TaxTMI 
TaxTMI 
2023 (2) TMI 1250
X X X X Extracts X X X X
X X X X Extracts X X X X
....rce u/s. 194H of the Act. The ground No. 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 assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vered by the decision of the Hon'ble Supreme Court 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 nam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....butors. The distributors would sell to the retailers after adding its margin and the retailers would 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 pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....distributor, sub-distributor and the retailer would be dependant on the agreement between them and all of 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee sells the sim cards to the distributors. Accordingly, the arguments advanced by the ld. DR before us 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 pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ier decision in the case of Korean Air v. Dy. CIT in which, in similar circumstances, it was held that TDS was not deductible. He finds that 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2014 dated 12/10/2022 for A.Y. 2008-09 had elaborately deleted the very same disallowance u/s 40(a)(ia) of the Act and decided the issue in favour 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 dur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rform its duty. It has also not rendered a complete decision. Once the Tribunal was obliged in law to examine the matter and reappraise and reappreciate all the 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by CIT(A). This fact is clearly mentioned in para 7 of the order of the Hon'ble Bombay High Court by holding that the Tribunal has reproduced the entire assessment order which is set aside by 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act. The Tribunal was, therefore, in error in holding that the finding recorded by the Commissioner (Appeals) remained unchallenged since the assessee had not filed cross objections." 3.13. The ld. DR also placed 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was given to CIT(A). Hence the legislature in its wisdom had consciously curtailed the powers of the tribunal to adjudicate only those issues that are reflected in the orders of the lower authorities and materials available on record with respect to the facts. Accordingly, the tribunal 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)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax effect of such an issue is below the prescribed limits. 3.17. We find that the DR has relied on the decision of Hon'ble Gujarat High Court in case of Dahod Sahkari Kahrid Vechan Sangh Ltd. Vs CIT 282 ITR 321 rendered in the context of Rule 27 of ITAT rules and held that not 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this question in the present petition though prima facie it may appear that even without any specific powers under the statute, for example, as referred to in sub-section (2) of section 254 for rectification, it would appear that any judicial or quasi-judicial authority would have inherent powers 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on. It was completely practical and permissible for the airlines to assemble the amounts together and make a comprehensive TDS deduction at the end of the month. o The language of Section 194H is inclusive and covers any "direct or indirect" payments to the agent. Hence, there was no need for the payment to be made directly by the Assessees to the agents in order for it to fall 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 contracto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns title over the property and is responsible for the actual services provided to the final customer. The assessee has the responsibility to provide full and final compensation to the agent for the acts it carries out under the agreement. (similar to DoT rules).. Para 33-Assessee contends that "the prerequisite of a payment on which TDS can be deducted in the first place is not fulfilled." * Para 34 "Section 194H of the IT Act, as noted earlier, does not distinguish between direct and indirect payments. 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 does....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." o Para 2.6: "First of all, the assessee herein does not make any payment of commission or discount to the distributor in the instant case." o Patra 2.6.1: CIT vs Qatar Airways reported in 332 ITR 253 (Bom) which has been relied upon: Explicitly overruled by Hon'ble SC. o Para 2.7: "Though the net effect of both these 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 distribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r paying such income to payee. Para 35: same as above (e) The amount of commission should actually be ascertainable. Para 41, 42: not transaction wise but monthly deduction can be made (f) The time of credit or payment should be known Para 41, 42: same as above Para 2.4: o "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." 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 dist....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fact. Para 2.8.1: o 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. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee company as under:- 1. Ld. DR has pointed out extracts of certain paras for submitting that the case of the assessee is similar to that in the Singapore Airlines case. 2. However, the assessee most humbly submits that the contention that the decision in Singapore Airlines case is applicable is completely erroneous and some paras cannot be read in isolation. Major distinguishing fact is that in that case the airlines had not disputed the existence of principal-agent relationship and applicability of provisions of section 194H on the portion of standard commission. Secondly, Hon'ble Supreme Court has decided the matter on the facts before it which are peculiar to the airline industry, which facts (majorly, as to principal-agent relationship and the Billing and Payment Settlement) are absent in the assessee's case. 3. The assessee humbly submits that the decision 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: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nisation functioning under the aegis of the IATA and manages inter alia logistics vis-a-vis payments and acts as a forum for the agents and airlines to examine details pertaining to the sale of flight tickets and the details of the amounts at which the tickets are sold is transmitted by the travel agents to BSP, BSP stores the data and consolidates the amounts owed by each agent to various airlines following the sale of the tickets by the former. The aggregate amount accumulated in the BSP would then be transmitted to each airline by the IATA in a single financial transaction to smoothen the process and prevent the need to make multiple payments over time. The dispute before Hon'ble Supreme Court was applicability of provisions of TDS u/s 194H on the Supplementary Commission. The assessee submits that the facts in the present case, as also those examined by ITAT in case of Idea Cellular Ltd. in AY 2008-09 in ITA No. 2285/Mum/2014, are completely different 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 distributo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as nothing in the agreement to dissect the transaction into two limbs as contended by the airlines: Hon'ble SC in Para 32 has also noted that the Contract does not distinguish in terms of stages of the transaction involved in selling flight tickets. While Assessees had readily accepted the existence of the principal agent relationship, their consternation had been directed at the so called second limb of the deal that is exclusively between the agent and the customer. Hence, the Hon'ble SC has held that the arrangement between the agent and the purchaser is not a separate and distinct arrangement but is merely part of the package of activities undertaken pursuant to the PSA. Further, the court, in Para 44 and 45 has held that lack of control over the pricing above the Net Fare cannot in itself make the relationship as principal to principal as there is a difference between contract of principal-agent and master-servant relationship. In a principal agent relationship, it is sufficient for the latter to be informed of the responsibilities and duties under the contract and certain guidelines on how to satisfy them. An agent undoubtedly retains a sizeable leve....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which incurs an expenditure of purchase price in order to earn income from resale of the cards. f) 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. Hon'ble Supreme court, in Pare 36 to 43, has discussed the modus operandi which is peculiar to the airline industry i.e. all the travel agents submit all the details with the BPS and ultimately the settlement happens through BPS. Thus, it is noted that the airlines are aware of the ultimate price at which tickets are sold to the consumers and the amount of supplementary commission earned by the agent. Hon'ble Supreme Court in Para 43 has specifically noted that the mechanism of BSP was not placed before the Bombay High Court in Qatar Airways. Ultimately, Hon'ble Court has concluded in para 63 that once the relationship of principal to agent is established, the definition of commission u/s 194H stands attracted. Further, the realities of how the airline industry functions has bolstered the conclusion that it was practical and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Please also read para 59-62 of the decision of Hon'ble Karnataka High Court in case of Bharti Airtel Ltd. Vs. DCIT (2015) 372 ITR 33 wherein the arrangement between a telecom operator and the distributors is discussed at length and it is that it a transaction of sale of 'right to sell the service' between two principals. The assessee submits that all these aspects are dealt at length in the order of Hon'ble Tribunal in case of erstwhile Idea Cellular Ltd. in ITA 2285/Mum/2014 on page no. 14 and 15 of the Legal Paper Book which squarely applies to the facts of the present case. The facts before Hon'ble Supreme Court are completely different from its facts and thus the order of AY 2008-09 in ITA 2285/Mum/2014 remains unaffected by the order of Hon'ble Supreme Court III. The assessee humbly submits that it has restricted its submissions in this note only to the two aspects required by Hon'ble Bench. It has argued at length on various other aspects in the course of hearing which are not once again reiterated here for the sake of brevity. The assessee also submits that the Ld. DR has filed a written submission running into 15 page....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eement with its distributors on the same lines as that of the assessee. This Tribunal in para 2.5 of its order had relied on the decision rendered by the Hon'ble Karnataka High Court in Bharti Airtel Ltd. case by referring to para 62 of the decision, apart from other decisions. At the cost of repetition we hold that the agreement entered by the assessee for its distributors is only that of principal to principal and not principal to agent. Hence, the decision rendered by the Hon'ble Supreme Court in the case of Singapore Airlines Ltd. becomes factually distinguishable on this point. 3.25. We find that the decision in the case of Singapore Airlines Ltd. was rendered on the facts which are peculiar to airline industry. The Hon'ble Supreme Court in the case of Singapore Airlines Ltd. had narrated the entire facts in para 3-7 of its order which are peculiar to the airlines industry. These facts are also narrated in the submissions of the ld. AR hereinabove. The core dispute before the Hon'ble Supreme Court was the applicability of TDS provisions u/s. 194H of the Act on supplementary commission component. As far as the payment of standard commission, there was no dispute in the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Hon'ble Supreme Court in the case of Singapore Airlines are applied, then it is very clear that the decision of the Hon'ble Supreme Court is not applied to the assessee's case at all. 3.27. The ld. DR before us vehemently argued that the decision of the Hon'ble Jurisdictional High Court in the case of Qatar Airways Ltd has been reversed by the Hon'ble Supreme Court in the case of Singapore Airlines Ltd. Consequently, the reliance placed by this Tribunal in A.Y. 2008-09 in ITA No. 2285/Mum/2014 dated 12/10/2022 on the said decision of the Hon'ble Jurisdictional High Court while granting relief to the assessee also falls flat and accordingly, the said decision of the Tribunal becomes factually distinguishable because of the decision of the Hon'ble Supreme Court. To buttress this argument, the ld. AR before us drew our attention to paras 42-51 of the decision of the Hon'ble Supreme Court. For the sake of convenience, the relevant paragraphs i.e. 42-51 of the decision of the Hon'ble Supreme Court are reproduced hereunder:- 42. Learned Counsel for the Revenue has rebutted this by highlighting the manner of operation of the BSP where financial data regarding the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n in the course of his work. An agent though bound to exercise his authority in accordance with all lawful instructions which may be given to him from time to time by his principal, is not subject in its exercise to the direct control or supervision of the principal. Indeed, learned counsel for the appellant accepts as correct the distinction made above and also accepts that the true relation between the Mills and the Trustees was that of principal and agent; but he contends that as between the Trustees and the appellant the relation was one of master and servant. We consider that this contention is wholly unsound. We have examined the original agreement between the Mills and the Trustees dated April 12, 1934. Clause 9 of that agreement said that "the agents may regulate and conduct their proceedings in such manner as they may from time to time determine and may delegate all or any of their powers, authorities and discretions as secretaries, treasurers and agents of the company to such person or persons and on such terms and conditions as they may think fit, subject to the approval of the Board of Directors of the company." The delegation in favour of the appellant was made under t....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Hence, once the IATA makes the payment of the accumulated amounts shown on the BSP, it would be feasible for the Assessees to deduct TDS on this additional income earned by the agent, and whatever remains after the subtraction under section 194H would count as income for the agents themselves. It is at this point that settlement is made fully and finally, in line with clause 7.2 of the PSA. 48. The only remaining objection from the Assessees concerns Section 216 of the Contract Act. To appropriately appreciate the scope of the provision, a combined reading of both Sections 215 & 216 is necessary. Both these provisions are reproduced below for ease of reference: 215. Right of principal when agent deals, on his own account, in business of agency without principal's consent.- If an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows, either that any material fact has been dishonestly concealed from him by the agent, or that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upra) stands overruled. 3.28. From the perusal of the aforesaid paragraphs quoted from the decision of the Hon'ble Supreme Court in the case of Singapore Airlines Ltd, we find that in the case of airline industry, there is an operation of Billing and Payment Settlement (in short "BSP") where financial data regarding the sale of tickets are stored and BSP collects the data from multiple transactions and furnishes the details of tax to be deducted by the agents by transmitting the same twice a month or bimonthly. From the data available in the BSP, the air carriers must simply calculate the accumulated amount of TDS at the end of each month and make a single comprehensive deduction thereon. Since, it was practicable in that case to determine the amount of TDS based on the data provided in the BSP which is peculiar only to airline industry, the Hon'ble Supreme Court held that the air carrier cannot be absolved from its liability of deduction of tax at source in terms of Section 194H of the Act on the ground that no payment is made by the air carrier to the agent. In fact, in para 43 of the said decision reproduced supra, there is a categorical finding that the airlines may utilise ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly distinguishable with the assessee's case and hence, does not come to the rescue of the Revenue herein. 3.30. In view of the above observations, we hold that the decision rendered by us in assessee's own case for A.Y. 2008-09 in ITA No. 2285/Mum/2014 dated 12/10/2022 would be squarely applicable to the facts of the assessee's case before us for the year under consideration also. The relevant operative portion of the said order of this Tribunal is reproduced hereunder:- "2.8.2. We find that in the case before the Co-ordinate Bench of Pune Tribunal in the case of Idea Cellular Limited vs DCIT (TDS) in ITA Nos. 1041, 1042, 1953 -1955/Pun/2013 and ITA Nos. 1867 -1870 /Pun/2014 dated 04/01/2017, the lower authorities had held that relationship between assessee and its distributors was Principal and Agent. It was only the Pune Tribunal which after examining the distributors agreement came to the conclusion that the relationship is that of Principal to Principal. Infact Pune Tribunal also examined the very same agreement which is the subject matter of agreement before us in the instant case before us, as it is not in dispute that all the distributors agreements ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs was not commission and therefore not liable to deduct the TDS under Section 194H. The Tribunal noted that there was no decision of this Court on this issue on that date. 6. Learned counsel for the parties have tendered the copy of the order passed in Income Tax Appeal No. 702 of 2017 subsequently in the case of Pr. Commissioner of Income Tax-8 vs. M/s. Reliance Communications Infrastructure Ltd., where same issue arose for the consideration of this Court. The Division Bench of this Court while holding against the Appellant - Revenue observed thus :- "3. Having heard the learned Counsel for the parties and having perused the documents on record, we do not find any error in the view of the Tribunal. The Tribunal, as noted, besides holding that the Commissioner's order setting aside the order passed under Section 201 was not carried in appeal, had also independently examined the nature of the transaction and come to the conclusion that when the transaction was between two persons on principal to principal basis, deduction of tax at source as per section 194H of the Act, would not be made since the payment was not for commission or brokerage." 7. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n respect of the identical issue. The question no.1 raised before the Hon'ble Rajasthan High Court is as under:- 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2.8.4.1. We find that the Hon'ble Rajasthan High Court after considering the plethora of judgements on the impugned issue of various High Courts (which includes the three High Court decisions of Kerala, Delhi and Calcutta relied upon by the ld. DR before us herein) had rendered its decision as under:- Idea Cellular 58. As the agreement is produced, issues are answered in favour of assessee in the departmental appeals. 59. Even the contention which has been raised by the counsel for the assessee that the final tax is paid by the Distributor and not by the agent, the revenue is not at loss in any form. 60. In view of above, all the issues in each appeal are answered in tabular form as follows: Sr. No. Appeal No. Ques. 1 Ques. 2 Ques. 3 Ques.4 Ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and In favour of assessee Against the department and In favour of assessee -- -- -- 14. 126/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 15. 131/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 16. 132/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 17. 168/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 18. 169/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 19. 170/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 20. 171/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 21. 195/2015 Against the department and In favour of assessee Against the department and In favour of ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....34. 104/2016 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 35. 105/2016 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 36. 106/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- - - 37. 107/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- - -- 38. 108/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- - -- 39. 199/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- - -- 40. 200/2016 Against the department and In favour of assessee Against the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oss Revenues, no deduction would be available such as discount , commission etc. First of all, we have already held that the assessee had not made any payment of discount to the distributors. In any case, we have already held that the entries in the books of accounts are not determinative of tax liability of an assessee by placing reliance on various decisions of Hon'ble Apex Court. Those decisions still rule the field as they were not overruled by the latest Supreme Court decision relied upon supra by the ld. DR. It is trite law that though the decision of Hon'ble Apex Court would be binding as per Article 141 of the Constitution of India, still the judgement of the Hon'ble Supreme Court should be understood from the issue raised before it. In our considered opinion, this decision has got absolutely nothing to do with the applicability of provisions of section 194H of the Act. Hence we hold that the reliance placed by the ld. DR on the said decision is grossly misplaced. 2.8.7. The ld. DR before us vehemently submitted that the orders of Hon'ble Rajasthan High Courts and Hon'ble Jurisdictional High Courts and Hon'ble Karnataka High Court had not attained finality as they ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act for nondeduction of tax at source u/s. 194J of the Act. 4.1. We have heard rival submissions and perused the materials available on record. During the year, the assessee has debited Rs. 15,39,23,749/- on account of roaming charges in its profit and loss account which was claimed as deduction. The ld. AO observed that this expenditure was incurred without deduction of tax at source. The ld. AO show-caused the assessee as to why the same should not be disallowed u/s. 40(a)(ia) of the Act as the said payment would tantamount to rendering "fee for technical services" in terms of Section 194J of the Act. The assessee gave a detailed written submissions explaining the entire modus operandi as under:- 1. Roaming facility is a standard facility provided by the OTOs to the assessee and vice versa. When a subscriber is roaming in circles (states) where the assessee's network is not available, he is all able to make and receive calls by using network of OTOS. In such a scenario, since the subscriber is using the network of OTO, ideally such service provider should directly recover charges from that subscriber. But since it is impossible practically to do so, there i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usiness Agreement Network and Billing configuration IREG & TADIG Testing Launch of commercial Service * Commercial Service Launch - After success testing of all scenarios defined in IREG document and TADIG verification, visited network is opened for commercial subscriber to roam in visited network. After commercial launch subscriber will automatically latch in visited network and will be able to use the services when they are in visited network coverage area. 6. Effort required for providing roaming service - GSM Service provider has to deploy and maintain a GSM network infrastructure to provide service to its own subscriber. Same infrastructure is used to provide service to roaming subscriber as well, hence service provider does not make any extra effort to provide service to roaming subscribers. 7. On commercial launch of any network, the entire telecommunication services (locally or roaming) is done automatically with negligible human intervention. Factually, it is impossible for the employee of a telecom company to connect lakhs of subscriber to the desired networks. 8. Thus, at the cost of repetition, may the assessee submit that ev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... examine such experts before arriving at any conclusion thereon. 4.3. The ld. AO however, held that the payment made by the assessee in the nature of "fee for technical services" involving human intervention and thereby liable for disallowance u/s. 40(a)(ia) of the Act. 4.4. The ld. CIT(A) observed that the similar issue had come up in the case of Idea Cellular Ltd for A.Y. 2009-10 before the ld. CIT(A), Chandigarh in the Appeal No. 22/11-12 dated 01/12/2012 and extracted the findings recorded thereon. The ld. CIT(A) also observed that in the said proceedings before the Chandigarh case of Idea Cellular Ltd, the ld. AO had recorded the statements of technical experts i.e. Shri Tanay Krishna and Shri Ashok Mittal on 08/01/2014 as per the directions of the Hon'ble Supreme Court in the case of Bharti Cellular Ltd. The photo copies of the said statements were also furnished to that assessee affording an opportunity to cross examine those technical experts. The ld. AO in that case, had carried out detailed investigation by collecting technical evidences, recorded statements of technical experts and decided the issue of applicability of Section 194J of the Act to the payme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervention warranting deduction of tax at source u/s. 194J of the Act. Similar view was also taken by the Bangalore Tribunal in Idea Cellular Ltd case in ITA No. 608-651/BANG/2014 which was confirmed and upheld by the Hon'ble Karnataka High Court in the case of CIT(TDS) Bangalore vs. Vodafone (South) Ltd reported in 72 taxmann.com 347 and the ld. CIT(A) also placed reliance on the decision of Kolkata Tribunal in the case of Vodafone (East) Ltd vs. Addl. CIT(A) reported in 61 taxmann.com 263 and Delhi Tribunal in the case of Bharti Airtel Ltd vs ITO (TDS) reported in 61 taxmann.com 223. Further the ld. CIT(A) also placed reliance on the decision of the Hon'ble Rajasthan High Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd and others in ITA No. 205/2005 wherein the issue as to whether TDS is applicable u/s. 194J of the Act on roaming charges paid for facilities provided by the service provider, as this interconnection is managed / controlled / monitored by human intervention was the subject matter of adjudication and the Hon'ble Rajasthan High Court vide its order dated 11/07/2017 dismissed the departmental's appeal on this issue. By placing reliance on all the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pra) after considering the judgment of the Hon'ble Supreme Court in case of Bharti Airtel (supra) as discussed in Proposition-I and Proposition-II, and also in the absence of any contrary judgments at on date of any of the Hon'ble High Courts, no tax is deductible at source w 1943 of the Act on payment of roaming charges to the OTOs " 7.2 We further find that considering this the issue was decided by the CIT(A) in the following manner: 5.4. I have gone through the order of AO, the decisions that the appellant has relied upon in support and have carefully considered the various submissions made by the appellant. Since the grounds of appeal preferred by the appellant are inter-connected as well as consequential to each other, they are not dealt separately and are considered together. It would not be out of confort to reproduce the observation and findings of Hon'ble ITAT. Jaipur in the case of M/s Bharti Hexacom Ltd Vs ITO(TDS)-II, Jaipur in its order dt. 12.6.2015 in ITA No. 656/JP/2010 at under "11. We have heard the rival contentions of both the parties and perused the material available on the record. After going through border of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Add/2011, dt.07.07.2015). Following these, we are of the opinion that assessee could not have been deemed as one in default for non-deduction of tax at source on roaming charges paid by it to other service providers, Ground 3 it allowed" Similar findings are also rendered by Home ITAT Kelana in the case of Vodafone Ea Lad v Add CIT (2015) 61 Taman.com 263 as well as by Hon'ble ITAT, Delhi in the case of Bharti Airtel Lads ITO, TDS (2016) 67 Tom.com 223. More recently, in the case of Hindustan Coca Cola Beverages Pot Lid and others (D.B. ITA No. 205/2005), the Hon'ble Rajasthan High Court had the occasion to examine the issue as to whether TDS is applicable w/s 1941 of the Act on roaming charges paid for facilities provided by service provider, as this interconnection is managed/controlled/monitored by human intervention. In their order dt. 11.07.2017, while disposing off a bunch of appeals involving various mobile service providers including the appellant, M/s Tata Teleservices Ltd, Ms Bharti Hexacom Ltd. and M/s Vodafone Digilink Ltd the Hon'ble High Court dismissed the Departmental appeals on this issue. The facts and the issues involved in the present appea....