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Income Tax Officer, Ward-02, Rohtak Versus M/s Tarun Sales

2017 (8) TMI 442 - ITAT DELHI

TDS u/s 194H - sale of SIM cards / pre-paid recharge coupons -Disallowance of discount and activation charges u/s 40(a)(ia) - non deduction of tds - principal to agent relationship between assessee and the customers - Held that:- Similar facts had already been adjudicated in assessee’s own case for the preceding year as held since no dealer or sub-dealer was appointed either by Bharat Sanchar Nigam Ltd. (BSNL) or by the assessee, for the purpose of marketing the products and/or service of the Bh .....

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d to deposit the money in advance. Undisputed, it is to customers directly and to petty shopkeepers, that the SIM cards and recharge coupons were sold in cash. The customers and shopkeepers were offered discount on the face value of the SIM cards. Apropos the recharge coupons, on the other hand, a small margin was kept by the assessee out of the commission/discount offered by BSNL. Then, activation charges were given by BSNL to the assessee on new connections, and a major portion thereof was giv .....

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o. 967/Del/2014 - Dated:- 9-12-2016 - Sh. N. K. Saini, AM And Sh. N. K. Choudhary, JM For The Assessee : Sh. Manoj Kumar, CA For The Revenue : Sh. F. R. Meena, Sr. DR ORDER Per N. K. Saini, AM: This is an appeal by the department against the order dated 02.12.2013 of ld. CIT(A), Rohtak. 2. The grievance of the department in this appeal relates to the deletion of addition of ₹ 75,47,717/- and ₹ 4,80,270/- (totaling ₹ 80,27,987/-) made by the AO on account of disallowance of disc .....

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ting to ₹ 4,80,270/- and discount amounting to ₹ 75,47,717/- were paid. He also asked the assessee to explain as to why tax at source on those payments was not deducted and deposited and that as to why those amount be not added to the income u/s 40(a)(ia) of the Act. The AO did not find merit in the submissions of the assessee and made the addition of ₹ 80,27,987/- by observing in para 5 of the impugned order as under: 5. The replies filed by the assessee in the course of asses .....

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aid coupons/Sim cards on behalf of BSNL. The assessee has taken the assistance of various retailers in performing these activities. The assessee also part with a part of consumer/service charges received from BSNL to the retailers. The assessee has reflected such payments under the head "activation scheme and discount" amounting to ₹ 4,80,270/- and ₹ 75,47,717/- in the profit and loss account respectively. In the course of assessment proceedings the assessee was time and ag .....

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ion that he has actually parted with this money to this extent to various customers/retailers, the entire amount of ₹ 4,80,270/- and ₹ 75,47,717/-, totaling ₹ 80,27,987/- shown under the head "activation scheme and discount" respectively is added to the returned income of the assessee on account of nonproduction of any reliable and sustainable evidence in support of his contention. 4. Being aggrieved the assessee carried the matter to the ld. CIT(A) who deleted the ad .....

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ore, the ld. CIT(A) was fully justified in deleting the addition made by the AO. 7. We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that an identical issued having similar facts had already been adjudicated in assessee s own case for the preceding year by the ITAT Delhi Bench H , New Delhi in ITA No. 3523/Del/2011 wherein relevant findings have been given in paras 15 to 25 of the order dated 22.02.2013 which re .....

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aximum retail price and the discount regarded as discount was the retailer s margin. There was no agreement in existence between the assessee and the customers. The assessee, during the year, was an authorized franchisee of Bharat Sanchar Nigal Ltd. (i.e. BSNL) vide agreement dated 12.01.2007 (copy at pages 17- 36 of the assessee s paper book- APB for short) . Under the agreement, the assessee was to provide services to walk-in customers. It was to distribute all types of authorized telecom serv .....

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a case of collection of money from the customers for various services to be provided/already provided by BSNL and, as such, it was in the nature of payment to an agent for collection of money on behalf of BSNL; that the assessee had shown the expense as commission in its Profit & Loss Account; that therefore, even though the payments were covered u/s 194H of the IT Act, no TDS had been deducted thereon. It was on this basis that the Assessing Officer made the disallowance. The Ld.CIT(A) dele .....

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ount . As per the agreement between the BSNL and the assessee:- The Franchisee shall provide BSNL services to walk-in-customers. It shall also establish, through its sale-force, direct contact with prospective customers and register as many new BSNL customers as possible subject to a minimum number fixed by BSNL. Franchisee shall also distribute all types of authorized telecom services for marketing to its Franchisees and cash card (prepaid) to its retailers. No dealer/sub-dealer was either appo .....

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sion was paid by the assessee to the customers. Then, Section 194H of the Act does not cover such discounts as under consideration herein and that being so, obviously the provisions of Section 40(a)(ia) of the Act was wrongly applied. Accounting-wise, the face value of the recharge coupon was debited to the purchase account, whereas the commission given by BSNL was credited to the commission account. At the time of sale, on the other hand, the face value of the recharge coupon was credited to th .....

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d, a small margin was kept by the assessee out of the commission/discount offered by BSNL. Then, activation charges were given by BSNL to the assessee on new connections, and a major portion thereof was given to the customers as discount. 19. As discussed, it was on the basis of the mistaken presumption of existence of relationship of principal and agent, that the discount offered by the assessee to its customers was considered by the Assessing Officer as commission. This, however, is not so, to .....

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