2018 (5) TMI 582 - AT - Income Tax

TDS u/s 194H - non deduction of tds on payments of commission to its distributors on the sale of pre-paid SIM cards, recharge coupons etc. - Held that - The issue contested herein was decided against the assessee by the Hon ble Delhi High Court in case of the assessee s own case in CIT vs. Idea Cellular Ltd. for A.Ys 2003-04 and 2004-05 2010 (2) TMI 24 - DELHI HIGH COURT . But, in case of Bharati Airtel Limited vs. DCIT (2014 (12) TMI 642 - KARNATAKA HIGH COURT) and in assessee s own case (2017 (7) TMI 1076 - RAJASTHAN HIGH COURT) Hon ble Rajasthan High Court decided this issue in favour of the assessee. Thus as relying on case of CIT vs. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME Court wherein it is held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. Hence assessee cannot be deemed to be an assessee-in-default on discount/commission of sale of prepaid sim cards. Therefore, Ground No. 2 of the assessee s appeal is allowed. TDS on roaming charges - TDS u/s 194J - held that - in absence of any human intervention during the actual roaming process, payment would not be Fees for Technical services as per the decisions of the various High Court and the Apex Court in case of CIT vs. Bharati Cellular 2010 (8) TMI 332 - Supreme Court of India . Thus, payment made to other telecom operators should not be regarded as payment towards fees for technical service. No Tds liability - Decided in favour of assessee.

Summary

Issues:
1. Failure to deduct TDS on commission payments to distributors.
2. Failure to deduct TDS on roaming charges.
3. Appeal against CIT(A) order regarding TDS liability.
4. Applicability of judicial decisions on TDS liability.

Issue 1: Failure to deduct TDS on commission payments to distributors:
The appellant, a cellular service provider, did not deduct TDS on commission payments to distributors. The Assessing Officer held the appellant as an assessee in default under Section 201(1) for not deducting TDS on commission payments. The CIT(A) partly allowed the appeal. The Revenue contested, citing the retrospective application of Section 191 and the need for the Assessing Officer's order to stand. However, the Tribunal ruled in favor of the appellant, considering conflicting High Court decisions and the principle favoring the assessee in tax matters.

Issue 2: Failure to deduct TDS on roaming charges:
The appellant also failed to deduct TDS on roaming charges paid to other telecom operators for technical services. The Assessing Officer held the appellant in default under Section 201(1). The appellant argued that these payments did not qualify as fees for technical services as per judicial precedents. The Tribunal agreed with the appellant, citing the absence of human intervention in the roaming process and the nature of the services provided.

Issue 3: Appeal against CIT(A) order regarding TDS liability:
The Revenue's appeal against the CIT(A) order focused on the applicability of certain Supreme Court decisions. However, since the Tribunal had already ruled in favor of the appellant on the TDS issues, the Revenue's appeal was deemed infructuous and dismissed.

Issue 4: Applicability of judicial decisions on TDS liability:
Various judicial decisions, including those from the Delhi High Court, Karnataka High Court, and Rajasthan High Court, were cited to support arguments on TDS liability. The Tribunal considered these decisions, along with the principle favoring the assessee in tax matters, to determine the outcome of the appeals.

In conclusion, the Tribunal allowed the appellant's appeals related to TDS on commission payments and roaming charges while dismissing the Revenue's appeal. The orders were pronounced on 1st May 2018.