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Issues Involved:
1. Application of Section 194H to the transaction of supply of prepaid vouchers to distributors. 2. Treatment of the business relationship between the company and the distributor as Principal to Agent versus Principal to Principal. 3. Default in non-deduction of tax u/s 201(1) and charging of interest u/s 201(1A). 4. Non-deduction of tax on domestic roaming charges paid to third-party service providers u/s 194C. Summary of Judgment: Issue 1: Application of Section 194H The assessee contended that the provisions of Section 194H of the Income Tax Act should not apply to the transaction of supply of prepaid vouchers to distributors, arguing that the relationship was Principal to Principal. The Assessing Officer (AO) and the CIT(A) disagreed, treating the difference between the price at which prepaid cards were sold to distributors and the price at which end customers bought them as commission, thus attracting Section 194H. The ITAT upheld this view, citing the decision in Vodafone Essar Cellular Ltd. vs. ACIT, where it was held that the margin earned by distributors is commission liable for TDS u/s 194H. Issue 2: Principal to Agent vs. Principal to Principal The AO and CIT(A) treated the business relationship between the company and the distributor as Principal to Agent. The ITAT concurred, noting that the distributors acted as agents of the company, and the relationship was not of Principal to Principal. The ITAT referenced several judicial decisions, including the Hon'ble Delhi High Court's decision in the case of Idea Cellular Ltd., affirming that the distributors provide essential services to the assessee company, thus establishing an agency relationship. Issue 3: Default in Non-Deduction of Tax and Interest The AO held the assessee in default for non-deduction of tax amounting to Rs. 2,875,880/- u/s 201(1) and charged interest of Rs. 1,754,290/- u/s 201(1A) for the assessment year 2006-07. The CIT(A) upheld the AO's decision, and the ITAT confirmed the order, stating that the assessee failed to provide proof that taxes on the amount received from the assessee had been paid by the distributors. Issue 4: Non-Deduction of Tax on Roaming Charges For the assessment year 2007-08, the AO applied Section 194C to the transaction of domestic roaming charges paid to third-party service providers. The assessee argued that no TDS was required, referencing the case of Skycell Communications Ltd. The CIT(A) upheld the AO's decision, and the ITAT agreed, stating that the roaming facility is a service provided to customers and is part of the entire package of services. The ITAT concluded that the roaming charges paid by the assessee to other operators attract TDS provisions u/s 194C. Conclusion The ITAT dismissed all the appeals of the assessee for the assessment years 2006-07 to 2010-11, confirming the orders of the AO and CIT(A) on all issues, including the application of Section 194H, the nature of the business relationship, the default in non-deduction of tax, and the treatment of roaming charges.
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