TaxTMI 
TaxTMI 
2022 (1) TMI 343
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....er on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the factual and legal matrix brought out by the AO in the order passed u/s. 201(1)/201(1A) of the Act, wherein the AO has relied on the examination of technical expert wherein it was confirmed that interconnectivity/roaming charges are in the nature of technical service as there exists human intervention. (3) The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and the order of the Assessing Officer be restored. 4. Grounds of appeal in assessee's appeal read as under :- 1. Ground No. 1 - The Appellant is not liable to deduct tax on discount extended to its prepaid distributors 1.1. On the facts and circumstances of the case and in law, the learned CIT( A) has erred in concluding that discount extended to the prepaid distributors is in the nature of commission liable for deduction of tax at source under section 194H of the Act. 1.2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that the relationship between the appellant and prepaid distributors is t....
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.... reason to assume that the accounting treatment adopted by the Appellant during the subject AY was different then that followed in past AYs. 1.8. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not following the judicial precedents in the Appellant's own case and in the case of its erstwhile Group/sister concerns wherein it has been held that the discount extended to prepaid distributors is not in the nature of commission and hence, not liable to deduction of tax at source under section 194Hofthe Act. The Appellant prays that the learned CIT(A) be directed not to treat the discount extended by the Appellant to pre-paid distributors as 'commission or brokerage' to attract the provisions of section 194H of the Act. 2. Ground No. 2 - No tax under section 201(1) of the Act can be recovered from the Appellant (payer) when the tax due has already been paid by the payee 2.1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in ignoring the submissions filed by the Appellant contending that TDS demand could not be recovered from the Appellant when taxes have already been....
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....e said grounds of appeal and the facts and circumstances of the case. 5. Brief facts of the case are as under :- The assessee is an Indian company registered under the Companies Act, 1956 and is engaged in the business of providing Cellular Mobile Telephony Services ('CMTS') in the Mumbai telecom circle. On 3rd August 2011 a survey under Section ' 33A of the Act was conducted at the premises of the Appellant to verify compliance with provisions relating to taxes deducted at source (TDS'). Pursuant to the survey, the TDS Officer had passed an order wherein a demand of Rs. 8,77,60,001 was raised on the Appellant under Section 201(1)7 201(1A) of the Act. In the said order, the TDS officer has held that the Appellant has made default on account of non-deduction of tax at source in respect of following payments made during AY 2009-10: a) Discount extended to its pre-paid distributors on distributions of pre-paid talk time b) Roaming charges 6. Interest under section 201(1A) of the Act has also been levied on account of the above. Pursuant to the above, a rectification application dated 19 March 2012 was filed before the learned TDS Officer agai....
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....omatically by machines without any human involvement/ interface. The recent judicial pronouncements are discussed as under: 2.47. a) CIT v/s. Vodafone South Ltd. [2016] 72 taxman ri.com 347 (Karnataka HC) wherein it is held that, respectfully following the binding judgment of the Supreme Court of India, the submissions of the assesses that the payment in question cannot be considered as 'Fee for Technical Services' in terms of section 9(1)(vii) read with Explanation 2 has to be upheld b) Bharti Airtel vs ITO (TDS) [2016] 67 taxmann.com 223 (Del Trio.) - On the issue 'Whether payment of IUC by assesses to FTOs are taxable as Fees for Technical Services under section 9(1)(viii)", it has been held that there is no human intervention at the time of traffic of calls and the payment in question cannot be considered as 'Fee for Technical Services' in terms of section 9(1)(vii) read with Explanation 2. c) Siemens Limited (ITA No.4356/Mum/2010/30 taxmann.com 200) (Mum Trb.) - Hon'ble Tribunal has held that the word "technical" has to be construed in the same sense involving direct human involvement without that, technical services cannot be held to....
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.... reasons and following the decisions of the various judicial precedents stated above, I agree with the contention of the Appellant that the said payments are not liable for deduction of tax at source under Section 194J of the IT Act. On this issue, the appeal is decided in favour of the appellant. " 3.7 Thus, following the order passed by this office in the prior years, this ground of appeal is decided in favour of the Appellant." 8. Against the above order Revenue is in appeal before us. 9. We have heard both the parties and perused the record. We find that the issue in this case is covered in favour of the assessee. No contrary decision has been brought to our notice from Jurisdictional Hon'ble High Court. Hence, we respectfully follow the precedents and uphold the order of CIT(A) on this issue. Hence Revenue's appeals are dismissed. 10. As regards the deductibility of TDS on discount extended to its pre-paid distributors on distribution of pre-paid talk time, learned CIT(A) has dealt with this issue as under after reproducing submission of the assessee :- "I have gone through the assessment order, sec 154 order, grounds of appeal and the appellant&....
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....s it has to be treated as sale consideration. The Court also highlighted that there is specific clause in the agreement that after sale of the products, the distributor cannot return the goods to the assessee and it is the distributor who has to insure the products at godowns at their own cost. The Hon'ble High Court however accepted the contention of the Revenue that the telephone service is nothing but service and SIM card on its own, without service, would hardly have any intrinsic value. According to Judges a right to service can be sold. The distributor acquires a right to demand service from the assessee at the time when assessee sells these pre-paid cards for consideration to the distributor. The distributor does not earn any income; in fact, rattier than earning income, distributors incur expenditure the purchase of pre-paid cards. It is only upon sale of those pre-paid cards, distributors derive income. In the time of sate of these pre-paid cards by the assessee, he is not in a position to earn income belonging to the distributor and therefore, the question of any income accruing/arising to a distributor, does not arise. In short, section 194H gets attracted i....
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....t cannot be given to the appellant, it was the onus shifted to him to produce such records and to satisfy the AO with regard to the nature of transactions undertaken during the process. In the absence of such documents, following the above Judgement of the Hon'ble Karnataka High Court and because of non-verification of the accounting records of the Appellant, the discount allowed by Appellant to pre-paid distributors qualify as 'commission' within the meaning of the term under section 194H of the Act and hence, there will be obligation to deduct tax at source which arises on this account of transaction made." 11. Against the above order the assessee is in appeal before us. We have heard both the parties and perused the records. Ld counsel for the assessee submitted that Ld.CIT(A) has passed a contradictory order. That in passing the aforesaid order ld CIT(A) has referred to the remand report of the AO and that the assessee has not been able to submit all necessary details. He submitted that this is quiet factually wrong as the assessee has submitted all necessary details and the authorities below have not properly examined the same. In this regard he referred to the ....