commission structure and other terms and condition on the basis of changes in telecom. market which the Channel Partners will have to abide to (Ciause 2.1, 2.2, 2.3). The Channel Partners is not independent in making decision with respect to marketing and distribution standards, appointment of dealers/retailers, place of business but has to carry out its duties as underlined by TTSL in its Operational Manual (Clause 8.5 (ii) (iv) (vi) (vii) (ix)) Any negligence on part of the Channel Partners in market and distribution of service products would render it liable to TTSL, the service provider (Clause 14.1) 6.21 Perusal of clauses 8.1, 8.5 (ii), (iv), (vi), (vii), (is), 8.8 & 8.10 clearly indicate that the Channel Partners has no right over the product. Hence the claim of the appellant that there is a principal to principal relation....
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....eement (supra) between TTSL and Channel Partners, the SIM Cards/RCVs continue to remain the property of TTSL In the present case the Channel Partners are functioning as distributors who are in a principal to agent relationship with the TTSL whereas in case of wholesalers there is no relationship with the manufactures. The Id AR of the appellant has mingled all these positions so as to justify the claim of the appellant. 6.25 The contention that monies charged over and above the discounted value charged by TTSL from the Channel Partners are in the nature of discount rather than commission is not tenable. The fact that this is a payment which the Channel Partners receives from the retailers by virtue of sale of the items of which TTSL is the owner, at a point till the transaction is made, clearly establishes that it is a commission and not Discount. The word 'discount1 is normally used to describe a deduction from the full amount or value of something especially a price, whereas a commission is defined in Explanation (i) to section 194H as any payment received or receivable, directly or indirectly by an agent for services rendered acting on behalf of the principal. In vi....
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....nature of commission and the same attracts the provision of section 194H of the Act. During appellate proceedings the Id AR has quoted the judgment of Karnataka High Court which is in favour of appellant. It would be pertinent to state that the said judgment has not been accepted by Revenue and the judicial pronouncement has been contended before the Supreme Court. The SLP proposed by Revenue has been admitted by the Apex Court which proves that the issue is alive and debatable. Considering all these facts, Ground No. 1, 4 to 10 are dismissed. On the second issue, the ld. CIT(A) observed as under : 11. Ground No. 12.13.14 & 15:- In respect of these Grounds Ld AR of the appellant pleaded that the AO raised demand on account of TDS liability u/s 194J on payment made for Interconnect Usage Charges (IUC) to other operators. The appellant has also contended in Ground No. 14, that the AO did not provide the appellant with the opportunity to cross examine the statement of technical experts. 11.1 In the remand report dated 04.02.2014 and 02.06.2014 the AO has submitted that: The applicability of Section 194J of the Act on the payments towards Interconnec....
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....rd to the details of TDS on IUC were filed. * Subsequently, the then AO vide letter dated 18.03.2011, rejected the objections raised to the issuance of notice u/s 201(1) of the Act and directed to deductor company to comply with the requirements and the case was adjourned to 22.03.2011. * Again, vide letter dated 23.03.2011, it was submitted that during the FY 2006-07, the company was operating telecom services under CDMA technology which did not provide any roaming facility to its subscribers on any other operator's network and hence there were no inter-operator network and hence there were no inter-operator payments for roaming charges n this account and on request, the case was adjourned on 25.03.2011. * Yet again, vide order sheet entry dated 25.03.2011, the ARs were asked as to whether any tax was deducted u/s 194J of the Act on IUC charges and the case was further adjourned to 28.03.2011. * Further, during the proceedings u/s 201(1) of the Act, the then AO correctly recorded her displeasure in order sheet entry dated 28.03.2011 over the action of ARs of the deductor company in not complying with the requirements as called for repeatedly....
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....rection of Hon'ble Supreme Court in Civil appeal no. 6692 dated 12.08.2010. Following the Hon'ble Court decision the AO considered the expert opinion recorded by ACIT, Circle-51(1), New Delhi in order passed u/s 201(1) dated 13.12.2010 for F.Y. 2002-03, which is detailed from pages 7 to 20 of the assessment order. 11.3 It is observed from perusal of page 6 and 7 of the assessment order dated 30.03.2011 that the appellant was regularly appearing before the AO and could have given opinion on the subject. Moreover the relevant findings in the exercise carried out consequence to the direction of the Apex Court by ACIT, Circle-51 (1) was relied upon by the AO as the facts of the present case was similar to that of Vodafone Essar Mobile Service Ltd. 11.4 Perusal of details submitted during appellate proceedings as well as r _ AO's order dated 30.03.2011, it is observed that the entire process of carriage and transfer of calls from the network of one operator to another though being - an automated process undertaken by a series of highly advanced telecom network equipment, still requires constant human intervention in form of configuration, installation, test....
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....M/s Hindustan Coco-Cola Beverages v. Jaipur (decision dated 11.07.2017 in DB ITA 205/2005). The decisions of Mumbai Tribunal, Kolkata Tribunal and Patna Tribunal are also in favour of the assessee. Thus demand for non-deduction of TDS on IUC under Section 194J is not proper. This Tribunal in case of Bharat Sanchar Nigam Ltd., vs. Addl. CIT, New Delhi, in ITA No. 920/Del./2017 decision dated 25.10.2017 {"the BSNL Tribunal case") has also held that Section 194J is not attracted to the IUC payments and that there is no liability to deduct tax. Thus, the issue be decided in favour of the Appellant and appeal be allowed. Deduction under Section 194H 2. The Appellant in course of its business supply the SIM Cards and Recharge Vouchers to its distributors (also referred to as the channel partners). That the primary agreement with the channel partners is to buy & sell Appellant's products on a principal to principal basis [clause 2.4 of the Distributor Agreement @pg. 83 of the paper book]; the Appellant sells its product to channel partners allowing discount on the primary transaction, which the channel partners were free to sell to sub-channel partners/retailers at a....
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....ice as per the agreements before them which establish that there exists a principal to principal relationship between the assessees and the distributors. 8. The decision of the Hon'ble Delhi High Court in CIT vs. Idea Cellular, [2010] 325 ITR 148 (Delhi) ("Idea Cellular") is not applicable to the facts and circumstances of the case, following are the points of differences between the two transactions/ cases: i. No argument that the 'right to avail service can be sold' was ever raised or considered by the Hon'ble High Court in Idea Cellular (supra). The decision in Idea proceeded on the basis that the transaction was one of service and service can only be rendered and not sold. The issue that a right to avail service can be traded was neither raised nor considered by the court. If a point is not raised or considered, the judgment cannot be said to have decided that issue. ii. The discounts allowed to the channel partners are at the time of bulk-purchase of the Appellant's products by the channel partners on a principal to principal basis, however, in Idea cellular, counsel for both the parties agreed that determination of element of age....
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....ea is a Telecom Operator i.e. holder of telecom licenses, issued by Department of Telecommunication, Government of India. - Idea is engaged in the business of rendering telecom services through its own telecom network.- For rendering its services, Idea appoints distributors and transfer 'SIM cards' & 'recharge coupons' ('products) to distributors without relinquishing the rights of title and interest. - Distributors further appoint retailers with the permission of Idea and the aforesaid products finally transferred to customer through retailers. - TTSL is engaged in the business of trading in telecom products. - TTSL sells in bulk SIM cards ('SUK') & Recharge Voucher ('RCV'} - TTSL sell aforesaid SUK products to distributors by shifting the title ship right in the product. - Distributors further sell the products to retailers and finally retailers sell these products to end customers charging VAT the SUKs. - In pursuant to each sale all rights of title/interest and risk for loss are transferred. (Discussed in detail in Point No. 2) 2. Transfer of Title and Risk Para 8: "Full legal and equitable title and interest in prepaid SIM Card a....
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....of performing the obligations of the Distributor as set out in the Agreement. Nothing in the Agreement deem to constitute a Distributor as an agent employee or partner or joint venture or affiliate of TTSL in any manner. The Distributor shall have no authority to bind TTSL in any respect whatsoever and shall not hold itself out as owned by or associated with TTSL other than as an independent distributor authorized and permitted to promote, market, distribute and sell the Product in accordance with the terms and conditions of the Agreement. None of the employees of the Distributor shall be construed or deemed to be the employees or agent of TTSL at any time and the Distributor agrees to indemnify TTSL against any claim, action or loss or damages whatsoever in this connection. 4. Payment of Sales tax/VAT Para 8: "the transaction in question was not that of sale and purchase between the assessee and the PMAs and for this reason, no Sales tax was even paid." The Hon'ble HC has considered payment of Sales Tax, inter alia, as one of the determinant to decide the relationship. It has been held that transaction in question is not sale and purchase as no sales tax has even b....
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....act was neither under consideration in the BSNL Tribunal case (supra) nor Idea Cellular (supra). Thus, where the parties to a contract have considered the sale of SIM Cards and recharge vouchers as sale, the same cannot be considered as a service in view of decision of the Hon'ble Supreme Court in BSNL (supra) (Para 87). ii. The Hon'ble Tribunal in BSNL Tribunal case (supra) has not considered the view taken by the Rajasthan High Court in the case of the Appellant itself in Commissioner of Income Tax (TDS), Jaipur vs. M/s Tata Teleservices Limited, (decision dated 11.07.2017 in DB ITA No. 124,125,126,131 and 132 of 2015) wherein identical terms and conditions, the Hon'ble Rajasthan High Court in Appellant's own case has held that the agreement is one of principal to principal. It is pertinent to note that the agreements in BSNL Tribunal case/ Idea cellular (supra) are different from the agreement of the Appellant. iii. The Appellant in the present case has been deducting appropriate IDS on all commission/incentives or credits allowed to the channel partners for any ancillary or connected services apart from the primary arrangement. [@pg. 445 of the....
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....peal No. 10270 of 2003 being CIT vs Ahmedabad Stamp Vendors wherein it is held that a principal to principal relation exists when a distributor sells products acquired at a discount are squarely applicable in the present case. 11. The decision of the Kerala High Court in Vodafone Essar Cellular Ltd. Assistant Commissioner of Income Tax, [2011] 332 ITR 255 (Ker) is no longer good law after the order of the Supreme Court dated 06.09.2012 in Civil Appeal No. 10270 of 2003 being CIT vs Ahmedabad Stamp Vendors. It is submitted that the order of the Supreme Court dated 06.09.2012 in Civil Appeal No. 10270 of 2003 being CIT vs Ahmedabad Stamp Vendors effectively overrules the decision of the Kerala High Court dated 17.8.2010 in Vodafone Essar Cellular Ltd. Assistant Commissioner of Income Tax, [2011] 332 ITR 255 (Ker), where the Kerala High Court had doubted its own decision in Kerala State Stamp Vendors Association vs Office of the Accountant-General and Ors.[2006] 282 ITR 7 (Ker), which in turn had ruled upon Ahmedabad Stamp Vendors case. Once the Hon'ble Supreme Court has upheld the Ahmedabad Stamp Vendors, the contrary view expressed in Vodafone Essar Cellular cannot be s....
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....on 9(1)(vii) of IT Act 1961 on Interconnect usage charge to other telecom operators. 3. Ld. CIT (A), for example, in appeal no 639/14-15 dated 13.03.2015 for Financial year 2006-07 at Para 11.4/page 21 has stated " Perusal of details submitted during appellate proceedings as well as AO's order dated 30.03.2011, it is observed that the entire process of carriage and transfer of calls from the network of one operator to another though being an automated process undertaken by a series of highly advanced telecom network equipment, still required constant human intervention in form configuration, installation, testing etc. in the order to make the process of carriage of calls effectively operational .Moreover after analysing the reason why expert opinion was not cross verified by TTSL given by the AO in remand report. I ^ see no reason to interfere with the observations of the AO in this connection." Hence, considering the facts and Law, The Ld. AO has correctly applied provision of section u/s 194J read with explanation 2 of section 9(1)(vii) of IT Act 1961 which was legally & factually supported by Ld. CIT (A). 4. The Appellant assessee has taken alternative plea....
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.... 1961, in appellant assessee's own case which has been admitted before the Hon'ble Supreme Court in C.A. No. 004939-004940/2015 on 06.05.2015 & SLP (C) no. 017439-017440/2015 on 02.07.2015, which clearly prove that the issue of application of section 194H is alive and debatable and subjudice for Revenue before the Hon'ble apex Court and so it is submitted that the original order of the Ld. AO wherein Ld. AO has taken stand on application of S.194H of I.T. Act 1961 should be upheld. Ld. CIT(A) at Para 6.27 in appeal no. 641/14-15 dated 13.03.2015 for F.Y. 2008-09 at page 16 has stated.. "I have also considered the judgment of Delhi, Kotkata & Kerala High Court in the case of Ideal Cellular Ltd. 325 ITR 148 (Del), Bharti Cellular Ltd. Vs. ACIT 244 CTR 185 (Cat) and Vodafone Essar Cellular Ltd. Vs. ACIT (2009) 317 ITR (AT) 234 (Cochin), I hold that the discounts allowed and incentives given by the appellant to its Channel Partners on sale of its products is in the nature of commission and the same attracts the provision of section 194H of the Act". 7. Recently in Bharat Sanchar Nigam Ltd., vs. Addl. CIT,Range-4, New Delhi, in ITA No. 920/Del/2017 decided on 25.10.....
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.... transactions of starter kits/pre-paid recharge vouchers were the transactions of purchase and sale on principal - to - principal basis or on principal-to-agent basis. It is an admitted position of law that in the former case, the assessee shall not be liable for TDS, but in latter situation, the provisions of section 194H would come into play. The answer to the above two situations would decide whether the discount given to the distributor was in the nature of commission or not. We have been addressed at length by both the parties on the strength of these two decisions. First core question to be seen in this scenario is whether there is any variance in views expressed by both these High Court decisions. Hon'ble Jurisdictional High Court in case of Idea Cellular (supra) concluded that the relationship between parties in that case was principal to agent observing as under : 23. We, thus, come back to the central question, which is to be addressed viz. the nature of relationship. Reverting back to this aspect, in the present case, we are of the opinion that the legal relationship is established between the assessee and the ultimate consumer/subscriber, who is sold the SIM ca....
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....ment in advance. That would not make any difference to the nature of transaction in view of cl. 25(d) of the agreement, which stipulates as under : "25(d). Upon the termination or expiration of this agreement for any reason, PMA shall discontinue the marketing/distributing/offering for sale, IDEA Chitchat Prepaid Services, and shall forthwith return to ICL the entire stock of prepaid SIM cards/recharge coupons remaining with him and/or his authorized retailer. ICL shall pay to PMA for such prepaid SIM cards/recharge coupons received by it from the distributor." 26. Thus, even if advance payment is made by the PMA on receipt of the SIM cards, qua those SIM cards, it does not amount to "sale" of goods. The purpose is to ensure that the payment is received in respect of those SIM cards, which are ultimately sold to the subscribers in as much as unsold SIM cards are to be returned to the assessee and the assessee is required to make payment against them. This is an antithesis of "sale". There cannot be any such obligation to receive back the unsold stocks. Further, cl. 25(f) lays down that on termination of agreement, PMA or its authorized retailer appointed by it, is....
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....dafone 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 telephone network established and operated by the assessee company on its own behalf. Since the SIM card is only a device to have access to the mobile phone network, there is no question of passing of any ownership or title of the goods from the assessee company to the distributor or from the distributor to the ultimate consumer. The distributors are acting only as a link in the chain of service providers. The assessee company is providing the mobile phone service. It is the ultimate owner of the service system. The service is meant for public at large. In between providing of that service, it is necessary for the company to appoint distributors to make available the prepaid products to the public as well as to look after the documentation and other statutory matters regarding the ....
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....essee to prove that the services rendered by the assessee through the distributors on prepaid package is different from the post-paid package so as to qualify the former for exemption from operation of s. 194H. 57. It is beyond any dispute that the essence of services rendered to the prepaid and post-paid consumers is one and the same. There is no difference. The only difference is technical. The difference exists only in billing system and revenue collection, etc. In both the cases assessee company is providing the service. Distributors are helping to reach such services to the ultimate consumers. In both the systems, there is documentation. In both the systems, the distributors render similar types of services to the assessee company. Of course accounting the revenue collection and related matters are different. The essence of post-paid and prepaid services rendered by the assessee company is the same and the relationship between the assessee and the customers is also the same. Therefore, if post-paid scheme is subject to s. 194H, it is quite unlikely that prepaid system would be outside the purview of s. 194H. 60. The next question is whether the commission/bro....
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....ns, 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 transactions 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 phone network system maintained and operated by the assessee company; (4) The services provided by the assessee company through various distributors is regulated by law. Carrying on the business of providing service is subject to so many statutory compliance requirements, like verification of the identity of the consumer and the related documentation, etc. The assessee company is having all lawful obligations to a prepaid consumer, even though the direct deal is between the distributor and the consumer. This is because the distributor does not have anything to provide 'as service' to the consumer. These are all features of agency relationship. (5) Other matters explained by the assessee as, there was no payment by the assessee in cash or cheque by way of....
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....nd prepaid services, on which the assessee admitted to have given discount to the distributors. These crucial facts as considered by the jurisdictional High Court are also existing in the case before us. 11. Contrary to above view expressed by Hon'ble jurisdictional High Court, the assessee has relied on the decision of Hon'ble Karnataka High Court (supra) wherein it has been held that a right to service can be sold and this aspect was not considered by the jurisdictional High Court. The relevant observations of the Hon'ble Karnataka High Court read as under: "56. In the Idea Cellular Ltd. case (supra), the Delhi High Court proceeded on the footing that the assessee is providing the mobile phone service. It is the ultimate owner of the service system. The service is meant for public at large. They had appointed distributors to make available the pre-paid products to the public and look after the documentation and other statutory requirements regarding the mobile phone connection and, therefore, the essence of service rendered by the distributor is not the sale of any product or goods and, therefore, it was held that all the distributors are always acting for and on beha....
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....t as an agent. The seller may have fixed the MRP and the price at which they sell the products to the distributors but the products are sold and ownership vests and is transferred to the distributors. However, who ever ultimately sells the said right to customers is not entitled to charge more than the MRP. The income of these middlemen would be the difference in the sale price and the MRP, which they have to share as per the agreement between them. The said income accrues to them only when they sell this right to service and not when they purchase this right to service. The assessee is not concerned with quantum and time of accrual of income to the distributors by reselling the prepaid cards to the subdistributors/ retailers. As at the time of sale of prepaid card by the assessee to the distributor, income has not accrued or arisen to the distributor, there is no primary liability to tax on the Distributor. In the absence of primary liability on the distributor at such point of time, there is no liability on the assessee to deduct tax at source. The difference between the sale price to retailer and the price which the distributor pays to the assessee is his income from business. I....
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....t reflected anywhere in the books of accounts, in such circumstances, Section 194H of the Act is not attracted. If we deliberate upon the facts of the present case on the anvil of above illustrations, given by Hon'ble Karnataka High Court, we find that the assessee has not produced before us either any specimen invoice or any entry passed in the books of account in relation thereto or any financial statement for the impugned year so as to cover its case within any of the above two illustrations reproduced above. Therefore, the case of the assessee does not stand proved on the anvil of above illustrations given by Hon'ble Karnataka High Court. 13. We have also perused the copy of business agreement entered between the assessee and its channel Partner (distributor) M/s. Goel Agencies placed at page Nos. 62 to 154 of the paper book. We observe that in clause 10.1, it has been agreed as under : "In consideration of duly performing the duties and obligations as contemplated herein, channel partner shall be entitled to the consideration as set forth in schedule-B attached herewith." Schedule -B placed at page No. 127 of the paper book speaks of the consideration as per ....
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....into consideration retrospective amendments made to section 9 by Finance Act 2012. Relevant head-notes of this decision as reported in (2016) 67 taxmann.com 223(Del) are reproduced below: "Section 9 , read with sections 194J and 195, of the Income-tax Act, 1961, read with article 12 of Model OECD Convention - Income - Deemed to accrue or arise in India (Royalties and Fees for technical services) - Assessment years 2008-09 to 2011- 2012 - Assessee, as part of its International Long Distance (ILD) Telecom Services business, was responsible for providing services to its subscribers in respect of calls originated/terminated outside India - For provisions of ILD services, assessee was required to obtain services of Foreign Telecom Operators (FTOs) - ILD Operators were in turn billed by FTOs in form of Inter-connected Usage Charges(IUC) - There was no manual or human intervention during process of transportation of calls between two networks - This was done automatically, with human intervention being required only for installation of network which could not be said to be for inter-connection of a call - Assessee merely delivered calls that originated on its network to inter con....