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2023 (9) TMI 1021 - AT - Income TaxPenalty u/s 271C - TDS u/s 194H - assessee appoints the distributors for issuing and sale of pre-paid SIM card and recharge vouchers - proceedings u/s 201 & 201(A) initiated on failure on the part of the assessee to deduct tax on the amount allowed by the assessee to its distributors/dealers which in the opinion of the department was in the nature of commission - diversified views on issue - HELD THAT:- There is no dispute that whether the transaction of allowing discount/commission to the distributors by the assessee as well as other telecom service providers for sale of SIM Card and pre-paid Recharge Vouchers would fall in the ambit of section 194H or not is a highly debatable issue as there are a series of decisions of this tribunal, as well as various High Courts on this point. Some of the judgment of Hon’ble High courts are in favour of the assessee and some are in favour of the revenue upholding that the transactions of sale of SIM Card and Recharge vouchers are in the nature of sale and discount allowed by the assessee to the distributors is in the nature of commission attracting the provision of section 194H and consequently, the assessee was rightly held as deemed to be an assessee is in default as per the provision of section 201 of the Act. Similarly, a good number of other decisions have held that transaction in question does not fall in the ambit of section 194H and thereby the assessee was not liable to deduct TDS at source on these transactions. Apart from a series of decisions of this Tribunal there are divergent views of Hon’ble High courts on this issue of liability of the assessee to deduct tax u/s 194H. It is undisputed fact that this is debatable issue having two possible views and the assessee was of the view that it was not under obligation to deduct tax at source as per the provisions of chapter XVII of Income Tax and particularly u/s 194H of the tax. This belief of the assessee is one of the possible view and therefore failure to deduct the tax at source in respect of the discount/commission allowed to the distributors in light of divergent decisions by the different High Courts as well as by the different benches of this Tribunal clearly established the genuine and bona fide decision of the assessee not to deduct tax u/s 194H. Hence there was a reasonable cause as provided u/s 273B of the Act to have not deducted TDS on these transactions. See SINGAPORE AIRLINES LTD. [2022 (11) TMI 783 - SUPREME COURT] and GM. (TELECOM), BSNL [2014 (2) TMI 800 - ALLAHABAD HIGH COURT] Thus penalty levied by the AO u/s 271C is not justified and liable to be deleted. Decided in favour of assessee.
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