TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1116
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....ounds of appeal of the assessee are as under: "b) The appellant was given very short opportunity to reply before concluding the assessment proceedings u/s 201(1)/201(1A) of the Act." 4. The Ld. CIT(A) has dismissed this ground of appeal of the assessee vide para 5.1 of his order and was of the opinion that the AO has given sufficient opportunity to the assessee. Assailing the aforesaid action of the Ld. CIT(A), the Ld. Counsel draws our attention to the affidavit filed by the assessee to show that the assessee had not got proper opportunity before the AO. We note that a survey was carried out on the business premises of the assessee company on 05.09.2016. Thereafter notice u/s 201(1)/201(1A) of the Act was issued to the company on 28.09.2016 for the aforesaid assessment years. In terms of the questionnaire raised be the AO, the company was required to furnish the following details: a) Copies of audited balance sheet, profit and loss account Form 3CD along with computation of income; b) Details of bank accounts etc.; c) Copy of TDS return filed giving details of TDS payments; d) Party wise details of MRP, invoices amount and commission/discount allowed on recharge vouche....
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....port the aforesaid claim of the assessee. And it was pointed out to us that thereafter (assessee's reply to AO dated 17.01.2017) there was no further direction/action from the part of the AO till January, 2019 i.e. for 2 years there was no action on this issue. 7. Thereafter on 11.01.2019, the assessee received another notice from the successor AO u/s 201 of the Act, who repeated the allegation raised by his predecessor against the assessee and the AO then directed the assessee to submit the general ledger containing MRP of recharge vouchers/starter packs distributors price and discount given as well as audit report and tax audit report, which facts we note from a perusal of copy of notice dated 11.01.2019 which is enclosed along with the Annexure 'A' which is found placed at page 29. The assessee company pursuant to the direction of AO dated 24.01.2019 submitted the audit and tax audit reports (copy of letter dated 24.01.2019 of assessee submitting these documents is seen enclosed as Annexure 4) and it was brought to our attention that copy of the general ledger was submitted along with letter dated 31.01.2019 (Annexure 5). Thereafter the AO issued another letter dated 06.02.201....
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..... Idea (effective from 31.08.2018) which resulted in some practical difficulties in retrieval of agreements (which facts are explained in the Affidavit) and the Ld. Counsel pleaded that due to aforesaid reason, and the failure on the part of earlier Ld. AR as discussed above should not be a ground to deny justice to assessee and therefore the documents (infra) which is essential to adjudicate the lis before us need to be admitted. The following documents according to him were sine qua non to decide the issue. a) Copy of the pre-paid marketing agreement dated 07.11.2002; b) Distributorship agreement dated 25.04.2014; c) Distributorship agreement dated 19.08.2015; d) Distributorship agreement dated 11.08.2016; 8. Shri Deepak Chopra, the Ld. Counsel for assessee drew our attention to the notice that there were several changes between the distributorship agreements dated 29.09.2010 filed before the Ld. CIT(A) and the agreements after that date and which is applicable in the relevant assessment years under consideration and drew our attention to certain notable changes: a) Clauses 7.6.2 and 7.6.3 of the 2010 agreement were merged into one clause - being clause 7.6.2 of the ne....
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....he reply by assessee as on 17.01.2017 and so the assessee did not produce the contracts referred to in para 7(a) to (d) supra. And when the AO again asked questions after two years on 11.01.2019, he did not bother to call for the new contracts, so the assessee did not file it before AO, prompting AO to declare the assessee as a defaulter for the purpose of Section 201 of the Act actions of AO was without giving proper opportunity to the assessee at assessment stage and by relying on the case of Tin Box Company Vs. CIT [Three Hon'ble Judges Bench] (2001) 249 ITR 216 (SC), he prayed that the matter be remanded for de novo adjudication of the AO. 10. Per contra, the Ld. CIT(DR) vehemently opposing the plea of the assessee to remand the issue back to AO, wondered as to how the assessee did not produce the documents referred to in para 7(a) to (d) supra before the AO/Ld. CIT(A). So according to him, this was clearly an afterthought on the part of assessee to wriggle out of the judicial decisions against the assessee in the earlier years and should not be allowed. 11. Having heard both the parties, we note that the AO had held that the Appellant/assessee had failed to deduct tax at sou....
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....afone East Ltd. Vs. DCIT (ITA 1499- 1502/Kol/2015) (pertaining to AYs 2010-11 to 2011-12) had noted that w.e.f. January 2007 the contractual terms had changed and decided the matter in favour of the assessee (M/s. Vodafone East Ltd.). 13. According to the Ld. Counsel for assessee, consideration of the later agreements [mentioned in para 7(a) to (d) supra] has a direct and significant bearing on the transfer of risk and relationship between the parties (assessee/Appellant and its distributors) in respect of the pre-paid SIM cards. In the light of the aforesaid facts and in order to distinguish the facts from the earlier years, four agreements were filed along with the application dated 13.08.2019 before this Tribunal- (a) Copy of the pre-paid marketing agreement dated 07.11.2014; (b) Distributorship agreement dated 25.04.2014; (c) Distributorship agreement dated 19.08.2015; (d) Distributorship agreement dated 11.08.2016. 14. And it was brought to our notice that during the course of the hearing conducted on 09.09.2019, the Tribunal directed the Appellant to file an affidavit in support of the Rule 29 application, since the Ld. Departmental Representative had raised doubts ....
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....t source in respect of the discount to various distributors. The said notice also referred to the preceding years proceedings under section 201 and the confirmation of the applicability of section 194H on such discounts by the first appellate authority. The said notice required the company to submit the general ledger containing MRP of recharge vouchers/starter packs distributors price and discount given as well as audit report and tax audit report. Copy of notice dated 11.1.2019 is enclosed as Annexure 3. 5. By way of its letter dated 24.1.2019 the Company submitted the audit and tax audit reports. Copy of letter dated 24.1.2019 is annexed as Annexure 4. The copy of the general ledger was submitted by way of letter dated 31.1.2019. Copy of letters dated 24.1.2019 and 31.1.2019 are enclosed as Annexures 4 and 5 respectively. 6. On 6.2.2019 another notice was issued to the Company to submit distributor wise details in respect of the discount given to distributors. The AO also required the Company to file Form 26A from distributors. Copy of notice dated 6.2.2019 is enclosed as Annexure 6. On 18.2.2019 the Company sought additional time to furnish the said details. Copy of letter ....
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.... dated 29.9.2010 filed before the CIT(A) revealed that there were several changes when compared with the later agreements (which are sought to be placed for consideration before the Hon'ble Tribunal now) applicable for the years under consideration. Although most of the terms and conditions as contained in the 2010 agreement remained the same as the later agreements with the following notable changes- (a) Clauses 7.6.2 and 7.6.3 of the 2010 agreement were merged into one clause - being clause 7.6.2 of the new agreements. (b) Clause 13 of the 2010 agreement (relating to severance with distributors and its consequences) underwent a significant change in the later agreements (as applicable for the year under consideration). 13. The change in clause 13 of the later agreements has a direct and significant bearing on the transfer of risk and the relationship between the parties in respect of the sale of pre-paid sim cards and the effect of termination or severance. 14. It is submitted that post the merger of Vodafone and Idea (effective 31.8.2018) there were some practical difficulties in retrieval of the agreements. This was due to changes in the team and alignment of accounti....
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....s sub-dealers or retailers or ultimate customers at any price maximum to the extent of MRP. 4. It is the distributor who pays the discounted price to us and there is no payment of any kind made by us to the Distributor for the above transaction. 5. ............................................. 6. For attracting provisions of section of I94H of the Act it is essential that assesses Company, must appoint a person who would act on its behalf in the course of rendering services to third parties and only then it can be said that there exist Principal to Agent (P2A) relationship. In the present case the arrangement between the assessee and Prepaid Distributors is not in the nature of P2A but Principal to Principal (P2P). In this context, attention is: invited to the following: > The Distributor is not acting as an agent of the Assessee but as art- independent contracting party. (Refer Clause 4 of the Agreement at page no. 4), which specifically states that the Agreement between the Assessee and the Distributor is on a principal to principal basis i.e. the Distributor, is hot an agent of the Assessee. This being the specific provision, agreed by both the parties, it is not open to....
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....nsible for any unused or unsold stock lying with the distributor post termination. (Refer Clause 7 page 5 to 10) Thus, the above clauses read with agreement would prove that the relationship is of P2P and risk and rewards are also being transferred to Distributor, The risk of stock remaining unsold, expired etc is with Distributor. Also, it would also demonstrate that the difference between price paid, to Assessee and selling price to Retailer is on his own account and not on account of Assessee and hence Assessee is not a 'person responsible for paying any income'. In fact, a mere purchase from Assessee does not generate income at the stage of purchase, at which stage the financial transactionwith Assessed has already ended. 7. Further, it has been held under the English Law that where an Agent is permitted to sell the goods at such prices, and on such terms and conditions as he thinks fit, and when he is allowed to retain any profits over and above an agreed price, the payment of which he guarantees to the principal, the Agent could be regarded as the "Buyer" of goods and not an Agent in law. Re "Neville, ex p White (1871) 6 Ch App 397. Also Hon'ble. Supreme Court of Indi....
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.... do not exist between vendor and purchaser - Ex parte Bright, In re Smith (1879), 10 Ch. Div. 566; Ex parte White, In re Nevill - (1871) 6Ch. 397-" Applying the ratio laid down by the Hon'ble Supreme Court, in the present case also, the Distributors is paying a discounted price in advance on his own account arid he is not accountable to us' in respect of the price which the- retailer realizes and hence, he is acting as a Principal. 8. It is a settled law that restrictions per se would not make all transactions that of Principal and Agent. In this regards, reliance is placed on following decisions: * Ahmedabad Stamp Vendors Associations vs. Union of India (257 ITR 202) (Guj), now affirmed by the Hon'ble Supreme Court is reported in 348 ITR 378; * Bhopal Sugar Industries vs. STO (1977 - 064 AIR 1275) * Foster's India P. Ltd. Vs. ITO (117 TTJ 346). Thus, we humbly submit that based on the ratio of the above decisions as also the agreement for the relevant assessment year, the relationship with Distributor is on principal to principal basis and hence, TDS u/s. 194H of the Act cannot be applied. 9. ............................................. 10. .......................
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....ome or not and accordingly, to the extent, tax credit to be given to the Assessee. 10. ............................................. 11. ............................................. 12. ............................................. In view of the: above foregoing, we submit, that we shall not be liable to pay tax u/s 194H of the Act, hence, we are not an "assessee in default u/s 201(1) of the Act. We hope our above submissions provide sufficient cause as to why no tax was deducted by us and that we cannot be treated as an "assessee in default" under section 201(1) of the Act. We further request Your Goodself to kindly grant us an opportunity of personal hearing, in the matter, in case Your Goodself decides otherwise." 16. We also note that the aforesaid reply of assessee to AO dated 17.01.2017 has been received by the ACIT (Shri Malay Bhadra) on 20.01.2017 [His signature with the official seal and hand written endorsement of having received the letter is found on the letter of assessee dated 17.01.2017 page (2) Annexure-2] and thereafter we note that no action was initiated by the AO till 11.01.2019. That is after approximately two years, the successor AO initiated acti....