2020 (2) TMI 152 - AT - Income Tax

TDS u/s 194H OR 194C - short computation of TDS - Payment made to service providers for installation of STB and dish antenna - HELD THAT - In assessee's own case for AY 2010-11 and 2011- 12, where under identical set of facts, it has been held that service charges paid to service providers is in the nature of works contracts and hence, the assesee has rightly conducted TDS u/s 194C. We are of the considered view that service charges paid to service providers for installation of STB and dish antenna is in the nature of works contract and accordingly, the assessee has rightly deducted TDS u/s 194C of the I.T.Act, 1961. The Ld.CIT(A) after considering relevant facts has rightly deleted additions made by the Ld. AO towards short deduction of TDS on service charges u/s 201(1) and 201(1A) TDS u/s 194H - discount offered to distributor/dealers - HELD THAT - Discount offered to distributor/dealers is not in the nature of commission, as defined u/s 194H of the Act, and the assessee shall not required to deduct tax at source on said payment. The Ld.CIT(A) after considering relevant facts has rightly deleted additions made by the Ld. AO towards non levy of TDS u/s 194H of the I.T.Act, 1961 and hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject ground taken by the revenue.

Issues Involved:
1. Applicability of Section 194H for discounts offered to distributors/dealers.
2. Reliance on the Karnataka High Court decision in Bharti Airtel Ltd. case.
3. Deletion of interest under Section 201(1A) for non-deduction of TDS.
4. Applicability of Section 194C vs. Section 194J for payments to Installation Service Providers (ISP).
5. Deletion of interest under Section 201(1A) for short deduction of TDS on installation service provider payments.

Issue-wise Detailed Analysis:

1. Applicability of Section 194H for Discounts Offered to Distributors/Dealers:
The primary issue concerns whether the discounts provided to distributors/dealers for the sale of Set-Top Boxes (STB) and recharge coupons fall under the purview of Section 194H, which deals with TDS on commission or brokerage. The assessee argued that the relationship with distributors/dealers is on a principal-to-principal basis, thus not constituting commission under Section 194H. The ITAT Mumbai upheld this view, referencing earlier decisions in similar cases, including the assessee's own case for previous assessment years. The Tribunal concluded that the discounts do not qualify as commission, and therefore, Section 194H is not applicable.

2. Reliance on Karnataka High Court Decision in Bharti Airtel Ltd. Case:
The revenue questioned the reliance on the Karnataka High Court's decision in Bharti Airtel Ltd., which was not accepted by the Department and was under appeal. However, the ITAT Mumbai found that the facts of the case were consistent with the principles established in the Bharti Airtel case, reinforcing the decision to exclude the discounts from the purview of Section 194H.

3. Deletion of Interest under Section 201(1A) for Non-Deduction of TDS:
The revenue contested the deletion of interest under Section 201(1A) amounting to ?3,72,11,418/- due to non-deduction of TDS on the discounts. Given the Tribunal's conclusion that Section 194H does not apply to the discounts, the deletion of interest was upheld.

4. Applicability of Section 194C vs. Section 194J for Payments to Installation Service Providers (ISP):
The next issue addressed whether the payments to ISPs for the installation of STB and dish antennas should be subject to TDS under Section 194C (contracts) or Section 194J (technical services). The assessee contended that the services provided were in the nature of a works contract, thus falling under Section 194C. The Tribunal agreed, noting that the installation work did not require specialized technical skills and could be performed by individuals with basic training. This view was consistent with previous decisions in the assessee's own case for earlier years.

5. Deletion of Interest under Section 201(1A) for Short Deduction of TDS on Installation Service Provider Payments:
The revenue also challenged the deletion of interest under Section 201(1A) amounting to ?1,96,13,781/- due to short deduction of TDS on payments to ISPs. Given the Tribunal's decision that Section 194C was correctly applied, the deletion of interest was upheld.

Conclusion:
The ITAT Mumbai dismissed the revenue's appeal, affirming the CIT(A)'s order. The Tribunal concluded that the discounts to distributors/dealers do not constitute commission under Section 194H, and the payments to ISPs are correctly categorized under Section 194C. Consequently, the interest under Section 201(1A) was rightly deleted. The judgment was pronounced in the open court on 29/01/2020.

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