Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Latest Cases

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (8) TMI 726

..... as far as the Tribunals and authorities within the territorial jurisdiction of the Karnataka High Court and the Rajasthan High Court are concerned, there is no doubt that the issue stands concluded in favour of the assessee. Admittedly for the Tribunal’s and the authorities which are in the territorial jurisdiction of the Kerala High Court, Delhi High Court and the Calcutta High Court are concerned, the issue can be considered to be settled against the assessee. Apex Court in the case of CIT Vs Vegetable Products [1973 (1) TMI 1 - SUPREME COURT] , CIT Vs Madho Prasad Jatia [1976 (8) TMI 3 - SUPREME COURT] , CIT Vs J.K. Hosiery Factory [1986 (3) TMI 4 - SUPREME COURT] has held that in case of divergent view interpretation which favours the assessee need to follow. Thus, in case of cleavage of opinions, the issue is well settled that in the absence of decision of the jurisdictional High Court, the binding precedent for the Tribunals and authorities would be the decisions in favour of the assessee not only on the principles of ambiguity but also on the principle that these decisions are latest in point of time. Accordingly, the legal issue on facts to be established stands concl .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... s for SIM. The Revenue has assailed the relief granted to the assessee wherein on the roaming charges it has been held that TDS was not attracted in terms of Section 194J of the Act. 3. Taking up the assessee's appeals first, it was a common stand that the facts, circumstances and position of law in each of the assessee's appeals remain identical. Accordingly, it has been canvassed that the arguments advanced in ITA 317/CHD/2019 pertaining to 2007-08 assessment year may be applied to each of the remaining appeals. 4. However, considering the fact that the rejection of assessee's claim has been maintained by the tax authorities right upto 2013-14 assessment year as per the present bunch of appeals and since this is the latest order in point of time on same set of facts, circumstances and position of law, thus keeping in mind the argument that the grounds raised in ITA 427/CHD/2019 are also identical, the parties were required to address their arguments addressing the facts in the said appeal on record unless there is an added reasoning in 2008-09 assessment year. Considering the record, the parties agreed that the facts as taken into consideration by the CIT(A) in his la .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ion 194H of the Act. 2.3. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating the fact that there is no payment/credit to the account of distributors by the Appellant towards the discount extended to them and therefore, provisions of section 194H of the Act do not apply on such discount. 2.4. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating that discount allowed by the Appellant is not income in the hands of its distributors and that income, if any, arises only when the pre-paid services are further distributed by the distributors. 2.5. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating the fact that there is no flow of monies from the Appellant to the distributor of pre-paid services but rather from the distributor to the Appellant, and hence, the provisions of section 194H of the Act fail to apply. 2.6. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating the difference in nature of distribution arrangement entered by the .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 4H are not applicable to discount extended to pre-paid distributors on transfer of pre-paid SIM cards/talk time. It was submitted that though the written submissions of the assessee have been extracted in part in the orders, however, without assigning any specific reasoning, relief has not been granted. Referring to the record, it was submitted that reliance had been placed upon the decision of the Hon'ble Karnataka High Court in the case of of Bharti Airtel (2015) 372 ITR 33 (KHC) and order of the Bengalore Bench in the case of Vodafone South Ltd. Vs DCIT dated 31.07.2005 i.e. in the case of assessee itself. The Karnataka High Court, it was submitted in 72 taxmann 347 has affirmed the decision. Similar reasoning on facts it was submitted, is available in assessee's favour in the decision of the Rajasthan High Court in the case of Vodafone Digital Link Ltd. it was submitted, had also been relied upon. 5.2 It was submitted that without addressing the legal position, the CIT(A) following the past practice rejected the assessee's claim. As a result of these actions, the present appeals have been filed. 5.3 Relying upon the synopsis filed, it was his submission that the poi .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... n favour of the assessee. It was his submission that the said position of law has repeatedly been followed by the various Benches of the ITAT that wherever the decision of the jurisdictional High Court was not available and there were contrary views expressed by different High Courts, the view favourable to the assessee had to be followed. For the said proposition, reliance was also placed upon the decision of the Special Bench rendered by five Members in the case of Narang Overseas P.ltd. reported in 111 ITD 1 (Mum) (SB). 5.5 Apart from the decisions cited, it was his submission that the assessee has filed a separate Paper Book of case laws addressing the issues which have came up for consideration u/s 194H on which the assessee is placing heavy reliance. Relevant decisions cited read as under : 1. Bharti Airtel lid. Vs. DC1T [2015 372 ITR 33| Karnataka High Court 2. Hindustan Cofca Cola Beverages (P.) (Ltd.) vs. CIT, Jaipur [2017 87 taxmann.com 295] Rajasthan High Court 3. Tata Teleservices (Maharashtra) Limited Vs ACIT, TDS-3(1) (ITA Nos. 2043 to 2045/Mum/2014) (Mumbai Tribunal) 4. Tata Sky Ltd. Vs. ACIT, Mumbai [68 ITR (T) 1621 5. Vodafone Spacetel Limited Vs ACIT, TDS (ITA Nos .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... tween VSL-Punjab and the distributors was on 'Principal to Agent' basis, wherein VSL-Punjab paid commission to the pre-paid distributors and deducted tax at source thereon. However, with effect from January 2007 the arrangement between VSL-Punjab and the pre-paid distributors has changed to 'Principal to Principal'. Thus the question of treating VSL-Punjab as an 'assessee-in-default' for FY 20005-06 and for the period April 1, 2006 to December 31, 2006 does not arise as VSLPunjab had deducted taxes at source on the commission paid to the pre-paid distributors. We can provide the agreement copies if required by the department." It is clear that the decision to discontinue deduction of taxes was based on change in agreement from 'principal to agent' based to 'principal to principal' basis. Mere change in agreement doesn't alter the basic character of the relationship between the service provider and the distributor. This issue of the relationship being between 'principal 8s agent', has, even otherwise, been dealt with in the preceding paragraphs. 5.4.8 AO made the addition on the ground that, same channel of distributors sellin .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... l along over the years has been arguing that the decision of the Karnataka High Court is on the same set of facts. Inviting attention to the Paper Book page 31 to 33, it was submitted that the assessee has made similar arguments before the CIT(A) as per the written submissions dated 04.10.2018 which is part of the detailed submissions indicated at Sr.No. 2 at pages 15-122. Reverting to pages 31-32 it was his submission that the assessee has specifically drawn attention to the specific clauses and the wordings in the Agreement as considered by the decisions considered by Hon'ble Karnataka High Court and available in the facts of the assessee's case. Accordingly, it was submitted that it cannot be said that the assessee did not draw attention of the CIT(A) to the facts that the terms and conditions of the contracts considered by the Hon'ble Court and in the case of the assessee were identical. Referring to the impugned order it was his submission that the First Appellate Authority infact has not given any negative finding and infact has not cared to directly address this issue and has skirted it. Accordingly, it was his prayer that in the absence of any direct finding aga .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... onsideration variously and repeatedly by different High Courts. Reference may be made to the decision of the Apex Court in the case of CIT Vs Madho Prasad Jatia 105 ITR 179 (S.C) wherein the Court faced with divergent interpretations on the legal issue preferred to take the view in favour of the subject holding that though there is no equity in tax laws but if from amongst the two views available, the interpretation in favour of the subject is also in consonance with ordinary notions of equity and fairness, such a view would further fortify the Court in adopting such a course. Similarly in CIT Vs J.K. Hosiery Factory 159 ITR 85 (S.C) the Apex Court held that where two interpretations were possible, the Court could take the interpretation that is favourable to the assessee bearing in mind that a taxing statute is being construed. Thus, in case of cleavage of opinions, the issue is well settled that in the absence of decision of the jurisdictional High Court, the binding precedent for the Tribunals and authorities would be the decisions in favour of the assessee not only on the principles of ambiguity but also on the principle that these decisions are latest in point of time. Accordi .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... : 13. We have heard the contentions of both the parties, perused the orders of the authorities below and have also gone through the decisions referred to before us. The issue for consideration before us is vis-a-vis the nature of transaction between the assessee telecommunication services provider and its distributors in so far as it relates to sale of prepaid SIM cards and whether the discount of price given to the distributors on such sale of prepaid SIM cards is in the nature of commission attracting the provisions of section 194H of the Act. As pointed out to us. the Hon'ble Karnataka High Court in the case of the assessee itself, while dealing with an identical issue in appeal against the demand raised u/s 201(1) and 201(1A) of the Act, decided the issue in favour of the assessee. The Hon'ble High Court held that there was no relationship of principal and agent between the assessee and its distributors and the transaction was that of sale of right to service on a principal to principal basis.; The Hon'ble High Court held that when the assessee sold SIM card to distributors he was neither paying any commission by such sale, nor any income accrued in the hands of the .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... e milk from the dairy which raises a bill on the concessionaire and the amount he has paid for. The dairy merely fixed the MRP at which the concessionaire can sell the milk. Under the agreement the concessionaire cannot return the milk under any the account of the concessionaire and the dairy is not responsible for the same. The concessionaire becomes the owner of the milk and the products on taking delivery of the same from the Dairy. He thus purchased the milk and the products from the Dairy and sold them at the MRP. The difference between the MRP and the price which he pays to the Dairy is his income from business. It cannot be categorized as commission. The loss and gain is of the concessionaire. The Dairy may have fixed the MRP and the price at which they sell the products to the concessionaire but the products are sold and ownership vests and is transferred to the concessionaires. The sale is subject to conditions, and stipulations. This by itself does not show and establish principal and agent relationship. The supervision and control required in case of agency is missing. Therefore, it was held that there is no relationship of principal and agent and the consideration paid .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ibutor. 58. In both the aforesaid cases, the Court proceeded on the basis that service cannot be sold. It has to be rendered. But, they did not go into the question whether right to service can be sold. 59. The telephone service is nothing but service. SIM cards, have no intrinsic sale value. It is supplied to the customers for providing mobile services to them. The SIM card is in the nature of a key to the consumer to have access to the telephone network established and operated by the assessee-company on its own behalf. Since the SIM Card is only a device to have access to the mobile phone network, there is no question of passing of any ownership or title of the goods from the assessee-company to the distributor or from the distributor to the ultimate consumer. Therefore, the SIM card, on its own but without service would hardly have any value. A customer, who wants to have its service initially, has to purchase a sim-card. When he pays for the simcard, he gets the mobile service activated. Service can only be rendered and cannot be sold. However, right to service can be sold. What is sold by the service provider to the distributor is the right to service. Once the distributor pa .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... essee and distributor is that of service and therefore, Section 194H of the Act is attracted. 61. However, in the first instance, if the assessee accounted for only ₹ 80/- and on payment of ₹ 80/-, he hands over the prepaid card prescribing the MRP as ₹ 100/-, then at the time of sale, the assessee is not making any payment. Consequently, the distributor is not earning any income. This discount of ₹ 20/- if not reflected anywhere in the books of accounts, in such circumstances, Section 194H of the Act is not attracted. 62. In the appeals before us, the assessees sell prepaid cards/ vouchers to the distributors. At the time of the assessee selling these pre-paid cards for a consideration to the distributor, the distributor does not earn any income. In fact, rather than earning income, distributors incur expenditure for the purchase of prepaid cards. Only after the resale of those prepaid cards, distributors would derive income. At the time of the assessee selling these pre-paid cards, he is not in possession of any income belonging to the distributor. Therefore, the question of any income accruing or arising to the distributor at the point of time of sale of .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ot liable to tax it is always open to him to seek for refund of the tax and, therefore, it cannot be said that Section 194H is not attracted to the case on hand. As stated earlier, on a proper construction of Section 1 94H and keeping in mind the object with which Chapter XVII is introduced, the person paying should be in possession of an income which is chargeable to tax under the Act and which belongs to the payee. A statutory obligation is cast on the payer to deduct the tax at source and jemit the same to the Department. If the payee is not in possession of the net income which is chargeable to tax, the question of payer deducting any tax does not arise. As held by the Apex Court in Bhavani Cotton Mills Limited's case, if a person is not liable for payment of tax at all, at any time, the collection of tax from him, with a possible contingency of refund at a later stage will not make the original levy valid. 64. In the case of Vodafone, it is necessary to look into the accounts before granting any relief to them as set out above. They have accounted the entire price of the prepaid card at ₹ 100/- in their books of accounts and showing the discount of ₹ 20/'- .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... e sale of prepaid sim cards by the assessee to the distributors are on principal to principal basis and hence out side the ambit of section 194H of the Act. Therefore, the assessee was not required to deduct tax on the same and, therefore, could not be held to be an assessee in default for not deducting tax at source. The demand raised on the assessee u/s 201(1) and 201(1A) of the Act is, therefore, directed to be deleted. 13. Accordingly, ITA 427/CHD/2019 in terms of the pronouncement made in the Court at the time of hearing itself is decided in favour of the assessee and is allowed for statistical purposes. 14. Since in the remaining appeals of the assessee i.e. ITA 317 to 320/CHD/2019 and ITA 425 to 426/CHD/2019, no separate arguments on facts or law were made by the parties which position had been noted at the outset itself, accordingly, with similar directions on account of similar reasons in terms of the pronouncement made at the time of hearing itself, these appeals are also restored back to the AO. 15. In the result, appeals of the assessee in ITA Nos. 317 to 320/CHD/2019 and ITA 425 to 427/CHD/2019 are allowed for statistical purposes. 16. Addressing the identical issue ra .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... T. Act, 1961 are attracted on the payment of technical fee on account of interconnect charges/access/port charges. This fact has again been confirmed by the same Technical Experts S/Shri Tanay Krishna and Shri Ashok Mittal, as per their statements recorded again on 08.01.2014 and subsequent cross examination by the Authorised Representative of the company 30.01.2014 on& maintenance etc to ensure fault fee It is clearly established that the process of national roaming for the purpose of carriage of calls involves many processes likes operations & maintenance supervision and monitoring, fault detection and rectification, monitoring and ensuring quality of signals, provisions of additional capacity when the installed capacity gets exhausted, capacity augmentation etc. The entire process is depended upon the services of highly technical manpower and installations of network having various peripheral, hardware & software which are technical in nature. This hardware, software along with peripherals need continues monitoring, supervision, operation & maintenance etc to ensure fault free carriage of calls for purpose of interconnection. They essentially involved the human i .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 5 316,517 316,517 Oct-11 19,301,058 1,930,106 1,930,106 - 14 270,215 270,215 Nov-I 1 22,762,894 2,276,289 2,276,289 - 13 295,918 295,918 Dec-] I 24,157,908 2,415,791 2,415,791 - 12 289,895 289,895 Jan-12 26,164,298 2,616,430 2,616,430 - 1 1 287,807 287,807 Feb-12 26,014,942 2,601,494 2,601,494 10 260,149 260,149 Mar-12 25,251,043 2,525,104 2,525,104 - 9 227,259 227,259 Total (A) 281,403,474 28,140,347 28,140,347 - 4,043,002 4,043,002 Confirmations not received from party Month Confirmations not available Tax deductible u/s 194 J Tax Deducted Tax Liability No of Months of Default Interest U/s 201(1A) Total Liability Apr-11 317,494 31,749 Nil 31,749 36 11,430 43,179 May-11 299,764 29,976 Nil 29,976 35 10,792 40,768 Jun-11 344,066 34,407 Nil 34,407 34 12,386 46,793 July,11 367,603 36,760 Nil 36,760 33 13,234 49,994 Aug-ll 315,016 31,502 Nil 31,502 32 11,341 42,842 Sep-11 297,377 29,738 Nil 29,738 31 10,706 40,443 Oct-11 272,008 27,201 Nil 27,201 30 9,792 36,993 Nov-11 320,796 32,080 Nil 32,080 29 11,549 43,628 Dec-11 340,456 34,046 Nil 34,046 28 12,256 46,302 Jan-12 368,731 36,873 Nil 36,873 27 13,274 50,147 Feb-12 366,627 36,663 Nil 36,663 26 13,199 49,861 Mar-12 355,861 35,586 Nil 3 .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 'ble Karnataka High Court in appellant's own case has affirmed the view of the Hon'ble ITAT "that roaming process between participating entities is fully automatic and does not require any human intervention". This decision is directly applicable to the present case. Moreover, Hon'ble ITAT in appellant's own case for AY 2007-08 to 2011-12 [ITA No. 3593 to 3596/Del/2012] has decided the similar issue in favour of the assessee and the Department has accepted the Hon'ble ITAT ruling and has also not preferred an appeal before High Court. Though the decision of ITAT in this case is on IUC Charges, it is pertinent to mention that the technical process of Roaming and IUC are similar as both entail carriage of calls of the subscriber of the home network to the network of the other operator. Respectfully following the above decisions, it is held the process of roaming does not require any human intervention and cannot be said to be a technical service for the purpose of deduction of tax at source under section 194 J of the Income Tax Act, 1961. Accordingly, the grounds of appeal no 3 is allowed 6. Ground no. '1' of appeal is general in nature and r .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... -10 assessment year in the case of DCIT Vs Idea Cellular Ltd. wherein on a similar issue, the department s appeal was dismissed by the ITAT. 18. We have heard the rival submissions and perused the material available on record. It is seen that the Co-ordinate Bench in ITA 21 to 24/CHD/2018 pertaining to 2005-06 considered an identical appeal of the Revenue and concluded the issue in para 6 of the aforesaid decision holding as under : 6. We have heard the rival submissions and perused the material on record. The relevant facts of the case are that the assessee is engaged in the business of providing telecommunication services in telecom circles of Punjab for which purposes, it had entered into roaming agreements with OTOs. The AO noticed that no TDS has been deducted by it from the roaming charges paid by the assessee. The AO held the assessee to be assessee in default u/s 201(1) r.w.s. 194 J of the Act as he was of the view that roaming is nothing but fees for technical services and since there was human intervention during the roaming process, TDS u/s 194J of the Act should have been deducted. 6.1 It is seen from the record that the assessee preferred an appeal against the order of .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||