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Vodafone Cellular Ltd. (Formerly Vodafone Essar Cellular Ltd.,) Versus Addl. CIT, TDS Range, Pune

2015 (7) TMI 204 - ITAT PUNE

Penalty u/s.271C - non-deduction of tax at source from discount extended to its pre-paid distributors - assessee has moved the Stay Application for stay on realisation of the outstanding demand levied u/s.271C for the A.Yrs. 2007-08 to A.Y. 2012-13 being penalty for failure to deduct tax at source - Held that:- It is an admitted fact that the quantum appeals levying interest u/s.201(1) and 201(1A) are pending for disposal before the Tribunal. The Tribunal in assessee’s own case for A.Y. 2001-12 .....

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H of the Act to the transactions in question.

While Hon’ble Karnataka High Court has decided the issue in favour of the assessee the Hon’ble Delhi High Court and Hon’ble Calcutta High Court have decided the issue against the assessee. The matter is now pending before the Hon’ble Supreme Court for adjudication. However, it is also a fact that the Jaipur Bench of the Tribunal in a recent decision in the case of M/s.Bharti Hexacom Ltd. Vs. ITO, TDS-2, Jaipur [2015 (7) TMI 175 - ITAT JAI .....

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w that the Ld. Counsel for the assessee has made out a prima-facie case in its favour so far as the realisation of the outstanding demand is concerned that too in a penalty proceeding.

The Hon’ble Bombay High Court in the case of UTI Mutual Funds and UTI Trustees Company Pvt. Ltd. (2012 (3) TMI 333 - BOMBAY HIGH COURT ) has held that where a direct prima-facie case has been made out, calling upon the assessee to deposit would itself occasion undue hardship. We therefore allow the stay .....

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es. - Decided in favour of assessee. - S.A. Nos.51 to 56/PN/2015,ITA Nos.788 to 793/PN/2015 - Dated:- 24-6-2015 - Shri R.K. Panda, and Shri Vikas Awasthy, JJ. For the Petitioner : Shri Salil Kapoor For the Respondent : Shri A.K. Modi ORDER PER R.K. PANDA, AM : The assessee vide the captioned Stay Applications requests the Tribunal to stay the realisation of outstanding demand of ₹ 27,93,47,377/- levied u/s.271C of the I.T. Act for the F.Yrs. 2006- 07 to 2011-12, the details of which are as .....

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assessee is inter alia engaged in providing Cellular Mobile Telephone Services (CMTS) in the telecom circles of Maharashtra & Goa (except Mumbai). 2.1 Under the prepaid model, the subscriber is required to pay for the talktime in advance, which is available in the form of recharge vouchers/e-top up, through internet or any other modes, either physical or electronic. The talktime is made available in different denominations and under different schemes, which can be availed by a prepaid subscr .....

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evel of the distribution, the party distributing the talktime retains a margin for its efforts and the risks assumed. The transfer of talktime by the Assessee to the distributor is at a discount, a part of which is, in turn, passed on by the distributor to the retailer / subscriber. A similar mechanism is followed for distribution of pre-paid connections (SIM Cards) using the same distribution network. The transaction in all aspects is akin to sale and purchase of goods as it happens in FMCG sec .....

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and interest demand of ₹ 5,11,54,426 against the Assessee, on account of non-deduction of tax at source on discount extended to its pre-paid distributors. Subsequently, the case for FY 2008-09 and 2009-10 was taken up for scrutiny as well and after due verification of all the records, TDS order dated March 15, 2012 under section 201(1)/ 201( 1A) of the Act was passed by the TDS Officer raising a tax and interest demand of ₹ 16,34,00.556 on the Assessee, on account of non-deduction o .....

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uently, notice dated February 5, 2013 was issued by the Additional Commissioner of Income Tax, (TDS) Pune to show cause why penalty under section 271C of the Act should not be imposed on account of non-deduction of tax at source from discount extended to its pre-paid distributors. 3. However, rejecting the explanations given by the assessee the Assessing Officer has levied penalty u/s.271C of the I.T. Act which has been upheld by the CIT(A). 4. While explaining the prima-facie case in favour of .....

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o.256 to 263 of 2012 order dated 14-08-2014 he submitted that the Hon ble High Court in the said decision has held that withholding tax provisions u/s.194H of the Act are not applicable to discount extended to prepaid distributors. 4.2 Referring to the decision of Hon ble Karnataka High Court the Ld. Counsel for the assessee further submitted that the Hon ble High Court has also observed that the decision of the Hon ble High Courts in the case of Idea Cellular Ltd. reported in 325 ITR 148 (Delhi .....

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to 2008-09 vide ITA No. 309/JP/121 & ITA Nos. 502 to 505/JP/11 order dated 13-03-2015 he submitted that the Tribunal in this case relying on the decision of the Hon ble Karnataka High Court (cited supra) has held that there is no liability on the part of the assessee to deduct tax at source from discount extended to prepaid distributors. Therefore, it is clear that the position taken by the assessee that TDS provisions are not applicable to the discount extended by the assessee to its prepai .....

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t the assessee. However, considering the decision of Hon ble Karnataka High Court in the case of Bharti Airtel Ltd. and Others which has taken a different view on this issue the Tribunal has granted stay on recovery of the outstanding demand for A.Yrs. 2011-12 and 2012-13. Since in the quantum proceedings stay has been granted holding that there is a prima-facie case, therefore, the penalty proceedings are in a better footing and therefore full stay should be granted to the assessee. 4.5 Referri .....

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en the corresponding appeals of the assessee shall be heard by the Tribunal. So however, in so far as it is necessary to appraise the prima-facie nature of assessee's case and the balance of convenience necessary to dispose of the captioned Stay Applications is concerned, the same have been noted by us. Considering the entirety of circumstances and the factual and legal matrix brought out by the Ld. Representative for the assessee, we deem it fit and proper to direct the Assessing Officer no .....

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e order restraining the Assessing Officer from taking coercive measures shall operate for a period of six months from today or till the date of order of the Tribunal in assessee's appeals, whichever is earlier. 4.6 Referring to the decision of the Hon ble Bombay High Court in the case of UTI Mutual Fund and UTI Trustees Company Ltd. Vs. Ito reported in 260 ITR 56 he drew the attention of the Bench to the following observation : Where a strong prima facie case has been made out calling upon t .....

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alue in our legal regime. No public authority, including the Revenue, can ignore the principle of precedent. Certainty in tax administration is of cardinal importance and its absence undermines public confidence. 4.7 Referring to various other decisions placed in the paper book he submitted that the issue has been decided in favour of the assessee in the quantum proceedings. He accordingly submitted that full stay should be granted to the assessee. He also requested for an early hearing of the a .....

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epresentative accordingly submitted that the Stay Application filed by the assessee should be dismissed and the assessee should be directed to pay the outstanding demand at least in instalments. 6. We have considered the rival arguments made by both the sides. In this case the assessee has moved the Stay Application for stay on realisation of the outstanding demand of ₹ 27,93,41,377/- levied u/s.271C of the I.T.Act for the A.Yrs. 2007-08 to A.Y. 2012-13 being penalty for failure to deduct .....

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demand raised u/s.271C of the I.T. Act. It is also an admitted fact that different high courts have taken different views on the applicability of provisions of section 194H of the Act to the transactions in question. While Hon ble Karnataka High Court has decided the issue in favour of the assessee the Hon ble Delhi High Court and Hon ble Calcutta High Court have decided the issue against the assessee. The matter is now pending before the Hon ble Supreme Court for adjudication. However, it is a .....

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