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TMI Blog2012 (12) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... h as unsold SIM cards are to be returned to the assessee and it is required to make payment against them - This is an antithesis of ‘sale’ Therefore, the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS under s. 194H - Contention of the assessee that s. 194H is not applicable as there is no ‘payment or credit’ by the assessee to the distributor cannot be accepted."- no infirmity in the order passed by the learned CIT(A). Therefore, this ground of appeal raised by the assessee for both the assessment years under consideration is dismissed. Decision in CIT v. Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] followed. - ITA Nos.1560 & 1561/Mds/2011 - - - Dated:- 30-10-2012 - N. S. Saini And V. Durga Rao, JJ. Appellant Rep by: Shri Philip George, Adv. Respondent Rep by: Shri KEB Rengarajan, Jr. Standing Counsel ORDER Per: V Durga Rao: These appeals by the assessee are directed against the order of the CIT(Appeals)-IV, Chennai dated 30-06-2011 for the assessment years 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est u/s 201(1A) of the Act amounting to Rs. 8,62,787/-. Ultimately the total amount as determined by the Assessing Officer was Rs. 53,75,423/- u/s 201(1) and 201(1A) of the Act and taxed accordingly. 3. On being aggrieved, the assessee carried the matter before the CIT(Appeals). Before the learned CIT(Appeals) it was submitted that the amount paid to the dealer is principal to principal basis. It is only discount and not commission and therefore no TDS is necessary to be deducted. Recharge coupon is different from SIM card. The learned CIT(Appeals) after considering the submissions of the assessee observed as under: 6. I have, considered the written submissions filed by Id. AR, assessment order of A.O. and proceed to decide the issue. I am of the considered view that TDS is deductible on the commission payments made by BSNL while selling SIM cards/recharge coupons, to its franchisees, for the following reasons: (a) The assessee company deducted the TDS on these payments upto AY 2007 08 and from the AY 2008 09 onwards, they stopped deducting tax. Before the Assessing Officer, the assessee company did not give any proper reason as to why there is a sudden change, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sim cards and recharge coupons (para 11, page 37 of Hon'ble ITAT's order). Similarly, both Hon'ble Delhi High Court and Hon'ble Kerala High Court in the case of Idea Cellular Limited 325 ITR 148(Del.) and Vodafone Essar Limited 235 CTR:393(Ker.) have held that TDS is applicable u/s 194H on both sim cards and recharge coupons. Hence, this alternate argument of assessee company is also rejected. (d) The assessee company relied on Idea Cellular decision of Delhi ITAT before the A.C. and argued that the provisions u/s 194H are not applicable for the "discount" given by assessee company to its franchisees. Actually, the amount paid to franchisees is "commission", but the assessee company chose to term it as "discount" to come out of the provisions of section 194H. Since there is no other incentive payable to franchisees by assessee company, the amount paid at reduced price is actually "commission" only and the assesee company accepted this proposition till AY 1997 98. There being no change in facts, circumstances and law, the assessee company should have continued to deduct tax as in earlier years. Moreover, the decision relied on by assessee company before the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port his argument of non-deduction of tax. This case was considered by Hon'ble Delhi High Court in the case of CIT Vs Idea Cellular Limited 325 ITR 148 (Del.) and since the facts and circumstances were different, it was held that section 194H was applicable for the differential portion while selling sim cards/recharge coupons. So, this argument of assessee company is decided against it on merit. (f) The assessee company argued that there is only a principal to principal relationship but not principal to Agent relationship and hence 194H is not applicable. This is not correct. The Agreement between BSNL and franchisee clearly shows that there is one-way flow i.e. it is only assessee company sells to franchisees and franchisees never sells goods to assessee company nor the franchisee companies give discount/commission to assessee company. This argument of principal to principal relationship was repelled by Hon'ble Delhi High Court in the case of Idea Cellular Limited 325 ITR 148 (Del.) by stating that all the services were rendered by assessee company and hence the relationship between assessee company and franchisee is that of principal to Agent and not principal to princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Accountant General 150 TM 30(Ker.), in his written submissions to argue that TDS provisions are not applicable for his case also. Hon'ble Kerala High Court in the case of Vodafone Essar Limited 235 CTH 393 (Ker.) has considered and distinguished the above case relied on by assessee stating that in that case, stamp vendors are licenced distributors of Government and moreover specific exemption was granted to them by State Government from S.T. Act. Since the facts and circumstances in that case are different, Hon'ble Kerala High Court has held that the case relied on by assessee will not come to the rescue of assessee. In other words, since the case relied on by assessee company was discussed and distinguished by Hon'ble Kerala High Court in the above case and held in favour of Department, this argument of assessee company also is liable to be rejected. (h) The assessee company has also argued that from this Assessment Year onwards, they have changed their accounting system and. not deducting tax as per section 194H. Now, it is a settled law and accounting entries in the books of account of assessee cannot alter the legal position nor can override the statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the chapter of "Tax Deducted at Source" provisions, the same are to be followed and if the assessee company wants to challenge the "vires" of a provision/section, the appropriate forum is High Court or Supreme Court, but not this appellate authority. Moreover, it is a settled law that provisions of TDS are legal and constitutional. (k) Payment of tax by payee is not relevant for charging of interest u/s 201(1A) which is mandatory - 243 ITR 13 (Ker.) Dhanalaxmi Weaving Works ; Crescent Housing 0 ITD 317(Mad.) and Air Canada 88 ITD 545(Del.) where Hon'ble Delhi ITAT followed the decision of Hon'ble Supreme Court in the case of K.K. Engg. Recently, Hon'ble Supreme Court in the case of Hindustan Coca Cola 293 ITR 226(SC) has held that interest u/s 201(1A) is mandatory even if the payee admits the income in his return of income. 7. In view of the above legal position, facts and circumstances, the entire addition of Rs.53,75,423/- for the Assessment Year 2009-10 and Rs.85,13,970/- for the Assessment Year 2010-11 is hereby confirmed." 4. On being aggrieved, the assessee carried the matter before the Tribunal. The learned counsel for the assessee has submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lular operator, provides prepaid connections to the subscribers through distributors called prepaid market associates (PMAs) appointed by it - It offers discount for prepaid calling services to its distributors - Legal relationship is established between the assessee and the ultimate consumer/subscriber, who is sold the SIM card by the agents further appointed by the PMAs with the consent of the assessee - Fact that the PMA is supposed to make the payment in advance as per the agreement does not make any difference to the nature of the transaction in view of the other terms of the agreement - Even though advance payment is made by the PMA qua SIM cards, it does not amount to sale of goods in as much as unsold SIM cards are to be returned to the assessee and it is required to make payment against them - This is an antithesis of sale - Therefore, the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS under s. 194H - Contention of the assessee that s. 194H is not applicable as there is no payment or credit by ..... 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