2023 (7) TMI 647 - AT - Income Tax

Assessee in default u/s 201(1) - non deduction of tds u/s 194C - Order beyond statutory period as per section 201(3) - HELD THAT - As the show cause notice was issued on 16/03/2021 and the order was passed on 30/03/2021 for the financial year 2012-13 which is not as per sec. 201(3) of the IT Act, accordingly the order has not been passed by the AO within the within the prescribed time period of seven from the end of relevant financial year in which the payment was made. See M/s Coffee Day Enterprises Ltd. case 2020 (12) TMI 1192 - ITAT BANGALORE Decided in favour of assessee. TDS u/s 194H - service charges received from the end customers - HELD THAT - Admittedly, in the present facts of the assessee, no expenditure is claimed by the assessee in respect of any payments alleged to be in the nature of commission / service fee by the Ld.AO. On analyzing the above scanned agreement between the assessee and M/s. Bigtree, we note that there is no non-compete clause wherein a complete /partial control of M/s. Bigtree by the assessee is not established. M/s. Bigtree on its online platform sells tickets of other / many theatre owners apart from the assessee before us. The agreement of the assessee with M/s.Bigtree is a non exclusive agreement for selling cinema tickets of the assessee through its platform. The only income earned by the Bigtree is the convenience fee that it collects from the customers / movie viewers. Even there is no discounts given by the assessee to the Bigtree on account of tickets purchased by the customer from their platform. In our view, the transaction / service fee collected by M/s. Bigtree from the end customers are actually margin charged from the end customers for provision of such services to the end customers. It is also to be noted that the end customer, pays service tax on such additional transaction / convenience fee charged by M/s. Bigtree. It is also very much pertinent to note that such service tax is not levied on the ticket charges. This fact establishes that the assessee do not cast any obligation on M/s.Bigtree to sell tickets from their platform. However one more aspect that needs to be considered is the situation where the tickets are liable to be refunded. For example, the theater owner is unable to start or play the movie, then who will be liable to refund the ticket price. Is it the Bigtree or the Theater owner. This issue needs to be ascertained. The risk needs to be analysed. We therefore direct the AO to carry out necessary verification. We direct the Ld.AO to consider the claim of assessee in accordance with law.

Summary

Issues Involved:
1. Non-deduction of TDS on the commission paid to M/s Bigtree Entertainment Pvt. Ltd.
2. Barred by limitation under section 201(3) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Non-deduction of TDS on the Commission Paid to M/s Bigtree Entertainment Pvt. Ltd.:

The core issue revolves around whether the assessee should have deducted TDS under section 194H on the commission/service charges retained by M/s Bigtree. The assessee, a proprietor of cinema theatres, had an agreement with M/s Bigtree, which facilitated online ticket booking through its platform. The payment made by customers included ticket costs and convenience fees. The ticket cost was remitted to the cinema owners after deducting TDS, while the convenience fee was retained by M/s Bigtree as its revenue.

The Assessing Officer (AO) considered this convenience fee as a commission/service charge paid by the cinema owners (assessee) to M/s Bigtree, thereby necessitating TDS deduction under section 194H. The AO computed the TDS payable by the assessee on such convenience fees, issuing a show-cause notice under sections 201(1) and 201(1A) of the Act. The assessee contended that the relationship with M/s Bigtree was of principal-to-principal and not principal-agent, thus section 194H was not applicable. However, the AO was not convinced and held the assessee as "assessee in default" for non-deduction of TDS.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the convenience fees were charges for using M/s Bigtree's ticket booking platform, amounting to constructive payment of commission.

2. Barred by Limitation under Section 201(3) of the Income Tax Act, 1961:

The assessee raised a legal issue regarding the order being barred by limitation. The AO issued the show-cause notice on 16/03/2021 and passed the order on 30/03/2021 for the financial year 2012-13. The assessee argued that the order was beyond the statutory period as per section 201(3) of the Act, which prescribes a limitation period of six years from the end of the financial year in which the payment was made. The Tribunal agreed with the assessee, referencing the decision of the coordinate bench in the case of M/s Coffee Day Enterprises Ltd., which supported the view that the order was not passed within the prescribed time period.

Tribunal's Decision:

Assessment Year 2013-14:

The Tribunal allowed the appeal on the legal issue of limitation, holding that the order passed by the AO was beyond the statutory period as per section 201(3) of the Act. Consequently, the order was quashed.

Assessment Year 2014-15:

On the merits, the Tribunal noted that M/s Bigtree charged a convenience fee from end customers for using its online platform, and the relationship between the assessee and M/s Bigtree was not of principal-agent. The Tribunal observed that the transaction charges retained by M/s Bigtree were margins charged from end customers for the provision of services, and the assessee had no obligation to deduct TDS on these charges. However, the Tribunal directed the AO to verify the liability in situations where tickets are refunded, ensuring proper opportunity for the assessee to be heard.

Conclusion:

The appeals filed by the assessee were allowed, with the order for the assessment year 2013-14 being quashed on the ground of limitation and the case for the assessment year 2014-15 being allowed for statistical purposes with directions for further verification by the AO.