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TMI Blog2019 (8) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... ment's appeals pertaining to 2009-10 to 2012-13 assessment years, the issues raised in the respective orders were also stated to be identical. Accordingly, with the consent of the parties, a common order is being passed in these appeals. 2. The assessee has assailed the finding that the assessee is in default for non deduction of TDS in terms of the requirement of Section 194H for the pre-paid cheques for SIM. The Revenue has assailed the relief granted to the assessee wherein on the roaming charges it has been held that TDS was not attracted in terms of Section 194J of the Act. 3. Taking up the assessee's appeals first, it was a common stand that the facts, circumstances and position of law in each of the assessee's appeals remain identical. Accordingly, it has been canvassed that the arguments advanced in ITA 317/CHD/2019 pertaining to 2007-08 assessment year may be applied to each of the remaining appeals. 4. However, considering the fact that the rejection of assessee's claim has been maintained by the tax authorities right upto 2013-14 assessment year as per the present bunch of appeals and since this is the latest order in point of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4H of the Act on discount amounting to INR 33,53,59,310 extended to the distributors of its pre-paid services and thereby, erred in computing demand under section 201(1)/201(1A) of the Act. 2.2. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in holding that the relationship between the Appellant and the pre-paid distributors is not that of 'Principal to Principal' and the discount allowed to them is in nature of 'commission' liable for tax deduction at source as envisaged under section 194H of the Act. 2.3. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating the fact that there is no payment/credit to the account of distributors by the Appellant towards the discount extended to them and therefore, provisions of section 194H of the Act do not apply on such discount. 2.4. On the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer have erred in not appreciating that discount allowed by the Appellant is not income in the hands of its distributors and that income, if any, arises only when the pre-paid services are further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO has held the assessee to be in violation of the requirements of Section 194H and hence in default for not deducting TDS for the amounts pertaining to the pre-paid SIM cards to its distributors etc. 5.1 Referring to the record, it was submitted that in each of the years assailed an identical order and reasoning has been given. The assessee carried the issue in appeal before the CIT(A) stating that various judicial forums have held on similar set of facts and circumstances considering similar agreements entered into between the parties that withholding tax provisions u/s 194H are not applicable to discount extended to pre-paid distributors on transfer of pre-paid SIM cards/talk time. It was submitted that though the written submissions of the assessee have been extracted in part in the orders, however, without assigning any specific reasoning, relief has not been granted. Referring to the record, it was submitted that reliance had been placed upon the decision of the Hon'ble Karnataka High Court in the case of of Bharti Airtel (2015) 372 ITR 33 (KHC) and order of the Bengalore Bench in the case of Vodafone South Ltd. Vs DCIT dated 31.07.2005 i.e. in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive Courts, it was submitted, have been fully addressed by the Hon'ble Karnataka High Court and Rajasthan High Court in their decisions. Thus, it was his argument that the latest decisions of the High Courts and the consistent orders of the ITAT are available in favour of the assessee. It was also his submission that there is no decision of the jurisdictional High Court. Accordingly, relying upon the proposition that in case there are contrary views of the High Courts then relying upon the decision of the Apex Court in the case of CIT Vs Vegetable Products (1973) 88 ITR 192 (S.C), it was his submission that the issue has to be decided in favour of the assessee. It was his submission that the said position of law has repeatedly been followed by the various Benches of the ITAT that wherever the decision of the jurisdictional High Court was not available and there were contrary views expressed by different High Courts, the view favourable to the assessee had to be followed. For the said proposition, reliance was also placed upon the decision of the Special Bench rendered by five Members in the case of Narang Overseas P.ltd. reported in 111 ITD 1 (Mum) (SB).&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2013-14 assessment year, the ld. CIT-DR carrying us through the same, disputed the argument that there was similarity of facts in the case of the present assessee vis-a-vis the facts considered in the favourable decision cited in the case of the other assessees. For ready reference, the relevant findings relied upon is extracted hereunder : 5.4.7 It is also pertinent that the same entity till AY 2006-07 (FY 2005-06) had been deducting TDS on discounts to distributors on pre-paid sims and other services. This gets revealed from the statement given during the assessment proceedings for the FY 2005-06. To quote the relevant excerpts are as under: "At the very outset, we wish to submit that for the FY 2005-06 and till 31st December 2006, the agreement between VSL-Punjab and the distributors was on 'Principal to Agent' basis, wherein VSL-Punjab paid commission to the pre-paid distributors and deducted tax at source thereon. However, with effect from January 2007 the arrangement between VSL-Punjab and the pre-paid distributors has changed to 'Principal to Principal'. Thus the question of treating VSL-Punjab as an 'assessee-in-default' for FY 20005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the claim put forth in the earlier years, the CIT(A) considered that the assessee was acting on a principal to agent basis and in the year under consideration, it was claimed that the nature of responsibilities and contractual obligations are being discharged were on a principal to principal basis. The claim, it was submitted, appears to have not been accepted by the CIT(A). The arguments of the ld. AR that the terms of Agreements are identical to the terms and Agreements as considered by the Hon'ble Karnataka High Court, it was submitted, were not borne out from the order of the CIT(A). Accordingly, it was his submission that the argument that there was a similarity on facts, cannot be said to have supported by the orders as this conclusion is not coming out from the record. 7. The ld.AR in response submitted that the assessee all along over the years has been arguing that the decision of the Karnataka High Court is on the same set of facts. Inviting attention to the Paper Book page 31 to 33, it was submitted that the assessee has made similar arguments before the CIT(A) as per the written submissions dated 04.10.2018 which is part of the detailed submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly for the Tribunal's and the authorities which are in the territorial jurisdiction of the Kerala High Court, Delhi High Court and the Calcutta High Court are concerned, the issue can be considered to be settled against the assessee. There is no decision available on the issue of the jurisdictional High Court is an undisputed fact. The issue, thus, which arises for consideration in the present proceedings is what would constitute a binding precedent in these peculiar facts and circumstances for the Courts and the Tribunals where there is no decision of a jurisdictional High Court available. The said issue has been addressed by the Apex Court in the case of CIT Vs Vegetable Products (1973) 88 ITR 192 (S.C) where the Court was pleased to hold that "if the Court finds that the language of a taxing provision is ambiguous or capable of more meanings, then the Court has to adopt that interpretation which favours the assessee". The principle has been followed by the Special Bench in the case of Narang Overseas (cited supra) and has come up for consideration variously and repeatedly by different High Courts. Reference may be made to the decision of the Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee be communicated the specific objections and be afforded a reasonable opportunity to meet the objections. 11. Accordingly, on a consideration of the peculiar facts and circumstances of the present appeals, we deem it appropriate acceding to the requests of the parties as noted above to remand the issue for verification on facts back to the file of the AO. The AO shall pass a speaking order in accordance with law after giving the assessee a reasonable and effective opportunity of being heard, specifically confronting the objections if any to the assessee so as to enable the assessee to meet the objections etc. 12. The legal issue as we have earlier addressed in the absence of any decision by the jurisdictional High Court and considering the decisions rendered by the Hon'ble Karnataka High Court and Rajasthan High Court in the case of the assessee itself stands concluded in favour of the assessee. The said legal view as argued by the ld. AR has been followed by the Co-ordinate Bench of the Chandigarh Bench wherein one of us ( ld. AM) has decided the issue in the case of Bharti Airtel Ltd. Vs ITO as under : 13. We have heard the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase it was held that, when the airlines sell the air tickets it would have no information about the exact rate at which the tickets would ultimately be sold by their agents since the agents had been given discretion to sell the tickets at any rate between the fixed minimum commercial price and the published price. The question of deducting any tax at source would not arise. 53. In the Ahmedabad Stamp Vendors' Association case also, it was held that, when the licensed stamp vendors took delivery of stamp papers on payment of full price less discount and they sell such stamp papers to retail customers, neither of the two activities can be termed as the service in the course of buying or selling of goods. Discount given to the Stamp Vendors is for purchasing the stamps in bulk quantity and the said amount is in the nature of cash discount and, therefore, such a transaction is a sale. Therefore, the discount made available to the licensed stamp vendors does not fall within the expression "commission" or "brokerage" under Section 194H of the Act. 54. In the Mother Dairy's case referred to supra, it was held that, the concessionaire purchases the milk from the dairy which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on behalf of the principal airline in selling the traffic documents/air tickets to a third party who is a passenger and, therefore, the second leg of the transaction cannot be different from the first leg of the transaction. 56. In the Idea Cellular Limited's case, the Delhi High Court proceeded on the footing that the assessee is providing the mobile phone service. It is the ultimate owner of the service system. The service is meant for public at large. They had appointed distributors to make available the pre-paid products to the public and look after the documentation and other statutory requirements regarding the mobile phone connection and, therefore, the essence of service rendered by the distributor is not the sale of any product or goods and, therefore, it was held that all the distributors are always acting for and on behalf of the assessee company and the distributor commits the assessee to the subscribers to whom assessee is accountable under the service contract which is the subscriber connection arranged by the distributor for the assessee. In that context it was held that, discount is nothing but a margin given by the assessee to the distributor at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s right to service. The assessee is not concerned with quantum and time of accrual of income to the distributors by reselling the prepaid cards to the subdistributors/ retailers. As at the time of sale of prepaid card by the assessee to the distributor, income has not accrued or arisen to the distributor, there is no primary difference between the sale price to retailer and the price which the distributor pays to the assessee is his income from business. It cannot be categorized as commission. The sale is subject to conditions, and stipulations. This by itself does not show and establish principal and agent relationship. 60. The following illustration makes the point clear: On delivery of the prepaid card, the assessee raises invoices and updates the accounts. In the first instance, sale is accounted for Rs. 100/ -, which is the first account and Rs. 80/-is the second account and the third account is Rs. 20/-. It shows that the sales is for Rs. 100/-, commission is given at Rs. 20/- to the distributors and net value is Rs. 80/-. The assessee's sale is accounted at the gross value of Rs. 100/-and thereafter, the commission paid at Rs. 20/-is accounted. Therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is concerned and, therefore, it cannot be said that there exists a relationship of principal and agent. In the facts of the case, we are satisfied that, it is a sale of right to service. The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands. The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS. Once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent. The terms of the agreement set out supra in unmistakable terms demonstrate that the relationship between the assessee and the distributor is not that of principal and agent but it is that of principal to principal. 63. It was contended by the revenue that, in the event of the assessee deducting the amount an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M / s Bharti Hexacom Limited (supra) in a subsequent assessment year. Further we note that the I.T.A.T. Gauhati Bench has also affirmed the aforesaid proposition of law in the matter of the assessee itself i.e. Bharti Airtel Limited in its order dated 22.2.2018 in ITA Nos.59 to 62 / Guahati/ 20 1 2 relating to assessment years 2006-07 to 2009- 10. Therefore, we find that the issue has been decided in favour of the assessee by various High Courts and various Benches of the I.T.A.T. in the case of the assessee's group concerns only wherein the business model is more or less of identical nature. The said decisions are therefore applicable to the facts of the present case. Moreover, for deciding the issue before us , when no decision of the Hon'ble Jurisdictional High Court is settled legal principle is that the view favourable to the assessee has to be adopted, as held by the Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) and CIT Vs. Vatika Township Pvt. Ltd., 367 ITR 466 (SC). 15. In view of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not require any human intervention and that the charges received or paid on account of this is not technical fees and does not fall under purview of Section 194J of the Act even when the Assessing Authority rightly treated the payment made by Vodafone South Ltd., to various operators as technical services falling within the ambit of the provisions of Section 194J of the ACT?" (3) The appellant craves leave to amend, add, alter or delete any of the aforesaid grounds till the disposal. 16.1 The ld. CIT-DR in support of the departmental grounds placed reliance upon the order dated 19.03.2014 passed by the AO u/s 201(1) r.w.s. 201(1A) in the respective years. Reliance was placed upon the orders. Accordingly, for the sake of completeness, the relevant extract from the order is reproduced hereunder : The photocopy of the cross-examined statement dated 30.12014 was, supplied to the assessee deductor vide this office letter no. ACIT(TDS)/2013-14/3399 dated 5.12.2014 asking the assessee deductor file their reply in this regard . The reply has been considered which is not acceptable in view of the following finding: The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Oct., 1 1 1,95,73,066 19,57,306 Nil 19,57,306 30 587191 2544492 Nov., 11 2,30,83,690 23,08,369 Nil 23,08,369 29 669427 2977796 Dec. 1 1 2,44,98,364 24,49,836 Nil 24,49,836 28 685954 3135790 Jan' 12 2,65,33,029 26,53,3,02 Nil 26,53,3,02 27 716391 3369693 Feb'12 2,63,81,568 26,38,156 Nil 26,38,156 26 685920 3324076 March' 12 2,56,06,904 25,60,690 Nil 25,60,690 25 640172 3200862 Total 28,53,69,272 28536921 866S883 3,72,02,804 The plea taken by the assessee deductor that the tax has already been paid by the deductees and no demand of tax should be created on this account in view of the of the Hon'ble Supreme Court judgement in the matter of Hindustan Coca-Cola Beverages Ltd. v. CIT: 293 ITR 226 and the instructions of the CBDT issued in the file F.No.275/201/95-IT (B) dated 29 January, 1997, has been considered. The assessee deductor has been able to furnish the information to the extent of Rs. 28,14,03,474/- and has requested that on this amount has been paid by the respective d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 3,965,798 396,580 396,580 142,769 539,348 In spite of the sufficient times/opportunities taken by the assessee deductor, the PR has failed to furnish the supporting evidence to prove its contention to the sum of Rs. 39,65,798/-, as given above. The contention of the assessee has been considered and being accepted to that extent. Accordingly the PR is held liable u/s 201(1) for not deducting tax at source amounting to Rs. 3,96,580/- u/s 194J of the I.T.Act,1961 on the payment of Rs. 39,65,798/- and u/s 201(1 A) Rs. 41,85,771/-( Rs. 40,43,002 + Rs. 1,42,769) Therefore, the total demand created in this order on this issue of charges paid on account of national roaming comes to Rs. 45,82,351/- 16.2 Taking note of the fact that the department is placing heavy reliance on the order of the Assessing Officer. The ld. CIT-DR was specifically required to address in the context of the fact that the order under challenge is the order of the CIT(A). Thus, the specific departmental grievance made out on facts and law in the order under challenge was required to be pointed out. The ld. CIT-DR submitted that he would confine his arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;1' of appeal is general in nature and requires no separate adjudication. Since the substantive grounds namely '2' and '3' have been dealt with, no separate adjudication on grounds '4' and '5' is required. 17.1 In the absence of any specific departmental objection, the ld. AR inviting attention to the Paper Book filed by the assessee in support of the said claim submitted that the assessee relies on these decisions. These decisions, it was submitted, had been cited before the tax authorities also and have been considered while granting relief. These decisions, it was requested may be taken on record as the assessee is placing heavy reliance thereon. It was re-iterated that since no contrary argument on facts or law has been submitted, he would confine himself to placing reliance on these orders. These are extracted hereunder: 1. CIT (TDS) vs Delhi Transco Limited (68 taxmann.com 231) (Supreme Court) 2. CIT vs Kotak Securities Limited (383 ITR 1) (Supreme Court) 3. CIT(TDS) vs Vodafone South Limited (72 taxmann.com 347) (Karnataka High Court) 4. Vodafone Cellular Limited (ITA No. 2802 & 2803 /MDS/2014) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s. 194 J of the Act as he was of the view that roaming is nothing but fees for technical services and since there was human intervention during the roaming process, TDS u/s 194J of the Act should have been deducted. 6.1 It is seen from the record that the assessee preferred an appeal against the order of the AO. The CIT(A) while deciding the appeals of the assessee for the assessment year 2005-06 directed the AO to take a fresh decision on the applicability of Section 194J to the payment made for national roaming charges paid by the assessee in the light of the observations of the Hon'ble Supreme Court in the case of M/s Bharti Cellulars Ltd. (193 Taxman 97). 6.2 The record shows that in compliance of the directions of the Hon'ble Supreme Court, the Department had sought the services of C-DOT, a Government of India undertaking after making certain enquiries. The C-DOT deputed Mr. Tanay Krishna and Mr. Ashok Mittal, technical experts for this purpose. The TDS officer recorded the statements of the above technical experts on 08.01.2014 and copies of the statements so recorded were made available to the assessee. Subsequently, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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