2017 (8) TMI 442 - AT - Income Tax

TDS u/s 194H - sale of SIM cards / pre-paid recharge coupons -Disallowance of discount and activation charges u/s 40(a)(ia) - non deduction of tds - principal to agent relationship between assessee and the customers - Held that - Similar facts had already been adjudicated in assessee s own case for the preceding year as held since no dealer or sub-dealer was appointed either by Bharat Sanchar Nigam Ltd. (BSNL) or by the assessee, for the purpose of marketing the products and/or service of the Bharat Sanchar Nigam Ltd., the entire sales were to customers, either directly or through shopkeepers, who rendered services to the customers. The entire sales were in cash. No commission was paid by the assessee to the customers. Then, Section 194H of the Act does not cover such discounts as under consideration herein and that being so, obviously the provisions of Section 40(a)(ia) of the Act was wrongly applied. When purchasing the SIM cards and recharge coupons from BSNL, the assessee had to deposit the money in advance. Undisputed, it is to customers directly and to petty shopkeepers, that the SIM cards and recharge coupons were sold in cash. The customers and shopkeepers were offered discount on the face value of the SIM cards. Apropos the recharge coupons, on the other hand, a small margin was kept by the assessee out of the commission/discount offered by BSNL. Then, activation charges were given by BSNL to the assessee on new connections, and a major portion thereof was given to the customers as discount. As discussed, it was on the basis of the mistaken presumption of existence of relationship of principal and agent, that the discount offered by the assessee to its customers was considered by the Assessing Officer as commission. This, however, is not so, to reiterate it was only discounts offered to the customers, on a principal to principal basis, on which, no TDS was either required to be made or was actually made. - Decided in favour of assessee.

Summary

Issues Involved:
Appeal by department against deletion of addition under section 40(a)(ia) of the Income Tax Act, 1961 relating to discount and activation charges.

Detailed Analysis:

Issue 1:
The grievance of the department was the deletion of the addition of ?80,27,987 made by the AO on account of disallowance of discount and activation charges under section 40(a)(ia) of the Act.

Analysis:
The AO observed that the assessee failed to provide reliable evidence supporting the payments made for activation scheme and discount to customers/retailers. The AO added the amount to the income due to lack of evidence. The CIT(A) deleted the addition based on a previous ITAT order in the assessee's own case for a similar issue.

Issue 2:
The department's appeal against the CIT(A)'s decision to delete the addition.

Analysis:
The department argued in favor of the AO's order, emphasizing the observations made in the assessment order. The assessee's counsel highlighted a previous ITAT order in the assessee's favor for a similar issue in a preceding year, justifying the deletion of the addition by the CIT(A).

Issue 3:
Comparison of facts with a previous ITAT order in the assessee's own case.

Analysis:
The ITAT compared the facts of the current case with a previous order where it was held that the discounts given were not commission but trade discounts. The ITAT found no merit in the department's appeal, as the facts were identical to the previous case, leading to the dismissal of the department's appeal.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete the addition, citing a previous order in the assessee's favor for a similar issue. The department's appeal was dismissed, emphasizing the consistency in the facts and decisions across the cases.