2019 (8) TMI 726 - AT - Income Tax

TDS u/s 194H - on discount extended to its pre-paid distributors on distribution of prepaid services - pre-paid cheques for SIM - short deduction of TDS - HELD THAT - Admittedly the legal issue as far as the Tribunals and authorities within the territorial jurisdiction of the Karnataka High Court and the Rajasthan High Court are concerned, there is no doubt that the issue stands concluded in favour of the assessee. Admittedly for the Tribunal s and the authorities which are in the territorial jurisdiction of the Kerala High Court, Delhi High Court and the Calcutta High Court are concerned, the issue can be considered to be settled against the assessee. Apex Court in the case of CIT Vs Vegetable Products 1973 (1) TMI 1 - SUPREME COURT , CIT Vs Madho Prasad Jatia 1976 (8) TMI 3 - SUPREME COURT , CIT Vs J.K. Hosiery Factory 1986 (3) TMI 4 - SUPREME COURT has held that in case of divergent view interpretation which favours the assessee need to follow. Thus, in case of cleavage of opinions, the issue is well settled that in the absence of decision of the jurisdictional High Court, the binding precedent for the Tribunals and authorities would be the decisions in favour of the assessee not only on the principles of ambiguity but also on the principle that these decisions are latest in point of time. Accordingly, the legal issue on facts to be established stands concluded in favour of the assessee. Accordingly, the sale of prepaid sim cards by the assessee to the distributors are on principal to principal basis and hence out side the ambit of section 194H. Therefore, the assessee was not required to deduct tax on the same and, therefore, could not be held to be an assessee in default for not deducting tax at source. - decided in favour of the assessee TDS u/s 194J - default for non-deduction of tax at source on roaming charges paid by it to other service providers - HELD THAT - We have heard the rival submissions and perused the material available on record. It is seen that the Co-ordinate Bench in THE DCIT (TDS) , VERSUS M/S IDEA CELLULAR LTD. 2018 (6) TMI 1646 - ITAT CHANDIGARH considered an identical appeal of the Revenue and concluded that the payments made for interconnection are not fees for rendering any technical services as envisaged in section 194J. Therefore, no tax is deductible at source u/s 194J on payment of roaming charges to the OTOs and the assessee therefore cannot be treated as an assessee in default. Accordingly, in the peculiar facts and circumstances of the present case in the absence of any infirmity having been pointed out by the Revenue in the order, we find no merit in the departmental appeal. The grounds, accordingly, are dismissed.

Summary

Issues Involved:
1. Non-deduction of TDS under Section 194H for prepaid SIM card discounts.
2. Non-deduction of TDS under Section 194J for roaming charges.

Detailed Analysis:

Non-deduction of TDS under Section 194H for Prepaid SIM Card Discounts:
1. Ground No. 1 - Order Bad in Law:
- The assessee argued that the CIT(A)'s order was "bad in law" as it was passed in the name of a non-existent entity, Vodafone South Limited, citing the Supreme Court judgment in CIT Vs Spice Infotainment (CA 285 of 2014).

2. Ground No. 2 - Principal to Principal Relationship:
- The assessee contended that the relationship with prepaid distributors was on a "Principal to Principal" basis, not "Principal to Agent," and thus, the discount extended was not commission liable for TDS under Section 194H.
- It was argued that there was no payment or credit to the distributors' accounts, and the discount was not income in the distributors' hands until further distribution.
- The assessee cited favorable judgments, including Bharti Airtel (2015) 372 ITR 33 (KHC) and Vodafone South Ltd. Vs DCIT, asserting that similar cases had held that Section 194H was not applicable.

3. Revenue's Arguments:
- The Revenue maintained that the relationship was "Principal to Agent" and that the discount was commission, thus attracting TDS under Section 194H.
- The CIT(A) noted that the assessee had previously deducted TDS under a "Principal to Agent" agreement, and a mere change in agreement did not alter the relationship's nature.

4. Tribunal's Decision:
- The Tribunal noted conflicting High Court decisions on the matter but followed the principle that in the absence of a jurisdictional High Court decision, the view favorable to the assessee should be adopted, citing CIT Vs Vegetable Products (1973) 88 ITR 192 (S.C).
- The Tribunal remanded the case to the AO to verify if the terms and conditions of the agreements were identical to those considered by the Karnataka and Rajasthan High Courts.

Non-deduction of TDS under Section 194J for Roaming Charges:
1. Revenue's Appeal:
- The Revenue challenged the CIT(A)'s decision that roaming charges did not attract TDS under Section 194J, arguing that human intervention was involved in the technical process of roaming.

2. Assessee's Defense:
- The assessee argued that the process of roaming was fully automated and did not require human intervention, thus not constituting technical services under Section 194J.
- The assessee cited various favorable judgments, including the Karnataka High Court decision in Vodafone South Ltd. and the ITAT decisions in the cases of Bharti Airtel Ltd. and Idea Cellular Ltd.

3. Tribunal's Decision:
- The Tribunal upheld the CIT(A)'s decision, noting consistent rulings in favor of the assessee that roaming charges did not require human intervention and thus did not fall under Section 194J.
- The Tribunal dismissed the Revenue's appeals, finding no merit in their arguments and no specific infirmity in the CIT(A)'s order.

Conclusion:
- The Tribunal allowed the assessee's appeals for statistical purposes, remanding the issue of agreement terms verification to the AO.
- The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decision that roaming charges did not attract TDS under Section 194J.