Appeal details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 7820 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-01-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
F
Assessment Year
2007-2008
Appeal Filed On
08-01-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.AS. NO.118, 119, 120, 2466 & 2467/DEL/2019 ASSESSMENT YEARS 2007-08, 2008-09, 2009-10, 2010-11 & 2011-12 VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LTD.) A-19, VODAFONE DELHI OFFICE, MOHAN COOPERATIVE, MATHURA ROAD, NEW DELHI. V. ITO, TDS, KARNAL TAN/PAN: AAACB2100P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI DEEPAK CHOPRA, ADV. & MS. MANASVINI BAJPAI, ADV. RESPONDENT BY: MS. SULEKHA VERMA, CIT-DR DATE OF HEARING: 04 12 2020 DATE OF PRONOUNCEMENT: 20 01 2021 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSESSEE COMPANY M/S VODAFONE IDEA LIMITED AS A SUCCESSOR OF M/S VODAFONE DIGILINK LIMITED (WHICH GOT MERGED WITH M/S VODAFONE MOBILE SERVICES LIMITED WHICH AGAIN GOT SUBSEQUENTLY M ERGED WITH M/S IDEA CELLULAR LIMITED AND NOW KNOWN AS VODAFONE IDEA LIMITED) (HEREINAFTER REFERRED TO AS ASSESSEE) AGAI NST THE CONSOLIDATED ORDER DATED 23.10.2018, PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEARS (AY) 2007-08, 2008-09 AND 2009-10 AND THE ORDER DATED 21. 01.2019 FOR ASSESSMENT YEARS 2010-11 AND 2011-12. SINCE THE ISSUE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 2 INVOLVED IN ALL THE APPEALS ARE BY AND LARGE COMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, WERE HEARD TOGETHER AN D BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. FOR THE SAKE OF REFERENCE, THE MAIN ISSUES RAISED IN ALL THE APPEALS BY THE ASSESSEE ARE REPRODUCED AS UNDER: ASSESSMENT YEAR 2007-08 TO 2011-12 (COMMON GROUNDS) 1. GROUND NO.1-THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON DISCOUNT EXTENDED TO ITS PRE-PAID DISTRIBUTOR S ON DISTRIBUTION OF PRE-PAID SERVICES. 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED TDS OFFICER IN TREATING THE APPELLANT AS ASSESSEE IN D EFAULT FOR NON-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H OF TH E ACT ON DISCOUNT EXTENDED OF INR 2,10,56,933 BY THE APPELLAN T TO THE DISTRIBUTORS OF ITS PRE-PAID SERVICES. (FOR AY 2008-0 9 THE AMOUNT IS INR 17,18,06,175, FOR AY 2009-10 AMOUNT IS INR 19,15 ,95,051, AY 2010-11 INR 30,37,20,165 AND 2011-12 INR 29, 33,40,558). 1.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE CONTENTION OF THE LEARNED TDS OFFICER THAT THE RELATIONSHIP BETWEEN THE AP PELLANT AND THE PRE-PAID DISTRIBUTORS IS NOT THAT OF PRINCIPAL TO PRINCIPAL AND THE DISCOUNT ALLOWED TO THEM IS IN NATURE OF COMMIS SION LIABLE FOR TAX DEDUCTION AT SOURCE AS ENVISAGED UNDER SECTION 194H OF THE ACT. 1.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 3 LEARNED CIT (A)/TDS OFFICER HAVE ERRED IN NOT APPRE CIATING THE FACT THAT THERE IS NO PAYMENT/CREDIT TO THE ACCOUNT OF DISTRIBUT ORS BY THE APPELLANT TOWARDS THE DISCOUNT EXTENDED TO THEM AND THEREFORE, PROVISIONS OF SECTION 194H OF THE ACT DO NOT APPLY ON SUCH DISCOUNT. 1.4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A)/TDS OFFICER HAVE ERRED IN NOT APPREC IATING THAT THE DISCOUNT ALLOWED BY THE APPELLANT IS NOT INCOME IN TH E HANDS OF ITS DISTRIBUTORS AND THAT INCOME, IF ANY, ARISES ONLY WHE N THE PRE-PAID SERVICES ARE FURTHER DISTRIBUTED BY THE DISTRIBUTORS. 1.5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A)/TDS OFFICER HAVE ERRED IN NOT APPRE CIATING THE FACT THAT THERE IS NO FLOW OF MONIES FROM THE APPELLANT TO THE DISTRIBUTOR OF PRE-PAID SERVICES BUT RATHER FROM THE DI STRIBUTOR TO THE APPELLANT, AND HENCE, THE PROVISIONS OF SECTION 194 H OF THE ACT FAIL TO APPLY. 1.6 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A)/TDS OFFICER HAS ERRED IN PLACING RE LIANCE ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF IDEA CEL LULAR AND KOLKATA TRIBUNAL IN THE CASE OF BHARTI CELLULAR LIMITED , WITHOUT APPRECIATING THAT THE FACTS IN THOSE CASES WERE DIFFEREN T FROM THE FACTS OF THE APPELLANTS CASE. 2. GROUND NO.2-NO TDS DEMAND CAN BE RAISED UNDER SE CTION 201(1) OF THE ACT I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 4 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LEARNED TDS OFFICER, AS UPHELD BY LEARN ED CIT(A), IS BAD IN LAW IN SO FAR AS IT SEEKS TO RECOVER TAX DEMAN D UNDER SECTION 201 OF THE ACT IN CONTRADICTION TO THE SETTLED PRIN CIPLE THAT THE PAYER CANNOT BE HELD LIABLE FOR PAYMENT OF THE TAX D EMAND IN CASES INVOLVING NON-DEDUCTION OF TAX AT SOURCE AND ONL Y INTEREST LIABILITY UNDER SECTION 201(1A) OF THE ACT, IF ANY, CAN BE LEVIED IN SUCH CASES. 3. GROUND NO.3 - NO INTEREST UNDER SECTION 201(1A) OF THE ACT CAN BE CHARGED 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED TDS OFFICER IN CHARGING INTEREST UNDER SECTION 201(1A ) OF THE ACT. ASSESSMENT YEARS 2010-11 AND 2011-12. GROUND NO.1 - THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON DISCOUNT EXTENDED TO ITS PRE-PAID DISTRIBUTORS ON DIS TRIBUTION OF PRE-PAID SERVICES. 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A)/TDS OFFICER HAS ERRED IN TREATING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT FOR NON-DEDUCTION OF TAX A T SOURCE UNDER SECTION 194H OF THE ACT ON DISCOUNT EXTENDED OF I NR 30,37,20,165 BY THE APPELLANT TO THE DISTRIBUTORS OF ITS PRE-PAID I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 5 SERVICES (FOR AY2011-12 INR 29,33,40,558). 1.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)/TDS OFFICER HAS ERRED IN UPHOLDING TH AT THE RELATIONSHIP BETWEEN THE APPELLANT AND THE PRE-PAID DIS TRIBUTORS IS NOT THAT OF PRINCIPAL TO PRINCIPAL AND THE DISCOUNT ALL OWED TO THEM IS IN NATURE OF COMMISSION LIABLE FOR TAX DEDUCTION AT SOURCE AS ENVISAGED UNDER SECTION 194H OF THE ACT. 1.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)/TDS OFFICER HAVE ERRED IN NOT APPRECI ATING THE FACT THAT THERE IS NO PAYMENT/CREDIT TO THE ACCOUNT OF DISTRIBUT ORS BY THE APPELLANT TOWARDS THE DISCOUNT EXTENDED TO THEM AND THEREFORE, PROVISIONS OF SECTION 194H OF THE ACT DO NOT APPLY ON SUCH DISCOUNT. 1.4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)/TDS OFFICER HAVE ERRED IN NOT APPRECI ATING THAT THE DISCOUNT ALLOWED BY THE APPELLANT IS NOT THE INCOME IN THE HANDS OF ITS DISTRIBUTORS AND THAT INCOME, IF ANY, ARISES ONL Y WHEN THE PRE-PAID SERVICES ARE FURTHER DISTRIBUTED BY THE DISTRI BUTORS. 1.5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)/TDS OFFICER HAVE ERRED IN NOT APPRECI ATING THE FACT THAT THERE IS NO FLOW OF MONIES FROM THE APPELLANT TO THE DISTRIBUTOR OF PRE-PAID SERVICES BUT RATHER FROM THE DI STRIBUTOR TO THE APPELLANT, AND HENCE, THE PROVISIONS OF SECTION 194 H OF THE ACT FAIL TO APPLY. 1.6 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING THE JUDGME NT RENDERED BY THE HONBLE RAJASTHAN HIGH COURT IN THE APPELLANTS OWN CASE AS I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 6 WELL AS OTHER LATEST FAVOURABLE ORDERS/JUDGMENT. GROUND NO.2-DISALLOWANCE UNDER SECTION 194J OF THE A CT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON DOMESTIC ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS. 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN SUMMARILY REJECTING THE G ROUNDS ON THE ISSUE OF APPLICABILITY OF SECTION 194J OF THE ACT ON T HE ROAMING CHARGES, WITHOUT EVEN ADJUDICATING ON THE SAME. WITHOUT PREJUDICE TO GROUND 2.1 2.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A)/TDS OFFICER HAVE ERRED IN NOT APPR ECIATING THE FACT THAT ROAMING SERVICES ARE STANDARD AUTOMATED SERVIC ES REQUIRING NO HUMAN INTERVENTION WHICH IS SINE QUA NON FOR A SERVICE TO QUALIFY AS A TECHNICAL SERVICE FOR THE PUR POSES OF SECTION 194J OF THE ACT. 2.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) HAVE ERRED IN NOT APPRECIATING THAT E VEN AS PER THE STATEMENT OF TECHNICAL EXPERTS, THE CARRIAGE OF CALL S IS AN AUTOMATIC ACTIVITY AND HUMAN INTERVENTION, IF ANY, IS R EQUIRED ONLY AT THE STAGE OF INTER-CONNECT SET-UP, CAPACITY ENHANCEME NT, MONITORING, MAINTENANCE, FAULT IDENTIFICATION, REPAIR, E TC. I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 7 2.4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) HAVE ERRED IN IGNORING THE STATEME NT OF TECHNICAL EXPERTS RECORDED BY THE INCOME-TAX AUTHORITIE S IN CASE OF VODAFONE CELLULAR LIMITED (NOW MERGED WITH APPELLANT I TSELF), IN THE CONTEXT OF ROAMING SERVICES, WHEREIN IT HAS BEEN CL EARLY OBSERVED THAT ROAMING SERVICES ARE AUTOMATED SERVICES R EQUIRING NO HUMAN INTERVENTION. 2.5 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A)/TDS OFFICER HAS ERRED IN NOT HOLDI NG THAT CHARACTERIZATION OF A PAYMENT MUST BE DONE HAVING REGAR D TO THE DOMINANT PURPOSE/INTENTION OF THE PAYMENT. 2.6 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING THE PRI NCIPLES LAID DOWN IN JUDICIAL PRECEDENTS CITED BY THE APPELLANT AND ALSO IGNORING THE BINDING APEX COURT JUDGMENT IN THE CASE OF CIT VS. DELHI TRANSCO LIMITED 68 TAXMANN.COM 231 AND CIT VS. KOTAK SECURITIES LIMITED 67 TAXMANN.COM 356. GROUND NO.3 - NO TDS DEMAND CAN BE RAISED UNDER SEC TION 201(1) OF THE ACT. 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER OF THE LEARNED TDS OFFICER, AS UPHELD BY LEARN ED CIT(A), IS BAD IN LAW IN SO FAR AS IT SEEKS TO RECOVER TAX DEMAN D UNDER SECTION 201 OF THE ACT IN CONTRADICTION TO THE SETTLED PRIN CIPLE THAT THE PAYER CANNOT BE HELD LIABLE FOR PAYMENT OF THE TAX D EMAND IN CASES INVOLVING NON-DEDUCTION OF TAX AT SOURCE AND ONL Y INTEREST LIABILITY UNDER SECTION 201(1A) OF THE ACT, IF ANY, CAN BE LEVIED IN I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 8 SUCH CASES. GROUND NO.4 - NO INTEREST UNDER SECTION 201(1A) OF THE ACT CAN BE CHARGED. 4.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED TDS OFFICER IN CHARGING INTEREST UNDER SECTION 201(1A ) OF THE ACT. 2. THE KEY ISSUES FORMULATING IN ALL THESE APPEA LS RELATING TO THE ASSESSEE BEING HELD AS AN ASSESSEE IN DEFAULT WITH IN THE MEANING OF SECTION 201 READ WITH SECTION 194H OF THE INCOME TA X ACT, 1961 (THE ACT) ON ACCOUNT OF DISCOUNT EXTENDED TO ITS PREPA ID DISTRIBUTORS (COMMON FOR ASSESSMENT YEARS 2007-08, 20 08-2009, 2009-10, 2010-11 AND 2011-12); AND BEING TREATED AS AN ASSESSEE IN DEFAULT IN TERMS OF SECTION 201 READ WITH SECTION 19 4J OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON DOME STIC ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS (FOR ASSESSMENT YEARS 2010-11 AND 2011-12). BEFORE PROCEEDING TO DEC IDE THE ISSUE AS CHALLENGED IN VARIOUS APPEALS, IT WOULD BE RELEV ANT TO CAPTURE THE BACKGROUND AND THE FACTS OF THE CASE AS CULLED OUT FROM RECORDS PRODUCED BEFORE. 3. THAT A SURVEY WAS CARRIED OUT ON THE PREMISES O F THE ASSESSEE (VODAFONE ESSAR DIGILINK LIMITED, HARYANA CIRCLE, KA RNAL) ON 14.01.209. DURING THE COURSE OF THE SURVEY, IT WAS FO UND THAT M/S VODAFONE ESSAR DIGILINK LIMITED, HARYANA CIRCLE WAS PROVIDING SERVICES OF POST-PAID MOBILE CONNECTIONS AS WELL AS PREPAID MOBILE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 9 CONNECTIONS THROUGH ITS DISTRIBUTORS. IT WAS FOUND DURI NG THE SURVEY THAT IN RESPECT OF POST-PAID MOBILE SERVICES, T HE ASSESSEE WAS DEDUCTING TAX AT SOURCE UNDER SECTION 194H OF THE A CT WHILE MAKING PAYMENTS OF DISCOUNT/COMMISSION TO ITS DISTRIBUTOR S. HOWEVER, THE ASSESSEE WAS NOT DEDUCTING ANY TAX IN RESP ECT OF THE MONETARY TRANSACTIONS ARISING OUT OF PROVIDING PREPAI D MOBILE SERVICES TO THE CONSUMERS. THE PREPAID MOBILE SERVICE S WERE PROVIDED BY THE ASSESSEE BY DISTRIBUTING PREPAID CARDS , SERVICE TICKETS, REFILL SLIPS, SIM CARDS ETC. TO THE CONSUMERS T HROUGH ITS DISTRIBUTION NETWORK. 4. ON THE BASIS OF THE SURVEY CARRIED OUT, SHOW CAU SE NOTICES WERE ISSUED TO THE ASSESSEE TO SHOW CAUSE AS TO WHY IT S HOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT IN TERMS OF SEC TION 201(1) OF THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194H IN RESPECT OF THE DISCOUNT/COMMISSION ALLOWED TO THE PREPAI D DISTRIBUTORS. THE PERIOD UNDER CONSIDERATION IN THE SHOW CAUSE NOTICE WAS FROM 01.01.2007 TO 31.07.2007 AND FINANCI AL YEARS 2007-08 AND 2008-09. BY VIRTUE OF THE SHOW CAUSE NO TICE IN RESPECT OF THE DEFAULTS UNDER SECTION 194H, THE AMOUNTS O F DISCOUNT/COMMISSION WERE UNDER: FINANCIAL YEAR AMOUNT (INR) 01.01.2007 TO 31.07.2007 2,10,56,933 2007-08 17,18,06,175 2008-09 19,15,95,051 2009-10 30,37,20,165 2010-11 29,33,40,558 I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 10 5. FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12, I NFORMATION WAS CALLED FOR UNDER SECTION 133(6) OF THE ACT REGARD ING TAX DEDUCTED AT SOURCE BY THE ASSESSEE. APART FROM REQUIRI NG THE ASSESSEE TO PROVIDE THE DETAILS OF DISCOUNTS OFFERED O N PREPAID SIM CARDS, RECHARGE COUPONS ETC., THE ASSESSING OFFICER A LSO REQUIRED THE ASSESSEE TO GIVE DETAILS OF THE ROAMING CHARGES PA ID TO OTHER TELECOM OPERATORS AND THE TDS DEDUCTED THEREON. 6. AFTER REJECTING THE ASSESSEES CONTENTION VIDE OR DER DATED 29.03.2011, THE INCOME TAX OFFICER (TDS), KARNAL TREA TED THE ASSESSEE-IN-DEFAULT UNDER THE PROVISIONS OF SECTION 19 4H OF THE ACT ON THE DISCOUNT/COMMISSION ALLOWED TO THE DISTRIBU TORS FOR AYS 2007-08, 2008-09 AND 2009-10. SIMILARLY, BY WAY OF A COMMON ORDER DATED 17.02.2012 THE ASSESSEE WAS ALSO TREATED AS ASSESSEE IN DEFAULT FOR THE SAME ISSUE FOR AYS 2010 -11 AND 2011- 12. WE MAY CLARIFY THAT THE ISSUE OF TREATING THE ASSES SEE AS BEING IN DEFAULT FOR NON-DEDUCTION OF TAX UNDER SECTION 194J OF THE ACT IN RESPECT OF THE ROAMING CHARGES IS CONFINED ONLY TO AY 2010-11 AND 2011-12 AND BY WAY OF THE ORDER DATED 17.12.2012 THE ASSESSEE WAS HELD AS AN ASSESSEE IN DEFAULT IN RES PECT OF THE ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS. 7. FOR TREATING THE ASSESSEE AS AN ASSESSEE IN DEF AULT FOR THE DISCOUNT/COMMISSION ALLOWED TO ITS DISTRIBUTORS, THE AO REJECTED THE DISCOUNT ALLOWED BY THE ASSESSEE WHILE RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IDEAL CELLULAR LIMITED [(2010) 325 ITR 148] AND CONCLUDED THAT THE ASSESSEE WAS IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE UNDER SECTION 194H OF THE ACT. THE AO ALSO RELIED ON THE DECI SION OF THE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 11 KOLKATA BENCH OF THE INCOME TAX APPELLATE TRIBUNAL ( ITAT) IN THE CASE OF ACIT V/S BHARTI CELLULAR LIMITED [(2007) 108 TTJ 38] AND THE COCHIN BENCH DECISION IN THE CASE OF VODAFONE ESS AR LIMITED V/S ACIT [(2010) 129 TTJ 222]. 8. FOR AY 2010-11 AND 2011-12 ALSO, THE AO CAME T O THE SAME CONCLUSION BY FOLLOWING THE SAME JUDGMENTS AND HELD THE ASSESSEE TO BE IN DEFAULT IN TERMS OF SECTION 194H READ WITH SEC TION 201 OF THE ACT. 9. AS POINTED OUT ABOVE, FOR AY 2010-11 AND 2011-12 , ANOTHER ISSUE WAS ON ACCOUNT OF NON-DEDUCTION OF TAX ON THE RO AMING CHARGES PAID BY THE ASSESSEE TO OTHER TELECOM OPERATORS . THE AO IN HIS ORDER DATED 17.02.2012 TREATED THE SAID PAYMENTS A S BEING IN THE NATURE OF FEE FOR TECHNICAL SERVICES WHICH REQU IRED DEDUCTION OF TAX AT SOURCE UNDER SECTION 194J OF THE ACT. HAVING R EJECTED THE CONTENTIONS OF THE ASSESSEE, THE AO CONCLUDED THAT THE ASS ESSEE WAS REQUIRED TO DEDUCT TAX ON AN AMOUNT OF RS.25,80,15, 841 FOR AY 2010-11 AND RS.32,76,64,361 FOR AY 2011-12. 10. AGGRIEVED WITH THE ORDERS PASSED UNDER SECTIO N 201, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS). THE LD. CIT (A) ALSO REJECTED THE ASSESSE ES ARGUMENTS WHILE RELYING ON THE DECISIONS CITED BY THE AO AND PR IMARILY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR LIMITED (SUPRA). THE CIT (A) ALSO CONFIRMED THE CONCLUSIONS OF THE AO ON THE ISSUE OF THE APPLICABILIT Y OF SECTION 194J ON THE ROAMING CHARGES PAID BY THE ASSESSEE TO O THER TELECOM OPERATORS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. CONTENTIONS RAISED BY THE LEARNED COUNSEL FOR THE ASSES SEE-SECTION I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 12 194H: 11. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE, MR. DEEPAK CHOPRA, FIRST OF ALL TOOK US THROUGH THE ORDER OF THE AO DATED 29.03.2011, PASSED UNDER SECTION 201(1) OF THE ACT BY VIRTUE OF WHICH THE ASSESSEE WAS HELD TO BE AN ASSESSEE IN DE FAULT IN RESPECT OF DISCOUNT/COMMISSION ALLOWED TO THE DISTRIBUT ORS FOR THE PREPAID SIM CARDS, SERVICE TICKETS, REFILL SLIPS ETC. (PRE-PAID SERVICES). AT THE VERY OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IMPUGNED ORDERS UNDER SECTION 201 OF TH E ACT WERE PASSED BY THE TDS OFFICER IN KARNAL AND AS SUC H THE JURISDICTIONAL HIGH COURT WAS THAT OF THE HIGH COURT OF P UNJAB & HARYANA, WHICH HAD NOT RENDERED ANY DECISION IN RESP ECT OF THE SAID ISSUE OF WHETHER THERE AROSE ANY OBLIGATION ON THE ASSESSEE TO DEDUCT TAX UNDER SECTION 194H OF THE INCOME TAX ACT, 196 1 (ACT) IN RESPECT OF DISCOUNTS GRANTED BY THE ASSESSEE TO ITS D ISTRIBUTORS ON PRE-PAID SIM CARDS ETC. HE SUBMITTED THAT THIS ISSUE H AS COME UP BEFORE SEVERAL HIGH COURTS AND THERE WAS DIVERGE NCE OF JUDICIAL OPINION ON THE SAME. HE FURTHER SUBMITTED THAT THE HONBL E DELHI, KOLKATA, KERALA AND ANDHRA PRADESH HIGH COURTS HAD DE CIDED THE ISSUE FOLLOWING THE JUDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR LIMITED (SUPRA), WHILE THE HON BLE KARNATAKA HIGH COURT IN BHARTI AIRTEL LTD. VS. DCIT (372 ITR 33)] ; AND RAJASTHAN HIGH COURT IN HINDUSTAN COCA-COLA BEVERAGES VS. CIT (402 ITR 539) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF VODAFONE ITSELF. 12. THE LD. COUNSEL FURTHER SUBMITTED THAT IN THE ABS ENCE OF ANY DECISION OF THE JURISDICTIONAL HIGH COURT, PUNJA B & HARYANA, IN TERMS OF THE SETTLED POSITION OF LAW, A VIEW IN FAVOU R OF THE ASSESSEE SHOULD BE TAKEN WHILE FOLLOWING THE DECISIO NS OF I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 13 KARNATAKA AND RAJASTHAN HIGH COURTS. HE FURTHER SUBMITTE D THAT A COORDINATE BENCH OF THE DELHI TRIBUNAL IN THE CASE OF IDEA CELLULAR LIMITED ITSELF HAS DECIDED THE ISSUE IN ITS FA VOUR, NOTING THAT THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR (SUPRA) ITSELF, WAS NOT THE JURISDICTIO NAL HIGH COURT AS IN THAT CASE THE INCOME TAX OFFICER (TDS), ROHTAK H AD FRAMED THE SECTION 201 ORDERS AND THE JURISDICTIONAL HIGH CO URT WAS THAT OF PUNJAB & HARYANA. A COPY OF THE DECISION DATED 01. 05.2018 IN THE CASE OF DCIT, TDS CIRCLE, GURGAON VS. IDEA CELLU LAR LIMITED IN ITA NO. 852/DEL/2015 WAS PLACED BEFORE US VIDE SUBM ISSIONS DATED 29.7.2019. HE FURTHER RELIED ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL DATED 11.06.2018 IN THE CASE OF INCOME TAX OFFICER (TDS), GURGAON VS. IDEA CELLULAR LIMITED, HARYANA CIRCLE IN ITA NO.2299/DEL/2015 WHERE THE EAR LIER DECISION DATED 01.05.2018 WAS FOLLOWED AND THE DEPARTM ENT APPEAL WAS DISMISSED. HE ALSO BROUGHT TO OUR ATTENTION THE CONTENTIONS OF PARA 6 OF THE TRIBUNAL ORDER DATED 01.0 5.2018 (IN ITA NO. 852/DEL/2015) WHERE NOTING THE ABSENCE OF JUR ISDICTIONAL HIGH COURT ON THIS ISSUE, RELATING TO GURGAON), THE COO RDINATE BENCH OF THIS TRIBUNAL FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUC TS LIMITED (88 ITR 192) AND DECIDED THE ISSUE IN FAVOUR OF THE TA X PAYER. 13. THE LD. COUNSEL FURTHER SUBMITTED THAT THE PERIOD U NDER CONSIDERATION FOR WHICH THE IMPUGNED ORDERS HAVE BEE N PASSED WAS FROM 01.01.2007 ONWARDS WHEN THE COMMERCIAL REL ATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTORS HAD UNDERGON E A CHANGE (GIVEN THE CHANGE OF OWNERSHIP OF THE ASSESSEE FROM HUTCHISON TO VODAFONE). HE FURTHER SUBMITTED THAT IN THE O RDER U/S 201 ITSELF, IT HAD BEEN POINTED OUT BEFORE THE AO TH AT DURING I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 14 THE PERIOD APRIL 2005 TO DECEMBER 2006, THE DISTRIBUTORS OF PREPAID STARTER PACKS AND SERVICE TICKETS ACTED AS AGE NTS OF THE ASSESSEE IN HARYANA CIRCLE AND WERE ENTITLED TO COMMIS SION AS PER THE TERMS OF THE AGREEMENT ENTERED INTO WITH THEM. HE F URTHER POINTED OUT THAT FROM THE SECTION 201 ORDER ITSELF IT WAS EVIDENT THAT THE ASSESSEE HAD SUBMITTED COPIES OF AGREEMENTS PRI OR TO JANUARY 2007 FOR THE PERUSAL OF THE AO. HOWEVER, W.E. F. JANUARY 2007, THE COMMERCIAL ARRANGEMENTS BETWEEN VODAFONE E SSAR DIGILINK LIMITED, HARYANA CIRCLE AND THE DISTRIBUTORS CHANGED FROM PRINCIPAL TO AGENT TO THAT OF PRINCIPAL TO PRINCI PAL. UNDER THE NEW ARRANGEMENT, VODAFONE ESSAR DIGILINK LIMITED, HA RYANA CIRCLE, TRANSFERRED ITS PREPAID TALK TIME TO THE DISTRIBUT ORS AT A DISCOUNT AND THE DISTRIBUTORS IN TURN DISTRIBUTED THE SAM E TO THE RETAILERS, THE RETAILERS THEREAFTER TRANSFER THE SAME TO TH E ULTIMATE SUBSCRIBERS. AT EACH LEVEL OF THE DISTRIBUTION, THE PAR TY DISTRIBUTING THE PREPAID TALK TIME RETAINS A MARGIN FOR ITS RISK AND EFFORTS, WHILE VODAFONE ESSAR DIGILINK LIMITED, HARYANA CIRCLE ASSU MED THE RESPONSIBILITY FOR THE PROVISION OF SERVICES TO THE SU BSCRIBERS. ACCORDINGLY, HE SUBMITTED THAT POST JANUARY 2007, THE ASS ESSEE ALSO ACCOUNTED FOR REVENUES ON THE BASIS OF CONSIDERA TION RECEIVED FROM THE DISTRIBUTORS, I.E., THE PRICE ON WHICH THE PR EPAID TALK TIME WERE TRANSFERRED TO THE DISTRIBUTOR. AS AN EXAMPLE HE STATED THAT SUPPOSE THE MRP OF PREPAID TALK TIME IS RS.100 AND THE ASSESSEE SOLD THE SAME TO THE DISTRIBUTOR AT RS.96, THE ASSESSEE ACCOUNTED FOR RS.96 ONLY AS ITS REVENUE. THUS, IT WAS SUBMITTED THAT NO COMMISSION WAS PAID BY THE ASSESSEE TO ITS DISTRIBUTOR S FOR DISTRIBUTION OF ITS PREPAID SIM CARDS AND TALK TIME FRO M JANUARY 2007 ONWARDS AND THERE BEING A CHANGE IN THE COMMERC IAL ARRANGEMENT, THERE WAS NO OBLIGATION TO WITHHOLD ANY TAX ON THE AMOUNT OF DISCOUNT/COMMISSION GIVEN TO THE DISTRIBUTORS. I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 15 14. THE LD. COUNSEL FURTHER SUBMITTED THAT WITHOUT APPR ECIATING THE CHANGE IN THE COMMERCIAL ARRANGEMENT, THE AO SIMPLY FOLLOWED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF IDEA CELLULAR LIMITED (SUPRA), WHICH WAS RENDERED FOR AY 2003-04 AND 2004-05. HE FURTHER POINTED OUT THAT THE AO REPRODUCED A PORTION OF HONBLE DELHI HIGH COURT JUDGMENT WITHOUT REALLY APP RECIATING THE CONTEXT AND WITHOUT APPRECIATING THAT THE HONBLE DELH I HIGH COURT HAD REJECTED THE ARGUMENT OF SALE OF GOODS IN RE SPECT OF THE SIM CARDS SINCE IN THAT CASE THE SIM CARDS WERE TO BE R ETURNED BACK TO IDEA CELLULAR LIMITED, WHICH THE HIGH COURT HAD HELD WAS AN ANTITHESIS OF SALE. HE FURTHER SUBMITTED THAT IT WAS I N THE PECULIAR FACTS OF THAT CASE THAT THE HONBLE DELHI HIGH C OURT IN THE CASE OF IDEA CELLULAR LIMITED (SUPRA) HELD THAT THE DIS COUNT OFFERED WAS IN THE NATURE OF COMMISSION AS THE DISTRIBUTOR WAS ACTING AS AN AGENT. 15. LD. COUNSEL ALSO SUBMITTED THAT THE HONBLE KARNA TAKA HIGH COURT (SUPRA) IN THE CASE OF THE ASSESSEE ITSELF HAD D ISTINGUISHED THE JUDGMENT OF THE DELHI HIGH COURT WHILE OBSERVING TH AT THE HONBLE DELHI HIGH COURT DID NOT CONSIDER THAT SERVICES CAN BE BOUGHT AND SOLD. THE HONBLE KARNATAKA HIGH COURT HELD , AFTER CONSIDERING THE DECISION OF IDEA CELLULAR AND OTHER D ECISIONS REFERRED TO BY THE LD. DR, THAT SERVICES CAN BE BOUGHT AND SOLD. THUS, AFTER ANALYSING CLAUSES OF AGREEMENTS OF VARIO US SERVICE PROVIDERS HELD THAT THE RELATION BETWEEN THE DISTRIBUTOR AND SERVICE WAS PRINCIPAL-TO-PRINCIPAL AND THERE WAS NO REQUIREME NT TO WITHHOLD TAX UNDER THE PROVISIONS OF SECTION 194H OF T HE ACT ON THE DISCOUNTS. HE ALSO POINTED OUT THAT THE COMMERCIAL ARRANGEMENTS AS NOTED BY THE KARNATAKA HIGH COURT ARE A KIN TO I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 16 THE ASSESSMENT YEARS UNDER CONSIDERATION. 16. IN ORDER TO APPRECIATE THE CONTENTIONS IN PROPE R PERSPECTIVE WE HAD DIRECTED THE ASSESSEE TO FURNISH RELEVANT AGREE MENTS INCLUDING THE AGREEMENTS RELATING TO THE PERIOD PRIOR TO JANUARY 2007 AND AFTER JANUARY 2007, WHICH WAS COMPLIED WITH ALONG WITH DETAILED WRITTEN SUBMISSIONS BRINGING OUT THE DISTINCTION BETWEEN THE TWO AGREEMENTS AS WELL AS THE DISTINCTION ON FACTS BETWEEN THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR LIMITED (SUPRA) AND THE FACTS APPLICABLE FOR THE RELEVANT AYS. 17. LD. COUNSEL SUBMITTED THAT THE ENTIRE CASE OF THE RE VENUE IS THAT UNDER THE NEW AGREEMENT ALSO THE APPELLANT IS IMPOSI NG RESTRICTIONS ON THE DISTRIBUTOR AND THE DISTRIBUTOR IS R EPORTING TO THE APPELLANT AND THE APPELLANT IS ALSO EVALUATING THE ITS PERFORMANCE. HE SUBMITTED THAT THE ISSUE OF IMPOSITION O F CONDITIONS BY A TRANSFEREE ON THE TRANSFEROR IS NO LO NGER RES- INTEGRA. THIS ISSUE WAS EXAMINED BY THE HONBLE SUPR EME COURT IN THE CASE OF BHOPAL SUGAR INDUSTRIES (AIR 1977 SC 1275 ) AND THE APEX COURT HAD OBSERVED THAT MERE IMPOSITION OF CONDITI ONS WOULD NOT CONVERT AN AGREEMENT OF SALE INTO AN AGREEMENT OF AGENCY. HE SUBMITTED THAT GIVEN THE CHANGE OF THE CONTRACTUAL ARRANGE MENTS IN THE PRESENT CASE, THE RELATIONSHIP BETWEEN THE PARTIE S HAS TO BE VIEWED QUA THE INTENTION OF THE PARTIES AND IT WAS NOT OPE N TO THE DEPARTMENT TO GIVE A DIFFERENT CONNOTATION TO SUCH ARRANGE MENTS SO AS TO ARRIVE AT ERRONEOUS CONCLUSIONS. HE ALSO RELIED ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE O F BANK OF INDIA VS. K. MOHANDAS (289) 5 SCC 313, AND INVITED T HE ATTENTION OF THE BENCH TO THE FOLLOWING OBSERVATIONS MADE BY THE HONBLE SUPREME COURT: I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 17 TRUE CONSTRUCTION OF A CONTRACT MUST DEPEND UPON IMPORT OF WORDS USED AND NOT UPON WHAT THE PARTIES CHOOSE TO SAY AFTERWARDS. NOR DOES SUBSEQUENT CONDUCT OF THE PARTIES IN THE PERFORMANCE OF CONTRACT AFFECT THE TRUE EFFECT OF CLEAR AND UNAMBIGUOUS WORDS USED IN CONTRACT. INTENTION OF THE PAR TIES MUST BE ASCERTAINED FROM THE LANGUAGE THEY HAVE USED, C ONSIDERED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES AND THE OBJE CT OF THE CONTRACT. NATURE AND PURPOSE OF CONTRACT IS AN IMPORTANT GUIDE IN ASCERTAINING INTENTION OF THE PARTIES. CONTRACT MUST BE R EAD AS A WHOLE IN ORDER TO ASCERTAIN TRUE MEANING OF ITS SEVERAL CLAUSES AND THE WORDS OF EACH CLAUSE SHOULD BE INTERPRETED SO AS TO BRING THEM IN HARMONY WITH OTHER PROVISIONS, IF THAT INTERPRETATION DOES NO VIOLENCE TO THE MEANING OF WHICH THEY ARE NATURALLY SUS CEPTIBLE. 18. LD. COUNSEL ALSO PLACED RELIANCE ON THE OTHER DECISIONS OF THE SUPREME COURT IN THIS CONTEXT BEING IN THE CASE OF NABHA POWER LIMITED VS. PUNJAB STATE CORPORATION LIMITED AND ANOTHER (2018) 11 SCC 508, SATYA JAIN (DEAD) THROUGH L.RS. AND ORS . VS. ANIS AHMED RUSHDIE (DEAD) (2013) 8 SCC 131 AND UNION OF INDIA VS. D. N. REVRI & CO. AND ORS., (1976) 4 SCC 147. THUS, HE SUBMITTED, THAT THERE IS A CLEAR MANDATE OF THE HONBLE SUPREME C OURT OF INDIA THAT BUSINESS EFFICACY AND THE INTENTIONS OF THE PARTIES SHOULD NOT BE MEDDLED WITH WHEN THE WRITTEN CONTRACTS ARE BLATANTLY CLEAR, SO AS TO DELIBERATELY APPLY CERTAIN P ROVISIONS OF LAW, WHICH ARE OTHERWISE NOT APPLICABLE - MORE SO TO CREATE LEGAL CONSEQUENCES, WHEN NONE EXIST. 19. THE LD. COUNSEL ALSO SUBMITTED THAT THE AFORESAI D PRINCIPLE IS ALSO APPLICABLE IN THE PRESENT CASE AND SUPPORTS THE CONTENTION I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 18 OF THE ASSESSEE THAT THE RELATIONSHIP BETWEEN THE ASSESSE E AND ITS PRE-PAID DISTRIBUTORS IS ON PRINCIPAL TO PRINCIPAL BA SIS AND NOT THAT OF A PRINCIPAL-AGENCY RELATIONSHIP. IN THE PRESENT CA SE AS WELL, FIXATION OF MRP BY THE APPELLANT IS NOT CONCLUSIVE OF THE ARRANGEMENT BETWEEN THE PARTIES AND DOES NOT RESULT INTO CREATION OF A PRINCIPAL AGENT RELATIONSHIP BETWEEN THE APPELL ANT AND THE PRE-PAID DISTRIBUTORS. IT WAS FURTHER SUBMITTED THAT WHERE THE AFORESAID CONDITION IS CONSIDERED CONCLUSIVE OF THE A RRANGEMENT BETWEEN THE PARTIES, ALL ARRANGEMENTS BETWEEN THE MANU FACTURER AND THE DISTRIBUTORS IN THE FMCG INDUSTRY WOULD BECOME A PRINCIPAL AGENT RELATIONSHIP SINCE IN SUCH CASES, M RP IS ALWAYS DETERMINED BY THE MANUFACTURERS. 20. HE FURTHER SUBMITTED THAT IN THE PRESENT CASE, SINC E RELATIONSHIP BETWEEN THE APPELLANT AND DISTRIBUTORS OF I TS PRE-PAID TALK TIME IS ON A PRINCIPAL TO PRINCIPAL BASIS, THE MARGIN EARNED BY THE DISTRIBUTORS CONSTITUTES TRADE DISCOUNT AND NOT COMMISSION OR BROKERAGE TO ATTRACT TAX DEDUCTION AT SOURCE UNDER SE CTION 194H OF THE ACT. THE AFORESAID CONTENTION IS SUPPORTE D BY THE DISTRIBUTION MODEL OF THE APPELLANT. OUR ATTENTION WAS DR AWN TO THE FOLLOWING TERMS OF THE DISTRIBUTOR AGREEMENT PLACED BEFORE US: THE PRE-PAID DISTRIBUTORS ARE FREE TO DISTRIBUTE THE TA LK TIME TO THE RETAILERS/ ELIGIBLE SUBSCRIBERS AT ANY PRICE SU BJECT TO THE MRP, ONCE THEY HAVE ACQUIRED THE SAME FROM THE APPELLA NT ON PAYMENT OF UPFRONT CONSIDERATION; THE DISTRIBUTORS IN SUCH CASES BECOME LIABLE TO THE APPELLANT AS DEBTORS FOR THE PRICE TO BE PAID FOR THE TALK TIME A ND NOT AS AGENTS; I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 19 THE OWNERSHIP IN THE TALK TIME PASSES TO THE DISTRIBU TORS THE MOMENT THEY TAKE DELIVERY OF THE RECHARGE COUPONS OR AN E-TOP-UP (REPRESENTING ENTITLEMENT/ RIGHT TO TALK TIME) IS CREDITED TO THEIR ACCOUNT; HAVING TAKEN DELIVERY OF THE TALK TIME, THE DISTRIBUTOR S ARE FREE TO USE THE SAME FOR THEIR OWN CONSUMPTION AND NOT NECESSARILY TRADE IN THE SAME BY PROVIDING IT AT A MARG IN TO RETAILERS/ SUBSCRIBERS; THE DISTRIBUTORS ENTER INTO AN INDEPENDENT ARRANGEMEN T WITH RETAILERS/ SUBSCRIBERS FOR DISTRIBUTION OF PRE-PAID S IM CARDS/ TALK TIME. THE RETAILERS DISTRIBUTE THE PRE-PAID SIM CARDS AN D TALK TIME TO THE SUBSCRIBERS AT ANY PRICE UPTO THE MRP PRESCRIBED BY THE APPELLANT. IN A PRE-PAID BUSINESS MODEL, SIGNIFICANT RISKS AN D REWARDS ARE TRANSFERRED TO THE PRE-PAID DISTRIBUTORS ON PROVIS ION OF SIM CARDS AND TALK TIME AND THE ARRANGEMENT WITH THE PRE-PAID DISTRIBUTORS IS ON A PRINCIPAL TO PRINCIPAL BASIS. THE SIM CARDS AND TALK TIME IS PROVIDED TO THE DISTRIBUTORS ON PAYMEN T OF THE CONSIDERATION UPFRONT. THE FACT THAT THE APPELLANT MAY FI X MRP FOR THE TALK TIME AND MAY IMPOSE CERTAIN OTHER RESTRICTIONS O N THE DISTRIBUTOR DOES NOT MAKE THE RELATIONSHIP A PRINCIPAL AGENT RELATIONSHIP. THESE COULD BE CONSTRUED AS PROVISIONS INSERTED BY THE APPELLANT TO SAVE FROM ANY THIRD PARTY CLAIMS WHIC H MAY ARISE. SUCH A STIPULATION IS THERE IN MOST DISTRIBUTORSHIP AG REEMENTS WHETHER THE DISTRIBUTOR IS A WHITE GOODS DISTRIBUTOR OR IS ENGAGED IN THE FMCG SECTOR. ANY LOSS SUFFERED BY THE DISTRIBUTORS ON ACCOUNT OF I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 20 UNAUTHORIZED USE OF TALK TIME (PURSUANT TO SAY PILFERA GE) OR NON- PAYMENT BY THE RETAILERS/ SUBSCRIBERS IS NOT MADE GOOD BY THE APPELLANT. THE ABOVE RELATIONSHIP IS SIGNIFICANTLY DIF FERENT FROM A TYPICAL PRINCIPAL - AGENT RELATIONSHIP, WHEREIN THE AGENT IS NOT THE OWNER OF THE GOODS AND HE IS INDEMNIFIED IF HE INCUR S ANY LOSS WHILE ACTING ON BEHALF OF THE PRINCIPAL. 21. IN CONTRAST, THE RESPONSIBILITY/OBLIGATIONS OF T HE CUSTOMER MANAGEMENT UNIT [CMU] OWNER IN THE OLD AGREEMENT DATED 18.06.2004 BETWEEN AIRCEL DIGILINK INDIA LTD. [ADIL] AND CHOKHANI DISTRIBUTORS WERE AS UNDER CLAUSE/ OBLIGATION/ RESPONSIBILITY REMARK IT SHALL BE THE PRIME RESPONSIBILITY OF CMU OWNER TO G ET, CHECK, VERIFY THE COMPLETE INFORMATION OF THE SUBSCRIBERS/PR OSPECTIVE AND OBTAIN ALL DOCUMENTS SUCH AS CUSTOMER APPLICATION FORM . CUSTOMER AGREEMENT FORM, PAN NO., RESIDENTIAL/OFFICE PROOF. PHOTO IDENTITY CARDS ETC OR ANY OTHER DOCUMENT/PROOF RE QUIRED BY AIRCEL ADIL WHETHER IN ITS DISCRETION OR AS PER THE REQ UIREMENT BY THE AUTHORITIES. THIS OBLIGATION IS AS PER THE TRAI RE GULATIONS AND THESE CONDITIONS ARE AMENDED EVERY NOW AND THEN. THIS AN INDUSTRY PRACTICE AND ALL THE DISTRIBUTORS/ AGENTS OPERA TING ACROSS THE COUNTRY FOR ALL THE TELECOM OPERATORS CARRY OUT THI S EXERCISE. IT MAY BE NOTED THAT THIS EXERCISE IS ONLY CARRIED OUT WHIL E SELLING NEW SIM CARD AND NOT WHILE RECHARGING THE TALK TIME. THE RECHARGE COUPONS ARE SOLD TO CUSTOMERS WHO ALREADY HAVE A SIM CARD AND NEED AN E-TOP UP OR RECHARGE COUPON. THE CMU OWNER SHALL FORWARD THE COMPLETE SET OF DOCUM ENTS TO I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 21 ADIL AT ITS SPECIFIED OFFICE. IN CASE, AT ANY POINT OF TIME, IF ANY DOCUMENT IS NOT FORWARDED TO ADIL, FOR ANY REASON WHATS OEVER, IT SHALL BE ASSUMED THAT THIS DOCUMENT(S) IS WITH CMU OWNE R AND IT SHALL BE THE RESPONSIBILITY OF CUM OWNER TO KEEP THESE DOCUMENTS IN SAFE CUSTODY AND FORWARD THE SAME TO ADIL WHENEVER IT IS ASKED FOR. NO SUCH CLAUSE IS PRESENT IN THE NEW AGREEMENT. THIS GIVES A FLAVOUR OF AGENCY RELATIONSHIP. THE CMU OWNER SHALL CARRY OUT ALL ITS OBLIGATION HERE UNDER AT ITS OWN COST AND EXPENSES INCLUDING BUT NOT LIMITED TO USAG E OF HIS/ITS OWN SPACE AND PERSONNEL ETC AND NO REIMBURSEM ENT, WHATSOEVER SHALL BE MADE BY ADIL TO THE CMU OWNER ON ANY ACCOUNT, WHATSOEVER. THIS IS A BASIC CONDITION WHERE IN THE CMU OWNER IS REQUIRED TO MAINTAIN ITS OWN PLACE OF BUSINES S. THIS CONDITION PREVAILS IN THE NEW AGREEMENT AS WELL. THE MAINTENANCE IS AT ITS OWN RISK. THE CMU OWNER SHALL BE FULLY RESPONSIBLE FOR THE EMP LOYMENT AND PAYMENT OF WAGES, ETC. TO ITS EMPLOYEES, ETC. AND SHALL FULLY COMPLY WITH ALL LAWS, RULES, REGULATIONS, NOTIFICATIONS, DIR ECTIONS ORDERS, ETC. OF THE GOVERNMENT WHETHER CENTRAL, STATE, LOCAL OR MU NICIPAL RELATING TO SUCH EMPLOYMENT, PAYMENT OF WAGES ETC. AND ALL OTHER MATTERS CONNECTED. THIS IS A BASIC CONDITION WHEREI N THE CMU OWNER IS REQUIRED TO MAINTAIN ITS OWN PLACE OF BUSINES S. THIS CONDITION PREVAILS IN THE NEW AGREEMENT AS WELL. THE MAINTENANCE IS AT ITS OWN RISK. ENSURE ALL PAYMENTS COLLECTED FOR AND ON BEHALF OF AD IL AND DUE TO ADIL UNDER THIS AGREEMENT ARE TENDERED IN A TIMELY M ANNER I.E. WITHIN 24 HOURS OR IN SUCH OTHER MANNER AS ADIL MAY AGREE. THE CMU OWNER SHALL COLLECT CASH FROM THE PROSPECTIVE SUBS CRIBERS / I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 22 SUBSCRIBER ONLY ON PRIOR WRITTEN PERMISSION FROM ADIL AND AS PER THE POLICY OF ADIL AND ITS INSTRUCTIONS COMMUNICATED F ROM TIME TO TIME OTHERWISE CMU OWNER SHALL RESTRAIN FROM COLLECTING CASH. NO SUCH CLAUSE IS PRESENT IN THE NEW AGREEMENT. THIS GIVES A FLAVOUR OF AGENCY RELATIONSHIP. COMPLY WITH ALL OF ADILS REQUIREMENTS IN RESPECT OF I NVOICING AND ACCOUNTS. NO SUCH CLAUSE IS PRESENT IN THE NEW AGREEME NT. THIS GIVES A FLAVOUR OF AGENCY RELATIONSHIP. MAINTAIN ADILS BRAND IMAGE AND COMPLY WITH ALL DIRE CTIONS AND GUIDELINES ISSUED IN RESPECT OF THE BRAND AND NOT DO A NYTHING TO TARNISH SPOIL OR REDUCE THE VALUE OF THE SAME. THIS I S A BASIC CONDITION WHICH IS PRESENT IN NEW AGREEMENT AS WELL. PROVIDE REPORTS ON CUSTOMERS EXPENSES, SERVICE, PURCH ASES, INVENTORY, COMPLIANCE, BILL COLLECTION AND ANY OTHER R ELEVANT DETAILS IN THE FORMAT AND AS REQUIRED BY ADIL. NO SUCH CLAUSE IS PRESENT IN THE NEW AGREEMENT. THIS GIVES A FLAVOUR OF AGENCY RELATIONSHIP. THOUGH UNDER THE NEW AGREEMENT THE DISTRIBUTOR IS REQU IRED TO PROVIDE REPORTS EVERY QUARTERLY BUT THAT IS REQUIRES ON LY FOR PURPOSE OF BETTERMENT OF HIS BUSINESS. MAKE PAYMENT TO ADIL FOR ANY AMOUNT DUE UNDER THIS AGR EEMENT BY WAY OF ACCOUNT PAYEE CHEQUE OR BANKERS DRAFT OR I N SUCH OTHER MANNER AS ADIL MAY AGREE. BASIC CONDITION PAY ALL LICENSE FEES, TAXES, DUTIES, SERVICE TAX AND A NY OTHER CHARGES, ASSESSMENTS OR PENALTIES WHETHER STATUTORY OR OTH ERWISE LEVIED BY ANY AUTHORITY IN CONNECTION WITH THE OPERATIO N OF THE CMU AND PROVIDING THE SERVICES. BASIC CONDITION F OR THE PURPOSE OF CARRYING OUT THE BUSINESS OF THE CMU. THIS CONDITI ON IS PRESENT I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 23 IN THE NEW AGREEMENT WHILE THIS AGREEMENT IS IN FORCE NOT ENTER INTO AGREEME NT WITH ANY OTHER PARTY WHERE SUCH PARTY COULD BE CONSIDERED TO B E A COMPETITOR TO THE BUSINESS. THIS CONDITION IS PRESENT IN BOTH THE AGREEMENTS FOR CARRYING OUT BUSINESS EFFECTIVELY. ENSURE THAT ALL ITS STAFF DEAL WITH THE CUSTOMERS IN A FRI ENDLY AND COURTEOUS MANNER AND COMPLY WITH ALL GUIDELINES ISSU ED BY THE CMU OWNER OR ADIL THIS CONDITION IS PRESENT IN BOTH THE AGREEMENTS. ITS A COMMON EFFORT BY BOTH THE PARTIES FOR CARRYING OUT BUSINESSES EFFECTIVELY. THIS CONDITION WILL BENEFI T BOTH THE PARTIES. COMPLY WITH ALL OTHER REASONABLE REQUESTS FROM ADIL FROM TIME TO TIME AS CONSIDERED NECESSARY TO FURTHER THE SPIRIT AND O BJECTS OF THIS AGREEMENT. GENERAL CONDITION PRESENT IN BOTH THE AGREEMENTS. IN THE EVENT OF ANY LOSS/ MISPLACEMENT ETC OF ANY / ALL CHEQUES/ DRAFTS, THE CMU OWNER SHALL INTIMATE THE DETAILS THEREOF TO ADIL WITHIN THREE HOURS OF HIS DISCOVERING OF THE LOST/ MI SPLACED THE CHEQUES/ DRAFTS. THE CMU OWNER SHALL BE RESPONSIBLE TO ENSURE COLLECTION OF AMOUNTS COVERED BY SUCH LOSS/ MISPLACED CHEQUES/DRAFTS WITHIN A PERIOD OF 7 DAYS COMMENCING F ROM THE TIME OF SUCH LOSS/MISPLACEMENT FAILING WHICH THE CMU OWNER SHALL BE RESPONSIBLE TO ADIL FOR LOSS OF INTEREST AS ALSO CONSEQUENTIAL LOSSES FOR NON-COLLECTION OF THE AMOUNTS COVERED BY SUCH/PART OF SUCH CHEQUES/ DRAFTS. THIS CONDITION IS NOT PRESENT IN THE NEW AGREEMENT AND CLEARLY DEMONSTRATES AGENCY RELATIONSHIP. THIS ACTIVITY IS NOT CARRIED OUT BY A DI STRIBUTOR UNDER I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 24 THE NEW AGREEMENT AS HE CARRIES OUT BUSINESS AND BEAR S THE RISK. CMU OWNER HEREBY AGREES THAT UPON TERMINATION OF THIS AGREEMENT FOR ANY REASON THE CMU OWNER WILL RETURN ALL EQUIPMENT AND FURNITURE SUPPLIED BY ADIL FORTHWITH UP ON REQUEST AND REMOVE ALL ADIL SIGNAGE AND ALL OTHER ITEMS INDI CATING THAT THE PREMISES WERE OPERATED AS ADILS CMU. CMU OWNER HEREBY AGREES TO GRANT AN IRREVOCABLE LICE NSE TO ADIL AND ITS DESIGNATED EMPLOYEES TO ENTER THE PREMISES AND REMOVE ALL ADIL SIGNAGES IF THE CMU OWNER HAS NOT DONE SO ITSEL F TO THE SATISFACTION OF ADIL WITHIN 7 DAYS OF TERMINATION OF THE AGREEMENT. THIS IS A CONDITION WHICH INDICATED THAT ON TERMINATION THE CMU OWNER WILL GIVE IRREVOCABLE LICENSE TO ADIL TO E NTER THE PREMISES OF THE CMU OWNER TO REMOVE THE SIGNAGES ETC. A SIMILAR CONDITION IS ALSO PRESENT IN THE NEW AGREEME NT BUT THERE ARE SPECIFIC CONDITIONS FOR TERMINATION AND AS AN EFFE CT OF TERMINATION BOTH THE PARTIES AGREE THAT THE DISTRIBUTOR SH ALL RETURN ALL EQUIPMENT/ FURNITURE AND REMOVE SIGNAGES. IT IS CLARIFIED THAT THE EQUIPMENT AND FURNITURE WHICH MAY BE PROVIDED BY TH E APPELLANT WOULD BE AS A PROMOTIONAL ACTIVITY WITH CUSTOM IZATION OF THE APPELLANTS AND AS SUCH WOULD BECOME USELESS FOR THE DISTRIBUTOR AFTER THE TERMINATION. I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 25 22. APART FROM THE ABOVE, THERE ARE CERTAIN OBLIGATION S OF THE CMU OWNER IN RELATION TO THE SUBSCRIBERS AS PRESCRIBED UN DER THE AGREEMENT AT PAGE 112 OF THE PAPER BOOK VOL II. THES E CONDITIONS ARE NOT PRESENT IN THE NEW AGREEMENT. THE DISTRIBUTOR IS NOT DEALING WITH THE SUBSCRIBERS DIRECTLY, THE RETAILERS IS SELLING THE SIM CARD AND RECHARGE COUPON ETC. TO THE SUBSCRIBERS/C USTOMERS. THERE ARE OTHER SERVICES ALSO TO BE PROVIDED BY THE CM U OWNER UNDER THE OLD AGREEMENT AS PRESCRIBED IN SCHEDULE 1 OF THE AGREEMENT AT PAGE 117 OF THE PAPER BOOK VOL. II WHIC H WERE HIGHLIGHTED AS UNDER PROVIDE ASSISTANCE TO CUSTOMERS ON HANDSET SERVICING A ND REPLACEMENT OF HANDSETS UNDER WARRANTY. THIS CONDITION IS NOT PRESENT IN THE NEW AGREEMENT AND THUS THERE IS NO SUCH OBLIGATION ON THE DISTRIBUTOR. ASSIST CUSTOMERS IN INSURANCE CLAIM SETTLEMENTS. NO SUC H CONDITION/OBLIGATION IS PRESENT IN THE NEW AGREEMENT. ACCEPTANCE OF CUSTOMERS REQUESTS TO PROVIDE ITEMIZED OR DUPLICATE BILL REQUEST AND PROVIDE CLARIFICATIONS ON BILL ENQUI RIES. THIS IS CONDITION PERTAINS TO A POST PAID MODEL. BILL COLLECTION AND ACCEPTANCE OF PAYMENTS ON BEHALF O F ADIL FOR TELEPHONE BILLS AND SIM CARDS ON THE FOLLOWING BASIS : A. ANY PAYMENT BY CHEQUE OR CREDIT CARD WILL BE PAYAB LE TO ADIL AND HELD FOR DAILY COLLECTION BY ADIL; B. THE CMU OWNER SHALL PREPARE A DAILY SUMMARY STATEM ENT OF ALL PAYMENTS RECEIVED THE PREVIOUS DAY AND FORWARD THI S TO ADIL BY 2 PM EACH DAY. I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 26 C. IN RESPECT OF ALL PAYMENTS RECEIVED BY THE CMU OWN ER FOR SIM CARDS, THE CMU OWNER WILL ENSURE THAT ADIL RECEIVE S ITS CHEQUE AND THE APPLICATION FORM WITHIN 28 HOURS OF EA CH PURCHASE. THESE CONDITIONS ARE NO PRESENT IN THE NEW AGREEMENT . THE DISTRIBUTOR UNDER THE NEW AGREEMENT DOES NOT PERFORM SU CH FUNCTIONS ON BEHALF OF THE ASSESSEE. FACILITATE SIM/ SPEED/ CASH CARD ACTIVATION AND REPLACE MENT. THIS FUNCTION HAS TO BE PERFORMED BY THE DISTRIBUTOR ON LY AS HE BECOMES THE OWNER OF THE SERVICE TICKET AND IS OBLIG ED TO PERFORM THIS FUNCTION. ACTIVITIES UNDER THE HEAD PLANNING, PROCESSING AND MA RKET DEVELOPMENT THESE FUNCTIONS ARE NOT PERFORMED BY A DISTRIBUTOR UNDER THE NEW AGREEMENT 23. LD. COUNSEL SUBMITTED THAT, HOWEVER, IMPOSITION OF SUCH CONDITIONS WILL NOT CONVERT A CONTRACT OF SALE INTO A C ONTRACT OF AGENCY. HE FURTHER BROUGHT TO OUR ATTENTION THE DECISION O F THE KOLKATA BENCHES IN THE CASE OF M/S VODAFONE EAST LIMITE D (SINCE AMALGAMATED WITH VODAFONE MOBILE SERVICES LIMITED) IN ITA NOS.1499-1502/KOL/2015 FOR AY 2010-11 AND 2011-12, WHERE AN IDENTICAL ISSUE HAD COME UP AND SIMILAR PLEAS WERE TA KEN QUA THE CHANGE OF THE COMMERCIAL ARRANGEMENTS. HE FURTHER DREW OUR ATTENTION TO PARA 8.2 OF THE ORDER OF THE KOLKATA BENCH O F THE TRIBUNAL, THE CHANGE OF THE COMMERCIAL ARRANGEMENT WE RE DULY NOTED. HE POINTED OUT THAT THE ITAT DISTINGUISHED THE JURISDICTIONAL HIGH COURT JUDGMENT (KOLKATA HIGH COURT) IN CASE OF I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 27 HUTCHISON TELECOM EAST V/S CIT (375 ITR 566). THE ITA T NOTING THE CHANGE OF THE COMMERCIAL ARRANGEMENTS, IN PARA 8.4 OF ITS ORDER FOLLOWED THE DECISION OF THE HONBLE KARNATAKA AND RAJASTHAN HIGH COURTS WHICH HIGH COURTS (SUPRA) HAD D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE TAKING NOTE OF THE COMM ERCIAL TERMS AS APPLICABLE IN THE NEW AGREEMENTS. HE FURTHER SUBM ITTED THAT BOTH BEFORE THE HONBLE KARNATAKA AS WELL AS RAJASTHAN HIGH COURTS, THE ASSESSEE WAS A PARTY. HE FURTHER SUBMITTED THAT THE ITAT KOLKATA BENCH IN PARAS 9 AND 10 OF ITS ORDER NOTE D THE CHANGE OF FACTS, DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE. 24. ON THE ISSUE OF PAYMENT OF ROAMING CHARGES, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION RENDERED BY THE KOLKATA TRIBUNAL IN THE CASE OF VODAFONE EAST LIMITED VS. ACI T (2015) [(43 ITR (TRIB) 0551 (KOLK)] WHICH IN THE ASSESSEES OWN CASE ITSELF HAD EXAMINED THE APPLICABILITY OF SECTION 194J QUA THE PAY MENT OF ROAMING CHARGES TO OTHER TELECOM OPERATORS AFTER TAKING INTO CONSIDERATION THE STATEMENTS RECORDED AS PER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BHARTI [330 ITR 2 39 (SC)]. HAVING CONSIDERED THE DECISIONS OF HONBLE DELHI HIG H COURT IN THE CASE OF CIT V/S BHARTI CELLULAR LIMITED (390 ITR 139) , THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S BH ARTI CELLULAR LIMITED (330 ITR 239) AND THE STATEMENTS OF THE EXPERT WITNESSES RECORDED POST THE DIRECTIONS OF THE HONBLE S UPREME COURT, THE KOLKATTA BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND HELD THAT THE PAYMENT OF RO AMING CHARGES DID NOT ATTRACT DEDUCTION OF TAX UNDER SECTION 1 94J OF THE ACT. THIS ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE DELHI BENCH OF THE TRIBUNAL IN DCIT VS. VODAFONE ESSAR DIGILINK LTD. (2018) (52 CCH 181) (DEL.). THE LD. C OUNSEL FOR THE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 28 ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LIMITED (2016 ) (383 ITR 1), THE CASE OF VODAFONE DIGILINK LIMITED VS. CIT (TDS) CHANDIGARH (167 ITD 679), THE JUDGMENT OF THE BOMBAY BENCH IN THE CASE OF RELIANCE COMMUNICATION LIMITED VS. ACIT (TDS) [(2016 ) 69 TAXMANN.COM 307 (MUM-TRIB)]. THE LD. COUNSEL SUBMITTE D THAT BOTH THE ISSUES NOW STAND DECIDED IN FAVOUR OF THE AS SESSEE WHERE IT WAS HELD THAT THERE WAS NO OBLIGATION ON THE ASSESSE E TO WITHHOLD TAX UNDER THE PROVISIONS OF SECTION 194H ON T HE DISCOUNT ALLOWED TO DISTRIBUTORS ON PREPAID SIM CARDS AND THER E WAS NO OBLIGATION TO WITHHOLD ANY TAX ON THE PAYMENT OF ROAMIN G CHARGES TO OTHER TELECOM OPERATORS UNDER SECTION 194J OF THE AC T, SINCE SUCH PAYMENTS DID NOT PARTAKE THE CHARACTER OF FEES FOR TECHNICAL SERVICES. ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE (CIT-DR) 25. PER CONTRA, THE LD. CIR DR FILED WRITTEN SUBMISSIO NS DATED 28.3.2019, 16.7.2019 AND 24.9.2019, WHICH EXTENSIVE LY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES, THE JUDGMENT OF THE HONBLE DELHI HIGH COURT, JUDGMENTS OF OTHER HIGH COURTS WHERE THE MATTER HAD BEEN DECIDED AGAINST THE ASSESSEE. THE LD. DR SUBMITTED THAT AS REGARDS THE GROUNDS RELATING TO APPLICA BILITY OF SECTION 194H IS CONCERNED, THE SAME STANDS COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR LIMITED (SUPRA). THE LD. DR E MPHASIZED THAT THE PRESENT ASSESSEE HAS NOW MERGED WITH IDEA CELLULA R LIMITED AND HENCE THE HONBLE DELHI HIGH COURT DECISION IS AP PLICABLE. THEREAFTER, THE LD. DR SUBMITTED THAT THE HONBLE DELHI HIGH I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 29 COURT HAD EXTENSIVELY DISCUSSED THE MATTER IN ITS JUDGME NT AND HAVING CONSIDERED THE SAME, DECIDED THE ISSUE AGAINST THE ASSESSEE. THE DR ALSO SUBMITTED THAT THE ASSESSEE HAD M ADE A VERY WEAK ATTEMPT TO DISTINGUISH ITS CASE FROM THE DELH I HIGH COURT JUDGMENT IN THE CASE OF IDEA CELLULAR LIMITED AND DREW OUR ATTENTION TO SIMILAR CLAUSES BEING PRESENT IN THE PRE 20 07 AND POST 2007 AGREEMENTS ON THE RETURN AND REPLACEMENT AND EFFEC T OF TERMINATION. THE LD. DR ALSO RELIED ON VARIOUS CLAUS ES OF THE AGREEMENT POST 2007 TO EMPHASIZE THAT THERE WERE SEVERAL CONDITIONS IMPOSED UPON THE DISTRIBUTORS IN TERMS OF A DHERING TO BRAND IMAGE GUIDELINES, MAINTENANCE OF RECORDS, REP ORTING AND EVALUATION OF PERFORMANCE. THE LD. DR ALSO SUBMITTED THAT THE PLEA OF THE ASSESSEE ON THE CHANGE IN THE CONTRACTUAL AR RANGEMENT WAS ALSO CONSIDERED BY THE COORDINATE BENCH OF THE TR IBUNAL IN THE CASE OF TATA TELESERVICES LIMITED V/S ITO (171 ITD 196) AND REFERRED TO THE COPY OF THE DECISION FILED IN THE PAPE R BOOK FILED BY THE REVENUE ON 20.02.2019. SHE FURTHER POINTED OUT THAT THE COORDINATE BENCH IN SPITE OF CHANGE IN CONTRACTUAL ARR ANGEMENTS HAD FOLLOWED THE HONBLE DELHI HIGH COURT JUDGMENT, BE ING THE JURISDICTIONAL HIGH COURT AND HAD NOT FOLLOWED THE KAR NATAKA HIGH COURT JUDGMENT, WHICH WAS IN FAVOUR OF THE ASSESSEE/S. 26. THE LD. DR ALSO RELIED ON THE DECISION OF THE HONBLE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF VODAFO NE MOBILE SERVICES LIMITED V/S ACIT (168 ITD 219) WHERE THE ITA T HAD DISMISSED SIMILAR PLEA TAKEN BY THE ASSESSEE. COPY OF THE DECISION OF THE HYDERABAD BENCH WAS ALSO REFERRED TO BEING A PART OF THE PAPER BOOK FILED BY THE REVENUE. 27. ON THE SECOND ISSUE RELATING TO THE OBLIGATION O F THE ASSESSEE TO WITHHOLD TAX UNDER SECTION 194J OF THE ACT ON THE PA YMENT OF I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 30 ROAMING CHARGES BY THE ASSESSEE TO OTHER TELECOM OPERA TORS, THE LEARNED DR REFERRED TO THE BACKGROUND OF THE MATTER INC LUDING THE DECISION OF THE HONBLE DELHI HIGH COURT AND THE HONB LE SUPREME COURT IN THE CASE OF BHARTI CELLULAR LIMITED (SUPRA). SHE THEN REFERRED TO THE STATEMENT OF THE TECHNICAL EXPERT RECORDE D IN THE CASE OF VODAFONE ESSAR LIMITED AND DREW OUR ATTENTION TO THE ANSWERS GIVEN BY THE TECHNICAL EXPERT MS. VASANTHI RA MAMURTHY, DIVISIONAL ENGINEER OF BSNL TO SUBMIT THAT THE TRANSMI SSION OF CALLS WAS AUTOMATIC BUT TO KEEP THE SYSTEM RUNNING IN A FAULT FREE ENVIRONMENT, CONTINUOUS MONITORING IS REQUIRED AND H ENCE HUMAN INTERVENTION IS CONSTANTLY REQUIRED IN THE PROVISION OF ROAMING SERVICES. IN VIEW OF THE ABOVE, THE LEARNED DR SUBMITT ED THAT THE TEST LAID DOWN BY THE HONBLE DELHI HIGH COURT, I.E., THAT FOR THE PAYMENTS TO FALL WITHIN THE SCOPE OF FEE FOR TECHNICAL SERVICES UNDER SECTION 194J OF THE ACT, THERE WAS HUMAN INTERVENTI ON INVOLVED IN THE PROVISION OF ROAMING SERVICES AND AS SUCH THE PAYMENT MADE BY THE ASSESSEE TO OTHER TELECOM OPERATORS FALL WITHIN THE PURVIEW OF FEE FOR TECHNICAL SERVICES AND THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE WHILE MAKING PAYME NTS UNDER SECTION 194J OF THE ACT. 28. THE LD. DR ALSO RELIED ON THE LETTER DATED 20.8 .2019 OF THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 78(1), L AXMI NAGAR, NEW DELHI WHERE IN REPLY IT HAS BEEN INFORMED TO THE D R THAT THE CURRENT JURISDICTION OF VODAFONE IDEA LTD. IS NEW DEL HI WHERE THE TAN OF IDEA CELLULAR IS BEING USED TO FILE TDS RETURN S. HENCE, SHE SUBMITTED THAT THE TAN JURISDICTION BEING DELHI THE JUDGM ENT OF THE HONBLE DELHI HIGH COURT WOULD BE APPLICABLE. I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 31 REJOINDER BY THE COUNSEL OF THE ASSESSEE 29. IN HIS REJOINDER, THE LD. COUNSEL FOR THE ASS ESSEE REFERRED TO THE DETAILED WRITTEN SUBMISSION FILED ON 29.07.2019 AN D BROUGHT TO OUR ATTENTION THAT THE CONTENTION OF THE REVENUE THAT THE JUDGMENT OF THE HONBLE DELHI HIGH COURT WAS APPLICABL E ON THE FACTS OF THE CASE, BEING JURISDICTIONAL HIGH COURT WA S PATENTLY INCORRECT. HE SUBMITTED THAT THE IMPUGNED ORDER UNDER SE CTION 201 OF THE ACT WAS PASSED BY THE AO IN KARNAL AND THE JURISDICTIONAL HIGH COURT IN THE PRESENT CASE WAS THE HONBLE PUNJAB & HARYANA HIGH COURT. FOR THIS PROPOSITION HE RELIED ON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT I N THE CASE OF CIT VS. MOTOROLA INDIA LIMITED (326 ITR 156) WHERE THE HONBLE PUNJAB & HARYANA HIGH COURT HAD CLEARLY HELD THAT THE SITUS OF THE AO AT THE TIME WHEN THE ASSESSMENT WAS FRAMED WOULD BE THE DETERMINATIVE FACTOR FOR THE HIGH COURT JURISDICTION TO ENTERTAIN AN APPEAL. HE ALSO RELIED ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DDA VS. ITO (230 ITR 9) [FURTHER CONFIRME D BY THE SUPREME COURT IN THE CASE OF ITO VS. DDA (252 ITR 772 )] THAT 201 ORDERS WERE AKIN TO AN ASSESSMENT. FURTHER, THE COUNS EL FOR THE ASSESSEE AGAIN INVITED OUR ATTENTION TO THE DECISION PAS SED BY THE CO-ORDINATE BENCH IN THE CASE OF IDEA CELLULAR LIMITE D ITSELF FOR AY 2010-11 AND 2011-12 WHERE THE SECTION 201 PROCEEDINGS WERE INITIATED BY THE INCOME TAX OFFICER (TDS), ROHTAK. THE COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PARA 6 OF THE ORDER W HERE THE COORDINATE BENCH HAD RECORDED THAT THE SECTION 201 ORDER WAS PASSED BY THE INCOME TAX OFFICER (TDS), ROHTAK AND HE NCE THERE BEING NO DECISION FROM THE JURISDICTIONAL HIGH COURT I .E. PUNJAB & HARYANA HIGH COURT, THE DECISION OF THE INCOME TAX OFF ICER (TDS), KARNAL WHICH HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 32 SHOULD BE FOLLOWED. HE FURTHER REFERRED TO PARA 7 OF THE SAID DECISION WHERE THE COORDINATE BENCH HAD RECORDED, AFT ER TAKING DUE NOTE OF THE DECISION OF HONBLE DELHI HIGH COURT I N THE SAME ASSESSEES CASE. HE FURTHER POINTED OUT THAT THE COORDINA TE BENCH HAD HELD THAT FOR THE SECTION 201 ORDER WAS PASSED BY TH E INCOME TAX OFFICER (TDS), ROHTAK, THE JURISDICTIONAL HIGH CO URT WOULD NOT BE THE DELHI HIGH COURT AND WOULD BE THE PUNJAB & HARY ANA HIGH COURT. THUS, HE SUBMITTED THAT IN THE CASE OF IDEA CELLU LAR LIMITED ITSELF WHERE THE HONBLE DELHI HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THE COORDINATE BENCH HAD TAKEN A VIEW IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LIMIT ED (SUPRA) AND WHILE FOLLOWING THE HONBLE KARNATAKA HIGH COURT D ECISION, HAD DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. HE A LSO REFERRED TO THE ORDER IN THE CASE OF IDEA CELLULAR LIMITED, HARYA NA CIRCLE IN ITA NO.2299/DEL/2015 FOR AY 2011-12 WHICH HAD ENDOR SED THE VIEW TAKEN BY THE COORDINATE BENCH FOR AY 2010-11. 30. THAT APART, THE COUNSEL FOR THE ASSESSEE, TO REBUT T HE CONTENTIONS PUT FORTH BY THE LD. DR, REFERRED TO THE DECI SION OF THE COORDINATE BENCH IN THE CASE OF TATA TELESERVICES LIMI TED (SUPRA) AND SUBMITTED THAT IN PARA 15 OF THE SAID ORDER, THE COOR DINATE BENCH BEING BOUND BY THE JURISDICTIONAL HIGH COURT JU DGMENT I.E., HONBLE DELHI HIGH COURT HAD DECIDED AGAINST THE ASSES SEE. HE SUBMITTED THAT IN THE CASE OF TATA TELESERVICES LIMITED, THE SECTION 201 PROCEEDINGS HAD BEEN CONCLUDED BY THE INCOME TA X OFFICER, WARD-51, NEW DELHI AND HENCE CLEARLY THE CO-ORDINATE BENCH WAS BOUND BY THE DECISION OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF IDEA CELLULAR LIMITED. SAME IS THE ISSUE WITH THE H YDERABAD BENCH DECISION IN THE ASSESSEES OWN CASE. HOWEVER, HE ALSO I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 33 BROUGHT TO OUR ATTENTION THAT THE HONBLE HIGH COURT OF A NDHRA PRADESH AND TELANGANA HAD ADMITTED THE APPEAL OF THE A SSESSEE VIDE ORDER DATED 6.12.2017 AND GRANTED STAY OR RECOVE RY PROCEEDINGS (ORDER IS PLACED ON PAGE 395 OF PAPER B OOK VOLUME 2). 31. HE FURTHER REFERRED TO THE HYDERABAD BENCH DECI SION IN THE CASE OF VODAFONE MOBILE SERVICES LIMITED (SUPRA) WHE RE IN PARA 84 AND 85, THE HONBLE TRIBUNAL HAD HELD THAT SINCE THE JU RISDICTIONAL HIGH COURT HAD DECIDED THE ISSUE AGAINST THE ASSESSEE, THEY WERE BOUND BY THE DECISION OF THE HONBLE HIGH COURT. THE L EARNED COUNSEL FOR THE ASSESSEE AGAIN DREW OUR ATTENTION TO THE COORDINATE BENCH OF KOLKATA TRIBUNALS DECISION IN TH E CASE OF VODAFONE EAST LIMITED WHERE IN-SPITE OF THE JURISDICTION AL HIGH COURT (KOLKATA HIGH COURT) DECISION HAVING BEEN RENDE RED IN THE CASE OF BHARTI CELLULAR LIMITED (354 ITR 507), THE CO- ORDINATE BENCH HAD TAKEN A NOTE OF THE CHANGE OF FACTS IN THE ASS ESSMENT YEAR BEFORE IT WHERE THE COMMERCIAL TRANSACTIONS HAD CH ANGED AND HENCE DISTINGUISHED THE HONBLE KOLKATA HIGH COURTS DE CISION AFTER ELABORATELY REFERRING TO THE VARIOUS CLAUSES O F THE CONTRACTUAL ARRANGEMENTS BETWEEN THE PARTIES. HENCE, HE SUBMITTED TH AT ON THIS ISSUE, IT WOULD BE APT TO FOLLOW THE DECISION OF HO NBLE KARNATAKA HIGH COURT AS WELL AS THE RAJASTHAN HIGH COUR T WHICH DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE COUN SEL FOR THE ASSESSEE ALSO SUBMITTED THAT WITHOUT PREJUDICE, THE HONB LE DELHI HIGH COURT ITSELF HAD ADMITTED THE QUESTIONS OF LAW IN THE CASE OF TATA TELESERVICES LIMITED BY WAY OF ITS ORDER DATED 07 .05.2018. HE ALSO SUBMITTED THAT AS REGARDS THE HONBLE HYDERABAD BENCH DECISION REFERRED TO BY THE LEARNED DR FOLLOWING THE HONBLE ANDHRA PRADESH HIGH COURT JUDGMENT THE HONBLE HIGH CO URT HAD I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 34 ALSO ADMITTED THE QUESTIONS OF LAW AND GRANTED STAY OF RE COVERY PROCEEDINGS VIDE ITS ORDER DATED 06.12.2017. ALL THE SE ORDERS HAVE BEEN PLACED BY THE LEARNED COUNSEL IN THE PAPER BOOK FILED BEFORE US. TO CONCLUDE IT WAS SUBMITTED THAT DECISIONS O F THE HONBLE KARNATAKA AND RAJASTHAN HIGH COURTS BE FOLLOWE D AND ISSUE BE DECIDED IN FAVOUR OF THE ASSESSEE, IN THE AB SENCE OF ANY DECISION BY THE JURISDICTIONAL HIGH COURT. 32. ON THE ISSUE RAISED BY THE DR THAT THE CURRENT TA N JURISDICTION OF VODAFONE IDEA LTD. IS NEW DELHI, THE L D. COUNSEL SUBMITTED THAT IT IS A SETTLED POSITION OF LAW THAT THE JURI SDICTION OF THE AO HAD TO BE SEEN AT THE TIME OF PASSING THE ORDER U NDER SECTION 201 OF THE ACT, WHICH ADMITTEDLY WAS KARNAL AND UNDER THE JURISDICTION OF THE PUNJAB AND HARYANA HIGH COURT. H E SUBMITTED THAT THIS ISSUE ALSO STANDS SETTLED BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF MOTOROLA (SUPRA). THUS, BY RELYING ON THE CURRENT TAN JURISDICTION OF VODAFONE ID EA LTD. DOES NOT FURTHER THE CASE OF THE REVENUE. HE OTHERWISE ALSO RELIED ON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL W HERE IN THE CASE OF IDEA CELLULAR LTD. ITSELF, RELATING TO HARYANA AND UP, THE CO- ORDINATE BENCH HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE ABSENCE OF ANY JURISDICTIONAL HIGH COURT DECISION. 33. THE ISSUE OF JURISDICTION HAS ALSO BEEN DEALT W ITH BY THE GUJARAT BENCH OF TRIBUNAL IN ASSESSEES OWN CASE I.E . VODAFONE ESSAR GUJARAT VS ACIT FOR AY 2008-09 BEARING ITA 386 /AHD/2011 DATED 07.07.2015. 34. AS REGARDS THE ATTEMPT OF THE LD. DR TO DRAW A SI MILARITY BETWEEN THE PRE AND POST 2007 AGREEMENTS, THE LD. COUNS EL POINTED OUT THAT THE DR HAD RELIED ON THE RETURN AND I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 35 REPLACEMENT CLAUSE AND THE CLAUSE RELATING TO THE EFF ECT ON TERMINATION IN THE SAMPLE AGREEMENT FILED BY THE APPEL LANT IN ITS PAPER BOOK ON 15.2.2019 (NOT 15.2.2008 AS WRONGLY ME NTIONED IN THE DRS SUBMISSIONS). THE COUNSEL POINTED OUT THAT CLAU SE 10 OF SUCH AGREEMENT DEALS WITH EFFECT OF TERMINATION. THE CL AUSE PROVIDES THAT IN THE EVENT OF TERMINATION OF THE DISTRIBUT OR AGREEMENT THE PARTIES AGREED THAT ALL EQUIPMENT AND FURN ITURE SUPPLIED BY THE ASSESSEE WOULD BE RETURNED AND DOES N OT REFER TO THE RETURN OF SERVICE TICKETS. HENCE, THE SIMILARITY BEI NG DRAWN BY THE DR WAS FACTUALLY INCORRECT. IN FACT, HE POINTED OUT, THAT CLAUSE (E) OF ANNEXURE -1 (AT PAGE 13 REFERRED TO BY THE DR ) SPECIFICALLY PROVIDES THAT THE ASSESSEE SHALL NOT BE RESPONSIBLE FO R ANY POST- DELIVERY DEFECT IN SERVICES TICKETS. THE CLAUSE ALSO S TATES THAT THE ASSESSEE MAY AT ITS SOLE DISCRETION AND AFTER MAKING VERIFICATIONS AS IT MAY DEEM FIT, REPLACE ANY UNUSED NON-WORKING R EFILL SLIPS. HENCE, HE SUBMITTED THAT UNLIKE THE FACTS OF THE IDEA C ELLULAR DECISION (OF THE DELHI HIGH COURT) UNDER THE EXISTING COMMERCIAL ARRANGEMENTS, THERE WAS NO PROVISION FOR RETURN OR REF UND IN RESPECT OF THE SERVICE TICKETS. HENCE, HE SUBMITTED THAT THE AVERMENTS MADE BY THE LD. DR IN HER SUBMISSIONS OF 16 .7.2019 WERE FACTUALLY INCORRECT AND CONSEQUENTIALLY THE ENDEA VOUR OF THE DR TO SHOW SIMILARITY BETWEEN THE PRE AND POST 2007 A GREEMENTS WAS INCORRECT. 35. ON THE SECOND ISSUE, THE LD. COUNSEL FOR THE ASS ESSEE RELIED ON THE DECISION RENDERED BY THE KOLKATA TRIBUNAL IN TH E CASE OF VODAFONE EAST LIMITED V/S ACIT (2015 43 ITR 2 (TRIB.) 0551 (KOLK) WHICH IN THE ASSESSEES CASE ITSELF HAD EXAMINED THE APPLICABILITY OF SECTION 194J QUA THE PAYMENT OF ROAMING CHARGES TO O THER I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 36 TELECOM OPERATORS. HE SUBMITTED THAT THE STATEMENTS OF THE TECHNICAL EXPERTS HAD BEEN DULY CONSIDERED BY THE KOL KATA BENCH OF THE TRIBUNAL AND HAVING CONSIDERED THE SAME HAD CO NCLUDED THAT THERE WAS NO HUMAN INTERVENTION INVOLVED AND AS SU CH THE PROVISIONS OF SECTION 194J WERE NOT APPLICABLE ON PAY MENTS OF ROAMING CHARGES MADE BY THE ASSESSEE TO OTHER TELECOM OPERATORS. DECISION 36. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF TH E LD. COUNSEL FOR THE ASSESSEE AS WELL AS OF THE LEARNED CI T-DR AND HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE P ARTIES AND JUDGMENTS PLACED IN SUPPORT OF THEIR ARGUMENTS. WE SHAL L FIRST DEAL WITH THE ISSUE WHETHER THE ASSESSEE WAS LIABLE TO WITHHOLD TAX ON DISCOUNTS OFFERED ON SALE OF PRE-PAID SIM SERVIC ES. 37. AT THE OUTSET, WE FIND MERIT IN THE CONTENTION OF TH E LD. COUNSEL OF THE ASSESSEE THAT IN THE ABSENCE OF ANY ADV ERSE JUDGMENT BY THE HONBLE JURISDICTIONAL HIGH COURT, I.E ., THE HONBLE HIGH COURT OF PUNJAB & HARYANA, THERE BEING DIVERGENCE OF JUDICIAL OPINION ON THE SUBJECT MATTER, A VIEW IN FAVO UR OF THE ASSESSEE HAS TO BE TAKEN. IT HAS ALREADY BEEN BROUGHT TO OUR ATTENTION THAT A COORDINATE BENCH OF THIS TRIBUNAL IN THE C ASE OF IDEA CELLULAR ITSELF IN ITA NO. 852/DELHI/2015 VIDE ORDER DATED 01.05.2018, HAS DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE NOTING THAT IN THE ABSENCE OF ANY JUDGMENT OF THE JURISDICTIONA L HIGH COURT, I.E., THE HONBLE HIGH COURT OF PUNJAB & HARYAN A, A VIEW IN FAVOUR OF THE ASSESSEE HAVE TO BE TAKEN. THE RELEVANT P ORTION OF THE COORDINATE BENCHS JUDGMENT IS REPRODUCED AS UNDER: WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RE CORDS. THE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 37 FIRST ISSUE ON WHICH ASSESSEE WAS HELD BY THE REVENUE AS ASSESSEE-IN-DEFAULT IS FOR DISCOUNT/COMMISSION ON S ALE OF PREPAID SIM CARDS. THE ISSUE CONTESTED HEREIN WAS DECIDED AGA INST THE ASSESSEE BY THE HONBLE DELHI HIGH COURT IN CASE OF TH E ASSESSEES OWN CASE IN CIT VS. IDEA CELLULAR LTD. FOR A.YS 2003 -04 AND 2004- 05. BUT, IN CASE OF BHARATI AIRTEL LIMITED VS. DCIT (20 14) (372 ITR 33), HONBLE KARNATAKA HIGH COURT AND IN ASSESSEES O WN CASE (87 TAXMANN.COM 295) HONBLE RAJASTHAN HIGH COURT DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. AS PER LD. AR, THE ORDER U/S 201 OF THE ACT WAS PASSED BY ITO TDS, ROHTAK AND THUS, THE HON BLE PUNJAB AND HARYANA HIGH COURT WHICH HAS NECESSARY JU RISDICTION. AFTER LOOKING INTO THE ADDRESS OF THE ASSESSEE, THE ASS ESSEES ADDRESS IS AT NOIDA, UTTAR PRADESH. THUS, IN BOTH THESE CIRCUMSTANCES THE JURISDICTIONAL HIGH COURT WILL NOT BE THE HONBLE DELHI HIGH COURT. THE LD. AR RELIED UPON THE DECISIO N OF THE HONBLE SUPREME COURT IN CASE OF CIT VS. VEGETABLE PR ODUCTS LTD. 88 ITR 192 WHEREIN IT IS HELD THAT IF TWO REASONABLE C ONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE THAT CONSTRUCTION WH ICH FAVOURS THE ASSESSEE MUST BE ADOPTED. IN ABSENCE OF ANY DECISI ON OF THE HONBLE PUNJAB AND HARYANA HIGH COURT AS WELL AS THE HONBLE ALLAHABAD HIGH COURT ON THIS ISSUE AND IN VIEW OF CO NFLICTING DECISIONS OF OTHER HIGH COURTS, FOLLOWING THE RATIO OF THE HONBLE APEX COURT, THE VIEW FAVOURABLE TO ASSESSEE IS UPHELD. HENCE ASSESSEE CANNOT BE DEEMED TO BE AN ASSESSEE-IN-DEFAU LT ON DISCOUNT/COMMISSION OF SALE OF PREPAID SIM CARDS. TH EREFORE, GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED. 38. WHILE COMING TO THE ABOVE CONCLUSION COORDI NATE BENCH HAS NOTED THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE A SSESSEE BY KARNATAKA HIGH COURT AND SINCE THE ORDERS UNDER SECTIO N 201 OF I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 38 THE INCOME TAX ACT WERE PASSED BY THE ITO TDS ROHTAK THE HONBLE PUNJAB & HARYANA HIGH COURT HAD THE NECESSARY JURISDICTION. IN PARAS 7 & 8 OF THEIR ORDER THE COORDI NATE BENCH WHILE RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LIMITED (88 ITR 192) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE FIND THAT THE ABOVE DECISION WAS RENDERED IN THE CASE OF IDEA CELLULAR L IMITED ITSELF FOR THE HARYANA CIRCLE IN-SPITE OF THE CONTRARY DECISION O F THE DELHI HIGH COURT IN THE CASE OF THAT ASSESSEE. IT IS A SETTLED P OSITION IN LAW THAT WHERE TWO CONTRARY DECISIONS OF THE HIGH COURTS ARE AVAILABLE, THE VIEW TAKEN IN FAVOUR OF THE ASSESSEE IS TO BE ADOPTED AND APPLIED. BASED ON THE ABOVE AND ON THIS SHORT GRO UND ITSELF THE APPEAL OF THE ASSESSEE IS CAPABLE OF BEING ALLOWE D. 39. EVEN OTHERWISE, ON MERITS WE FIND THAT THE COMMERC IAL ARRANGEMENT BETWEEN THE ASSESSEE AND ITS DISTRIBUTORS H AD UNDERGONE A CHANGE WITH EFFECT FROM 01.01.2007 AND UN DER THE NEW COMMERCIAL ARRANGEMENT THE RELATIONSHIP BETWEEN T HE ASSESSEE AND THE DISTRIBUTORS IS CLEARLY BASED ON PRI NCIPAL TO PRINCIPAL BASIS AND HENCE, THE EARLIER JUDGMENTS WOUL D NOT APPLY. HAVING CAREFULLY CONSIDERED THE WRITTEN SUBMISSIONS O F THE LD. DR DATED 28.3.2019, 16.7.2019 AND 24.9.2019 AND THE REJ OINDER MADE BY THE LD. COUNSEL OF THE ASSESSEE, WE FIND THAT THE CO MMERCIAL ARRANGEMENTS BETWEEN THE ASSESSEE AND DISTRIBUTORS HAD SIGNIFICANTLY CHANGED W.E.F. 2007. THE NEW ARRANGEM ENTS BETWEEN THE ASSESSEE AND THE DISTRIBUTORS WERE IN FACT IN THE NAT URE OF PRINCIPAL TO PRINCIPAL GIVEN THAT ALL RISK IN THE SER VICES TICKETS, ONCE HAVING SOLD TO THE DISTRIBUTORS, PASSED TO THE DISTR IBUTORS. UNDER THE NEW ARRANGEMENT, VODAFONE ESSAR DIGILINK LI MITED, HARYANA CIRCLE, TRANSFERRED ITS PREPAID TALK TIME TO THE DISTRIBUTORS I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 39 AT A DISCOUNT AND THE DISTRIBUTORS IN TURN DISTRIBUTED THE SAME TO THE RETAILERS, THE RETAILERS THEREAFTER TRANSFER THE SAME TO THE ULTIMATE SUBSCRIBERS. AT EACH LEVEL OF THE DISTRIBUTION , THE PARTY DISTRIBUTING THE PREPAID TALK TIME RETAINS A MARGIN FOR ITS RISK AND EFFORTS, WHILE VODAFONE ESSAR DIGILINK LIMITED, HARYA NA CIRCLE ASSUMED THE RESPONSIBILITY FOR THE PROVISION OF SERVI CES TO THE SUBSCRIBERS. ACCORDINGLY, POST JANUARY 2007, THE ASSE SSEE ALSO ACCOUNTED FOR REVENUES ON THE BASIS OF CONSIDERATION R ECEIVED FROM THE DISTRIBUTORS, I.E., THE PRICE ON WHICH THE PREPAID TA LK TIME WAS TRANSFERRED TO THE DISTRIBUTOR. FROM THE TERMS OF CONDITI ON MENTIONED IN THE NEW AGREEMENT THE GIST OF WHICH HAS BE EN DEALT WITH IN PARA 20 HEREIN FORE IT IS QUITE EVIDENT THAT THE RELATIONSHIP IS NO LONGER AGENT - PRINCIPAL RELATIONSHIP. THE COMP ARISON AND THE DIFFERENCES BETWEEN EARLIER AGREEMENTS HAVE BEEN HIG HLIGHTED ABOVE WHICH CLEARLY SHOWS THE CHANGES AND HOW IT HAS TRANSFORMED TO PRINCIPAL TO PRINCIPAL RELATIONSHIP. 40. WE ALSO FIND SUPPORT FROM THE DECISION OF THE K OLKATA BENCH OF TRIBUNAL IN THE ASSESSEES CASE WHERE THE BENCH HA S TAKEN INTO NOTE THAT CHANGE OF COMMERCIAL ARRANGEMENT AND HAD DEC IDED ISSUE IN FAVOUR OF THE ASSESSEE, WHILE HOLDING THAT T HE DISCOUNT OFFERED ON SOME OF THE PREPAID SERVICES DID NOT PARTAK E THE CHARACTER OF COMMISSION UNDER SECTION 194H OF THE ACT A ND HENCE THERE IS NO OBLIGATION TO WITHHOLD TAX ON SUCH DISCOUN TS ON PRE- PAID SERVICES. THE RELEVANT PARAS READ AS FOLLOWS: WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES AN D PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INC LUDING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPO N. FROM THE FOREGOING DISCUSSION, WE FIND THAT THE AO HAS TREATED TH E DISCOUNT GIVEN BY THE ASSESSEE TO ITS DISTRIBUTORS ON THE SALE O F RECHARGE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 40 COUPONS/ STARTER PACK AS COMMISSION EXPENSES. THEREFO RE THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS LIABLE TO DEDUCT THE TDS UNDER SECTION 194H OF THE ACT. ON THE CONTRARY THE ASSES SEE TREATED THE AFORESAID TRANSACTION AS SALE AT A PRICE NET OF DISCOUNT IN THE BOOKS OF ACCOUNTS. THE LD. CIT (A) ALSO CONFI RMED THE ORDER OF AO AFTER HAVING RELIANCE IN THE CASE OF BHARATI CEL LULAR LIMITED (SUPRA). 9.1 NOW THE ISSUE BEFORE US ARISES FOR OUR ADJUDICA TION SO AS TO WHETHER THE DISCOUNT GIVEN BY THE ASSESSEE IS IN THE NATU RE OF COMMISSION IN THE GIVEN FACTS & CIRCUMSTANCES. FROM TH E SUBMISSION OF THE LD. AR FOR THE ASSESSEE, WE FIND THA T THE TRANSACTION OF RECHARGE COUPONS WAS TREATED AS SALE IN THE BOOKS OF ACCOUNTS WHICH WAS SHOWN NET OF DISCOUNTS IN THE BO OKS OF ACCOUNTS. IN THIS CONNECTION WE FIND THAT THE AGREEMENT MADE BETWEEN THE ASSESSEE AND THE DISTRIBUTOR WAS FOR THE S ALE OF RECHARGE COUPONS AND NOT THE AGREEMENT FOR THE COMMISS ION. THE RELEVANT PORTION OF AGREEMENT HAS ALREADY BEEN DISCUSS ED IN THE PRECEDING PARAGRAPH AND THE SAME IS NOT REPRODUCED HERE FOR THE SAKE OF BREVITY. ON PERUSAL OF THE AGREEMENT IT CAN BE INFERRED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE DISTRIBUTOR W AS BASED ON PRINCIPAL TO PRINCIPAL BASIS AND WHICH IS I N THE NATURE OF PURCHASE AND SALE TRANSACTION. THERE WAS NO CLAUSE IN THE AGREEMENT SUGGESTING THAT THE ASSESSEE IS LIABLE FOR TH E PAYMENT OF THE COMMISSION TO THE DISTRIBUTORS. THE DISTRIBUTOR WAS AU THORIZED TO SALE THE PREPAID RECHARGE COUPONS AT A PRICE OF ITS/ HIS CHOICE BUT NOT EXCEEDING MRP DETERMINED BY THE ASSESSEE. WE A LSO FIND THAT ALL THE RISKS & REWARDS ATTACHED WITH THE PRODUCT WER E SHIFTED TO THE DISTRIBUTOR. THUS WE HOLD THAT THERE WAS NO AGREEME NT BETWEEN THE ASSESSEE AND THE DISTRIBUTOR AS OF PRINCIPA L AND AGENT. I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 41 9.2 WE ALSO FIND THAT THE BUSINESS MODEL OF THE ASSES SEE FOR THE PREPAID MOBILE CONNECTIONS AND POST PAID MOBILE CONNE CTIONS ARE DIFFERENT. IN CASE OF POST PAID CONNECTIONS THE ASSESSE E IS PAYING COMMISSION TO THE DISTRIBUTORS AGAINST CERTAIN SERVICES RENDERED BY THEM AND THEREFORE THE TDS WAS BEING DEDUCTED. THUS ACCORDING TO THE AO THE TDS PROVISIONS SHOULD HAVE A LSO BEEN APPLIED TO THE DISCOUNT OFFERED BY THE ASSESSEE TO THE D ISTRIBUTOR OF THE PREPAID CONNECTIONS WHICH IN OUR CONSIDERED VIEW WAS BASED ON WRONG ASSUMPTIONS OF FACTS. IN THIS CONNECTION, WE F IND THAT UNDER THE POST-PAID CONNECTION THERE ARE CERTAIN SERVI CES RENDERED BY THE ASSESSEE SUCH AS COLLECTION OF DOCUMENTS FOR P ROOF OF IDENTITY, DELIVERY OF SIM CARDS, COLLECTION OF CHARGE S ETC. AGAINST THESE SERVICES THE DISTRIBUTORS ARE PAID THE AMOUNT OF AGREED COMMISSION BY THE ASSESSEE AFTER DEDUCTING TDS U/S 194H OF THE ACT. HOWEVER, WE FIND THAT IN CASE OF PREPAID CONNECTIO N THE RECHARGE COUPONS ARE SOLD TO THE DISTRIBUTORS ON OUTRI GHT SALE BASIS AT A DISCOUNTED PRICE. THE AMOUNT OF DISCOUNT IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. THEREFORE WE HOL D THE TRANSACTION BETWEEN THE ASSESSEE AND PREPAID DISTRIBUTOR FOR RECHARGE COUPONS IS NATURE OF SALE & PURCHASE. THUS AMOUNT OF DISCOUNT CANNOT BE EQUATED WITH THE COMMISSION AS ENVI SAGED UNDER SECTION 194H OF THE ACT. SIMILARLY WE FIND THAT THE OWNERSHIP OF THE RECHARGE COUPONS GETS TRANSFERRED TO TH E DISTRIBUTOR ON THE SALE OF RECHARGE COUPONS. IN THIS C ONNECTION, WE ALSO RELY IN THE CASE OF BHARTI AIRTEL LIMITED VS. CIT & ANR. REPORTED IN 372 ITR 33 (KAR) (SUPRA) WHERE THE HONB LE KARNATAKA HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSE E. SIMILARLY HONBLE RAJASTHAN HIGH COURT IN THE CASE OF VARIOUS P ARTIES WHERE THE ASSESSEE WAS ALSO A PARTY HAS DECIDED THE ISSUE I N FAVOUR OF ASSESSEE ON THE IDENTICAL FACTS & CIRCUMSTANCES IN ITA NO. 1/2014 I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 42 & ITA NO. 4/2014 VIDE ORDER 11/07/2017 (SUPRA). THE LD DR HAS NOT BROUGHT ANYTHING CONTRARY TO THE ARGUMENTS OF LD AR . THEREFORE WE HAVE NO ALTERNATE EXCEPT TO FOLLOW RESPEC TFULLY THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT AND RAJASTHAN HIGH COURT IN THE CASE OF BHARTI AIRTEL LIMITED VS. CIT (SUPRA) AND IN THE CASE OF VARIOUS ASSESSEES WHERE THE ASSESSEE WAS ALSO A PARTY I.E. VODAFONE MOBILE SERVICES LIMI TED (SUPRA). HENCE, WE HAVE NO HESITATION IN REVERSING THE ORDER O F AUTHORITIES BELOW. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 10. AS WE HAVE ALREADY HELD THAT THE PROVISIONS OF TDS UNDER SECTION 194H OF THE ACT ARE NOT ATTRACTED ON THE SALE OF RE CHARGE COUPONS FOR THE PREPAID TALK TIME TO THE DISTRIBUTORS AND ACCORDINGLY THE ASSESSEE CANNOT BE TREATED AS ASSESSE E IN DEFAULT FOR NON DEDUCTION OF TDS U/S 201 OF THE ACT. THUS, OTH ER GROUNDS RAISED BY THE ASSESSEE BECOME ACADEMIC IN NATURE AND THEREFORE DO NOT REQUIRE SEPARATE ADJUDICATION. HENCE, THESE GR OUNDS BECOME INFRUCTUOUS AND ACCORDINGLY BEING DISMISSED. 41. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE IDE NTICAL TO THAT CONSIDERED BY THE KOLKATA BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE. WE DO NOT FIND ANY MERIT IN THE REVENUES PL EA THAT THE DECISION OF DELHI HIGH COURT IS APPLICABLE IN THE PRE SENT CASE. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALREADY SETTLE D THIS ISSUE OF JURISDICTION IN THE DECISION OF CIT VS. MOTO ROLA INDIA LIMITED (326 ITR PAGE 156), WHERE THE HONBLE HIGH CO URT HELD THAT IT IS THE SITUS OF AO AT THE TIME WHEN ASSESSMENT WAS FRAMED WHICH WOULD BE DETERMINATIVE OF DECIDING THE ISSUE O F THE HIGH COURTS APPELLATE JURISDICTION. ON THE FACTS OF THE PRE SENT CASE IT IS NOT IN DISPUTE THAT THE IMPUGNED ORDERS WERE PASSED BY THE INCOME TAX OFFICER (TDS) KARNAL. THE LD. DR HAD AL SO PLEADED I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 43 THAT SINCE THE ASSESSEE HAD MERGED WITH IDEA CELLULAR, THE DECISION OF THE DELHI HIGH COURT SHOULD BE APPLIED. HOWEVER, WE FIND NO MERIT IN THIS CONTENTION SINCE THE WAY THE POSITI ON STANDS TODAY THE RESULTING COMPANY IS VODAFONE IDEA LTD. HAV ING JURISDICTION IN MUMBAI. ON THAT COUNT ALSO, THE ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINA TE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF TATA TELESERVICES LTD. VS. ACIT (ITA 2043/MUM/2014 - DECISION DATED 27.5.2016) AND ACIT VS. RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD. (ITA 4677/MUM/2012 DECISION DATED 23.3.2016). 42. BE THAT AS IT MAY, SINCE THE ORDERS U/S 201 WE RE PASSED BY THE ITO KARNAL, IT IS CLEAR THAT THE JURISDICTIONAL HIGH COURT BEING THE HONBLE PUNJAB & HARYANA HIGH COURT WOULD HAVE THE APPELLATE JURISDICTION OVER THE MATTER. THUS, WHILE R ESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN CA SE OF DCIT VS. IDEA CELLULAR LIMITED (DECISION DATED 01/05/2018 IN ITA NO. 852/DELHI/2018) THIS ISSUE IS DECIDED FAVOUR OF THE ASSESSEE AND GROUNDS ARE ACCORDINGLY ALLOWED. 43. ACCORDINGLY, WE HOLD THAT THERE WAS NO REQUIREM ENT FOR THE ASSESSEE TO WITHHOLD TAXES ON THE AMOUNT OF DISCOUNTS OF FERED BY IT ON PRE-PAID SERVICES UNDER SECTION 194H OF THE IT A CT AND CONSEQUENTIALLY THE ASSESSEE COULD NOT BE TREATED AS AN ASSESSEE- IN-DEFAULT IN TERMS OF SECTION 201 OF THE IT ACT. 44. THE OTHER ISSUE, WHICH IS RELEVANT FOR THE AS SESSMENT ORDER 2010-11 AND 2011-12 IS WHETHER THE ASSESSEE WAS IN DE FAULT IN RESPECT OF THE ROAMING CHARGES AND CONSEQUENTIALLY WHE THER THE ASSESSEE WAS REQUIRED TO WITHHOLD TAX UNDER SECTION 194 J OF THE ACT. WE FIND THAT THIS ISSUE HAS ALREADY DECIDED IN FAV OUR OF THE I.T.AS. NO. 118, 119, 120, 2466, 2467/DEL/2019 44 ASSESSEE IN THE ASSESSEE OWN CASE BY THE KOLKATA TRIBU NAL IN THE CASE OF VODAFONE EAST LIMITED VS. ACIT (2015) (43) IT R (TRIB.) 551). WE ALSO FIND THAT THIS ISSUE WAS ALSO CONSIDERED BY TH E COORDINATE BENCH IN THE CASE OF DCIT VS. IDEA CELLULAR (ITA 852 /DELHI/2015) AND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE TAX PA YER TO THE EXTENT THAT PAYMENTS FOR ROAMING CHARGES DO NOT PARTAKE TH E CHARACTER OF FEES FOR TECHNICAL SERVICES AND HENCE TH ERE IS NO OBLIGATION TO WITHHOLD TAX ON SUCH PAYMENT UNDER SECTION 194J OF THE ACT. NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR ATTE NTION BY DR AND RESPECTFULLY FOLLOWING THE COORDINATE BENCH DEC ISION AS NOTED ABOVE, THE ISSUE IS ALSO DECIDED IN FAVOUR OF TH E ASSESSEE. 45. THE LAST ISSUE IS IN RESPECT OF LEVY OF INTERES T UNDER THE PROVISIONS OF 201(1A) OF THE ACT. SINCE WE HAVE ALRE ADY HELD THAT THE ASSESSEE WAS NOT AN ASSESSEE-IN-DEFAULT IN TERMS OF SECTION 194H AND SECTION 194J OF THE ACT, THIS GROUND OF APPEA L IS ACADEMIC AND DISPOSED OF AS SUCH. 46. IN CONCLUSION, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2021 . SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20 TH JANUARY, 2021 PKK:
