M/s Tata Teleservices Limited, Bangalore V. DCIT, Bangalore

ITA 1289/BANG/2012

• Counselvise Citation: 128921114 RSA 2012
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 01-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K AMBASTHA
• Assessee Lawyers: S S NAGANANDA
• Section: 201(1); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N. BARAT H VAJA SANKAR, VICE - PRESIDENT A ND SHRI N.V.VASUDEVAN , JUDICIAL MEMBER ITA NOS.308 TO 310(BANG)/2011 (ASSESSMENT YEARS: 2006-07 TO 2008-09) ITA NOS.1285, 1287, 1289 (BANG)/2012 (ASSESSMENT YEARS: 2006-07 TO 2008-09) AND ITA NO.1286, 1288, 1290(BANG)/2012 (ASSESSMENT YEARS: 2006-07 TO 2008-09) M/S.TATA TELESERVICES LTD., A BLOCK, SILICON TERRACES, 30/1, HOSUR MAIN ROAD, KORAMANGALA, BANGALORE - 560095. APPELLANT PAN: AAACT2438A VS. DEPUTY COMMISSIONER OF INCOME - TAX (TDS) CIRCLE 18(1), BANGALORE. RESPONDENT **** ITA NOS.393 TO 396(BANG)/2011 (ASSESSMENT YEARS: 2005-06 TO 2008-09) ITA NOS.1014, 1016, 1018, 1020(BANG)/2012 (ASSESSMENT YEARS: 2005-06 TO 2008-09) AND ITA NOS.1015, 1017, 1019, 1021(BANG)/2012 (ASSESSMENT YEARS: 2005-06 TO 2008-09) DEPUTY COMMISSIONER OF INCOME - TAX (TDS) CIRCLE 18( 2 ), BANGALORE. APPELLANT VS. M/S.TATA TELESERVICES LTD., BAN GALORE. RESPONDENT ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 2 OF 34 A PPELLANT BY: SHR I S.S.NAGANANDA, ADVOCATE. RESPONDENT BY : SHRI P.K.AMBASTHA, CIT(DR). DATE OF HEARING: 05 - 11 - 2012. DATE OF PRONOUNCEMENT: 27 - 11 - 2012 . O R D E R PER BENCH: ALL THE APPEALS ARISE OUT OF ORDERS PASSED U/S 201( 1) AND 201(1A) OF THE INCOME-TAX ACT, 1961 [THE ACT]. THE ABOVE APPEALS ARISE UNDER THE FOLLOWING FACTS AND CIRCUMS TANCES: 2. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF PROVIDING TELECOMMUNICATION SERVICES ACROSS THE COU NTRY. THE TELECOMMUNICATION SERVICES INCLUDE BASIC TELEPHONES , ISD, NLD, BROADBAND AND CDMA MOBILE SERVICES. THE ASSESSEE I S DULY LICENSED TO ESTABLISH, MAINTAIN AND OPERATE TELECOM MUNICATION SERVICES AND OTHER VALUE ADDED SERVICES IN VARIOUS TELECOM CIRCLES IN INDIA UNDER LICENSES GRANTED BY THE GOVERNMENT O F INDIA THROUGH DEPARTMENT OF TELECOMMUNICATIONS (DOT). 3. TO MARKET ITS PRODUCTS AND SERVICES THE ASSESSEE APPOINTS PERSONS WHO ARE CALLED CHANNEL PARTNERS [CP FOR SHORT]. THE CPS ARE APPOINTED FOR SPECIFIED GEOGRAPHICAL AREAS. THE TERMS OF THE AGREEMENT BETWEEN THE ASSESSEE AND CP NEED TO B E SPECIFIED AS THE SAME IS OF IMPORTANCE FOR DECIDING THE ISSUE S THAT ARISE FOR CONSIDERATION IN THESE APPEALS. A COPY OF CHANNEL PARTNER AGREEMENT [CPA] DATED 16-4-2008 BETWEEN ASSESSEE AN D ONE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 3 OF 34 M/S.AASTHA DISTRIBUTORS REPRESENTED BY PROP. MR. MU NEER AHMED WAS FILED BEFORE US AND IT WAS SUBMITTED THAT THE S AID AGREEMENT IS A STANDARD FORM ADOPTED IN THE CASE OF ALL CPS. THE TERMS OF THE CPA, IN SO FAR AS IT IS RELEVANT FOR THE PRESEN T CASE, ARE AS FOLLOWS: A) CPS ARE APPOINTED TO MARKET PRODUCTS AND SERVICES O F THE ASSESSEE. B) PRODUCTS AND SERVICES ARE DEFINED IN CLAUSE 1(N) AS FOLLOWS: PRODUCTS AND/OR SERVICE SHALL MEAN ONE OR MORE OF THE TELECOM PRODUCTS AND SERVICES PROVIDED BY TTSL EITH ER DIRECTLY OR THROUGH ITS DISTRIBUTORS, IN THE SERVIC E AREA, WHICH INCLUDES DISTRIBUTION OF MOBILE HANDSETS, TEL EPHONE INSTRUMENTS, TELECOM EQUIPMENT, NETWORK INTERFACE U NITS (NIU), SIM CARDS, RUIM CARDS, USB MODEMS, V-DATA CA RDS, RECHARGE VOUCHERS, CALLING CARDS, PROVISION OF ALL UNIFIED ACCESS TELECOMMUNICATION SERVICES AND OTHER VALUE A DDED SERVICES UNDER THE UNIFIED SERVICE LICENSES ISSUED BY DOT AND ALL OTHER SERVICES WITHIN THE PURVIEW OF THE SA ID LICENSES, AS MAY BE INCLUDED/SPECIFIED BY TTSL, FROM TIME TO TIME. C) CLAUSE 2.1 OF THE AGREEMENT MENTIONS THAT CHANNEL PARTNER IS BEING APPOINTED FOR THE PURPOSE OF DISTRIBUTING/SELLING/RESELLING OF PRODUCTS AND SERV ICES. D) CLAUSE 2.2 PROVIDES THAT THE APPOINTMENT IS NON- EXCLUSIVE AND OTHER PERSONS CAN BE APPOINTED AS CP IN THE SAME AREA. E) CLAUSE 2.4 OF THE AGREEMENT READS AS FOLLOWS: 2.4 CHANNEL PARTNER ACKNOWLEDGES THAT IT IS ACTING FOR THE LIMITED AND EXCLUSIVE PURPOSE OF THIS AGREEMENT, WH ICH DOES NOT CONSTITUTE CHANNEL PARTNER AS A SERVANT OR EMPL OYEE OR PARTNER OR JOINT VENTURE OR AFFILIATE OR GROUP COMP ANY OF TTSL. CHANNEL PARTNER SHALL HAVE NO AUTHORITY TO B IND TTSL IN ANY RESPECT WHATSOEVER AND SHALL NOT HOLD ITSELF OUT AS OWNED BY OR ASSOCIATED WITH TTSL OTHER THAN AS AN INDEPENDENT CHANNEL PARTNER ON A PRINCIPAL TO PRINC IPAL BASIS AUTHORIZED AND PERMITTED TO MARKET THE PRODUCTS AND SERVICES UNDER THESE PRESENTS. NONE OF THE EMPLOYE ES OF CHANNEL PARTNER SHALL BE CONSTRUED OR DEEMED TO BE THE EMPLOYEES OF TTSL AT ANY TIME AND CHANNEL PARTNER S HALL INDEMNIFY AND KEEP INDEMNIFIED TTSL, ITS DIRECTORS AND ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 4 OF 34 OFFICERS AGAINST ANY CLAIM, DEMAND, LOSS OR WHATSOE VER IN THIS CONNECTION. F) WITHIN HIS AREA THE CP IS PERMITTED TO HAVE DIFFERE NT OUTLETS. G) THE EXPRESSION CONSIDERATION HAS BEEN DEFINED IN CLAUSE 1(C) OF THE AGREEMENT AS FOLLOWS: 1(C) CONSIDERATION SHALL MAN THE TRADE DISCOUNTS, COMMISSIONS AND OTHER MONETARY COMPENSATION THAT CHANNEL PARTNER IS ENTITLED TO RECEIVE FOR DISTRIBU TING THE PRODUCTS AND SERVICES, WHICH WILL KEEP CHANGING PER IODICALLY DUE TO VARIOUS FACTORS INCLUDING CHANGING NATURE OF MARKET AND THE SAME WILL BE INFORMED BY TTSL TO CHANNEL PA RTNER FROM TIME TO TIME, AS SET FORTH IN THE SCHEDULE B. H) THE RESPONSIBILITIES, DUTIES AND OBLIGATIONS OF THE ASSESSEE AND THAT OF THE CP ARE AS FOLLOWS: 7. RESPONSIBILITIES, DUTIES AND OBLIGATIONS OF TTSL TTSL SHALL BE RESPONSIBLE FOR THE FOLLOWING AND ACC ORDINGLY SHALL: 7.1 ENDEAVOUR TO PROVIDE CHANNEL PARTNER WITH SUCH MARKETING INFORMATION AND PERIODIC PRODUCTS AND SERVICE FEATURES WHICH IN TTSLS OPINION WILL ASSIS T CHANNEL PARTNER IN THE PERFORMANCE OF ITS/HIS/HER OBLIGATIONS HEREUNDER. 7.2 USE ITS BEST EFFORTS TO PROVIDE GOOD COVERAGE A ND GRADE OF SERVICE CONSISTENT WITH MARKET REQUIREMENT S. 7.3 ENDEAVOUR TO MAKE AVAILABLE AND PROVIDE TO CHANNEL PARTNER, PRODUCTS AND SERVICE CONSULTATIONS AND BROCHURES AND OTHER AIDS, AS HAVE BEEN PUBLISHE D BY TFSL. THE QUANTITIES WILL BE ESTABLISHED BY TTSL . 7.4 MAKE THE CONSIDERATION TO CHANNEL PARTNER, AS CONTEMPLATED IN THE SCHEDULE B OF THIS AGREEMENT. 7.5 COMMUNICATE/ INFORM CHANNEL PARTNER ON AN ONGOING BASIS OF ALL CHANGES IN THE RATES, CONDITIO NS AND SERVICE AREAS, AS SOON AS PRACTICABLE AFTER ANY SUC H CHANGE. 7.6 ASSIGN A REPRESENTATIVE OF CONTACT IN TTSL TO A SSIST CHANNEL PARTNER FOR RESOLVING PROBLEMS, TO SUPPORT CHANNEL PARTNERS SERVICE EFFORTS OR TO PROVIDE CHA NNEL PARTNER WITH INFORMATION PERTINENT TO THE PRODUCTS AND ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 5 OF 34 SERVICE OR OTHER INFORMATION THAT TTSL WOULD DEEM NECESSARY/IMPORTANT. 8 . RESPONSIBILITIES, DUTIES AND OBLIGATIONS OF CHANNEL PARTNER 8.1 CHANNEL PARTNER SHALL BE RESPONSIBLE FOR VARIOU S DUTIES AND OBLIGATIONS SET FORTH IN THIS SECTION AN D UNDERTAKES TO PERFORM THE SAME AND ALL OTHER DUTIES AND OBLIGATIONS UNDER SCOPE OF SERVICE FOR CHANNEL PARTNER ARRANGEMENT AS SET FORTH IN SCHEDULE A HERE TO, AS AMENDED, MODIFIED FROM TIME TO TIME BY TTSL, IN LETTER AND SPIRIT. 8.2 CHANNEL PARTNER ACKNOWLEDGES AND AGREES THAT STRICT COMPLIANCE WITH THE STANDARDS AND REQUIREMEN TS AS SET OUT IN THIS AGREEMENT AND THE MANUALS THAT M AY BE SUPPLIED AND AS ARE MODIFIED AND AMENDED TIME TO TIME BY TTSL, IS NECESSARY FOR CHANNEL PARTNER TO MAINTAIN ITS/HIS APPOINTMENT AS A CHANNEL PARTNER O F TTSL. CHANNEL PARTNER WITHOUT LIMITING TO THE GENER ALITY OF THE FOREGOING SHALL COMPLY WITH THOSE RESPONSIBI LITIES DUTIES AND OBLIGATIONS SET FORTH HEREIN. 8.3 CHANNEL PARTNER ACKNOWLEDGES AND AGREES THAT IT IS ITS/HIS RESPONSIBILITY FOR DEPLOYMENT OF NECESSARY RESOURCES, EQUIPMENTS, FACILITIES AND TO APPOINT DEALER/RETAILERS TO WORK UNDER ITS/HIS SUPERVISION AND CONTROL, WHO WILL RUN THE OUTLETS IN THE SERVICE AR EA, AS CONTEMPLATED ABOVE AND AS MAY BE STIPULATED BY TTSL , FROM TIME TO TIME. IN SUCH CASES CHANNEL PARTNER SH ALL HAVE ABSOLUTE CONTROL OVER SUCH DEALERS/RETAILERS FUNCTIONING IN TERMS OF THE GUIDELINES/STIPULATIONS / INSTRUCTIONS OF TFSL. CHANNEL PARTNER SHALL BE FULL Y RESPONSIBLE FOR THE REMUNERATION/WAGES/SALARY/ANY OTHER PAYMENT/DISCOUNT THAT MAY BE PAYABLE TO ITS DEALER/RETAILERS/PERSONNEL IN RESPECT OF THE SERVIC ES RENDERED BY THEM AND T1SL SHALL NOT BE HELD RESPONSIBLE FOR ANY SUCH PAYMENTS, WHATSOEVER. CHANNEL PARTNER SHALL BE LIABLE TO ENSURE THAT THE PERSONNEL IDENTIFIED/APPOINTED BY CHANNEL PARTNER D O NOT COMMIT ANY ACT OR OMISSION, WHICH MAY RESULT IN VIOLATION OF THIS AGREEMENT OR OF THE AGREEMENT BETWEEN CHANNEL PARTNER AND SUCH DEALERS/RETAILERS AND/OR OF ANY APPLICABLE LAW/S. 8.4 CHANNEL PARTNER AGREES TO AND ACCORDINGLY SH ALL: I) OBTAIN NECESSARY LICENSE, PERMITS AND THE LIKE FROM THE CONCERNED STATUTORY AND/OR LOCAL BODIES IN RESPECT OF CHANNEL PARTNERS OPERATION UNDER THIS AGREEMENT, INCLUDING ANY SPECIFIC LICENSES/PERMITS REQUIRED FOR PLAYING CHANNEL/PIPE MUSIC IN THE OUTLETS AND OTHER BUSINESS OUTLETS IN CONNECTION ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 6 OF 34 HEREWITH AND ENSURE ITS CONTINUED VALIDITY AND STRI CT COMPLIANCE THEREOF; II) DILIGENTLY AND FAITHFULLY CAN OUT ALL ITS/HIS/H ER OBLIGATIONS AND DUTIES AS A CHANNEL PARTNER AND AT ALL TIMES PROTECT AND PROMOTE THE INTEREST OF TTSL; III) NOT COMMIT BREACH OR VIOLATE ANY OF THE TERMS AND CONDITIONS OF THIS AGREEMENT AND SHALL ALSO HONORS AND FOLLOW SUCH INSTRUCTIONS AS MAY BE ISSUED BY TFSL FROM TIME TO TIME; IV) ACCEPT AND ABIDE BY ANY CHANGE IN THE TERMS AND CONDITIONS OF THIS AGREEMENT INCLUDING BU T NOT LIMITED TO THE SCOPE OF SERVICE, WHICH MAY IN T HE ABSOLUTE DISCRETION OF TTSL BECOME NECESSARY DUE TO ANY CHANGE IN LAW, RULES AND REGULATIONS OR DUE TO MARKET DYNAMICS, OR DUE TO ANY CHANGE IN THE TERMS OR CONDITIONS OF THE SAID LICENSES GRANTED BY THE D OT INCLUDING ANY CHANGE IN- THE TARIFF OR WHICH CHANGE MAY BE NECESSARY TO ENSURE THAT THE SUBSCRIBERS, GENERAL PUBLIC GET BETTER SERVICE AND RANGE OF PRODUCTS; V) FOR ALL TIMES TO COME, KEEP STRICTLY CONFIDENTIAL ALL INFORMATION, DATA, DETAILS, CUSTOM ER LISTS, MANUALS AND ALL OTHER DOCUMENTS, WHICH CHANNEL PARTNER MAY RECEIVE OR ACQUIRE FROM TTSL, BY VIRTUE OF IT/HIM/HER BEING APPOINTED AS TTSL CHANNEL PARTNER; VI) APPOINT DEALERS/RETAILERS/OPERATORS TO WORK UNDER IT/HIM/HER IN THE SERVICE AREA DEPENDING UPON THE REQUIREMENTS AND/OR AS MAY BE INSTRUCTED/ADVISED BY TTSL FROM TIME TO TIME; VII) HAVE COMPLETE CONTROL OVER SUCH DEALERS/RETAILERS/OPERATORS AND ENSURE THEIR STRICT COMPLIANCE OF STATUTORY OBLIGATIONS AND RULES, REGULATIONS AND ALL OTHER GUIDELINES/INSTRUCTIONS E TC FROM TFSL, IN THEIR OPERATION BY MEANS OF THOROUGH SUPERVISION OF THEIR ACTIVITIES; VIII) PAY APPLICABLE COMMISSIONS/SERVICE CHARGES IN TERMS OF THE AGREEMENT BETWEEN CHANNEL PARTNER AND THE DEALERS/RETAILERS/OPERATORS AND ENSURE UNINTERRUPTED SERVICE IN DISTRIBUTION OF PRODUCTS A ND SERVICES; IX) FOLLOW THE GUIDELINES/STIPULATIONS THAT ARE OUTLINED IN THE MANUALS THAT MAY BE SUPPLIED BY TFSL, FROM TIME TO TIME, CHANNEL PARTNER AGREES TO AND ACCORDINGLY SHALL 8.5 CHANNEL PARTNER AGREES TO AND ACCORDINGLY SHAL L ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 7 OF 34 I) BE LIABLE TO PAY ALL THE TAXES SUCH AS SALES TAX , SERVICE TAX APPLICABLE AND PAYABLE IN RESPECT OF TH E SUBJECT MATTER OF THIS AGREEMENT AND ANY STATUTORY INCREASE IN RESPECT THEREOF; II) MAINTAIN SUCH MARKETING AND DISTRIBUTION STANDA RDS AS ARE, IN THE OPINION OF TTSL, APPROPRIATE CONSIDE RING THE QUALITY AND REPUTATION OF PRODUCTS AND SERVICE; III) AT ALL TIMES PROMPTLY, EFFICIENTLY AND IN BUSI NESSLIKE MANNER PROVIDE TOP QUALITY SERVICE TO THE SUBSCRIBE RS, POTENTIAL SUBSCRIBERS AND RESPOND TO ANY AND ALL CUSTOMER/PUBLIC ENQUIRIES REGARDING THE PRODUCTS AN D SERVICE; IV) EMPLOY A FULLY TRAINED SERVICE STAFF IN ACCORDA NCE WITH THE STANDARDS SET BY TTSL. THE NUMBER OF TRAIN ED SALES PERSONNEL SHALL BE ADEQUATE TO PROVIDE PROMPT AND EFFICIENT SERVICES KEEPING IN VIEW THE TTSLS SERVICE STANDARDS. V) ADVERTISE THE PRODUCTS AND SERVICES USING THE PROMOTIONAL MATERIALS OR LITERATURE EITHER SUPPLIED BY OR APPROVED IN ADVANCE IN WRITING BY TTSL AND SHALL MAINTAIN STOCK OF POINT OF PURCHASE (POP) MATERIAL OR ANY OTHER PRINTED MATERIAL, ADVERTISEMENT MATERIAL, ETC. AS SPECIFIED BY TTSL FROM TIME TO TIME, WHICH SHALL BE USED FOR THE PURPOSE OF PROMOTION AND DISTRIBUTION OF PRODUCTS AND SERVICES. ALL SUCH POP MATERIALS SHALL HAVE TTSL LOGO AND SHALL BE PRINTED ONLY AFTER SPECIFIC WRITTEN APPROVAL OF TTSL. HOWEV ER, ANY TAX LIABILITY/IES, AS MAY BE APPLICABLE FROM TI ME TO TIME WITH RESPECT TO DISPLAY OF SUCH POP MATERIALS IN THE OUTLETS SHALL BE BORNE BY THE CHANNEL PARTNER; VI) PARTICIPATE IN ALL PROGRAMMES AND PROMOTIONS AN D OTHER ACTIVITIES, WHICH TTSL MAY REQUIRE CHANNEL PARTNER TO PARTICIPATE FROM TIME TO TIME; VII)AT ALL TIMES CO-OPERATE WITH AND RENDER ALL ASSISTANCE TO THE REPRESENTATIVES TTSL AND REPORT PROMPTLY TO TTSL WITHIN 24 HOURS OF ANY INFORMATION , WHICH MAY COME TO CHANNEL PARTNERS NOTICE REGARDIN G CUSTOMER COMPLAINTS OR CLAIMS OR FEEDBACK WITH RESPECT TO THE PRODUCTS AND SERVICES, CUSTOMER NEED S AND INTERESTS AND LOCAL MARKET CONDITIONS AND SHALL MAINTAIN A SEPARATE REGISTERS IN RESPECT OF THE SAM E AND THE COMMUNICATIONS TO TFSL. VIII) PROVIDE A INTEREST FREE SECURITY DEPOSIT AS M AY BE DECIDED BY TTSL FROM TIME TO TIME, AS A SECURITY FO R DUE PERFORMANCE AND OBSERVANCE OF ALL THE TERMS AND CONDITIONS OF THIS AGREEMENT, ALL THE INSTRUCTIONS FROM TTSL RELATING TO THE RULES AND REGULATIONS GOVERNIN G THE PRODUCTS AND SERVICES AND ANY ORDERS IN CONNECTION THEREWITH BY THE STATUTORY AUTHORITIES; ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 8 OF 34 IX) IMMEDIATELY INFORM TTSL, IF AT ANY POINT OF TIM E IN FUTURE, ANY RELATIVE OF CHANNEL PARTNER/ PERSONS IN CHARGE/CONTROL OF CHANNEL PARTNER/PARTNERS/ASSOCIAT ES OF CHANNEL PARTNER ENGAGED IN ANY COMPETING SERVICE . CHANNEL PARTNER HAS ASSURED TTSL THAT AT PRESENT NO SUCH PERSON OF CHANNEL PARTNER IS ENGAGED IN ANY BUSINESS OR ACTIVITY IN COMPETING SERVICE; X) BE RESPONSIBLE FOR THE RENT, RATES, TAXES AND OT HER EXPENSES PERTAINING TO THE MAINTENANCE OF THE OUTLE TS AND PROVISION OF THE DISTRIBUTION SERVICES THEREAT; XI) COMPLY WITH ALL REQUIREMENTS/OBLIGATIONS/ GUIDELINES/INSTRUCTIONS, ESTABLISHED BY TTSL FOR CHANNEL PARTNERS FROM TIME TO TIME; XII) PROMPTLY INFORM TTSL FORTHWITH IN CASE OF ANY CHANGE IN THE CONSTITUTION OF THE CHANNEL PARTNER A ND SHALL SUBMIT A COPY OF REVISED CONSTITUTIONAL DOCUMENTATION TO TTSL, WITHIN REASONABLE TIME. HOWEVER THIS PROVISION SHALL NOT APPLY IF THE CHANN EL PARTNER IS A PROPRIETARY CONCERN. 8.6 STATUTORY COMPLIANCE I) CHANNEL PARTNER ACKNOWLEDGES AND AGREES THAT IT/HE/SHE HAVING TO ASSOCIATE WITH T UNDER THESE PRESENTS, WHICH IS ALWAYS DEMONSTRATING TO BE A GOO D AND RESPONSIBLE CORPORATE CITIZEN, SHALL HAVE TO CONDUCT BUSINESS AT ALL TIMES IN STRICT COMPLIANCE WITH ALL APPLICABLE LAWS, RULES, REGULATIONS AND OTHER GOVERNMENTAL/STATUTORY/REGULATORY REQUIREMENTS, WHICH IS MANDATORY TO MAINTAIN ITS ASSOCIATION WITH TFSL AS A CHANNEL PARTNER. ACCORDINGLY, CHANNEL PARTNER SHALL BE RESPONSIBLE VARIOUS LABOUR ENACTMENTS, INCLUDING BUT NOT LIMITED TO THE PROVIS IONS OF PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, EMPLOYEES STATE INSURANCE ACT 1948, MINIMUM WAGES ACT, PAYMENTS OF WAGES ACT 1936, SHOPS AND ESTABLISHMENTS ACT, CHILD LABOUR ACT, OTHER PROVISI ONS UNDER CORPORATION/MUNICIPAL & OTHER LOCAL LAWS, AND SHALL ENSURE THAT NO PERSON BELOW THE AGE OF 18 YEA RS WILL BE ENGAGED DIRECTLY OR INDIRECTLY FOR EXECUTIO N OF THE TERMS OF THIS AGREEMENT. CHANNEL PARTNER CONFIR MS THAT TTSL SHALL NOT BE LIABLE IN ANY MANNER WHATSOE VER FOR ANY NON-COMPLIANCE ON THE PART OF CHANNEL PARTN ER OF THE APPLICABLE LAWS AND IN THE EVENT OF ANY ADVE RSE CLAIMS/ACTIONS/DEMANDS/PROCEEDINGS OF WHATSOEVER NATURE ARISING THEREOF, THE ENTIRE BURDEN INCLUDING COSTS AND EXPENSES SHALL BE STRICTLY BORNE BY CHANN EL PARTNER. CHANNEL PARTNER AGREES TO INDEMNIFY AND KE EP TTSL INDEMNIFIED IN RESPECT HEREOF. II) CHANNEL PARTNER SHALL MAINTAIN ALL REQUISITE RE CORDS, REGISTERS, ACCOUNT BOOKS ETC. WHICH ARE OBLIGATORY ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 9 OF 34 UNDER ANY APPLICABLE LAW AND SHALL PROVIDE SUCH INFORMATION AS MAY BE REQUIRED UNDER ANY LAW TO ANY AUTHORITY. III) CHANNEL PARTNER SHALL FURNISH A MANDATORY INDEMNITY TO TTSL IN THE FORMAT PROVIDED IN APPENDI X 2 HEREIN. 8.7 CHANNEL PARTNER SHALL ENSURE THAT NEITHER CHANN EL PARTNER NOR THE DEALERS/RETAILERS APPOINTED BY CHAN NEL PARTNER OR ANYONE UNDER ANY OF THEM: I) MAKE/S OR GIVE/S DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, ANY GUARANTEES, REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS AND SERVICES, RATE PACKAGES IN THE PRODUCT S AND SERVICES, TO THE CUSTOMERS OR ANY PERSON, SAVE AND EXCEPT AS MAY HAVE BEEN EXPRESSLY AUTHORIZED BY TTSL. II) OFFER THE PRODUCTS AND SERVICE TO ANYONE AT RAT ES OR PRICES OTHER THAN THOSE SPECIFIED BY TTSL OR PROVID ES INCENTIVES OR SUBSIDIES, WHICH HAVE THE EFFECT OF D OING SO. III) ENGAGE OR DO OR CAUSE TO BE DONE OR BE A PARTY TO ANY UNFAIR OR UNETHICAL TRADE PRACTICES OR ANY OTHE R BUSINESS PRACTICE WITH RESPECT TO THE DISTRIBUTION SERVICE OR INDULGE IN ANY ILLEGAL OR UNLAWFUL ACTIV ITIES. IV) CARRY ON OR ALLOW ANYONE TO CARRY ON, AT ANY TI ME IN ITS/HIS OUTLETS OR ANY PART THEREOF ANY OTHER BUSINESS INCLUDING THE BUSINESS OF ANY COMPETING SERVICE OR OTHERWISE HOWSOEVER ASSOCIATING WITH ANY COMPETING SERVICE. 8.8 CHANNEL PARTNER EXPRESSLY AGREES THAT IN VIEW O F RAPIDLY CHANGING MARKET DYNAMICS, TTSL SHALL HAVE T HE RIGHT AND OPTION TO REVISE THE SCOPE OF THE SERVICE S TO BE RENDERED BY CHANNEL PARTNER FROM TIME TO TIME BASED ON THE OPERATIONAL REQUIREMENTS AND THE SAME SHALL BE FINAL AND BINDING ON CHANNEL PARTNER. 8.9 CHANNEL PARTNER SHALL PROCURE THE PRODUCTS FRO M TTSL OR SUCH PERSON/S AUTHORIZED TTSL. CHANNEL PARTNER S HALL ENSURE THAT THERE IS NO SALE OF SPURIOUS AND UNAUTH ORIZED PRODUCTS FROM CHANNEL PARTNER OUTLET(S) AND/OR THE RETAILS OUTLETS UNDER THE CONTROL OF CHANNEL PARTNER. 8.10 IT SHALL BE THE RESPONSIBILITY OF CHANNEL PART NER TO EFFECT THE SALES AND SERVICE THROUGH PROPER INVOICE S OR AS MAY BE ADVISED BY TTSL. IN CASE OF INVOICES, IT SHA LL SERIALLY NUMBERED, DATED AND DETAILING THE MATERIAL PARTICULARS OF THE PRODUCTS AND SERVICES, NAME AND ADDRESS OF PURCHASERS AND AFTER REASONABLE VERIFICA TION THAT SUCH PURCHASE IS FOR SUBSCRIBING FOR TTSL SERV ICE IN ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 10 OF 34 THE CIRCLE IN WHICH THE CHANNEL PARTNER IS APPOINTE D. IF CHANNEL PARTNER HAS BEEN PAID CASH BY TTSL OR ANY PERSON AT THE INSTANCE OF TTSL, ON ANY PRODUCT SOLD TO THE CHANNEL PARTNER BY TTSL OR ANY AUTHORIZED DEALER OF TTSL, ANY LETHARGY, NEGLIGENCE IN OBSERVING THIS CONDITIO N OR MALAFIDE ACT ON THE PART OF THE CHANNEL PARTNER WOU LD ENTITLE TTSL TO TERMINATE THIS AGREEMENT WITHOUT NO TICE AND RECOVER FROM CHANNEL PARTNER THE AMOUNT OF SUBSIDY/SUPPORT ON THE QUANTITY OF THE PRODUCTS, WH ICH IN THE REASONABLE OPINION OF TTSL HAS BEEN DIVERTED TO USES AND/OR AREAS NOT INTENDED UNDER THIS AGREEMENT OR I N VIOLATION OF USES/AREAS INTENDED UNDER ANY AGREEMEN T SIGNED BY CHANNEL PARTNER WITH AUTHORIZED DEALERS/VENDOR/S OF TTSL. THIS IS WITHOUT PREJUDICE TO RIGHT OF TISL TO TAKE ANY OTHER LEGAL ACTION INCLU DING ACTION FOR CRIMINAL BREACH OF TRUST. 8.11 CHANNEL PARTNER WARRANTS THAT NO OFFICER, DIRE CTOR, EMPLOYEE OF TTSL OR IMMEDIATE FAMILY MEMBER THEREOF (COLLECTIVELY TTSL PERSONNEL) HAS RECEIVED OR WIL L RECEIVE ANYTHING OF VALUE OF ANY KIND FROM CHANNEL PARTNER OR ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS (COLLECTIV ELY CHANNEL PARTNER PERSONNEL) IN CONNECTION WITH THI S AGREEMENT AND THAT NO TTSL PERSONNEL HAVE A BUSINES S RELATIONSHIP OF ANY KIND WITH CHANNEL PARTNER OR CH ANNEL PARTNER PERSONNEL. I) CLAUSE 10 OF THE AGREEMENT PROVIDES FOR CONSIDERATI ON PAYABLE BY ASSESSEE TO CP. THE GIST OF THIS CLAUSE IN SO FAR AS IT RELATES TO STARTER PACKS AND RCVS IS T HAT THE ASSESSEE WILL SUPPLY STARTER KITS AND RCVS TO CHANNEL PARTNER UNDER SALE INVOICES AT A DISCOUNT F ROM THE MAXIMUM RETAIL PRICE (MRP). CLAUSE 10.4 OF THE CPA PROVIDES THAT CP IS LIABLE TO PAY STATE AND LOC AL TAXES INCLUDING SALES-TAX IN RELATION TO THE AGREEM ENT. J) CLAUSE 15.2 PROVIDES THAT ASSESSEE SHALL HAVE NO OBLIGATION TO TAKE BACK PRODUCTS SOLD TO CP. 4. AS FAR AS THE PRESENT APPEALS ARE CONCERNED, WE ARE CONCERNED ONLY WITH MOBILE TELEPHONE SERVICES PROVIDED BY THE ASSESSEE TO ITS CUSTOMERS THROUGH CP. IN PARTICULAR, WE ARE CO NCERNED WITH THE STARTER KITS AND RCVS THAT ARE PROVIDED BY THE ASSESSEE TO CP WHO, IN TURN, PROVIDE THEM TO THE CUSTOMERS TO ENAB LE THEM TO USE THE MOBILE TELEPHONE SERVICES PROVIDED BY THE A SSESSEE. THE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 11 OF 34 NATURE OF THESE SERVICES PROVIDED BY THE ASSESSEE N EEDS TO BE EXPLAINED. A MOBILE PHONE (ALSO KNOWN AS A CELLULA R PHONE, CELL PHONE AND A HAND PHONE) IS A DEVICE THAT CAN MAKE A ND RECEIVE TELEPHONE CALLS OVER A RADIO LINK WHILE MOVING AROU ND A WIDE GEOGRAPHIC AREA. IT DOES SO BY CONNECTING TO A CELL ULAR NETWORK PROVIDED BY A MOBILE PHONE OPERATOR, ALLOWING ACCES S TO THE PUBLIC TELEPHONE NETWORK. 5. A COMMON COMPONENT FOUND ON ALL PHONES IS A SUB SCRIBER IDENTITY MODULE SIM CARD A ND REMOVABLE USER IDENTITY MODULE (RUIM). THE SIM HAS INFORMATION LIKE THE PHONE NUMBER AND PAYMENT ACCOUNT AND THIS IS NEEDED TO MAKE OR RECEI VE CALLS. A SUBSCRIBER IDENTITY MODULE ( SIM ) IS AN INTEGRATED CIRCUIT THAT SECURELY STORES THE INTERNATIONAL MOBILE SUBSCRIBER IDENTITY (IMSI) AND THE RELATED KEY USED TO IDENTIFY AND AUTHENTICA TE SUBSCRIBERS ON MOBILE TELEPHONY DEVICES (SUCH AS MOBILE PHONES AND COMPUTERS). A SIM IS EMBEDDED INTO A REMOVABLE SIM CARD, WHICH CAN BE TRANSFERRED BETWEEN DIFFERENT MOBILE DEVICES . A SIM CARD CONTAINS ITS UNIQUE SERIAL NUMBER (ICCID), INTERNAT IONAL MOBILE SUBSCRIBER IDENTITY (IMSI), SECURITY AUTHENTICATION AND CIPHERING INFORMATION, TEMPORARY INFORMATION RELATED TO THE L OCAL NETWORK, A LIST OF THE SERVICES THE USER HAS ACCESS TO AND TWO PASSWORDS: A PERSONAL IDENTIFICATION NUMBER (PIN) FOR ORDINARY U SE AND A PERSONAL UNBLOCKING CODE (PUK) FOR PIN UNLOCKING. SIM CARDS STORE NETWORK-SPECIFIC INFORMATION USED TO AUTHENTI CATE AND IDENTIFY SUBSCRIBERS ON THE NETWORK. THE MOST IMPOR TANT OF THESE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 12 OF 34 ARE THE ICCID, IMSI, AUTHENTICATION KEY (KI), LOCAL AREA IDENTITY (LAI) AND OPERATOR-SPECIFIC EMERGENCY NUMBER. THE S IM ALSO STORES OTHER CARRIER-SPECIFIC DATA SUCH AS THE SMSC (SHORT MESSAGE SERVICE CENTER) NUMBER, SERVICE PROVIDER NA ME (SPN), SERVICE DIALING NUMBERS (SDN), ADVICE-OF-CHARGE PAR AMETERS AND VALUE ADDED SERVICE (VAS) APPLICATIONS. 6. THE NETWORK IS THE COMPANY THAT PROVIDES THE PH ONE SERVICE. IN MOST AREAS THERE WILL BE MORE THAN ONE MOBILE NE TWORK. CUSTOMERS CHOOSE NETWORKS BASED ON HOW WELL THE DIF FERENT NETWORKS WORK IN THEIR AREA, OR BY PRICE. 7. THERE ARE TWO MAIN WAYS TO PAY FOR USE OF MOBIL E TELEPHONE SERVICES: POST PAID: IF YOU PAY BY CONTRACT YOU WILL PAY THE NETWORK MONEY EVERY MONTH SO THAT YOU CAN MAKE CALLS. PREPAID: IF YOU PAY AS YOU USE, YOU WILL PAY FOR A FIXED AMOUNT OF CALL TIME CREDIT WHICH YOU THEN USE UP WH EN PHONING PEOPLE. ONCE THE CREDIT IS USED UP YOU MUST BUY SOME MORE TO USE THE PHONE. 8. AS EXPLAINED ABOVE, IT IS THE CARD WHICH ENABLE S THE ASSESSEE TO PROVIDE AND THE CUSTOMER TO USE THE PRE-PAID/POS T-PAID MOBILE TELEPHONE SERVICES. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 13 OF 34 9. AS ALREADY EXPLAINED, THE ASSESSEE TO ENABLE CU STOMERS TO AVAIL OF THE SERVICES IT PROVIDES APPOINTS PERSONS WHO ARE CALLED CHANNEL PARTNERS (CP FOR SHORT). CPS ARE APPOINT ED FOR VARIOUS AREAS OR REGIONS. A CUSTOMER WHO WISHES TO USE THE SERVICES OF THE ASSESSEE APPROACHES THE CP. THE CP GETS ALL TH E REQUIRED DETAILS OF THE CUSTOMER. THE CUSTOMER IS THEN GIVE N A STARTER PACK WHICH CONTAINS THE TERMS AND CONDITIONS SUBJECT TO WHICH THE SERVICES WILL BE PROVIDED AND AVAILED BY THE CUSTOM ER. IT ALSO CONTAINS THE SIM CARD AND THE TELEPHONE NUMBER CORR ELATING TO A PARTICULAR SIM CARD NUMBER. 10. WHEN THE CUSTOMER AVAILS OF PREPAID MOBILE TEL EPHONE SERVICES, HE CAN PURCHASE RECHARGE VOUCHERS FROM TH E CPS. THE RECHARGE VOUCHERS WILL ENABLE THE CUSTOMER TO USE T HE MOBILE TELEPHONE SERVICES EQUIVALENT TO THE VALUE OF THE R ECHARGE VOUCHERS. 11. APART FROM STARTER PACKS AND RECHARGE VOUCHERS , THE CP ALSO RENDERS SERVICES WHEREBY THE MOBILE TELEPHONE SERVI CES ARE ACTIVATED, I.E., THE CUSTOMER IS LINKED TO THE NETW ORK OF THE ASSESSEE AND CAN ALSO USE THE NETWORK OF OTHER MOBI LE TELEPHONE SERVICE PROVIDERS AS WELL AS TELEPHONE SERVICE PROV IDERS. THERE IS NO DISPUTE IN THESE APPEALS THAT THE CHARGES PAID B Y THE ASSESSEE TO CP FOR SERVICES RENDERED FOR ACTIVATING THE SIM CARD IS IN THE NATURE OF COMMISSION PAID BY THE ASSESSEE ATTRACTIN G THE PROVISIONS OF SEC.194-H OF THE ACT. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 14 OF 34 12. THE ASSESSEE TO ENABLE ITS CUSTOMERS TO USE IT S SERVICES GIVES STARTER PACKS AS WELL AS RECHARGE VOUCHERS TO ITS C PS. THE ASSESSEE RAISES COMMERCIAL INVOICES IN RESPECT OF E ACH AND EVERY SALE OF PRODUCT TO THE CP. WHILE THE MRP VALUE OF T HE PRODUCTS ARE FIXED AT THE TIME OF RAISING INVOICES THE PRODUCTS ARE PRICED AT THE DISCOUNTED PRICE AGREED TO BETWEEN THE ASSESSEE AND THE CP. THE CPS, HOWEVER ARE FREE TO SELL THE PRODUCTS TO RETAI LER AT ANY PRICE (BUT NOT EXCEEDING THE MRP) AND RETAIN THE MARGIN W ITH THEM AS THEIR SHARE OF PROFIT. 13. THE ASSESSING OFFICER I.E. THE INCOME-TAX OFFI CER, TDS WARD, CONSIDERED THE TERMS AND CONDITIONS OF THE AGREEMEN T AND ALSO GOING BY THE NATURE OF SERVICES PROVIDED, CONCLUDED THAT THE ACTUAL RELATIONSHIP IN REGARD TO THIS TRANSACTION BETWEEN THE ASSESSEE AND THE DISTRIBUTOR IS THAT OF PRINCIPAL AND AGENT. HE ALSO CONCLUDED THAT THE DIFFERENCE BETWEEN THE PRICE FIX ED (I.E. MRP) AND THE PRICE CHARGED FOR THEM BY THE ASSESSEE, CON STITUTES ONLY COMMISSION PAYMENT. THEREFORE, THE STAND OF THE ASS ESSING OFFICER IS THAT THE DIFFERENCE DENOTES DEEMED PAYME NT OF COMMISSION WHICH FALLS UNDER THE REALM OF THE PROVI SIONS OF SECTION 194H OF THE ACT. THE ASSESSEE ON THE OTHER HAND TOOK THE STAND THAT ON THE BASIS OF THE TERMS AND CONDITIONS ENTERED INTO WITH THE DISTRIBUTORS, THE RELATIONSHIP WAS NOT THA T OF PRINCIPAL AND AGENT AS HAS BEEN HELD BY THE ASSESSING OFFICER. IT WAS THE STAND OF THE ASSESSEE THAT THE DIFFERENCE BETWEEN THE INV OICED PRICE AND ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 15 OF 34 THE MRP IS ONLY IN THE NATURE OF SALES/TRADE DISCOU NT. THE RELATIONSHIP BETWEEN THE ASSESSEE AND DISTRIBUTOR I S NOTHING BUT PRINCIPAL TO PRINCIPAL. THE AO DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE. CONSEQUENTLY ORDER U/S.201(1)) & 201 (1A) WAS PASSED TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT IN RESPECT OF TAX NOT DEDUCTED AT SOURCE U/S.201(1) OF THE ACT AN D ALSO PASSED ORDER LEVYING INTEREST U/S.201(1A) OF THE ACT. THE CIT(A) CONCURRED WITH THE VIEW OF THE AO. AGGRIEVED BY TH E ORDER OF THE CIT(APPEALS) UPHOLDING THE APPLICABILITY OF SECTION 194H IN RESPECT OF DIFFERENCE BETWEEN THE MRP OF STARTER KIT/PACKS AND RCVS AND THE PRICE AT WHICH THEY WERE GIVEN TO THE CP, THE A SSESSEE PREFERRED APPEALS BEING ITA NOS.308 TO 310/BANG/201 1 FOR ASSESSMENT YEARS 2006-07 TO 2008-09. 14. APART FROM THE ABOVE, THE ASSESSEE HAS ARRANGEM ENT WITH SEVERAL BANKS WHEREBY THE CUSTOMERS OF THE ASSESSEE , WHO ALSO HOLD CREDIT CARD OF SUCH BANKS, CAN MAKE PAYMENT FO R SERVICES UTILIZED BY THEM FROM THE ASSESSEE THROUGH CREDIT C ARD. THE BANKS AGREE TO RENDER PAYMENT PROCESSING SERVICES T O THE ASSESSEE IN CONSIDERATION FOR THE ASSESSEE MAKING P AYMENT OF FEE TO THE BANK. THE ASSESSEE DOES NOT MAKE ANY PAYMEN T TO BANKS. WHEN A CUSTOMER MAKES PAYMENT BY CREDIT CARD OF A B ANK, THE BANK PROCESSES PAYMENT TO THE ASSESSEE AFTER RETAIN ING FOR IT THE FEES FOR PROCESSING THE PAYMENT AND REMITS THE REMA INING SUM TO THE ASSESSEE. ACCORDING TO THE REVENUE THE FEE RET AINED BY THE BANK IS ALSO IN THE NATURE OF COMMISSION AND THEREF ORE THE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 16 OF 34 ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON SU CH PAYMENT U/S 194H OF THE ACT. AN ORDER U/S 201(1) AND 201(1 A) OF THE ACT WAS PASSED BY THE AO FOR ASSESSMENT YEARS 2005-06 T O 2008-09 TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT FOR NO T DEDUCTING TAX AT SOURCE ON THE TAX SO NOT DEDUCTED AND LEVYING IN TEREST THEREON FROM THE DATE ON WHICH TAX SOUGHT TO HAVE BEEN DEDU CTED TILL ACTUAL PAYMENT OF SUCH TAXES TO THE GOVERNMENT. 15. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) HEL D THAT PROVISIONS OF SECTION 194H OF THE ACT WERE NOT ATTR ACTED IN RESPECT OF SUCH PAYMENTS. THE RELEVANT OBSERVATIONS OF THE CIT(APPEALS) WERE AS FOLLOWS: 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO TDS ON CREDIT CARD PAYMENTS. THE A.O NOTICED THAT THE APPELLANT C OMPANY WAS COLLECTING ITS PAYMENTS FROM THE CUSTOMERS THROUGH CREDIT CARD COMPANIES AND IN THAT PROCESS THESE CREDIT CARD COM PANIES ARE EARNING COMMISSION FROM THE APPELLANT COMPANY. THE A.O FELT THAT THE APPELLANT COMPANY IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194 H OF THE IT ACT 1961 AND ACCORDINGLY RAISED DEM ANDS U/S- 201(1) & 201(IA) OF THE IT ACT. THE ARGUMENTS OF THE APPELLANT ARE AS UNDER. THE APPELLANT HAD ARRANGEMENTS WITH BANKS, WHEREIN THE APPELLANT USED TO GET THE PAYMENTS MADE BY ITS SUBS CRIBERS THROUGH CREDIT CARDS DISCOUNTED. THE PROCEDURE IS A S UNDER. I. THE APPELLANT TAKES EDC MACHINES (CARD SWIPE MACHINES,) FROM DESIGNATED BANKS. EACH MACHINE IS H AVING A MERCHANT ESTABLISHMENT (ME) NUMBER. II A SPECIFIC PERCENTAGE RATE CALLED MERCHANT DISCO UNTING RATE(MDR,) WILL BE NEGOTIATED. III. THESE MACHINES ARE INSTALLED AT VARIOUS COLLEC TION LOCATIONS. IV. THE SUBSCRIBER WALKS IN AND SWIPES HIS CARD. THROUGH ONLINE AUTHORIZATION PROCESS, THE PAYMENT CAN BE APPROVED/REJECTED. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 17 OF 34 V. FOR APPROVED PAYMENTS, DESIGNATED BANK GIVES CRE DIT TO APPELLANTS BANK ACCOUNT IN THE AGREED TIME. THE CR EDIT WILL BE NET AMOUNT (GROSS AMOUNT PAID BY CUSTOMER - MDR) VI. AFTER THE COLLECTIONS ARE CREDITED TO APPELLANT S ACCOUNT, THE DESIGNATED BANK, IN TURN COLLECTS THE AMOUNT FR ONT VARIOUS BANK BASED ON THE CARD ISSUER BANK. THIS SETTLEMENT WILL TAKE SOME TIME LAG. AS A RESULT THE DESIGNATED BANK COLL ECTS THE DISCOUNT CHARGES FROM THE APPELLANTS PAYMENTS. THE APPELLANT FURTHER ARGUED THAT THERE IS NO PRINC IPLE TO AGENT RELATIONSHIP BETWEEN THE APPELLANT AND TIME BANKS A ND HENCE PROVISIONS OF SECTION 194H OF THE IT ACT 1961 ARE N OT APPLICABLE. THE MDR CHARGES ARE NOTHING BUT BILL DISCOUNTING CH ARGES AND WOULD FALL WITHIN THE DEFINITION OF THE TERM INTERE ST AS ENVISAGED U/S-2(28A) OF THE IT ACT 1961. THUS ORDINARILY, IF AT ALL ANY TDS PROVISIONS APPLY, IT COULD BE ONLY 194A. HOWEVER C LAUSE (III) TO SUB SECTION (3) TO SECTION 194A SPECIFICALLY PROVID ES THAT THE PROVISIONS OF SUB SECTION (1) SHALL NOT APPLY TO SU CH INCOME CREDITED OR PAID TO ANY BANKING COMPANY. 8. I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOT H THE A.O AND THE APPELLANT. I FOUND THAT THE STAND TAKEN BY THE APPELLANT IS IN ORDER AND ACCORDINGLY THE DEMANDS RAISED BY T HE A.O U/S- 201(1) & 201(1A) AS MENTIONED BELOW ARE CANCELLED. ASSESSMENT YEAR : 2005-06 DEMAND RAISED U/S 201(1) RS. 38,940/- INTEREST U/S 201(1A) RS. 18,922/- TOTAL RS. 57,862/- ASSESSMENT YEAR : 2006-07 DEMAND RAISED U/S 201(1) RS. 69,449/- INTEREST U/S 201(1A) RS. 2 6,016/- TOTAL RS. 95,465/- ASSESSMENT YEAR : 2007-08 DEMAND RAISED U/S 201(1) RS. 58,253/- INTEREST U/S 201(1A) RS. 14,808/- TOTAL RS. 73,061/- ASSESSMENT YEAR : 2008-09 DEMAND RAISED U/S 201(1) RS. 77,111/- INTEREST U/S 201(1A) RS. 10,130/- TOTAL RS. 87,241/- 16. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) IN H OLDING THAT PROVISIONS OF SEC.194H OF THE ACT ARE NOT APPLICABL E TO CREDIT CARD PAYMENTS TO BANKS, THE REVENUE HAS FILED APPEALS BE FORE THE TRIBUNAL BEING ITA NOS.393 TO 396/BANG/2011 FOR ASS ESSMENT YEARS 2005-06 TO 2008-09. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 18 OF 34 17. WHEN THE ABOVE APPEALS OF THE ASSESSEE AND THE REVENUE CAME UP FOR HEARING, IT WAS POINTED OUT BY THE BENC H THAT SEPARATE APPEALS HAVE TO BE FILED IN RESPECT OF LIA BILITY ARISING OUT OF ORDER U/S 201(1) AND LEVY OF INTEREST U/S 201(1A ) OF THE ACT, THOUGH COMMON ORDERS HAVE BEEN PASSED BY THE AO AS WELL AS THE CIT(APPEALS) U/S 201(1) AND 201(1A) OF THE ACT. CO NSEQUENT TO SUCH DIRECTIONS OF THE TRIBUNAL, THE ASSESSEE FILED SIX APPEALS WHICH ARE ITA NOS.1285 TO 1290/BANG/2012. THE REVE NUE HAS ALSO FILED EIGHT APPEALS BEING ITA NOS.1014 TO 1021 /BANG/2012. THOUGH THESE APPEALS HAVE BEEN FILED BEYOND THE PER IOD PRESCRIBED FOR FILING APPEALS BEFORE THE TRIBUNAL A GAINST THE ORDER OF THE CIT(APPEALS), SINCE THESE APPEALS WERE FILED ON DIRECTIONS BY THE BENCH, THE DELAY, IF ANY, IN FILING THESE AP PEALS IS PURELY TECHNICAL AND DESERVES TO BE CONDONED. WE, THEREFO RE, PROCEED TO CONSIDER THESE APPEALS ON MERITS. 18. AS FAR AS THE ORIGINAL APPEALS FILED BY THE REV ENUE BEING ITA NOS.393 TO 396/BANG/2011 AND BY THE ASSESSEE BEING ITA NOS.308 TO 310/BANG/2011, THE SUBSTANCE OF THESE AP PEALS IS IDENTICAL TO ANOTHER APPEALS FILED BY THE REVENUE A ND THE ASSESSEE. THESE APPEALS ARE, THEREFORE, TREATED AS SUPERFLUOU S AND DISMISSED AS NOT REQUIRING ANY CONSIDERATION. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 19 OF 34 19. WE SHALL TAKE UP FOR CONSIDERATION THE APPEALS BY THE ASSESSEE. THE PROVISIONS OF SEC.194-H OF THE ACT READ AS UNDER: SECTION 194H: COMMISSION, BROKERAGE, ETC. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF OCTOBER, 1991 BUT BEFORE THE 1ST DAY OF JUNE, 1992, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSIO N (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 1 94D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INC OME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF S UCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME -TAX THEREON AT THE RATE OF TEN PER CENT. (2) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APP LY (A) TO SUCH PERSONS OR CLASS OR CLASSES OF PERSONS AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF INCONVENIENCE CAUSED OR LIK ELY TO BE CAUSED TO THEM AND BEING SATISFIED THAT IT WI LL NOT BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE, BY NOTIFICATION IN THE OFFICIAL GAZETTE , SPECIFY IN T HIS BEHALF; (B) WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDIT ED OR PAID DURING THE FINANCIAL YEAR BY THE PERSON REFERRED TO IN SUB-SECTION (1) TO THE ACCOUNT OF, O R TO, THE PAYEE, DOES NOT EXCEED TWO THOUSAND FIVE HUNDRED RUPEES. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, - (I) 'COMMISSION OR BROKERAGE' INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES REN DERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVIC ES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING; (II) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERE D BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL, MEDICA L, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROF ESSION OF ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 20 OF 34 ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DE CORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOA RD FOR THE PURPOSES OF SECTION 44AA; (III) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH I NCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF T HIS SECTION SHALL APPLY ACCORDINGLY. 20. IT IS CLEAR FROM THE AFORESAID PROVISION THAT TAXES HAVE TO BE DEDUCTED AT SOURCE BY A PERSON RESPONSIBLE FOR PAYI NG ANY INCOME BY WAY OF COMMISSION OR BROKERAGE. THE EXPRESSION COMMISSION OR BROKERAGE HAS BEEN DEFINED IN THE EXPLANATION, WHICH INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDI RECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVI CES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVIC ES IN THE COURSE OF BUYING AND SELLING OF GOODS OR IN RELATION TO A NY TRANSACTION RELATING TO FOLLOWING: (I) FOR SERVICES RENDERED (NOT BEING PROFESSIONAL); (II) FOR ANY SERVICES IN THE COURSE OF BUYING AND S ELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING 21. SEC. 201(1) OF THE ACT PROVIDES THAT WHERE A P ERSON IS OBLIGED TO DEDUCT TAX AT SOURCE IN ACCORDANCE WITH THE AFOR ESAID PROVISIONS FAILS TO DEDUCT TAX AT SOURCE OR AFTER DEDUCTING TA X AT SOURCE FAILS TO PAY IT TO THE GOVERNMENT THEN SUCH PERSON WILL B E DEEMED TO BE AN ASSESSEE IN DEFAULT AND IS LIABLE TO PAY THE TAX NOT SO ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 21 OF 34 DEDUCTED OR NOT PAID. FURTHER SEC.201(1A) PROVIDES THAT SUCH PERSON SHALL ALSO BE LIABLE TO PAY INTEREST ON THE TAX NOT SO DEDUCTED OR PAID FROM THE DATE ON WHICH SUCH TAX OU GHT TO HAVE BEEN PAID TO THE GOVERNMENT TILL SUCH TIME SUCH TAX ES ARE PAID TO THE GOVERNMENT. 22. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US WAS THAT THE RELATIONSHIP BETWEEN THE ASS ESSEE AND THE CP WAS PURELY PRINCIPAL TO PRINCIPAL RELATIONSHIP A ND THERE WAS NO ELEMENT OF AGENCY INVOLVED WHATSOEVER. IT WAS SUBM ITTED THAT THERE WAS OUTRIGHT SALE ON STARTER KIT AND RECHARGE VOUCHERS BY THE ASSESSEE TO CP AND IN THIS REGARD OUR ATTENTION WAS DRAWN TO SEVERAL CLAUSES IN THE CPA WHICH REFERS TO THE FACT THAT THE CP HAS TO PAY SALES TAX. IT WAS ALSO HIGHLIGHTED THAT THE CP IS LIABLE FOR ALL LOSS, PILFERAGE, DAMAGE TO THE PRODUCTS AND WAS ALS O LIABLE TO TAKE INSURANCE ON THE PRODUCTS. THE ABOVE FEATURES IN T HE CP, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, CLEARLY SHOW THAT THERE WAS NO CONTRACT AGENCY BETWEEN THE ASSES SEE AND THE CP. IT WAS ALSO ARGUED THAT THE ASSESSEE GIVES THE PRODUCT TO THE CP AT A PARTICULAR PRICE WHICH IS LESS THAN THE MRP . THE ASSESSEE DOES NOT HAVE CONTROL ON THE PRICE AT WHICH THE CP SELLS THE PRODUCTS TO THE CUSTOMERS. IT WAS THEREFORE ARGUED THAT ASSESSEE DOES NOT KNOW AS TO WHAT IS THE COMMISSION IN RESPE CT OF WHICH IT HAS TO DEDUCT TAX AT SOURCE U/S 195H OF THE ACT. O UR ATTENTION WAS DRAWN TO THE INVOICE, A COPY OF WHICH IS PLACED AT PAGE 328 OF THE ASSESSEES PAPER BOOK. IT WAS POINTED OUT THAT THE INVOICE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 22 OF 34 CLEARLY DECLARES THAT THE GOODS ARE BEING SOLD BY T HE ASSESSEE TO CP. IT WAS POINTED OUT THAT ON DELIVERY OF RCV (RE CHARGE VOUCHERS) STARTER KIT, THERE IS A TRANSFER OF OWNER SHIP IN GOODS FROM THE ASSESSEE TO THE CP. IT WAS ALSO SUBMITTED THAT SIM CARD IS SPECIFIC AND ASCERTAINED GOODS AND ON DELIVERY T O THE CP, OWNERSHIP IN SIM CARD IS TRANSFER TO THE CP. THE L EARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION (2012) 25 TAXMAN 201 (SC) WHEREIN THE DECISION OF THE HONBLE GUJARAT HIGH COURT WAS AFFIRMED. THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IS REPORTED IN 257 ITR 2 02. THE QUESTION BEFORE THE HONBLE GUJARAT HIGH COURT WAS AS TO WHETHER THE DIFFERENCE BETWEEN THE FACE VALUE OF THE STAMPS AND THE PRICE AT WHICH THE LICENSED STAMP VENDORS GET STAMPS FROM THE GOVERNMENT IS COMMISSION. ON THE QUESTION AS TO WH ETHER THE DIFFERENCE BETWEEN FACE VALUE OF THE STAMP AND THE PRICE AT WHICH THE GOVERNMENT GIVES THE SAME TO THE STAMP VENDOR W AS COMMISSION WITHIN THE MEANING OF SECTION 194H OF TH E ACT, IT WAS HELD THAT THERE WAS NO CONTRACT OF AGENCY BETWEEN T HE GOVERNMENT AND THE STAMP VENDOR AND THAT IT WAS A C ASE OF SALE AND THERE IS NO ELEMENT OF SERVICE INVOLVED WHATSOE VER AND THE PROVISIONS OF SEC.194H OF THE ACT WERE NOT ATTRACTE D. BESIDES THE ABOVE, THE FOLLOWING DECISIONS WERE ALSO REFERRED T O VIZ., ACIT VS SAMAJ (2001)77 ITD 358 (CUTTACK) WHICH WAS A CASE OF SALE OF NEWSPAPERS BY A NEWSPAPER PUBLISHER TO ITS SALES AG ENTS. IT WAS HELD THAT THERE WAS AN OUTRIGHT SALE OF THE NEWSPAP ER TO THE SALES ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 23 OF 34 AGENT AT A DISCOUNTED PRICE AND THEREFORE SEC.194H OF THE ACT DID NOT APPLY. THE LEARNED COUNSEL FOR THE ASSESSEE AL SO RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. JAI DRINKS PVT. LTD. (336 ITR 383). IT WAS A CASE WHERE THE QUESTION INVOLVED WAS AS TO WHETHER THE DIFFERENCE BETWEEN T HE MRP AND THE PRICE AT WHICH MANUFACTURER OF SOFT DRINKS GAVE IT TO THE DISTRIBUTOR OF SOFT DRINKS WAS COMMISSION WITHIN TH E MEANING OF SEC.194H OF THE ACT. THE HONBLE HIGH COURT HELD T HAT THERE WAS NO PRINCIPAL-AGENCY RELATIONSHIP BETWEEN SOFT DRINK MANUFACTURER AND THE DISTRIBUTORS AND THE PROVISIONS OF SEC.194H OF THE ACT WERE NOT ATTRACTED. THE LEARNED COUNSEL FOR THE AS SESSEE FAIRLY ADMITTED THAT THE HONBLE DELHI HIGH COURT, IN THE CASE OF CIT VS. IDEA CELLULLOR LTD. (230 CTR 43) AND THE HONBLE KERALA HIGH COURT IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. VS. ACIT (332 ITR 255)(KER) HAVE TAKEN A VIEW THAT THE DIFFERENCE BET WEEN THE MRP AT WHICH SIM CARD WERE GIVEN BY THE TELECOM SERVICE PROVIDER TO THE DISTRIBUTORS WAS IN THE NATURE OF COMMISSION OF ATTRACTING THE PROVISIONS OF SEC.194H OF THE ACT. HE POINTED OUT THAT IN THE AFORESAID CASES ON THE TERMS OF THE AGREEMENT BETWE EN THE DISTRIBUTOR AND THE TELECOM SERVICE PROVIDER, THE C OURT FOUND THAT THERE WAS RELATIONSHIP OF PRINCIPAL-AGENT AND THERE FORE APPLICABILITY OF SEC.194H WAS UPHELD. IT WAS HIS S UBMISSION THAT IN THE PRESENT CASE THERE WAS TRANSFER OF OWNERSHIP IN THE SIM CARD FROM THE ASSESSEE TO THE CP AND THEREFORE THOSE DEC ISIONS WILL NOT HAVE ANY APPLICATION TO THE FACTS OF THE PRESENT CA SE. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 24 OF 34 23. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT STARTER KITS AND SIM CARD ARE NOT TANGIBLE PROPERTI ES. IT WAS HIS SUBMISSION THAT SIM CARD MERELY ENABLES THE CUSTOME R TO AVAIL SERVICES PROVIDED BY THE TELECOM SERVICES PROVIDER. ACCORDING TO HIM, SIM CARD AND RCV CANNOT BE CONSIDERED AS GOODS . HE PLACED STRONG RELIANCE ON THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF IDEA CELLULLOR LTD. (SUPRA), VODAFONE ESSAR CELLULAR LTD. (KER.). HIS SUBMISSION WAS THAT THE ATTEMPT BY THE LEARNED COUNSEL FOR THE ASSESSEE TO DISTINGUISH THOSE CASES ON THE GROUND THAT THE BUSINESS MODEL IN THOSE CASES WAS DIFFEREN T, CANNOT BE ACCEPTED. IN THIS REGARD, IT WAS HIS SUBMISSION TH AT ONE HAS TO SEE THE SUBSTANCE OF THE TRANSACTION OVER THE FORM IN WHICH THE TRANSACTION IS SOUGHT TO BE PROJECTED. ACCORDING T O HIM, THE SUBSTANCE OF THE TRANSACTION FOR SALE OF SIM CARD A ND RCV IS NOTHING BUT A MEDIUM THROUGH WHICH THE CUSTOMER CAN AVAIL THE SERVICES PROVIDED BY A TELECOM SERVICE PROVIDER. E XCEPT SUCH USE, SIM CARD AND RCV HAVE NO INTRINSIC VALUE AND THE DI STRIBUTOR PURCHASING THE SAME FROM THE TELECOM OPERATOR WILL HAVE NO USE WHATSOEVER OF THE SIM CARD AND RCV. IT WAS THE LEA RNED DRS SUBMISSION THAT THE AGREEMENT BETWEEN THE PARTIES C ANNOT BE CONCLUSIVE IN SUCH MATTERS. IN SUBSTANCE, DIFFEREN CE BETWEEN THE MRP AND THE PRICE AT WHICH THE SIM CARD AND RCV ARE SOLD TO THE DISTRIBUTOR IS ONLY A COMMISSION FOR SERVICES RENDE RED BY THE DISTRIBUTOR TO ENABLE THE TELECOM SERVICE PROVIDER TO SELL HIS SERVICES TO THE ULTIMATE CUSTOMER. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 25 OF 34 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. BEFO RE WE DEAL WITH THE VARIOUS CONTENTIONS OF THE PARTIES BEFORE US, IT SHOULD BE MENTIONED THAT THE ISSUE THAT ARISES FOR CONSIDERAT ION IN THESE APPEALS HAS ALREADY BEEN CONSIDERED AND DECIDED BY VARIOUS HONBLE HIGH COURTS AND DIFFERENT BENCHES OF THE TR IBUNAL. IT WOULD BE BETTER TO REFER TO THOSE DECISIONS AND THE RATIO LAID DOWN THEREIN SO THAT WE CAN APPRECIATE THE CONTENTIONS P UT FORTH BY THE PARTIES BEFORE US WHICH WERE BASED ON THE AFORESAID DECISIONS. 25. AS WE HAVE ALREADY SEEN THERE IS A PROCESS OF ACTIVATION OF THE SIM CARDS FOR WHICH CHARGES ARE COLLECTED BY TH E TELECOM SERVICE PROVIDER FROM THE CUSTOMERS. SERVICE TAX O N SUCH CHARGES WERE PAYABLE BY THE TELECOM SERVICE PROVIDER. ON S ALE OF SIM CARDS THE TELECOM SERVICE PROVIDER WAS PAYING SALES TAX. THE SALES TAX AUTHORITIES INCLUDED THE ACTIVATION CHARG ES AS PART OF THE SALE CONSIDERATION OF THE SIM CARDS ON THE GROUND T HAT SUCH ACTIVATION WAS NOTHING BUT A VALUE ADDITION OF THE GOODS AND THUS COVERED UNDER THE DEFINITION OF GOODS UNDER THE R ELEVANT SALES TAX LAW. ON THE OTHER HAND, THE SERVICE TAX AUTHORI TIES PROCEEDED ON THE BASIS THAT A MERE SIM CARD, WITHOUT ACTIVATI ON, WAS OF NO USE AND CONSEQUENTLY HELD THAT THE APPELLANTS WERE LIABLE TO PAY SERVICE TAX ON THE VALUE OF THE SIM CARDS AS WELL. THUS, BOTH THE SALES TAX AND THE SERVICE TAX AUTHORITIES PROCEEDED TO CHARGE THEIR RESPECTIVE TAXES ON THE ENTIRE VALUE OF THE TRANSAC TION RELATIVE TO SIM CARDS, INCLUDING THE ACTIVATION CHARGES. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 26 OF 34 26. THERE WAS A CHALLENGE TO DOUBLE TAXATION OF TH E TRANSACTIONS RELATING TO SIM CARDS. THE HONBLE SUPREME COURT I N BSNL VS. UOI (2006) 3 SCC 1 DEALT WITH THIS ISSUE. THE HON BLE SUPREME COURT HELD THAT THE QUESTION AS TO WHAT A SIM CARD ACTUALLY REPRESENTED WAS A QUESTION OF FACT AND IN DETERMINI NG THE ISSUE, THE PRINCIPLE TO BE KEPT IN MIND WAS AS TO WHAT WAS THE INTENTION OF THE PARTIES REGARDING THE SIM CARD TRANSACTION. IF THE PARTIES INTENDED THAT THE SIM CARD WOULD BE A SEPARATE OBJE CT OF SALE, IT WILL BE OPEN TO THE SALES TAX AUTHORITIES TO LEVY T HE TAX. HOWEVER, IF THE SALE OF THE SIM CARD WAS MERELY INCIDENTAL T O THE SERVICES BEING PROVIDED AND ONLY FACILITATED THE IDENTIFICAT ION OF THE SUBSCRIBER AND OTHER DETAILS, IT WOULD NOT BE ASSES SABLE TO THE SALES TAX. CONSEQUENTLY, THE SUPREME COURT HELD THA T BOTH TAXES COULD NOT POSSIBLY APPLY TO THE TRANSACTION IN QUES TION AND BASED ON THE ABOVE DETERMINATION OF INTENT, ONLY ONE OR T HE OTHER TAX WOULD APPLY. ACCORDINGLY, THE SUPREME COURT REMANDE D THE MATTER IN THE ABOVE DECISION IN THE BSNL CASE TO TH E SALES TAX AUTHORITIES. M/S. IDEA MOBILE COMMUNICATION LTD., A TELECOM SERVICE PROVIDER WAS ALSO PARTY TO THE PROCEEDINGS IN THE CASE OF BSNL (SUPRA). THEY CHALLENGED THE LEVY OF SERVICE TAX INCLUDING THE VALUE OF THE SIM CARD BEFORE THE HONBLE SUPREM E COURT. THEY HAD ALSO FILED APPEALS BEFORE THE CENTRAL EXCI SE AND SERVICE TAX TRIBUNAL (TRIBUNAL) CHALLENGING THE LEVY OF SER VICE TAX WHICH WERE PENDING WHEN THE HONBLE SUPREME COURT DECIDED THE CASE OF BSNL (SUPRA). AFTER THE ORDER OF THE HONBLE SU PREME COURT IN THE CASE OF BSNL (SUPRA), THE CENTRAL EXCISE AND SE RVICE TAX ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 27 OF 34 TRIBUNAL (TRIBUNAL) SET ASIDE THE IMPOSITION OF THE SERVICE TAX WHICH DECISION WAS, IN TURN, SET ASIDE BY THE KERAL A HIGH COURT, WHICH REINSTATED THE ORIGINAL SERVICE TAX DEMAND. AGAINST THE ORDER OF THE HONBLE KERALA HIGH COURT, M/S.IDEA MO BILE COMMUNICATION FILED APPEAL BEFORE HONBLE SUPREME C OURT. IN THE MEANWHILE THEIR CASE WAS DULY TAKEN UP BY THE SALES TAX AUTHORITIES WHO TOOK THE VIEW THAT SIM CARDS HAD NO INTRINSIC SALE VALUE AND DROPPED THE PROCEEDINGS. THUS, THE TRANSA CTIONS RELATING TO SIM CARDS WERE HELD NOT TAXABLE TO SALE S TAX AND THESE PROCEEDINGS STOOD CONCLUDED. 27. AGAIN THE QUESTION CAME UP FOR CONSIDERATION B EFORE THE HONBLE SUPREME COURT REGARDING DOUBLE TAXATION VIZ ., SERVICE TAX AS WELL AS SALES TAX ON THE SAME TRANSACTION. IN C IVIL APPEAL NO. 6319 OF 2011 [ARISING OUT OF SLP(C) NO. 24690 OF 20 09] IN THE CASE OF IDEA MOBILE COMMUNICATION LTD. VS.C.C.E.C., COCHIN RENDERED ON 4.8.2011, THE HONBLE SUPREME COURT HA S AGAIN ADDRESSED THE ISSUE OF THE CHARGEABILITY OF SUCH TR ANSACTIONS TO THE APPROPRIATE INDIRECT TAX, I.E, THE SERVICE TAX OR SALES TAX/VAT. 28. THE HONBLE SUPREME COURT EXAMINED THE NATURE OF SIM CARD AND OBSERVED AS FOLLOWS: 11.WE HAVE EXAMINED THE MATERIALS ON RECORD IN THE LIGHT OF THE FACTS PLACED BEFORE US AND ALSO THE DECISION S REFERRED TO AND RELIED UPON BY THE COUNSEL APPEARING FOR THE PARTIES. 12. A SIM CARD OR SUBSCRIBER IDENTITY MODULE IS A P ORTABLE MEMORY CHIP USED IN CELLULAR TELEPHONES. IT IS A TI NY ENCODED CIRCUIT BOARD WHICH IS FITTED INTO CELL PHO NES AT THE TIME OF SIGNING ON AS A SUBSCRIBER. THE SIM CARD HO LDS THE DETAILS OF THE SUBSCRIBER, SECURITY DATA AND MEMORY TO STORE PERSONAL NUMBERS AND IT STORES INFORMATION WHICH HE LPS THE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 28 OF 34 NETWORK SERVICE PROVIDER TO RECOGNIZE THE CALLER. A S STATED HEREINBEFORE THE KERALA HIGH COURT HAD OCCASION TO DEAL WITH THE AFORESAID ISSUE AND IN THAT CONTEXT IN ITS JUDGMENT PRONOUNCED ON 15 TH FEBRUARY, 2002 IN ESCOTEL MOBILE COMMUNICATIONS LTD. VS. UNION OF INDIA AND OTHERS, REPORTED IN (2002) VOL. 126 STC 475 (KERALA), IT WA S STATED IN PARAGRAPH 36 THAT A TRANSACTION OF SELLING OF SI M CARD TO THE SUBSCRIBER IS ALSO A PART OF THE SERVICE REND ERED BY THE SERVICE PROVIDER TO THE SUBSCRIBER. THE KERALA HIGH COURT IN THE FACTS AND CIRCUMSTANCES OF THE CASE OBSERVED AT PARAS 36 AND 47 AS UNDER: - 36. WITH THIS PERSPECTIVE IN MIND, IF WE ANALYSE T HE TRANSACTION THAT TAKES PLACE, IT APPEARS TO US THAT THERE IS NO DIFFICULTY IN CORRECTLY UNDERSTANDING I TS FACTS. THE TRANSACTION OF SELLING THE SIM. CARD TO THE SUBSCRIBER IS ALSO A PART OF THE 'SERVICE' RENDERED BY THE SERVICE PROVIDER TO THE SUBSCRIBER, HENCE, WHIL E THE STATE LEGISLATURE IS COMPETENT TO IMPOSE TAX ON 'SALE' BY A LEGISLATION RELATABLE TO ENTRY 54 OF LI ST II OF SEVENTH SCHEDULE, THE TAX ON THE ASPECT OF 'SERVICES' RENDERED NOT BEING RELATABLE TO ANY ENTR Y IN THE STATE LIST, WOULD BE WITHIN THE LEGISLATIVE COMPETENCE OF PARLIAMENT UNDER ARTICLE 248 READ WIT H ENTRY 97 OF LIST I OF THE SEVENTH SCHEDULE TO THE CONSTITUTION. WE ARE, THEREFORE, UNABLE TO ACCEPT T HE CONTENTION OF MR.RAVINDRANATHA MENON THAT THERE IS ANY POSSIBILITY OF CONSTITUTIONAL INVALIDITY ARISIN G DUE TO LEGISLATIVE INCOMPETENCE BY TAKING THE VIEW THAT 'SALE' OF SIM CARD IS SIMULTANEOUSLY EXIGIBLE TO SA LES TAX AS WELL AS SERVICE TAX. ONCE THE 'ASPECT THEORY ' IS KEPT IN FOCUS, IT WOULD BE CLEAR THAT THE SAME TRANSACTION COULD BE EXIGIBLE TO DIFFERENT TAXES IN ITS DIFFERENT ASPECTS. THUS, WE SEE NO REASON TO READ DOWN THE LEGISLATION AS SUGGESTED BY MR. MENON. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 47. CONCLUSIONS: (A) THE TRANSACTION OF SALE OF SIM CARD IS WITHOUT DOUBT EXIGIBLE TO SALES TAX UNDER THE KGST ACT. THE ACTIVATION CHARGES PAID ARE IN THE NATURE OF DEFERR ED PAYMENT OF CONSIDERATION FOR THE ORIGINAL SALE, OR IN THE NATURE OF VALUE ADDITION, AND, THEREFORE, ALSO AMOUNT TO PARTS OF THE SALE AND BECOME EXIGIBLE TO SALES TAX UNDER THE KGST ACT. (B) BOTH THE SELLING OF THE SIM CARD AND THE PROCES S OF ACTIVATION ARE SERVICES PROVIDED BY THE MOBILE CELLULAR TELEPHONE COMPANIES TO THE SUBSCRIBER, AND SQUARELY FALL WITHIN THE DEFINITION OF TAXABLE SER VICE AS DEFINED IN SECTION 65(72)(B) OF THE FINANCE ACT. THEY ARE ALSO EXIGIBLE TO SERVICE TAX ON THE VALUE OF ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 29 OF 34 TAXABLE SERVICE AS DEFINED IN SECTION 67 OF THE FINANCE ACT. 29. THE HONBLE SUPREME COURT THEREAFTER NOTICED T HAT THE SALES TAX AUTHORITIES DID NOT LEVY SALES TAX ON SALE OF S IM CARDS ACCEPTING THE PLEA OF THE TELECOM SERVICE PROVIDER THAT SIM CARD MERELY ENABLES PROVIDING TELECOM SERVICE TO CUSTOME RS AND CANNOT BE CONSIDERED AS GOODS. THE HONBLE SUPREME COURT NOTICED THAT THE CESTAT TOOK A VIEW THAT VALUE OF SIM CARD SOLD SHOULD NOT TREATED AS PART OF TAXABLE SERVICE WHICH WAS REVERS ED BY THE HONBLE KERALA HIGH COURT. THE HONBLE SUPREME COU RT FINALLY CONCLUDED AS FOLLOWS: 17. THE HIGH COURT HAS GIVEN COGENT REASONS FOR CO MING TO THE CONCLUSION THAT SERVICE TAX IS PAYABLE INASMUCH AS SIM CARD HAS NO INTRINSIC SALE VALUE AND IT IS SUPPLIED TO THE CUSTOMERS FOR PROVIDING MOBILE SERVICE TO THEM. IT SHOULD ALSO BE NOTED AT THIS STAGE THAT AFTER THE REMAND O F THE MATTER BY THE SUPREME COURT TO THE SALES TAX AUTHOR ITIES THE ASSESSING AUTHORITY UNDER THE SALES TAX ACT DRO PPED THE PROCEEDINGS AFTER CONCEDING THE POSITION THAT SIM C ARD HAS NO INTRINSIC SALE VALUE AND IT IS SUPPLIED TO THE C USTOMERS FOR PROVIDING TELEPHONE SERVICE TO THE CUSTOMERS. THIS AFORESAID STAND OF THE SALES TAX AUTHORITY IS PRACTICALLY THE END OF THE MATTER AND SIGNIFIES THE CONCLUSION. 18. THE SALES TAX AUTHORITIES HAVE THEMSELVES CONCE DED THE POSITION BEFORE THE HIGH COURT THAT NO ASSESSMENT O F SALES TAX WOULD BE MADE ON THE SALE VALUE OF THE SIM CARD SUPPLIED BY THE APPELLANT TO THEIR CUSTOMERS IRRESP ECTIVE OF THE FACT WHETHER THEY HAVE FILED RETURNS AND REMITT ED TAX OR NOT. IT ALSO CANNOT BE DISPUTED THAT EVEN IF SALES TAX IS WRONGLY REMITTED AND PAID THAT WOULD NOT ABSOLVE TH EM FROM THE RESPONSIBILITY OF PAYMENT OF SERVICE TAX, IF OTHERWISE THERE IS A LIABILITY TO PAY THE SAME. IF THE ARTICLE IS NOT SUSCEPTIBLE TO TAX UNDER THE SALES TAX ACT, THE AMOUNT OF TAX PAID BY THE ASSESSEE COULD BE REFUNDED AS TH E CASE MAY BE OR, THE ASSESSEE HAS TO FOLLOW THE LAW AS MA Y BE APPLICABLE. BUT WE CANNOT ACCEPT A POSITION IN LAW THAT EVEN IF TAX IS WRONGLY REMITTED THAT WOULD ABSOLVE THE P ARTIES FROM PAYING THE SERVICE TAX IF THE SAME IS OTHERWIS E FOUND PAYABLE AND A LIABILITY ACCRUES ON THE ASSESSEE. TH E CHARGES PAID BY THE SUBSCRIBERS FOR PROCURING A SIM CARD AR E ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 30 OF 34 GENERALLY PROCESSING CHARGES FOR ACTIVATING THE CEL LULAR PHONE AND CONSEQUENTLY THE SAME WOULD NECESSARILY B E INCLUDED IN THE VALUE OF THE SIM CARD. 19. THERE CANNOT BE ANY DISPUTE TO THE AFORESAID PO SITION AS THE APPELLANT ITSELF SUBSEQUENTLY HAS BEEN PAYING S ERVICE TAX FOR THE ENTIRE COLLECTION AS PROCESSING CHARGES FOR ACTIVATING CELLULAR PHONE AND PAYING THE SERVICE TA X ON THE ACTIVATION. THE APPELLANT ALSO ACCEPTS THE POSITION THAT ACTIVATION IS A TAXABLE SERVICE. THE POSITION IN LA W IS THEREFORE CLEAR THAT THE AMOUNT RECEIVED BY THE CEL LULAR TELEPHONE COMPANY FROM ITS SUBSCRIBERS TOWARDS SIM CARD WILL FORM PART OF THE TAXABLE VALUE FOR LEVY OF SER VICE TAX, FOR THE SIM CARDS ARE NEVER SOLD AS GOODS INDEPENDENT F ROM SERVICES PROVIDED. THEY ARE CONSIDERED PART AND PAR CEL OF THE SERVICES PROVIDED AND THE DOMINANT POSITION OF THE TRANSACTION IS TO PROVIDE SERVICES AND NOT TO SELL THE MATERIAL I.E. SIM CARDS WHICH ON ITS OWN BUT WITHOU T THE SERVICE WOULD HARDLY HAVE ANY VALUE AT ALL. THUS, I T IS ESTABLISHED FROM THE RECORDS AND FACTS OF THIS CASE THAT THE VALUE OF SIM CARDS FORMS PART OF THE ACTIVATION CHA RGES AS NO ACTIVATION IS POSSIBLE WITHOUT A VALID FUNCTIONI NG OF SIM CARD AND THE VALUE OF THE TAXABLE SERVICE IS CALCUL ATED ON THE GROSS TOTAL AMOUNT RECEIVED BY THE OPERATOR FRO M THE SUBSCRIBERS. THE SALES TAX AUTHORITY UNDERSTOOD THE AFORESAID POSITION THAT NO ELEMENT OF SALE IS INVOL VED IN THE PRESENT TRANSACTION. 20. THAT BEING THE POSITION, WE FIND NO INFIRMITY W ITH THE FINDINGS AND REASONING IN THE JUDGMENT AND ORDER PA SSED BY THE HIGH COURT AND THEREFORE THE APPEAL HAS NO M ERIT AND THE SAME IS DISMISSED. 30. THUS THE HONBLE COURT CONCLUDED THAT THE AMOU NT RECEIVED BY THE TELECOM COMPANY FROM ITS SUBSCRIBER TOWARDS THE SIM CARD WOULD FORM PART OF THE TAXABLE VALUE FOR THE LEVY O F SERVICE TAX IN RELATION TO THE ACTIVATION CHARGES, WHICH WERE UNDE NIABLY IN THE NATURE OF A SERVICE, SINCE THE SIM CARD WAS NEVER S OLD INDEPENDENT FROM THE ABOVE SERVICE AND WAS HENCE CO NSIDERED PART AND PARCEL OF SUCH SERVICE. THE DOMINANT INTEN T OF THE TRANSACTION WAS CLEARLY TO PROVIDE SERVICES AND NOT TO SELL ANY GOODS. IT WAS THUS HELD THAT VALUE OF THE SIM CARD FORMED PART OF ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 31 OF 34 THE ACTIVATION CHARGES SINCE NO ACTIVATION WAS POSS IBLE WITHOUT A VALID FUNCTIONING SIM CARD. THE SUPREME COURT OPINE D THAT IT WAS PRECISELY FOR THIS REASON THAT THE SALES TAX AUTHOR ITIES HAD WITHDRAWN THEIR ATTEMPT TO TAX SUCH SERVICES TO THE SALES TAX. CONSEQUENTLY, IT HELD THAT THE SALE AND SUPPLY OF S IM CARDS TO SUBSCRIBERS, INCLUDING THE ACTIVATION CHARGES, WAS INDEED INTENDED AND DEALT WITH BY BOTH PARTIES AS SERVICES AND NOT AS SALE OF GOODS. THEREFORE, THE CHARGE OF SERVICE TAX IN THIS REGARD WAS UPHELD BY THE COURT. 31. THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT SHOULD BE CONSIDERED AS SETTLING THE ISSUE AS TO WHETHER T HE TRANSACTIONS RELATING TO SUPPLY OF SIM CARDS BETWEEN TELECOM OPE RATORS AND THE SUBSCRIBERS WOULD BE CHARGED TO JUST THE ONE TAX I. E. THE SERVICE TAX AND NOT THE SALES TAX. 32. AS FAR AS THE DECISIONS RELIED UPON BY THE LEA RNED COUNSEL FOR THE ASSESSEE ARE CONCERNED, WE ARE OF THE VIEW THAT IN THE LIGHT OF THE LATER DECISION OF THE HONBLE SUPREME COURT, TH OSE DECISIONS CAN NO LONGER BE CONSIDERED AS BINDING. WE ARE OF THE VIEW THAT THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JAI DRINKS PVT. LTD. (SUPRA) AS WELL AS THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION (SUPRA) STAND ON A DIFFERENT FOOTING. INASMUCH AS IN BOTH THE AFORESAID CASES, THERE WAS A TANGIBLE ASSE T WHICH WAS SUBJECT MATTER OF SALE. AS WE HAVE ALREADY SEEN, T HE HONBLE ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 32 OF 34 SUPREME COURT HAS HELD THAT SIM CARD HAS NO TANGIBL E VALUE AND IT IS MERELY A MEDIUM THROUGH WHICH THE CUSTOMER ENJOY S THE SERVICES PROVIDED BY A TELECOM SERVICE PROVIDER. T HE HONBLE SUPREME COURT HAS TAKEN A VIEW THAT THERE IS NO ELE MENT OF SALE INVOLVED. IN VIEW OF THE AFORESAID DECISION OF THE HONBLE SUPREME COURT, WE DO NOT THINK THAT THE DECISIONS R ELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND ARGUMENTS BASED ON THE TERMS OF CP AGREEMENT, WILL BE OF ANY ASSISTANCE. WE, THEREFORE HAVE, NO HESITATION IN UPHOLDING THE ORDER OF THE C IT(APPEALS). 33. THE LEARNED COUNSEL FOR THE ASSESSEE HAD MADE A SUBMISSION BEFORE US THAT IN ANY EVENT, DETERMINATION OF TAX P AYABLE U/S 201(1) OF THE ACT SHOULD BE DONE AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. VS. CIT (293 ITR 226)(SC) WHEREIN IT WAS HELD THAT IF THE PAYEE HAS MADE PAYM ENT OF TAXES THEN TO THAT EXTENT, THE ASSESSEE SHOULD NOT BE CON SIDERED AS AN ASSESSEE IN DEFAULT. WE ARE OF THE VIEW THAT IT WO ULD BE JUST AND APPROPRIATE TO DIRECT THE AO TO CONSIDER THE CLAIM OF THE ASSESSEE ONLY WITH REGARD TO DETERMINATION OF THE LIABILITY U/S 201(1) OF THE ACT. TO THIS EXTENT, THE APPEALS OF THE ASSESSEE C HALLENGING THE ORDER U/S 201(1) STAND PARTLY ALLOWED FOR STATISTIC AL PURPOSES. THE APPEALS OF THE ASSESSEE, CHALLENGING LEVY OF INTERE ST U/S 201(1A) OF THE ACT, HOWEVER, STAND DISMISSED. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 33 OF 34 34. AS FAR AS THE APPEALS OF THE REVENUE ARE CONCER NED, WE FIND THAT THE QUESTION INVOLVED IN THE AFORESAID APPEALS IS AS TO WHETHER THE PAYMENTS ON ACCOUNT OF CREDIT CARD CHAR GES SHOULD BE TREATED AS COMMISSION WITHIN THE MEANING OF SEC.194 H OF THE ACT. ON THIS ISSUE, WE FIND THAT THE HONBLE ITAT, HYDER ABAD, HAS HELD AS FOLLOWS: 4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTAT IVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTH ER MATERIAL ON RECORD. ASSESSEE IS A COMPANY ENGAGED IN THE BU SINESS OF DIRECT RETAIL TRADING IN CONSUMER GOODS. ASSESSEE C LAIMED DEDUCTION OF RS.16,34,000 ON ACCOUNT OF COMMISSION PAID TO THE CREDIT CARD COMPANIES, WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER IN TERMS OF S.40(A)(IA) ON ACCOUN T OF THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE IN TERMS OF S.194H OF THE ACT, WHILE MAKING THE SAID COMMISSION PAYMENTS. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE LOWER AUT HORITIES THAT THE ASSESSEE ONLY RECEIVES THE PAYMENT FORM THE BAN K/CREDIT CARD COMPANIES CONCERNED, AFTER DEDUCTION OF COMMIS SION THEREON, AND THUS, THIS IS ONLY IN THE NATURE OF A POST FACTO ACCOUNTING AND DOES NOT INVOLVE ANY PAYMENT OR CRED ITING OF THE ACCOUNT OF THE BANKS OR ANY OTHER ACCOUNT BEFORE SU CH PAYMENT BY THE ASSESSEE. CONSIDERING THESE SUBMISSION OF T HE ASSESSEE, THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE FOR D EDUCTION OF THE AMOUNT OF RS.16,34,000 ON THE FOLLOWING REASONI NG- 9.8 ON GOING THROUGH THE NATURE OF TRANSACTIONS, I FIND CONSIDERABLE MERIT IN THE CONTENTION OF THE APPELLA NT THAT COMMISSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLING WITHIN THE PURVIEW OF S.194H. EVEN THOUGH THE DEFINITION OF THE TERM COMMISSION OR BROKERAGE USED IN THE SAID SECTION IS AN INCLUSIVE DEFINITION, IT IS CLEAR THAT THE LIABILITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON ACTS BEH ALF OF ANOTHER PERSON. IN THE CASE OF COMMISSION RETAINED BY THE CREDIT CARD COMPANIES HOWEVER, IT CANNOT BE SAID TH AT THE BANK ACTS ON BEHALF OF THE MERCHANT ESTABLISHMENT O R THAT EVEN THE MERCHANT ESTABLISHMENT CONDUCTS THE TRANSA CTION FOR THE BANK. THE SALE MADE ON THE BASIS OF A CREDI T CARD IS CLEARLY A TRANSACTION OF THE MERCHANTS ESTABLISHMEN T ONLY AND THE CREDIT CARD COMPANY ONLY FACILITATES THE EL ECTRONIC PAYMENT, FOR A CERTAIN CHARGE. THE COMMISSION RETAI NED BY THE CREDIT CARD COMPANY IS THEREFORE IN THE NATU RE OF NORMAL BANK CHARGES AND NOT IN THE NATURE OF COMMISSION/BROKERAGE FOR ACTING ON BEHALF OF THE ME RCHANT ESTABLISHMENT. ACCORDINGLY, CONCLUDING THAT THERE W AS NO REQUIREMENT FOR MAKING TDS ON THE COMMISSION RETAI NED BY THE CREDIT CARD COMPANIES, THE DISALLOWANCE OF RS.16,34,000 IS DELETED.. ITA NOS.308 TO 310/B/11.1290/BANG/2012 PAGE 34 OF 34 WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN B Y THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND R EJECT THE GROUNDS OF THE REVENUE WHICH ARE DEVOID OF MERIT. 35. IN LIGHT OF THE AFORESAID DECISION OF THE HON BLE HYDERABAD BENCH, WE ARE OF THE VIEW THAT PAYMENTS TO BANKS ON ACCOUNT OF UTILIZATION OF CREDIT CARD FACILITIES WOULD BE IN T HE NATURE OF BANK CHARGE AND NOT IN THE NATURE OF COMMISSION WITHIN T HE MEANING OF SEC.194H OF THE ACT. WE, THEREFORE, CONFIRM THE OR DER OF THE CIT(APPEALS) ON THIS ISSUE AND DISMISS THE APPEALS OF THE REVENUE. 36. IN THE RESULT, APPEALS BEARING ITA NOS.1285, 12 87 & 1289/BANG/2012 ARE TREATED AS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES WHILE ALL OTHER APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER 2012 . SD/ - (N.BARATHVAJA SANKAR) VICE-PRESIDENT SD/ - (N.V.VASUDEVAN) JUDICIAL MEMBER EKSRINIVASULU COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBU NAL, BANGALORE