Idea Cellualr Ltd, Hyderabad V. ACIT, Circle -14(2) (TDS), Hyderabad

ITA 1087/HYD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6465 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Section: 201(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1083/HYD/2011 ASSESSMENT YEAR 2004-05 ITA.NO.1084/HYD/2011 ASSESSMENT YEAR 2005-06 ITA.NO.1085/HYD/2011 ASSESSMENT YEAR 2006-07 ITA.NO.1086/HYD/2011 ASSESSMENT YEAR 2007-08 ITA.NO.1087/HYD/2011 ASSESSMENT YEAR 2008-09 ITA.NO.1088/HYD/2011 ASSESSMENT YEAR 2009-10 IDEA CELLULAR LTD. HYDERABAD 004 PAN AAACB-2100-P VS. ACIT, CIRCLE 14(2) (TDS) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. RONAK DOSHI FOR REVENUE : MS. K. HARITA DATE OF HEARING : 05.05.2014 DATE OF PRONOUNCEMENT : 23.05.2014 ORDER PER BENCH : THESE SIX APPEALS ARE BY ASSESSEE AGAINST THE ORDERS OF THE CIT(A), HYDERABAD DATED 25.03.2011 IN RESPECTIVE A.YS. EVEN THOUGH SEPARATE ORDERS ARE PA SSED, ISSUES ARE COMMON, THEREFORE, THESE APPEALS ARE HEA RD TOGETHER AND DECIDED BY THIS COMMON ORDER. 2. WE HAVE HEARD LD. COUNSEL AND LEARNED CIT/D.R. AND ALSO PERUSED THE WRITTEN SUBMISSIONS PLACED BY THE LD. COUNSEL RUNNING INTO PAGES 1 TO 20 ELABORATELY EXPL AINING THE CONTENTIONS. 2 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE-COMP ANY IS ENGAGED IN THE BUSINESS OF PROVIDING CELLULAR MO BILE TELEPHONE SERVICES TO ITS CUSTOMERS IN ANDHRA PRADE SH THROUGH A NET WORK OF DISTRIBUTORS. IN ORDER TO VERIFY ITS COMPLIANCE TOWARDS TDS PROVISIONS, A SURVEY WAS CONDUCTED IN T HE BUSINESS PREMISES OF THE ASSESSEE ON 13.10.2009. A. O. FOUND THAT ASSESSEE COMPANY IS NOT DEDUCTING TAX AT SOURC E IN CASE OF COMMISSION PAYMENTS MADE TO DISTRIBUTORS ON PREP AID CONNECTIONS. ASSESSEE HAS CLAIMED THAT THE COMMISSI ON ALLOWED TO DISTRIBUTORS IS IN THE NATURE OF DISCOUN T ONLY AND THEREFORE, PROVISIONS OF SECTION 194H THE INCOME TA X ACT, 1961 ARE NOT APPLICABLE. A.O. ANALYSED THE TRANSACTIONS AND HELD THAT LIKE IN POSTPAID MOBILE CONNECTIONS, ON THE PR EPAID CONNECTIONS ALSO ASSESSEE IS GIVING DISCOUNT AND A CCORDINGLY, HE HELD THAT ASSESSEE IS LIABLE FOR DEDUCTION OF TA X AND RAISED DEMANDS AS PER THE PROVISIONS OF SECTION 201(1) AND CONSEQUENT INTEREST LIABILITY UNDER SECTION 201(1A) . 4. ASSESSEE TOOK-UP THE MATTER BEFORE THE LD. CIT( A). IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE DIS COUNT GIVEN TO THE DISTRIBUTORS AT THE TIME OF SELLING PREPAID CARDS CANNOT BE CONSIDERED AS COMMISSION AND RELIED ON THE COORD INATE BENCH DECISION IN THE CASE OF ACIT VS. IDEA CELLULA R LTD., DATED 26.02.2009. HOWEVER, LD. CIT(A) DISTINGUISHED THE D ECISION AND FOLLOWED THE ITAT, COCHIN BENCH IN THE CASE OF VODAFONE CELLULAR LTD. VS. ACIT DATED 30 TH APRIL, 2009 WHICH ALSO INTURN, FOLLOWED THE HONBLE KERALA HIGH COURT DECISION IN THE CASE OF BPL MOBILE CELLULAR LTD. VS. STATE OF KERALA DATED 13 TH FEBRUARY, 2009. LD. CIT(A) ALSO FOLLOWED THE DECISI ON OF ITAT DELHI BENCH IN THE CASE OF IDEA CELLULAR LTD. VS. D CIT. LD. CIT(A) ALSO RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD. DATED 19. 02.2010 AND 3 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD BSNL VS. UNION OF INDIA 282 ITR 273 (SC) TO UPHOLD THE A.OS CONTENTIONS. HOWEVER, LD. CIT(A) GAVE RELIEF DIRECT ING THE A.O. TO VERIFY THE CLAIM OF THE ASSESSEE THAT RECIPIENTS / PAYEES PAID TAXES. LD. CIT(A) TOOK INTO CONSIDERATION THE PRINC IPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF HI NDUSTAN COCACOLA BEVERAGE P. LTD. VS. CIT 293 ITR 226 TO DI RECT THE A.O. TO GIVE RELIEF TO THE EXTENT OF TAX PAID BY TH E RECIPIENT / PAYEES. ACCORDINGLY, THE APPEALS WERE PARTLY ALLOW ED. 5. APART FROM THE ISSUE OF CONSIDERING THE COMMISSION, ASSESSEE ALSO RAISED THE ISSUE OF LIMIT ATION ON THE ORDERS PASSED UNDER SECTION 201 AFTER EXPIRY OF FOU R YEARS FROM THE END OF RELEVANT FINANCIAL YEAR IN AY 2004-05 AN D 2005-06. THE ORDERS FOR A.YS 2004-05 AND 2005-06 WERE PASSED ON 31.12.2009. IT WAS THE CONTENTION THAT THE ORDERS W ERE PASSED AFTER FOUR YEARS FROM THE END OF FINANCIAL YEAR, TH EREFORE BAD IN LAW. 6. LEARNED D.R. HOWEVER, RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF USHODAYA ENTERPRISES LTD. AND OTHERS ITA.NO.1516/HYD/2008 DATED 08.08.2013 TO CON TEND THAT THIS ISSUE WAS CONSIDERED ELABORATELY BY THE C OORDINATE BENCH AND RELIED ON THE SPECIAL BENCH DECISION IN T HE CASE OF MAHINDRA & MAHINDRA 122 TTJ 57 (MUM.). 6.2 THIS ISSUE WAS ELABORATELY CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF USHODAYA ENTERPRISE S LTD.(SUPRA) WHEREIN ON SIMILAR CONTENTIONS IT WAS H ELD AS UNDER : 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE A COMMON OR DER WAS PASSED U/S 201(1) & 201(1A) ON 02/04/2008 FOR T HE AYS 2001-02, 2002-03 & 2003-04. THE CONTENTION OF T HE ASSESSEES COUNSEL IS THAT IN VIEW OF THE JUDGMENT OF THE 4 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHINDRA VS . DCIT, 122 TTJ 577 (SB)(MUM.), THE ORDER PASSED BY T HE ASSESSING OFFICER IS BARRED BY LIMITATION AS THE OR DER HAS NOT BEEN PASSED WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT AY. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE ITAT SPECIAL BENCH, MUMBAI IN THE C ASE OF MAHINDRA & MAHINDRA (SUPRA) WHEREIN IT WAS HELD THA T MAXIMUM TIME LIMIT FOR PASSING THE ORDER U/S 201(1) AND 201(1A) IS THE SAME AS PRESCRIBED UNDER SECTION 149 OF THE ACT, I.E., 4 YEARS OR 6 YEARS FROM THE END OF THE R ELEVANT AY, AS THE CASE MAY BE DEPENDING UPON THE AMOUNT OF INC OME IN RESPECT OF WHICH THE PERSON RESPONSIBLE IS SOUGH T TO BE TREATED AS THE ASSESSEE IN DEFAULT. THE ORDER PASSE D U/S 201(1) OR 201(1A) CANNOT BE HELD AS BARRED BY LIMIT ATION IF IT IS PASSED WITHIN 4 YEARS FROM THE END OF THE REL EVANT AYS OR 6 YEARS AS THE CASE MAY BE. IN THE PRESENT CASE, TIME LIMIT AVAILABLE FOR PASSING THE ORDER U/S 201(1) AN D 201(1A) IS AS FOLLOWS: S.NO. A.Y. TIME LIMIT AVAILABLE FOR PASSING ORDER ACTUAL DATE OF PASSING ORDER 1. 2001-02 31/03/2008 02.04.2008 2. 2002 - 03 31/03/2009 - DO - 3. 2003 - 04 31/03/2010 - DO - 14. AS SEEN FROM THE ABOVE TABLE, THE ORDER PASSED FOR AY 2001-02 U/S 201(1) AND 201(1A) ON 02/04/2008 AS TH E TIME LIMIT FOR PASSING THE ORDER WAS 31/03/2008, TH EREFORE, THE ORDER PASSED FOR AY 2001-02 IS BARRED BY LIMITA TION. HOWEVER, FOR THE AYS 2002-03 AND 2003-04, THE ORDER WAS PASSED WITHIN TIME I.E. WITHIN 6 YEARS FROM THE END OF THE RELEVANT AYS AS THE ORDER PASSED ON 02/04/2008. THEREFORE, THE ORDER PASSED IN AY 2002-03 AND 2003- 04 CANNOT BE HELD AS BARRED BY LIMITATION. 15. IN VIEW OF THE ORDER OF THE SPECIAL BENCH OF IT AT, MUMBAI IN CASE OF MAHINDRA AND MAHINDRA (SUPRA), WE ARE INCLINED TO HOLD THAT THE ORDER PASSED U/S 201(1) A ND 201(1A) FOR THE ASSESSMENT YEARS 2002-03 AND 2003-0 4 IS NOT BARRED BY LIMITATION AND THE SAME IS VALID, THE REFORE, TO THAT EXTENT THE CIT(A) IS NOT CORRECT IN ANNULLING THE ORDER PASSED U/S 201(1) AND 201(1A) OF THE ACT FOR THE AY S 2002- 03 AND 2003-04. FURTHER, IT IS NOTICED THAT THE HON BLE DELHI HIGH COURT IN THE CASE OF DELHI DEVELOPMENT A UTHORITY VS. ITO [2008] 230 ITR 9 HAS HELD THAT THE ORDER UN DER SECTION 201(1) IS AN ORDER OF ASSESSMENT AND THE SA ME 5 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD JUDGMENT STANDS APPROVED BY THE HON'BLE SUPREME COU RT IN THE CASE OF ITO V. DELHI DEVELOPMENT AUTHORITY [200 1] 252 ITR 772 BY HOLDING AS UNDER : ORDER UNDER SECTION 201(1) IS TO BE TREATED AS AN ORDER OF ASSESSMENT AS PER SECTION 2(8) ASSESSMENT INCLUDES REASSESSMENT', THEN IT BECOMES MANIFEST THAT THE TIME-LIMIT FOR INITIATING AND COMPLETING T HE PROCEEDINGS UNDER SECTION 201(1) HAS TO BE AT PAR WITH THE TIME-LIMIT AVAILABLE FOR INITIATING AND COMPLETING THE REASSESSMENT, MORE SO WHEN THE SCOPE OF SECTION 147 ALSO ROPES IN THE CASES OF ASSESSMENT APART FROM REASSESSMENT. 16. IN THAT VIEW OF THE MATTER, IT IS MANIFEST THAT ONCE A PARTICULAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE S UPREME COURT ON AN ISSUE, THEN ANY CONTRARY VIEW TAKEN BY THE OTHER HIGH COURTS HAS TO BE CONSIDERED AS IMPLIEDLY OVERRULED. 7. SINCE IN THIS CASE, IT WAS AN ADMITTED FACT THA T EVEN THOUGH THE ORDERS ARE PASSED BEYOND FOUR YEARS FROM FY 2003-04 AND 2004-05, BUT WITHIN SIX YEARS FROM THE RELEVANT FINANCIAL YEAR, ACCORDINGLY, THIS GROUND OF THE ASS ESSEE RAISED IN A.Y. 2004-05, 2005-06 AS GROUND NO.1 IS REJECTED . 8. GROUND NO.2 IN A.YS. 2004-05 AND 2005-06 AND GROUND NO.1 IN OTHERS YEARS IS ON THE ISSUE OF TREA TING DISCOUNT OFFERED BY THE ASSESSEE TO THE DISTRIBUT ORS AS IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H AND ACCORDINGLY HOLDING THAT ASSESSEE IS IN DEFAULT FOR NON- DEDUCTION OF TAX AT SOURCE UNDER SECTION 201 READ W ITH SECTION 194H OF THE I.T. ACT. 9. AT THE OUTSET, LD. COUNSEL FAIRLY ADMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF THE HONBLE HIGH COURT OF DELHI IN ASSESSEES OWN CASE REPORTED AT (2010) 230 CTR (DEL.) 43. IT WAS HELD BY THE HONBL E DELHI HIGH COURT AS UNDER : 6 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD THE ARGUMENT OF THE COUNSEL THAT S. 194H IS NOT APPLICABLE, AS THERE IS NO 'PAYMENT OR CREDIT' BY T HE ASSESSEE TO ITS DISTRIBUTOR IS TO BE REJECTED. LIKE WISE, THE ARGUMENT THAT THE AMOUNT MUST BE SHOWN TO BE THE INCOME OF THE RESPONDENT ALSO DOES NOT HOLD GOOD. T HE LEGAL RELATIONSHIP IS ESTABLISHED BETWEEN THE ASSES SEE AND THE ULTIMATE CONSUMER/SUBSCRIBER, WHO IS SOLD T HE SIM CARD BY THE AGENTS FURTHER APPOINTED BY THE PMA S WITH THE CONSENT OF THE ASSESSEE. IT IS CREATED BY : (A) ACTIVATION OF THE SAID SIM CARD BY THE ASSESSEE IN THE NAME OF THE CONSUMER/SUBSCRIBER. (B) SERVICE PROVID ED BY THE ASSESSEE TO THE SUBSCRIBER. FURTHER, DEALINGS B ETWEEN THE SUBSCRIBERS AND THE ASSESSEE IN RELATION TO THE SAID SIM CARD INCLUDING ANY COMPLAINT, ETC. FOR IMPROPER SERVICE/DEFECT IN SERVICE. (C) ENTERING INTO THE UL TIMATE AGREEMENT BETWEEN THE SUBSCRIBER AND THE ASSESSEE. IT IS TO BE BORNE IN MIND THAT THE NATURE OF SERVICE PROV IDED BY THE ASSESSEE TO THE ULTIMATE CONSUMERS/SUBSCRIBERS, WHETHER IT IS PREPAID OR POST-PAID SIM CARD REMAINS THE SAME. IN THE INSTANT CASE, THE SIM CARDS ARE PREPAI D, WHICH ARE SOLD BY THE ASSESSEE TO THE CONSUMERS THR OUGH THE MEDIUM OF PMAS. IN THE CASE OF POST-PAID, SIM C ARD TRANSACTION IS ENTERED INTO DIRECTLY BETWEEN THE AS SESSEE AND THE SUBSCRIBER AND THE SUBSCRIBER IS SENT BILL PERIODICALLY DEPENDING UPON THE USER OF THE SIM CAR D FOR THE PERIOD IN QUESTION. IN BOTH THE CASES, LEGAL RE LATIONSHIP IS CREATED BETWEEN THE SUBSCRIBER AND THE ASSESSEE THAT TOO BY ENTERING INTO SPECIFIC AGREEMENT BETWEEN THE SE TWO PARTIES. IN CONTRAST, THE LEGAL POSITION WHEN THE G OODS ARE SOLD BY PRINCIPAL TO ITS DISTRIBUTORS CREATING 'PRI NCIPAL AND PRINCIPAL' RELATIONSHIP WOULD BE ENTIRELY DIFFERENT . ON THE SALE OF GOODS, THE OWNERSHIP PASSES BETWEEN THE MANUFACTURER AND THE DISTRIBUTORS. IT IS THE RESPON SIBILITY OF THE DISTRIBUTOR THEREAFTER TO SELL THOSE GOODS F URTHER TO THE CONSUMERSTHE ULTIMATE USERS. THE PRINCIPAL/MANUFACTURER DOES NOT COME IN PICTURE AT ALL. OF COURSE, HE MAY BE LIABLE FOR SOME ACTION BY THE CON SUMER BECAUSE OF DEFECTIVE GOODS, ETC., WHICH IS THE RESU LT OF OTHER ENACTMENTS CONFERRING CERTAIN RIGHTS ON THE CONSUMER OR COMMON LAW RIGHTS IN HIS FAVOUR AS AGAI NST THE MANUFACTURER. NO DOUBT, AS PER CL. 6(A) OF THE AGREEMENT, PMA IS SUPPOSED TO MAKE THE PAYMENT IN ADVANCE. THAT WOULD NOT MAKE ANY DIFFERENCE TO THE NATURE OF TRANSACTION IN VIEW OF CL. 25(D) OF THE A GREEMENT. THUS, EVEN IF ADVANCE PAYMENT IS MADE BY THE PMA ON RECEIPT OF THE SIM CARDS, QUA THOSE SIM CARDS, IT D OES NOT 7 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD AMOUNT TO 'SALE' OF GOODS. THE PURPOSE IS TO ENSURE THAT THE PAYMENT IS RECEIVED IN RESPECT OF THOSE SIM CAR DS, WHICH ARE ULTIMATELY SOLD TO THE SUBSCRIBERS IN AS MUCH AS UNSOLD SIM CARDS ARE TO BE RETURNED TO THE ASSESSEE AND THE ASSESSEE IS REQUIRED TO MAKE PAYMENT AGAINST TH EM. THIS IS AN ANTITHESIS OF 'SALE'. THERE CANNOT BE AN Y SUCH OBLIGATION TO RECEIVE BACK THE UNSOLD STOCKS. FURTH ER, CL. 25(F) LAYS DOWN THAT ON TERMINATION OF AGREEMENT, P MA OR ITS AUTHORIZED RETAILER APPOINTED BY IT, IS NOT ENT ITLED TO ANY COMPENSATION FOR COST OR EXPENSES INCURRED BY I T IN EITHER SETTING UP OR PROMOTION OF ITS BUSINESS, ETC . NO SUCH CLAUSE WAS REQUIRED IN CASE OF 'SALE'. THUS, THE TR IBUNAL ERRED IN HOLDING THAT THE PAYMENTS PAID BY THE ASSE SSEE ARE NOT COMMISSION AS ENVISAGED UNDER S. 194H. ACCORDINGLY, AS THE ISSUE IS COVERED AGAINST THE AS SESSEE, ORDER OF THE LD. CIT(A) STANDS CONFIRMED. ACCORDINGLY, RE LEVANT GROUNDS ARE REJECTED. 10. GROUND NO.3 IN A.Y. 2004-05 AND GROUND NO.2 IN OTHER YEARS IS AN ALTERNATE GROUND WITHOUT PREJUDIC E TO GROUND NO.1/2 DISCUSSED ABOVE, WHICH IS AS UNDER: 3.1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. WITHOUT APPRECIATING THE FACT THAT WHERE MECHANISM TO DEDUCT TAX FAILS, APPELLANT CANNOT BE HELD TO BE ASSESSEE IN DEFAULT UNDER SECTION 201 OF THE ACT. .2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: * ADMITTEDLY, THERE WAS NO PAYMENT NO CREDIT OF ANY SUM TO THE DISTRIBUTORS. * APPELLANT WAS NOT RESPONSIBLE FOR PAYING ANY INCOME BY WAY OF COMMISSION TO DISTRIBUTORS. .3. THE APPELLANT THEREFORE PRAYS THAT IT CANNOT BE REGARDED AS ASSESSEE IN DEFAULT FOR ALLEGED NON- DEDUCTION OF TAX UNDER SECTION 194H OF THE ACT. 11. EVEN THOUGH THE ISSUE ON PRINCIPLE IS DECIDED IN EARLIER GROUND, ASSESSEE RAISED THE ISSUE STATING T HAT MECHANISM TO DEDUCT TAX WILL FAIL AND SO ASSESSEE C AN NOT BE 8 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD HELD ASSESSEE IN DEFAULT . DETAILED SUBMISSIONS OF THE ASSESSEE ON THIS ISSUE ARE THAT HONBLE KERALA HIGH COURT IN THE CASE OF M.S. HAMEED VS. DIRECTOR OF STATE LOTTERIES 249 ITR 186 (KER.) HELD THAT SINCE THE GOVERNMENT IS NOT RESPONSIBLE FOR PAYING ANYTHING TO THE PETITIONERS, THERE IS NO QUESTION O F DEDUCTING ANYTHING AND WHAT IS DIRECTED/DEDUCTED UNDER EX.P.4 IS COLLECTION OF TAX WHICH IS OUTSIDE THE AMBIT OF SEC TION 104G . SINCE THE DECISION WAS CHALLENGED BEFORE HONBLE SU PREME COURT AND SLP WAS DISMISSED, THE ORDER BECAME FINAL . THEREFORE, IT WAS THE CONTENTION THAT THE CONDITION SPECIFIED FOR INVOKING THE LIABILITY UNDER SECTION 194H FAILS AS ASSESSEE WAS NOT PAYING ANY AMOUNT BY CREDITING OR PAYMENT ANY A MOUNT TO THE DISTRIBUTORS. THE RATIO OF SUPREME COURT IN THE CASE OF B. SRINIVASA SHETTY WILL APPLY. FOLLOWING THE DECISION IN THE CASE OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. QATAR A IRLINES 332 ITR 253, ASSESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT UNDER SECTION 201 READ WITH SECTION 194H OF THE ACT . IT WAS FURTHER CONTENDED THAT DIRECTING THE ASSESSEE TO DE DUCT TAX AT SOURCE UNDER SECTION 194H AT THE TIME OF RECEIVING PURCHASE PRICE FROM THE DISTRIBUTORS, WOULD AMOUNT TO INVOKI NG OF TAX COLLECTION UNDER SECTION 206C OF THE ACT. LD. COUNS EL ALSO PLACED RELIANCE ON THE DECISION OF ITAT, DELHI IN T HE CASE OF SRL RANBAXY LTD. VS. ACIT 50 SOT 173 WHEREIN IT WAS HELD THAT APPLICATION OF TDS UNDER SECTION 194H ARISE ON LY AT THE TIME OF PAYMENT OR CREDIT. SINCE THE ASSESSEE HAS NOT PAID OR CREDITED ANY AMOUNT TO THE ACCOUNT OF DISTRIBUTOR, SECTION 194H HAD NO APPLICATION. THE EXPLANATION ON ACCOUNT ING ENTRIES MADE IN THE BOOKS OF ACCOUNTS AND DETAILED SUBMISSIONS ON THE BASIS OF VARIOUS DECISIONS ON TH E ISSUE ARE AS UNDER : 9 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD * SUCH INCOME SHOULD BE PAID OR CREDITED BY T HE PAYER IN FAVOUR OF THE PAYEE; * THE PAYER SHOULD BE A PERSON RESPONSIBLE FOR PAY ING SUCH INCOME TO THE PAYEE; * THE TIME OF CREDIT OR PAYMENT SHOULD ALSO BE TAKEN. IN THE CASE OF THE APPELLANT, EACH OF THE ABOVE CONDITIONS ARE MISSING, AND HENCE, FOLLOWING THE RA TIO OF THE SUPREME COURT IN CIT VS. SRINIVASA SHETTY B. C. (128 ITR 294) (SC), THE KERALA HIGH COURT IN M.S. HAMEED VS. DIRECTOR OF STATE LOTTERIES 249 ITR 186 (KER.) (SLP OF DEPARTMENT BEING DISMISSED) AND THE BOMBAY HIGH COURT IN CIT VS. QATAR AIRLINES 332 ITR 253 (BOM.), THE APPELLANT CANNOT BE TREATED AS ASSESSEE-IN-DEFAULT U/S. 201 R.W.S. 194H OF THE A CT. FURTHER, IF IT IS HELD THAT THE APPELLANT SHOULD DE DUCT TAX AT SOURCE U/S. 194H OF THE ACT AT THE TIME OF RECEIVING THE PURCHASE PRICE FROM THE DISTRIBUTOR, IT WOULD AMOUNT TO IMPORTING SECTION 206C OF THE ACT WHICH GOVERNS TAX COLLECTED AT SOURCE IN SECTION 19 4H OF THE ACT. THE APPELLANT ALSO CRAVES TO RELY ON THE RECENT JUDGMENT OF THE HONBLE DELHI TRIBUNAL IN THE CASE OF SRL RANBAXY LTD. VS. ACIT (2011) 50 SOT 173 (TDEL.) (REFER PAGE NO.75 TO 88 OF THE PB), WHEREIN INTER A LIA IT WAS HELD THAT OBLIGATION OF TDS U/S. 194H OF THE AC T ARISES ONLY AT THE TIME OF PAYMENT OR CREDIT. A S THE ASSESSEE HAD NOT PAID OR CREDITED ANY AMOUNT TO THE ACCOUNT OF THE CENTRES, SECTION 194H OF THE ACT HAD NO APPLICATION. THE ASSESSEE HAD ONLY CREDITED THE NET AMOUNT RECEIVED FROM THE CENTRES AS ITS INCOME. FURTHER, THE APPELLANT WOULD LIKE TO BRING TO THE ATTENTION THE DECISIONS OF CIT VS. IDEA CELLULAR LT D. 325 ITR 148, VODAFONE ESSAR CELLULAR LTD. VS. ACIT 332 ITR 25, BHARTI CELLULAR LTD. VS. ACIT 244 CTR 1 85 (CAL.) AND M/S. VODAFONE ESSAR SOUTH LTD. VS. DCIT ITTA.NO.291 OF 2013 (AP) WHEREIN IT IS CONCLUDED TH AT DISCOUNT SHOULD BE CONSIDERED AS COMMISSION AND AS SUCH WOULD BE LIABLE FOR WITHHOLDING TAX U/S.194H O F THE ACT WOULD NOT SQUARELY APPLY IN THE PRESENT CAS E. 12. LEARNED D.R. IN REPLY, HOWEVER, COUNTERED THE ABOVE AND REFERRED TO THE DETAILED ORDERS/ JUDGMENT S PASSED IN 10 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD THIS REGARD BY VARIOUS HIGH COURTS, WHICH INCLUDED THE ANALYSIS OF ACCOUNTING TREATMENT. HE EXPLAINED THAT INSTEAD OF CREDITING RS.100/- AT THE TIME OF ISSUANCE OF CARD, ASSESSEES ACCOUNTING ENTRIES AS EXPLAINED ARE SHOWING PREPAID AMOUNT OF RS.80/- INITIALLY AS EXPENDITURE IN THE WRITTEN SUB MISSIONS. HOWEVER, ASSESSEE AT THE TIME OF CONNECTION, CREDIT S BALANCE OF RS.20/- ALSO TO THE PREPAID ACCOUNT THEREBY, ENTIRE RS.100/- IS DEEMED TO HAVE BEEN CREDITED. HE REFERRED TO THE AC COUNTING ENTRIES ANALYSED BY THE A.O. AT PAGE NO.4 OF THE OR DER. IT WAS SUBMITTED THAT ASSESSEE IS TRYING TO MISLEAD BY REF ERRING TO ONLY THE AMOUNT CREDITED TO THE DISTRIBUTOR WHEREAS , THE BALANCE AMOUNT WAS DEBITED TO AIR-TIME REVENUE AND PREPAID CARD ADVANCE. AS CAN BE SEEN FROM THE ACCOUNTING EN TRIES EXTRACTED BY THE A.O. IN THE ORDER, OUT OF MRP AT R S.100/- ASSESSEE IS SHOWING THE RECEIPT OF RS.100/-, RS.96/ - TO THE DISTRIBUTOR AND RS.4/- TO THE PREPAID CARD ADVANCE. THEREFORE, ENTIRE AMOUNT IS DIRECTLY OR INDIRECTLY ACCOUNTED F OR IN THE BOOKS OF ACCOUNTS. RS.4/- EVEN THOUGH IS NOT DIRECT LY CHARGED OR CREDITED TO THE DISTRIBUTOR, ASSESSEE IS CLAIMIN G IT AS AN EXPENDITURE IN THE BOOKS OF ACCOUNTS AND THIS IS NO THING BUT COMMISSION PAID AS HELD BY THE HONBLE HIGH COURT. SHE THEN REFERRED TO THE DETAILED JUDGMENTS OF VARIOUS HIGH COURTS TO SUBMIT THAT NOMENCLATURE ADOPTED BY THE ASSESSEE MA Y BE DIFFERENT BUT THE GIST OF TRANSACTION IS NOTHING BU T COMMISSION PAYMENT. SHE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS 161 ITR 1 TO SUBMIT THAT ENTRIES MADE IN THE BOOKS OF ACCOUNTS ARE NOT DETERMINATIVE FACTOR AND THE ENTIRE TRANSACTION IS TO BE CONSIDERED. SHE RELIED ON THE DECISION OF DELHI HIG H COURT AND A.P. HIGH COURT WHICH ANALYSED THE ACCOUNTING TREAT MENT IN 11 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD THE BOOKS OF ACCOUNTS AND SUBMITTED THAT THE ARGUME NTS CANNOT BE SUSTAINED. 13. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE CONTENTIONS. WE ARE NOT IN AGREEMENT WITH THE ARGUM ENTS OF THE LD. COUNSEL AS THESE ARGUMENTS ARE ALREADY CONS IDERED BY VARIOUS HIGH COURTS IN DETAIL, PARTICULARLY, HONBL E DELHI HIGH COURT IN THE DECISION CITED (SUPRA) IN ASSESSEES O WN CASE. HONBLE HIGH COURT OF DELHI HAS CONSIDERED THIS ARG UMENT IN ASSESSEES OWN CASE I.E., COMMISSIONER OF INCOME TA X VS. IDEA CELLULAR LTD. (2010) 230 CTR (DEL.) 43 VIDE PARAS 2 1 AND 22 AS UNDER : 21. ANOTHER ARGUMENT WAS RAISED IN THE SAID CASE, VIZ., THAT THE ASSESSEE AIRLINE WAS NOT PAYING INCOME BY WAY OF COMMISSION, AS 'THE SUPPLEMENTARY COMMISSION' WA S RETAINED BY THE TRAVEL AGENT AND THUS, S. 194H OF T HE ACT WAS NOT ATTRACTED. THIS CONTENTION WAS BRUSHED ASID E IN THE FOLLOWING MANNER : '23. THIS BRINGS US TO THE SECOND LEG OF THE TRANSACTION AS TO WHETHER INCOME BY WAY OF COMMISSION HAS BEEN PAID BY THE ASSESSEE AIRLINE TO THE TRAVEL AGENT. IT IS NOT DISPUTED THAT ANY AMOUN T WHICH THE TRAVEL AGENT WOULD RECEIVE OVER AND ABOVE THE NET FARE WOULD BE ASSESSED IN THE HANDS OF THE TRAVEL AGENT AS PROFIT, GAIN OR INCOME. AS A MATTER OF FACT ONE OF THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE AIRLINE HAS BEEN THAT THEY OUGHT NOT T O BE HELD AN ASSESSEE IN DEFAULT IN VIEW OF THE FACT THA T THE SUPPLEMENTARY COMMISSION, THAT IS, SUMS RECEIVED OVER AND ABOVE THE NET FARE BY THE TRAVEL AGENTS AN D RETAINED BY THEM HAVE BEEN DISCLOSED BY TRAVEL AGEN TS AS THEIR INCOME ON WHICH THE TRAVEL AGENTS HAVE PAI D TAX. IN VIEW OF THIS WE FIND NO DIFFICULTY IN HOLDI NG THAT SUPPLEMENTARY COMMISSION IS INCOME WITHIN THE MEANING OF S. 194H OF THE ACT. 28. IN VIEW OF THE ABOVE WE HOLD THAT THE SUPPLEMENTARY COMMISSION WHICH IS THE AMOUNT RETAINED BY THE TRAVEL AGENT IS COMMISSION WITHIN T HE 12 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD MEANING OF S. 194H R/W EXPLN. (I) TO THE SAID SECTI ON. THE ASSESSEE AIRLINES WERE THUS OBLIGED TO DEDUCT TAX AT SOURCE AT THE RATE PRESCRIBED DURING THE RELEVANT PERIOD. THE ASSESSEE AIRLINES HAVING NOT DEDUCTED THE TAX AT SOURCE, THEY ARE LIABLE TO BE H ELD, WITHIN THE TERMS OF S. 201(1) AS ASSESSEE(S) IN DEFAULT AND ALSO LIABLE FOR PAYMENT OF INTEREST IN TERMS OF S. 201(1A) OF THE ACT. IN VIEW OF THE FACT THAT THE TRIBUNAL HAVING COMING TO THE CONCLUSION THAT S . 194H OF THE ACT WAS NOT APPLICABLE AND HENCE DID NOT EXAMINE ANY OTHER CONTENTION OF THE ASSESSEE AIRLINE, AS ALSO, THE QUANTUM AND THE PERIOD FOR WHICH ASSESSEE AIRLINE WOULD BE ENTITLED TO PAY INTEREST OR TO WHAT EXTENT THE BENEFIT OF THE CERTI FICATE ISSUED TO THEM, IF ANY, UNDER S. 197 OF THE ACT WOU LD BE AVAILABLE. WE ALLOW THE FOLLOWING APPEALS AND SE T ASIDE THE IMPUGNED JUDGMENTS PASSED BY THE TRIBUNAL IN EACH OF THESE APPEALS AND REMAND THE MATTER TO THE TRIBUNAL FOR EXAMINING ALL OTHER ASPE CTS OF THE MATTER AS ALSO THE CONSEQUENCES WHICH WOULD FLOW THEREFROM.' 22. IN VIEW THEREOF, THE ARGUMENT OF THE LEARNED COUNSEL THAT S. 194H IS NOT APPLICABLE, AS THERE IS NO 'PAYMENT OR CREDIT' BY THE ASSESSEE TO ITS DISTRIBUTOR IS TO BE REJECTED . LIKEWISE, THE ARGUMENT THAT THE AMOUNT MUST BE SHOWN TO BE THE INCOME OF T HE RESPONDENT ALSO DOES NOT HOLD GOOD. ( EMPHASIS SUPPLIED) 14. THUS, IN OUR VIEW, THE ISSUE IS SETTLED IN FAV OUR OF THE REVENUE AND AGAINST THE ASSESSEE. FURTHER, AS W E NOTICED FROM THE ORDERS OF THE A.O. THE ENTRIES PASSED BY T HE ASSESSEE ARE AS UNDER : ENTRIES ON ISSUE OF RECHARGE TOP-UP AND PREPAID VOUCHERS AS MENTIONED BELOW : FOR RS.100/- MRP TRADE MARGIN IS @ 4% ON ISSUE OF T HE RECHARGE TO DISTRIBUTOR. 13 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD FOR MRP 100 AT THE TIME OF ISSUE TO DISTRIBUTOR DISTRIBUTOR PREPAID CARD ADVANCE SERVICE TAX DR. CR. CR. 96 86.66 9.34 ON RECEIPT OF PAYMENT BANK DISTRIBUTOR DR. CR. 96 96 ON RECHARGE BY SUBSCRIBER AIRTIME REVENUE PREPAID CARD ADVANCE FOR CREDIT OF TALK TIME TO SUBSCRIBER. DR. CR 4 4 15. THUS, AS CAN BE SEEN FROM THE ENTRIES ON WHICH THERE IS NO DISPUTE, THERE IS A CONSTRUCTIVE PAYMEN T OF RS.100/- AND RS.4/- ARE CHARGED BY THE ASSESSEE AT THE TIME OF CREDIT ON TALK-TIME TO SUBSCRIBER. EVEN THE PROVISI ONS OF SECTION 194H CONSIDER THE CONSTRUCTIVE PAYMENTS I.E ., PAYMENTS MADE INDIRECTLY ALSO. THEREFORE, THE ARGUM ENT THAT ASSESSEE HAS NOT PAID OR CREDITED THE AMOUNT DOES N OT HOLD GOOD AS THERE IS CONSTRUCTIVE PAYMENT IN THIS REGAR D IN THE BOOKS OF ACCOUNTS. AS HELD BY THE HONBLE SUPREME C OURT IN THE CASE OF SUTLEJ COTTON MILLS (SUPRA), ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT DETERMINATIVE FACTOR AND REAL NATU RE OF TRANSACTION HAS TO BE CONSIDERED. EVEN THOUGH LD. C OUNSEL RAISED DETAILED OBJECTIONS BASED ON THE INTERPRETAT ION OF THE DECISIONS OF THE HONBLE HIGH COURTS, WE ARE NOT IN AGREEMENT WITH HIS CONTENTIONS, AS THESE ARGUMENTS WERE ALREA DY CONSIDERED AND ELABORATELY DISCUSSED IN THOSE JUDGM ENTS AND THE ISSUE ULTIMATELY WAS DECIDED AGAINST THE ASSESS EE. 14 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD THEREFORE, THIS ALTERNATIVE GROUND/WITHOUT PREJUDIC E TO THE EARLIER GROUND OF THE ASSESSEE IS REJECTED. 16. THE LAST GROUND NO.4 IN A.Y. 2004-05 AND 2005- 06 AND GROUND NO.3 IN OTHER APPEALS IS WITH REFERENCE TO LEVY OF INTEREST UNDER SECTION 201(1A). IT WAS SUBMITTED TH AT IN CASE, IT WAS HELD THAT ASSESSEE IS LIABLE TO DEDUCT TDS U NDER SECTION 194H OF THE ACT, THEN, IN SUCH A CASE, WHERE THE RE CIPIENTS OF SUCH INCOME HAS PAID TAXES ON THEIR INCOME, THEN TH E INTEREST SHOULD BE CALCULATED ONLY FROM THE DATE ON WHICH SU CH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALL Y PAID BY THE RECIPIENT AS ADVANCE TAX/SELF-ASSESSMENT TAX OR UP TO FILING OF RETURN OF INCOME. THIS GROUND IS CONSEQUENTIAL T O THE DIRECTIONS OF THE CIT(A) TO EXAMINE THE TAX PAYMENT S, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCACOLA (SUPRA). A. O. IS DIRECTED TO RE-WORKOUT THE INTEREST ON THE AMOUNTS WHICH ARE DETERMINED AFTER VERIFICATION FROM THE DATE OF TAX DEDUCTIBLE TO THE DATE OF PAYMENT BY THE RECIPIENT. WITH THESE DI RECTIONS, GROUND NO.4 IS CONSIDERED AS ALLOWED FOR STATISTICA L PURPOSES. 17. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 23 RD MAY, 2014. VBP/- 15 ITA.NO.1083 TO 1088/HYD/2011 M/S. IDEA CELLULAR LTD. HYDERABAD COPY TO 1. IDEA CELLULAR LTD., 5-9-62, KLK ESTATE, FATEH MA IDEN ROAD, HYDERABAD 500 004. 2. ACIT, CIRCLE 14(2) (TDS), HYDERABAD. 3. CIT(A)-II, HYDERABAD 4. CIT (TDS), HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.