TaxTMI 
TaxTMI 
2018 (6) TMI 158
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appeal's sole substantive issue pleads that both the lower authorities have erred in law as well as on facts is treating it to be an assessee in default u/s 201(1) and 201(1A) of the Act on account of non deduction of TDS pertaining to its discount coupons amounting to Rs. 44,03,27,555 (MRP of recharge vouchers starter packs of Rs. 470,33,82,078/- issued for Rs. 426,30,54,523 to its distributors). This assessee is a cellular service provider. It issued its recharge vouchers/starters packets in relevant previous year to its distributors without deducting TDS thereupon. The Assessing Officer treated the assessee to be in default u/s. 201(1)/201(1A) on account of its above failure in non deduction of TDS upon the said discount sums. The assessee had pleaded that the said differential amount did not represent any commission element so as to be eligible for TDS deduction under Chapter-XVIIB of the Act. Its further case was that said SIM cards etc. did not have any value in themselves as well. All this failed to convince the Assessing Officer who raised then impugned demand. 4. The CIT(A) upholds Assessing Officer's action in question as follows:- "4. The grounds No. I, IT, III & TV ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s deductible. The test to be applied has been held as one to see whether or not assessee appellant has made any payment and whether it was for services rendered by the payee to the assessee deductor. The jurisdictional High Court of Calcutta has held the views to the following effect :- 1) the property in the starter pack and pre-paid coupons even after transfer and delivery to the franchises remained with the assessee; 2) the franchises really acted as a facilitator or instrumentality of providing services by the assessee to the ultimate subscriber; 3) the franchises had no free choice to sell it and everything was being regulated and guided by the assessee, and 4) the rate at which the franchises sold to retailers and that's at which the assessee sold to the franchises, was also regulated and fixed by the assessee. It was thus held that there was indirect payment to the franchisees of the commission and the commission would be liable to tax: deduction at source. Whatever the effect of the terms of agreement, the appellant is a principal exercising overall control on the business, various schemes and products and services, reducing the distributors or franchisee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in default till it is found that assessee has also failed to pay such tax directly. Once this finding about the non-payment of taxes by the recipient is held to a condition precedent to invoking section 201 (1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied. No doubt the assessee has to submit all the information about the recipient as he is obliged to maintain under the law, once this information is submitted, it is for the Assessing Officer to ascertain whether or not the ta;'1;es have been paid by the recipient of income" 6.1 In my view! in view of various judicial decisions on the point, it is not correct to collect the tax twice - ones from the deductee and then from the deductor. The A.O should have examined whether the distributors included the commission in its income chargeable to tax and offered it in the return. Only in cases of failure to pay taxes on the part of the deductees the A.O. can resort to the collection mechanism of section 201 of the l.T. Act. I, therefore, direct the A.O. to verify the payment of taxes by the distributors of the appellant and restrict the liability u/s.201(1) of the I.T. Act only to the amoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'s next plea is that the interest u/s. 201(1A) of the Act is not leviable in its case as well. Same is the Revenue's grievance in its crossappeal ITA 1302/Kol/2016 that the CIT(A)'s directions (contained in above extracted para-7 of lower appellate order) to the Assessing Officer for carrying out necessary exercise of factual verification to be not sustainable as per u/s 251(1)(a) of the Act. Its case therefore is these directions go contrary to scheme of the Act after necessary legislative amendment with effect from 01.06.2001. We find that in this backdrop of pleadings that CIT(A)'s direction in question qua section 201(1A) interest restore the issue in view of assessee's arguments that the amount in question is to be recalculated after considering the corresponding advance and self-assessment tax paid by its distributors. We make it clear that said aspect had not been examined in Assessing Officer's order. There is thus no prejudice caused either to the taxpayer or to the Revenue at this stage. The Revenue's last plea is that such a course is no more open to the CIT(A) is also found to be without any substance being mere technical in nature. We repeat that the above indicated ci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....J read with Explanation 2(iv)(a) to Section 9(1)(vi) of the Act. The appellant prays that it be held that payment of roaming charges neither fall within "fees for technical services" as defined under Explanation 2 to section 9(1)(vii) nor falls within "Royalty" as defined Explanation 2 to section 9(1)(vi). Therefore, no tax is deductible u/s.194J on roaming charges and, consequently, the action of the AO in holding the Appellant as 'assessee in default' under section 201 LWS 194J be set aside/quashed. The Appellant prays that it be held that no tax is deductible u/s. 194J of the Act and hence, the Appellant cannot be held as an "assessee in default" under section 201(1) of the Act. In the statement of facts the appellant has challenged the Assessing Officer's action based on the following two propositions:- a) Any payment for the use of standard facilities doesn't amount to fee for technical services and; b) In absence of any human intervention during the actual roaming process payment would not be fees for technical services. 8.1 On both the above propositions reliance has been made on various judicial decision. In roaming there is no human intervention. This facil....