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TMI Blog2015 (6) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... ing same as 'Principal to Principal transaction'. Thus assessee is not liable for deduction u/s 194H. Therefore we reverse the orders of lower authorities on these issues and delete the demand. - Decided in favour of assessee. - ITA Nos. 64, 65 & 66/JP/2013 - - - Dated:- 29-5-2015 - R. P. Tolani, JM And T. R. Meena, AM,JJ. For the Appellant : Shri Alok Basant For the Respondent : Shri Rajesh Ojha ORDER Per T R Meena, AM. These are the appeals filed by the assessee against the order dated 12/10/2012 passed by the learned CIT(A)-III, Jaipur for A.Ys. 2007-08 to 2009-10. The effective common grounds of all the appeals are as under:- 1 The Ld. CIT(A) has grossly erred on facts and in law in upholding the order passed by the learned Income-tax Officer, TDS-1 (Ld. A.O.), Jaipur and dismissing the various grounds of the appellant in terms of which it had contended that it was not liable to deduct tax under the provisions of Chapter XVII B of the Act on the trading margin that the distributors could have potentially earned from sale of pre-paid talk time/prepaid products and recharge coupons. 1.1. The Ld. CIT(A) has grossly erred in not appreciating the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s grossly erred by merely referring to the decisions of the Hon'ble High Courts and Hon'ble benches of the Tribunal without bringing out any similarity in facts of those decisions with that of the appellant and without addressing the appellant's submissions in respect of such decisions. 3. The impugned order suffers from gross violation of natural justice and hence, liable to be quashed. 3.1 On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in passing the impugned order in gross violation of the principles of natural justice and due process of law since no reasonable opportunity was granted to the appellant to put forth its contentions which is evident from the fact that the detailed written submissions, dated October 8, 2012, filed by the appellant were not even discussed nor negated in the impugned order. 3.2 On the facts and circumstances of the case and in law, the ld CIT(A) has erred in passing the impugned order in haste and without providing the appellant an opportunity to be personally heard and hence it renders the impugned order liable to be quashed. 3.3 The impugned order by the ld CIT(A) is a nonspeaking order on many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred to the distributors by the company. The submission of assessee was not found convincing to the ITO (TDS). He referred Section 194H of the Income Tax Act, 1961 (in short the Act) and the assessee was treated in default for non-deducting and depositing TDS. He worked out the commission for each F.Y. as under :- F.Y. 2006-07:- ₹ 22,93,744/- F.Y. 2007-08:- ₹ 75,17,315.7 F.Y. 2008-09:- ₹ 23,19,074/- The Ld AR of the assessee further submitted before the Assessing Officer as under:- 1. That in the impugned show cause notice your good self has stated that assessee company has paid commission to various dealers on sale of various products, however, TDS u/s 194H has not been deducted in respect of the above payment. Your good self has worked out the amount of non deduction from financial year 2006- 07/2007-08/2008-09. Your good self has stated that as per agreement it is evident that there is principal agent relationship between you and your dealer and therefore TDS is required to be made U/s 194H of the Act. However, your goodse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of a 'principal-agent' relationship when a payment could be termed as commission or brokerage. 4. In the instant case, the distributors of prepaid products are not rendering any independent services to Rainbow. Nor any services in the course of buying or selling of products. There is no agency relationship created between the company and the distributors. The reliance was placed on cases of Gujarat High Court in the case of Ahmadabad Stamp Vendors Association 257 ITR 202, Kerala High court in the case of M.S. Hameed 249 ITR 186 and the Delhi Tribunal in the case of Idea Cellular Ltd. 5. The explanation provided in Section 191 clarifies that the principal officer shall be deemed to be an assessee is default U/s 201(1A) only when he does not deduct the whole or any part of the tax and such tax has not been paid by the assessee direct, conversely where recipient has paid the tax direct the principal officer shall not be held to be an assessee in default for short deduction of tax at source. It is also a settled law that where assessee has failed to deduct tax at source but the recipient paid advanced tax/self assessment tax and there is no loss to the revenue it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv. In a discount sale, once goods are sold there cannot be any restriction by one principal on another as to how and where to sell these goods. The distributorship agreements in the instant case clearly denote a geographical area of operation and the manner in which the goods should be sold. v. In case of purchase on discount, there cannot be any restriction on the manner in which the stock purchased by the principal is to be kept, nor is there any right of one principal to inspect the stock movements. This is not true in the instant case. vi. A significant clause in the distributorship agreements is that of brand exclusively. A distributor, once he has been appointed a distributor for the assessee deductor is not to market or distribute or display or otherwise deal in similar products of other competitors during the continuance of the agreement and for one year after termination. Thus, once a distributor signs the agreement, he becomes an exclusive representative of the assessee company. Since the terms of the agreement forbid him from displaying or dealing in similar products, he cannot be considered an independent principal. In his interaction with retailers and custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of his claim that the distributors have already paid the due taxes on the margins allowed to them on which tax was deductable by the appellant. Since this onus could not be discharged by the appellant, it was not allowed the benefit of aforesaid decision of Hon'ble Supreme Court. 03.2 I agree with the ITO, TDS that onus lies on the appellant to prove that the due taxes have been paid by the payees for claiming the benefits of decisions of Hon'ble Supreme Court. Since the appellant failed to discharge this onus, the alternative plea raised by it, is dismissed. 5. Now the assessee is in appeals before us. The ld AR for the assessee has reiterated the arguments made before the ld CIT(A). He further submitted that the assessee's appeal is squarely covered by the recent decision dated 13/3/2015 of the Hon'ble Jaipur Bench of ITAT in the case of Tata Teleservices Ltd. Vs. ITO in ITA No. 309/JP/2012, 502 to 505/JP/2011. This very Bench in turn has considered the Hon'ble Karnataka High Court's decision in the case of Bharti Airtel Limited Ors. Vs. DCIT 52 Taxmann.com 31, which has examined all available judgment on these issues. The Bench after elabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;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 cards, as held by Hon'ble Karnataka High Court and treating same as 'Principal to Principal transaction'. iv. The facts and circumstances of assesses case are on parity with our ITAT judgment in the case of Tata Tele Services, which we have to respectfully follow. v. In view of the facts, circumstances, rival submission and material available on record assessee is not liable for deduction u/s 194H. Therefore we reverse the orders of lower authorities on these issues and delete the demand. vi. Since there is no liability of TDS u/s 194H on the assesse there is no need to go into the aspects of alternate relief awarded by ld. CIT(A) and challenged by revenue, to examine the taxability of distributors and applicability of Hon'ble Supreme Court judgment in the case of Hindustan Coca cola (supra). The case laws relied on the ld AR are squarely applicable on the case of the assessee. BY respectfully following our own decision in the case of M/s. Idea Cellular Ltd. Vs. ITO, we allow the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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