TaxTMI 
TaxTMI 
2017 (9) TMI 1835
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....been pressed at the time of hearing of the appeals. Accordingly, the ground raised in the grounds appeal is dismissed as not pressed. 3. The second common ground raised in the appeals of all the assessees is that the ld. CIT(A) has erred in holding that the assessee is liable to deduct TDS on the amount of commission/discount allowed on the prepaid recharge coupons to the distributors under section 194H of the Income Tax Act, 1961 ["Act" in short] and confirming the demand raised by the Assessing Officer. 3.1 The crux of the issue is that there was a survey under section 133A of the Act was conducted in the business premise of the assessee i.e., erstwhile Vodafone Essar Cellular Limited. Based on the information gathered and also the details filed subsequently by the assessee in pursuant to summons issued under section 131 of the Act, the Assessing Officer has noticed that the assessee has not deducted TDS on the sale of prepaid recharge coupons as required under section 194H of the Act and the details are as under: Name of the assessee Financial year Asstt. Year Amount Vodafone Cellular Limited 2010-11 2011-12 Rs.. 62,99,76,....
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....taken similar decision and the same are squarely applies to the facts of the present case, which shall be followed. In the form of paper book, the assessee has filed following case law for consideration: 1. Vodafone Cellular Limited Vs Dy. CIT (TDS-I) (ITA Nos. 817,818 1577,1578,1961 & 1962/PUN/2013)(Pune Tribunal) 2. Vodafone Spacetel Limited Vs ACIT, TDS (ITA Nos. 76-77/PAT/2012) (Patna Tribunal) 3. Tata Teleservices (Maharashtra) Limited Vs ACIT, TDS-3(1) (in ITA Nos. 2043 to 2045/Mum/2014) (Mumbai Tribunal) 4. Bharti Airtel Limited Vs DCIT(TDS) (52 taxmann.com 31) (Karnataka HC) 5. TATA Teleservices Limited Vs The ITa, TDS-l, Jaipur (ITA Nos. 309/JP/2012, 502, 503, 504, & 505/JP/2011)(ITAT Jaipur) 6. M/s Bharti Hexacom Limited vs ITO(TDS)-II (IT A No. 656/JP/2010), (Jaipur ITAT) 7. Vodafone Essar Gujarat Limited (in IT A No. 386/Ahd/11) (Ahmedabad ITAT) 8. Idea Cellular Limited vs ITO (ITA 356 to 359(JP/2012) (Jaipur Bench) 9. CIT Vs Ahmedabad Stamp Vendors Association 348 ITR 378 (SC) 10. CIT Vs Ahmedabad Stamp Vendors Association 257 ITR 202 11. Vodafone South Limited Vs Deputy ....
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....9 in I.T.A. Nos. 1415 & 1416/Mds/2009 dated 01.04.2011, the Coordinate Benches of the Tribunal has held that the assessee was liable to deduct tax at source on the amount of commission/discount allowed to the distributors under section 194H for both the years under consideration and since it has failed to do so, therefore, the Assessing Officer had correctly created demand under sections 201(1) and 201(1A) of the Act and the ld. CIT(A) was not justified at all to delete such demands. 3.7 Similarly, by referring to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Idea Cellular Ltd. in 325 ITR 148 as well as various other decisions, in the case of Vodafone Essar Cellular Ltd. v. ACIT in 332 ITR 255, in the case of Vodafone Essar Cellular Ltd. v. ACIT in 332 ITR 255, the Hon'ble Kerala High Court has held that the distributors acted on behalf of the assessee for procuring and retaining customers and, therefore, the discount given was commission within the meaning of Explanation (1) on which tax was deductible under section 194H of the Act. 3.8 Further, on similar facts and circumstances, in the case of Bharti Cellular Ltd. Vs. ACIT in 354 ITR 507, th....
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....hone service is nothing but service. SIM cards, have no intrinsic sale value: It is supplied to the customers. for providing mobile services to them. 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. Therefore, the SIM card, on its own but without service would hardly have any value. A customer, who wants to have its service initially, has to purchase a sim-card. When he pays for the sim-card, he gets the mobile service activated. Service can only be rendered and cannot be sold. However, right to service can be sold. What is sold by the service provider to the distributor is the right to service. Once the distributor pays for the service, and the service provider, delivers the Sim Card or Recharge Coupons, the distributor acquires a right to demand service. Once such a right is acquired the distributor may use it by himself. He m....
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....herefore, Section 194H of the Act is attracted. 61. However, in the first instance, if the assessee accounted for only Rs. 80/- and on payment of Rs. 80/-, he hands over the prepaid card prescribing the MRP as Rs. 100/-, then at the time of sale, the assessee is not making any payment. Consequently, the distributor is not earning any income. This discount of Rs. 20/- if not reflected anywhere in the books of accounts, in such circumstances, Section 194H of the Act is not attracted. 62. In the appeals before us, the assessees sell prepaid cards/vouchers to the distributors. At the time of the assessee selling these pre-paid cards for a consideration to the distributor, the distributor does not earn any income. In fact, rather than earning income, distributors: incur expenditure for the purchase of prepaid cards. Only after the resale of those prepaid cards, distributors would derive income. At the time of the assessee selling these pre-paid cards, he is not in possession of any income belonging to the distributor. Therefore, the question of any income accruing or arising to the distributor at the point of time of sale of prepaid card by the assessee t....
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.... 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 same to the Department. If the payee is not in possession of the net income which is chargeable to tax, the question of payer deducting any tax does not arise. As held by the Apex Court in Bhavani Cotton Mills Limited's case, if a person is not liable for payment of tax at all, at any time, the collection of tax from him, with a possible contingency of refund at a later stage will not make the original levy valid. 64. In the case of Vodafone Essar Celluar Ltd., (supra) it is necessary to look into the accounts ....
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.... 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 company. It was only the arrangement by which the amount which was to be received was reduced and no amount was paid as commission. 46. In that view of the matter, if we look at the provisions of Section 194H and even if explanation is taken into consideration, there is no occasion of invoking provisions of Section 194H, since the amo....
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.... 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 always a matter of contract how further goods will be distributed. Restriction on sub-distributor will not change the transaction from Principal to Principal. (ix) Regarding expenses which are described by the Tribunal and one of the reason is that it....
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.... by assessee Coca Cola. M/s Bharti Hexacom Ltd. 52. Regarding the other appeals of Cellular Companies the questions are required to be answered as discussed hereinabove. The relationship is not of agent. It is principal to principal basis. The payment is received by the company and the amount of commission is never paid to the agent or the Distributor. Therefore, no TDS is required to be deducted. We also accept the contention raised by Mr. Jhanwar that even otherwise in view of divergent judicial views, one in favour of the assessee is required to be adopted as per settled law. Taking into consideration the above conclusion, the first issue is required to be answered in favour of assessee. 53. Regarding Section 194J of the Act, in view of the Kerala High Court decisions, the issue is answered in favour of assessee and third issue even as per the statutory definition, there is no service and Sections 201 and 194H would not apply in view of the agreement as referred hereinabove. Tata Teleservices 54. In view of agreement the issue regarding 194H and 194J as held in other cases, both the issues are answered in f....
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....d, we decide the issue in favour of the assessee by following the decisions of the Hon'ble High of Judicature for Rajasthan Bench at Jaipur as well as Hon'ble Karnataka High Court. However, in the orders of authorities below, there was no elaborate discussion with regard to the sale discount offered by the assessee and maintained in the books of accounts of the assessee. Accordingly, as has been held by the Hon'ble Karnataka High Court, we also remit the matter back to the file of the Assessing Officer only to find out as to how the books are maintained and how the sale price and the sale discount is treated and whether the sale discount is reflected in the books of the assessee or not. If the accounts are not reflected as set out by the Hon'ble Karnataka High Court in its order at para 60 of the order, as reproduced hereinabove, the provisions of section 194H of the Act is not attracted. Therefore, in line of the above observations of the Hon'ble Karnataka High Court, we restore the matter to the file of the Assessing Officer for necessary verification. Hence, for limited purpose to verify the books, as observed hereinabove, the ground raised by the assessee is allowed for statist....
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....income of the recipient chargeable under the head "Salaries". The above definition leaves no room for ambiguity as it clearly states that the provision for services of technical or other personnel for rendering any managerial, technical or consultancy services will be treated as technical services. The persons so supplied need not possesses any technical qualifications. This is made clear by the phrase "other personnel." Since section 194J r.w.s Explanation 2 to (vii) of section 9 is a special provision in the Act defining technical services, it will override the general reference to supply of labour for carrying out any work contained in Section 194C of the Act. Further, on facts also it was seen in the assessee's case that personnel for performing front office, managerial and services including data entry etc have been taken on outsourcing basis. This would amount to supply of personnel for rendering technical services and would attract tax. at deduction @ 10%. Failed to deduct the TDS, the assessee is in appeal and the Assessing Officer considered the assessee is in default and accordingly he invoked the provision of sections 201(1) and 201(1A) of the Act. ....
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....ents and third parties on a "need to know" basis and upon the execution of a written undertaking from such employees, agents, and third parties to maintain confidentiality of the confidential information disclosed to them in accordance with this clause 8 and to treat the confidential information as confidential for a period of five years from the date of receipt. In the event of earlier termination of this agreement, the parties hereby agree to maintain the confidentiality of the confidential information for a further period of three years from the date of such termination. The service provider agrees that any of assessee's technical or business information that service provider's employees or agents acquire while on assessee's premises or through access to assessee's computer system or databases while on or off assessee's premises, shall be deemed confidential information. All information provided by the assessee to service provider shall at all times, remain the sole and exclusive property of assessee. Upon termination /expiry of this agreement, confidential information shall be returned to assessee or destroyed in accordance with the instructions of assessee and evidence of such....
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..... Therefore, it was held by the Commissioner of Income Tax (Appeals) that the payments made towards housekeeping services shall be subject to tax u/s.194C and he also held that the assessee should deduct tax u/s.194J for technical services for the services provided "1) Support services such as filed activations, vendor payment queries, entering receipts into SAP, field verification etc. and 2) Customer support services such 'as tele- calling for bill payments, tele- calling for new activation". "9. In our opinion, the findings of the Commissioner of Income Tax (Appeals) is to be confirmed as the activities undertaken by the service provider for the assessee company discussed as per the agreement, it is not possible to undertake such activities without technical expertise, skilled manpower and by using up to date technology of the service provider. Contrary to this, the ld. Authorised Representative for assessee relied on the various judicial precedents. However, a careful reading of these judgments shows that the facts involved in the said cases were entirely different from the facts involved in this case. Therefore, it cannot be applied in the present case to decide t....
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....eme Apex Court to the file of the Assessing Officer with a direction to decide the same afresh, after examining a technical expert. 11. However in the present case, there is no dispute that there is 'human interface' in rendering service provider to the assessee. Being so, the said decision is squarely applicable to the assessee case and there is no need to sent the file back to the Assessing Officer to decide the issue a afresh. Accordingly, the ground of the appeal of the assessee is dismissed." 4.6 Respectfully following the above decision of the Coordinate Benches of the Tribunal, for the assessment years under consideration also, which was followed by the ld. CIT(A) to decide the issue, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and the same stands confirmed. Thus, the ground raised by the assessee is dismissed in both the assessment years. 5. The next issue raised in the appeal of the assessee for the assessment year 2011-12 is with regard to liability of TDS under section 194J of the Act on roaming charges paid to other telecom operators. 5.1 During the year under consideration, the assessee paid roaming charges to ....
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....ounds in both the appeals; however the Ld. A.R. has confined his arguments only with respect to one identical ground raised in both the appeals which is reproduced herein below for adjudication. "On the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in upholding the decision of the learned TDS officer that the appellant is to be treated as an 'assessee in default' for non-deduction of tax at source under section 194J of the Act on roaming charges paid by the appellant to other telecom operators and thus, holding the appellant liable to pay tax U/s. 201(1) and interest U/s.201(1A) of the Act." 3. The assessee is engaged in the business of providing cellular mobile services. During the course of its business the assessee had paid roaming charges to other telecom operators against which the assessee had not deducted tax at source in accordance with the provisions of Section-194J of the Act. After an elaborate discussion, the Ld. Assessing Officer came to a conclusion that the machinery and equipments deployed by the service provider company cannot work on its own and there has to be man-machine interface and human intervention at vario....
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....b-Divisional Engineer of BSNL. The SubDivisional Engineer clarified that human intervention is required for establishing the physical connectivity between two operators for doing necessary system configurations. After necessary configuration for providing roaming services, human intervention is not required. Once human intervention is not required, as found by the Apex Court, the service provided by the other service provider cannot be considered to be a technical service. It is common knowledge that when one of the subscribers in the assessee's circle travels to the jurisdiction of another circle, the call gets connected automatically without any human intervention. It is due to configuration of software system in the respective service provider's place. In fact, the Sub-Divisional Engineer of BSNL has explained as follows in response to Question No.23:- "Regarding roaming services as explained to question no.21. Regarding interconnectivity, initially human intervention is required for establishing the physical connectivity and also for doing the required configuration. Once it is working fine, no intervention is required. In case of any faults human intervention is requi....