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TMI Blog2015 (7) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... e Karnataka High Court has decided the issue in favour of the assessee the Hon’ble Delhi High Court and Hon’ble Calcutta High Court have decided the issue against the assessee. The matter is now pending before the Hon’ble Supreme Court for adjudication. However, it is also a fact that the Jaipur Bench of the Tribunal in a recent decision in the case of M/s.Bharti Hexacom Ltd. Vs. ITO, TDS-2, Jaipur [2015 (7) TMI 175 - ITAT JAIPUR] has decided the issue in favour of the assessee holding that the sale of prepaid products from the company to the distributor is actually a sale of right to service and the provisions of section 194H of the Act do not apply. In the said decision the Tribunal has considered various decisions including the decisions of the Hon’ble Kerala High Court, Hon’ble Delhi High Court and Hon’ble Calcutta High Court who have decided the issue against the assessee. Therefore, we are of the considered view that the Ld. Counsel for the assessee has made out a prima-facie case in its favour so far as the realisation of the outstanding demand is concerned that too in a penalty proceeding. The Hon’ble Bombay High Court in the case of UTI Mutual Funds and UTI Trustees Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vouchers/e-top up, through internet or any other modes, either physical or electronic. The talktime is made available in different denominations and under different schemes, which can be availed by a prepaid subscriber as per his requirements. 2.2 The assessee for efficient distribution of its services has appointed distributors in its territories. The assessee s distributors have been distributing its prepaid talktime on a principal to principal basis. Under this arrangement the assessee transfers its prepaid talktime to the distributors for a consideration and the distributors in turn transfer the same to the retailers. The retailers would thereafter transfer the same to the ultimate consumer. At each level of the distribution, the party distributing the talktime retains a margin for its efforts and the risks assumed. The transfer of talktime by the Assessee to the distributor is at a discount, a part of which is, in turn, passed on by the distributor to the retailer / subscriber. A similar mechanism is followed for distribution of pre-paid connections (SIM Cards) using the same distribution network. The transaction in all aspects is akin to sale and purchase of goods as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 15-01-2015. 4.1 Referring to the decision of the Hon ble Karnataka High Court in the case of Vodafone Essar South Ltd. vide ITA No.256 to 263 of 2012 order dated 14-08-2014 he submitted that the Hon ble High Court in the said decision has held that withholding tax provisions u/s.194H of the Act are not applicable to discount extended to prepaid distributors. 4.2 Referring to the decision of Hon ble Karnataka High Court the Ld. Counsel for the assessee further submitted that the Hon ble High Court has also observed that the decision of the Hon ble High Courts in the case of Idea Cellular Ltd. reported in 325 ITR 148 (Delhi) and Vodafone Essar Cellular Ltd. reported in 332 ITR 235 (Kerala) were based on the understanding that distributors are rendering services to the telecom operators which cannot be sold. However, the question of law framed before these courts did not address the issue whether the right to provide service can be sold or not which is in fact the crux of the whole issue. 4.3 Referring to the decision of Jaipur Bench of the Tribunal in the case of Tata Tele Services Ltd. Vs. ITO for F.Yrs. 2004-05 to 2008-09 vide ITA No. 309/JP/121 ITA Nos. 502 to 505/J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and proper to direct the Assessing Officer not to take any coercive measures to recover the outstanding demands. 7. Meanwhile, the corresponding appeals of the assessee pending with the Tribunal shall be posted for hearing on an out-of-turn basis before the regular Bench on 02nd March, 2015, as announced in the open Court at the time of hearing. Since the aforesaid date of hearing was announced in the open Court in the presence of both the parties, the requirement of issuance of a formal notice of hearing is hereby dispensed with. The above order restraining the Assessing Officer from taking coercive measures shall operate for a period of six months from today or till the date of order of the Tribunal in assessee's appeals, whichever is earlier. 4.6 Referring to the decision of the Hon ble Bombay High Court in the case of UTI Mutual Fund and UTI Trustees Company Ltd. Vs. Ito reported in 260 ITR 56 he drew the attention of the Bench to the following observation : Where a strong prima facie case has been made out calling upon the assessee to deposit, would itself occasion undue hardship. Where the issue has raised a strong prima face case which requires serio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the I.T. Act. It is also an admitted fact that different high courts have taken different views on the applicability of provisions of section 194H of the Act to the transactions in question. While Hon ble Karnataka High Court has decided the issue in favour of the assessee the Hon ble Delhi High Court and Hon ble Calcutta High Court have decided the issue against the assessee. The matter is now pending before the Hon ble Supreme Court for adjudication. However, it is also a fact that the Jaipur Bench of the Tribunal in a recent decision vide ITA Nos. 656/JP/2010 order dated 12-06-2015 in the case of M/s.Bharti Hexacom Ltd. Vs. ITO, TDS-2, Jaipur for A.Y. 2009-10 has decided the issue in favour of the assessee holding that the sale of prepaid products from the company to the distributor is actually a sale of right to service and the provisions of section 194H of the Act do not apply. In the said decision the Tribunal has considered various decisions including the decisions of the Hon ble Kerala High Court, Hon ble Delhi High Court and Hon ble Calcutta High Court who have decided the issue against the assessee. Therefore, we are of the considered view that the Ld. Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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