TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 601
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....tor 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 absence of any decision of the jurisdictional Tribunal and Hon'ble High Court, the Appellant pr....
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....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 discount / commission. Further aggrieved by the order of ld. CIT(A), the assessee has filed present appeal before us. 4. We have heard the submission of Ld.AR o....
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....ue 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, 2018, * ITA No.1586/Che/2015 dated July 15, 2018 7. The ld.AR further submits that in case of other similar service provider, Ahmedabad Tribunal , Chennai Tribunal, Delhi Tribunal, and Jaipur Tribunal decided the issue in favour of the assessee in the following cases:- * DCIT vs Vod....
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....es 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 before appellate authority. Accordingly the assessee filed appeal before ld CIT(A). The ld CIT(A) affirmed the action of assessing officer. However, on the issue of Jurisdiction the ld CIT(A) directed that assessing officer TDS could exercised his jurisdiction in respect of Mumbai Circle only. 12. We find that the Ahmedabad Tribunal in the case of Vodafone Essar Gujarat Ltd vs ACIT, TDS Circle, Ah....
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....d 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 Section 194H of the Act is that there should be an income payable by the assessee to the distributor. In other words the income accrued or belonging to the distributor should be in the hands of the assessees. Then out of that income, the assessee has to deduct income tax thereon at the rate of 10% and then pay the remaining portion of the income to the distributor. In this context it is pertinent to mention that the assessee sel....
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....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 their books of account and showing the discount of Rs. 20/- to the dealer. Only if they are showing Rs. 80/-as the sale price and not reflecting in their accounts a credit of Rs. 207- to the distributor, then there is no liability to deduct tax under Section 194H of the Act. This exercise has to be done by the assessing authority before granting any relief. The same exercise can be done even in respect of other assessees also. 65. In the....
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....re 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 subscribers for the assessee. The terms of distribution agreement clearly indicate that it is for the distributor to enroll the subscribers with proper identification and documentation which responsibility is entrusted by the assessee on the distributors under the agreement. It is pertinent to note that besides the discount given at the time of supply of Sim Cards and Recharge coupons, the assessee is not paying any amount to the distributors for the services rendered by th....
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....tion 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 to deduct tax at source at the time of passing on the discount benefit to the distributors and the assessee could have given discount net of the tax amount or given full discount and recovered tax amount thereon from the distributors to remit the same in terms of Section I94H of the Act." 11. There is no, and there cannot be any, dispute about the fundamental legal position that in the hierarchical judicial system, that we have in our country, lower tiers of judicial hierarchy ....
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....aw 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 drew our attention to the judgment of the Andhra Pradesh High Court in Kashiratn v. ITO (1977) 107 ITR 825 (API. From the report, it appears that the said judgment was delivered on 10th Dec., 1975. Therefore, the Tribunal was not right in proceeding on the basis that only the Madras High Court judgment was in the field and. therefore, it was open to it to proceed on the basis that s. 140A(3) was non-existent. He also submitted that for that reason, the Tribunal was not right in following the judgment of the Bombay Hi....
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....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 Hon'ble jurisdictional High Court. 17. In our humble understanding of the legal position and of the propriety, it will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoints, as such an exercise will de facto amount to sitting in judgment over the views of the Hon'ble High Courts- something diametrically opposed to the very basic principles of hierarchical judicial system. Of course, when the matter travels to Hon'ble jurisdictional High Court, Their Lordships, being unfettered by the....
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....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 interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. v. Dadabhoy's New Chirmiry Ponri Hill Colliery Co. Lid. AIR 1972 SC 614. That is what Hon'ble jurisdictional High Court has also held in the case of Shah Electrical Corporation (supra). None of these exceptions, however, admittedly apply to the situation that we are dealing with at present. 20. There can be no dispute on the proposition that irrespective of whether or not the judgments of Hon'ble non-jurisdictional High Courts are binding on us. these judgments deserve utmost r....
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....use 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 also noted that material facts of the case and the terms of agreements with the distributors are the same as were before Hon'ble Karnataka High Court in the above case. A comparative chart of these clauses is as follows: Sr.No. Disclosure in the Agreement as highlighted in the Hon'ble Karnataka High Court's judgement - relevant extracts Corresponding clause in the agreement of the assessee with its prepaid distributors 1. 'The agreement stipulates that the distributors have to represent to the customers that the distributor's agreement with the customers / its dealers is on Principal to Principal basis and assessee is no way concerned or ....
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....utor / 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 warranties or guarantees in respect of the products (i.e. SIM card and prepaid vouchers)(Clause 1 i.e. Annexure III). 24. In the light of the above discussions, and particularly as there is no dispute that the factual matrix of all the cases before the Hon'ble non jurisdictional High Courts were materially the same as in this case, in conformity with the esteemed views of Hon'ble Karnataka High Court in Bharti Airtel's case (supra), and hold as follows: (a) On the facts of the case, and as is evident from a reading of the agreements before us, the assessee has sold, by way of prepaid vouchers, e-top ups and prepaid SIM cards, the 'right to service' on principal to principa....