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2013 (9) TMI 263 - AT - Income TaxTDS u/s 194H – Tax deduction at source in relation of the margin money allowed by the assessee to the distributors on supply of pre paid Sim cards and recharge coupons - The assessee is rendering mobile telephone services to the customers through appointment of distributors – Held that:- Margin allowed by the assessee to the distributors was of the nature of commission which was liable for deduction of tax at source u/s 194H and the transaction between assessee and distributors is not in the nature of sale of sim card – Decided against the Assessee. As per the telecom regulation, connection could be given to customer only after production of identity, proof of address etc. and this job has been entrusted by the assessee to the distributors. In the post paid scheme, the assessee pays certain charges to the distributors for all these services such as enrollment of subscribers with proper verification and documentation on behalf of the assessee. The assessee treats such payment made to the distributors in post paid scheme as commission for services rendered on which tax has been deducted at source. However, in case of pre paid scheme, the assessee allows certain margin to the distributors while supplying the Sim cards and recharge coupons and this margin is treated by assessee as discount on which no tax has been deducted at source. The assessee’s claim is that it was a case of sale of Sim cards and recharge coupons to the distributors at discount and therefore the payment were not for rendering any services and thus could not be considered as commission – Held that:- Relying upon the decision of Hon’ble High Court of Kerala in case of Vodafone Essar Cellular Ltd. [2010 (8) TMI 691 - KERALA HIGH COURT], it has been held that transaction of the assessee, with the distributor for supply of Sim cards and recharge coupons under the pre paid scheme is not sale – In a similar case Hon’ble Supreme Court in case of BSNL and another Vs. Union of India reported [2006 (3) TMI 1 - Supreme court] upheld the contention of the assessee that there was no sale involved. Applicability of provision of section 194J regarding deduction of tax at source in relation to roaming charges and inter-connect usage charges paid by the assessee to other cellular operators - Payments were for technical services rendered and therefore provisions of section 194 J were attracted as per which tax was required to be deducted, which had not been done by the assessee and, accordingly the AO treated the assessee in default u/s 201(1) of the IT Act – Held that:- Reliance has been placed upon the judgment passed by Hon’ble Supreme Court of India in Bharti Cellular Ltd [2010 (8) TMI 332 - Supreme Court of India], wherein it was held that for applicability of section 194 J, it was necessary to find out if human intervention was involved at any stage including the stage where the existing capacity was exhausted and additional capacity was required. The Hon’ble Supreme Court directed the CBDT to issue directions to all its officers that in such cases the department need not proceed only by the contracts placed before the officers and the matter should be examined with the help of technical experts – Accordingly, in the present case it was held the issue should receive fresh consideration at the hands of the AO – Matter restored to the file of A.O. for fresh adjudication. Applicability of provisions of section 194 J to the payments made by the assessee for outsourcing of manpower from the sister concern – A.O. contended the applicability of section 194 J as per which tax was required to be deducted at the rate of 10% in place of tax deducted at the rate of 2% by the assessee u/s 194 C of the IT Act - The claim of the assessee is that it did not want to keep on its roll the employees rendering clerical services in the back office and accordingly such staff were outsourced from the sister concerned. However, the payments were made for reimbursement of actual expenses incurred by the sister concern plus a sum of Rs. 350 per employee per month – Held that:- As regards the payment for reimbursement, there is no profit element involved and therefore TDS provisions could not be applied - Payment of Rs. 350 per employee was for supply of manpower and not for any professional and technical services - CIT (A) has also given a finding that the persons supplied by the sister concern were just graduate and under graduate and had been assigned the work at the clerical level or had been given routine work - Nothing produced before us to controvert the finding of CIT (A) - No infirmity in the order of CIT (A) holding that the payments were not for any technical services or for any professional or managerial services – No applicability of section 194J – Decided in favor of Assessee
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