AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1116
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....ssee preferred before the CIT(A) wherein the grounds 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 w....
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....7.01.2017, neither any further query was raised by the AO nor the AO asked the assessee to produce any agreement to support 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 le....
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....re on the part of the earlier AR of the assessee and it happened also due to the fact of merger between M/s. Vodafone and M/s. 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 d....
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....een them cannot be termed as that between Principal and its Agent (Para 4-6 supra). However, the AO did not call for the changed contracts and kept silent after perusal of the 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 assess....
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....ment of the jurisdictional Hon'ble High Court in the case of Bharti Cellular Ltd. Vs. ACIT (2011) (354 ITR 507) (Cal.). It was also submitted that this Trubunal in the case of Vodafone 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 dur....
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....roceedings were conducted between January 2017 till January 2019 as explained in the following para's. 4. On 11.1.2019 the Company received another notice (by the successor AO) under section 201 of the Act. It was alleged that the Company has failed to deduct tax at 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 distr....
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....o place on record the following agreements- (a) Copy of the pre-paid marketing agreement dated 7.11.2002; (b) Distributorship agreement dated 25.4.2014; (c) Distributorship agreement dated 19.8.2015; (d) Distributorship agreement dated 11.8.2016. 12. This was advised as a perusal of the Distributorship agreement 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 signif....
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.... at a discounted price which is Maximum. Retail Price ("MRP") less the discount. The Distributors places the order for SIM/RV with us vide the Purchase Order, and the discounted price of the SJM/RV is required to be paid in advance by the Distributors irrespective of the fact that whether such products purchased are in turn sold or are remained unsold. 3. The Distributors can, in turn, independently sell the SIM/RV to various 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 con....
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....be treated as used by the distributors at the end of the expiry period unless the same is brought to the notice of the Assessee by the distributor Within the expiry period. (Refer Clause 7 page 5 to 10) > On termination under the Principal and Agency relationship, the Principal is liable to take back the unsold stock without paying anything to the Agent since tire stock was always belonging to Principal. In the Assessee's case, on the Distributor returning the SIM/RV, the Assessed is not responsible 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 fi....
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....ice that he thinks fit after they have been so manipulated, and is still Only liable to pay for them at a price fixed beforehand, without any reference to the mice at which he sold them, it is impossible to say that the produce of the goods so sold was the money of the consignors, or that the relation o f principal and agent exists - Ex parte White, In re Nevill (1871), 6 Ch. 397 - A purchaser had not to account to his vendor; his only duty is to pay him; and all the other rights and duties which exist between principal and agent 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 Ass....
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....the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT (2931TR 226) where it has been held that where deductee, recipient of income, has already paid taxes on amount received from deductor, the department once again cannot recover tax from the deductor on same income by treating deductor to be "assessee-in-default" for shortfall in. its amount of tax deducted at source. 9. In the case of Bharti Cellular Limited vs. ACIT (200 Taxman 254) (Cal), the Hon'ble Calcutta High Court directed to the Assessing Officer to examine whether ail the franchisees, whose Income-tax has not been deducted at source by the assessee, has paid taxes on their income 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....