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2017 (11) TMI 631 - AT - Income TaxTDS u/s 194H - TDS liability on commission paid to the distributor - applicability of section 201(1) and consequent interest u/s 201(1A) - whether assessee has furnished basic details in discharging its primary onus to show that assessee can no longer be considered as defaulter and interest can only be charged till date of payment, if any, by the distributors - Held that - We are of the opinion that expecting assessee to obtain a certificate in Form 26A, at this juncture, is not practicable. At the time of filing of its returns, the issue of applicability of section 194H, on payments received by the assessee in the form of discount was under challenge and there are few decisions in favour of the assessee holding that the amounts received from the distributors by the assessee cannot be treated as commission, but, it has to be treated as discounts since the relationship between the distributor and the assessee is on principal to principal basis. Thus, at the relevant point of time, the assessee has not obtained minute details from the distributors, since the assessee was under bonafide impression that it could not be treated as a defaulter u/s 201(1) of the Act. ITAT Hyderabad Bench in the case of Idea Cellular Ltd.(2009 (2) TMI 246 - ITAT HYDERABAD-B) had taken a view in favour of the assessee. This aspect has to be taken into consideration while considering as to whether the material filed before the AO is sufficient to prove that the assessee cannot be treated as a defaulter, u/s 201(1A) of the Act. Expecting the assessee to file a certificate of CA at this juncture creates force majeure situation, as held by the Hon ble Madras High Court in the case of S. Hastimal Vs. CIT, 1962 (12) TMI 60 - MADRAS HIGH COURT wherein observed that assessee cannot be put on the neck, after a lapse of more than 10 years, to furnish details beyond a particular point. Assessee having furnished the basic details i.e. list of declarations collected from the concerned distributors for the above AYs along with turnover and income-tax returns filed by them, it should be treated as sufficient compliance and interest should not have been charged u/s 201(1A) of the Act from the dates when the recipients have filed returns.
Issues Involved:
1. Applicability of Section 194H to prepaid SIM card transactions. 2. Treatment of the assessee as a defaulter under Section 201(1) and the consequent interest under Section 201(1A). 3. Verification of tax payments by distributors and the onus of proof. 4. Directions to furnish Form 26A and its applicability to the assessment years in question. Issue-wise Detailed Analysis: 1. Applicability of Section 194H to Prepaid SIM Card Transactions: The assessee is engaged in providing mobile services through prepaid and postpaid SIM cards. For postpaid SIM cards, the assessee admitted the applicability of Section 194H and deducted tax at source on the amounts paid to the distributor. However, for prepaid SIM cards, the assessee argued that the discount given to distributors could not be equated to a commission, thus not invoking Section 194H. The TDS Officer and CIT(A) rejected this contention, and the Tribunal confirmed the order, treating the assessee as a defaulter under Section 201(1) and charging interest under Section 201(1A). 2. Treatment of the Assessee as a Defaulter under Section 201(1) and the Consequent Interest under Section 201(1A): The assessee contended that, based on the decision of the Hon’ble Apex Court in the case of M/s Hindustan Coco Cola Beverages Pvt. Ltd., the assessee could not be treated as a defaulter if the distributors had filed returns and offered the amount to tax. CIT(A) directed the AO to verify the payment of taxes by the recipients and give credit accordingly. However, the AO did not grant relief as the assessee could not furnish the required information, only providing a soft copy of the ledger account of expenses. 3. Verification of Tax Payments by Distributors and the Onus of Proof: The assessee argued that it was unreasonable to expect it to furnish detailed accounts of distributors' returns after many years. The CIT(A) noted the impracticality of verifying thousands of cases and suggested that the best course of action would have been to deduct tax at the time of payment. CIT(A) directed the assessee to furnish Form 26A to prove that payments made by the assessee were considered in arriving at profit by the deductees and that taxes were paid. 4. Directions to Furnish Form 26A and Its Applicability to the Assessment Years in Question: The assessee contended that the procedure prescribed in Form 26A was not applicable to the years under consideration and that it was impractical to obtain certificates after so many years. The Tribunal agreed that expecting the assessee to obtain a certificate in Form 26A at this juncture was not practicable, especially given the bonafide impression at the relevant time that the amounts received from distributors could not be treated as commission. The Tribunal held that the material filed before the AO should be considered sufficient to prove that the assessee could not be treated as a defaulter under Section 201(1A). Conclusion: The Tribunal modified the CIT(A)'s order, directing the AO to determine interest liability under Section 201(1A) from the date taxes were payable to the date when returns of income were filed by the recipients/distributors. All appeals filed by the assessee and revenue were treated as allowed for statistical purposes.
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