TMI Blog2014 (1) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... tributes of the relationship of principal and agent - Once the recipients have paid tax on income embedded in these payments then the tax cannot once again be recovered from the assessee by treating the assessee in default for non deduction of TDS - The issue was restored for fresh adjudication. - I.T.A Nos. 367 to 369/Kol/2013 - - - Dated:- 19-12-2013 - Shri Mahavir Singh, JM And Shri Abraham P. George, AM,JJ. For the Appellant : Shri S. M. Surana, Advocate For the Respondent : Dr. Swetabh Suman, CIT ORDER Per Shri Mahavir Singh, JM: These three appeals by assessee are arising out of order of CIT(A)-I, Kolkata in Appeal No. 168-169/CIT(A)-I/C-57/11-12 dated 13.12.2012 and No. 170/CIT(A)-I/C-57/11-12 dated 14.12.2012. Assessments were framed by DCIT, Circle-57, Kolkata u/s. 201(1)/201(1A) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 to 2010-11 vide his separate orders dated 31.03.2011. 2. The only common issue in these three appeals of assessee is against the order of CIT(A) confirming the action of DCIT, Circle-57, Kolkata in treating the assessee in default u/s. 201(1) for non-deduction of TDS and thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r mobile post paid connections the franchisees act as agents of BSNL. Consequently, BSNL deducts tax at source under section 194H from the commission that was paid to the franchisees for selling BSNL SIM cards or providing BSNL landline or mobile post paid connection. However, when the franchisees purchase BSNL cash cards (such as recharge coupons, ITC, FLPP, etc.) from BSNL and sell such items to the reta lers or customers the franchisees do not act as agents of BSNL. On the contrary, BSNL sells its cash cards to its franchisees and the transaction between BSNL and its franchisees in respect of BSNL cash cards take place on a principal-to-principal basis. So far as BSNL is concerned, the sale of BSNL cash cards is completed when the franchisees make payment for the cash cards and BSNL delivers the cards to the franchisees. Ld. Counsel stated that in case of cash cards the documentation and identification procedures are not necessary. The franchisees simply sell the cash cards to the subscribers/customers. Thus, in case of cash cards two separate transactions of sale take place. The first sale is made by BSNL to its franchisees. The second sale is made by the franchisees to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord and duly considered factual matrix of the case as also the applicable legal position. 6. Learned counsel's vehement reliance is on Hon'ble Allahabad High Court's judgment in the case of Jagran Prakashan Ltd Vs DCIT [ (2012) 21 taxmann.com 489 All] wherein Their Lordships have, inter alia, observed as follows: ...........it is clear that deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income tax authorities had not adverted to the Explanation to Section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax..... 7. It is thus argued that the onus is on the revenue to demonstrate that the taxes have not been recovered from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltimately recovered through other means. The provisions regarding interest in delay in depositing the taxes are set out in Section 201(1A). These provisions provide that for any delay in recovery of such taxes is to be compensated by the levy of interest. As far as recovery provisions are concerned, these provisions are set out in Section 201(1) which seeks to make good any loss to revenue on account of lapse by the assessee tax deductor. However, the question of making good the loss of revenue arises only when there is indeed a loss of revenue and the loss of revenue can be there only when recipient of income has not paid tax. Therefore, recovery provisions under section 201(1) can be invoked only when loss to revenue is established, and that can only be established when it is demonstrated that the recipient of income has not paid due taxes thereon. In the absence of the statutory powers to requisition any information from the recipient of income, the assessee is indeed not always able to obtain the same. The provisions to make good the shortfall in collection of taxes may thus end up being invoked even when there is no shortfall in fact. On the other hand, once assessee furnishes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner (Appeals) held that there was no principal and agent relationship between the assessee and its distributors, and their business activities and entities were independent. The Tribunal reversed the findings of the Commissioner (Appeals). On appeal: Held, dismissing the appeal, that the salient features of the agreement between the assessee and the franchisees were (i) the property in the start up pack and pre-paid coupons even after transfer and delivery to the franchisees remained with the assessee, (ii) the franchisee really acted as a facilitator or instrumentality of providing services by the assessee to the ultimate subscriber, (iii) the franchisee had no free choice to sell it and everything was being regulated and guided by the assessee, and (iv) the rate at which the franchisee sold to retailers and that at which the assessee sold to the franchisee, was also regulated and fixed by the assessee. From the conditions in clauses 16, 16.1, 16.2 and 16.3 of the agreement, it emerged though the nomenclature had been used as franchisee, the agreement was essentially that of the principal and agent albeit the stipulation in clause 16.2. In the real sense, the franchisee a ..... 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