TaxTMI 
TaxTMI 
2019 (8) TMI 726
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....d on identical grounds and in the four department's appeals pertaining to 2009-10 to 2012-13 assessment years, the issues raised in the respective orders were also stated to be identical. Accordingly, with the consent of the parties, a common order is being passed in these appeals. 2. The assessee has assailed the finding that the assessee is in default for non deduction of TDS in terms of the requirement of Section 194H for the pre-paid cheques for SIM. The Revenue has assailed the relief granted to the assessee wherein on the roaming charges it has been held that TDS was not attracted in terms of Section 194J of the Act. 3. Taking up the assessee's appeals first, it was a common stand that the facts, circumstances and position of law in each of the assessee's appeals remain identical. Accordingly, it has been canvassed that the arguments advanced in ITA 317/CHD/2019 pertaining to 2007-08 assessment year may be applied to each of the remaining appeals. 4. However, considering the fact that the rejection of assessee's claim has been maintained by the tax authorities right upto 2013-14 assessment year as per the present bunch of appeals a....
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....lant as an 'assessee in default' for non-deduction of tax at source under section 194H of the Act on discount amounting to INR 33,53,59,310 extended to the distributors of its pre-paid services and thereby, erred in computing demand under section 201(1)/201(1A) of the Act. 2.2. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in holding that the relationship between the Appellant and the pre-paid distributors is not that of 'Principal to Principal' and the discount allowed to them is in nature of 'commission' liable for tax deduction at source as envisaged under section 194H of the Act. 2.3. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating the fact that there is no payment/credit to the account of distributors by the Appellant towards the discount extended to them and therefore, provisions of section 194H of the Act do not apply on such discount. 2.4. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating that discount allowed by the Appellant is not income....
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.... any, can be levied in such cases. 5. The ld. AR inviting attention to the order passed by the AO u/s 201(1) r.w.s. 201(1A) of the Act submitted that the AO has held the assessee to be in violation of the requirements of Section 194H and hence in default for not deducting TDS for the amounts pertaining to the pre-paid SIM cards to its distributors etc. 5.1 Referring to the record, it was submitted that in each of the years assailed an identical order and reasoning has been given. The assessee carried the issue in appeal before the CIT(A) stating that various judicial forums have held on similar set of facts and circumstances considering similar agreements entered into between the parties that withholding tax provisions u/s 194H are not applicable to discount extended to pre-paid distributors on transfer of pre-paid SIM cards/talk time. It was submitted that though the written submissions of the assessee have been extracted in part in the orders, however, without assigning any specific reasoning, relief has not been granted. Referring to the record, it was submitted that reliance had been placed upon the decision of the Hon'ble Karnataka High Court in th....
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....ntion to the decisions against the assessee available in public domain which were rendered by the Kerala High Court, Delhi High Court and the Calcutta High Court. These contrary views expressed by the respective Courts, it was submitted, have been fully addressed by the Hon'ble Karnataka High Court and Rajasthan High Court in their decisions. Thus, it was his argument that the latest decisions of the High Courts and the consistent orders of the ITAT are available in favour of the assessee. It was also his submission that there is no decision of the jurisdictional High Court. Accordingly, relying upon the proposition that in case there are contrary views of the High Courts then relying upon the decision of the Apex Court in the case of CIT Vs Vegetable Products (1973) 88 ITR 192 (S.C), it was his submission that the issue has to be decided in favour of the assessee. It was his submission that the said position of law has repeatedly been followed by the various Benches of the ITAT that wherever the decision of the jurisdictional High Court was not available and there were contrary views expressed by different High Courts, the view favourable to the assessee had to be ....
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....cordingly, it was his submission that the issue is fully covered in favour of the assessee and the addition, accordingly, made may be deleted. 6. The ld. CIT-DR placed heavy reliance on the respective impugned orders. Inviting attention to the finding of the CIT(A), available in para 5.4.7 and 5.4.8 in 2013-14 assessment year, the ld. CIT-DR carrying us through the same, disputed the argument that there was similarity of facts in the case of the present assessee vis-a-vis the facts considered in the favourable decision cited in the case of the other assessees. For ready reference, the relevant findings relied upon is extracted hereunder : 5.4.7 It is also pertinent that the same entity till AY 2006-07 (FY 2005-06) had been deducting TDS on discounts to distributors on pre-paid sims and other services. This gets revealed from the statement given during the assessment proceedings for the FY 2005-06. To quote the relevant excerpts are as under: "At the very outset, we wish to submit that for the FY 2005-06 and till 31st December 2006, the agreement between VSL-Punjab and the distributors was on 'Principal to Agent' basis, wherein VSL-Punjab pa....
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....ring services. The court had, after referring to the judgement of Supreme Court in BSNL Vs. Union of India. (emphasis supplied) 6.1 Relying upon the same it was his submission that the CIT(A) has taken into consideration that there was a change in the agreement between VSL Punjab i.e. assessee and the distributors. As per the claim put forth in the earlier years, the CIT(A) considered that the assessee was acting on a principal to agent basis and in the year under consideration, it was claimed that the nature of responsibilities and contractual obligations are being discharged were on a principal to principal basis. The claim, it was submitted, appears to have not been accepted by the CIT(A). The arguments of the ld. AR that the terms of Agreements are identical to the terms and Agreements as considered by the Hon'ble Karnataka High Court, it was submitted, were not borne out from the order of the CIT(A). Accordingly, it was his submission that the argument that there was a similarity on facts, cannot be said to have supported by the orders as this conclusion is not coming out from the record. 7. The ld.AR in response submitted that the assessee....
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.... 9. We have heard the rival submissions and perused the material available on record. Admittedly the legal issue as far as the Tribunals and authorities within the territorial jurisdiction of the Karnataka High Court and the Rajasthan High Court are concerned, there is no doubt that the issue stands concluded in favour of the assessee. Admittedly for the Tribunal's and the authorities which are in the territorial jurisdiction of the Kerala High Court, Delhi High Court and the Calcutta High Court are concerned, the issue can be considered to be settled against the assessee. There is no decision available on the issue of the jurisdictional High Court is an undisputed fact. The issue, thus, which arises for consideration in the present proceedings is what would constitute a binding precedent in these peculiar facts and circumstances for the Courts and the Tribunals where there is no decision of a jurisdictional High Court available. The said issue has been addressed by the Apex Court in the case of CIT Vs Vegetable Products (1973) 88 ITR 192 (S.C) where the Court was pleased to hold that "if the Court finds that the language of a taxing provision is ambiguous or capable ....
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.... Forum the issue for verification on facts be remanded to. The ld. CIT-DR made a prayer that it may be remanded to the AO. The ld. AR agreed requesting that the concerned authority may be directed to give the assessee a reasonable opportunity of being heard and in the eventuality he is not convinced by the assessee's explanation, the assessee be communicated the specific objections and be afforded a reasonable opportunity to meet the objections. 11. Accordingly, on a consideration of the peculiar facts and circumstances of the present appeals, we deem it appropriate acceding to the requests of the parties as noted above to remand the issue for verification on facts back to the file of the AO. The AO shall pass a speaking order in accordance with law after giving the assessee a reasonable and effective opportunity of being heard, specifically confronting the objections if any to the assessee so as to enable the assessee to meet the objections etc. 12. The legal issue as we have earlier addressed in the absence of any decision by the jurisdictional High Court and considering the decisions rendered by the Hon'ble Karnataka High Court and Raj....
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....tever reason. It is the Channel Partner and the Distributor who have to insure the products and the godowns at their cost. They are even prevented from making any representation to the retailers unless authorized by the assessee. What is given by the assessee to its Distributor/ Channel Partner is a trade discount. It is not commission. 52. In Qatar Airways case it was held that, when the airlines sell the air tickets it would have no information about the exact rate at which the tickets would ultimately be sold by their agents since the agents had been given discretion to sell the tickets at any rate between the fixed minimum commercial price and the published price. The question of deducting any tax at source would not arise. 53. In the Ahmedabad Stamp Vendors' Association case also, it was held that, when the licensed stamp vendors took delivery of stamp papers on payment of full price less discount and they sell such stamp papers to retail customers, neither of the two activities can be termed as the service in the course of buying or selling of goods. Discount given to the Stamp Vendors is for purchasing the stamps in bulk quantity and the said amount is ....
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....mission to the travel agent on which assessee-airline deduct tax at source. The dispute was only in respect of the money or monies which the travel agent retains over and above the net fare. In that context, the Delhi High Court held that, under an agreement only one relationship exists and the transaction is a singular transaction which is executed between the travel agent while acting on behalf of the principal airline in selling the traffic documents/air tickets to a third party who is a passenger and, therefore, the second leg of the transaction cannot be different from the first leg of the transaction. 56. In the Idea Cellular Limited's case, 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 ....
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....ip 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 difference between the sale price to retailer and the price which the distributor pays to the assessee is his income from business. It cannot be categorized as commission. The sale is subject to conditions, and stipulations. This by itself does not show and establish principal and agent relationship. 60. The following illustration makes the point clear: On delivery of the prepaid card, the assessee raises invoices and updates the accounts.....
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....n turn may sell the SIM cards to a subdistributor who in turn may sell the SIM cards to the retailer of them have to share Rs. 20/~ which is allowed as discount by the assessee to the distributor. There is no relationship between the assessee and the sub-distributor as well as the retailer. However, under the terms of the agreement, several obligations flow in so far as the services to be rendered by the assessee to the customer is concerned and, therefore, it cannot be said that there exists a relationship of principal and agent. In the facts of the case, we are satisfied that, it is a sale of right to service. The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands. The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS. Once it is held that the right to service can be sold then the relati....
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....of M / s Bharti Hexacom Limited (supra), stated to be a subsidiary of the assessee, held that the discount paid to distributors was not in the nature of commission as envisaged u/s 194H of the Act and thus there was no liability to deduct tax at source on the same. The I.T.A.T. Jaipur Bench following the decision of the Hon'ble Rajasthan High Court in the case of M / s Bharti Hexacom Limited (supra) deleted the demand raised on identical issue in the case of M / s Bharti Hexacom Limited (supra) in a subsequent assessment year. Further we note that the I.T.A.T. Gauhati Bench has also affirmed the aforesaid proposition of law in the matter of the assessee itself i.e. Bharti Airtel Limited in its order dated 22.2.2018 in ITA Nos.59 to 62 / Guahati/ 20 1 2 relating to assessment years 2006-07 to 2009- 10. Therefore, we find that the issue has been decided in favour of the assessee by various High Courts and various Benches of the I.T.A.T. in the case of the assessee's group concerns only wherein the business model is more or less of identical nature. The said decisions are therefore applicable to the facts of the present case. Moreover, for deciding the issue before us , when n....
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....right in law in holding that the assessee could not have been deemed as one in default for non-deduction of tax at source on roaming charges paid by it to other service providers when the Assessing Authority has rightly held as assessee in default due to non deduction of TDS as required under Section 194 J of the Income Tax Act, 1961. (2) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is right in law in holding that the roaming charges does not require any human intervention and that the charges received or paid on account of this is not technical fees and does not fall under purview of Section 194J of the Act even when the Assessing Authority rightly treated the payment made by Vodafone South Ltd., to various operators as technical services falling within the ambit of the provisions of Section 194J of the ACT?" (3) The appellant craves leave to amend, add, alter or delete any of the aforesaid grounds till the disposal. 16.1 The ld. CIT-DR in support of the departmental grounds placed reliance upon the order dated 19.03.2014 passed by the AO u/s 201(1) r.w.s. 201(1A) in the respective years. Reliance was placed upon the o....
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.... April, 11 2,28,46,128 22,84,612 Nil 22,84,612 36 822460 3107072 May, i 1 2,15,70,297 21,57,029 Nil 21,57,029 35 754960 2911989 June. 11 2,47,58,144 24,75,8 i4 Nil 24,75,814 34 841777 3317591 July, 1 1 2,64,51,812 26,45,181 Nil 26,15,181 33 872910 3518091 Aug., 11 2,26,67,761 22,66,776 Nil 22,66,776 32 725368 2992144 Sept., 1 1 2,13,98,507 21,39,850 Nil 21,39,850 31 663353 2803203 Oct., 1 1 1,95,73,066 19,57,306 Nil 19,57,306 30 587191 2544492 Nov., 11 2,30,83,690 23,08,369 Nil 23,08,369 29 669427 2977796 Dec. 1 1 2,44,98,364 24,49,836 Nil 24,49,836 28 685954 3135790 Jan' 12 2,65,33,029 26,53,3,02 Nil 26,53,3,02 27 716391 3369693 Feb'12 2,63,81,568 26,38,156 Nil 26,38,156 26 685920 3324076 March' 12 2,56,06,904 25,60,690 Nil 25,60,690 25 640172 3200862 Total 28,53,69....
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....ability Apr-11 317,494 31,749 Nil 31,749 36 11,430 43,179 May-11 299,764 29,976 Nil 29,976 35 10,792 40,768 Jun-11 344,066 34,407 Nil 34,407 34 12,386 46,793 July,11 367,603 36,760 Nil 36,760 33 13,234 49,994 Aug-ll 315,016 31,502 Nil 31,502 32 11,341 42,842 Sep-11 297,377 29,738 Nil 29,738 31 10,706 40,443 Oct-11 272,008 27,201 Nil 27,201 30 9,792 36,993 Nov-11 320,796 32,080 Nil 32,080 29 11,549 43,628 Dec-11 340,456 34,046 Nil 34,046 28 12,256 46,302 Jan-12 368,731 36,873 Nil 36,873 27 13,274 50,147 Feb-12 366,627 36,663 Nil 36,663 26 13,199 49,861 Mar-12 355,861 35,586 Nil 35,586 25 12,811 48,397 Total (A) 3,965,798 396,580 396,580 142,769 539,348 In spite of the sufficient times/opportunities taken by the assessee deductor, the PR has failed to furnish the supporting evidence to prove its contention to the sum of Rs. 39,65,798/-, as given abo....
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.... human intervention". This decision is directly applicable to the present case. Moreover, Hon'ble ITAT in appellant's own case for AY 2007-08 to 2011-12 [ITA No. 3593 to 3596/Del/2012] has decided the similar issue in favour of the assessee and the Department has accepted the Hon'ble ITAT ruling and has also not preferred an appeal before High Court. Though the decision of ITAT in this case is on IUC Charges, it is pertinent to mention that the technical process of Roaming and IUC are similar as both entail carriage of calls of the subscriber of the home network to the network of the other operator. Respectfully following the above decisions, it is held the process of roaming does not require any human intervention and cannot be said to be a technical service for the purpose of deduction of tax at source under section 194 J of the Income Tax Act, 1961. Accordingly, the grounds of appeal no 3 is allowed 6. Ground no. '1' of appeal is general in nature and requires no separate adjudication. Since the substantive grounds namely '2' and '3' have been dealt with, no separate adjudication on grounds '4' and '5' is required. ....
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....aced upon the order of the Chandigarh Bench of the ITAT dated 28.06.2018 in ITA 21 to 24/CHD/2018 pertaining to 2005-06 to 2009-10 assessment year in the case of DCIT Vs Idea Cellular Ltd. wherein on a similar issue, the department's appeal was dismissed by the ITAT. 18. We have heard the rival submissions and perused the material available on record. It is seen that the Co-ordinate Bench in ITA 21 to 24/CHD/2018 pertaining to 2005-06 considered an identical appeal of the Revenue and concluded the issue in para 6 of the aforesaid decision holding as under : "6. We have heard the rival submissions and perused the material on record. The relevant facts of the case are that the assessee is engaged in the business of providing telecommunication services in telecom circles of Punjab for which purposes, it had entered into roaming agreements with OTOs. The AO noticed that no TDS has been deducted by it from the roaming charges paid by the assessee. The AO held the assessee to be assessee in default u/s 201(1) r.w.s. 194 J of the Act as he was of the view that roaming is nothing but fees for technical services and since there was human intervention duri....