TMI Blog2015 (6) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... he franchisee stands on a different footing and the same was recognised by the CBDT. In fact, the decision of Hon'ble Delhi High Court and other High courts, on this point were considered by Hon'ble Karnataka High Court in the case Bharti Airtel Ltd. V/s. Dy. CIT and others (2014 (12) TMI 642 - KARNATAKA HIGH COURT) while holding that Section 194H is not applicable . Since no jurisdictional High Court decision is available as on date, the latest decision of Karnataka High Court, which considered and distinguished earlier rulings of other High Courts, deserves to be followed. In fact, the first appellate authority has taken into consideration the circular issued by the corporate office of the BSNL dated 13.12.2007 and another circular dated 15.4.2008 while coming to the conclusion that the nature of the payment made by the assessee to its franchisee is trade discount only. Since the view taken by the learned CIT(A) is mainly based on the factual matrix of the case, the order passed by the learned CIT(A) does not call for any interference. - Decided against revenue. - ITA No.170/Hyd/10,Cross Objection No.10/Hyd/2010 - - - Dated:- 5-6-2015 - Shri D.Manmohan,JJ. For the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the nature of trade discount and instead he ought to have examined the true nature of transactions which is rendering of service to the customer with the franchisee acting as an agent. 6.The learned CIT(A) ought to have placed reliance on th decisions of the Hon'ble Kolkata Tribunal in the case of Bharati Cellular Limited (2007) 108 TTJ 38 and the Kochin Tribunal in the case of Vodafone Essar Cellular Limited Vs. ACIT in ITA os. 106 to 113/Coch/2009 to hold that the discount allowed to the franchisees is in the nature of commission liable for u/s. 194H of the LT. Act. 7...... Supporting the order passed by the learned Commissioner of Income-tax(Appeals), assessee has filed cross-objection by raising the following grounds 1. The Hon ble Commissioner of Income Tax (Appeals) Thirupathi has correctly interpreted the law and facts involved in the case, and held that the transactions relating to Franchisee top up card sales as transfer of property in the pre-paid cards and allowed the appeal placing reliance on various judicial pronouncements. 2. The transaction being on a principle to principle basis and the revenue on prepaid recharge coupons etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Corporate Office of the BSNL dated 13.12.2007 and another Circular No.131 dated 15.4.2008 were referred to. He also furnished a copy of the franchise agreement and copy of the invoice raised on one of the franchisees to highlight that the discount on the face value of the discount coupon has been deducted resulting in net amount receivable, for which the franchisee has paid by demand draft in favour of BSNL. As such the franchisee offered the net amount to tax, which is in accordance with the method followed in accordance with AS-9. It was further contended that the relationship between BSNL and the franchisee is on principal to principal basis ; a franchisee pays the amount and collects the recharge coupon and thereafter the coupons become the property of the franchisee and the obligation of the BSNL is only to the customer for the value of the services to be rendered. In fact, the risks and rewards in the recharge coupons are fully transferred to the franchisee alongwith the property therein, and hence, the relationship between the assessee and the franchisee is that of principal to principal and the transaction completed is one of sale. 6. The learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned that the franchisee will be allowed discount on recharge coupons. It is also clear from the copy of the invoice filed and relied upon by the appellant that the franchisee has not only placed an indent for supply and delivery of the prepaid cards of different ations but he has also paid the total cost of such cards by means of an account payee demand drafts. This clearly expounds that the franchisee has made the payment for the cards he is indenting which clearly establishes that the property, risk and rewards have been transferred to the franchisee. On these two counts, the ITO loses his case and the appellant wins his appeal convincingly. It would be appropriate to mention here that the method of accounting cannot be permanent for ever in the case of an assessee as he has right to choose that particular method of accounting which can result in proper and accurate arrival of profits. As the appellant company noticed the lacunae in accounting for the gross sale receipts as sale, they are at liberty to revert to the correct method of accounting as given in AS-9. This cannot be found fault with nor this can be a bar for roping in the assessee in section 201. This has been accep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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