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2013 (12) TMI 466 - AT - Income TaxWhether cash discount on payments made to the assessee in advance by agents for sale of SIM cards covered under section 194H Held that - Following CIT v Idea Cellular Ltd 2010 (2) TMI 24 - DELHI HIGH COURT - Prepaid or post paid connections are provided to the subscribers through distributors called Prepaid Market Associates (PMAs) appointed by the assessee The agreement with the assessee and prepaid distributors were that of Principal and Agent at all times and prepaid distributors were selling a prepaid SIM Card/recharge coupon The amount of discount offered to prepaid distributor was in nature of commission and liable to tax deduction at source under Section 194H- It does not amount to sale of goods as unsold SIM cards are to be returned to the assessee and it is required to make payment against them. This is an antithesis of sale Decided against assessee. Levy of interest u/s 201(1A) The assessee has not provided the details of recipients and the particulars of payment of taxes by them - Held that - Following Ramakrishna Vedantha Math v ITO 2012 (8) TMI 128 - ITAT, KOLKATA - When the Assessee furnishes lawfully maintained information about the recipients, the AO should first ascertain the related facts about payment of taxes directly by the recipients Following Hindustan Coca Cola beverages Ltd v CIT 2007 (8) TMI 12 - SUPREME COURT OF INDIA If the recipients have paid the tax on the amount of commission receivable by them, then the Assessee cannot be visited with liability u/s 201(1), but interest for non deduction of tax may be levied till the date of filing of return by the recipient The issue was restored to the files of the AO for fresh decision.
Issues:
1. Liability of the Assessee to deduct tax at source in respect of amounts passed on to agents as cash discounts. 2. Admissibility of additional ground raised by the assessee regarding jurisdiction of the TDS officer. 3. Applicability of provisions of section 194H in respect of amounts paid to agents in connection with the sale of SIM cards and other services. 4. Treatment of the Assessee as an 'assessee in default' under section 201(1) of the IT Act. Issue 1: Liability of the Assessee to deduct tax at source in respect of amounts passed on to agents as cash discounts: The case involved the question of whether the Assessee was liable to deduct tax at source in relation to cash discounts passed on to agents for services rendered. The Assessing Officer (AO) sought to levy tax under section 201(1) of the IT Act for not deducting tax at source on these payments. The CIT(A) confirmed the AO's order, relying on precedents like the decision of the Kerala High Court. However, the Assessee contended that the payments were discounts and not commission, citing various legal authorities. The ITAT Hyderabad, after considering the arguments and relevant legal precedents, dismissed the appeal, upholding the applicability of section 194H to the amounts paid to agents for the sale of SIM cards and other services. Issue 2: Admissibility of additional ground regarding jurisdiction of the TDS officer: The Assessee raised an additional ground challenging the jurisdiction of the TDS officer to treat them as an 'assessee in default.' The ITAT Hyderabad admitted this additional ground, noting that it was a legal issue and did not require further investigation into facts. The ITAT relied on various decisions to support the admission of the additional ground, emphasizing that it went to the root of the matter. The ITAT directed the Assessing Officer to consider this additional ground for adjudication. Issue 3: Applicability of provisions of section 194H in respect of amounts paid to agents: The ITAT Hyderabad referred to decisions of three High Courts regarding the applicability of section 194H to amounts paid to agents for the sale of SIM cards and other services. Citing the decisions of the Delhi High Court, Kerala High Court, and Calcutta High Court, the ITAT dismissed the Assessee's appeal on this issue, following the precedents set by the High Courts. The ITAT emphasized that the nature of transactions and the legal relationship between the parties determined the applicability of section 194H. Issue 4: Treatment of the Assessee as an 'assessee in default' under section 201(1) of the IT Act: The Assessee contended that if the recipient had paid taxes on the commission received, they should not be treated as an 'assessee in default.' The ITAT acknowledged this argument, citing a decision of the Apex Court in a similar context. However, the ITAT clarified that this would not exempt the Assessee from payment of interest under section 201(1A). The ITAT directed the Assessing Officer to verify the payment of taxes by the recipients and rework the levy under section 201(1) and 201(1A. The ITAT also referred to a decision of the Kolkata tribunal regarding the Assessee furnishing information about tax payments by recipients. Ultimately, the ITAT restored the additional ground to the Assessing Officer for further adjudication based on the details to be furnished by the Assessee. This detailed analysis of the judgment covers all the issues involved, providing a comprehensive understanding of the legal reasoning and decisions made by the ITAT Hyderabad.
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