TaxTMI 
TaxTMI 
2020 (1) TMI 601
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.... the relationship between the Appellant and the Prepaid Distributor is of Principal to Principal ("P2P") and not Principal to Agent ("P2A"). 3. The Appellant, therefore, prays that it be held that section 194H of the Act is not applicable and consequentially, the Appellant cannot be treated as an "assessee in default" u/s.201 r.w.s 194H of the Act. 4. Without prejudice to the above, the Appellant prays that it be held that since the Appellant is not "a person responsible for paying" commission to the Prepaid Distributor, the Appellant cannot be treated as an "assessee in default" u/s. 201 r.w.s. 194H of the Act. 5. Without prejudice to the above, in the absence of any "payment" or "credit" by the Appellant in favour of the Prepaid Distributor on account of the alleged commission, it be held that the Appellant cannot be treated as an "assessee in default" u/s. 201 r.w.s 194H of the Act. 6. Without prejudice to the above, the Appellant prays that if the mechanism to deduct tax at source u/s. 194H fails, the Appellant cannot be treated as an "assessee in default" u/s 201 r.w.s 194H of the Act. 7. 'Without prejudice to the above, in the ....
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....lling its prepaid cellular connections and recharge coupons to the distributor in the form of discount / commission on the market price, the prepaid card as well as recharge coupon in the form of predefined information enabling the ultimate user to have access to the service provided by the assessee company. On the basis of the market price and the commission allowed by the assessee to its distributor, the AO took his view that the distributions on bulk sale of such prepaid cards and recharge coupons were 'commission' paid to them which required deduction at source u/s 194H. Since the assessee failed to deduct tax at source, the assessee was treated as an assessee in default and accordingly a demand was raised u/s 201(1) r.w.s. 201(1A). The AO further noted that the assessee has given discount to prepaid distributor of Rs. 1284,57,00,000/- and tax ought to be deducted under section 194H @10% and interest u/s 201(1A) @1% on the same. 3. On appeal before CIT(A), the action of AO was confirmed. However, the Ld. CIT(A) directed the AO to restrict the order for Mumbai Circle, for treating the assessee in default in respect of tax required to be deducted at source on the payment of di....
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....(Raj) held that section 194H is not applicable on sale of prepaid SIM cards to distributors. The ld. AR further submits that Mumbai Tribunal also decided similar issue in the following cases:- • Tata Tele Services vs ACIT ITA No.2043/M/2014, • ACIT Vs Reliance Communications Infrastructure Ltd in ITA 4677/Mum/2012 & 6726/Mum/2012, • JCIT vs Bharat Business Channels Ltd (170 ITD 628), • JCIT Vs Tata Teleservices (Mah.)Ltd ITA No.3857/Mum/2016 order. Dtd June 8, 2018, • Tata Sky Ltd ITA No.6923-6926/Mum/2012 Order dt October 12, 2018 6. Further, the ld.AR for the assessee further submits that in assessee's own case, Pune Tribunal, Jaipur Tribunal, Bangalore Tribunal, Delhi Tribunal and Chennai Tribunal, decided identical issue in favour of the assessee in following cases:- • ITA 807 & 808/Pun/2016 Dated May 07, 2018, • ITAs 1041 of 2013 order dated Jan 04,2017, • ITA 798/JP/2015 order. Dated May 13,2016, • ITAs No.356 to 359/JP/2012 dated May 22,2015, • ITA No.758-761/Bang/2014 dated May 1, 2018, • ITA Nos. 941 & 2382/Del/2015 dated May 1, ....
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....not explained the activity of dale of SIM cards. The ld. DR for the revenue relied on the decision of Hyderabad Tribunal in Idea Cellular Vs ACIT (2014) 51taxmann.com 50 Hyd Trib). The Pune Tribunal has not examined the facts in Qatar Airways [332 ITR 253 (Bom.)]. The ld. DR prayed for confirming the order of the ld. CIT(A). 11. We have considered the rival submissions of the ld. representatives of the parties and perused the material placed before us. We have also deliberated on various case law relied by ld. AR / DR for the parties. The assessing officer after considering the report of survey conducted at the premises of assessee on 09.09.2011 took his view that the margin allowed on the prepaid coupons was "commission" paid to the distributors, which should be subject to deduction of tax at source under section 194H. Since, the assessee failed to deduct the tax at sources, the assessee was treated as an assessee in default. From the record filed before us we find that the assessee filed Writ Petition challenging the jurisdiction of TDS Jurisdiction vide WP No. 2183 of 2014. The writ petition was decided vide order dated 29.09.2014, with the direction to raise all the issue be....
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....fit of guidance by Hon'ble jurisdictional High Court. 9. This issue is covered, in favour of the assessee, by Hon'ble Karnataka High Court's common judgment in the cases of Bharti Airtel Limited, Tata Teleservices Limited and Voadfone South Limited, reported as Bharti'AirtelLid. v. DCIT[2015] 372 1TR 33/228 Taxman 219 (Mag)/[2014J 52 laxmann.com 31 (Kar) wherein their Lordships have, inter alia, observed as follows: "62. In the appeals before us, the assessees sell prepaid cards/vouchers to the distributors. At the time of the assessee selling these prepaid 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 prepaid 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 to the distributor does not arise. The condition precedent for attracting Sec....
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....ducting the amount paying into the department, ultimately if the dealer is not liable to tax it is always open to him to for refund of the tax and, therefore, it cannot be said that Section I94H is not attracted to the case hand. As stated earlier, on a proper construction of Section I94H and keeping in mind the object wi which Chapter XVII is introduced, the person paying should be in possession of an income which is chargeable to lax 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, it is necessary to look into the accounts before granting any relief to them as set out above. They have accounted the entire price of the prepaid card at Rs. 100/- in ....
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.... assessee's network. Therefore, supply of Sim Card, whether it is treated as sale by the assessee or not. is only for the purpose of rendering continued services by the assessee to the subscriber of the mobile phone. Besides the purpose of retaining a mobile phone connection with a service provider, the subscriber has no use or value for the Sim Card purchased by him from assessee's distributor. The position is same so far as Recharge coupons or e-Top ups are concerned which are only air time charges collected from the subscribers in advance. We have to necessarily hold that our findings based on the observations of the Supreme Court in BS\L's case (supra) in the context of sales tax in the case of BPL Cellular- Lid. (supra) squarely apply to the assessee which is nothing but the successor company which has taken over the business of BPL Cellular Ltd. in Kerala. So much so, there is no sale of any goods involved as claimed by the assessee and the entire charges collected by the assessee at the time of delivery of Sim Cards or Recharge coupons is only for rendering services to ultimate subscribers and the distributor is only the middleman arranging customers or ....
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....iven by the assessee to the distributor at the time of delivery of Sim Cards or Recharge coupons against advance payment made by the distributor. The distributor undoubtedly charges over and above what is paid to the assessee and the only limitation is that the distributor cannot charge anything more than the MRP shown in the product namely, Sim Card or Recharge coupon. Distributor directly or indirectly gets customers for the assessee and Sim Cards are only used for giving connection to the customers procured by the distributor for the assessee. The assessee is accountable to the subscribers for failure to render prompt services pursuant to connections given by the distributor for the assessee. Therefore, the distributor acts on behalf of the assessee for procuring and retaining customers and. therefore, the discount given is nothing but commission within the meaning of Explanation (i) on which tax is deductible under Section I94H of the Act. The contention of the assessee that discount is not paid by the assessee to the distributor but is reduced from the price and so much so, deduction under Section 194H is not possible also does not apply because it was the duty of the assessee....
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....s: "It should not be overlooked that IT Act is an all India statute, and if a Tribunal in Madras has proceed on the fooling that s. 140A(3) was nonexistent, the order of penalty under that section cannot be imposed by any authority under the Act. Until a contrary decision is given by any other competent High Court, which is binding on the Tribunal in the State of Bombay (as it then was), it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land ...... an authority like Tribunal has to respect the iaw laid down by the High Court, though of a different State, so long as there is no contrary decision on that issue by any other High Court ......" 13. In the case of CITv. Shah Electrical Corpn. [1994] 207 ITR 350 (Gui). vide judgment dated 23rd June 1993, Their Lordships had an occasion to consider the aforesaid views. It was in this context that Their Lordships have observed as follows: "3. What is contended by the learned advocate for the Revenue is that the Tribunal decided the appeal on 26th Oct., 1976. By that time, the Andhra Pradesh High Court had upheld the validity of s. 140A(3). He....
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....xcept on the issue of legality of the statutory provision itself, the decisions of even the non-jurisdictional High Courts are binding on the lower tiers of judicial hierarchy such as this Tribunal. As we hold so, we are alive to the school of thought that non-jurisdictional High Courts are not binding on the subordinate courts and Tribunals, as articulated by Hon'ble Punjab & Haryana High Court in the case of CIT v. Ved Parkash [1989J 178 ITR 332 44 Taxman 365 but then that was a case in the context of validity of a statutory provision, i.e. I40A(3), covered by the rider to the general proposition. This exception does not come into play in the present case as we are not, and we cannot be, dealing with the constitutional validity of a provision. Clearly, therefore, the views expressed by Hon'ble non-jurisdictional High Court, in the absence of a direct decision on that issue by the Hon'ble jurisdictional High Court, deserve utmost respect and deference. 16. The difficulty, however, arises in the case in which Hon'ble nonjurisdictional High Courts have xpressed conflicting views and the subordinate courts and Tribunals do not have the benefit of guidance rom....
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....ss, to note the exception to this general rule as well. Supreme Court had, however, some occasions to deviate from this general principle of interpretation of taxing statute which can be construed as exceptions to this general rule. It has been held that the rule of resolving ambiguities in favour of taxpayer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorised. This exception, laid down in Littman v. Barron 1952(2) AIR 393 and followed by Apex Court in Mangalore Chemicals & Fertilizers Ltd v. Dy. Commissioner of Commercial Taxes [1992] Suppl. (I) SCC 21 and Novopan India Lid. v. CCE& C 1994 (73) ELT 769 (SC), has been summed up in the words of Lord Lohen, "in case of ambiguity, a taxing statute should be construed in favour of a taxpayer does not apply to a provision giving taxpayer relief in certain cases from a section clearly imposing liability". This exception has been also reiterated by Supreme Court in the case of Oil & Natural Gas Commission v. C!T [2015] 59 (axmann.com 5. However, in the present case, this exception has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the....
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....ich has considered and distinguished earlier rulings of other High Courts, deserves to be followed". Our conclusion is the same but our decision to follow Hon'ble Karnataka High Court's judgment is simply this judgment is to be preferred over, in the light of settled legal principles set out above, other Hon'ble High Court judgments, because it is favourable to the assessee. With utmost respect and reverence to all the Hon'ble Courts, it is not for us to choose which decision is to be followed because of its merits because of what it has discussed or because of how it has distinguished other Hon'ble High Courts or because of its liming i.e. of its being latest. Even when a nonjurisdictional High Court distinguishes all other decisions of Hon'ble High Courts but holds a view unfavourable to the assessee, that decision cannot normally be preferred over a decision from another Hon'ble non-jurisdictional High Court decision, of equal stature, in favour of the assessee. That is, as we understand, correct approach to the matter and that is the reason why we come to the same conclusion as the SMC did but for altogether different reasons. 23. We have al....
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....any obligations VWL's behalf or incur any liability on behalf of VWL or accept any contract binding upon VWL (clause 17.1 of the Agreement). 5. Çhannel Partner be liable to pay all the taxes such as sales tax, serv ice tax applicable and payable in respect of the subject-matter of this agreement and statutory increase in respect thereof'- Page 72. The distributor shall pay all licenses, fee, taxes, duties, sales-tax, service tax and any other charges, assessments penalties whether statutory or otherwise levied by any authority in connection with the operation of distributor's officer (Clause III(b) of Annexure III to agreement). 6. 'After sale of products distributor / channel partner cannot return goods to the assessee for whatever reason'- Page 74. The assessee shall not be responsible for any post delivery defect in the service tickets. No request of refund of any money shall be entertained by the assessee in any circumstances (Clause e-Annexure I). 7. 'Distributors are even prevented from making any representation to the retailers unless authorized by the assessee'. The distributor shall not make any promises or representations or give any warr....