TMI Blog2019 (6) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... rein as held there is no relationship between the assessee and the sub-distributor as well as the retailer. Thus, it is a sale of right to service - The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands - The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS - Decided in favour of assessee. - I.T.A. No. 2541/Ahd/2017 - - - Dated:- 28-6-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relationship and, therefore, any payments made to such franchisees was liable for deduction of tax at source under sec. 194H of the Income Tax Act, 1961 (hereinafter called the Act;). The AO proceeded to treat the assessee as a defaulter and computed the quantum of such un-deducted tax under sec. 201(1) of the Act and interest chargeable thereon under sec. 201(1A) of the Act to the tune of ₹ 3,88,177/- and ₹ 3,72,650/- respectively thereby creating a total demand of ₹ 7,60,826/-. 2.1. Aggrieved, the assessee approach the Ld. CIT (A) who upheld the findings of the AO by holding that the provisions of Sec. 194H of the Act were clearly applicable in the case of the assessee. 2.2 Now, the assessee is before this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.0 The Ld. Authorised Representative (AR) submitted that ITAT Ahmedabad Bench in the case of Vodafone Essar Gujarat Ltd. vs. ACIT in ITA No. 386/Ahd/2011 vide order dated 07.07.2015 for Assessment Year 2008-09 had adjudicated an identical issue and had decided in favour of the telecom operator by holding that when the assessee had credited the sale proceeds at the transaction value, the tax deduction liability under sec. 194H of the Act would not arise. A copy of the said order was placed on record and the Ld. Authorised Representative drew our attention to the relevant paragraphs to substantiate his arguments. It was also submitted that the Ld. CIT (Appeals) of Amreli, Junagadh and Rajkot, on identical issue, had allowed relief to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medabad Bench in the case of Vodafone Essar Gujarat Ltd. vs. ACIT (Supra) is correct. In the said order the ITAT Ahmedabad Bench has decided the issue in favour of the assessee by following the judgment of the Hon ble Karnataka High Court in the case of Bharti Airtel Ltd., Tata Tele Services Ltd. and Vodafone South Ltd. which has been reported as Bharti Airtel Ltd. vs. DCIT (2015) 372 ITR 33 (Karnataka). The Ahmedabad Bench in the case of Vodafone Essar Gujarat Ltd. vs. ACIT (Supra) has also noted that this issue had been decided against the assessees by Hon ble Kerala High Court as well as by the Hon ble Delhi High Court and that in cases where non-jurisdictional High Courts have given contradicting judgments on a particular issue, guidanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched to the sale of this right of service by the assessee to his distributors does not affect the character of sale on principal to principal basis. (c) Section 194 H comes into play only in a situation in which any person, ........responsible for paying..... to a resident, any income by way of commission pays or credits such income by way of commission . However, since at the time of the assessee selling these rights for a consideration to the distributor, the distributor does not earn any income, the provisions of Section 194 H do not come into play on the transaction of sale of the right to service by the assessee to his distributors. The condition precedent for attracting Section 194H of the Act is that there should be an income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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