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2015 (6) TMI 521 - ITAT HYDERABAD

2015 (6) TMI 521 - ITAT HYDERABAD - [2015] 42 ITR (Trib) 669 (ITAT [Hyd]) - Non deduction of TDS on commission payment u/s 194H - assessee sold SIM/recharge cards and top-up cards to the franchisees at a concessional price - CIT(A) concluded that the transaction between the parties is on principal to principal basis and therefore, the concession given to the franchisees cannot be treated as commission, but trade discount - Held that:- As per third proviso to S.194H which is inserted by the Finan .....

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URT) cannot be applied, since the relationship between the BSNL and the 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 o .....

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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 Petitioner :NONE For the Respondent :SHRI RAMAKRISHNA BANDI ORDER This appeal by the Revenue and cross-objection by the assessee are directed against the order passed by the Commissioner of Income-tax(Appeals) Tirupati, wherein he observed .....

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e learned CIT(A) ought to have appreciated that there is no sale of goods as no sale invoice is raised in the name of the franchisees, delivery of cards is made through the delivery challan only and no VAT is paid by the assessee on transfer of cards to the franchisees. 3.The learned CIT(A) ought to have relied on the decision of the Hon ble Kerala High Court in the case of M/s. BPL Mobile Cellular Limited Vs. State of Kerala & Others in writ petition no. 29202 of 2005 wherein it was held th .....

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in facilitating the access to such services of the assessee by distributing the cards to the customers. Accordingly, the learned CIT(A) ought to have held tha the transactions conducted with the franchisees is on a principal to agent basis and the discount allowed to the franchisees is in the nature of commission falling within the ambit of section 194H of the LT. Act. 5.The learned CIT(A) erred in placing reliance on the contents of the circular issued by the corporate office of the BSNL in con .....

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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 .....

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g with the property therein and accordingly and invoice is raised to collect the consideration. 3. The Respondent is of the view that in the actual position the deduction from the amounts collected is nothing but discount, and therefore, TDS is not applicable. 4….. 3. None appeared on behalf of the assessee. I have heard the Learned Departmental Representative and have carefully perused the relevant record. 4. Facts necessary for the dispose of this appeal are stated in brief: The assesse .....

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ch event, the assessee is liable to deduct tax at source and for the failure to do so, the provisions of S.201(1) and S.201(1A) get attracted. In this regard, he observed that the nomenclature adopted by the BSNL in the agreement would not decide the relationship between the BSNL and the franchisees and the nature of the transaction has to be taken into consideration. He also observed that it is not the card that is sold to the customer but the code number embedded in the recharge coupon which i .....

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(A) that the Revenue generated by BSNL, on sale of prepaid recharge coupons, etc., is taken into account net of discount given to the franchisees. In this regard, a circular 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 resul .....

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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) examined the facts placed before him and came to the conclusion that the transaction between the parties is on principal to principa .....

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hange in the method of recognizing the revenue followed by the appellant. Even though, the reasons and circumstances under which the change has been effected by the appellant, the same has not been found favour with the !TO. He has also found that the transaction continues till the discount is distributed to the sub-franchisees. I have gone through the instructions received by the appellant company from their Corporate Office wherein it is clearly mentioned that the transaction on the recharge c .....

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d as sale with the risk and reward transferred to franchisee. The existence of Implied Warranties, that is, assurance of the BSNL to provide service to the ultimate buyer of the recharge coupon does not take away the character of the sale in this instance. This is also s by the clause of the franchisee agreement as laid down in the clause No.11.1.2 as extracted below :- "11.1.2. Basic Fixed Discount Commission: a)Discount on Recharge Coupons: There will be uniform discount allowed for Recha .....

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nd 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 accoun .....

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arious judicial authorities. 7. Aggrieved, Revenue has come up in appeal before us. 8. The Learned Departmental Representative relied upon the decision of the ITAT Kolkata Bench in the case of Bharti Cellular Ltd. (2007) 108 TTJ (Kol) 38 and Delhi High Court in the case of idea Cellular Ltd. (325 ITR 148). Whereas this decision was already considered by the learned CIT(A) and having regard to the factual matrix of the case, it was held that the assessee has followed a systematic method of accoun .....

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