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TMI Blog2018 (5) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... as pointed out inordinate delay in filing of the present appeals by the Revenue. However, in course of hearing, the learned Departmental Representative explained that in Col. No.9 of Form no.36, filed originally in all these appeals, the date of communication of the order of the Commissioner (Appeals) was wrongly mentioned as 22nd March 2013 instead of 9th June 2016. In support of such explanation, he also filed revised form no.36, verified by the Assessing Officer mentioning the correct date of communication of learned Commissioner (Appeals) s order. After considering the submissions of the learned Departmental Representative and perusing the material on record, we are satisfied that these appeals were filed within the prescribed period of limitation. Therefore, the delay pointed out by the Registry is ignored and appeals are admitted for adjudication on merit. 3. Aforesaid appeals have been filed by the Revenue on the common issue of deletion of disallowance made under section 40(a)(ia) of the Act by the Assessing Officer on account of non deduction of tax at source on alleged commission payment to the distributors on sale of recharge coupon vouchers (RCVs). The ground raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ultimate subscriber to purchase the said products for whatever denomination by paying the same to the retailer in advance. It was submitted by the assessee that the starter kits and RCVs were sold to distributors on principal to principal basis and there is no relationship of principal and agent with the Distributors. Therefore, the discount given to the distributors on the MRP of the starter kits and RCVs cannot be treated as commission as provided under section 194H of the Act. In support of its contention, the assessee relied upon a number of judicial pronouncements. The Assessing Officer after considering the submissions of the assessee, however, was not convinced with them. Referring to the sample copy of the agreement entered into by the assessee and the distributor and relying upon certain clauses of the agreement, as reproduced in the assessment order, the Assessing Officer observed, though, the assessee has tried to make out a case to show that the business model followed by it is different from other mobile operators, in the sense, that the sale transaction between the assessee and the distributor is complete when the distributor purchases the prepaid sim card and RC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the relationship between the assessee and the distributor in so far as it relates to sale of prepaid sim card / RCVs is on principal to principal basis is not acceptable in view of the provisions contained under section 194H of the Act. The Assessing Officer observed, the discount on MRP given by the assessee to the distributor on sale of prepaid sim card and RCVs is in the nature of commission as per section 194H of the Act. Referring to the decision of the Hon'ble Delhi High Court in case of CIT v/s Idea Cellular Ltd.[2010] 325 ITR 148, and the decision of the Hon'ble Calcutta High Court in case of Bharti Cellular Ltd. v/s ACIT[2013] 354 ITR 507, the Assessing Officer ultimately held that the discount given to the dealers is in the nature of commission on which tax was deductible at source under section 194H of the Act. Accordingly, he made disallowance under section 40(a)(ia) of the Act for an amount of ` 37,23,82,412 under section 40(a)(ia) of the Act. Similar disallowances were also made in the other assessment years under appeal. Being aggrieved with the disallowances made as aforesaid, assessee preferred appeals before the first appellate authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of the Tribunal, Mumbai Bench, in assessee s own case. In this context, he placed reliance on order dated 27th May 2016, in case of M/s. Tata Teleservices (Maharashtra) Ltd. v/s ACIT, ITA no.2043/ Mum./2014 and Ors. For assessment year 2009 10, 2010 11 and 2011 12. Further, he submitted that the Hon'ble Karnataka High Court in case of Bharti Airtel Ltd. v/s DCIT [2015] 372 ITR 33, wherein, assessee s group company viz. Tata Teleservices Ltd. was also a party, upon considering similar nature of transaction has held that the nature of transaction between the assessee and its distributors being on principal to principal basis the trade discount given to the distributor is not in the nature of commission, hence, does not attract the provisions of section 194H of the Act. He submitted, following the aforesaid decision of the Hon'ble Karnataka High Court, the Tribunal, Jaipur Bench, in case of assessee s group company Tata Teleservices Ltd. has held that provisions of section 194H of the Act is not applicable in respect of sale of pre paid sim cards and RCVs to the distributors. Further, learned Authorised Representative relied upon the decision of the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the pre paid sim card / starter kit and recharge vouchers. However, on a perusal of the facts on records, it is noticed that though the assessee has fixed an MRP on the starter kits / pre paid sim card and recharge vouchers but that is only for the purpose of allowing margin to the distributors. The assessee does not sell the starter kit pre paid sim card to the distributor at the MRP but at a lesser price. The distributor is permitted to sell the starter kit / pre paid sim card to the retailer / consumers after retaining his margin but under no circumstances, the distributor can charge over and above the MRP. For example, if the MRP of the starter kit is ` 100, the assessee sells it to the distributor at ` 80 and the distributor can sell it to the retailer or customer for a price ranging from ` 80 to ` 100. However, as far as the assessee is concerned, it raises the invoice for ` 80 only to the distributer and also the same amount is reflected in the books of account towards the sale price. The assessee never credits the amount of ` 100 towards the sale price and allows discount of ` 20 in its books of account. Thus, as far as the assessee is concerned, sale price of the starter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties and analyzing the provisions of section 194H of the Act as well as other provisions of the statute ultimately concluded that there is no relationship of principal and agent between M/s. Tata Teleservices Ltd. and the distributor. The reason being, it is a completed sale transaction and after the sale is effected the distributor cannot return the goods to the assessee. What the assessee gives to the distributor is a trade discount and not commission. The Hon'ble Karnataka High Court after considering a number of decisions including the decision of the Hon'ble Delhi High Court in Ideal Cellular Ltd. (supra) and the decision of the Hon'ble Kerala High Court in case of Vodafone Essar Cellular Ltd. v/s ACIT [2011] 332 ITR 255, ultimately concluded that the provisions of section 194H of the Act are not attracted. The Tribunal, Jaipur Bench, in case of M/s. Tata Teleservices Ltd. v/s ITO, ITA no.309/Jp./ 2012, dated 13th March 2015, following the aforesaid decision of the Hon'ble Karnataka High Court has held that provision of section 194H of the Act is not applicable to the transaction relating to sale of prepaid sim cards and RCVs to the distributors as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Vodafone Mobile Services Ltd. (supra), it is seen that the Bench on examining the facts on record found that the assessee had not paid sales tax on the ground that there was no transfer of properties to the distributors. Apart from the terms and conditions of the agreement, the most important and potent factor which guided the Bench to conclude that there is a principal agent relationship between the assessee and the distributors to attract the provisions of section 194H of the Act is the binding decision of the Hon'ble Andhra Pradesh High Court in case of M/s. Vodafone Essar South Ltd. v/s ACIT, [2010] 7 taxmann.com 43. Though, the Tribunal, Hyderabad Bench, acknowledged the fact that the Hon'ble Karnataka High Court in case of Bharti Airtel Ltd. v/s DCIT, (supra) has taken a diametrically opposite view by holding that the sale of prepaid sim cards and RCVs by the assessee to the distributors are on principal to principal basis, however, the Hon'ble Bench has also expressed the view that they are bound by the decision of the Hon'ble Jurisdictional High Court. It has not been demonstrated before us by the learned Departmental Representative that the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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