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2022 (5) TMI 1462 - AT - Income TaxTDS u/s 194H - Sale of prepaid talk time - relationship between the appellant and the prepaid distributors is not that of Principal to Principal and hence not in the nature of commission - HELD THAT - After hearing the arguments of the assessee and also after going through the different clauses of the agreement which do not tangibly differentiate from the facts examined by the Hon ble Jurisdictional High Court in the case of Idea Cellular Ltd. 2010 (2) TMI 24 - DELHI HIGH COURT we decline to interfere with the order of the CIT(A). Non-deduction of Tax u/s 194J on the Roaming Charges - Roaming charges paid by the appellant to other telecom operators - HELD THAT - No TDS u/s 194J is deductible in case of roaming charges paid. Interest under section 201(1A) to the date of payment of taxes by the deductee/payee. Accordingly, we direct the Assessing Officer to re-compute the interest u/s 201(1A) in line with the instructions of CBDT till the date of payment of taxes by the respective deductee/payee in the respective Assessment Years. AO shall afford reasonable opportunity of hearing to the assessee in this regard and re-compute the interest chargeable u/s 201(1A) - In the result, the ground of appeal raised by the revenue is allowed for statistical purpose.
Issues Involved:
1. Sale of prepaid talk time and applicability of Section 194H. 2. Non-deduction of tax under Section 194J on roaming charges. Issue-wise Detailed Analysis: 1) Sale of Prepaid Talk Time: The primary issue was whether the relationship between the assessee and prepaid distributors was that of 'Principal to Principal' or 'Principal to Agent,' and consequently, whether the discount provided to distributors should be treated as commission subject to TDS under Section 194H. The AO treated the prepaid distributor as an agent and applied Section 194H to the discount offered, treating it as commission. The AO's decision was based on the jurisdictional High Court's ruling in Idea Cellular Ltd., 325 ITR 148. The assessee contended that the relationship was 'Principal to Principal' and cited the Karnataka High Court's decision in Bharti Airtel Ltd., which held that discounted sales of prepaid cards do not constitute a principal-agent relationship. The CIT(A) upheld the AO's decision, emphasizing that the relationship between the assessee and distributors was of principal-agent, thereby making the discount a commission subject to TDS under Section 194H. The CIT(A) also noted that the accounting treatment of the discount amount was crucial; if the discount was recorded as a reduction in sales, TDS would not be applicable. However, the CIT(A) confirmed the AO's findings based on the jurisdictional High Court's ruling. After examining the clauses of the agreement and the judicial precedents, the tribunal declined to interfere with the CIT(A)'s order, confirming that the discount offered to distributors was in the nature of commission liable to TDS under Section 194H. 2) Non-deduction of Tax u/s 194J on Roaming Charges: The second issue was whether roaming charges paid to other telecom operators constituted 'Fees for Technical Services' under Section 194J, requiring TDS deduction. The AO raised a demand based on the expert opinion that human intervention was involved in providing roaming services, thus classifying them as technical services. The appellant argued that roaming charges do not involve human intervention during the actual call transfer process, relying on the Delhi High Court's decision in Bharti Airtel Ltd., which distinguished between technical services requiring human intervention and automated processes. The CIT(A) and AO's reliance on the expert opinion from the Vodafone Essar Mobile Services Ltd. case was challenged by the assessee, who maintained that the roaming process was automated and did not involve human intervention. The tribunal examined the technical expert's statements and judicial precedents, including the Karnataka High Court's decision in Vodafone South Ltd., which held that roaming charges are not technical services as they do not involve human intervention during the call transfer process. The tribunal concluded that roaming charges paid by the assessee to other telecom operators do not constitute 'Fees for Technical Services' under Section 194J, and hence, no TDS is deductible on such payments. Additional Issue: Non-applicability of Section 201(1) & 201(1A): The revenue's appeal included the issue of interest under Section 201(1A) when the tax due had already been paid by the payee. The CIT(A) relied on the Supreme Court's decision in Hindustan Coca Cola Beverage (P) Ltd. Vs. CIT, which held that no demand should be enforced under Section 201(1) if the payee has paid the taxes. However, interest under Section 201(1A) is chargeable until the date of tax payment by the deductee. The tribunal directed the AO to re-compute the interest under Section 201(1A) in line with the Supreme Court's ruling and the CBDT's instructions, allowing the revenue's appeal for statistical purposes. Conclusion: The tribunal upheld the CIT(A)'s decision regarding the applicability of Section 194H to the discount offered to prepaid distributors, confirming it as commission liable to TDS. On the issue of roaming charges, the tribunal ruled in favor of the assessee, holding that no TDS is deductible under Section 194J. The tribunal also directed the AO to re-compute interest under Section 201(1A) in accordance with the Supreme Court's guidance.
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