Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (6) TMI 443 - ITAT JAIPUR

2015 (6) TMI 443 - ITAT JAIPUR - TMI - Non-deduction of TDS u/s 194H on discount given to the prepaid distributors - CIT(A) confirming the order of the AO in holding the assessee as 'assessee in default' u/s 201 - Held that:- Assessee has issued sale invoices of SIM cards to its distributors net of discount. Similarly relevant entries have been entered in the books net of discount.

Discount or so called commission has not been separately paid to distributors, thus there is no payment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. - Decided in favour of assessee. - ITA Nos. 356, 357,358 & 359/JP/2012, ITA Nos. 326, 327,328 & 329/JP/2012 - Dated:- 22-5-2015 - SHRI R.P. TOLANI & SHRI T.R. MEENA, JJ. For the Appellant : Shri Ronak G Doshi, C.A. For the Respondent : Smt. Neena Jeph, JCIT ORDER PER R.P. TOLANI, JM The above mentioned appeals have been filed by the assessee and the Revenue against order of the ld. CIT(A)-III, Jaipur dated 02-01-2012 for the assessment years 2007-08 to 2010-11 wherein both the parties hav .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DS)-2, Jaipur u/s 201(1)/201(1A) of the Act, by treating the discount offered by the assessee to the distributors as commission and thereby treating the assessee in default u/s 201(1) read with Section 194H of the Act. 2. The assessee most humbly prays that the discount allowed to the distributors be held as not liable to TDS u/s 194H of the Act as the relationship between the assessee and its pre-paid distributors is on principal to principal basis and thus, the demand raised in the impugned or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t in the absence of any payment or credit to the distributors, the appellant should not be treated as assessee in default u/s 201 r.w.s. 194H of the Act . Without prejudice to Ground No. I and II. Ground III 1. The ld. CIT(A) failed to appreciate that in the distribution channel, the distributors provide to retailers and they provide to ultimate customer and hence, the action of ld. CIT(A) in treating the assessee as assessee in default, u/s 201 r.w.s. 194H of the Act on the entire difference be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the order of the AO in holding the assessee as assessee in fault u/s 201 of the Act and thereby levying the interest u/s 201(1A) of the Act 2. The assessee prays that interest levied u/s 201(1A) of the Act be deleted or be appropriately reduced. 2.2 The grounds raised by the Revenue are as under:- The ld. CIT(A) has erred in law and on the facts in holding that the assessee was not liable to deduct tax regarding such distribution/ channel partners, who have certified that they have filed their r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

turns as the ld. CIT(A) directed the AO to verify the figures. (c) Many of the deductees did not have PAN ad therefore, the claim of filing of I.T. Return by them could not have been considered. (d) Incomplete and unverified information could not have been considered as additional evidence u/r 46a of the Income Tax Rule. 2.3 During the course of hearing, the ld. Counsel for the assessee contends that the issues in question as raised in assessee's and Revenue s appeals are squarely covered by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

194H on the assesse and thereby allowed assessee s appeals and dismissed the Revenue s appeals by following observations. 2.22 We have heard the rival contentions and perused the material available on record. Following observations emerge from the record:- i. Assessee has claimed that as per its business agreement terms the sale price is collected in advance from distributor. The sale price is received minus discount, what is accounted for in its books is net sale price and not the commission. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, accounting treatment and nature of relationship between assessee and its distributors qua the impugned sales fall within the ambit and observations at para 61 of the order. In view of the fore goings we have no hesitation to hold that: iii. What is sold by the assessee service provider to the distributor is the right to service. Once the distributor pays for the service, and the service provider, delivers the Sim Card or Recharge Coupons, the distributor acquires a right to demand service. Onc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agent. v. The assesseer may have fixed the MRP and the price at which they sell the products to the distributors but the products are sold and ownership vests and is transferred to the distributors. The discounted income accrues to distributor only when they sell this right to service and not when they purchase this right to service from assessee. vi As at the time of sale of prepaid card by the assessee to the distributor, income has not accrued or arisen to the distributor, there is no primary .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ipal and agent relationship. 2.23. We find merit in the contention of ld. Counsel that there is no jurisdictional high court judgment on this issue. Hon ble Karnataka High Court Judgment is elaborate, detailed, considers the previous Delhi and Kerala High Court judgment against the assessee and is latest comprehensive adjudication on the issue. Even if it is held that there exist divergence of judicial opinion a view favourable to the assessee is to be adopted as held by Hon ble Supreme Court in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

distributors as held by authorities below there orders are reversed. c. Looking at the transaction being of Sale/Purchase and relationship being of principal to principal the discount does not amount to commission in terms of sec. 194H, the same is not applicable to these transactions. Therefore, assesseesse cannot be held in default; impugned demand raised applying sec. 194H is quashed. Assessee s grounds are allowed. 2.24 Apropos the revenue appeal since we have held that sec. 194H is not app .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uisite discount, it is pleaded that the sale invoices & respective entries in the accounts books in this behalf are net of discount. Thus no income whatsoever has been paid to distributor which may be liable for TDS u/s 194H as held by the Hon ble Karnataka High Court in Tata Tele Services judgment(supra). Reference is invited to the copy of the sale invoices reflecting sale prices of ₹ 33,600/- and accounting entry in sales a/c; as against sale value of ₹ 40,000/-. Consequently .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

any by realizing more than the selling price fixed between the parties. It does not benefit the company in any way. It is a trading income of the distributor himself. The distributor does not ipso facto earn income just by purchasing the tickers from the company. Only if it is able to sell it, we can say that it has earned income. Hence, there is no fixed amount of commission from the agreement. Since the distributor is allowed to sell at any price between the selling price of the company and th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing, the distributors are free to appoint the retailers, irrespective of the actual sales the distributors are required to pay the company the net discounted price, thus concluding that the transaction between the company and the distributors is on principal to principal basis. It is pleaded that these submissions of the assessee have nowhere been disputed or controverted by the AO. Similarly, the property in goods passed to the distributors at a discounted value on the delivery of the SIM cards .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ibutors (See clause 5.1 of the Agreement page 4) . Further, on the delivery of the SIM/RC, the risks passes on to the distributor. (See Clause 7.4 of tee Agreement Page 5). It is also pleaded that the facts of the case of the assessee are on complete parity with M/s. Tata Teleservices Ltd. Thus in view of the above submissions, it is pleaded that assessee's case is not covered under liability u/s 194H of the Act. Accordingly the demand may be quashed. 2.6 The ld. DR on the other hand contend .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

p between the assessee and its distributors is of principal to agent and not of principal to principal basis. In these circumstances the discount assumes the character of commission which is squarely liable for TDS u/s 194H. Order of AO is relied on for both set of appeals i.e. assesse and revenue. 2.7 Ld. Counsel for the assesse in rejoinder countered the contentions of ld.DR as under: i. Only particular clause of agreement has been read by ld. DR to support her arguments. SIM card as such has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inated. In this eventuality also there is no payment of commission as what was paid was actual sale price i.e. MRP - Discount and on termination of sale what will be payable by the assesse is only this amount. Thus looking from any angle, even in case of rarest of rare contingency pointed out by ld. DR the facts do not detract the transaction being in the nature of sale and purchase and the relationship between assesse and distributor being that of principal to principal. iii. Hon ble Karnataka .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version