2018 (3) TMI 433 - AT - Income Tax

Applicability of section 194H in respect of discount allowed to the distributors on distribution of pre-paid SIM cards/talk time - Held that - As decided in assessee s own case 2017 (5) TMI 1538 - ITAT JAIPUR Section 194H pre-supposes the payment to be made to the third party namely, Distributor or the Agency and if on a close scrutiny of Section 182, Distributor is not an agent, therefore, in our considered opinion, the provisions of Section 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee. Deduction of TDS under section 194J in respect of roaming charges paid to other telecom operators - Held that - As decided in assessee s own case 2017 (7) TMI 1076 - RAJASTHAN HIGH COURT as decided the issue in favour of the assessee by holding that the fee paid for roaming charges does not fall in the ambit of fee for technical services as no human intervention is required in providing the roaming services by the mobile service provider. - Decided in favour of assessee.

Issues Involved:
1. Legality of the order passed by the TDS officer.
2. Applicability of section 194H regarding discount extended to pre-paid distributors.
3. Applicability of section 194J regarding roaming charges paid to other telecom operators.
4. Recovery of demand under section 201(1).
5. Charging of interest under section 201(1A).

Issue-wise Detailed Analysis:

1. Legality of the Order Passed by the TDS Officer:
The assessee argued that the order passed by the TDS officer treating the appellant as 'assessee in default' is bad in law, citing the provisions of section 201(1) read with section 191 and the judgment of Jagran Prakashan Limited Vs DCIT (TDS). The appellant contended that there was no finding by the TDS officer regarding the failure of deductees to pay taxes directly, which is a jurisdictional pre-requisite. The Tribunal noted that Ground No. 1 is general in nature and does not require any specific adjudication.

2. Applicability of Section 194H Regarding Discount Extended to Pre-paid Distributors:
The Tribunal examined whether the discount allowed to distributors on pre-paid SIM cards/talk time constitutes commission liable for tax deduction at source under section 194H. The Tribunal referred to its earlier decision in the assessee's own case for assessment years 2012-13 and 2013-14, where it was held that the relationship between the assessee and distributors is on a principal-to-principal basis, and thus, the provisions of section 194H are not applicable. The Tribunal also cited the judgment of the Hon'ble Jurisdictional High Court in the assessee's case for A.Y. 2007-08 to 2009-10, which concluded that the arrangement between the company and the distributor does not invoke section 194H as no commission was paid by the assessee. Consequently, the Tribunal decided this issue in favor of the assessee and against the revenue.

3. Applicability of Section 194J Regarding Roaming Charges Paid to Other Telecom Operators:
The Tribunal considered whether the roaming charges paid to other telecom operators qualify as fees for technical services under section 194J. Referring to its previous decision for assessment years 2012-13 and 2013-14, the Tribunal noted that roaming services do not involve human intervention and thus do not constitute technical services. The Tribunal also referenced the Hon'ble Jurisdictional High Court's judgment, which followed the decision of the Hon'ble Karnataka High Court in CIT TDS, Bangalore Vs Vodafone South Ltd., holding that roaming charges do not fall under section 194J. Therefore, the Tribunal decided this issue in favor of the assessee and against the revenue.

4. Recovery of Demand Under Section 201(1):
The assessee argued that no demand can be raised under section 201(1) as taxes would have been paid by the recipient parties, resulting in double recovery of taxes. The Tribunal noted that Ground Nos. 4 and 5 are consequential to the findings in Ground Nos. 2 and 3. Since the Tribunal decided in favor of the assessee on Grounds 2 and 3, the recovery of demand under section 201(1) was also resolved in favor of the assessee.

5. Charging of Interest Under Section 201(1A):
The assessee contended that interest under section 201(1A) should not be charged or should be computed from the due date of payment of withholding tax to the date of payment of taxes by the payee. Given the Tribunal's findings in favor of the assessee on the primary issues, the consequential issue of interest under section 201(1A) was also resolved accordingly.

Conclusion:
The Tribunal allowed the appeal of the assessee, deciding all relevant issues in favor of the assessee and against the revenue. The orders of the authorities below were set aside in line with the Tribunal's findings on each issue. The judgment was pronounced in the open court on 08/03/2018.

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