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2015 (3) TMI 1023 - AT - Income TaxLiability for TDS u/s 194H - discount on sale of recharge vouchers (RCVs) and the starter kits by the appellant to its channel partners (distributors/ dealers) - Held that - The relationship between assessee and its distributors qua the sale of impugned products is on principal to principal basis; the consideration received by assessee is sale price simpliciter. There is no relationship of Principal and agent between assessee and distributors as held by authorities below there orders are reversed. Looking at the transaction being of Sale/Purchase and relationship being of principal to principal the discount does not amount to commission in terms of sec. 194H, the same is not applicable to these transactions. Therefore, assessee cannot be held in default; impugned demand raised applying sec. 194H is quashed. See Bharti Airtel Ltd. And Others Versus Deputy Commissioner of Income-tax and Commissioner of Income Tax, Bangalore 2014 (12) TMI 642 - KARNATAKA HIGH COURT - Decided in favour of assessee. Non providing details of deductee regarding filing of I.T. Returns before the AO (TDS) during the proceedings - whether incomplete and unverified information could not have been considered as additional evidence under Rule 36A of Income Tax Rules? - Held that - Apropos the revenue appeal since we have held that sec. 194H is not applicable there remains no substance in revenue appeals. In any case there is no infirmity in the order of Ld. CIT(A) in admitting the additional evidence in the light of Hon ble Supreme Court judgment in the case of Hindustan Coca Cola (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) and following his past orders. - Decided against revenue.
Issues Involved:
1. Applicability of Section 194H on discounts on the sale of recharge vouchers (RCVs) and starter kits. 2. Relationship between the assessee and its distributors (principal to principal vs. principal to agent). 3. Liability under Sections 201(1) and 201(1A) for non-deduction of TDS. 4. Admission of additional evidence under Rule 46A. Issue-wise Detailed Analysis: 1. Applicability of Section 194H: The primary issue in the appeals was whether the discounts provided by the assessee on the sale of RCVs and starter kits to its distributors should be considered as commission under Section 194H, thereby necessitating TDS deduction. The Assessing Officer (AO) held that the discounts amounted to commission, establishing a principal-agent relationship. Consequently, the assessee was deemed in default under Sections 201(1) and 201(1A) for not deducting TDS. 2. Relationship Between Assessee and Distributors: The assessee contended that the transactions were sales on a principal-to-principal basis, with discounts being merely business discounts and not commissions. The assessee argued that the ownership of the goods transferred to the distributors upon sale, making the transactions sales simpliciter. The CIT(A) upheld the AO's view, citing precedents like CIT vs. Idea Cellular Ltd. and Vodafone Essar Cellular Ltd. However, the assessee relied on the Karnataka High Court's judgment, which clarified that the relationship was principal to principal, and the discounts did not constitute commission. 3. Liability Under Sections 201(1) and 201(1A): The CIT(A) directed the AO to verify whether the distributors had paid taxes on their income from the sale of the assessee's products. The CIT(A) also instructed the AO to reduce the interest liability under Section 201(1A) based on the filing dates of the distributors' tax returns. This direction was based on the Supreme Court's decision in Hindustan Coca Cola Beverages (P) Ltd., which prevents double taxation. 4. Admission of Additional Evidence: The Revenue challenged the CIT(A)'s acceptance of additional evidence under Rule 46A, arguing that the assessee should have presented this evidence during the AO's proceedings. However, the CIT(A) admitted the evidence, allowing the AO to verify the distributors' tax payments. Judgment Summary: The Tribunal held that the transactions between the assessee and its distributors were sales on a principal-to-principal basis. The discounts provided were not commissions, and thus, Section 194H did not apply. The Tribunal relied on the Karnataka High Court's judgment, which provided a detailed analysis of similar transactions and concluded that the relationship was principal to principal. Consequently, the assessee was not liable under Sections 201(1) and 201(1A) for non-deduction of TDS. The Tribunal also upheld the CIT(A)'s decision to admit additional evidence, as it was in line with the Supreme Court's judgment in Hindustan Coca Cola Beverages (P) Ltd. Conclusion: The appeals of the assessee were allowed, and those of the Revenue were dismissed. The Tribunal ruled that: - The relationship between the assessee and its distributors was principal to principal. - The discounts did not amount to commission under Section 194H. - The assessee was not liable for TDS under Sections 201(1) and 201(1A). - The CIT(A) rightly admitted additional evidence for verification of tax payments by distributors.
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