9911796707
TMI Blog2015 (5) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... ll First Recharge (FCFR) incentive which is the “Commissions” which was passed on to the dealers/ retailers. And so this amount/ discount/ incentive alone attracts provision of TDS u/s 194H of the Act, we endorse this finding of the ld CIT(A). However we find force in the argument of the ld DR that the ld CIT(A) gave show-cause notice to the assessee and called for the details of the commission disbursed to its dealer to non-deduction of TDS, but we find that ld CIT(A) has not given any opportunity to the AO before embarking into such an exercise. The ld CIT(A) has given relief to the assessee of ₹ 9,94,673/-, because the discounts/ incentives / commission disbursed was less than ₹ 2,500/-. And has directed an addition of ₹ 3,06,460/- because the discounts and incentives to the dealers were more than ₹ 2,500/-. In such circumstances it would be just and proper to set aside the order of the ld CIT(A) and remand the matter back to the file of AO to examine and verify whether the commission/ discount/ incentive given by the assessee to its dealers are correct and we direct that AO shall examine and verify this fact aspect and the amount disbursed if it fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for not deducting TDS. Both the issues being common are adjudicate together. 4. Brief facts of the case are that the assessee is a registered partnership firm deriving income from the trading of SIM cards of prepaid connections and sale of recharge coupons of M/s. Vodafone Essar South Ltd. It was observed by the AO, that the assessee had debited discount/incentives at ₹ 15,84,800/- in its P L account out of the commission amounting to ₹ 16,15,873/- received during the year. As per AO, the assessee was the distributor of the post-paid connections of the telecom company. It was intimated by the assessee that the assessee firm used to give the discounts/scheme incentives to the wholesalers and retailers as per directions of the telecom company; and the said disbursed discount/incentives were claimed by the assessee firm from the telecom company. According to the assessee, the telecom company used to give the commission in the form of compensation and the same was paid in the form of e-tops. As per AO, although details of discount/incentive claims bills and other relevant papers were produced before him by the assessee, but assessee failed to produce the following ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 15,84,800/- are as under:- Rs.13,01,133/- is F.C.F.R incentive Rs.2,03,155/- is CIFFID Incentive and ₹ 80,152/- is DMS Market expenses It is observed that while CIFF ID incentives are the payments made by the appellant firm to its employees, etc, and DMS market expenses are also the expenditure made by it; it is only the F.C.F R (First Call First Recharge) incentive which is the commission which is passed on dealers and/or retailers. It is the item attracts provisions of TDS U/s 194H of the Act, even if the appellant designates these amounts as discounts/incentives. The appellant was asked to furnish the complete list of dealer/retailers to whom such commission has been passed on. Admittedly, the appellant has not deducted tax on payment of commission as prescribed U/s 194H of the Act. The appellant has furnished the desired list which is made part of this' order as Annexure 'A', the details of the same are summarized as under:- No. Of Dealers/ retailers Discount/ Incentives less than ₹ 2500/- Discount/ Incentive more than ₹ 2500/- Total in (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon by the AO are not applicable to the facts of the case since those cases relates to post-paid connection. Ld DR could not bring to our notice any other material which can aid us to take a different opinion on this factual aspect. 8. The question whether the assessee is dealing with post paid or prepaid is immaterial. In both post-paid and pre paid the assessee company or the distributor has to deduct TDS as per the order of the Hon ble Delhi High Court as stated in the case of the Idea Cellular (2010) 325 ITR 148 (Delhi). The ld CIT(A) after observing that the assessee is into distributor of pre-paid connections has held:- From the language of this clause of the agreement, it is clear that the appellant firm was purely a distributor of the telecom company who paid commission to it based on certain mutually agreed formula. On papers, it is free to do its business as far as passing on the incentive/discount dealers or retailers is concerned. It is entirely different matter that the appellant firm had chosen to pass on almost the entire commission received from the company to its dealers/ retailers but there existed no such legal binding as far as terms of the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds/recharge coupons. The terms of the agreement further provided that without the written consent of the assessee the distributors (PMAs) shall not directly or indirectly: (i) market, solicit, sell, offer and accept offers for telephony services that competed with the assessee s telephony services; (ii) induce or refer any actual or prospective subscriber of the assessee's telephony services to subscribe to any competitive telephony services; and (iii) provide any company or customer information/data to any competitive entity. From this clause the Assessing Officer came to the conclusion that distributors were not free to sell similar products offered by the competitors of the assessee. The PMAs further appointed the retailers after the written approval of the assessee. The maximum price of SIM cards/ recharge coupons was also decided by the assessee. It was also found that under the agreement, it was the responsibility of the PMAs to obtain all the relevant information concerning a subscriber and to forward the same to the assessee; Unless that was done, no activation of SIM card could be done. Further, the assessee had the right to use service marks, trademarks, trade names, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to specific agreement between these two parties. Even if advance payment was made by the PMAs on receipt of the SIM cards, qua those SIM card it did not amount to sale of goods. The purpose was to ensure that the payment was received in respect of those SIM cards are to be returned to the assessee and the assessee was required to make payment against them. This was an antithesis of sale . There could not be any such obligation to receive back the unsold stocks. Further, clause 25(f) laid down that on termination of the agreement, the PMA or its authorized retailer appointed by it, was not entitled to any compensation for cost or expenses incurred by it in either setting up or promotion of its business, etc. No such clause was required in case of sale . The payment by the assessee constituted commission and tax had to be deducted at source on such payment. 10. From a perusal of the aforesaid ratio of the Hon ble Delhi High Court, we endorse the finding of the ld CIT(A) that the payment made by the assessee to its sub-distributors constituted commission and tax had to be deducted at source on such payment and we find that Vodaphone company deducted TDS u/s 194H of the Act, on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
