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TMI Blog2018 (5) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer mentioning the correct date of communication of learned Commissioner (Appeals)'s order. After considering the submissions of the learned Departmental Representative and perusing the material on record, we are satisfied that these appeals were filed within the prescribed period of limitation. Therefore, the delay pointed out by the Registry is ignored and appeals are admitted for adjudication on merit. 3. Aforesaid appeals have been filed by the Revenue on the common issue of deletion of disallowance made under section 40(a)(ia) of the Act by the Assessing Officer on account of non-deduction of tax at source on alleged commission payment to the distributors on sale of recharge coupon vouchers (RCVs). The ground raised by the Revenue on the aforesaid issue in all these appeals are identical except the figures. The facts relating to the disputed issue in all these appeals, though, are more or less common, however, considering the fact that the learned Departmental Representative took up ITA no.5032/Mum./2016, pertaining to the assessment year 2007-08 as the lead appeal, it is deemed appropriate to cull out the facts involved in the said appeal. 4. Brief facts are, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194H of the Act. In support of its contention, the assessee relied upon a number of judicial pronouncements. The Assessing Officer after considering the submissions of the assessee, however, was not convinced with them. Referring to the sample copy of the agreement entered into by the assessee and the distributor and relying upon certain clauses of the agreement, as reproduced in the assessment order, the Assessing Officer observed, though, the assessee has tried to make out a case to show that the business model followed by it is different from other mobile operators, in the sense, that the sale transaction between the assessee and the distributor is complete when the distributor purchases the prepaid sim card and RCVs from the assessee for subsequent sale to the mobile users, however, according to the Assessing Officer, the change in the business model do not alter the character of the business at the macro level. The Assessing Officer observed, the assessee is a mobile service provider to the customers and the intermediaries like distributors are provided in the system in order to facilitate the service to be rendered to the customers. The assessee owns the technology and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon'ble Delhi High Court in case of CIT v/s Idea Cellular Ltd.[2010] 325 ITR 148, and the decision of the Hon'ble Calcutta High Court in case of Bharti Cellular Ltd. v/s ACIT[2013] 354 ITR 507, the Assessing Officer ultimately held that the discount given to the dealers is in the nature of commission on which tax was deductible at source under section 194H of the Act. Accordingly, he made disallowance under section 40(a)(ia) of the Act for an amount of ` 37,23,82,412 under section 40(a)(ia) of the Act. Similar disallowances were also made in the other assessment years under appeal. Being aggrieved with the disallowances made as aforesaid, assessee preferred appeals before the first appellate authority. 5. The learned Commissioner (Appeals) after considering the submissions of the assessee and having found that in assessee's own case for assessment years 2009-10 and 2010-11, the Commissioner (Appeals) following the decision of the Hon'ble Karnataka High Court in assessee's case has decided the issue in favour of the assessee, followed the same and deleted the disallowance made under section 40(a)(ia) of the Act in the aforesaid assessment years. 6. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty, upon considering similar nature of transaction has held that the nature of transaction between the assessee and its distributors being on principal-to-principal basis the trade discount given to the distributor is not in the nature of commission, hence, does not attract the provisions of section 194H of the Act. He submitted, following the aforesaid decision of the Hon'ble Karnataka High Court, the Tribunal, Jaipur Bench, in case of assessee's group company Tata Teleservices Ltd. has held that provisions of section 194H of the Act is not applicable in respect of sale of pre-paid sim cards and RCVs to the distributors. Further, learned Authorised Representative relied upon the decision of the Hon'ble Rajasthan High Court in case of M/s. Tata Teleservices Ltd and Ors. in the judgment delivered on 11th July 2017 in ITA no.124/2015 and group of other appeals to contend that while deciding identical issue, the Hon'ble Court has held that the provision of section 194H of the Act is not attracted to the transactions involving sale of pre-paid sim cards and RCVs to the distributors. With reference to the decisions cited by learned Departmental Representative, he submitted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the retailer / consumers after retaining his margin but under no circumstances, the distributor can charge over and above the MRP. For example, if the MRP of the starter kit is ` 100, the assessee sells it to the distributor at ` 80 and the distributor can sell it to the retailer or customer for a price ranging from ` 80 to ` 100. However, as far as the assessee is concerned, it raises the invoice for ` 80 only to the distributer and also the same amount is reflected in the books of account towards the sale price. The assessee never credits the amount of ` 100 towards the sale price and allows discount of ` 20 in its books of account. Thus, as far as the assessee is concerned, sale price of the starter kit / sim card is ` 80. Furthermore, as per the terms and conditions, once the sim card / starter kits are sold to the distributor, the sale is complete and under no circumstances, they can be returned back to the assessee. From the aforesaid facts, it is clearly evident that as far as sale of starter kit / sim card is concerned, it is purely a purchase / sale transaction on principal-to-principal basis and there is no relationship of agency. That being the case, the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnataka High Court after considering a number of decisions including the decision of the Hon'ble Delhi High Court in Ideal Cellular Ltd. (supra) and the decision of the Hon'ble Kerala High Court in case of Vodafone Essar Cellular Ltd. v/s ACIT [2011] 332 ITR 255, ultimately concluded that the provisions of section 194H of the Act are not attracted. The Tribunal, Jaipur Bench, in case of M/s. Tata Teleservices Ltd. v/s ITO, ITA no.309/Jp./ 2012, dated 13th March 2015, following the aforesaid decision of the Hon'ble Karnataka High Court has held that provision of section 194H of the Act is not applicable to the transaction relating to sale of prepaid sim cards and RCVs to the distributors as it is on principal-to-principal basis. The Hon'ble Rajasthan High Court in the case cited by the learned Authorised Representative while considering identical nature of dispute after examining the relevant agreement has ultimately concluded that the distributor cannot be treated as an agent of the assessee, hence, the provisions of section 194H of the Act are not applicable in respect of discount given on sale of prepaid sim cards and RCVs to the distributors. Thus, from the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194H of the Act is the binding decision of the Hon'ble Andhra Pradesh High Court in case of M/s. Vodafone Essar South Ltd. v/s ACIT, [2010] 7 taxmann.com 43. Though, the Tribunal, Hyderabad Bench, acknowledged the fact that the Hon'ble Karnataka High Court in case of Bharti Airtel Ltd. v/s DCIT, (supra) has taken a diametrically opposite view by holding that the sale of prepaid sim cards and RCVs by the assessee to the distributors are on principal-to-principal basis, however, the Hon'ble Bench has also expressed the view that they are bound by the decision of the Hon'ble Jurisdictional High Court. It has not been demonstrated before us by the learned Departmental Representative that the agreements on the basis of which the cases of Hutchison Telecom East Ltd. (supra) and Vodafone Mobile Services Ltd. (supra) were decided are identical to the agreement between the present assessee and its distributors. On the contrary, in the impugned assessment order the Assessing Officer has acknowledged that the business model of the assessee is different from other mobile operators, though, of-course, he has attempted to get over it by observing that the little changes in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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