TaxTMI 
TaxTMI 
2023 (2) TMI 1250
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....p;I raised by the assessee is with regard to non-adjudication of additional evidences filed before the ld. CIT(A) is interconnected with ground No. II. Hence, they are taken up together for disposal. 3. We have heard rival submissions and perused the materials available on record. We find that assessee is in the business of providing cellular services in the telecom circles of Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Kerala, Uttar Pradesh(W), Haryana, Delhi, Uttar Pradesh (E), Himachal Pradesh and Rajasthan. The assessee had filed its return of income on 26/09/2009 declaring total income of Rs. "Nil" after setting of brought forward unabsorbed depreciation of Rs. 33,06,29,157/-. The assessee filed its revised return of income on 01/04/2010 declaring total income at Rs. Nil after set off of brought forward unabsorbed depreciation of Rs. 229,74,10,373/- on 30/03/2011. The assessee filed second revised return of income declaring total income at Rs. Nil after setting off of brought forward unabsorbed depreciation of Rs. 234,59,26,810/-. During the course of assessment proceedings, the assessee was asked to submit details of commission an....
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....rt in the case of Hindustan Coca Cola Beverages Pvt. Ltd. reported in 293 ITR 226 (SC). The ld.AO in the second remand report submitted that the said Hon'ble Supreme Court decision was not cited by the assessee before the assessment proceedings and hence, the same should not be considered by the ld. CIT(A). The assessee filed its rejoinder to the second remand report on 10/09/2013. Further, the ld. AO submitted his final remand report on 17/10/2013. In all the remand reports, the ld. AO objected to the admission of additional evidences by the ld. CIT(A). Accordingly, the ld. CIT(A) rejected the additional evidences furnished by the assessee without admitting the same by stating that the assessee's case does not fall under any of the clauses mentioned in Rule 46A of the Income Tax Rules. 3.2. It is not in dispute that during the year under consideration, the assessee paid discount on prepaid products to 213 distributors in Punjab circle totalling to Rs. 11,76,80,658/- and 491 distributors in Karnataka Circle amounting to Rs. 19,91,69,552/-. The total discount paid was Rs. 31,68,50,210/-. The assessee furnished the names of the distributors, address of the distributor....
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....ould sell to the customer after adding his margin. The ultimate price to the customer / user is subjected to the Maximum Retail Price (MRP) fixed by the assessee. It is pertinent to note that the distributor does not earn any income just by obtaining the prepaid sim cards and recharge vouchers from the assessee. The distributor earns income only if the said sim cards and recharge vouchers were sold further. Hence, there is no fixed amount of commission that could be determined from the agreement entered into by the assessee with the distributors. Once the amount of commission income that could be determined in the hands of the distributor is not permissible, there cannot be any obligation of deduction of tax at source that could be casted on the assessee. 3.5. From the perusal of the distributors agreement, we find that the distributor is allowed to distribute to its retailers at any price between the consideration paid to the assessee and the MRP fixed by the assessee. The distributor possesses complete freedom of pricing. Hence, the first tranche of the transaction is selling of prepaid sim cards and recharge vouchers containing the talk time for a higher value by the assessee t....
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.... them have to share Rs. 20/- which is allowed as discount by the assessee to the distributor. There is no relationship between the assessee and the sub-distributor as well as the retailer. However, under the terms of the agreement, several obligations flow in so far as the services to be rendered by the assessee to the customer is concerned and, therefore, it cannot be said that there exists a relationship of principal and agent. In the facts of the case, we are satisfied that, it is a sale of right to service. The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands. The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS. Once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not p....
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....vehemently that the TDS is to be done by the assessee at the difference in price of MRP and its sale price is rejected. We hold that the argument of the Revenue only results in impossibility of performance in the hands of the assessee. The famous legal maxim "LEX NON COGUT AD IMPOSSIBLIA" , meaning thereby - "law cannot compel a person to perform an act which he could not possibly perform" , would certainly come to the rescue of the assessee herein. As stated supra, the assessee only collects the discounted price of goods from its distributors and does not make any payment thereon. This aspect is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case of CIT(TDS) vs Super Religare Laboratories Ltd reported in 284 Taxman 657 (Bom) wherein the head notes are reproduced hereunder:- Section 194H of the Income-tax Act, 1961 - Deduction of tax at source - Commissions, brokerages etc. (Collection centres, discount allowed to) - Assessee-company was engaged in providing laboratory and testing services to customers through its own and through third party collection centres - It allowed certain discount to these collection centres - Assessing Officer held that suc....
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.... though an appeal was preferred against the aforesaid decision the same has been rejected by this court for non-removal of the office objections under rule 986. Be that as it may, for section 194H to be attracted, the income being paid out by the assessee must be in the nature of commission or brokerage. Counsel for the Revenue contended that it was not the case of the Revenue that this difference between the principal price of the tickets and the minimum fixed commercial price amounted to payment of brokerage. We find however, that in order to deduct tax at source the income being paid out must necessarily be ascertainable in the hands of the assessee. In the facts of the present case, it is seen that the airlines would have no information about the exact rate at which the tickets were ultimately sold by their agents since the agents had been given discretion to sell the tickets at any rate between the fixed minimum commercial price and the published price and it would be impracticable and unreasonable to expect the assessee to get a feed back from their numerous agents in respect of each ticket sold. Further, if the airlines have discretion to sell the tickets at the price lower ....
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....ur of the assessee. It is not in dispute that the agreements entered into by the assessee with its distributors were subject matter of verification and examination by the ld. AO for A.Y. 2008-09. This is evident from the detailed analysis made by this tribunal in A.Y. 2008-09 in the order referred supra. In view of the finding given by the ld. CIT(A) that facts and circumstances of A.Y. 2008-09 are identical with A.Y. 2009-10, it could be safely presumed that the agreements entered into during the year for fresh telecom circles are same as that was entered for other telecom circles in A.Y. 2008-09. In other words, terms and conditions of the distributors agreement always remain the same for all telecom circles. 3.10. Before us, the ld. DR vehemently argued that the agreement entered by erstwhile assessee Spice Communications Ltd. with its distributors need not be the same with the agreements entered by Idea Cellular Ltd with its distributor. The assessee has not furnished the agreements before the ld. AO during the course of assessment proceedings. Hence, neither the ld. AO nor the ld. CIT(A) had gone into the clauses in the agreement. Accordingly, in term....
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....he factual materials, then it should have performed that duty satisfactorily and in terms of the powers conferred by law. 20. Once this duty is not performed, we can safely come to the conclusion that the Tribunal's order is vitiated by not only total non-application of mind but also misdirection in law. We accordingly conclude and proceed to set aside the impugned order. We direct the Tribunal to hear the appeals afresh on the merits and in accordance with law after giving complete opportunity to both sides to place their versions and arguments. The Tribunal shall frame proper points for its determination and consideration and render specific findings on each of them. The Tribunal should carry out this exercise uninfluenced by any observations or conclusions in the impugned order which we have quashed and set aside. We clarify that beyond emphasizing what is the real controversy and which question goes to the root of the matter, we have not expressed any opinion on the rival contentions. All of them are open for being raised before the Tribunal. Once the two appeals succeed and the Tribunal's order is set aside, nothing survives in the writ petitions and the same are di....
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....y the first appellate authority but has not made any reference to the order of the first appellate authority and view taken by CIT(A). That view of the first appellate authority is based on the decision of the Tribunal Bench at Delhi. No attempt was made by the Tribunal to distinguish the Delhi Tribunal's decision. In these facts and circumstances, the Hon'ble Bombay High Court had given the aforesaid direction in para 19 of its order which is reproduced hereinabove. Hence, the reliance placed on this decision would not advance the case of the Revenue. e) On the categorical finding given by the ld. CIT(A) that the facts and circumstances of the A.Y. 2008-09 are identical with A.Y. 2009-10 i.e. the year under consideration and consequently the ld. CIT(A) upholding the disallowance made u/s. 40a(ia) of the Act, this Tribunal had reversed the order of the ld. CIT(A) in A.Y. 2008-09. Now, the ld. DR on knowing that the said order of the ld. CIT(A) for A.Y. 2008-09 has been reversed by this Tribunal, is trying to make out a fresh case with a request for examination of each and every clause in the distributors agreement so as to establish principal to agent relation....
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....reliance on yet another decision of the Hon'ble Gujarat High Court in the case of PCIT vs. Chartered Logistics Ltd. reported in 250 Taxman 385. The ld. DR argued that since the issue was decided in favour of the Revenue by the ld. CIT(A) there was no scope for the Revenue to file any appeal before this Tribunal against that finding in view of the Circular referred to above. 3.14. With regard to the aforesaid arguments, the ld. AR submitted as under:- * The reliance on the circular is misplaced by the DR. If DR's version is to be accepted, the department can never file an appeal in any case where tax effect is not involved. * For instance, consider an order passed by the AO u/s 163 of the Act holding a person as an agent of a non resident. This order is an appealable before CIT(A) order u/s 246A(1)(d). Now, where an appeal is filed before CIT(A) and the case is decided in favour of the assessee, there is no tax effect involved in this case. If DR's version is to be accepted, the department cannot file an appeal before ITAT even where section 253(1)(a) clearly provides that all orders passed by CIT(A) u/s 250 are appealable before ITAT. * Further, in cases where sectio....
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....ibunal is bound to pass orders only based on facts and materials available on record. In our considered opinion, this is how the expression "pass such orders thereon" used in section 254(1) of the Act need to be understood. Hence there is no question of examination of various clauses of agreements entered with distributors at this stage. In any case, the ld. CIT(A) had stated that the facts and circumstances of A.Y. 2008-09 are identical with facts and circumstances of A.Y. 2009-10 i.e. the year under consideration. As stated earlier, it is not in dispute that the agreements with distributors were subject matter of examination by the ld. AO and ld. CIT(A) in A.Y. 2008-09. Moreover, the very same agreements with distributors were placed on record before the ld. CIT(A) as additional evidences and it is the ld. AO who had even objected to admission of those additional evidences by the ld. CIT(A), which has been accepted by the ld. CIT(A). Hence both the lower authorities, in their wisdom, chose not to examine the agreements. While this is so, where is the need for the tribunal, being a second appellate authority, to examine those agreements ? Hence it could be safely co....
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....t filing an appeal/CO does not mean that the judgment has been accepted. In this regard, we find that Rule 27 of ITAT rules enables a respondent to support the order on any point/ground which has been decided against it. However, for a ground to be decided against a party, such a contention has to be made before the lower authority in the first place. In the decision relied upon by the DR, it was a case where the assessee had contended before the CIT(A) that the case is not of concealment of particulars of income for the levy of penalty. CIT(A) recorded that practically there is indeed a case of concealment of particulars of income and furnishing of inaccurate particulars of income but ultimately cancelled the penalty and held that it is not a fit case for levy of penalty. The revenue filed an appeal before the Tribunal. Before the Tribunal, the Assessee contended that it is not a case of concealment or furnishing of inaccurate particulars of income. The Tribunal held that the assessee did not challenge the finding of the CIT(A) that there indeed is a concealment and/or furnishing of inaccurate particulars of income since the assessee has not filed a cross objection. On appeal to H....
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....rs to correct an error which is plainly that of clerical. typographical, arithmetical or factual. If the Tribunal had proceeded on factual basis which was wholly and concededly erroneous, the Tribunal perhaps even in absence of specific provision of sub-section (2) of section 254, had the power to recall the order. However it is not necessary to elaborate this issue any further since the department has challenged not only the subsequent order of the Tribunal dated 13.10.2016 but also the original order dated 13.5.2015 which in any case is subject to examination in exercise of writ jurisdiction by this Court and is challenged before us. When we find that the Tribunal's order dated 13.5.2015 was passed on clearly incorrect factual premise and such factual premise being the very foundation of the order, such order must be set aside and is accordingly set aside." 3.19.1. However, we find that in the present case there are no incorrect facts. Hence the reliance placed on this decision would not advance the case of the revenue. 3.20. Hence we hold that it was a conscious decision of the ld. PCIT not to suggest any further appeal to this tribunal against the order of the ld. CIT(A)....
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....under the ambit of "Commission" and be subject to TDS. Reliance was placed on a decision of this Court in Director, Prasar Bharati v. CIT (2018) 7 SCC 800. o The taxing of the auxiliary amounts in the hands of the travel as income, did not cure the default by the assessees in deduction of TDS. * Para 20-23. o Para 22 is very important: o Lakshminarayan Ram Gopal and Sons Ltd. vs. The Government of Hyderabad(1955) 1 SCR 393: * The position is further clarified in Halsbury's Laws of England Hailsham Edition Volume 1, at page 193, article 345 where the positions of an agent, a servant and independent contractor are thus distinguished. * An agent is to be distinguished on the one hand from a servant, and on the other from an independent contractor A servant acts under the direct control and supervision of his master, and is bound to conform to all reasonable orders given him in the course of his work; an independent contractor, on the other hand, is entirely independent of any control or interference and merely undertakes to produce a specified result, employing his own means to produce that result. An agent, though bound to exercise his authority in accordance with all....
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....s. Both fall under Explanation (i) to the provision in classifying what may be called a" Commission". Para 35 o Therefore, if we view the ambit of Section 194H in an expansive manner, the factum of the exact source of the payment would be of no consequence to the requirement of deducting TDS. Even on an indirect payment stemming from the consumer, the Assessees would remain liable under the IT Act. Consequently, the contention of the airlines regarding the point of origination for the amounts does not impair the applicability of Section 194H of the IT Act. o Para 36 - practicality and feasibility of making the deductions o Argument that assessee doesn't know the commission has not been accepted by the Hon'ble SC. o Para 37, 43, 51- Qatar Airways decision of Hon'ble Bombay HC 332 ITR 253, has been negatived. * Para 42 - Assessee cannot be absolved from its statutory duties under Section 194H, irrespective of the viability of operating in this manner. * Para 44 - Lack of control over pricing does not determine principal - agent relationship. o As averted to in Lakshminarayan Ram Gopal & Son Ltd. (1955) 1 SCR 393 a contract of agency does not entail control ov....
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....se accounting methods would result in the same profit ultimately, it does present a picture that would enable the Revenue to expect assessee to deduct tax at source on the discount portion of Rs. 30/- deducted in the profit and loss account." * Para 2.8.1: "From the perusal of the various clauses of the distributors agreement, we are convinced that the relationship between the assessee and the distributor is only that of principal to principal and not principal to agent as alleged by the Revenue. This is clearly established from the fact that the distributor is merely purchasing the prepaid sim cards and recharge vouchers from the assessee and has got complete freedom of pricing and accordingly, it could sell the sim cards to the retailers at any price of its choice subject to MRP. The MRP had to be fixed by the assessee as it gives the ultimate customer/user the talk time worth the MRP by paying the price equivalent to MRP. This is the reason the assessee is fixing the MRP. This does not tantamount to fixation of pricing of the product by the assessee or exercising control over the distributors on pricing" Para 2.8.1 "In this regard, we find that assessee in its Accounti....
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....e distributors. Once the amount of commission income that could be determined in the hands of the distributor is not permissible, there cannot be any obligation of deduction of tax at source that could be casted on the assessee." o Addressed in para 6, 34, 41, 42 and others of Hon'ble SC decision o Para 2.5: o "we find that the distributor is allowed to distribute to its retailers at any price between the consideration paid to the assessee and the MRP fixed by the assessee. The distributor possesses complete freedom of pricing. Hence, the first tranche of the transaction is selling of prepaid sim cards and recharge vouchers containing the talk time for a higher value by the assessee to the distributors, on which the distributor does not earn any income at all. As stated supra, the distributors earn income only when the said sim cards and recharge vouchers were sold at a price higher than its purchase price (ie. the price paid by the distributor to the assessee herein). Hence, it is highly impossible to determine the amount of income that would accrue to the distributor on which tax ought to have been deducted by the assessee u/s. 194H of the Act. Hence, the entire TDS co....
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....o fixation of pricing of the product by the assessee or exercising control over the distributors on pricing. Hence, the arguments advanced by the ld. DR in this regard are hereby rejected. Freedom of pricing is already discussed in Hon'ble SC decision and assessee's contentions not accepted. As regards "perusal of the various clauses of the distributors agreement", assessee has not been able to demonstrate the same. Para 2.8.1: o We find that as per Clause 4 of the Distribution Agreement which clearly specifies the RELATIONSHIP between assessee and the distributor to be at Principal to Principal. o This has clearly been addressed in para 24 of Hon'ble SC decision. o Whether a particular agreement is an agency agreement or an agreement of sale depends upon the terms of the agreement. For deciding that question, the terms of the agreement have got to be examined. The true nature of a transaction evidenced by a written agreement has to be ascertained from the covenants and not merely from what the parties choose to call it. The terms of the agreement must be carefully scrutinised in the light of the surrounding circumstances." Para 2.8.2, 2.8.2.1: o Finding ....
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....of Hon'ble Supreme Court in Singapore Airlines has been rendered in the context of the peculiar facts which do not apply to the facts on hand and also the similar facts in AY 2008-09. The key distinguishing facts in case before the Hon'ble Supreme Court are summarized below: a) The facts under consideration are peculiar to the airline industry b) The relationship between the parties under the agreement was undisputedly that of Principal-agent and applicability of section 194H on the portion of standard commission was not disputed by the parties. c) There was nothing in the agreement to dissect the transaction into two limbs as contended by the airlines. d) Agent held the entire sale proceeds of the tickets, including the supplementary commission that he was entitled to, on behalf of the carrier in fiduciary capacity till the time the settlement was reached. e) The airlines was aware of the actual amount at which the tickets were ultimately sold and the amount of supplementary commission earned by the agents because this data was required to be fed into a system i.e. BPS. 4. The assessee draws Your Honour's attention to the following relevant paras of t....
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.... on the following grounds: The Agreement entered into between the parties are on principal-to-principal basis. The assessee does not owe any commission to the distributor. In fact, the distributor pays the entire consideration upfront for purchase of vouchers at discounted price: The assessee does not have any control or even knowledge of the price at which the vouchers are ultimately sold by the distributors. b) The relationship between the parties under the agreement was undisputedly that of Principal-agent and applicability of section 19411 on the portion of standard commission was not disputed by the parties, Hon'ble Supreme Court, in Para 20, has specifically noted that the Assessee's do not dispute that a principal agent relationship existed during the payment of the Standard Commission. Further, in Para 28, it is noted that at no stage does the PSA indicate that title in the goods i.e. the tickets, transfers from the air carrier to the agent and there is no rebuttal from the assessee on this averment. In Para 29 & 30, Hon'ble Supreme Court has noted the terms of the agreement which clearly point out that the agent acts on behalf of the carrier. In....
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.... responsibilities and duties under the contract and certain guidelines on how to satisfy them. An agent undoubtedly retains a sizeable level of discretion on how to achieve the desired results. The accretion of the Supplementary Commission to the travel agents is an accessory to the actual principal-agent relationship under the PSA. In such a commercial arrangement, the benefit gained by an agent is incidental to and has a reasonably close nexus with the responsibilities that were entrusted to it by the principal air carrier. The assessee submits that these observations are in the context of set of the facts that the original relationship under the PSA is that of principal-agent which is not disputed by the parties. These observations cannot be applied universally and in isolation of the fact that the relationship between the parties is undisputedly that of principal and agent. These observations cannot be applied to the assessee's case where the relationship is that of principal-principal and the contract is that of sale of right to sell services. d) Agent held the entire sale proceeds of the tickets, including the supplementary commission that he was entitled to, on ....
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....e airline industry functions has bolstered the conclusion that it was practical and feasible for the assessee to obtain the information from the BSP about the amount of the supplementary commission on which tax is required to be deducted. Thus, the assessee humbly submits that the decision rendered by Hon'ble SC in specific context of the facts of the airline industry. It is because of the BSP that the airlines are aware of the ultimate price at which the agent sells the tickets. However, there is no such system in the telecom industry. The assessee is neither aware nor concerned about the price at which the distributor sells it vouchers to sub-distributors or retailers. Further, the assessee submits that Hon'ble SC, in the context of peculiar facts of airline industry, has noted that these facts were not before Hon'ble Bombay High Court in case of Qatar Airways and it does not universally overrule the principles laid down in the said case of Qatar Airways, which has been followed by Hon'ble ITAT in case of Idea Cellular Ltd. in AY 2008-09. 5. At the cost of repetition, the assessee reiterates that the decision rendered by Hon'ble SC in context of the undi....
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....a written submission running into 15 pages and four annexures. Most humbly, the said submission is closely typed without any bullet points or numbering and hence it is difficult to address the same. On a perusal of the same, it it is observed that the said submission is largely a repetition of what was argued and decided against the revenue by the ITAT in the earlier years. Thus, the said contentions, which are already addressed in the oral submissions in the course of hearing, are not once again rebutted and the assessee shall be glad to address the same, if required. 3.23. We have gone through the written submissions of both ld. DR as well as ld. AR on the applicability of decision of the Hon'ble Supreme Court in the case of Singapore Airlines Ltd. referred to supra. At the outset, we find that in the case of Singapore Airlines Ltd, the agreement entered into clearly establish principal - agent relationship. This fact was not in dispute in the case of Singapore Airlines Ltd. Despite this relationship, though assessee argued that there is a secondary relationship between parties, which according to them was principal to principal relationship. The travel agent never pays the tick....
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...., there was no dispute in the case of Singapore Airlines Ltd. as that relationship was established to be principal-agent relationship. For supplementary commission alone, that assessee pleaded that the relationship would be principal to principal. In this regard, the findings of the Tribunal are recorded in para 14 of that order, the findings of the Hon'ble High Court are recorded in para 15 of that order, the submissions of the assessee's Counsel are recorded in para 17 of that order, the submissions of the Revenue's Counsel are recorded in para 18 of that order. Ultimately the Hon'ble Supreme Court laid down three principal tests that are to be satisfied:- First Test:- Whether title in the tickets at any point, were passed from the assessee's to the travel agents. In the instant case of the assessee before us, once the prepaid sim cards are sold by the assessee to the distributors, the title is duly passed on to the distributor. In para 28 of the order of the Hon'ble Supreme Court, it is noted that at no stage does the PSA indicate that title in the goods i.e. the tickets gets transferred from the air carrier to the agent and this fact was not rebutted from the side of the ass....
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....ale of tickets is stored. According to him, the BSP agglomerates the data from multiple transactions and transmits it twice a month, or bimonthly. The expectation from the Revenue is not that the Assessees make TDS deductions in real time as the sale of tickets by the agents is recorded on the BSP. Rather, a more reasonable approach is taken whereby the air carriers must simply calculate the accumulated amount of TDS, at the end of each month after having received the requisite date from the IATA and the BSP and make a single comprehensive deduction. It was submitted that the Assessee cannot be absolved from its statutory duties under section 194H, irrespective of the viability of operating in this manner. 43. Having analysed the rival contentions and keeping in mind the principal-agent relationship between the parties, we find significant merit in the arguments by the Revenue. The mechanics of how the airlines may utilize the BSP to discern the amounts earned as Supplementary Commission and deduct TDS accordingly is an internal mechanism that facilitates the implementation of Section 194H of the IT Act. The specifics of this system were seemingly not placed before the Bombay Hi....
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....ition was therefore this: the Trustees as agents had express authority to name another person to act for the principal in the business of the agency, and they named the appellant with the approval of the Board of Directors. Therefore, the appellant, was neither a servant nor a mere sub-agent. He was an agent of the principal for such part of the business of the agency as was entrusted to him." 45. The fact that the travel agent has discretion to set an Actual Fare which is above the Net Fare has no effect on the nature of the relationship between the parties. A contract of agency permits an agent to carry out acts on its own volition provided it does not contravene the purpose of the agency contract and the interests of the principal. The accretion of the Supplementary Commission to the travel agents is an accessory to the actual principal-agent relationship under the PSA. In such a commercial arrangement, the benefit gained by an agent is incidental to and has a reasonably close nexus with the responsibilities that were entrusted to it by the principal air carrier. Such incidental benefits or actions must come under the ambit of the relationship, subject to any express limitati....
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....** ** ** 216. Principal's right to benefit gained by agent dealing on his own account in business of agency.- If an agent, without the knowledge of his principal, deals in the business of the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction. 49. In the facts before us, we find that Sections 215 and 216 of the Contract Act are of no assistance. We have already ascertained that the PSA does not explicitly address the issue of Supplementary Commission at all. Further, an agent acting of its own account does not, in principle, alter the nature of a contract of agency and only gives rise to the consequences mentioned under sections 215 and 216 of the Contract Act if the conditions contained within them exist. We do not consider it helpful to dwell on this point. 50. In any case, given that information regarding the Supplementary Commission was available to the airlines, we have no doubt that the airlines could not have absolved themselves of liabilities under the IT Act attached to the accrual of that additional portion of income by the agent. Th....
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.... an internal mechanism that facilitates the implementation of Section 194H of the Act. It also goes on further to hold that this specifics of the BSP system prevailing in the airline industry was not placed before the Hon'ble Bombay High Court in the case of Qatar Airways Ltd. To that extent, the decision of the Hon'ble Bombay High Court in the case of Qatar Airways Ltd stands overruled by the decision of the Hon'ble Supreme Court. In other words, the decision rendered by the Hon'ble Bombay High Court in the case of Qatar Airways Ltd would still hold the field as far as the telecom industry is concerned where the system like BSP which determines the payment of commission is not available. As stated earlier, the BSP system is peculiar and available only to airline industry. In the case of telecom industry i.e. the assessee case before us, there is no mechanism to determine at what rate the distributor will be able to ultimately sell the prepaid simcards to the retailers so as to enable the assessee to determine the TDS component on sale of prepaid simcards. Hence, the concept of no payment made by the assessee resulting in no TDS thereon as was held in the case of Qatar Airways Ltd ....
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....of Hon'ble Karnataka High Court in the case of Bharti Airtel Ltd vs DCIT reported in 372 ITR 33 (Kar). We find that the Pune Tribunal had taken note of the fact that Hon'ble Karnataka High Court in 372 ITR 33 had distinguished all the three High Court judgements (i.e. Kerala, Calcutta and Delhi) relied upon by the ld. DR hereinabove. Effectively Pune Tribunal adopted the decision of Hon'ble Karnataka High Court. The ld. DR relied on para 64 of decision of Hon'ble Karnataka High Court and argued that it is against assessee for the first 7 months since discount is separately shown in the books of the assessee as an expenditure. In our considered opinion, what is to be seen is the broader question raised before the Hon'ble Jurisdictional High Court in Income Tax Appeal No. 1129 of 2017 dated 13/01/2020 in assessee's own case against the order of Pune Tribunal. For the sake of convenience, the entire order is reproduced hereunder:- "Heard learned counsel for the parties. 2. The Appellant-Revenue challenges the order dated 4 January 2017 passed by the Income Tax Appellate Tribunal in Income Tax Appeal No. 1041, 1042 and 1953 to 1955/PUN/2013. 3. This Appeal pertains t....
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....proposed do not give any rise to substantial question of law. The Appeal is disposed of." (emphasis supplied by us) 2.8.2.1. It is also pertinent to note that the Distribution Agreement of Maharashtra Circle was subject matter of examination and adjudication by the Pune Tribunal wherein the Pune Tribunal had recorded a finding of fact that the relationship between assessee and distributor is that of Principal to Principal. This Order has been approved by the Hon'ble Jurisdictional High Court. We find that the Hon'ble Jurisdictional High Court held that once Principal to Principal relationship is established, there could be no commission or discount and consequently no deduction of tax at source in terms of section 194 H of the Act is warranted. 2.8.3. With regard to reliance placed by the ld. DR vehemently on the decision of Hon'ble Delhi High Court in assessee's own case reported in 325 ITR 148 (Del) is concerned, we find that the Hon'ble Karnataka High Court in the case of Bharti Airtel Ltd (372 ITR 33) referred supra had after considering the decision of Hon'ble Delhi High Court referred supra and decided the issue in favour of the assessee. We find that the Hon'ble Karn....
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.... In favour of assessee and against the department In favour of assessee and against the department -- -- 3. 10/2007 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- - 4. 55/2007 In favour of assessee and against the department In favour of assessee and against the department - -- -- 5. 6/2008 In favour of assessee and against the department In favour of assessee and against the department - -- - 6. 7/2008 In favour of assessee and against the department In favour of assessee and against the department - -- -- 7. 540/2009 In favour of assessee and against the department In favour of assessee and against the department - -- -- 8. 1/2014 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department 9. 2/2014 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and a....
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....sessee Against the department and In favour of assessee -- -- -- 26. 96/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 27. 97/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 28. 98/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 29. 99/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 30. 100/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 31. 101/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favou....
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....nd In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 61. In view of the above discussion, all the appeals of assessees are allowed and those of Department are dismissed. (BOLD PORTION PERTAINS TO ASSESSEE IN THE AFORESAID JUDGEMENT OF HON'BLE RAJASTHAN HIGH COURT) 2.8.5. We further find that the Hon'ble Rajasthan High Court in the case of CIT (TDS) Jaipur vs Idea Cellular Ltd in Income Tax Appeal No. 90/2018 dated 12/04/2018 had taken an identical view on the identical set of facts. Further we find that the Hon'ble Jurisdictional High Court in the case of CIT(TDS) Pune vs Vodafone Cellular Ltd (assessee's own case) in Income Tax Appeal Nos. 1152 , 1274, 1995, of 2017 & Income Tax Appeal Nos. 571, 1266 of 2018 dated 27/01/2020 had also taken an identical view in respect of identical issue. 2.8.6. The ld. DR before us placed heavy reliance on the decision of Hon'ble Supreme Court in the case of Union of India vs Association of Unified Telecom Service Providers of India and Others reported in (202....
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....o disturb the findings of Hon'ble High Courts. Hence we have no hesitation in holding that the relationship between assessee and distributor is only that of Principal to Principal and not that of Principal to Agent and accordingly there is no obligation for the assessee to deduct tax at source in terms of section 194H of the Act. 2.8.8. In view of the aforesaid observations and findings given thereon, we do not deem it fit to adjudicate other arguments advanced by the ld. AR on the applicability of second proviso to section 40(a)(ia) read with section 201 of the Act, as it would become academic in nature. This aspect of the issue is left open." 3.31. In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the sale of prepaid sim cards / recharge vouchers by the assessee to distributors cannot be treated as commission / discount to attract the provisions of section 194H of the Act and hence there cannot be any obligation on the part of the assessee to deduct tax at source thereon and consequentially there cannot be any disallowance u/s 40(a)(ia) of the Act. Accordingly, the Ground No. II raised ....
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....a subscriber of HO travels to Mumbai, he will be able to seamlessly latch on to the network of VO and continue to use telecom services in Mumbai. Depending upon the usage of the subscriber and the arrangement between HO and VO, VO shall raise an invoice on HO for such usage by the subscriber, and HO shall subsequently recover such charges from the subscriber 4. Thus, each telecom operator would enter into a national roaming agreement with OTO (Refer a specimen national roaming agreement entered with BPL Cellular Limited on page no. 79 to 111 of the FPB-II). 5. Roaming Agreement Process: In order that a subscriber is able to "latch" on to a visited network, a roaming agreement needs to be in place between the visited network and the home network. Agreement is established after completing of following processes Aforesaid process is enumerated in be as under: * Business Agreement - A business agreement is signed between two networks as per GSMA guidelines to setup roaming service. * Network & Billing configuration - Post business agreement, necessary configures required to be done in visited and home network and billing system. * IREG & TADIG Testing - Once configuration....
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.... Communications Ltd vs DCIT reported in 251 ITR 53; decision of Chandigarh Tribunal in the case of HFCL Infotel Ltd vs. ITO reported in 99 TTJ 440; decision of Delhi Tribunal in the case of Idea Cellular Ltd (which is a successor to the assessee pursuant to a scheme of merger w.e.f. 01/02/2010) and in Escotel Mobile Communications Ltd. ITA No. 2154 to 2156/Del/2005; decision of the Hon'ble High Court in the case of CIT vs. Estel Communications Pvt. Ltd reported in 217 CTR 102; Decision of Pune Tribunal in the case of Idea Cellular Ltd in ITA No. 159/PN/2008; decision of Mumbai Tribunal in the case of Pacific Internet India Pvt. Ltd. vs. ITO reported in 27 SOT 523; and decision of Hyderabad Tribunal in the case of DCIT vs. Excel Media Pvt.Ltd reported in 2010-TIOL-781-ITAT-HYD. The assessee further relied on the decision of the Delhi High Court in the case of CIT vs. Bharti Cellular Ltd reported in 175 Taxman 573. Against this decision of the Hon'ble Delhi High Court, the Revenue preferred an appeal to Hon'ble Supreme Court and the Hon'ble Supreme Court directed the TDS Officer to carryout factual verification to determine whether human intervention takes place when actual....
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....ervices. With these observations, he upheld the disallowance made by the ld. AO u/s. 40(a)(ia) of the Act. 4.6. We find that as stated supra, the ld. CIT(A) had merely relied on the decision taken by the ld. CIT(A) Chandigarh in the case of Idea Cellular Ltd in Appeal No. 22/11-12 dated 01/12/2012. In the said order, the ld. CIT(A) had set aside the issue to the ld. AO to make various examinations as per the directions of the Hon'ble Supreme Court in the case of Bharti Cellular Ltd referred to supra. In the order giving effect passed us.250(6) of the Act dated 24/02/2014 by the ld. AO i.e. ACIT (TDS) Chandigarh, the ld AO carried out the directions of the ld. CIT(A) by making due examination of all the technical experts and concluded that human intervention is involved on the aspect of roaming charges. Against this order, the assessee thereof went again in appeal to the ld. CIT(A). The ld. CIT(A) vide his order dated 17/10/2017 in Appeal No. 72/2014-15 relied on the decision of Jaipur Tribunal in the case of Bharti Hexacom Ltd vs. ITO (TDS)-II Jaipur in ITA No. 656/JP/2010 dated 12/06/2015, wherein the Jaipur Tribunal had held that for installation / setting up / re....
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..... 24.03.2017 and 22.06.2017 and claimed that the payments made by it for roaming facilities do not attract provisions of section 1941 of the Act since they are not in the nature of payment, for technical services. In its support, the appellant relied upon various decisions including decisions on the issue in question in its own case as well as the following ones 1. M/s Bharti Hexacom Lad. vs ITO (TDS) (ITA No. 656/JP/2010) ITAT Jaipur); 2. M/s Idea Cellular Ltd. vs ITO (ITA No. 94 to 96/JP/2013 and 917JP2012) (ITAT Jaipur). 3. M/s Hindustan Coca Cola Beverages Pvt Ltd. and Others vs CIT(2017) (ITA No. 205/2005XHC, Rajasthan) 4. M/s Idea Cellular Ltd. vs ACIT (ITA No. 648 to 65 UBang/2014XITAT, Bangalore); 5. CIT vs M/s Vodafone South Lad. (241 Taxmann.com 496) (HC. Karnataka); 6. M/s Vodafone East Ltd. vs Addl. CM2015X61 Taxmann.com 263(ITAT Kolkota); 7. M/s Bharti Airtel Ltd. vs ITO (TDS) (67 Taxmann.com 223)ITAT, Delhi); Accordingly, the appellant made the following submissions: Thus the appellant humbly submits that following the view taken by High Court and Tribunals, especially the latest decisions of the Hon'ble Jaipur Tribunal & Ho....
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....rti Cellular Ltd in the case of I-Gate Computer Systems Lad and held that Data Link transfer does not require any human intervention and charges received or paid on account of this is not fees for technical services as envisaged in section 1941 read with section 9(1) (vii) read with Explanation-2 of the Act Respectfully following above judicial precedents, we hold that the charges are not fees for rendering any technical services as envisaged in section 1941 of the Act The above finding of fact was again reiterated by Hon'ble ITAT, Jaipur in appellant's own case in ITA-Nos. 94 to 96/JP/2013 as well as by Hon'ble ITAT Bangalore in appellant's own case in ITA Nos. 608 to 651/Bang/2014. This was also confirmed and upheld by Hon'ble Karnataka High in the case of CIT, TDS, Bangalore vs Vodafone South Lid (2016) 72 Taxmann.com 347 in which their lordship held that- "Reading of the above order clearly show that fact-situation was essentially similar to the one here in the case of the assessee. Assessee was also treated as one in default for failure to deduct tax at source on roaming charges paid to other distributors. Therefore the coordinate bench of the Tribuna....
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....e, have not been distinguished either on facts or in law nor have been upset by any higher Forum. In these peculiar facts and circumstances, we find that departmental appeals are without any merit. The facts taken on record which have not been upset are that for installation/setting up/repairing/servicing/maintenance/capacity augmentation etc. human intervention is required, however after this process is complete, the interconnection between the operators is automatic and at that stage, no human intervention is required. These conclusions have been arrived after considering the Reports of the technical experts, their cross-examination etc. We note that Interconnecting User Charges (IUC) which signifies charges for connecting two entities. The Co- ordinate Benches have relied upon the order in the case of i-Gate Computer Systems Ltd where decision of the Apex Court in the case of M/s Bharti Cellulars Ltd. has been considered and also on the decision of Data Link transfer wherein considering similar facts, it has been held that it does not require any human intervention and charges received or paid on account of this is not fees for technical services as envisaged in section 194J rea....