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TMI Blog2014 (6) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... survey was conducted in the business premises of the assessee on 13.10.2009. A.O. found that assessee company is not deducting tax at source in case of commission payments made to distributors on prepaid connections. Assessee has claimed that the commission allowed to distributors is in the nature of discount only and therefore, provisions of section 194H the Income Tax Act, 1961 are not applicable. A.O. analysed the transactions and held that like in postpaid mobile connections, on the prepaid connections also assessee is giving discount and accordingly, he held that assessee is liable for deduction of tax and raised demands as per the provisions of section 201(1) and consequent interest liability under section 201(1A). 4. Assessee took-up the matter before the Ld. CIT(A). It was contended before the Ld. CIT(A) that the discount given to the distributors at the time of selling prepaid cards cannot be considered as commission and relied on the Coordinate Bench decision in the case of ACIT vs. Idea Cellular Ltd., dated 26.02.2009. However, Ld. CIT(A) distinguished the decision and followed the ITAT, Cochin Bench in the case of Vodafone Cellular Ltd. vs. ACIT dated 30th April, 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Mahindra & Mahindra (supra) wherein it was held that maximum time limit for passing the order u/s 201(1) and 201(1A) is the same as prescribed under section 149 of the Act, i.e., 4 years or 6 years from the end of the relevant AY, as the case may be depending upon the amount of income in respect of which the person responsible is sought to be treated as the assessee in default. The order passed u/s 201(1) or 201(1A) cannot be held as barred by limitation if it is passed within 4 years from the end of the relevant AYs or 6 years as the case may be. In the present case, time limit available for passing the order u/s 201(1) and 201(1A) is as follows: S.No. A.Y. Time limit available for passing order Actual date of passing order 1. 2001-02 31/03/2008 02.04.2008 2. 2002-03 31/03/2009 -do- 3. 2003-04 31/03/2010 -do- 14. As seen from the above table, the order passed for AY 2001-02 u/s 201(1) and 201(1A) on 02/04/2008 as the time limit for passing the order was 31/03/2008, therefore, the order passed for AY 2001-02 is barred by limitation. However, for the AYs 2002-03 and 2003-04, the order was passed within time i.e. within 6 years from the end of the relevant AYs as the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase reported at (2010) 230 CTR (Del.) 43. It was held by the Hon'ble Delhi High Court as under : The argument of the counsel that s. 194H is not applicable, as there is no "payment or credit" by the assessee to its distributor is to be rejected. Likewise, the argument that the amount must be shown to be the income of the respondent also does not hold good. The 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. It is created by : (a) activation of the said SIM card by the assessee in the name of the consumer/subscriber. (b) service provided by the assessee to the subscriber. Further, dealings between the subscribers and the assessee in relation to the said SIM card including any complaint, etc. for improper service/defect in service. (c) entering into the ultimate agreement between the subscriber and the assessee. It is to be borne in mind that the nature of service provided by the assessee to the ultimate consumers/subscribers, whether it is prepaid or post-paid SIM card remains the same. In the instant case, the SIM cards are prepaid, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n A.Y. 2004-05 and ground No.2 in other years is an alternate ground without prejudice to ground No.1/2 discussed above, which is as under: 3.1. On the facts and in circumstances of the case and in law, the CIT(A) erred in upholding the action of the A.O. without appreciating the fact that where mechanism to deduct tax fails, appellant cannot be held to be 'assessee in default' under section 201 of the Act. 2. He failed to appreciate and ought to have held that: * Admittedly, there was no payment no credit of any sum to the distributors. * Appellant was not responsible for paying any income by way of commission to distributors. 3. The appellant therefore prays that it cannot be regarded as 'assessee in default' for alleged nondeduction of tax under section 194H of the Act." 11. Even though the issue on principle is decided in earlier ground, assessee raised the issue stating that mechanism to deduct tax will fail and so assessee can not be held assessee in default. Detailed submissions of the assessee on this issue are that Hon'ble Kerala High Court in the case of M.S. Hameed vs. Director of State Lotteries 249 ITR 186 (Ker.) held that 'since the Government is not responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g section 206C of the Act which governs tax collected at source in section 194H of the Act. The appellant also craves to rely on the recent judgment of the Hon'ble Delhi Tribunal in the case of SRL Ranbaxy Ltd. vs. ACIT (2011) 50 SOT 173 (TDel.) (Refer page No.75 to 88 of the PB), wherein inter alia it was held that obligation of TDS u/s. 194H of the Act arises only at the time of "payment" or "credit". As the assessee had not paid or credited any amount to the account of the Centres, section 194H of the Act had no application. The assessee had only credited the net amount received from the Centres as its income. Further, the appellant would like to bring to the attention the decisions of CIT vs. Idea Cellular Ltd. 325 ITR 148, Vodafone Essar Cellular Ltd. vs. ACIT 332 ITR 25, Bharti Cellular Ltd. vs. ACIT 244 CTR 185 (Cal.) and M/s. Vodafone Essar South ltd. vs. DCIT ITTA.No.291 of 2013 (AP) wherein it is concluded that discount should be considered as commission and as such would be liable for withholding tax u/s.194H of the Act would not squarely apply in the present case". 12. Learned D.R. in reply, however, countered the above and referred to the detailed orders/ judgments p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was raised in the said case, viz., that the assessee airline was not paying income by way of commission, as "the supplementary commission" was retained by the travel agent and thus, s. 194H of the Act was not attracted. This contention was brushed aside in the following manner : "23. This brings us to the second leg of the transaction as to whether income by way of commission has been paid by the assessee airline to the travel agent. It is not disputed that any amount which the travel agent would receive over and above the net fare would be assessed in the hands of the travel agent as profit, gain or income. As a matter of fact one of the submissions of the learned counsel for the assessee airline has been that they ought not to be held an assessee in default in view of the fact that the supplementary commission, that is, sums received over and above the net fare by the travel agents and retained by them have been disclosed by travel agents as their income on which the travel agents have paid tax. In view of this we find no difficulty in holding that supplementary commission is income within the meaning of s. 194H of the Act. 28. In view of the above we hold that the supplemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirectly also. Therefore, the argument that assessee has not paid or credited the amount does not hold good as there is constructive payment in this regard in the books of accounts. As held by the Hon'ble Supreme Court in the case of Sutlej Cotton Mills (supra), entries in the books of accounts are not determinative factor and real nature of transaction has to be considered. Even though Ld. Counsel raised detailed objections based on the interpretation of the decisions of the Hon'ble High Courts, we are not in agreement with his contentions, as these arguments were already considered and elaborately discussed in those judgments and the issue ultimately was decided against the assessee. Therefore, this alternative ground/without prejudice to the earlier ground of the assessee is rejected. 16. The last ground No.4 in A.Y. 2004-05 and 2005-06 and ground No.3 in other appeals is with reference to levy of interest under section 201(1A). It was submitted that in case, it was held that assessee is liable to deduct TDS under section 194H of the Act, then, in such a case, where the recipients of such income has paid taxes on their income, then the interest should be calculated only from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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