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TMI Blog2018 (3) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 67/JP/2015 - - - Dated:- 8-3-2018 - Shri Vijay Pal Rao, JM And Shri Bhagchand, AM Assessee by : Ms. Ishita Farsaiya (Adv.) Revenue by: Shri Varinder Mehta (CIT) ORDER Per Vijay Pal Rao, JM This appeal by the assessee is directed against the order dated 25th November, 2014 of ld. CIT (A)-III, Jaipur arising from the order passed under section 201(1)/201(1A) of the I.T. Act, 1961 for the assessment year 2011-12. The assessee has raised the following grounds :- 1. Ground No. 1 - The order passed by the learned TDS officer is bad in law 1.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not holding that the order passed by the TDS officer is bad-in-law. 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not holding that the order of the learned TDS Officer treating the Appellant as assessee in default is bad in law in view of the provisions of sec. 201(1) read with section 191 of the Act and the judgement of Jagran Prakashan Limited Vs DCIT(TDS) (21 Taxman.com 489) (Allahabad High Court), as there is no finding by the learned TDS officer with respect to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises only when the pre-paid SIM cards/ talktime is further distributed by the distributors. 2.5 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in not appreciating the fact that there is no flow of monies from the Appellant to the distributor of pre-paid SIM card/ talktime but rather from the distributor to the Appellant, and hence, the provisions of section 194H of the Act fail to apply. 2.6 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in not appreciating the difference between a SIM card and a pre-paid recharge voucher since while a SIM card enables a subscriber to get connected to the network of the telecom service provider, a pre- paid recharge voucher entitles the holder to receive telecom services equivalent to the value embedded in it, and hence, the terms SIM card and pre-paid recharge voucher cannot be used inter-changeably. 3. Ground No. 3- The appellant is not liable to deduct tax at source under section 194J of the Act on roaming charges paid to other telecom operators 3.1 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in upholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n double recovery of taxes, which is against the rules of taxation principles. 4.2 Without prejudice to Ground No. 4.1, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in not directing the learned TDS officer to verify the aforesaid fact relating to payment of taxes by the payees basis the details of payees (viz Permanent Account Number, address) submitted by the Appellant. 4.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in ignoring the ruling of the Mumbai bench of ITAT in the case of Vodafone Essar Limited (ITA Nos. 6058, 6059, 6060/Mum/2009) (December 2010) (Mumbai Tribunal) wherein the ITAT directed the Assessing officer to invoke his powers under the Act and verify payment of taxes by the payees from the respective Assessing officers assessing the payees with the help of the Permanent Account Numbers of the payees furnished by the assessee. 5. Ground No. 5- No Interest under section 201(1A) of the Act can be charged 5.1 On the facts and in the circumstances of the case and in law, the learned TDS officer has erred in charging interest under section 201(1 A) of the Act. 5.2 Witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances 'of the case, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provider as this interconnection is managed/controlled monitored by human intervention. 4. Whether in the facts and circumstances of the case, TDS u/s. 194J is applicable on roaming charges paid for facilities provided by service providers. 5. Whether in the facts and circumstances of the case, the Tribunal has erred in deleting the interest u/s. 201(1A) on the tax demand raised under section 201(1) of the Act. While deciding the above said questions of law, the Hon'ble High Court has held in para 43 to 48 as under: 43. We have heard learned counsel for the parties. 44. Now, the first question which has come up for our consideration is, whether in the facts and circumstances of the case the learned Tribunal was right and justified in holding that assessee was liable to withhold tax at source under S. 194H of the Income Tax Act, 1961 amounting to ₹ 19,74,842/- (including interest) in respect of sales to its distributors, which are on principal to principal basis and wherein property in the goods is transferred to the distributor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the parties. (ii) Regarding MRP, the findings which are arrived at is a price which has been fixed by the assessee company and other expenses, namely; commission given to the retailer and everything is to be managed by the Distributor. In that view of the matter, the restrictions which are put forward will not decide the relation-ship of Principal and Agent. (iii) The Distributor has all rights to reduce his margin. He can increase the margin of retailer and will reduce the margin from 10% to anything between 1% to 10%. There is no restriction by the assessee to give commission amount to the retailer. (iv) Regarding area of operation, it is the business policy of the assessee to give Distributor-ship for a particular area. Only on that basis, it will be erroneous to held that it is on Principal to Principal basis. For deciding the relation-ship on Principal to Principal basis, the criteria will not be of area of operation but agreement entered into between the parties. (v) Regarding the change in price it is always between the assessee or the company and the Distributor to decide who will absorb the loss. In that view of the matter, the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years 2012-13 and 2013-14 (supra) and accordingly by following the decision of the Coordinate Bench of the Tribunal as well as the judgment of the Hon ble Jurisdictional High Court in assessee s own case, this issue is decided in favour of the assessee and against the revenue. Ground No. 3 is regarding deduction of TDS under section 194J in respect of roaming charges paid to other telecom operators. 4. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. At the outset we note that an identical issue has been considered by this Tribunal in assessee s own case for the assessment years 2012-13 and 2013-14 and the Tribunal has decided the issue in para 9 by observing as under- 9. We have heard the ld AR and ld. CIT DR and considered the relevant material on record. At the outset, we note that an identical issue was considered by this Tribunal in assessee s own case for the A.Y. 2004-05 to 2010-11 in ITA No. 75 to 81/JP/2013 vide order dated 05/2/2016. The findings of this Tribunal is as under: 3.2. We have heard the rival contentions and perused the material available on record. The facts of the present appeal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices rendered by a person. The service of this nature involves human skill as well as computerized machines. It is not automatic. But it is fully supported by services of personnel and requires human application of mind along with technical equipments. The facts mentioned in the order of the Tribunal in ITA No. 656/JP/2010 at para 9 are to the following effect :- 9. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the revenues proposition is that thogh the roaming happens automatically but because equipment is used to render the roaming service, because technical manpower is needed to operate and maintain the technical equipment therefore, roaming per se is rendering of technical services and therefore, the amount paid for roaming is technical fee in terms of Section 194J read with Explanation 2 to Section 9(1)(vii) of the Act. The ld AR explained the roaming service and submitted that Hexacom subscriber in Jaipur travels of Mumbai switches on his mobile device after reaching Mumbai. Where the subscriber travels by land he automatically receives a message transferring to the roaming network on visiting another telecom, circle. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding airtime by visiting telecom circle is directly to the subscriber and not to Hexacom. The subscriber of Hexacom uses the network set up by the visiting circle and instead of amount being recovered from the roaming subscriber, the visiting circle sends the air minutes to be recovered from the roaming subscriber to the Home circle for recovery from the subscriber who had visited the visiting circle. Technical fees * It is an accepted fact that technical service can be said to have been rendered if there is an involvement of human element or there have been use of cerebral faculties in the provision of technical services by the recipient of fee. * This is so because the word technical comes in between the words managerial and consultancy services . Based upon the principles of nositur a sociis there has to be an element of manual intervention at the time when the service is being rendered. * Technical services should have a fact situation of imparting technical knowledge involving or concerning applied and industrial science. The ld AR further argued that finding of the ld CIT(A) are based on contract between two operators but contract has no rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Cellular mobile telephone facility to subscribe is not a technical service. Deduction of tax at source need not to be made from subscriptions U/s 194J of the Act. He further relied on the decision in the case of Jaipur Vidyut Vitran Limited Vs. DCIT (2009) 123 TTJ 888 (JP Trib) wherein it has been held that Section 194J would have application only when the technology or technical knowledge of person is made available to other and not where by using technical systems, services are rendered to others. Rendering of services by allowing use of technical system is different from charging fees for tendering technical services. The applicability of Section 194J would come into effect only when by making payment of fee for technical services, assessee acquires certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Therefore, he argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement pays interconnect/access/port charges to BSNL/MTNL, the question whether the cellular provider has rendered technical services and has to deduct tax at source, depended on whether the charges were for technical services, and this involved determination of whether any human intervention was involved, which could not be determined without technical assistance. Decision of the Delhi High Court in CIT v. BHARTI CELLULAR LTD. [2009] 319 ITR 139 set aside and matter remanded to the Assessing Officer with directions. After this decision, the ld Assessing Officer examined the technical expert of the C-DOT on 29/09/2010 in respect of IUC and which were cross examined on 04/10/2010 by M/s Bharti Cellular Limited, Delhi. The technical experts reexamined on 04/10/2010 on this issue and admitted that roaming services does not require any human intervention, it operates automatically. The ld AR also drawn our attention on independent opinion taken from Director CMAI, Ex-Director (C M), BSNL, Ex-Member Telecom Commission on 24/12/2010 and admitted that whole interconnected uses process, no manual intervention is required. He further drawn our attention on page No. 651 to 652 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led, considers the previous Delhi and 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 their 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, assessee cannot be held in default; impugned demand raised applying sec. 194H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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