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2015 (11) TMI 860 - AT - Income TaxTDS u/s 194H - sale of SIM cards - assessee has not deducted TDS on discount/commission allowed to distributors - Held that:- There is no dispute that initially, the issue was decided against the assessee in Commissioner of Income Tax-XVII Versus Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] by holding that service can be rendered and cannot be sold and therefore, the payment to distributors, who are acting as a link in the chain of service provider, cannot be a discount but the same is in the nature of commission. However, subsequently, the Hon'ble jurisdictional High Court in its decision reported in Bharti Airtel Ltd. And Others Versus Deputy Commissioner of Income-tax and Commissioner of Income Tax, Bangalore (2014 (12) TMI 642 - KARNATAKA HIGH COURT) has distinguished the finding of the Hon’ble Delhi High Court wherein held that the condition precedent for attracting Section 194H of the Act is that there should be an income payable by the assessee to the distributor – the income accrued or belonging to the distributor should be in the hands of the assessees - the assessee sells SIM cards to the distributor and allows a discount of ₹ 20/-, that ₹ 20/- does not represent the income at the hands of the distributor because the distributor in turn may sell the SIM cards to a sub-distributor who in turn may sell the SIM cards to the retailer and it is the retailer who sells it to the customer - The profit earned by the distributor, sub-distributor and the retailer would be dependent on the agreement between them and all of them have to share ₹ 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. Thus, 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 - 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 principal and agent – thus, the order passed by the authorities holding that Section 194H of the Act is attracted to the facts of the case is unsustainable. - Decided in favour of assessee Also roaming charges cannot be treated as fees for technical services, the ground raised by the revenue stands dismissed. - Decided in favour of assessee
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