Idea Cellular Ltd, Hyd, Hyderabad V. ACIT, TDS Circle, Ward-1(1), Hyd, Hyderabad

ITA 1445/HYD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6486 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 29-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Recovery proceedings; Non-deduction of tax
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 1445 & 1446/HYD/2015 ASSESSMENT YEARS: 2014-15 & 2015-16 IDEA CELLULAR LTD., HYDERABAD. PAN AACB 2100P VS. ASST. COMMISSIONER OF INCOME-TAX, TDS CIRCLE, WARD - 1(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RONAK G. DOSHI REVENUE BY : SHRI P. CHANDRASEKHAR DATE OF HEARING : 19-06-2018 DATE OF PRONOUNCEMENT : 20-07-2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TA X(A) - 8, HYDERABAD, BOTH, DATED 30/10/2015 FOR AY 2014-15 A ND 2015-16. AS THE ISSUE IS IDENTICAL IN BOTH THE APPEALS, THEY WE RE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PA SSED FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY THE FACTS OF THE CASE, AS TAKEN FROM AY 2014-15 ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING CELLULAR MOBILE TELEPHONE SERVICES TO ITS CUSTOMERS IN ANDHRA PRADESH & TELENGANA THROUGH A NETWORK OF DISTRIBUTORS. IN O RDER TO VERIFY COMPLIANCE TO THE PROVISIONS RELATING TO TAX DEDUCT ION AT SOURCE, A SURVEY U/S 133A WAS CONDUCTED IN THE CASE ON 16/02/ 2015. SUBSEQUENTLY, PROCEEDINGS U/S 201(1) AND 201(1A) OF THE ACT, WERE INITIATED BY ISSUING A NOTICE ON 23/02/2015. IN RE SPONSE, THE 2 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. ASSESSEE FURNISHED THE INFORMATION CALLED FOR. ON V ERIFICATION OF THE INFORMATION PROVIDED, AO NOTICED THAT THE ASSESSEE WAS NOT DEDUCTING TAX AT SOURCE IN THE CASE OF COMMISSION PAYMENTS OF RS. 77,27,80,277/- MADE TO ITS DISTRIBUTORS ON PREPAID CONNECTIONS, DURING FY 2013-14. SINCE THE ASSESSEE WAS NOT DEDUCTING TA X AT SOURCE ON THE COMMISSION PAYMENTS TO AGENTS ON PREPAID SIM CA RDS AND RECHARGE COUPONS, SOLD THROUGH AGENTS, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 23/02/2015 TO SHOW CAUSE AS TO WHY DEMAND U/S 201(1) AND 201(1A) SHOULD NOT BE RAISED FOR NON DEDUCTION OF TDS U/S 194H ON THE ABOVE MENTIONED EX PENDITURE. 2.1 IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE AG REEMENT WITH THE DISTRIBUTORS IS ON PRINCIPAL TO PRINCIPAL BASIS AND THAT THE DISTRIBUTORS PAY DISCOUNTED PRICE IN ADVANCE AND NO THING IS PAID BY THE ASSESSEE TO THE DISTRIBUTORS SO AS TO ATTRACT T HE PROVISIONS OF SECTION 194H. 2.2 THE AO FOLLOWING THE EARLIER ORDER IN ASSSSEES OWN CASE FOR AY 2009-10, HELD THAT THERE IS A PRINCIPAL TO AGENT RE LATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE DISTRIBUTORS, THE MARG IN EARNED BY THE DISTRIBUTORS ON SIM CARDS AND OTHER SERVICES ARE IN THE NATURE OF COMMISSION AND, THEREFORE, THE ASSESSEE IS LIABLE T O DEDUCT TAX AT SOURCE U/S 194H OF THE ACT AND AS THE ASSESSEE HAD NOT COMPLIED WITH THE PROVISIONS, TREATED IT AS AN ASSESSEE IN D EFAULT AS PER THE PROVISIONS OF SECTION 201(1) AND IS CONSEQUENTLY LI ABLE TO PAY INTEREST U/S 201(1A) OF THE ACT. ACCORDINGLY, HE COMPUTED TH E TDS PAYABLE U/S 201(1) @ 10% ON THE COMMISSION PAYMENT OF RS. 77,27 ,80,277/- U/S 194H AT RS. 7,72,78,028/- AND INTEREST U/S 201(1A) THEREON FROM APRIL, 2013 TO MARCH, 2015 @ 1% RS. 1,42,12,714/-. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) UPHELD THE ACTION OF THE AO. 3 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING FIVE GROUNDS OF APPEAL, WHICH REL ATE TO TDS ON DISCOUNT/ COMMISSION OF RS. 7,72,78,028/- U/S 201(1 ) AND INTEREST U/S 201(1A) OF RS. 1,42,12,714/-. 5. BEFORE US, THE LD. AR OF THE ASSESSEE FILED WRIT TEN SUBMISSIONS, WHICH ARE AS UNDER: AS REGARDS GROUND NO. I: TREATING ASSESSEE AS 'ASSESSEE IN DEFAULT' FOR NON-DEDUCTION OF TAX DEDUCTED AT SOURCE '(TDS)' UNDER SECTION '(U/S.)' 201 READ WITH SECTION '(R.W.S.)' 194H OF THE ACT WITHOUT ASCERTAINING AND PROVING THE FACT AS TO WHETHER RECIPIENT OF INCOME HAS PAID TAXES ON ALLEGED INCOME RECEIVED/ RECEIVABLE FROM ASSESSEE AS REQUIRED U/S. 191 OF THE ACT: SUBMISSIONS: 1. THE TDS OFFICER ERRED IN TREATING THE ASSESSEE A S AN 'ASSESSEE-IN-DEFAULT' U/S. 201 R.W.S. 19H OF THE AC T WITHOUT ASCERTAINING AND PROVING THAT THE RECIPIENT HAD NOT PAID TAX ON THE ALLEGED INCOME RECEIVED/RECEIVABLE FROM THE ASS ESSEE AS REQUIRED U/S. 191 OF THE ACT. 2. ON THE PLAIN READING OF SECTION 201 RWS 191 OF T HE ACT, UNLESS AND UNTIL THE INCOME-TAX DEPARTMENT HAS FOUN D THAT, THE RECIPIENT OF THE INCOME I.E., THE PRE-PAID DISTRIBU TORS ('THE DISTRIBUTORS') HAVE NOT DISCHARGED THE TAX LIABILIT Y, THE ASSESSEE CANNOT BE TREATED AS AN 'ASSESSEE-IN-DEFAULT' U/S. 201 RWS 194H OF THE ACT. IN THIS REGARD, THE ASSESSEE WOULD LIKE TO PLACE RE LIANCE ON: JAGRAN PRAKASHAN LTD. VS. DCIT (345 ITR 288)(ALLA HABAD HC) ICICI BANK LTD. V. DCIT(TDS) (156 TTJ 569) (LUCKN OW TRIB.) RAMAKRISHNA VEDANTA MATH VS. INCOME-TAX OFFICER ( 24 TAXMANN.COM 29)(KOL.) AS REGARDS GROUND II & III: TREATING THE ASSESSEE AS AN 'ASSESSEE IN DEFAULT' U/S. 201 OF THE ACT FOR NON-DEDUCTION OF TAX U/S. 194H OF THE ACT ON DISCOUNT ALLOWED TO THE PRE-PAID DISTRIBUTORS ('THE DISTRIBUTORS') IN RESPECT OF SUPPLY OF SIM CARD/RECHARGE VOUCHERS (SIM/RV): 4 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. FACTS IN BRIEF: THE ASSESSEE IS A TELECOM SERVICE PROVIDER ENGAGE D IN PROVIDING SERVICES IN ANDHRA PRADESH. IN THE COURSE OF ITS BUSINESS, IT APPOINTS VARIOUS DISTRIBUTORS. THE ASSESSEE IS ADMITTEDLY PAYING SERVICE TAX ON THE TELECOMMUNICATIONS SERVICES PROVIDED TO THE ULTIMAT E SUBSCRIBER. THE ASSESSEE SUPPLIES PREPAID CARDS I.E. SUBSCRIB ER IDENTIFICATION MODULE AND RECHARGE VOUCHERS ('SIM / RV') TO ITS DISTRIBUTORS AT A DISCOUNTED PRICE. THE DISTRIBUTOR S ARE FREE TO RESUPPLY THEM TO THE RETAILERS AT ANY PRICE SUBJECT TO THE MAXIMUM RETAIL PRICE ('MRP'). IT IS THE DISTRIBUTOR WHO PAYS THE DISCOUNTED PRI CE TO THE ASSESSEE AND THERE IS NO PAYMENT OF ANY KIND MADE B Y THE ASSESSEE TO THE DISTRIBUTOR FOR THE ABOVE TRANSACTI ON. THE DISTRIBUTORS ARE REQUIRED TO PAY THE ASSESSEE , THE DISCOUNTED PRICE OF THE PRODUCTS PURCHASED BY THEM IN ADVANCE IRRESPECTIVE OF THE FACT THAT WHETHER SUCH PRODUCTS PURCHASED ARE IN TUM SOLD OR ARE REMAINED UNSOLD. FOR THE A.YS 2004-05 TO 2009-10, THE HON'BLE JURI SDICTIONAL HYDERABAD TRIBUNAL, VIDE IT'S ORDER DATED MAY 23, 2 014 [(66 SOT 184 (THYD URO)], HAS, FOLLOWING THE ORDER OF TH E HON'BLE DELHI HIGH COURT IN ASSESSEE'S OWN CASE (325 ITR 14 8) AND HON'BLE JURISIDCTIONAL ANDHRA PRADESH HIGH COURT'S ORDER IN THE CASE OF VODAFONE ESSAR SOUTH LTD. (ITA 291/2013), H ELD THE DISCOUNT ALLOWED TO PREPAID DISTRIBUTORS TO BE IN T HE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H AND A CCORDINGLY ASSESSEE TO BE AS ASSESSEE-IN-DEFAULT FOR NON-DEDUC TION OF TAX AT SOURCE U/S 201(1) R.W.S 194H OF THE ACT. AGAINST THE SAID ORDER OF THE HON'BLE HYDERABAD TRIBUNAL, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE HON'BLE ANDHRA PRADE SH HIGH COURT. THE HON'BLE HIGH COURT HAS ADMITTED THE APPE AL AGAINST THE SAID ORDER OF THE HON'BLE HYDERABAD TRIBUNAL. F OR THE SAKE OF REFERENCE EVIDENCING THE ADMISSION OF APPEAL BY THE HON'BLE ANDHRA PRADESH HIGH COURT, APPEAL STATUS AVAILABLE FROM THE WEBSITE OF THE HIGH COURT IS ATTACHED AT ANNEXURE-A . ASSESSEES SUBMISSIONS: AT THE OUTSET, THE ASSESSEE MOST HUMBLY ADMITS THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HON'BL E JURISDICTIONAL ANDHRA PRADESH HIGH COURT. NEVERTHEL ESS, THE 5 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. ASSESSEE MOST HUMBLY SUBMITS THAT EVEN AFTER THE 'A GAINST' DECISIONS OF DELHI, KERALA AND CALCUTTA HIGH COURTS ON THE SAID ISSUE, THE HON'BLE KAMATAKA HIGH COURT, AFTER DEALI NG WITH ALL THE AFORESAID DECISIONS, HAS DECIDED THE ISSUE IN F AVOUR OF THE BUNCH OF ASSESSEES IN TELECOM SECTOR. RECENTLY, EVE N THE HON'BLE RAJASTHAN HIGH COURT HAS ALSO DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE IN RESPECT OF IT'S RAJASTHAN CIRCLE. IN VIEW OF THE FOREGOING DEVELOPMENTS, THE ASSESSEE MOST HUMBLY SUMMARISES IT'S CONTENTIONS AS UNDER: THE ASSESSEE'S CONTENTION THAT NO TAX IS DEDUCTIBLE UNDER SECTION 194H OF THE ACT ON DISCOUNT ALLOWED TO PRE- PAID DISTRIBUTORS IS BASED ON TWO SEPARATE AND DISTINCT PROPOSITIONS: I. THE ASSESSEE AND THE DISTRIBUTORS ARE ACTING ON PRINCIPAL TO PRINCIPAL ('P2P') BASIS AND NOT AS PRINCIPAL TO AGE NT ('P2A') AND; II. WITHOUT PREJUDICE TO THE ABOVE & ASSUMING WITHO UT ADMITTING THAT RELATIONSHIP IS P2A, IN THE INSTANT CASE, AS T HE PAYMENT IS MADE BY THE DISTRIBUTOR AND THERE IS NOTHING EVER P AYABLE BY THE ASSESSEE TO THE DISTRIBUTOR OR ANYONE ELSE IN R ESPECT OF THE SIM / RV, THE MECHANISM FOR DEDUCTING TAX U/S. 194H OF THE ACT FAILS AND THUS THE ASSESSEE CANNOT BE TREATED AS 'A SSESSEE-IN- DEFAULT' U/S. 201 OF THE ACT. PROPOSITION 1: THE ASSESSEE AND THE DISTRIBUTORS AR E ACTING ON PRINCIPAL TO PRINCIPAL ('P2P') BASIS AND NOT AS PRI NCIPAL TO AGENT ('P2A') FOR ATTRACTING PROVISIONS OF SECTION OF 194H OF THE ACT IT IS ESSENTIAL THAT ASSESSEE MUST APPOINT A PERSON WHO W OULD ACT ON HIS BEHALF IN THE COURSE OF RENDERING SERVICES T O THIRD PARTIES AND ONLY THEN IT CAN BE SAID THAT THERE EXIST P2A R ELATIONSHIP. IN THE PRESENT CASE THE ARRANGEMENT BETWEEN THE ASSESS EE AND DISTRIBUTORS IS NOT IN THE NATURE OF P2A BUT P2P. I N THIS CONTEXT, ATTENTION IS INVITED TO THE FOLLOWING: (I) THE DISTRIBUTOR IS NOT ACTING AS AN AGENT OF TH E ASSESSEE BUT AS AN INDEPENDENT CONTRACTING PARTY. (REFER CLAUSE 2 OF THE AGREEMENT AT PAGE NO. 7 OF THE FACTUAL PAPER BOOK ( 'FPB')), WHICH SPECIFICALLY STATES THAT THE AGREEMENT BETWEE N THE ASSESSEE AND THE DISTRIBUTOR IS ON A P2P BASIS I.E. , THE DISTRIBUTOR, IS NOT AN AGENT OF THE ASSESSEE. (II) THE AGENT HAS TO PAY OVER TO THE PRINCIPAL ALL SUMS RECEIVED BY HIM FROM THIRD PARTIES (AFTER MAKING THE SPECIFI ED RETENTION) TO THE PRINCIPAL. (SECTION 218 OF THE INDIAN CONTRA CT ACT). THE 6 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. DISTRIBUTOR DOES NOT HAVE TO PAY OVER TO THE ASSESS EE ANY AMOUNT REALISED BY HIM FROM THE RETAILER HE HAVING ALREADY PAID PURCHASE PRICE UPFRONT. (REFER CLAUSE 4 OF THE AGRE EMENT AT PAGE NO.8 OF THE FPB). WHATEVER, HE MAY COLLECT FRO M THE RETAILER, IS COLLECTED AT HIS OWN PROPERTY AND NOT ON ACCOUNT OF THE ASSESSEE PRINCIPAL. THE ASSESSEE IS NOT CONCERN ED WITH THE PROFIT / LOSS WHICH THE DISTRIBUTOR MAKES, THE FINA NCIAL TRANSACTION WITH THE ASSESSEE BEING CONCLUDED WHEN THE DISTRIBUTOR PAYS THE PRICE TO THE ASSESSEE. (III) IN A PRINCIPAL AGENCY RELATIONSHIP, AN AGENT NEVER TAKES CREDIT RISK OR OTHER RISKS AND ALL RISKS ARE BORN B Y THE PRINCIPAL WHEREAS IN THE ASSESSEE'S CASE THE DISTRIBUTOR BEAR S THE CREDIT RISK IN CASES WHERE CREDIT IS EXTENDED BY THE DISTR IBUTOR TO AUTHORISED RETAILERS OR END USER. (REFER CLAUSE 6(Q ) OF THE AGREEMENT AT PAGE NO. 13 OF THE FPB) (IV)IN A PRINCIPAL AGENCY RELATIONSHIP, THE PRINCIP AL IS LIABLE TO COMPENSATE THE AGENT FOR ANY LOSS OR DAMAGE SUFFERE D IN DISCHARGING HIS FUNCTIONS AS AN AGENT (SEE SECTION 222, 223, AND 225 OF THE INDIAN CONTRACT ACT). HOWEVER, IN AS SESSEE'S CASE, IF THERE IS ANY LOSS DUE TO THEFT, NATURAL CA LAMITY, ETC., PER SE ASSESSEE IS NOT LIABLE TO RECOUP THE SAME. ONLY IN SOME CASES, ON PREPAID DISTRIBUTOR MAKING PAYMENT OF PRO CESSING FEES, THE ASSESSEE MAY REVALIDATE THE PRODUCTS. (RE FER CLAUSE 6.2 OF THE AGREEMENT AT PAGE NO. 14 OF THE FPB) (V) IN A PRINCIPAL AGENCY RELATIONSHIP, THE PRINCIP AL IS LIABLE TO TAKE BACK THE STOCK OF PRODUCTS NOT USED OR SOLD BY EXPIRY DATE. HOWEVER, IN THE PRESENT CASE IT IS AGREED THAT INAC TIVE SIM I RV BEYOND EXPIRY SHALL NOT BE RETURNED TO THE ASSESSEE BUT SHALL BE TREATED AS USED BY THE DISTRIBUTORS AT THE END O F THE EXPIRY PERIOD UNLESS THE SAME IS BROUGHT TO THE NOTICE OF THE ASSESSEE BY THE DISTRIBUTOR WITHIN THE EXPIRY PERIOD. (REFER CLAUSE 6.3.3 OF THE AGREEMENT AT PAGE NO. 15 OF THE FPB) (VI)ON TERMINATION UNDER THE PRINCIPAL AND AGENCY R ELATIONSHIP, THE PRINCIPAL IS LIABLE TO TAKE BACK THE UNSOLD STO CK WITHOUT PAYING ANYTHING TO THE AGENT SINCE THE STOCK WAS AL WAYS BELONGING TO PRINCIPAL. IN THE ASSESSEE'S CASE, ON THE DISTRIBUTOR RETURNING THE SIM / RV, THE ASSESSEE IS NOT RESPONSIBLE FOR ANY UNUSED OR UNSOLD STOCK LYING WI TH THE DISTRIBUTOR POST TERMINATION. (REFER CLAUSE 10(I) O F THE AGREEMENT AT PAGE NO.24 OF THE FPB) THUS, THE ABOVE CLAUSES READ WITH AGREEMENT WOULD P ROVE THAT THE RELATIONSHIP IS OF P2P AND RISK AND REWARDS ARE ALSO BEING TRANSFERRED TO DISTRIBUTOR. THE RISK OF STOCK REMAI NING UNSOLD, EXPIRED ETC. IS WITH DISTRIBUTOR. ALSO, IT WOULD DE MONSTRATE THAT THE DIFFERENCE BETWEEN PRICE PAID TO ASSESSEE AND S ELLING PRICE 7 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. TO RETAILER IS ON HIS OWN ACCOUNT AND NOT ON ACCOUN T OF ASSESSEE AND HENCE THE ASSESSEE IS NOT A 'PERSON RE SPONSIBLE FOR PAYING ANY INCOME'. IN FACT, A MERE PURCHASE FR OM ASSESSEE DOES NOT GENERATE INCOME AT THE STAGE OF PURCHASE, AT WHICH STAGE THE FINANCIAL TRANSACTION WITH ASSESSEE HAS A LREADY ENDED. PROPOSITION 2: WITHOUT PREJUDICE TO THE ABOVE & ASS UMING WITHOUT ADMITTING THAT RELATIONSHIP IS P2A, IN THE INSTANT CASE, AS THE PAYMENT IS MADE BY THE DISTRIBUTOR AND THERE IS NOTHING EVER PAYABLE BY THE ASSESSEE TO THE DISTRIBUTOR OR ANYONE ELSE IN RESPECT OF THE SIM / RV, THE MECHANISM FOR DEDUC TING TAX U/S. 194H OF THE ACT FAILS AND THUS THE ASSESSEE CANNOT BE TREATED AS 'ASSESSEE-IN-DEFAULT' U/S. 201 OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE IS NOT LIABLE IN LAW OR FACTUALLY TO MAKE ANY PAYMENT TO THE DISTRIBUTORS. INDEED, THE DISTRIBUTORSHIP AGREEMENT MAKES IT CLEAR T T THE AS SESSEE HAS TO PROVIDE TO THE DISTRIBUTOR SIM / RV FOR WHICH TH E DISTRIBUTORS HAVE TO PAY THE DISTRIBUTOR'S PRICE TO THE ASSESSEE IN ADVANCE, I.E., BEFORE THE ASSESSEE HANDS OVER THE SIM / RV T O THE DISTRIBUTOR. THE HANDING OVER OF SIM / RV, A PHYSIC AL ITEM REPRESENTING THE TALK TIME BY THE ASSESSEE IS IN RE TURN FOR THE PAYMENT MADE BY THE DISTRIBUTORS (REFER CLAUSE 4 OF AGREEMENT AT PAGE NO.8 OF THE FPB). IN VIEW OF THE ABOVE, THE CONDITION FOR ACTIVATING SECTION 194H OF THE ACT IS NOT FULFILLED . RESPONSIBILITY FOR PAYMENT MUST BE FOUND IN THE CONTRACT WITH THE DISTRIBUTORS. UNDER THE AGREEMENT, THE ASSESSEE IS NOT PAYING ANY AMOUNT TO THE DISTRIBUTORS. WITHOUT PREJUDICE TO THE ABOVE AND EVEN ASSUMING WH ILST DISPUTING THAT THE ASSESSEE IS RESPONSIBLE FOR MAKI NG ANY PAYMENT TO THE DISTRIBUTORS, THE DEPARTMENT HAS TO SHOW THAT THE DISTRIBUTORS HAVE RECEIVED A PAYMENT BY WAY OF COMMISSION OR BROKERAGE (WHICH WOULD INCLUDE ANY PAYMENT RECEI VED OR RECEIVABLE BY THE DISTRIBUTORS) WHILST ACTING ON BE HALF OF THE ASSESSEE. THE LIABILITY OF DEDUCTING TAX AT SOURCE U/S. 194H OF THE ACT CAN BE IMPOSED ONLY IF THE FOLLOWING CONDITIONS ARE CUM ULATIVELY COMPLIED WITH: THE PAYER SHOULD BE A 'PERSON RESPONSIBLE FOR PAY ING' SUCH INCOME TO THE PAYEE; 'INCOME SHOULD BE IN THE NATURE OF 'COMMISSION' O R 'BROKERAGE', AND PAYMENT SHOULD BE RECEIVED BY A PERSON ACTING O N BEHALF OF OTHER, IN THE COURSE OF RENDERING SERVICES TO THIRD PARTIES; 8 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. SUCH INCOME SHOULD BE 'PAID' OR 'CREDITED' BY THE PAYER IN FAVOUR OF THE PAYEE; THE TIME OF 'CREDIT' OR 'PAYME NT' SHOULD ALSO BE KNOWN, AND THE AMOUNT ON WHICH TAX IS DEDUCTIBLE SHOULD BE DETERMINABLE. AS STATED ABOVE, THE HON'BLE KARNATAKA HIGH COURT I N THE CASE OF BHARTI AIRTEL LIMITED VS. DCIT (2014) (372 ITR 3 3) (REFER PAGE NO. 39 TO 60 OF LPB) HAS GIVEN A FINDING THAT THE DISCOUNT ALLOWED TO PREPAID DISTRIBUTORS IS NOT LIABLE FOR T AX DEDUCTION AT SOURCE U/S 194H OF THE ACT. ALSO, THIS DECISION LAY S DOWN THE KEY INGREDIENTS FOR APPLICABILITY OF 194H OF THE AC T, NAMELY: WHO IS THE PERSON RESPONSIBLE FOR INCOME IN ABSENCE OF PAYMENT OR CREDIT, WHEN TDS TO BE D EDUCTED AND LASTLY ON WHAT AMOUNT TDS IS TO BE DEDUCTED ALBEIT AT THE COST OF REPETITION, THE ASSESSEE MOST HUMBLY SUBMITS THAT AS FAR AS JURISDICTIONAL PRECEDENCE IS CONCERNED, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F MIS VODAFONE ESSAR SOUTH LTD. (SUPRA) VIDE ORDER DATED JULY 17,2013 HAS UPHELD THE ORDER OF THE HON'BLE HYDERAB AD TRIBUNAL AND HELD THAT THE PROVISION OF SECTION 194 H IS APPLICABLE IN RESPECT AMOUNTS PAID TO THE AGENTS IN CONNECTION WITH SALE OF SIM CARDS AND OTHER SERVICES. HOWEVER, IN THE SECOND LAST PARA OF THE ABOVE HIGH COURT ORDER, IT HAS FOLLOWED THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V IDEA CELLULAR LTD. (325 ITR 145), HON'BLE KERALA HI GH COURT IN THE CASE OF VODAFONE ESSAR CELLULAR LTD V ACIT (332 ITR 255) AND HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BHAR TI CELLULAR V ACIT (244 CTR 185) AND HELD THAT THE AR HAD NOT DIS TINGUISHED THE ABOVE CASE LAWS IN SO FAR AS SIMILARITY OF FACT S AND METHOD OF ACCOUNTING WERE CONCERNED. FURTHER, THE HON'BLE JURISDICTIONAL TRIBUNAL IN ASSESSEE'S OWN CASE (SUP RA) FOR A Y 2004-05 TO 2009-10 HAS FOLLOWING THE ORDER OF THE H ON'BLE DELHI HIGH COURT IN ASSESSEE'S OWN CASE (SUPRA) HELD THE DISCOUNT ALLOWED TO PREPAID DISTRIBUTORS TO BE IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H AND A CCORDINGLY ASSESSEE TO BE AS ASSESSEE-IN-DEFAULT FOR NON DEDUC TION OF TAX AT SOURCE U/S 201(1) R.W.S 194H OF THE ACT. THE HON'BLE ANDHRA PRADESH HIGH COURT HAS DISMISSED APPEAL IN CASE OF VODAFONE ESSAR SOUTH LTD (ITA NO. 291 OF 2013) VIDE ORDER DATED JULY 17,2013 BY: FOLLOWING THE DECISION OF HON'BLE DELHI, KERELA A ND CALCUTTA HIGH COURTS. 9 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. RECORDING THAT BEFORE THE ITAT, THE AR DID NOT BR ING ANY ARGUMENTS TO DISTINGUISH THOSE CASES IN SO FAR AS S IMILARITY OF FACTS AND METHOD OF ACCOUNTING ARE CONCERNED. IN THIS REGARD THE ASSESSEE, MOST HUMBLY SUBMITS AS UNDER: HON'BLE DELHI HIGH COURT IN ASSESSEE'S DELHI CIRC LE CASE WAS RELATING TO AY 200304 AND 2004-05 WHEN ASSESSEE ACC OUNTED ON GROSS SALE PRICE. HON'BLE DELHI HIGH COURT DECIDED AGAINST THE ASSE SSE MAINLY ON THE BASIS THAT SERVICES CANNOT BE BOUGHT AND SOL D AND HENCE ANY INTERMEDIARY IS ALWAYS AN AGENT AND NOT A DISTR IBUTOR. HON'BLE KERELA AND CALCUTTA HIGH COURTS MAJORLY F OLLOWS DELHI HIGH COURT AND INDIRECTLY JURISDICTIONAL HIGH COURT ALSO FOLLOWS THOSE 3 HIGH COURTS. ASSESSEE SUBMITS THAT CERTAIN CLAUSES IN PRESENT AGREEMENT ARE DIFFERENT FROM DELHI CIRCLE. ASSESSEE SUBMITS THAT THE HON'BLE KAMATAKA HIGH C OURT WHICH WAS RENDERED POST ABOVE HIGH COURT DECISIONS, SPECIFICALLY REFERS TO DELHI, KERELA AND CALCUTTA H IGH COURTS AND STATES THAT 'SERVICES CAN BE BOUGHT AND SOLD'. LASTLY, IT ALSO CONSIDERS THE ACCOUNTING TREATMEN T AT PARA 11 . POST KAMATAKA HIGH COURT DECISION, HON'BLE RAJAST HAN HIGH COURT TAKES A VIEW IN FAVOUR OF ASSESSEE. THUS, ASSESSEE SUBMITS THAT RIGHT TO SERVICES CAN BE BOUGHT AND SOLD AND HENCE RELATIONSHIP CAN BE OFP2P. SECONDLY, CONSIDERING NET ACCOUNTING IN CAPTIONED YEARS AS DEMONSTRATED BY THE ASSESSEE AT PAGE NO 39 OF FACTU AL PAPER BOOK, EVEN AS PER PARA 11 OF ORDER OF HON'BLE KARNA TAKA HIGH COURT, IT BE HELD THAT THE ASSESSEE IS NOT LIABLE T O DEDUCT TDS. IN THE ASSESSEE'S OWN CASE FOR EARLIER YEAR UNLIK E IN THE CASE OF VODAFONE SOUTH LTD, APPEAL IS ADMITTED BY HON'BL E JURISDICTIONAL HIGH COURT. ) IN ANY EVENT, NEITHER IT AT NOR HON'BLE ANDHRA PR ADESH HIGH COURT HAS CONSIDERED THE ABSURDITY TO HOLD ASSESSEE AS 'ASSESSE-IN-DEFAULT' U/S 201 R.W.S 194H ON FACTS OF PRESENT CASE BY IMPORTING SECTION 206C IN 194H. IF VIEW OF DEPAR TMENT IS ACCEPTED THEN IT MEANS THAT WHEN COLLECTING PRICE F ROM DISTRIBUTOR OF SAY RS 80/-, ASSESSEE OUGHT TO HAVE COLLECTED RS 10 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. 80/- + RS 2(I.E. 10% ON DIFFERENCE BETWEEN MRP OF R S 100/- AND DISTRIBUTOR PRICE OF RS 80/-) THEREBY IMPORTING SECTION 206C( A TCS MECHANISM IS TDS PROVISION.) THEREFORE ASSESSEE HUMBLY SUBMITS THAT WITH UTMOST RESPECT TO HON'BLE ANDHRA PRADESH HIGH COURT, IN VIEW OF ABOVE FACTS ON ACCOUNTING AND ABOVE SUBMISSIONS, A DIFFERENT VIEW MAY BE TAKEN. IN SO FAR AS RECENT DECISION OF HON'BLE HYDERABAD I TAT IN VODAFONE MOBILE SERVICES VS. DCIT (86 TAXMANN 115) IS CONCERNED, IT APPEARS THAT MAIN THRUST OF ARGUMENT IN THAT CA SE WAS THAT HON'BLE KARNATAKA HIGH COURT BEING SUBSEQUENT DECIS ION BE CONSIDERED. SINCE HON'BLE ANDHRA PRADESH HIGH COURT GRANTED STA Y, A DIFFERENT VIEW MAY BE UNDERTAKEN. ASSESSEE HUMBLY SUBMITS THAT: IN PRESENT CASE ASSESSEE HAS CLEARLY DEMONSTRATED THAT IT'S ACCOUNTING TREATMENT IS DIFFERENT FROM VODAFONE ESS AR SOUTH LTD AND FALLS WITHIN PARA 11 OF ORDER OF KARNATAKA HIGH COURT. CERTAIN CLAUSES AS COMPARED TO HON'BLE DELHI HIGH COURT ARE DIFFERENT IN CURRENT YEAR. RESTRICTIONS PER SE CANNOT MAKE PRINCIPAL AS AGEN T. NEITHER IT AT IN VODAFONE ESSAR SOUTH LTD NOR HIG H COURT HAS CONSIDERED THE ARGUMENT ON SECTION 206C AS SUBMITTE D ABOVE. WITHOUT PREJUDICE TO THE ABOVE: AS REGARDS GROUND IV: TAX ON SAME INCOME CANNOT BE RECOVERED TWICE: 1. THE ASSESSEE HUMBLY SUBMITS THAT, AS THE RECIPIE NTS OF INCOME WOULD HAVE ALREADY ACCOUNTED AND DISCHARGED APPROPRIATE TAX LIABILITY ON THEIR INCOME, AND THE ACTION OF TREATING THE ASSESSEE AS 'ASSESSEE-IN-DEFAULT' U/S. 201(1) OF THE ACT AND RECOVERING THE AMOUNT OF TAXES WOULD TANTAM OUNT TO RECOVERING OF TAX TWICE IN RELATION TO THE SAME INC OME. 2. FOR THIS PROPOSITION, RELIANCE IS PLACED ON FOLL OWING DECISIONS: 11 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. A. HINDUSTAN COCA COLA BEVERAGE PVT. LTD. VS. CIT ( 293 ITR 226)(SC); B. BHARTI CELLULAR LIMITED VS. ACIT (200 TAXMAN 254 ) (CAL) C. VODAFONE ESSAR LIMITED VS. DY. CIT (45 SOT 82) ( T MUM) 3. IN THIS REGARDS, THE ASSESSEE SUBMITS THAT WHERE THE BASIC INFORMATION OF TAXES PAID BY THE RECIPIENT IS PROVI DED BY THE ASSESSEE, THEN THE ONUS, TO EXAMINE THE FACTS AND C ONFIRM WHETHER THE TAX HAS BEEN PAID BY THE RECIPIENTS OR NOT, FALLS ON THE ITO. IN THIS REGARDS, THE ASSESSEE HAS SUBMITTE D THE DECLARATIONS RECEIVED FROM THE DISTRIBUTORS (I.E. R ECIPIENT OF THE INCOME) WHICH CONTAINS THAT THE AMOUNT RECEIVED FRO M THE ASSESSEE HAS BEEN OFFERED FOR TAX IN THEIR RETURN O F INCOME, DETAILS OF THE JURISDICTION UNDER WHICH THEY ARE AS SESSED, ADDRESS FOR COMMUNICATION AND THEIR PAN. IN VIEW OF THE ABOVE, THE ASSESSEE REQUEST YOUR HON OUR TO DIRECT THE LEARNED TDS OFFICER TO CONSIDER THE DECL ARATIONS SUBMITTED BY THE ASSESSEE AND RECALCULATE THE DEMAN D U/S. 201(1) OF THE ACT AND CONSEQUENTIALLY THE INTEREST U/S. 201(IA) OF THE ACT. WITHOUT PREJUDICE TO ABOVE AS REGARDS GROUND V: LEVY OF INTEREST U/S. 20L(IA) OF THE ACT: 1) IF IT IS HELD THAT THE ASSESSEE IS LIABLE TO DED UCT TDS U/S. 194H OF THE ACT, THE ASSESSEE HUMBLY SUBMIT THAT WH ERE THE RECIPIENT (I.E. THE DISTRIBUTORS) OF THE INCOME (I. E. DISCOUNT) HAD PAID INCOME-TAX ON THEIR INCOME BY WAY OF ADVANCE T AX OR / AND SELF ASSESSMENT TAX, THEN THERE WAS NO QUESTION OF LEVYING ANY INTEREST ON THE ASSESSEE AS THE AMOUNT WHICH WAS PA YABLE TO THE INCOME-TAX DEPARTMENT HAVE BEEN DULY PAID BY TH E DISTRIBUTORS. RELIANCE IS PLACED ON CIT VS. RISHIKE SH APARTMENTS CO-OPERATIVE HOUSING (253 ITR 310) (GUJ) , 2) FURTHER, THE ASSESSEE SUBMITS THAT, IN THE CASE OF RECIPIENTS OF TAXES WHO HAVE CLAIMED REFUND OF TAXES PAID BY T HEM OR WHO HAVE FILED LOSS RETURN OF INCOME, THERE IS NO JUSTI FICATION FOR CHARGING OF INTEREST U/S. 201(1A) OF THE ACT AS THE INTEREST IS TO COMPENSATE THE REVENUE FOR THE LOSS. IN THE ABOVE C ASE, THE QUESTION OF LATE DEPOSIT OF ADVANCE TAX / SELF-ASSE SSMENT TAX TO THE INCOME-TAX DEPARTMENT DOES NOT ARISE AND THEREF ORE, THERE IS NO QUESTION OF LEVYING OF INTEREST ON NON-PAYMEN T OF TDS. IN THIS CONTENTION, THE ASSESSEE RELIES ON THE FOLLOWI NG DECISIONS WHICH ARE AS UNDER: 12 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. CIT VS. RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LTD . (287 ITR 354) (RAJ); ITO VS. EMERALD CONSTRUCTION CO. (P.) LTD. (29 SO T 495) (JODH.) CIT V. DEWAN CHAND (178 TAXMAN 173) (DEL) (HC); RAMAKRISHNA VEDANTA MATH V S. INCOME-TAX OFFICER (24 TAXMANN.COM 29)(KOLKATA TRIBUNAL) MADHYA PRADESH MADHYA KSHETRA VIDYUT VITARAN CO. LTD. VS. ACIT (ITA. NO. 54 TO 56/ IND/2012) THEREFORE, THE ASSESSEE SUBMITS THAT NO INTEREST SH OULD BE CHARGEABLE ON THE ASSESSEE AS THE ASSESSEE IS NOT A N 'ASSESSEE IN DEFAULT' UNDER THE ACT. 6. BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A YS 2004-05 TO 2009-10 IN ITA NOS. 1083 TO 1088/HYD/2011, ORDER DA TED 23/05/2014. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. WE FIND THAT SIMILAR ISSUES CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WHEREIN THE COORDINATE BENCH HAS DISMISSED THE APPEAL OF THE AS SESSEE. RECENTLY, THE COORDINATE BENCH HAS PASSED JUDGMENT IN THE CASE OF M/S VODAFONE MOBILE SERVICES LTD. IN ITA NOS. 1189/ HYD/104 AND 1401 TO 1405/HYD/2015 AND OTHERS, ORDER DATED 29/09 /2017. THE FACTS IN THE ABOVE CASE ARE SIMILAR TO THE FACTS OF THE A SSESSEES CASE AND THE FINDINGS OF THE COORDINATE BENCH ARE REPRODUCED BELOW: 84. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED RECORD. IT IS NOT IN DISPUTE THAT HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF M/S. VODAFONE ESS AR SOUTH LTD (ITTA NO.291 OF 2013) FOLLOWED DECISIONS OF HON BLE DELHI HIGH COURT (325 ITR 147), HONBLE KERALA HIGH COURT (332 ITR 255) AND HONBLE CALCUTTA HIGH COURT (244 CTR 185) BY OBSERVING THAT FACTS OF THE CASE IN ALL THOSE REPOR TED JUDGMENTS ARE IDENTICAL TO THE CASE OF ASSESSEE AND THE ASSES SEE COULD NOT DISTINGUISH THE ABOVE CASES IN SO FAR AS THE SIMILA RITY OF THE FACTS AND METHOD OF ACCOUNTING ARE CONCERNED. IN O THERWORDS IT CAN BE CONSIDERED AS A DECISION RENDERED ON MERI TS. THE ISSUE AS TO WHETHER PAYMENT TO BE MADE BY THE ASSES SEE IS MANDATORY IN ORDER TO INVOKE PROVISIONS OF SECTION 194H, OR WHETHER SALE PRICE AT THE END OF DISTRIBUTOR IS ASC ERTAINABLE, 13 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. WAS ALREADY TAKEN INTO CONSIDERATION IN DETAILED JU DGMENTS RENDERED BY HONBLE DELHI HIGH COURT, KERALA HIGH C OURT AND CALCUTTA HIGH COURT. IT CANNOT BE SAID THAT THE DE CISION OF ANDHRA PRADESH HIGH COURT IS NOT ON MERITS. WHEN T HE FACTS ARE IDENTICAL THERE IS NO NEED FOR ANOTHER HIGH COU RT TO PASS A DETAILED ORDER. IN FACT HONBLE HIGH COURT OF ANDH RA PRADESH CATEGORICALLY OBSERVED THAT THERE IS NO ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY ITAT, HYDERABAD BENCH, WHICH IN TURN IS BASED UPON THE DECISIONS REFERRED TO ABOVE. 85. AS AGAINST THIS, HONBLE KARNATAKA HIGH COURT H AD TAKEN A DIAMETRICALLY OPPOSITE VIEW WITH REGARD TO NEED FOR PAYMENT TO BE MADE BY ASSESSEE TO DISTRIBUTOR AND THE FACT THA T COMPUTATION IS NOT POSSIBLE SINCE DISTRIBUTOR CAN S ELL AT ANY PRICE SUBJECT TO THE MAXIMUM LIMIT OF MRP. SINCE H ONBLE JURISDICTIONAL HIGH COURT HAD ALREADY RENDERED A DE CISION ON THESE POINTS, WE CANNOT RECONSIDER THE MATTER ON TH OSE ISSUES. SUFFICE TO SAY THAT ON THE AFOREMENTIONED ISSUES WE ARE BOUND BY THE DECISION OF HONBLE ANDHRA PRADESH HIGH COUR T. 86. IN FACT LD COUNSEL MAINLY FOCUSED ON ONE ISSUE I.E., ON THE ASPECT OF SALE OF SERVICE. ACCORDING TO LD C OUNSEL FOR THE ASSESSEE THIS ASPECT OF THE MATTER WAS NOT CONSIDER ED EITHER BY HONBLE ANDHRA PRADESH HIGH COURT OR OTHER HIGH COU RTS WHICH, IN TURN WERE REFERRED TO BY ANDHRA PRADESH HIGH COU RT. WE SHALL NOW, THEREFORE, REFER TO THE ORDER PASSED BY HONBLE DELHI HIGH COURT SINCE HONBLE ANDHRA PRADESH HIGH COURT HAS FOLLOWED THE SAID DECISION. IN THE CASE OF CIT VS. IDEA CELLULAR LTD (SUPRA) IT WAS OBSERVED THAT CONNECTIONS ARE PR OVIDED TO SUBSCRIBERS THROUGH DISTRIBUTORS, CALLED PRE-PAID MARKET ASSOCIATES, APPOINTED BY ASSESSEE AND SUCH PMAS AR E NOT ALLOWED TO REMOVE, OBSCURE OR DELETE ANY MARKS PLAC ED ON PREPAID SIM CARDS / RECHARGE COUPONS AND DISTRIBUTO RS ARE NOT ALLOWED TO SELL SIMILAR PRODUCTS OFFERED BY OTHER C OMPANIES, WHICH ARE IN THE SIMILAR LINE OF BUSINESS. ASSESSE E RESERVED ITS RIGHT TO TERMINATE THE AGREEMENT UNILATERALLY. IF THERE ARE NATURAL CALAMITIES OR CIRCUMSTANCES BEYOND THE CONT ROL OF EITHER PARTY BY WHICH SIM CARDS / RECHARGE COUPONS ARE DES TROYED, ASSESSEE AGREED TO REPLACE THE SIM CARDS / RECHARGE COUPONS. OTHER CLAUSES WERE ALSO TAKEN INTO CONSIDERATION AN D THE COURT OBSERVED THAT CELLULAR COMPANY HAS FULL LEGAL AND E QUITABLE TITLE IN RESPECT OF SIM CARDS / RECHARGE COUPONS DELIVERE D TO SUBSCRIBERS AND DISTRIBUTORS HAVE TO STORE THE SIM CARDS ETC., IN SUCH A WAY TO CLEARLY INDICATE AT ALL TIMES THAT PR E-PAID SIM CARDS / RECHARGE COUPONS ARE OWNED BY ASSESSEE. EV EN RETAILERS CANNOT BE APPOINTED WITHOUT PRIOR APPROVA L OF ASSESSEE. IN FACT NO SALES TAX WAS EVEN PAID ON TH E GROUND THAT THERE IS NO TRANSFER OF PROPERTY TO THE DISTRI BUTOR. IT WAS 14 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. ALWAYS TREATED AS SERVICE, FOR ACTING AS A LIVE LIN K BETWEEN SUBSCRIBER AND ASSESSEE. THEREFORE, THE RELATIONSH IP BETWEEN ASSESSEE AND DISTRIBUTOR CAN ONLY BE CONSIDERED AS A RELATIONSHIP OF PRINCIPAL TO AGENT. THE COURT FU RTHER OBSERVED THAT THE PRICING FREEDOM PERMITTING DISTRIBUTOR T O SELL AT ANY PRICE - WOULD NOT COME IN THE WAY OF DETERMINING TH E RELATIONSHIP BETWEEN ASSESSEE AND DISTRIBUTOR SO LO NG AS AGENT IS OBLIGED TO RENDER SERVICES FOR AND ON BEHALF OF ASSESSEE ON CERTAIN PARAMETERS AND IN THIS REGARD HONBLE DELHI HIGH COURT RELIED UPON A DECISION OF THE APEX COURT IN THE CAS E OF BHOPAL SUGAR INDUSTRIES LTD VS. STO (1977) [40 STC 42] (SC ). THE COURT ALSO TOOK NOTE OF THE FACT THAT LEGAL RELATIO NSHIP IS ESTABLISHED BETWEEN ASSESSEE AND THE ULTIMATE CONSU MER / SUBSCRIBER SINCE ACTIVATION OF SIM CARDS BY ASSESSE E IS IN THE NAME OF SUBSCRIBER / CONSUMER AND SERVICE IS PROVID ED TO THE SUBSCRIBER. MERELY BECAUSE ADVANCE PAYMENT IS RECE IVED FROM DISTRIBUTOR, IT DOES NOT AMOUNT TO SALE OF GOODS SINCE UNSOLD SIM CARDS CAN BE TAKEN BACK BY ASSESSEE UNDER CERTA IN CIRCUMSTANCES. THE COURT FURTHER OBSERVED THAT THI S IS ANTITHESIS OF SALE. THE COURT ALSO OBSERVED THAT A SERVICE CAN ONLY BE RENDERED AND IT CANNOT BE SOLD PARTICULARLY WHEN ASSESSEE-COMPANY IS OPERATING UNDER THE RIGHT OF LI CENCE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OF INDIA ; NOBODY ELSE CAN BE GIVEN THE RIGHT TO OPERATE AS CELLULAR SERVICE PROVIDER. IT WAS THUS CONCLUDED THAT THE ULTIMATE SERVICE IS PROVIDED BY ASSESSEE-COMPANY AND NOT BY DISTRIBUTOR . SIM CARD / OTHER MODULE IS ONLY IN THE NATURE OF A KEY TO TH E CONSUMER TO HAVE ACCESS TO THE TELEPHONE NETWORK. 87. BEFORE PARTING THE COURT ALSO TOOK NOTE OF THE FACT THAT CONCERNED DISTRIBUTOR CAN ALWAYS FILE RETURN OF INC OME AND CLAIM CREDIT FOR THE PAYMENTS ALREADY MADE ON THEIR BEHAL F BY THE ASSESSEE. ON THE OTHER HAND, SUCH A PROVISION SERV ES PUBLIC PURPOSE INASMUCH AS ANY DISTRIBUTOR WHO IS LIABLE T O PAY TAX BUT RATHER EVADING TAX, WOULD COME UNDER THE INCOME TAX NET AND ASSESSEE IS IN NO WAY AFFECTED BY THIS. 88. ANDHRA PRADESH HIGH COURT ALSO REFERRED TO D ECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF VODAFONE E SSAR CELLULAR LTD (SUPRA) WHEREIN COURT OBSERVED THAT TE RMINOLOGY USED BY THE ASSESSEE FOR RECEIVING THE AMOUNT PAYAB LE BY DISTRIBUTORS IS IMMATERIAL SINCE THE DISCOUNT GIVEN TO DISTRIBUTOR IS FOR THE SERVICES TO BE RENDERED TO ASSESSEE IN W HICH EVENT IT FALLS WITHIN THE DEFINITION OF COMMISSION U/S 194 H OF THE ACT. THE DISCOUNT IS NOTHING BUT A MARGIN GIVEN BY ASSES SEE TO DISTRIBUTOR AT THE TIME OF DELIVERY OF SIM CARDS / RECHARGE COUPONS. DISTRIBUTOR ACTS AS AN AGENT ON BEHALF OF ASSESSEE FOR 15 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. PROCURING AND RETAINING CUSTOMERS. THE COURT OBSER VED THAT ESSENCE OF CONTRACT BETWEEN ASSESSEE AND DISTRIBUTO R IS THAT OF SERVICE AND DISTRIBUTORS ARE ACTING AS AGENTS OF AS SESSEE- COMPANY. HERE ALSO THE COURT NOTICED THAT THE RELA TIONSHIP BETWEEN ASSESSEE AND DISTRIBUTOR IS NOT ON PRINCIP AL TO PRINCIPAL BASIS BECAUSE THE DISTRIBUTOR IS ONLY A MIDDLEMAN BETWEEN SERVICE PROVIDER AND ULTIMATE CONSUMER. TH E COURT FURTHER OBSERVED THAT THE ESSENCE OF A CONTRACT OF AGENCY IS THE AGENTS AUTHORITY TO COMMIT THE PRINCIPAL. ACCORDING TO THE COURT, DISTRIBUTOR COMMITS ASSESSEE TO SUBSC RIBERS TO WHOM ASSESSEE IS ACCOUNTABLE UNDER THE SERVICE CONT RACT WHICH IS THE SUBSCRIBER SINCE CONNECTION IS ARRANGED BY D ISTRIBUTOR ON BEHALF OF ASSESSEE. THEREFORE, IT WAS CONCLUDED TH AT THE TERMINOLOGY USED BY ASSESSEE FOR PAYMENT BY DISTRIB UTORS IS IMMATERIAL AND IN SUBSTANCE THE DISCOUNT GIVEN AT T HE TIME OF SALE OF SIM CARDS / RECHARGE COUPONS IS A PAYMENT R ECEIVED OR RECEIVABLE BY DISTRIBUTORS FOR THE SERVICES TO BE R ENDERED TO ASSESSEE AND IT FALLS WITHIN THE DEFINITION OF COM MISSION U/S 194H OF THE ACT. 89. THE COURT ALSO MENTIONED ABOUT THE SCHEME OF DE DUCTION OF TAX AT SOURCE AND OBSERVED THAT THE GRIEVANCE, I F ANY, AGAINST RECOVERY OF TAX BY ASSESSEE, SHOULD BE ON D ISTRIBUTORS AND NOT ON ASSESSEE / CELLULAR OPERATORS. 90. ON CAREFUL PERUSAL OF THE AFORECITED TWO JUDGME NTS, WHICH IN TURN WERE FOLLOWED BY HONBLE JURISDICTIONAL HIG H COURT, INDICATE THAT THE ESSENCE OF CONTRACT WAS TREATED A S A CONTRACT BETWEEN PRINCIPAL AND AGENT AND DISTRIBUTOR IN HI S CAPACITY AS AN AGENT MAY EXERCISE HIS AUTHORITY TO COMMIT THE P RINCIPAL TO RENDER SERVICES TO SUBSCRIBERS AND THIS IN ITSELF C ANNOT BE TERMED AS CONTRACT BETWEEN PRINCIPAL TO PRINCIPAL . IN OTHERWORDS THE ISSUE IS AS TO WHETHER THERE WAS A S ALE OF SERVICE OR NOT WAS IMPLIEDLY CONSIDERED BY HONBLE HIGH COURT OF KERALA WHICH IN TURN WAS FOLLOWED BY HONBLE AND HRA PRADESH HIGH COURT. THUS IT MAY BE DIFFICULT FOR US TO TAK E A DIFFERENT VIEW, MERELY BECAUSE HONBLE KARNATAKA HIGH COURT H AD TAKEN A DIFFERENT STAND UNDER IDENTICAL CIRCUMSTANCES. 91. AT THIS JUNCTURE, WE MAY STATE THAT IN THE CASE OF CIT VS. THANA ELECTRICITY SUPPLY LTD (SUPRA) HONBLE BOMBAY HIGH COURT OBSERVED THAT THE EXPRESSION TWO VIEWS SHOULD BE UNDERSTOOD IN THE SENSE THAT THE COURT, WHICH IS CALLED UPON T O CONSIDER THE ISSUE, SHOULD BE OF THE OPINION THAT THE OTHER VIEW IS REASONABLE. WITH DUE RESPECT WE ARE OF THE VIEW TH AT THE ONLY REASONABLE INTERPRETATION IS THAT OF THE VIEW TAKEN BY HONBLE ANDHRA PRADESH HIGH COURT BY FOLLOWING DECISIONS OF HONBLE 16 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. DELHI HIGH COURT, KERALA HIGH COURT AS WELL AS CALC UTTA HIGH COURT. IN OTHERWORDS, THE ISSUE AS TO WHETHER THE AGENTS RIGHT TO COMMIT ASSESSEE TO RENDER SERVICE TO SUBSCRIBERS WOULD CHANGE THE NATURE OF CONTRACT FROM PRINCIPAL TO AG ENT TO PRINCIPAL TO PRINCIPAL, WAS IMPLIEDLY CONSIDERED BY THE AFOREMENTIONED HIGH COURTS WHICH, IN OUR VIEW IS MO ST APPROPRIATE, IN THE CIRCUMSTANCES OF THE CASE. THE REFORE, WE PREFER TO FOLLOW THE DECISIONS OF HONBLE DELHI HIG H COURT, KERALA HIGH COURT AND CALCUTTA HIGH COURT. 92. LD COUNSEL FOR THE ASSESSEE REFERRED TO AN ORDE R PASSED BY SMC BENCH OF ITAT HYDERABAD IN THE CASE OF BHARA T SANCHAR NIGAM LTD (2015) [42 ITR (TRIB) 669]. ON CAREFUL P ERUSAL OF THE SAID ORDER IT INDICATES THAT THE DECISION IS ES SENTIALLY RENDERED IN THE LIGHT OF THE CIRCULAR ISSUED BY CBD T. IT IS WELL SETTLED THAT THE LANGUAGE USED BY THE TRIBUNAL, WHI LE DISPOSING OF THE MATTER, PARTICULARLY WHEN IT IS ESSENTIALLY BASED ON A CIRCULAR ISSUED BY CBDT, CANNOT BE EQUATED TO A LAN GUAGE USED IN A STATUTE. AT ANY RATE IN THE AFOREMENTIONED CA SE NONE APPEARED FOR THE ASSESSEE. LD DR HAD AGREED THAT I T IS COVERED BY THE CIRCULAR AS WELL AS THE LATEST DECISION OF H ONBLE KARNATAKA HIGH COURT AND THUS THERE WAS NO NEED FOR THE SINGLE MEMBER TO GO IN DEPTH AS TO THE NITTY-GRITTIES OF T HE CONTRACT AND THE ESSENTIAL DIFFERENCE BETWEEN THE DECISION R ENDERED BY HONBLE ANDHRA PRADESH HIGH COURT ON ONE HAND AND T HE VIEW TAKEN BY THE HONBLE KARNATAKA HIGH COURT ON THE OT HER HAND. 93. HOWEVER, WHILE GIVING A FINDING IN THE CASE ON HAND WE HAVE ALSO CAREFULLY GONE THROUGH THE DISTRIBUTORSHI P AGREEMENTS. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE DISTRIBUTOR HAS COMPLETE RIGHT AN D CONTROL OVER THE MATTER OF PROVIDING TALK-TIME TO ULTIMATE SUBSCRIBERS; DISTRIBUTOR CAN OF COURSE INSIST UPON ASSESSEE WHIL E MAKING A REQUEST TO PROVIDE TALK-TIME THROUGH E-MODULE ETC., BUT THE FINAL DECISION HAS TO BE TAKEN BY ASSESSEE, ONLY UP ON VERIFICATION OF CONSUMER DETAILS WHICH IN TURN HAS TO BE PROVIDED BY DISTRIBUTOR. ASSESSEE CAN TERMINATE TH E CONTRACT AT ANY TIME BY GIVING THIRTY DAYS TIME WITHOUT ASSIGNI NG ANY REASON AND DISTRIBUTOR HAS TO RETURN ALL EQUIPMENT AND FURNITURE SUPPLIED BY THE VESL UPON TERMINATION OF SUCH CONTR ACT. OTHER CONDITIONS SUCH AS MAINTAINING THE CONFIDENTIALITY AND LIMITATION OF ASSIGNING RIGHTS OR OBLIGATIONS TO THIRD PARTY B Y DISTRIBUTOR WOULD ALSO INDICATE THAT DISTRIBUTOR IS MERELY ACTI NG AS AN AGENT I.E., AS A CONNECTING LINK BETWEEN ASSESSEE AND ULT IMATE SUBSCRIBER. 17 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. 94. WE THEREFORE PREFER TO FOLLOW THE DECISION OF H ONBLE JURISDICTIONAL HIGH COURT BY HOLDING THAT THOUGH DI STRIBUTOR COMMITS ASSESSEE TO SUBSCRIBERS AND EXERCISE HIS AU THORITY TO ENSURE ARRANGING CONNECTION TO SUBSCRIBER, IT WILL NOT ALTER THE SITUATION SINCE THE OVERALL CONTEXT IN WHICH SUCH P OWER IS GIVEN TO DISTRIBUTOR HAS TO BE LOOKED INTO IN THE CIRCUMS TANCES OF THE CASE AND THE ROLE OF DISTRIBUTOR CAN ONLY BE SAID T O BE A MIDDLEMAN BETWEEN SERVICE PROVIDER ON ONE HAND (ASS ESSEE HEREIN) AND ULTIMATE CONSUMER ON THE OTHER HAND. I N OTHERWORDS THE DISTRIBUTOR CAN ONLY BE TERMED AS AN AGENT OF ASSESSEE IN WHICH EVENT PROVIDING SERVICE TO ULTIMA TE CONSUMER THROUGH THE MEDIUM OF DISTRIBUTOR CANNOT BE SAID TO BE A SALE OF SERVICE BY ASSESSEE TO THE DISTRIBUTOR. 95. NOW WE SHALL REFER TO THE OBSERVATIONS OF JURIS DICTIONAL HIGH COURT (ORDER DATED 25.08.2015) IN W.P. NOS. 24 56 AND BATCH OF 2015. IN THE AFOREMENTIONED CASE, THE COU RT WAS CONCERNED WITH GRANTING OF STAY AND THE VERY FACT T HAT IT HAS GRANTED PARTIAL STAY INDICATES THAT THE DECISION RE NDERED BY HONBLE KARNATAKA HIGH COURT WAS NOT FOLLOWED. IN OTHERWORDS THE OBSERVATIONS MADE THEREIN ARE ONLY IN THE CONTE XT OF CONSIDERING BALANCE OF CONVENIENCE WHILE GRANTING S TAY AND SUCH OBSERVATIONS NEED NOT BE CONSIDERED AS A DECIS ION DOUBTING THE CORRECTNESS OF THE JUDGMENT DELIVERED BY EARLIER BENCH OF HIGH COURT. IN FACT, EVEN IN THE AFORECIT ED JUDGMENT, IT WAS ADMITTED THAT THE EARLIER BENCH AFFIRMED THE ORDER OF THE TRIBUNAL BY FOLLOWING JUDGMENTS OF HONBLE DELHI HI GH COURT, KERALA HIGH COURT AND CALCUTTA HIGH COURT AND BECAU SE A SIMILAR ISSUE IS PENDING BEFORE HONBLE SUPREME COU RT, APART FROM THE FACT THAT THERE IS A FAVOURABLE DECISION O F HONBLE KARNATAKA HIGH COURT, HONBLE ANDHRA PRADESH HIGH C OURT THOUGHT FIT TO GRANT CONDITIONAL STAY. THEREFORE, OBSERVATIONS MADE BY ANDHRA PRADESH HIGH COURT IN W.P. NOS. 2456 AND OTHERS CANNOT BE TERMED AS AN ORDER DOUBTING THE CO RRECTNESS OF EARLIER JUDGMENT OF THE SAME HIGH COURT. 96. THE ITAT HYDERABAD BENCH IS BOUND TO FOLLOW THE ORDER PASSED HONBLE JURISDICTIONAL HIGH COURT ON MERITS RATHER THAN INTERPRETING / RECONSIDERING THE ISSUE BASED UPON C ERTAIN OBSERVATIONS MADE BY A LATER BENCH WHILE GRANTING P ARTIAL STAY. WE ALREADY NOTICED THAT EARLIER DECISIONS OF HONBL E DELHI HIGH COURT AND KERALA HIGH COURT ARE ON THE PREMISE THAT DISTRIBUTOR IS MERELY A LINK BETWEEN ASSESSEE AND ULTIMATE CONS UMER / SUBSCRIBER AND DISTRIBUTOR CAN AT BEST ENFORCE OBLI GATION ON THE PART OF ASSESSEE TO PROVIDE CONNECTION / TALK-TIME TO SUBSCRIBER WHICH ITSELF WOULD NOT CHANGE THE CHARACTERISTIC OF TRANSACTION FROM PRINCIPAL TO AGENT TO PRINCIPAL TO PRINCIPA L. WE THEREFORE 18 ITA NOS. 1445 & 1446/H/15 IDEA CELLULAR LTD. HOLD THAT THE ORDER PASSED BY ASSESSING OFFICER, AS CONFIRMED BY LD CIT (A), BY HOLDING THAT ASSESSEE IS A DEFAUL TER U/S 201(1) AND CONSEQUENTLY LIABLE TO PAY INTEREST U/S 201(1A) OF THE ACT, SUBJECT TO CERTAIN CONDITIONS AS PRESCRIBE D BY HONBLE SUPREME COURT (HINDUSTAN COCA COLA BEVERAGE P. LTD) , IS IN ACCORDANCE WITH LAW. AS THE GROUNDS AND FACTS IN THE AYS UNDER CONSIDERA TION ARE SIMILAR TO THE ABOVE CASES (SUPRA), FOLLOWING THE DECISION THEREIN, WE DISMISS GROUND NOS. 1 TO 4 AND GROUND NO. 5 IS REMITTED TO THE FILE OF THE AO FOR RECOMPUTATION OF INTEREST U/S 201(1A) OF THE AC T IN THE LIGHT OF THE ABOVE DECISION AND IS TREATED AS ALLOWED FOR STATIS TICAL PURPOSES. 8. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERAT ION ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 20 TH JULY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 20 TH JULY, 2018 KV COPY TO:- 1) IDEA CELLULAR LTD., D.N. 5-9-62, KHAN LATEEF KHA N ESTATE, 3 RD FLOOR, FATEH MAIDAN ROAD, HYDERABA. 2) ACIT, TDS CIRCLE WARD 1(1), 4 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 3) CIT(A) 8, HYDERABAD 4 CIT (TDS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE