TMI Blog2020 (6) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... see not in default u/s.201(1), the interest u/s.201(1A) is not required to be charged. We, accordingly, allow the grounds of appeal raised by the assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - ITA Nos.306 to 309/CTK/2019 - - - Dated:- 5-6-2020 - Shri Chandra Mohan Garg, Judicial Member And Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri Salil Kapoor, Ms Soumya Singh Nirod Patade For the Revenue : Shri M.K.Gautam, CIT DR ORDER PER L.P.SAHU, AM These are bunch of four appeals filed by the assessee against the separate orders of the CIT(A),1, Bhubaneswar, all dated 20.8.2019 for the assessment years 2009-10 to 2012-13, respectively. 2. In all these appeals, the assessee has raised various common grounds. Hence, we proceed to adjudicate the appeal in ITA No.306/CTK/2019 for A.Y. 2009-10 and the decision will apply mutatis-mutandis to othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Appellant is not a 'assessee-in-default' u/s 201(1) of the Act and also the AO be directed to delete the impugned demand. Without Prejudice to Ground I, GROUND III: 1. On the facts and in the circumstances of the case and in law, the C1T(A) erred in upholding the order passed by the TDS officer of holding the Appellant as 'assessee-in-default' for non-deduction of tax at source u/s 194J of the Act on roaming charges paid to other telecom operators. 2. The C1T(A) further erred in not appreciating that the TDS officer has not taken cognizance of the submissions made by the Appellant on issues of' Human intervention' in the roaming process as directed by the Hon'ble Tribunal while remitting the matter back to his office. 3. The C1T(A) failed to appreciate that the roaming charges paid to various operators are standard automated services which do not require any human intervention which is an essential condition to qualify as a technical service and therefore, it cannot be construed as Fees for Technical Service ('FTS') for the purposes of applicability of section 194J of the Act. 4. The Appellant prays that it be he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various parts of India. A survey under section 133A of the Act was conducted on 29.9.2011 in the premises of the assessee and it was found that the assessee has violated the provisions of TDS in non-deducting TDS in respect of payments. The Assessing Officer issued show cause notice to the assessee requiring to explain as to why tax is not liable to be withheld under section 194J of the Act on roaming charges paid and under section 194H of the Act on discount extended to the pre-paid distributors by the assessee. The assessee filed its reply but did not find favour with the Assessing Officer. The AO observed that the assessee offers services to its subscribers in both post and prepaid categories and TDS has to be made on discount/commission paid u/s.194 of the Act, whereas in case of prepaid services, SIM cards or recharge vouchers are sold to the customers through network of distributors and agents who remit the sale proceeds back to the telecom companies after retaining a fixed amount which is commonly termed as discount. The AO was of the opinion that TDS has to be deducted in respect of prepaid SIM cards and commission is paid for services rendered by the network of distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished all necessary evidence. He submitted that the first requirement of section 194H is that there should be payment made of commission or brokerage by any person other than individual or HUF to a resident, any income by way of commission, not being insurance commission. He submitted that in this case, the assessee is receiving the amount from the distributor below MRP amount of SIM cards and prepaid cards, so there is no payment of any amount to the distributor by the assessee as commission. 9. Ld A.R. relied on the following decisions to support its claim: i) Bharti Airtel ltd vs DCIT, 372 ITR 33 (Kar) ii) Tata Teleservices Ltd vs ITO 42 ITR (Trib) 121 iii) Hindustan Coca Cola Beverages Pvt ltd vs CIT, 402 ITR 5139(Raj) iv) Vodafone Cellular Limited vs DCIT, ITA No.817/Pun/2013 v) DCIT (TDS) vs Idea Cellular Ltd, ITA No.953/JP/2016 vi) CIT (TDS) VS Idea Cellular Ltd. ITA No.90/2018(Raj) vii) Vodafone Spacetel Ltd vs ACIT (TDS) ITA No.76-77/Pat/2012 viii) Fodafone East Ltd vs DCIT (tds) ITA No.1499-1502/Kol/2015 ix) DCIT (TDS) vs Vodafone West Ltd., ITA No.1317 1318/Ahd/2016 x) CIT vs Kotak Securities Ltd, 383 ITR 1 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that in this case the assessee company had made agreements with other cellular service providers for roaming facilities, where its network is not functioning. He submitted that the assessee company is only a facilitator between the subscriber and the other service providers, enabling the subscriber to make a roaming call. Taxpayer's job is confined to collecting the roaming charges from the subscriber and transfer it to the other service provider. In such a case the tax payer does not use the equipment involved in providing the roaming facility. He, he pleaded that the assessee is not required to deduct TDS u/s.194J of the Act and, accordingly, is not in default under section 201(1) and under section 201(1A) of the Act. For this proposition, ld A.R. relied on various judicial pronouncements including the judgement of Hon ble Delhi High Court in the case of CIT vs. Bharti Cellular Ltd and others, 185 taxmann 583, which was pronounced in the context of interconnection charges paid by one telecom operator to another under the interconnect arrangement. 13. On the other hand, ld CIT DR supported the orders of lower authorities. Ld DR relied on the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is not required to deduct tax on such roaming charges under section 194J of the Act. 16. In this factual scenario the Assessing Officer has held the assessee to be in default as per section 201(1) of the Act for non deduction of tax at source u/s.194H in respect of the discount offered to distributor and consequently making the assessee liable for interest u/s. 201(1A) of the Act. 17. We may refer to paras 28 to 30 of the judgment of Hon ble Karnataka High Court in the case of Bharati Airtel Ltd (supra), wherein, it was held as under: 28. Reliance is placed on the judgment of the Delhi High Court in the case of Commissioner of Income Tax Vs. Idea Cellular Limited reported in (2010) 325 ITR 148, while dealing with the commission / brokerage to the distributor on the sim cards / recharge coupons under Section 194 H of the Act, it was held as under: 51. It is obvious that a service can only be rendered and cannot be sold. The owner of the SIM Cards and recharge coupons is the assessee-company, M/s. Vodafone Essar Cellular Ltd. This is because the assessee-company is operating under the right of a licence agreement entered into with the Government of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance is also placed on the judgment of the High Court of Kerala in the case of Vodafone Essar Cellular Ltd. Vs. Assistant Commissioner of Income Tax reported in (2011) 332 ITR 255, where the Cochin Bench held that the service can only be rendered and cannot be sold. The judgment at Para Nos.4 to 6, reads as under: 4. The main question to be considered is whether Section 194H is applicable for the discount given by the assessee to the distributors in the course of selling Sim Cards and Recharge coupons under prepaid scheme against advance payment received from the distributors. We have to necessarily examine this contention with reference to the statutory provisions namely, Section 194H . What is clear from Explanation (i) of the definition clause is that commission or brokerage includes any payment received or receivable directly or indirectly by a person acting on behalf of another person for the services rendered. We have already taken note of our finding in BPL Cellular's case (supra) abovereferred that a customer can have access to mobile phone service only by inserting Sim Card in his hand set (mobile phone) and on assessee activating it. Besides getting con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principal. In this case the distributors actually canvass business for the assesssee and only through distributors and retailers appointed by them assessee gets subscribers for the mobile service. Assessee renders services to the subscribers based on contracts entered into between distributors and subscribers. We have already noticed that the distributor is only rendering services to the assessee and the distributor commits the assessee to the subscribers to whom assessee is accountable under the service contract which is the subscriber connection arranged by the distributor for the assessee. The terminology used by the assessee for the payment to the distributors, in our view, is immaterial and in substance the discount given at the time of sale of Sim Cards or Recharge coupons by the assessee to the distributors is a payment received or receivable by the distributor for the services to be rendered to the assessee and so much so, it falls within the definition of commission or brokerage under Explanation (i) of Section 194H of the Act. The test to be applied to find out whether Explanation (i) of Section 194H is applicable or not is to see whether assessee has made any payment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices 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 assesseecompany 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 sim-card, 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 pays for the service, and the service provider, delivers the Sim Card or Recharge Coupons, the distributor acquires a right to demand service. Once such a right is acquired the distributor may use it by himself. He may also sell the right to sub-distributors who in turn may sell it to retailers. It is a well-settled proposition that if the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 prepaid card by the assessee to the distributor does not arise. The condition precedent for attracting Section 194H of the Act is that there should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into the department, ultimately if the dealer is not 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 194H 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 remit 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee to the distributor. There is no relationship between the assessee and the sub-distributor as well as the retailer. However, under the terms of the agreement, several obligations flow m so far as the services to be rendered by the assessee to the customer is concerned and, therefore, it cannot be said that there exists a relationship of principal and agent. In the facts of the case, we are satisfied that, 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 riot 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. Once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent. The terms of the agreement set out su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Bharti Airtel Ltd (supra). 19. We also find that the judgment of Hon ble Bombay High Court in the case of Vodafone Cellular Ltd (supra) is squarely covered in the present case as regards to non-applicable of provisions of section 194H of the Act. 20. Further, we also note that the issue of provisions of section 194H in the case of Bharati Airtel Ltd vs ACIT (TDS) in ITA No.185/CTK/2009 vide order dated 23.9.2011 was decided by this Bench of the Tribunal against the assessee and the assessee was required to deduct TDS and since the assessee did not deduct tax, the assessee was held as the assessee in default under section 201(1) of the Act. We also note that against the decision of the Tribunal, the assessee had preferred appeal before the Hon ble Jurisdictional High Court and the Hon ble High Court in ITA No.009/2012 order dated 20.2.2019 has reversed the decision of the Tribunal following the decision of Hon ble Rajasthan High Court in the case of CIT (TDS) Jaipur vs M/s. Idea Cellular Ltd in ITA No.205 of 2005, wherein, it has been held that the assessee is not in default under section 201(1) of the Act for non-deduction of tax u/s.194H of the Act in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l should be pronounced by the Bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble High Court in the case of Shivsagar Veg Restaurant vs ACIT (2009) 319 ITR 433 (Bom), wherein, it was, inter alia, observed as under: We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the ruled so framed, as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure... . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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