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TMI Blog2021 (9) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... Cellular Limited]. 2. Regard being had to the similitude in the controversy involved in all the three cases, they are heard analogously together and a common order is being passed. 3. The facts of the case in ITA.693/2019 reveal that the respondent-company is engaged in the business of providing cellular telecom operations in various telecom circles in India and it sells sim cards to the distributors. A search was conducted under Section 133A of the Income Tax Act to verify TDS compliances and it was noticed that the respondent had not deducted tax at source on payments of commission allowed to its distributors. Under those circumstances, the matter has finally travelled to the Tribunal and the Income Tax Appellate Tribunal has decided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-paid card prescribing the MRP as Rs. 100, then at the time of sale, the assessee is not making any payment. Consequently, the distributor is not earning any income. This discount of Rs. 20 if not reflected anywhere in the books of account, in such circumstances, section 194H of the Act is not attracted. 62. In the appeals before us, the assessees sell prepaid cards/vouchers to the distributors. At the time of the assessee selling these pre-paid cards for a consideration to the distributor, the distributor does not earn any income. In fact, rather than earning income, distributors incur expenditure for the purchase of pre-paid cards. Only after the resale of those pre-paid cards, distributors would derive income. At the time of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered by the assessee to the customer 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Celluar Ltd.,(Supra) it is necessary to look into the accounts before granting any relief to them as set out above. They have accounted the entire price of the pre-paid card at Rs. 100 in their books of account and showing the discount of Rs. 20 to the dealer. Only if they are showing Rs. 80 as the sale price and not reflecting in their accounts a credit of Rs. 20 to the distributor, then there is no liability to deduct tax under section 194H of the Act. This exercise has to be done by the assessing authority before granting any relief. The same exercise can be done even in respect of other assessees also. 65. In the light of the aforesaid discussions, we are of the view that the order passed by the authorities holding that section 194H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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