Sh.Anil Dhiwan S/O Sh.A.K.Dhwan, V. Dy.Commissioner of Income Tax, Mandi

ITA 1298/CHANDI/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7551 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ADITYA KUMAR
• Keywords: Non-deduction of tax; Relationship of principal and agent
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1298/CHD/2016 (ASSESSMENT YEAR : 2009-10) SH.ANIL DHAWAN, S/O SH.A.K.DHAWAN, VS. THE D.C.I .T., MOTI BAZAR, MANDI, DISTT. MANDI (H.P.) CIRCLE-MA NDI (H.P.) PAN: AEJPD7188M (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI ASHWANI KUMAR, CA & ADITYA KUMAR, CA RESPONDENT BY : SMT.CHANDERKANTA, ADDL.CIT, DR DATE OF HEARING :28.03.2018 / 17.07.2018 DATE OF PRONOUNCEMENT : 17/07/2018 ORDER PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL S), PALAMPUR DATED 2.9.2016 RELATING TO ASSESSMENT YEAR 2009- 10. GROUND NO. 1 RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS),PALAMPUR IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS SHE WAS NOT JUSTIFIED TO ARBITRARILYU PHOLD THE DISALLOWANCE OF RS. 11,46,311/- BY RESORT TO PROVISIONS OF SEC. 194H R.W.S 40(A)(IA) OF THE INCO ME TAX ACT, 1961 ON ACCOUNT OF PAYMENTS MADE TO DEALERS. 2. THE SOLE ISSUE IN THE PRESENT GROUND PERTAINS TO DISALLOWANCE OF EXPENSES MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR NON-DEDUCTIO N OF TAX AT SOURCE ON THE SAME. ITA NO NO.1298/CHD/2016 A.Y. 2009-10 2 3. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE AS SESSING OFFICER HAD NOTED THAT THE ASSESSEE WAS AN AUTHORIZ ED DEALER OF BSNL AND WAS ENGAGED IN THE BUSINESS OF S ALE AND PURCHASE OF SIM CARDS, RECHARGE COUPONS, MOBILE PHO NES AND ACCESSORIES ETC. DURING THE YEAR, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DEBITED RS.44,63,094/- IN THE TRADING-CUM-PROFIT & LOSS ACCOUNT UNDER THE HEAD COMMISSION TO PARTIES WHICH FELL WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 194H OF THE ACT. ON PERUSAL O F THE BOOKS OF ACCOUNTS IT WAS NOTICED BY THE ASSESSING O FFICER THAT THE ASSESSEE HAD PAID COMMISSION AMOUNTING TO RS.11,46,311/- TO 54 DEALERS, WHERE THE AMOUNT OF COMMISSION PAID WAS AT A TIME MORE THAN RS.2500/-, WHILE IN THE REMAINING CASES, THE COMMISSION PAID WAS LES S THAN RS.2500/-. THE ASSESSING OFFICER ACCORDINGLY, HELD THAT THE ASSESSEE, BY NOT DEDUCTING TAX AT SOURCE ON THE COM MISSION PAID AMOUNTING TO RS.11,46,311/-, HAD VIOLATED THE PROVISIONS OF SECTION 194H OF THE ACT AND, THEREFOR E, THE SAID EXPENSES WERE LIABLE TO BE DISALLOWED AS PER T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. RELIANC E WAS PLACED BY THE ASSESSING OFFICER ON THE DECISION OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF VODAFON E ESSAR CELLULAR LTD. VS. ACIT (2010) 194 TAXMAN 518 (KER.) AND I.T.A.T. MUMBAI IN THE CASE OF MAHESH ENTERPRISES V S. ITO, MUMBAI (2010) 42 SOT 125 (MUM). ACCORDINGLY, DISALLOWANCE OF EXPENSES TO THE EXTENT OF RS.11,46, 311/- CLAIMED UNDER THE HEAD COMMISSION WAS MADE BY THE ASSESSING OFFICER. ITA NO NO.1298/CHD/2016 A.Y. 2009-10 3 4. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE CONTEND ED THAT THE PAYMENTS MADE WERE NOT IN THE NATURE OF COMMISSION BUT THAT IT WAS ONLY PASSING ON PART OF THE DISCOUNT RECEIVED BY IT FROM BSNL TO ITS RETAILERS THAT TOO BY REDUCING THE VALUE OF PRODUCTS SOLD TO THEM AND NOT IN CASH. THE ASSESSEE ALSO SUBMITTED THAT THE DECISIO N IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. (SUPRA) WAS NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE I N THAT CASE THE ASSESSEE WAS A TELECOM SERVICE PROVIDER, WHICH THE ASSESSEE WAS NOT IN THE PRESENT CASE. IT WAS ALSO C ONTENDED THAT THE ASSESSEE WAS NOT ACCOUNTABLE FOR ANY SERVI CE CONTRACT WITH THE CUSTOMERS AND THE TRANSACTION WIT H ITS CUSTOMERS WAS ON PRINCIPAL TO PRINCIPAL BASIS AND, THEREFORE, THE INCENTIVE GIVEN TO THEM COULD NOT BE TERMED TO BE IN THE NATURE OF COMMISSION SO AS TO ATTRACT TDS U/S 194H OF THE ACT. THE LD.CIT(APPEALS) REJECTED ASSE SSEES CONTENTION HOLDING THAT THE AGREEMENT BETWEEN BSNL AND THE ASSESSEE CLEARLY SHOWED THAT THE ASSESSEE WAS P ROVIDING VARIOUS SERVICES TO CUSTOMERS ON BEHALF OF THE BSNL AND RELATIONSHIP BETWEEN BSNL AND THE ASSESSEE WAS OF PRINCIPAL AND AGENT AND THE SERVICES PROVIDED BY TH E ASSESSEE WERE COVERED WITHIN THE DEFINITION OF COMM ISSION. THE LD.CIT(APPEALS) FURTHER HELD THAT FOR THE SAID SERVICES TO BSNL THE ASSESSEE HAD APPOINTED AGENTS AND RETAI LERS TO ASSIST IT IN EXECUTION OF THE CONTRACT WITH BSNL WH ICH CLEARLY ATTRACTED THE PROVISIONS OF SECTION 194H OF THE ACT TO THE INCENTIVE GIVEN TO THE RETAILERS OF THE ASSE SSEE. THE DISALLOWANCE OF EXPENSES OF RS.11,46,311/- ON ACCOU NT OF ITA NO NO.1298/CHD/2016 A.Y. 2009-10 4 NON-DEDUCTION OF TAX ON THE SAME U/S 194 OF THE ACT WAS, THEREFORE, UPHELD BY THE CIT(A). THE RELEVANT FINDI NGS OF THE LD.CIT(APPEALS) AT PAGES 7 AND 8 OF ITS ORDER ARE A S UNDER: THE APPELLANT HAS CONTENDED THAT THE APPELLANT USED TO GET 5% DISCOUNT/ COMMISSION FROM THE BSNL WHICH USE D TO DEDUCT TAX THEREON AT SOURCE AND SUBSEQUENTLY THE AP PELLANT HAD TO PASS ON 4% OF THE ABOVE SAID DISCOUNT/ COMMI SSION WHICH WAS NOT PAID IN CASH BUT WAS TO BE ADJUSTED B Y REDUCING THE VALUE OF THE PRODUCT I.E. UPFRONT BASIS . THE APPELLANT HAS STATED THAT THE JUDGMENT OF KERALA HI GH COURT IN THE CASE OF VODAFONE ESSAR CELLULAR LD. VS SCIT ( 2010 194 TAXMAN 518 (KER.)] IS NOT APPLICABLE SINCE APPE LLANT IS NOT PROVIDING ANY CELLULAR SERVICE, BSNL IS THE PRINCI PAL NOR THE APPELLANT AND APPELLANT IS NOT ACCOUNTABLE FOR ANY SERVICE CONTRACT WITH CUSTOMERS. THE CONTRACT BETWEEN THE APPELLANT AND BSNL IS FOR MARKETING AND SELLING TELECOM SERVICES. CLAUSE 5 GI VES THE DETAILS OF SCOPE OF WORK HIGHLIGHTS THE SCOPE OF MA RKETING AND DISTRIBUTION SERVICES. THE FRANCHISEE SHALL PROVIDE BSNL SERVICES TO WALK-IN- {CUSTOMERS, IT SHALL ALSO ESTAB LISH THROUGH ITS SALES FORCE, DIRECT CONTACT WITH PROSPECTIVE CUSTO MERS AND REGISTER AS MANY NEW BSNL CUSTOMERS AS POSSIBLE. TH E APPELLANT WILL BE RESPONSIBLE FOR THE VERIFICATION OF CREDENTIALS OF CUSTOMERS. THESE TELECOM SERVICES COME WITHIN THE P URVIEW OF SERVICES PROVIDED BY THE DISTRIBUTORS AS PER CLAUSE 8 OF THE AGREEMENT FRANCHISEE SHALL EXCLUSIVELY ENGAGED HIMSELF/ ITSELF IN MARKETING AND SELLING ONLY BSNL'S TELECOM SERVICES UNDER THIS AGREEMENT AND SHALL NOT INVOLVE ITSELF/ H IMSELF IN ANY MANNER EITHER DIRECTLY OR INDIRECTLY IN ANY BUSI NESS OR ACTIVITY OTHER THAN OF THE BSNL THE APPELLANT IS RES PONSIBLE FOR THE VERIFICATION OF THE DOCUMENTS OF THE NEW CUSTOM ERS AS IS CLEARLY EVIDENT FROM CLAUSE NO. 9 OF THE AGREEMENT: 'THE FRANCHISEE WILL BE FULLY RESPONSIBLE FOR THE VERIFICATION OF CREDENTIALS OF NEW CUSTOMERS-BOTH AS PER DOCUMENTS SUBMITTED AS WELL AS PER PHYSICAL VERIFICATIONS. FRANCHISEE WILL BE RESPONSIBLE FOR T HE VERIFICATIONS DONE BY ALL THE CHANNELS I.E. SUB- FRANCHISEES AND RETAILERS WORKING UNDER THEM AS PER THE INSTRUCTIONS AS LAID DOWN IN IR. NO. MOB-27/SECURITY - 2006 DATED 06.02.2007 AND ANY FURTHER INSTRUCTIONS ISSUED ON THE SUBJECT FROM TIME TO TIME SHALL BE SCRUPULOUSLY FOLLOWED BY THE FRANCHISEES/ POINT OF S ALE IN ALL CHANNELS'. THE AGREEMENT BETWEEN BSNL AND THE APPELLANT CLEARLY SHOWS THAT APPELLANT IS PROVIDING TELECOM SERVICES OF V ERIFICATION OF CREDENTIALS OF THE CUSTOMERS. BSNL SERVICES TO W ALK-IN- CUSTOMER, DISTRIBUTE ALL TYPE OF AUTHORIZED TELECOM SER VICES. THESE SERVICES CLEARLY SHOWS THAT THE RELATIONSHIP B ETWEEN BSNL AND THE APPELLANT IS OF PRINCIPAL AND AGENT AND THE ITA NO NO.1298/CHD/2016 A.Y. 2009-10 5 PROVISIONS OF SERVICES ARE COVERED WITHIN THE DEFINITI ON OF COMMISSION, IN ORDER TO PROVIDE THE SERVICES APPELLANT H AS APPOINTED AGENTS AND RETAILERS WHO ARE ASSISTING THE APPELLANT IN EXECUTION OF THE CONTRACT WITH BSNL AS PER SECTION 194H, COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED DIRECTLY OR INDIRECTLY BY THE PERSON ACTING ON BEHAL F OF ANOTHER PERSON FOR SERVICES RENDERED OR FOR ANY SERVICES IN T HE COURSE OF BUYING AND SELLING OF GOODS. THEREFORE, IT IS CLEAR LY EVIDENT THAT PROVISIONS OF SECTION 194H R.W.S. 40(A)(I A) THE DISALLOWANCE OF EXPENSES OF RS.11,46,311/- MADE BY T HE LD.A.O. IS UPHELD. 5. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 6. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERAT ED THE CONTENTION MADE BEFORE THE LD.CIT(APPEALS) EMPHASIZ ING THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE RETAILERS WAS ON PRINCIPAL TO PRINCIPAL BASIS WHICH WAS EVIDE NT FROM THE FACT THAT THERE WAS NO ORAL OR WRITTEN AGREEMEN T BETWEEN THE ASSESSEE AND ITS RETAILERS EXHIBITING A NY CONTROL OF THE ASSESSEE OVER THE GOODS SOLD TO THE RETAILERS AND FURTHER BY THE FACT THAT THE TRANSACTION WAS UN DERTAKEN IN CASH ENTIRELY AND THE BILLS CLEARLY SHOWED THE DISCOUNT GIVEN TO THE RETAILERS AND NOT COMMISSION TO THEM. THE LD. COUNSEL FOR ASSESSEE STATED THAT THE FACTS OF ITS C ASE WERE IDENTICAL TO THAT DECIDED BY THE I.T.A.T. IN A NUMB ER OF CASES WHEREIN AFTER APPRECIATING THE AFOREMENTIONED FACTS IT WAS HELD BY THE I.T.A.T. THAT THE RELATIONSHIP BETW EEN THE ASSESSEE AND ITS RETAILERS WAS OF PRINCIPAL TO PRIN CIPAL AND THE INCENTIVE GIVEN TO THEM, THEREFORE, DID NOT TAN TAMOUNT TO COMMISSION FOR THE PURPOSE OF TAX DEDUCTION AT S OURCE U/S 194H OF THE ACT. THE CASE LAWS RELIED UPON BY T HE ASSESSEE IN THIS REGARD ARE AS UNDER: ITA NO NO.1298/CHD/2016 A.Y. 2009-10 6 1) ITO VS. M/S TARUN SALES IN ITA NO.967/DEL/2014, DATED 9.12.2016 2) DCIT VS. SHRI SHRAWAN KUMAR AGGARWAL, PROP. M/S USHA AGENCIES IN ITA NO.1401/JP/2010, DATED 21.10.2011 3) M/S PAREEK ELECTRICAL VS. ACIT IN ITA NO.354/CTK/2012, DATED 28.9.2012 4) M/S GURPREET SINGH SETHI, PROP. M/S ELECTRONICS VS. ITO, ITA NO.608 & 609(ASR)/2013, DATED 15.4.2014 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT(APPEALS) STATING THAT THE AGREEMENT OF T HE ASSESSEE WITH THE TELECOM SERVICES PROVIDER I.E. BS NL CLEARLY REFLECTED THE EXISTENCE OF PRINCIPAL AND AG ENT RELATIONSHIP BETWEEN THE TWO AND FOR RENDERING THE SERVICES UNDER THE SAID AGREEMENT THE ASSESSEE HAD TAKEN THE SERVICES OF THE RETAILERS AND, THEREFORE, INCENTIVE GIVEN TO THEM WAS IN THE NATURE OF COMMISSION ATTRACTING THE TDS U/S 194H OF THE ACT. 8. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S. THE ISSUE BEFORE US IS WHETHER THE INCENTIVE GIVEN BY T HE ASSESSEE TO ITS RETAILERS/CUSTOMERS ON THE SALE OF SIM CARDS, RECHARGE COUPONS, ETC TANTAMOUNTED TO COMMISSION AMENABLE TO TAX DEDUCTION AT SOURCE U/S 194H OF THE ACT, NON-DEDUCTION OF WHICH WOULD RESULT IN ATTRACTING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT RESULTIN G IN DISALLOWANCE OF THE SAID EXPENSES INCURRED BY THE A SSESSEE. 9. WE HAVE GONE THROUGH VARIOUS CASE LAWS CITED BY THE LD. COUNSEL FOR ASSESSEE BEFORE US. WE FIND THAT IN ALL THE SAID CASES THE TRIBUNAL HAD ON THE FACTS OF EACH CA SE GIVEN ITA NO NO.1298/CHD/2016 A.Y. 2009-10 7 A FINDING THAT THE RELATIONSHIP BETWEEN THE ASSESSE E AND ITS RETAILERS ,ON ACCOUNT OF THE TRANSACTION OF SALE O F SIM CARDS AND RECHARGE COUPONS, WAS ON PRINCIPAL TO PRINCIPAL BASIS. FOR THE SAID REASON, THE INCENTIVES PAID TO THEM, T HEREFORE, WERE HELD TO BE IN THE NATURE OF DISCOUNT AND NOT COMMISSION. 10. IN THE CASE OF ITO VS. TARUN SALES IN ITA NO.967/DEL/2014 DATED 9.12.2016 (SUPRA), THE ASSESS EE WAS AN AUTHORIZED DEALER OF BSNL. THE ITAT IN THE SAID CASE FOUND THAT AS PER THE AGREEMENT BETWEEN BSNL AND TH E ASSESSEE NO DEALER OR SUB-DEALER WAS APPOINTED EITH ER BY BSNL OR BY THE ASSESSEE FOR THE PURPOSE OF MARKETIN G THE PRODUCTS AND/ OR SERVICES OF BSNL. THE ITAT FURTHE R NOTED THAT THE ENTIRE SALES MADE BY THE ASSESSEE TO THE R ETAILERS WAS IN CASH AT DISCOUNT AND NO PAYMENT OF INCENTIVE BY WAY OF COMMISSION WAS MADE. THE ITAT, THEREFORE, HELD T HAT THE INCENTIVE PAID WAS NOT IN THE NATURE OF COMMISSION BUT WAS IN FACT DISCOUNT WHICH WAS GIVEN TO THE RETAILERS/SHOPKEEPERS. THE RELEVANT FINDINGS OF THE I.T.A.T. ARE AS UNDER: WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE REC ORD. IT IS NOTICED THAT AN IDENTICAL ISSUED HAVING SIMILAR FACT S HAD ALREADY BEEN ADJUDICATED IN ASSESSEES OWN CASE FOR THE PRECEDING YEAR BY THE ITAT DELHI BENCH H, NEW DELHI I N ITA NO. 3523/DEL/2011 WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 15 TO 25 OF THE ORDER DATED 22.02.2013 WHICH READ AS UNDER: 15. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE ASSESSEE PAID DISCOUNT OF RS.66,57,565/- AND ACTIVATION SCHEME OF RS.6,25,600/. BOTH THESE AMOUNTS, TOTAL AMOUNTING TO RS. 77,31,395/- WERE CLAIMED IN THE PROFIT & LOSS ACCOUNT. THE STAND OF THE ITA NO NO.1298/CHD/2016 A.Y. 2009-10 8 ASSESSEE HAS BEEN THAT DISCOUNT/ACTIVATION CHARGES WERE NOT PAID IN CASH TO ANY RETAILER. RATHER, THEY WERE IN THE NATURE OF TRADE DISCOUNT GIVEN AT THE TIME OF SALE. TH E SALES WERE RECORDED AT THE MAXIMUM RETAIL PRICE AND THE DI SCOUNT REGARDED AS DISCOUNT WAS THE RETAILERS MARGIN. THERE WAS NO AGREEMENT IN EXISTENCE BETWEEN THE ASSESSEE AND T HE CUSTOMERS. THE ASSESSEE, DURING THE YEAR, WAS AN AUTHORIZED FRANCHISEE OF BHARAT SANCHAR NIGAL LTD. (I .E. BSNL) VIDE AGREEMENT DATED 12.01.2007 (COPY AT PAGES 1 7- 36 OF THE ASSESSEE S PAPER BOOK-APB FOR SHORT). UND ER THE AGREEMENT, THE ASSESSEE WAS TO PROVIDE SERVICES TO WALK-IN CUSTOMERS. IT WAS TO DISTRIBUTE ALL TYPES OF AUTHORIZED TELECOM SERVICES. NO DEALER OR SUB-DEALER WAS APPOINTED. THE DISCOUNT/COMMISSION WAS ALLOWED AS PER THE AGREEMENT. THIS POSITION REMAINS UNDISPUTED. THE RETAILERS SIMPLY BOUGHT SIM CARDS/RECHARGE COUPONS FR OM THE ASSESSEE AT A DISCOUNTED PRICE. THESE WERE SOLD IN THE MARKET WITH NO SPECIFIC OBLIGATION TOWARDS THE DISTRIBUTO R. 16. THE ASSESSING OFFICER, HOWEVER, CONCLUDED THAT TH E ASSESSEE WAS HAVING THE SAME RELATIONSHIP WITH THE DEALERS/RETAILERS, AS THE ONE OF BSNL WITH THE DEALERS/RETAILERS; THAT IT WAS A CASE OF COLLECTION OF MO NEY FROM THE CUSTOMERS FOR VARIOUS SERVICES TO BE PROVIDED/ALREADY PROVIDED BY BSNL AND, AS SUCH, IT WAS IN THE NATURE OF PAYMENT TO AN AGENT FOR COLLECTION OF MONEY ON BEHALF OF BSNL; THAT THE ASSESSEE HAD SHOWN THE EXPE NSE AS COMMISSION IN ITS PROFIT & LOSS ACCOUNT; THAT THE REFORE, EVEN THOUGH THE PAYMENTS WERE COVERED U/S 194H OF T HE IT ACT, NO TDS HAD BEEN DEDUCTED THEREON. IT WAS ON THIS BASIS THAT THE ASSESSING OFFICER MADE THE DISALLOWANC E. THE LD.CIT(A) DELETED THE SAME. 17. THE QUESTION IS AS TO WHETHER THE LD.CIT(A) CORRE CTLY DELETED THE DISALLOWANCE, HOLDING THAT THERE WAS NO PRINCIPAL TO AGENT RELATIONSHIP BETWEEN ASSESSEE AND THE CUSTOMERS. NOW, UNDOUBTEDLY, THE COMMISSION IN QUESTIO N WAS, IN FACT, DISCOUNT. IT WAS ONLY THAT THERE BEING NO HEAD OF DISCOUNT IN ITR-4, THE DEPICTION WAS OF COMMISSION IN COLUMN NO.23 OF THE PROFIT & LOSS ACCOU NT. THUS, HOWEVER, BY ITSELF DOES NOT LEAD TO THE CONCLUSION THAT IT WAS COMMISSION RATHER THAN DISCOUNT. AS PER THE AGREEMENT BETWEEN THE BSNL AND THE ASSESSEE:- THE FRANCHISEE SHALL PROVIDE BSNL SERVICES TO WALK-I N- CUSTOMERS. IT SHALL ALSO ESTABLISH, THROUGH ITS SALE-FORCE DIRECT CONTACT WITH PROSPECTIVE CUSTOMERS AND REGIST ER AS MANY NEW BSNL CUSTOMERS AS POSSIBLE SUBJECT TO A MINIMUM NUMBER FIXED BY BSNL. FRANCHISEE SHALL ALSO DISTRIBUTE ALL TYPES OF AUTHORIZED TELECOM SERVICES FO R MARKETING TO ITS FRANCHISEES AND CASH CARD (PREPAID ) TO ITS RETAILERS. NO DEALER/SUB-DEALER WAS EITHER APPOINTED BY BSNL ON TH E ASSESSEE. THE ASSESSEE IS ALLOWED COMMISSION/DISCOUNT AS PER ANNEXURE-B AND SECTION-III OF THE SAID AGREEMENT. ITA NO NO.1298/CHD/2016 A.Y. 2009-10 9 18. SINCE NO DEALER OR SUB-DEALER WAS APPOINTED EITHER BY BHARAT SANCHAR NIGAM LTD. (BSNL) OR BY THE ASSESSEE, FOR THE PURPOSE OF MARKETING THE PRODUCTS AND/OR SERVIC E OF THE BHARAT SANCHAR NIGAM LTD., THE ENTIRE SALES WERE TO CUSTOMERS EITHER DIRECTLY OR THROUGH SHOPKEEPERS, WHO RENDERED SERVICES TO THE CUSTOMERS. MOREOVER, THE ENT IRE SALES WERE IN CASH. NO COMMISSION WAS PAID BY THE ASSESSEE TO THE CUSTOMERS. THEN, SECTION 194H OF THE ACT DOES NOT COVER SUCH DISCOUNTS AS UNDER CONSIDERATIO N HEREIN AND THAT BEING SO, OBVIOUSLY THE PROVISIONS O F SECTION 40(A)(IA) OF THE ACT WAS WRONGLY APPLIED. ACCOUNTING- WISE, THE FACE VALUE OF THE RECHARGE COUPON WAS DEBITED TO THE PURCHASE ACCOUNT, WHEREAS THE COMMISSION GIVEN BY BSN L WAS CREDITED TO THE COMMISSION ACCOUNT. AT THE TIME OF SALE, ON THE OTHER HAND, THE FACE VALUE OF THE RECHARGE COU PON WAS CREDITED TO THE SALES ACCOUNT AND THE CASH RECEIP TS WAS DEBITED TO THE CASH ACCOUNT. THE DISCOUNT OFFERED WAS DEBITED TO THE DISCOUNT ACCOUNT. WHEN PURCHASIUNG TH E SIM CARDS AND RECHARGE COUPONS FROM BSNL, THE ASSESSEE HAD TO DEPOSIT THE MONEY IN ADVANCE. UNDISPUTED, IT IS TO CUSTOMERS DIRECTLY AND TO PETTY SHOPKEEPERS THAT TH E SIM CARDS AND RECHARGE COUPONS WERE SOLD IN CASH. THE CUSTOMERS AND SHOPKEEPERS WERE OFFERED DISCOUNT ON THE FACE VALUE OF THE SIM CARDS. APROPOS THE RECHARGE COU PONS, ON THE OTHER HAND,, A SMALL MARGIN WAS KEPT BY THE ASSESSEE OUT OF THE COMMISSION/DISCOUNT OFFERED BY BSNL. THEN ACTIVATION CHARGES WERE GIVEN BY BSNL TO THE ASSESSEE ON NEW CONNECTIONS AND A MAJOR PORTION THE REOF WAS GIVEN TO THE CUSTOMERS AS DISCOUNT. 19. AS DISCUSSED, IT WAS ON THE BASIS OF THE MISTAKE N PRESUMPTION OF EXISTENCE OF RELATIONSHIP OF PRINCIP AL AND AGENT, THAT THE DISCOUNT OFFERED BY THE ASSESSEE TO ITS CUSTOMERS WAS CONSIDERED BY THE ASSESSING OFFICER A S COMMISSION. THIS, HOWEVER, IS NOT SO, TO REITERATE IT W AS ONLY DISCOUNT OFFERED TO THE CUSTOMERS ON A PRINCIPA L TO PRINCIPAL BASIS ON WHICH NO TDS WAS EITHER REQUIRED T O BE MADE OR WAS ACTUALLY MADE. 20. IN ITL TOURS & TRAVELS (SUPRA), WHERE THE ASSESSE E WAS TAKING AIRLINES TICKETS, THE DISCOUNT GIVEN TO INTERMEDIARIES WAS HELD NOT TO BE COMMISSION, SINCE IT WAS DEAL ON A PRINCIPAL TO PRINCIPAL BASIS AND THERE WAS NO ELEMENT OF AGENCY INVOLVED. NO TDS WAS HELD TO BE DONE U/S 194H OF THE ACT. 21. IN SURNDRA BUILDTECH (SUPRA), THE ASSESSEE WAS I N THE REAL ESTATE BUSINESS. IT RECEIVED COMMISSION FROM BUI LDERS FOR BOOKING FLATS. PORTION OF SUCH COMMISSION WAS PAI D TO BUYERS OF FLATS. IT WAS HELD THAT THIS WAS LIKE GIVING A DISCOUNT TO BUYERS AND WAS NOT COMMISSION AND SO SE CTION 194H OF THE ACT DID NOT APPLY. 22 . IN AHMEDABAD STAMP VENDORS ASSOCIATION (SUPRA) IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT THAT WHERE LICENSED STAMP VENDORS TAKE DELIVERY OF STAMP PAPER S ON ITA NO NO.1298/CHD/2016 A.Y. 2009-10 10 PAYMENT OF FULL PRICE LESS DISCOUNT AND THEY SELL SUCH STAMP PAPERS TO RETAIL CUSTOMERS, NEITHER OF THE TWO ACTIVITI ES, I.E, BUYING FROM THE GOVERNMENT AND SELLING TO THE CUSTOM ERS, CAN BE TERMED AS SERVICE IN COURSE OF BUYING AND SE LLING OF GOODS; AND THAT SO THE DISCOUNT MADE AVAILABLE TO THE LICENSE STAMP VENDORS WAS OUTSIDE THE EXPRESSION COMMISSION OR BROKERAGE U/S 194H OF THE IT ACT AND A S SUCH, NO TDS IS REQUIRED TO BE MADE FROM THE DISCOUNT. 23. THE SLP FILED BY THE DEPARTMENT WAS DISMISSED BY THE HONBLE SUPREME COURT VIDE ORDER DATED 06.09.2012 (COPY AT PAGE 48 OF THE CASE LAWS PAPER BOOK FILED BY THE ASSESSEE), HOLDING THAT THE DISCOUNT GIVEN TO THE STAM P VENDORS WAS FOR PURCHASING THE STAMPS IN BULK QUANTIT Y AND THE DISCOUNT WAS IN THE NATURE OF CASH DISCOUNT , DUE TO WHICH THE TRANSACTION WAS A SALE AND CONSEQUENTLY, SE CTION 194H OF THE IT ACT HAD NO APPLICATION. 24. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. 25. IN VIEW OF THE ABOVE, FINDING NO MERIT THEREIN, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT IS REJECTED. 8. SINCE THE FACTS INVOLVED IN THE YEAR UNDER CONSIDE RATION ARE IDENTICAL TO THE FACTS INVOLVED IN THE PRECEDING YEAR OF THE ASSESSEES CASE. SO, RESPECTFULLY FOLLOWING THE AFORESA ID REFERRED TO ORDER DATED 22.02.2013 IN ITA NO. 3523/DEL/2011 FOR THE ASSESSMENT YEAR 2008-09 IN ASSESSEES OWN CASE, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11. IN THE CASE OF SHRI SHRAWAN KUMAR AGGARWAL, PRO P. M/S USHA AGENCIES (SUPRA), THE ASSESSEE WAS AN AUT HORIZED DEALER OF BSNL, SELLING SIM CARDS, RECHARGE COUPONS , ETC. OF BSNL. THE ITAT FOUND THAT AS PER THE AGREEMENT BETW EEN THE ASSESSEE AND BSNL, THE ASSESSEE WAS A FRANCHISE E OF BSNL DOING MARKETING AND DISTRIBUTION OF BSNL TELEC OM SERVICE AND WAS NOT ACTING AS AN AGENT OF BSNL. T HAT IN DOING ITS BUSINESS OF SELLING THE SIM CARDS AND REC HARGE COUPONS BY DOING MARKETING AND DISTRIBUTION ,IT HAD ENGAGED CERTAIN PERSONS IN THE MARKET AND HAD PARTE D WITH ITS SHARE OF INCENTIVE EARNED FROM BSNL. THE ITAT H ELD THIS ENGAGEMENT TO BE NOT AS AGENT AS THERE WAS NO INDEP ENDENT ITA NO NO.1298/CHD/2016 A.Y. 2009-10 11 CONTRACT WITH THE RETAILERS AND THUS NO SUPERVISIO N OR CONTROL OF THE ASSESSEE OVER THE RETAILERS FOR THE SALE OF RECHARGE COUPONS TO THEM. IT WAS ALSO NOTED THAT MO ST OF THE ASSESSEES SALE TO RETAILERS WAS IN CASH AND TH EREAFTER THERE WAS HARDLY ANY OBLIGATION OF THE RETAILERS TO WARDS THE ASSESSEE. FURTHER IT WAS FOUND THAT THE SALES MADE TO RETAILERS WAS IN CASH AND DISCOUNT HAD BEEN GIVEN T O THEM ON THE BILL RAISED BY REDUCING THE PRICE AND THAT N O COMMISSION HAD BEEN PAID TO THE RETAILERS. THEREFOR E, ON THESE FACTS, THE ITAT HELD THAT THE RELATIONSHIP BE TWEEN THE ASSESSEE AND ITS RETAILERS WAS TO BE TREATED AS THA T OF PRINCIPAL TO PRINCIPAL AND NOT THAT OF PRINCIPAL AN D AGENT AND THE PROVISIONS OF SECTION 194H, THEREFORE, WERE NOT APPLICABLE IN RESPECT OF THE SALE OF BSNL PRODUCTS BY THE ASSESSEE TO ITS RETAILERS. THE RELEVANT FINDINGS OF THE I.T.A.T. AT PARA 22.1 OF THE ORDER IS AS UNDER: 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WRITTE N SUBMISSIONS FILED BY ID. COUNSEL OF THE ASSESSEE AR E SIMILAR TO THE WRITTEN SUBMISSIONS FILED BEFORE ID. CIT (A). WE HAVE ALREADY REPRODUCED THE WRITTEN SUBMISSIONS FILED BEFORE ID. CIT (A) SOMEWHERE ABOVE IN THIS ORDER, THEREFORE, THERE IS NO NEED TO MENTION THE ARGUMENTS OF ID. A/R IN DETAIL HERE ONC E AGAIN. IN FACT, THE ASSESSEE IS AN INDEPENDENT BUSINESSMAN AN D NOT AN AGENT OF BSNL BUT HE HAS PURCHASED SIM CARD AND REC HARGE COUPON FROM BSNL AGAINST FULL PAYMENT OF PRICE OF T HE SAME TO BSNL. IN THIS WAY IT CAN NOT BE TERMED THAT THE ASS ESSEE IS AN AGENT OF BSNL. HOWEVER, THERE IS AN AGENCY AGREEMENT WITH BSNL AND IN THIS AGREEMENT IT HAS BEEN REFERRED TO AS FRANCHISEE, IT MEANS THAT A SSESSEE IS NOT AN AGENT OF BSNL. BY PURCHASING SIM CARD AND RE CHARGE COUPON, THE ASSESSEE IS DOING SERVICE ON BEHALF OF THE BSNL AS FRANCHISEE. AS FRANCHISEE THE ASSESSEE IS DOING MARKETING AND DISTRIBUTION OF BSNL TELECOM SERVICE AND AS PER AGREEMENT THE BSNL DEDUCTING TAX AT SOURCE @ 5.61% AND TDS CERTIFICATE HAS BEEN ISSUED IN FORM NO. 16A. THERE IS NO DISPUTE IN THESE FACTS. NOW THE ASSESSEE IS SELLI NG THESE SIM CARD AND RECHARGE COUPONS BY DOING MARKETING AN D ITA NO NO.1298/CHD/2016 A.Y. 2009-10 12 DISTRIBUTION OF BSNL TELECOM SERVICES. THE ASSESSEE IS DOING THIS BUSINESS BY ENGAGING SOME PERSONS IN THE MARKE T AND HAVE PARTED WITH SOME SHARE OF COMMISSION EARNED BY HIM FROM BSNL. PARTING OF THE COMMISSION, THE AO HAS TREATED THAT ASSESSEE HAS ENGAGED HIS AGENTS AND, THEREFORE, IS L IABLE TO DEDUCT TAX IN VIEW OF PROVISIONS OF SECTION 194H. IN F ACT, THE ASSESSEE HAS NOT ENGAGED ANY DISTRIBUTOR BY APP OINTING AGENTS BUT HAS USED THE SERVICES OF OTHER PERSONS I N THE MARKET TO DO THE MARKETING AND DISTRIBUTION WORK IN A LARGE SCALE ON BEHALF OF BSNL AND THIS ENGAGEMENTS CANNOT BE TERME D AS HIS AGENT OR HIS BROKER AS THERE IS NO INDEPENDENT AGRE EMENT EITHER WITH THE SUB BROKERS OR SUB AGENTS WHO ARE SE LLING SIM CARD OR RECHARGE COUPONS ON BEHALF OF THE ASSESSEE. THE ASSESSEE WAS MAKING SALES OF CASH CARDS AND SIM CARD S TO RETAILERS AT A PRICE WHICH WAS NET OF DISCOUNT. NO W HERE IN THE DOCUMENTS VIZ. THE SALE BILLS ETC. ISSUED BY THE AS SESSEE TO THE RETAILERS THE WORD COMMISSION HAS BEEN MENTIONED. N O COMMISSION WAS PAID BY THE ASSESSEE TO THE RETAILERS . WHATEVER THE PRICE WAS PAID BY THE ASSESSEE TO BSNL , THE BSNL GAVE DISCOUNT/COMMISSION TO THE ASSESSEE AND A SSESSEE HAS REDUCED THE SAME IN THE PURCHASE PRICE AND HAS SO LD TO THE RETAILERS ON A DISCOUNTED FIGURE. IN THIS WAY THE A SSESSEE HAS PARTED SOME DISCOUNT AVAILED BY IT TO THE RETAILERS. BE ING FRANCHISEE, A PERSON CANNOT BE TERMED AS AGENT AS HE LD IN THE CASE OF IDEA CELLULAR LTD. 121 TTJ 352 (DEL.) WHEREI N IT IS HELD THAT UNDER SECTION 194H DISCOUNT TO MARKET ASSOCIAT ES ON SIM CARDS AND RECHARGE COUPONS - DISCOUNT ALLOWED ON TRANSACTIONS RESULTING IN OUTRIGHT PURCHASES CANNOT BE TREATED AS BROKERAGES OR COMMISSION. THERE SHOULD BE IN EXI STENCE THE RELATIONSHIP OF PRINCIPAL AND AGENT IN ORDER TO BRIN G THE DISCOUNT IN THE AMBIT OF COMMISSION OR BROKERAGE. S IMILAR VIEW HAS BEEN TAKEN IN CASE OF IDEA CELLULAR LTD. BY ITA T HYDERABAD BENCH ALSO. 22.1. IN CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF INDIA, 176 CTR 193 (GUJ.), AGAIN SIMILAR VIE W HAS BEEN TAKEN BY HON'BLE GUJARAT HIGH COURT. IT IS ALS O A MATTER OF FACT THAT THE BSNL ITSELF HAS CHANGED THE NOMENCLATU RE OF THIS PAYMENT FROM WORD 'COMMISSION' TO 'DISCOUNT' WITH E FFECT FROM 31.5.2008 AND COPY OF THIS CLARIFICATION WAS I SSUED. FROM THIS FACT, IT IS AMPLY PROVED THAT ASSESSEE IS N OT AN AGENT OR BSNL BUT A FRANCHISEE. THEREAFTER, THE ASSESSEE A FTER MAKING FULL PAYMENT OF SIM CARD/RESEARCH COUPONS HA D SOLD THE SAME TO THE RETAILERS AND ON THE BASIS OF BILL ISSUED BY ASSESSEE THE FULL PAYMENT HAS BEEN CHARGED. THERE I S NO WORD OF ANY DISCOUNT OR COMMISSION IN THE BILL ISSUED BY T HE ASSESSEE. THEREFORE, THIS IS NOT THE CASE OF THE DEPARTM ENT THAT ASSESSEE HAS DEPUTED ANY SUB AGENTS AND CHARGING COMMISSION FROM THEM. IT IS ALSO SEEN THAT THE ASSESS EE HAS PURCHASED SIM CARD AND DISCOUNT COUPONS AND THEY HA VE BECOME THE PROPERTY OF THE ASSESSEE AS ASSESSEE IS LIABLE FOR DAMAGE/LOSS OF SIM CARD AND DISCOUNT COUPONS. THERE FORE, ALSO IT CANNOT BE SAID THAT ASSESSEE WAS AN AGENT A ND ASSESSEE HAS ENGAGED FURTHER SUB AGENTS. ALL THESE F ACTS HAVE BEEN CONSIDERED BY ID. CIT (A) AND THEREAFTER HE HA S GIVEN HIS ITA NO NO.1298/CHD/2016 A.Y. 2009-10 13 FINDINGS WHICH ARE RECORDED IN PARA 6.3 AT PAGES 32 TO 33, ARE ALSO REPRODUCED HERE AS UNDER :- ' 6.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF LD. AR. ON PERUSAL OF THE RELEVA NT RECORDS, FIND THAT THE NATURE OF THE RELATIONSHIP BE TWEEN THE BSNL AND THE APPELLANT ASSESSEE (FRANCHISEE OF BSNL) WAS DIFFERENT, AS COMPARED TO THE NATURE OF T HE RELATIONSHIP BETWEEN THE ASSESSEE AND HIS RETAILERS IN THIS REGARD, IT IS OBSERVED THAT THE APPELLANT WAS APPOINTED A FRANCHISEE OF THE BSNL, AS PER THE DETAI LED TERMS AND CONDITIONS OF FRANCHISEESHIP CONTAINED IN THE AGREEMENT DATED 21/03/2005, ENTERED INTO BETWEEN TH E BSNL AND THE APPELLANT, WHICH WAS SUBSEQUENTLY MODIFIED, VIDE ANOTHER AGREEMENT DATED 13/11/2006. THEREFORE, THE APPELLANT WAS OBLIGED TO FULFILL AND CONDITIONS OF THAT AGREEMENT AND, IN A WAY, WAS UND ER THE SUPERVISION AND CONTROL OF BSNL, WHILE PERFORMI NG HIS DUTIES AS THE FRANCHISEE OF BSNL, IN RESPECT OF THE SALE OF RECHARGE COUPONS ETC. OF BSNL BY HIM. HENCE, THE RELATIONSHIP BETWEEN THE BSNL AND THE APPELLANT IS T O BE TREATED AS THAT OF A PRINCIPAL AND AGENT AND THUS, T HE COMMISSION/DISCOUNT PAID BY THE BSNL TO THE APPELLAN T FELL IN THE AMBIT OF THE PROVISIONS OF S.194-H OF T HE I.T. ACT. IN THIS REGARD, IT IS NOTICED THAT THE BSNL HA D ALSO TREATED THE AFORESAID COMMISSION/DISCOUNT GIVEN TO THE APPELLANT S COMMISSION AND HAD ALSO MADE TDS THEREON U/S 194-H OF THE I.T. ACT. HOWEVER, ON GOING THROUG H THE RELEVANT MATERIAL PLACED ON RECORD, I FIND THAT THE RELATIONSHIP BETWEEN THE APPELLANT AND HIS NUMEROUS RETAILERS IS NOT THE SAME, AS IS BETWEEN THE BSNL AND THE APPELLANT. IN THIS REGARD, IT IS OBSERVED THAT THERE IS NO AGREEMENT OF ANY KIND BETWEEN THE APPELLANT AND HIS RETAILERS AND HENCE, THERE IS NO SUPERVISION OR CON TROL OF THE APPELLANT OVER THE RETAILERS, AFTER THE SALE OF TH E RECHARGE COUPONS ETC. BY THE APPELLANT TO THE RETAILER S. FURTHER, IT IS ALSO OBSERVED THAT MOST OF THE APPELLAN T'S SALES OF RECHARGE COUPONS ETC. TO THE RETAILERS ARE IN CASH AND, THEREAFTER, THERE IS HARDLY ANY OBLIGATION OF T HE RETAILERS TOWARDS THE APPELLANT. THEREFORE, ON THES E FACTS, THE RELATIONSHIP BETWEEN THE APPELLANT AND HIS RETAILE RS IS TO BE TREATED AS THAT OF PRINCIPAL TO PRINCIPAL AND NOT THAT OF A PRINCIPAL AND AGENT. HENCE, IT IS HELD TH AT THOUGH THE APPELLANT SOLD THE BSNL PRODUCTS TO THE RETAILERS AT A PRICE, WHICH WAS LOWER THAN THE MRP (AF TER PASSING ON A OF HIS COMMISSION AS A DISCOUNT TO THE RETAILERS), YET AS THE RELATIONSHIP BETWEEN THE APP ELLANT AND HIS RETAILERS WAS THAT OF PRINCIPAL TO PRINCIPAL, THE PROVISIONS OF S. 194-H OF THE I.T. ACT WERE NOT APP LICABLE, IN RESPECT OF THE AFORESAID SALE OF THE BSNL PRODUC TS BY THE APPELLANT TO HIS RETAILERS. THUS, IT IS HELD TH AT AS THE APPELLANT WAS NOT LIABLE TO MAKE TDS, IN RESPECT OF THE SALE DISCOUNT GIVEN BY HIM TO HIS RETAILERS, THE IM PUGNED DISALLOWANCE OF RS.91,83,554/- MADE BY THE LD. AO U/S 40(A)(IA) OF THE I.T. ACT IS NOT SUSTAINABLE ITA NO NO.1298/CHD/2016 A.Y. 2009-10 14 ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE IMPUGN ED ADDITION AND CONSEQUENTLY, THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 12. IN THE CASE OF GURPREET SINGH SETHI (SUPRA) THE ASSESSEE WAS ALSO AN AUTHORIZED DEALER OF BSNL SELL ING ITS PRODUCTS. THE I.T.A.T. IN THE SAID CASE, ON PERUSAL OF THE AGREEMENT BETWEEN THE ASSESSEE AND BSNL FOUND THAT THE RECHARGE COUPONS PURCHASED BY THE ASSESSEE FROM BSN L BECAME PROPERTY OF THE ASSESSEE AND NOT OF BSNL AND ON SALE OF SUCH RECHARGE COUPONS TO SUB-DISTRIBUTORS T HEY BECAME THE PROPERTY OF THE SUB0DISTRIBUTORS WHO WER E FREE TO SELL THEM AT A PRICE DEEMED FIT THOUGH THE MAXIM UM PRICE WAS FIXED BY BSNL. THE I.T.A.T. ON CONSIDERAT ION OF THESE FACTS HELD THE SALE OF RECHARGE COUPONS TO SU B- DISTRIBUTORS DIFFERENT ON PRINCIPAL TO PRINCIPAL BA SIS FINDING THAT THERE WAS NO WRITTEN AGREEMENT WITH THE SUB- DISTRIBUTORS AND THE BILLS SHOWS DISCOUNT TO THE DI STRIBUTORS AND NOT COMMISSION. IN THE SAID CASE, THE I.T.A.T. HELD THAT THE RELATIONSHIP OF THE ASSESSEE WITH THE BSNL WAS DIFFERENT FROM THAT OF THE ASSESSEE WITH ITS SUB-FRANCHISEE BECAUSE THE ASSESSEE HAD NO CONTROL OVER THE SUB-FRANCHISEE AND, THEREFORE, WAS ON PRINCIPAL TO PRINCIPAL BASIS. THE I.T.A.T., THEREFORE, HELD THAT THE INCENTIVE GIVEN TO THE SUB -FRANCHISE WAS, THEREFORE, NO IN THE NATURE OF COMMISSION AND, THEREFORE, NO TDS WAS REQUIRED TO BE DEDUCTED U/S 1 94H OF THE ACT. THE RELEVANT FINDINGS OF THE I.T.A.T. AT P ARA 10 OF ITS ORDER ARE AS UNDER: 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. AS PER REVENUE, THE PR IS ENGAGED IN PR OVIDING TELECOMMUNICATION SERVICES AND IS A SERVICE PROVIDE R AND ITA NO NO.1298/CHD/2016 A.Y. 2009-10 15 AFTER PROVIDING SUCH SERVICES, THE MARGIN SO EARNED IS TERMED AS COMMISSION LIABLE UNDER THE PROVISIONS OF SECTION 194H TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO SUB FRA NCHISEE AND SINCE PR ASSESSEE HAS FAILED TO DO SO, THE SAME I S LIABLE U/S 201(1) ALONGWITH INTEREST U/S 201(1A) OF THE AC T. ON PERUSAL OF RECORD AND ARGUMENTS OF BOTH THE AUTHORI TIES BELOW, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DEC LARED HIMSELF AS FRANCHISEE OF M/S. BHARAT SANCHAR NIGAM LIM ITED (BSNL) AND IS IN THE BUSINESS OF PURCHASING SIM CARD S AND RECHARGE COUPONS FROM BSNL AGAINST PAYMENT AND RESELLS THEM TO SUB CONTRACTORS/SUB DISTRIBUTORS/SU B- FRANCHISEE. THE ASSESSEE IS A FRANCHISEE OF BSNL, W HO CLAIMS HIMSELF AS A TRADER AND NOT AS SERVICE PROVIDER OR CELLULAR OPERATOR. THE ROLE OF FRANCHISEE IS LIMITED TO BOOKING OF NEW CONNECTIONS I.E. SUBSCRIBER IDENTIFICATION MODULE CAR DS AND SALE OF RECHARGE. BOOKING OF NEW CONNECTIONS I.E. SIM C ARDS. CONTRIBUTES TO LESS THAN5% OF TOTAL BUSINESS. ACCORD INGLY, IT WAS EXPLAINED THAT THE ASSESSEE'S ROLE IS LIMITED TO BOOKING OF NEW CONNECTIONS ONLY AND COMMISSION AFTER DEDUCTING TDS IS GIVEN ON NEW CONNECTIONS BY BSNL AND SIMILARLY, TDS I S DEDUCTED AND DEPOSITED ON COMMISSION DISBURSED TO S UB- FRANCHISEE ON ACCOUNT OF NEW CONNECTIONS BOOKED BY THEM.. ON THE OTHER HAND, SALE OF RECHARGE CONTRIBUTES MOR E THAN 95% OF BUSINESS AND ONLY DISPUTE IS WITH REGARD TO R ECHARGE OF COUPONS AND TOP-UPS. THE LD. COUNSEL FOR THE ASSESS EE INVITED OUR ATTENTION TO PAGE 68 & 89 OF THE AGREEMENT DATED 22.12.2004 AND AUGUST, 2009 IN WHICH THE RECHARGE C OUPONS PURCHASED BY THE ASSESSEE BECOMES THE PROPERTY OF T HE ASSESSEE AND WHEN THE SAME ARE LOST OR DESTROYED OR NOT SOLD THE RESPONSIBILITY RESTS WITH THE ASSESSEE. THE BS NL DOES NOT RECOUP THE LOSS TO THE ASSESSEE, WHICH IS CLEAR LY MENTIONED IN CLAUSE 22 OF THE AGREEMENT DATED 22.12.2004. THE ASSESSEE HAS SOLD THE RECHARGE COUPONS TO THE SUB-DISTRIBUTO RS SO THAT THEY ALSO EARN SOME MARGIN OF PROFIT AND SUCH RECHA RGE COUPONS ONCE SOLD BECOME THE PROPERTY OF THE SAID S UB- DISTRIBUTOR AND SUCH SUB-DISTRIBUTOR IS FREE TO SELL THE SAME AT A PRICE AS HE DEEMS FIT THOUGH THE MAXIMUM PRICE HAS B EEN FIXED BY THE BSNL WITH REGARD TO THE MARKET CONDITIO N. THE LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION AT PAGE 68 OF THE AGREEMENT DATED 22.12.2004 AND AT PAGE 89 OF THE AGREEMENT DATED AUGUST, 2008 WHERE IN CLAUSE 24.1, IT IS CLEARLY STATED THAT THERE SHALL NOT BE ANY PARTNERSHIP, JOI NT VENTURE, EMPLOYMENT OR RELATIONSHIP OF PRINCIPAL AND AGENT B ETWEEN PARTIES. AS REGARDS THE DECISIONS RELIED UPON BY TH E AO IN THE CASES OF BHARTI CELLULAR LTD; BPL MOBILE CELLULAR LTD ; IDEAL CELLULAR LTD; AND VODAFONE ESSAR CELLULAR LTD; THE ID. COUNSEL FOR THE ASSESSEE DISTINGUISHED THE SAME BY SUBMITTI NG THAT ALL THESE ENTITIES ARE THEMSELVES CELLULAR OPERATORS AND SERVICE PROVIDERS AND IN TERMS OF THE AGREEMENT BETWEEN THES E SERVICE PROVIDERS AND FRANCHISEES, THE HON'BLE COURTS HELD THAT THE MARGIN PROVIDED IS IN THE NATURE OF COMMISSION. THE SE CASES ARE NOT APPLICABLE IN THE PRESENT CASE SINCE T HE ASSESSEE IS NOT A SERVICE PROVIDER, AS HE PURCHASED RECHARGE COUPONS FROM THE SERVICE PROVIDER I.E. BSNL AND NOT PROVIDE S ANY SERVICE TO THE SUBSCRIBERS. THE ASSESSEE SIMPLY SEL LS ITA NO NO.1298/CHD/2016 A.Y. 2009-10 16 RECHARGES TO THE SUB-DISTRIBUTORS, WHICH IS ON PRINC IPAL TO PRINCIPAL BASIS AND THERE IS NO RELATIONSHIP OFF PRIN CIPAL AND AGENT. FURTHER, THERE IS NO WRITTEN AGREEMENT WITH THE SUB- DISTRIBUTORS. THE SALE BILLS ARE ISSUED TO THE SUB-DIST RIBUTORS AND COPIES WERE PRODUCED BEFORE THE AUTHORITIES BELOW. THE BOOKS OF ACCOUNT ARE AUDITED AND TRANSACTIONS HAS BEEN SHOWN AS SALE AND PURCHASE. NONE OF THE CONDITIONS REFERRED TO IN SECTION 194H TO EXPLANATION (I) IS FULFILLED. BUT EQUAL MARGIN EARNED/PROFIT EARNED AS COMMISSION I.E. THE SUB-DISTR IBUTOR IS NOT RECEIVING THE PAYMENT ON BEHALF OF THE ASSESSEE BUT ON HIS OWN AND HE IS NOT ACCOUNTABLE TO THE ASSESSEE. ON CE THE ASSESSEE HAS SOLD THE SIM CARDS OR RECHARGE COUPONS , THE ASSESSEE HAS NO CONTROL OR LIABILITY TOWARDS THE SUB - DISTRIBUTORS. A COPY OF THE BILLS FILED BEFORE THE AUTHORITIES BELOW ISSUED BY THE BSNL SHOW THAT BSNL HAS ALLOWED T HE DISCOUNT IN SOME CASES AND ALLOWED COMMISSION IN OT HER CASES. THE RELATIONSHIP WITH BSNL IS DIFFERENT FROM THE RELATIONSHIPS OF SUB-FRANCHISEE AND IS ON PRINCIPAL TO PRINCIPAL BASIS BECAUSE THE ASSESSEE HAS NO CONTROL OVER THE S UB FRANCHISEES WHATSOEVER. THE SUB FRANCHISEES ARE FROM TO SELL SIM CARDS AND TOP UPS TO ANY CUSTOMER AT ANY PRICE AND ONCE THESE ARE SOLD THE ASSESSEE LOSES ITS CONTROL OVER THE SAME. THE AUTHORITIES BELOW HAVE NOT APPRECIATED THAT SUB-FRAN CHISEES THEMSELVES ARE SHOWING PURCHASE AND SALE, WHICH HAS N OT BEEN QUESTIONED OR OBJECTED TO BY THE DEPARTMENT IN THEI R CASES, WHETHER THE ASSESSEE HAS PAID THE COMMISSION, THE A SSESSEE HAS DULY DEDUCTED TAX AT SOURCE, WHICH IS NOT DISPU TED. THE RELIANCE HAS BEEN PLACED BY THE ID. COUNSEL FOR THE A SSESSEE ON THE CASES MENTIONED HEREINABOVE. ON PERUSAL OF T HE SAME AND THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AND ALSO CASES RELIED UPON BY THE AO AND THE LD. CIT(A), HA VING BEEN DISTINGUISHED AND THE DEPARTMENT HAVING ACCEPT ED PURCHASE AND SALE DURING THE PRECEDING YEAR 2007-08 AND LOOKING TO THE DOCTRINE OF CONSISTENCY AND IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. VS. CIT REPORTED IN 266 ITR 99, WE F IND THAT THE ASSESSEE IS A TRADER' AND RELATIONSHIP IS T HAT OF THE PRINCIPAL TO PRINCIPAL AND THE AUTHORITIES BELOW AR E NOT JUSTIFIED TO HOLD RELATIONSHIP OF PRINCIPAL AND THAT OF AN AGE NT. ACCORDINGLY, THE ASSESSEE IS NOT LIABLE FOR THE PROVIS IONS OF SECTION 201(1) & 201(1 A) OF THE ACT. THUS, THE ORDE R OF THE LD. CIT(A) AND THAT OF THE A.O. IS REVERSED AND ALL THE GRO UNDS OF THE ASSESSEE ARE ALLOWED. 13. IN ALL THE ABOVE CASES, WE FIND THAT THE I.T.A. T. ON EXAMINATION OF THE FACTS OF THE CASE FOUND THAT WHE N RECHARGE COUPONS AND PRE-PAID SIM CARDS WERE SOLD T O THE RETAILERS/SHOPKEEPERS BY THE ASSESSEE, THE ASSESSEE LOST COMPLETE CONTROL OVER THE GOODS AND THE RETAILERS H AD FULL FREEDOM TO SELL THE GOODS AT THE PRICE THEY DEEMED FIT WITHIN ITA NO NO.1298/CHD/2016 A.Y. 2009-10 17 THE MAXIMUM LIMITS SET BY THE BSNL. IT WAS FOUND T HAT THE THERE WAS NO ORAL OR WRITTEN AGREEMENT, STIPULATING THAT THE ASSESSEE RETAINED THE CONTROL OVER THE GOODS SOLD T O THE RETAILERS/SHOPKEEPERS. IT WAS ALSO FOUND THAT THE E NTIRE SALE WAS MADE IN CASH AND THE INCENTIVE GIVEN WAS SHOWN AS DISCOUNT IN THE BILL ISSUED AND NO PAYMENT OF ANY COMMISSION WAS MADE. ON CONSIDERATION OF THESE FACT S, THE I.T.A.T. HELD THAT THE RELATIONSHIP BETWEEN THE ASS ESSEE AND THE RETAILERS WAS ON PRINCIPAL TO PRINCIPAL BASIS A ND THE INCENTIVE, THEREFORE, GIVEN TO THE RETAILERS WAS HE LD NOT TO BE IN THE NATURE OF COMMISSION ATTRACTING TDS U/S 1 94H OF THE ACT. 14. THE FACTS IN THE PRESENT CASE, WE FIND ARE IDE NTICAL TO THAT IN VARIOUS CASES REFERRED TO ABOVE BY THE ASSE SSEE .THE ASSESSEE IN THE PRESENT CASE WE FIND HAS ENTERED I NTO AN AGREEMENT WITH BSNL TO ACT AS ITS FRANCHISEE FOR M ARKETING AND SELLING OF BSNL TELECOM SERVICES. THE SAME IS C LEARLY EVIDENT FROM THE COPY OF AGREEMENT PLACED AT PAPER BOOK PAGE NO.6-18. AS PER CLAUSE 1.8 & 5 OF THE AGREEMEN T DEALING WITH AGENT/SALES EXECUTIVE/SALES FORCE AND THE SCOPE OF MARKETING AND DISTRIBUTION RESPECTIVELY, T HE ASSESSEE WAS TO ENTITLE TO DISCHARGE ITS FUNCTION O F INCREASING THE MARKET BASE OF BSNL BY APPOINTING SU B FRANCHISEES FOR BOOKING NEW CONNECTIONS AND RETAILE RS FOR SELLING BSNL PRODUCTS. THE RELEVANT CLAUSE READ AS UNDER: 1.8 AGENT/SALES EXECUTIVE/SALES FORCE: IN THE INTEREST OF INCREASING THE CUSTOMER BASE, THE FRANCHISEE CAN APPOINT SUB FRANCHISES RETAILER SOLELY FOR THE PURPOSE OF BOOKING NEW ITA NO NO.1298/CHD/2016 A.Y. 2009-10 18 BSNL CONNECTIONS AND RETAILERS FOR SELLING BSNL PRODUCTS AND SERVICE CARDS. 5. SCOPE OF MARKETING & DISTRIBUTION: THE FRANCHISEE SHALL PROVIDE BSNL SERVICES TO WALK-IN-CUSTOMERS. IT SHALL ALSO ESTABLISH, THROUGH ITS SALES-FORCE, DIRECT CONTACT WITH PROSPECTIVE CUSTOMERS AND REGISTER AS MANY NEW BSNL CUSTOMERS AS POSSIBLE SUBJECT TO A MINIMUM NUMBER FIXED BY BSNL. FRANCHISEE SHALL ALSO DISTRIBUTE ALL TYPES OF AUTHORIZED TELECOM SERVICES FOR MARKETING TO ITS FRANCHISEE AND CASH CARD (PREPAID) TO ITS RETAILERS. 15. THUS CLEARLY ALL THE FUNCTIONS OF THE ASSESSEE OF MARKETING THE TELECOM PRODUCTS OF BSNL WAS TO BE D ONE BY THE ASSESSEE THROUGH SUB FRANCHISEES AND RETAILERS ONLY AND NOT BY APPOINTING ANY AGENTS. FURTHER THERE IS NO ORAL OR WRITTEN AGREEMENT WITH THE RETAILERS BY VIRTUE OF W HICH THE ASSESSEE COULD BE SAID TO BE EXERCISING ANY CONTROL OVER THE GOODS SOLD TO THE RETAILERS. MOREOVER ENTIRE SALES TO THE RETAILERS HAVE BEEN MADE IN CASH AND THE INCENTIVE GIVEN TO THEM HAVE BEEN SHOWN AS DISCOUNT IN THE BILLS RAISE D ,COPIES OF WHICH WERE PLACED BEFORE US ALSO AT P.B1 24- 135.CLEARLY ONCE THE PRODUCTS HAVE BEEN SOLD FOR CA SH TO THE RETAILERS THE ASSESSEE LOSES ALL CONTROL OVER T HE PRODUCTS. FURTHER ONLY DISCOUNT HAS BEEN PASSED ON TO THE RETAILERS AND NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW ANY PAYMENT MADE BY THE ASSESSEE TO THE RETAILERS B Y WAY OF INCENTIVE. CLEARLY THE FACTS IN THE PRESENT CASE AR E IDENTICAL TO THAT CITED ABOVE OF THE COORDINATE BENCHES OF TH E I.T.A.T., AND THE ISSUE THEREFORE IS SQUARELY COVER ED BY THE AFORESAID DECISIONS. THE TRANSACTION BETWEEN THE AS SESSEE AND ITS RETAILERS CAN SAFELY BE HELD TO BE ON PRINC IPAL TO PRINCIPAL BASIS. THE INCENTIVE, THEREFORE, PAID BY THE ITA NO NO.1298/CHD/2016 A.Y. 2009-10 19 ASSESSEE TO THE RETAILERS/SHOPKEEPERS DOES NOT QUAL IFY AS COMMISSION FOR THE PURPOSE OF TDS U/S 194H OF THE A CT. 16. IN VIEW OF THE ABOVE, GROUND NO.1 OF THE APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 17. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS UN DER: 2. THAT SHE WAS FURTHER NOT JUSTIFIED TO ARBITRARIL Y UPHOLD THE DISALLOWANCE OF RS. 6,50,131/- MADE BY THE LD. AO ON ACCOUNT OF CASH INCENTIVES PAID TO THE DEALERS AND RETAILERS. 18. THE ADDITION BEING CHALLENGED IN THE PRESENT GR OUND RELATES TO CLAIM OF THE ASSESSEE OF INCENTIVE HAVIN G BEEN PAID TO SMALL RETAILERS, WHICH WAS DISALLOWED BY TH E AO FOR THE LACK OF EVIDENCE THAT THE ASSESSEE HAD MADE PAY MENTS TO THE RETAILER. 19. BRIEFLY STATED THE A.O. IN THE ASSESSMENT ORDER NOTED THAT THE ASSESSEE HAD PAID RS.8,80,619/- AS INCENTI VE TO THE PARTIES. THE A.O. CONDUCTED DETAILED ENQUIRY F ROM THE DEALERS AND RETAILERS ENGAGED WITH THE ASSESSEE WHO STATED THAT ONLY 3% COMMISSION HAD BEEN RECEIVED, BUT NO DISCOUNT AND INCENTIVE WAS RECEIVED. WHEN THE A.O. CONFRONTED THE SAME TO THE ASSESSEE THE ASESSEE EXP LAINED THAT THAT THE INCENTIVE HAD BEEN OFFERED ON SIM CAR DS ONLY. IT WAS BECAUSE OF THE FACT THAT THE SIM CARDS WERE SOLD MORE TALK TIME WOULD BE REQUIRED, THEREFORE, THE EM PHASIS WAS TO SELL SIM CARDS AT HIGHER PRICE FROM BSNL AND SELLING PRICE WAS MUCH LESS. THE DIFFERENCE WAS OFFERED AS INCENTIVES TO PARTIES. FURTHER, THE ASSESSEE SUBMIT TED CONFIRMATION CERTIFICATES FROM ELEVEN PARTIES OUT O F WHICH ITA NO NO.1298/CHD/2016 A.Y. 2009-10 20 THREE PARTIES STATEMENT WAS RECORDED BY THE INSPECT OR OF WHICH TWO PERSONS I.E. SH. SUNIL SHARMA PROP. M/S B ESAR PAN HOUSE AND SH. AJAY KASYAP PROP. M/S KASYAP DIGI TAL WORLD HAD USED THE SAME LANGUAGE AS, 'I HEREBY CERT IFY THAT I HAVE PURCHASE BSNL SIM CARDS, RECHARGE VOUCHERS & EASY RECHARGE FROM ANIL DHAWAN IN THE YEAR 2008-09 FOR S ALE PURPOSE. I FURTHER CLARIFY REGARDING EARLIER STATEM ENT GIVEN THAT I DID NOT KNOW THE FACT THAT COMMISSION RECEIV ED ON SIM CARDS WAS NAMED AS INCENTIVE AND COMMISSION REC EIVED IN LAST TWO MONTHS OF THAT FINANCIAL YEAR WAS NAMED AS DISCOUNT'. IN REMAINING NINE CASES, ALL PARTIES HAD USED SAME LANGUAGE THAT THEY HAD PURCHASED SIM CARD, REC HARGE VOUCHERS AND EASY RECHARGE FROM ANIL DHAWAN IN THE YEAR 2008-09. THE FONT, LANGUAGE AND PAGE SETUP IN ALL C ASE WERE FOUND SIMILAR. FURTHER THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS WHO HAD SUPPLIED THE SELF MADE CERTIFICATE FOR VERIFICATION. ON 28.12.2011 THE ASS ESSEE PRODUCED SH. SUNIL SHARMA PROP. BESAR PAN HOUSE WHO IN HIS STATEMENT RECORDED ACCEPTED THAT HE WAS NOT AWA RE OF DIFFERENCE BETWEEN COMMISSION AND DISCOUNT. HE FURT HER ACCEPTED THAT HE HAD PURCHASE SIM AND RECEIVED INCE NTIVE OF RS. 15-20 IN PER SIM DURING THE YEAR 2008-09 FRO M SH. ANIL DHAWAN BUT THAT HE HAD NEVER MAINTAINED BOOKS OF ACCOUNT SO IT SKIPPED FROM MIND DURING HIS 1 ST STATEMENT. THE AO THEREAFTER ACCEPTED PART OF THE TRANSACTION AMOUNTING TO RS. 2,30,488/- MADE THROUGH BANK AND DOCUMENTARY EVIDENCE OF WHICH WAS SUPPLIED BY THE ASSESSEE. HOWEVER, THE REMAINING CASES, IN WHICH AS PER THE ITA NO NO.1298/CHD/2016 A.Y. 2009-10 21 ASSESSEE'S SUBMISSION HE HAD MADE TRANSACTION AND P AID INCENTIVE TO THE RESPECTIVE PARTIES IN CASH AMOUNTI NG TO RS. 6,50,131/-, THE SAME WERE NOT ACCEPTED SINCE THE AS SESSEE HAD FAILED TO SUPPLY/ JUSTIFY BY ANY MEANS OF EVIDE NCE THAT THE ASSESSEE HAD MADE PAYMENT OF INCENTIVE TO THE RESPECTIVE SMALL RETAILERS, WHO HAD CLEARLY ADMITTE D THAT THEY HAD RECEIVED NO INCENTIVE DURING THE PERIOD FR OM 01.04.2008 TO 31.03.2009 FROM THE ASSESSEE EXCEPT COMMISSION. HENCE, THE REMAINING AMOUNT OF INCENTIV E RS. 6,50,131/- WHERE CASH TRANSACTION WAS MADE, AS CLAI MED BY ASSESSEE, WAS DISALLOWED. THE SAME WAS UPHELD BY THE LD. CIT(A)HOLDING THAT T HE DETAILED ENQUIRY CONDUCTED BY THE AO ESTABLISHED TH AT NO INCENTIVE HAD BEEN PAID BY THE ASSESSEE TO RETAILER TO THE TUNE OF RS. 6,50,131/- AND THEREFORE THE ADDITION M ADE IN THIS REGARD WAS JUSTIFIED. 20. DURING THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ADDITION MADE W AS NOT JUSTIFIED SINCE IDENTICAL INCENTIVE PAID TO THE RET AILER FROM WHOM PAYMENTS FOR PURCHASE OF SIM CARD HAD BEEN REC EIVED BY WAY OF CHEQUES AND WHICH WERE ALLOWED TO SELL S IM CARD AT HIGHER PRICE AND THEREBY RETAIN THE SURPLUS AS I NCENTIVE WAS NOT DOUBTED. HAVING ACCEPTED THE MODUS OPERANDI OF THE TRANSACTION IN THE CASE OF SUCH RETAILERS THERE WAS NO REASON FOR THE AO TO HAVE DOUBTED IDENTICAL TRANSAC TION IN THE CASE OF THOSE RETAILERS WITH WHICH TRANSACTION HAD BEEM UNDERTAKEN IN CASH ESPECIALLY WHEN THOSE RETAILERS HAD ITA NO NO.1298/CHD/2016 A.Y. 2009-10 22 LATER ON CONFIRMED THAT THEY DID RECEIVE INCENTIVE FROM THE ASSESSEE. 21. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE R OF THE LD. CIT(A). 22. WE HAVE HEARD THE CONTENTION OF BOTH THE PARTIE S WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. UNDENIABLY THE ASSESSEE HAD EXPLAINED THE MANNER OF GIVING INCENTIVE TO THE SMALL RETAILERS. THE SAID MANNER OF PASSING ON INCENTIVE HAS NOT BEEN DOUBTED BY THE AO IN THE CASE OF SIMILAR RETAILERS WHO HAD MADE PA YMENT BY WAY OF CHEQUES, SINCE THE AO HAD DULY VERIFIED T HE MANNER OF PASSING THE INCENTIVE. HAVING ACCEPTED TH E MODE AND MANNER OF TRANSFERRING INCENTIVE WE FIND THERE WAS NO REASON TO DOUBT THE MANNER OF PASSING THE INCENTIVE TO THOSE RETAILERS ALSO WHO HAD MADE PAYMENT IN CASH CONSIDERING THE FACT THAT THE SAID RETAILERS HAD CO NFIRMED RECEIVING INCENTIVE FROM THE ASSESSEE ON ACCOUNT OF SALE OF SIM CARD MADE TO THEM AND HAD CLARIFIED ALSO IN THE IR STATEMENT THAT THEY HAD MISUNDERSTOOD THE QUESTION POSED TO THEM EARLIER AND HAD THEREFORE WRONGLY STATED TH AT THEY HAD RECEIVED ONLY COMMISSION @3% WHICH INFACT WAS T HE INCENTIVE RECEIVED BY THEM AND THAT THEY HAD NO KNO WLEDGE OF DIFFERENCE BETWEEN THE TWO BEING SMALL TIME OPER ATORS. THERE WAS NO MERIT IN THE CONTENTION OF THE DEPARTM ENT THAT THE CERTIFICATE CONFIRMING THE RECEIPT OF INCENTIVE NOW FURNISHED BY THESE RETAILERS WERE NOT AUTHENTIC, SI NCE THEY WERE IN A STANDARD FORMAT, IN THE SAME FONT, SINCE THESE FACTORS MAY LEAD TO A DOUBT THAT THE STATEMENTS / ITA NO NO.1298/CHD/2016 A.Y. 2009-10 23 CONFIRMATION WERE FABRICATED BUT DO NOT CONCLUSIVEL Y ESTABLISH THE SAME. FOR THE AFORESAID REASONS WE HO LD THAT THE GENUINENESS OF THE INCENTIVE PAID TO THE SMALL RETAILERS IN CASH WAS DULY ESTABLISHED AND THEREFORE DELETION OF ADDITION MADE ON ACCOUNT OF SAME TO THE TUNE OF RS. 6,50,131/-. 23. GROUND NO.2 RAISED BY THE ASSESSEE IS THEREFORE ALLOWED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17/07/2018 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR