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2014 (6) TMI 38 - AT - Income TaxTDS u/s 194H - TDS on commission paid to Sub Contractors/ Sub Distributors/ Sub-Franchise from sale of Recharge of coupons and Top-ups - assessee is a franchisee of BSNL - purchasing SIM cards and Recharge coupons from BSNL against payment and resells them to Sub Contractors/Sub Distributors/Sub-Franchise - Assessee in default u/s 201(1) and 201(1A) of the Act – Submissions not appreciated – Assessee contended that the transactions were on principal to principal basis and no commission was paid and therefore provisions of TDS were not applicable - Held that:- The role of Franchisee is limited to booking of new connections i.e. Subscriber Identification Module cards and sale of Recharge - Booking of new connections i.e. SIM cards. Contributes to less than5% of total business - the assessee’s role is limited to booking of new connections only and commission after deducting TDS is given on new connections by BSNL and similarly, TDS is deducted and deposited on commission disbursed to Sub-Franchisee on account of new connections booked by them - sale of Recharge contributes more than 95% of business and only dispute is with regard to Recharge of coupons and Top-ups. The BSNL does not recoup the loss to the assessee, which is clearly mentioned - The assessee has sold the Recharge coupons to the Sub-Distributors so that they also earn some margin of profit and such Recharge coupons once sold become the property of the said Sub- Distributor and such Sub-Distributor is free to sell the same at a price as he deems fit though the maximum price has been fixed by the BSNL with regard to the market condition - there shall not be any partnership, joint venture, employment or relationship of principal and agent between parties. The assessee is not a service provider, as he purchased recharge coupons from the service provider i.e. BSNL and not provides any service to the subscribers - The assessee simply sells recharges to the sub-distributors, which is on principal to principal basis and there is no relationship of principal and agent - there is no written agreement with the sub-distributors - The sale bills are issued to the sub-distributors and copies were produced - The books of account are audited and transactions has been shown as sale and purchase - None of the conditions referred to in section 194H to Explanation (i) is fulfilled - But equal margin earned/profit earned as commission i.e. the sub-distributor is not receiving the payment on behalf of the assessee but on his own and he is not accountable to the assessee - once the assessee has sold the SIM cards or Recharge coupons, the assessee has no control or liability towards the sub-distributors - A copy of the bills filed before the authorities below issued by the BSNL show that BSNL has allowed the discount in some cases and allowed commission in other cases. The relationship with BSNL is different from the relationships of sub-franchisee and is on principal to principal basis because the assessee has no control over the sub franchisees whatsoever - The sub franchisees are from to sell SIM cards and Top Ups to any customer at any price and once these are sold the assessee loses its control over the same - Relying upon Berger Paints India Ltd. vs. CIT [2004 (2) TMI 4 - SUPREME Court] - the assessee is a ‘Trader’ and relationship is that of the principal to principal and the authorities are not justified to hold relationship of principal and that of an agent - the assessee is not liable for the provisions of Section 201(1) & 201(1A) of the Act – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee.
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