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TMI Blog2017 (10) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside this issue and restore it to the file of the AO with the direction that the AO shall redecide this issue afresh in accordance with law after going though the agreement which the assessee has entered into with the distributor as well as the sample subscription application form, whether the amount represents the expenditure incurred by the assessee towards commission or whether the said amount represents cash discount given by the assessee to the distributor for sale of talk time card - Appeals filed by the assessee are statistically allowed. Disallowance under section 14A r.w. Rule 8D - Held that:- As noted that the assessee has not earned any exempt dividend income during the impugned assessment year. Since the assessee has not earned any exempt income no disallowance under section 14A of the Income Tax Act can be made in view of the decision in the case of Principal CIT vs. Ballarpur Industries Ltd. [2016 (10) TMI 1039 - BOMBAY HIGH COURT ] following the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT]took the view that provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case and against the provision of law. (ii) The Ld. CIT(A) ought to have appreciated that ₹ 33,86,68,406/- is discount allowed in the invoice to the distributor or dealer for early payment and hence not liable to TDS. (iii) The Ld. CIT(A) failed to appreciate that the relationship between the appellant and distributor or dealer is on principal to principal basis and the distributor or dealer does not render any service to the appellant but invests at discounted price and recovers face value and earns profit as opportunity cost of money. In A.Y. 2012-13 the figure of ₹ 33,86,68,406/- be read as ₹ 50,52,75,132/-. 3. The Revenue in its appeal being ITA Nos. 3691 3692/Mum/2017 has taken ground 2, 3, 4, 5 and 6 to be the common ground being grounds A, B, C, D E in A.Y. 2012-13 while ground No. 1 taken in A.Y. 2011-12 is not taken in A.Y. 2012-13. Both the parties agreed that whatever view the Tribunal may take in respect of grounds 2 to 6 for at 2011-12 the same view may be taken in A.Y. 2012-13 also. Both the parties agreed that these appeals may be decided on the basis of the facts relating to A.Y. 2011-12. The Revenue in A.Y. 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the payments made for use/right to use of process are royalty in terms of the Income-tax Act, 1961. 6) Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the disallowance u/s. 40(a)(ia) without appreciating the Hon'ble Kerala High Court in its judgment dated 20.07.2015 in the case of CIT-1, Kochi Vs. PVS Memorial Hospital Ltd. [2015] 60 taxmann.com 69 (Kerala) has decided the issue in favour of the Department. ITA Nos. 3061 3062/Mum/2017 4. The only issue involved in assessee s appeals relates to the sustenance of disallowance under section 40(a)(i) for non deduction of tax. 5. The brief facts of the case are that the AO noted that the assessee has paid commission charges amounting to ₹ 33,86,68,406/- under section 40(a)(ia) and the assessee has not deducted TDS under section 194H of the Income Tax Act. The AO, therefore, after giving opportunity to the assessee disallowed the same under section 40(a)(ia). The assessee went in appeal before the CIT(A). The assessee took the view that the assessee has given cash discount to the distributer and it was not in fact commission but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is in fact a buying scheme under which the talk time cards are sold to the distributor at a discount and the distributor sells it to the retailers and the retailers sells it to the customers. 7. The learned D.R., on the other hand, vehemently contended that the assessee has not submitted the agreement between the distributor and the assessee as well as the sample subscription form neither before the AO nor before the CIT(A). Accepting the document at the level of the Tribunal will prejudice the Revenue. 8. We have gone through the copy of the agreement entered into by the assessee with the distributor available on pages 138 to 148 as well as the sample subscription application form available on pages 149 to 150 of the paper book. On the basis of the document and the issue involved we are of the view that examination of these documents as a whole along with the terms and conditions of the agreement entered into between the assessee and the distributor in respect of talk time card is essential to determine the true nature of the transaction whether the transaction entered into between the assessee and the distributor relates to discount or commission. The TDS provisions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Similar view has been taken by the Hon'ble Allahabad High Court in the case of CIT vs. Shivam Motors (P) Ltd. 272 CTR 277 and that of Hon'ble Punjab Haryana High Court in the case of CIT vs. Winsome Textile Industries Ltd. 319 ITR 204. 12. The learned D.R., even though vehemently relied on the orders of the authorities below but has not brought to our knowledge any contrary decision. We, therefore, dismiss ground No. 1 taken by the Revenue in A.Y. 2011-12. 13. Ground Nos. 2 to 6 in A.Y. 2011-12 and grounds A to E in A.Y. 2012-13 in Revenue s appeal relate to the deletion of disallowance under section 40(a)(ia) rw.s. 194J in respect of expenses on customer support services or disallowance under section 40(a)(ia) r.w.s. 194J in respect of CAS, Middleware and SMS charges. 14. The brief facts relating to this issue are that the AO noted that the assessee has deducted TDS in respect of expenditure on customer support services under section 194C by applying a rate of 2% whereas it should have been deducted tax under section 194J @10%. The AO was of the view that these expenses are incurred mainly for the purpose of solving customer grievances and technical issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted by the assessee, though under a bona fide wrong impression under wrong provisions, the provisions of Section 40(a)(ia) could not be invoked and if there was any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various tax deduction at source provisions, the assessee could be declared to be an assessee in default under section 201 but no disallowance could be made invoking the provisions of Section 40(a)(ia). The said decision of the Hon'ble Calcutta High Court has not been referred to before the Hon'ble Kerala High Court and the Kerala High Court, therefore, did not consider the decision of the Calcutta High Court. This Tribunal in the case of CIT vs. Shri Zubin J. Gandevia in ITA No. 3357/Mum/2014 vide order dated 1st February, 2016 had the occasion to consider the binding nature of both the decisions and ultimately under para 8 of its order held as under: - 8. Before us the Ld. Counsel has pointed out that there is a divergent view also taken by the Hon'ble Kerala High Court in the case of P V M Memorial Hospital (supra). But such a decision may not have a persuasive value as it is quite a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee failed to deduct TDS under appropriate provisions of the Act. Therefore, we are of the view that the provisions of sec. 40(a)(ia) of the Act is applicable, in case there is a failure on the part of the assessee to deduct TDS and remit the same to the government account. There is nothing in the said section to treat inter alia that the assessee is defaulter where there is shortfall in deduction of TDS. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under the various TDS provisions, the assessee can be declared to be an assessee in default under sec. 201 of the Act and no disallowance can be made by invoking the provisions of sec. 40(a)(ia) of the Act. Therefore, we do not find any error or infirmity in the CIT(A) s order, hence, we inclined to uphold the order of the CIT(A) and reject the ground raised by the Revenue. 16. No contrary decision of this Tribunal or of the Hon'ble Jurisdictional High Court or Hon'ble Supreme Court was placed before us. We, therefore, are bound to follow the decision of the Coordinate Bench. Therefore, we do not find any infirmity or illegality in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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