9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (6) TMI 38 - AT - Income TaxTDS u/s 194H - TDS on commission paid to Sub Contractors/ Sub Distributors/ Sub-Franchise from sale of Recharge of coupons and Top-ups - assessee is a franchisee of BSNL - purchasing SIM cards and Recharge coupons from BSNL against payment and resells them to Sub Contractors/Sub Distributors/Sub-Franchise - Assessee in default u/s 201(1) and 201(1A) of the Act Submissions not appreciated Assessee contended that the transactions were on principal to principal basis and no commission was paid and therefore provisions of TDS were not applicable - Held that - The role of Franchisee is limited to booking of new connections i.e. Subscriber Identification Module cards and sale of Recharge - Booking of new connections i.e. SIM cards. Contributes to less than5% of total business - the assessee s role is limited to booking of new connections only and commission after deducting TDS is given on new connections by BSNL and similarly, TDS is deducted and deposited on commission disbursed to Sub-Franchisee on account of new connections booked by them - sale of Recharge contributes more than 95% of business and only dispute is with regard to Recharge of coupons and Top-ups. The BSNL does not recoup the loss to the assessee, which is clearly mentioned - The assessee has sold the Recharge coupons to the Sub-Distributors so that they also earn some margin of profit and such Recharge coupons once sold become the property of the said Sub- Distributor and such Sub-Distributor is free to sell the same at a price as he deems fit though the maximum price has been fixed by the BSNL with regard to the market condition - there shall not be any partnership, joint venture, employment or relationship of principal and agent between parties. The assessee is not a service provider, as he purchased recharge coupons from the service provider i.e. BSNL and not provides any service to the subscribers - The assessee simply sells recharges to the sub-distributors, which is on principal to principal basis and there is no relationship of principal and agent - there is no written agreement with the sub-distributors - The sale bills are issued to the sub-distributors and copies were produced - The books of account are audited and transactions has been shown as sale and purchase - None of the conditions referred to in section 194H to Explanation (i) is fulfilled - But equal margin earned/profit earned as commission i.e. the sub-distributor is not receiving the payment on behalf of the assessee but on his own and he is not accountable to the assessee - once the assessee has sold the SIM cards or Recharge coupons, the assessee has no control or liability towards the sub-distributors - A copy of the bills filed before the authorities below issued by the BSNL show that BSNL has allowed the discount in some cases and allowed commission in other cases. The relationship with BSNL is different from the relationships of sub-franchisee and is on principal to principal basis because the assessee has no control over the sub franchisees whatsoever - The sub franchisees are from to sell SIM cards and Top Ups to any customer at any price and once these are sold the assessee loses its control over the same - Relying upon Berger Paints India Ltd. vs. CIT 2004 (2) TMI 4 - SUPREME Court - the assessee is a Trader and relationship is that of the principal to principal and the authorities are not justified to hold relationship of principal and that of an agent - the assessee is not liable for the provisions of Section 201(1) & 201(1A) of the Act thus, the order of the CIT(A) is set aside Decided in favour of Assessee.
Issues Involved:
1. Applicability of Section 201(1) and 201(1A) of the Income Tax Act. 2. Classification of transactions as principal-to-principal or principal-agent. 3. Applicability of TDS provisions under Section 194H. 4. Validity of computation by the Assessing Officer (AO). 5. Recognition of tax paid by the payee. 6. Nature of the orders as non-speaking. Issue-wise Detailed Analysis: 1. Applicability of Section 201(1) and 201(1A) of the Income Tax Act: The assessee challenged the confirmation of the AO's orders treating it as a defaulter under Section 201(1) and 201(1A), raising demands of Rs. 12,22,740/- and Rs. 10,60,260/- for the assessment years 2008-09 and 2009-10, respectively. The Tribunal found that the assessee was a trader and not a service provider or cellular operator. The relationship between the assessee and sub-franchisees was on a principal-to-principal basis, thus negating the applicability of Section 201(1) and 201(1A). 2. Classification of Transactions as Principal-to-Principal or Principal-Agent: The Tribunal examined the agreements and concluded that the transactions between the assessee and sub-franchisees were on a principal-to-principal basis. The agreements explicitly stated that there was no partnership, joint venture, employment, or principal-agent relationship. The Tribunal noted that the recharge coupons became the property of the sub-distributors upon sale, and the assessee had no control over the pricing or further sale of these coupons. 3. Applicability of TDS Provisions under Section 194H: The AO had argued that the margin earned by the assessee was in the nature of commission, making it liable for TDS under Section 194H. However, the Tribunal found that the assessee was not acting on behalf of BSNL but was purchasing and reselling recharge coupons. The Tribunal distinguished the assessee's case from other cases involving cellular operators and service providers, where the courts had held the margins to be commission. The Tribunal concluded that the provisions of Section 194H were not applicable. 4. Validity of Computation by the Assessing Officer (AO): The assessee contended that the AO's computation was incorrect and that the revised computation submitted by the assessee was not considered. The Tribunal did not specifically address this issue in detail but implicitly accepted the assessee's position by ruling in its favor on the primary issues. 5. Recognition of Tax Paid by the Payee: The assessee argued that where the tax had been paid by the payee, there should be no liability for the payer. The Tribunal noted that the sub-franchisees had shown the transactions as purchase and sale in their returns, which had not been questioned by the Department. The Tribunal emphasized the doctrine of consistency, referencing the Supreme Court's judgment in Berger Paints India Ltd. vs. CIT, and concluded that the assessee was not liable for the provisions of Section 201(1) & 201(1A). 6. Nature of the Orders as Non-Speaking: The assessee claimed that the orders were non-speaking, merely rejecting the assessee's explanations without providing detailed reasoning. The Tribunal's detailed analysis and ruling in favor of the assessee indicated that it found merit in the assessee's arguments that the orders lacked sufficient reasoning. Conclusion: The Tribunal ruled in favor of the assessee, reversing the orders of the CIT(A) and the AO. It concluded that the transactions were on a principal-to-principal basis, and the provisions of Section 194H and Section 201(1) & 201(1A) were not applicable. The appeals for both assessment years 2008-09 and 2009-10 were allowed, and the demands raised were vacated.
|
