2020 (1) TMI 1594 - HC - Income Tax

TDS u/s 194H - sale of SIM cards/recharge coupons at discounted rate to the distributors was not commission - HELD THAT - Tribunal noted the observations of the Assessing Officer that the discount allowed to the distributors by the Respondent assessee company is on account of principal to principal relationship and not that of principal to agent. The Tribunal followed the decision in the case of Bharati Airtel Ltd. 2014 (12) TMI 642 - KARNATAKA HIGH COURT and held that the sale of SIM cards/recharge coupons at discounted rate to the distributors was not commission and not liable for deduction of TDS under Section 194H. No substantial question of law.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding deduction of tax on discount given to distributors on prepaid SIM cards under Section 194H of the Income Tax Act for Assessment Year 2012-13.

Analysis:
The Appellant-Revenue contested the order of the Income Tax Appellate Tribunal dated 14 May 2018, pertaining to the Assessment Year 2012-13. The key questions raised were whether the discount provided by the assessee to its distributors on prepaid SIM cards necessitated tax deduction under Section 194H of the Income Tax Act and if the Tribunal erred in remanding the case to the Assessing Officer. The Tribunal, referencing the Karnataka High Court decision in Bharati Airtel Ltd. vs. DCIT, concluded that the discount was not commission and therefore not subject to TDS under Section 194H due to the principal to principal relationship. Notably, the Tribunal highlighted the absence of a decision from the High Court on this matter at the time.

Subsequently, the parties presented the order from Income Tax Appeal No. 702 of 2017 in the case of Pr. Commissioner of Income Tax-8 vs. M/s. Reliance Communications Infrastructure Ltd., where a similar issue was deliberated. The Division Bench of the High Court upheld the Tribunal's decision, emphasizing that tax deduction under Section 194H was not applicable when transactions occurred between parties on a principal to principal basis, as it was not payment for commission or brokerage. Given the factual findings by the Tribunal and the precedent set by the High Court, the principles applied in the aforementioned case were deemed applicable in the present scenario. Consequently, the proposed questions of law were deemed insufficient to raise substantial legal queries, leading to the disposal of the Appeal.