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TMI Blog2018 (5) TMI 1696X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 1 is regarding disallowance made under section 40(a)(ia) in respect of the commission/discount given to the retailers. 2. The assessee is an Individual and engaged in the business of trading in mobile and accessories including SIM card, pre-paid card etc. During the course of assessment proceedings, the AO noted that the assessee has shown the payment of commission of Rs. 16,41,989/- under section 40(a)(ia) of the Act without deduction of TDS. Accordingly, the AO disallowed the said amount by invoking the provisions of section 40(a)(ia). The assessee challenged the action of the AO before the ld. CIT (A) and submitted that the alleged payment was not made by the assessee but it was directly paid by the mobile operator to the retailers on the basis of sale figures supplied by the assessee out of purchase consideration of SIM card. However, the ld. CIT (A) did not accept the contention of the assessee and confirmed the disallowance made by the AO. 3. Before us, the ld. A/R of the assessee has reiterated his contention that the alleged payment of commission was not paid by the assessee to the retailers but it was directly paid by the mobile operator whose SIM card and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission paid by the assessee so as to attract the provisions of section 194H. The Coordinate Bench of this Tribunal in the case of Chocopack Enterprises vs. ITO (supra) has considered an identical issue in para 9 as under :- "9. I have considered the rival submissions as well as relevant material available on record. The assessee's firm engaged in the business of distributorship of Idea recharge cards. The issue involved in case of theassessee is in respect of sale of recharge coupons and not the sale of sim cards. Therefore to the extent the issue of sale of sim cards by the service provider it is held by the Hon'ble Karnatka High Court in the case of Bharati Airtel Ltd. vs. CIT (supra) that the assessee is the service provider had no obligation to deduct TDS and accordingly when the service provider has is under no obligation to deduct tax, the distributor would also not under obligation to deduct TDS. However, the said decision is only on the issue of sale Sim cards and therefore, will not applicable in the case of the assessee. The Hon'ble Supreme Court in case of Bharat Sanchar Nigam Ltd. vs. Union of India 282 ITR 273 as also observed in paras 85 and 86 which are reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and Restaurant Association of India v. Union of India [1989] 3 SCC 634- "subjects which in one aspect and for one purpose fall within the power of a particular Legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping ; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects". No one denies the legislative competence of the States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction." Therefore, as the issue of sale of sim cards is concerned the Hon'ble Supreme Court has clearly held that the sale of sim cards merely incidental to the service being provided and only facilitates the identification of subscribers their credit and other details it would not be assessable to sale tax. As regards the sale of recharge coupons it is clearly a transaction of sale of goods as held by the Hon'ble Supreme Court that the telephone is nothing but a servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Consequently disallowance made by the AO u/s 40 (a)(ia) is deleted." Thus the Coordinate Bench has followed the decision of Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. vs. Union of India, 282 ITR 273 (SC). It is pertinent to note that the issue in case of Bharat Sanchar Nigam Ltd. vs. UOI (supra) as well as in the cases which are relied upon by the ld. CIT (A) was regarding the nature of the payment made by the operating companies whether it was commission or discount allowed by the Cellular/Mobile operators. Therefore, even otherwise the decisions on those cases are not directly applicable in the case of the assessee where the assessee is a distributor and an inter-mediatory between the Cellular/Mobile operator and the retailers. Following the decision of the Coordinate Bench of this Tribunal, we set aside the orders of the authorities below qua this issue and delete the disallowance made by the AO under section 40(a)(ia). Ground No. 2 is regarding the addition of Rs. 1,56,787/- on account of bogus commission expenses. 5. The AO received the information/details from M/s. Vodafone Digilink Pvt. Ltd. and found that the said company has shown a payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival submissions as well as the relevant material on record. We note that the business model of the mobile operators through distributor/dealers/retailers is such that the income of all the down stream intermediatory is only the discount/commission allowed by the Cellular operators. There is no dispute that the mobile operators are making the payment of such commission/discount to the distributors/dealers/retailers directly. However, for accounting purposes the payments are reflected through inter-mediatory. Thus when the actual transaction of payment is made directly by the mobile operators to the retailers, then the assessee being a dealer has carried out only the accounting entries for completeness of the account. It is also not in dispute that these payments are determined by the mobile operators and the assessee is having no discretion or role in the quantum of the alleged discount/commission to be paid to the retailers. Hence having considered the undisputed fact and business model where the payments are directly made by the company to the retailers and the assessee is only showing the entries in the books of accounts for receipts as well as payments without actual rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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