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TMI Blog2015 (6) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee to the distributors as commission and thereby treating the assessee in default u/s 201(1) read with Section 194H of the Act. 2. The assessee most humbly prays that the discount allowed to the distributors be held as not liable to TDS u/s 194H of the Act as the relationship between the assessee and its pre-paid distributors is on principal to principal basis and thus, the demand raised in the impugned order in respect of the alleged failure to deduct tax u/s 194H of the Act be deleted. Without prejudice to Ground No. I Ground II. 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the observation of the AO by treating the assessee in default u/s 201 of the Act without appreciating that it is a settled legal position that if TDS machinery fails, the assessee cannot be treated as assessee in default u/s 201 of the Act. 2. The assessee thus prays that in the absence of any payment or credit to the distributors, the appellant should not be treated as assessee in default u/s 201 r.w.s. 194H of the Act . Without prejudice to Ground No. I and II. Ground III 1. The ld. CIT(A) failed to appreciate that in the distributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /12 ). This very Bench in turn has considered Hon'ble Karnataka High Court Judgment in Tata Tele Services Ltd. (ITA No. 158 of 2013 dated 14-08-2014) published in 52 Taxman. Com 31 which has examined all available judgments on these issues. The bench after elaborately dealing with them & relevant issues held that there is no liability of TDS u/s 194H on the assesse and thereby allowed assessee's appeals and dismissed the Revenue's appeals by following observations. ''2.22 We have heard the rival contentions and perused the material available on record. Following observations emerge from the record:- i. Assessee has claimed that as per its business agreement terms the sale price is collected in advance from distributor. The sale price is received minus discount, what is accounted for in its books is net sale price and not the commission. Assessee has demonstrated it from its pleading before lower authorities in this behalf and its written submissions filed before us. They are neither controverted by the authorities below nor by the ld. DR. Consequently the assessee's case falls in para 61 of the Hon'ble Karnataka High Court judgment and not in para 60 as proposed by ld. DR. ii. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Kerala High Court judgment against the assessee and is latest comprehensive adjudication on the issue. Even if it is held that there exist divergence of judicial opinion a view favourable to the assessee is to be adopted as held by Hon'ble Supreme Court in Vegetable Products Ltd. And Vatika township case (supra). From this angle also in these facts and circumstances Hon'ble Karnataka High Court judgment is applicable to the assessee's case. Respectfully following the same we hold that: a. The relationship between assessee and its distributors qua the sale of impugned products is on principal to principal basis; the consideration received by assessee is sale price simpliciter. b. There is no relationship of Principal and agent between assessee and distributors as held by authorities below there orders are reversed. c. Looking at the transaction being of Sale/Purchase and relationship being of principal to principal the discount does not amount to commission in terms of sec. 194H, the same is not applicable to these transactions. Therefore, assesseesse cannot be held in default; impugned demand raised applying sec. 194H is quashed. Assessee's grounds are allowed. 2.24 Apropos t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbly submits that there is no commission which is being paid to the distributors, the distributors are given a trade discount, there is complete freedom of pricing, the distributors are free to appoint the retailers, irrespective of the actual sales the distributors are required to pay the company the net discounted price, thus concluding that the transaction between the company and the distributors is on principal to principal basis.'' It is pleaded that these submissions of the assessee have nowhere been disputed or controverted by the AO. Similarly, the property in goods passed to the distributors at a discounted value on the delivery of the SIM cards is borne out from the assessee's submissions made before the ld. CIT(A)'s order at page 6 as under:- ''The distributor would then supply the same at any price subject to the Maximum Retail Price (MRP) to the retailers who in turn would supply the same to the ultimate subscriber again at any pice subject to the MRP. Thus the distributor has to pay a discounted price in advance before the delivery of SIM/RC by the appellant and only thereafter the appellant would deliver the SIM/RC to the distributors (See clause 5.1 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and distributor being that of principal to principal. iii. Hon'ble Karnataka High court if Tata Tele Services (supra) has consciously dealt with the this contention and held that the SIM card data is the valuable property and the transaction is actually sale of service and looking at the peculiar nature of data service, the transaction of embedding data on SIM card is sale of services and the relationship of assesse and distributor is on 'Principal to Principal' end. Thus the counter of ld. DR is also explained by Hon'ble Karnataka High Court. 2.8 We have heard the rival contentions and perused the material available on record. In our considered view, the following propositions arise from the facts of the case: i. Assessee has issued sale invoices of SIM cards to its distributors net of discount. Similarly relevant entries have been entered in the books net of discount. ii. Discount or so called commission has not been separately paid to distributors, thus there is no payment of any income as emphasized by Hon'ble Karnataka High Court in Tata Tele judgment(supra). iii. What has been effected by way of these sale transactions is sale of service embedded or encrypted on SIM car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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