Dutta Telecom Agency, Murshidabad V. JCIT, Range - Murshidabad, Murshidabad

ITA 1477/KOL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62107 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEBASISH ROY
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , !' !' !' !' /AND #! $'# #! $'# #! $'# #! $'# , ) [BEFORE SHRI PRAMOD KUMAR, AM & SHRI MAHAVIR SINGH, JM] '% '% '% '% / I.T.A NO. 1477/KOL/2011 $&' !() $&' !() $&' !() $&' !()/ // / ASSESSMENT YEAR : 2008-09 DUTTA TELECOM AGENCY VS. JOINT COMMISSIONER OF INCOME-TAX, (PAN: AAFFD 6936 M) RANGE-MURSHIDABAD (+, /APPELLANT ) (-+,/ RESPONDENT ) FOR THE APPELLANT: SHRI SANJAY BHATTACHARYA FOR THE RESPONDENT: SHRI DEBASISH ROY DATE OF HEARING: 21.03.2012 DATE OF PRONOUNCEMENT: 31.05.2012 . / ORDER PER MAHAVIR SINGH, JM ( #! $'# #! $'# #! $'# #! $'#, , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXVI, KOLKATA IN APPEAL NO.402/CIT(A)-XXXVI/KOL/R-2,MSD/10-11/317 DATED 05. 08.2011. ASSESSMENT WAS FRAMED BY JCIT, RANGE-MURSHIDABAD U/S. 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 31.12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE EXPE NSES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR VIOLATION OF PROVISION OF SECTION 194H OF THE ACT I./E. FOR NON-DEDUCTION OF TDS FROM THE COMMISSION PAID. FOR THIS, THE REV ENUE RAISED THE FOLLOWING GROUND GROUNDS OF APPEAL: 1) THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) WA S WRONG IN AGREEING WITH THE ASSESSING OFFICERS OBSERVATION THAT THE APPELLANT HAD ALLEGEDLY VIOLATED PROVISIONS OF SECTION 194H AND THUS HE ERRED IN CONFIRMING THE D ISALLOWANCE U/S 40(A)(IA). 2) THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO.1 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS WRONG IN S TATING IN HIS APPELLATE ORDER THAT THE APPELLANTS CLAIM THAT THE PAYMENTS TO THE SUB- AGENTS/RETAILERS HAD BEEN IN THE NATURE OF DISBURSEMENT OF EXPENSES AND THE APPELLANT HAD P AID THE SAME ON BEHALF OF VODAFONE, WERE ALLEGEDLY NOT BORNE BY THE FACTS. 3) THAT WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN GROUNDS NOS. I AND 2 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPR ECIATE THAT THE FACTS OF THE 2 ITA 1477/K/2011 DUTTA TELECOM AGENCY A.Y. 08-09 COURT/TRIBUNAL DECISIONS FOLLOWED BY THE ASSESSING OFFICER, HAD BEEN DISTINGUISHABLE FROM THE APPELLANTS CASE. 4) THAT WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN GROUNDS NOS. L ,2 AND 3 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS WRONG IN E NHANCING THE ASSESSMENT BY RS.156,253 BY WAY OF INCREASING THE SUM ALLEGEDLY D ISALLOWABLE U/S 40(A)(IA) FROM RS.31,77,505 TO RS.33,33,758. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT ASSESSEE IS AN AGENT OF VODAFONE ESSAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS EE DISCLOSED TOTAL TURNOVER AT RS.8,67,99,220/- AND DISCLOSED GROSS PROFIT AT RS.1 2,38,199/-. THE ASSESSEE ALSO DISCLOSED NET PROFIT AT RS.6,71,865/-. THE ASSESSING OFFICER DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS AFTER GOING THROUGH THE DETAILS FILED BY ASSESSEE N OTICED THAT IT HAS RECEIVED COMMISSION FROM VODAFONE ESSAR SOUTH LTD. AMOUNTING TO RS.31,77,505 /- AND ALSO TDS WAS DEDUCTED BY VODAFONE ESSAR SOUTH LTD. ON THIS ABOVE COMMISSION FOR AN AMOUNT OF RS.3,55,099/-. THE ASSESSING OFFICER AFTER GOING THROUGH THE SUBMISSIO NS OF THE ASSESSEE NOTED THAT IT HAD NOT DEDUCTED ANY TAX AT SOURCE FROM COMMISSION/DISCOUNT PAID TO RETAILERS ON SALE OF SIM CARDS. ACCORDING TO ASSESSING OFFICER, THIS COMMISSION IS LIABLE TO TDS U/S. 194H OF THE ACT AND, THEREFORE, FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASES OF ACIT V. BHARTI CELLULAR LTD. (2007) 294 ITR (AT) 283 (KOL), CIT V. IDEA CELLULAR LTD. (2010) 325 ITR 148 (DEL) AND VODAFONE ESSAR CELLULAR LTD. V. ACIT (TDS ) (2011) 332 ITR 255 (KER) DISALLOWED THE ENTIRE COMMISSION BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO C ONFIRMED THE ACTION OF ASSESSING OFFICER. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US IT WAS CLAIMED THAT THE BASIC FINDING OF THE ASSESSING OFFICER AS WELL AS CIT(A) IS WRONG QUA THE FACT THAT THE ASSESSEE HAS PAID COMMI SSION/DISCOUNT TO THE RETAILERS. ASSESSEES COUNSEL BEFORE US ADMITTED RECEIPT OF COMMISSION TO THE EXTENT OF RS.31,77,505/- ON WHICH TDS WAS DEDUCTED BY VODAFONE ESSAR SOUTH LTD. AT RS.3,5 5,099/- WHICH WAS CLAIMED BY ASSESSEE IN ITS RETURN OF INCOME. LD. COUNSEL FOR THE ASSESSEE STATED THAT IT IS COLLECTING INFORMATION FROM THE AMOUNTS PAYABLE TO RETAILERS HAS PREFERRED CLAI MS ON VODAFONE ESSAR SOUTH LIMITED BY DEBITING A CLAIM RECEIVABLE ACCOUNT, THE BALANCE OF WHICH HAS APPEARED IN THE BALANCE SHEET AND THE SAME IN ANY CASE, HAS NOT BEEN DEBITED TO THE P ROFIT & LOSS A/C. IN THE EXPENDITURE SIDE AS ALLEGED. ON RECEIPT OF PAYMENT FROM VODAFONE ESSAR SOUTH LIMITED, AGAINST THE AFORESAID CLAIM FROM TIME TO TIME, THE SAID AMOUNT HAS BEEN PASSED ON TO THE RETAILERS BY ADJUSTMENT OF THE 3 ITA 1477/K/2011 DUTTA TELECOM AGENCY A.Y. 08-09 CLAIM RECEIVABLE ACCOUNT AND NOT BY DEBITING OR CR EDITING THE PROFIT & LOSS A/C. THE BASIC PRESUMPTION OF THE ASSESSING OFFICER, BASED ON WHIC H HE HAS PROCEEDED WITH THE ASSESSMENT IS THEREFORE, ERRONEOUS AND IS NOT BORNE BY THE FACTS OF THE CASE AS STATED HEREIN BEFORE. LD. COUNSEL FURTHER ARGUED THAT THE BASIC TENET OF SECT ION 194H OF THE ACT IS THAT TAX AT SOURCE HAS TO BE DEDUCTED AT THE TIME OF CREDIT OF INCOME, WHICH WOULD NOT ARISE IN THE CASE OF THE ASSESSEE AS NO AMOUNT OF INCOME AROSE OUT OF THE PAYMENT AS THE SAME WERE NOT SHOWN AS EXPENDITURE IN THE BOOKS OF ACCOUNT OF THE APPELLANT. IN OTHER WOR DS, AMOUNTS RECEIVED FROM VODAFONE ESSAR SOUTH LIMITED RELATING TO THE RETAILERS, WERE PASSE D ON TO THEM AND THE ASSESSEE WAS MERELY AN INTERMEDIARY IN VIEW OF THE PRACTICAL DIFFICULTIES OF VODAFONE ESSAR SOUTH LIMITED TO DEAL WITH THE NUMEROUS RETAILERS FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE. THE ACTION TAKEN BY ASSESSING OFFICER IN INVOKING SECTION 194H OF THE A CT IS MISLEADING AND ERRONEOUS FROM THE POINT OF VIEW OF STATEMENT OF FACTS. IN FACT, THE A SSESSEE MADE PAYMENTS TO THE RETAILERS MAINLY ON ACCOUNT OF THE FOLLOWING: I) RUNNER CLAIM --- PAYMENTS TO SOME MESSENGERS II) SIM ACTIVATION SUPPLY CONTRACT III) VAN CLAIM PAYMENTS TO VAN DRIVERS IV) PSR SALARY ----- SALARY PAYMENT TO PILOT SALE S REPRESENTATIVES REIMBURSED SUBSEQUENTLY BY VODAFONE ESSAR SOUTH LIMITED. IT WAS THEREFORE, PLEADED THAT NONE OF THE GROUNDS ON WHICH PAYMENTS WERE MADE BY THE ASSESSEE AND ON WHICH PROVISION OF SECTION 194H OF THE ACT HAS BEEN INVOKED BY THE ASSESSING OFFICER FALLS WITHIN THE AMBIT OF ANY PAYMENT OF CO MMISSION OR BROKERAGE. THE CIT(A), ACCORDING TO LD. COUNSEL HAS ALSO WRONGLY CONFIRMED THE ISSUE. 5. ON THE OTHER HAND, LD. SR. DR RELIED ON THE FOLL OWING DECISIONS: (I) ACIT V. BHARTI CELLULAR LTD. (2007) 294 ITR (A T) 283 (KOL), (II) CIT V. IDEA CELLULAR LTD. (2010) 325 ITR 148 (DEL) (III) VODAFONE ESSAR CELLULAR LTD. V. ACIT (TDS) ( 2011) 332 ITR 255 (KER) 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ABOVE FACTS THAT THE ISSUE HAS NOW BEEN AGAINST THE ASSESSEE BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD . (2010) 325 ITR 148 (DEL.) AND ALSO BY HONBLE KERALA HIGH COURT IN THE CASE OF VODAFONE E SSAR CELLULAR LTD. VS. ACIT (TDS) (2011) 332 ITR 255 (KER). HONBLE KERALA HIGH COUR T HAS DEALT WITH THE ISSUE DISCUSSING THE SCHEME OF DEDUCTION OF TAX AT SOURCE UNDER THE ACT IS TO PRESS RECIPIENTS OF INCOME AND THEIR ACCOUNTABILITY TO THE DEPARTMENT FOR THE PAYMENT OF TAX ON VARIOUS TRANSACTIONS. IT WAS INTERPRETED THAT WHAT IS CLEAR FROM EXPLANATION (I) OF THE DEFINITION CLAUSE IN SECTION 194H OF THE 4 ITA 1477/K/2011 DUTTA TELECOM AGENCY A.Y. 08-09 ACT IS THAT COMMISSION OR BROKERAGE INCLUDES ANY PA YMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED. ACCORDING TO HONBLE KERALA HIGH COURT, THE TEST TO BE APPLIED T O FIND OUT WHETHER EXPLANATION (I) TO SECTION 194H OF THE ACT IS APPLICABLE OR NOT IS TO SEE WHET HER THE ASSESSEE HAS MADE PAYMENT AND IF SO, WHETHER IT IS FOR SERVICES RENDERED BY THE PAYEE TO THE ASSESSEE. HERE, IN THE PRESENT CASE BEFORE US, THE SERVICES RENDERED AND PAYMENTS RECEIVED AND AS CLAIMED BY ASSESSEE THAT THE SAME WERE PASSED ON, WERE ON ACCOUNT OF THE FOLLOWING: I) RUNNER CLAIM --- PAYMENTS TO SOME MESSENGERS II) SIM ACTIVATION SUPPLY CONTRACT III) VAN CLAIM PAYMENTS TO VAN DRIVERS IV) PSR SALARY ----- SALARY PAYMENT TO PILOT SALE S REPRESENTATIVES REIMBURSED SUBSEQUENTLY BY VODAFONE ESSAR SOUTH LIMITED. HERE, IN THE PRESENT CASE, THE SERVICES RENDERED I. E. THE BUYING AND SELLING OF GOODS IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET OR VALUABL E ARTICLE OR THING IS ESTABLISHED BECAUSE ADMITTED FACTS ARE THAT THE ASSESSEE WHILE COLLECTI NG THE INFORMATION OF THE AMOUNT PAYABLE TO THE RETAILER HAS PREFERRED CLAIM ON VODAFONE ESSAR SOUTH LTD. BY DEBITING A CLAIM OF RECEIVABLE ACCOUNTS AND THE BALANCE OF WHICH HAS APPEARED IN T HE BALANCE SHEET. THE CLAIM OF THE ASSESSEE THAT IT HAS NOT DEBITED THE EXPENDITURE TO THE P&L ACCOUNT WILL NOT MAKE THE ASSESSEES CLAIM THAT IT IS NOT LIABLE TO TDS IN AN Y WAY IN FAVOUR OF ASSESSEE. WE FIND THAT HONBLE DELHI HIGH COURT IN IDEA CELLULAR LTD. (SUP RA) HAS CONCLUDED THE ISSUE ON THE FOLLOWING GROUNDS: (1) IN THE JUDGMENT OF THE HON'BLE HIGH COURT OF K ERALA IN THE CASE OF BPL MOBILE CELLULAR LTD. V. STATE OF KERALA (W. P. NO. 29202 O F 2005) IT HAS BEEN HELD THAT IN THE SUPPLY AND DELIVERY OF SIM CARDS AND OTHER RECHARG E COUPONS, THERE IS NO SALE AND PURCHASE OF GOODS, BUT ONLY OF PROVIDING SERVICES ; (2) THE HON'BLE KERALA HIGH COURT IN THE CASE OF KE RALA STAMP VENDORS ASSOCIATION V. OFFICE OF THE ACCOUNTANT GENERAL [2006] 282 ITR 7 AN D M. S. HAMEED V. DIRECTOR OF STATE LOTTERIES [2001] 249 ITR 186 (KER) AND THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION V. UNI ON OF INDIA [2002] 257 ITR 202 HAVE TREATED THE SUBJECT TRANSACTIONS AS TRANSACTIO N OF PURCHASE AND SALE OF GOODS ; (3) THE ASSESSEE-COMPANY AS A SERVICE PROVIDER IS A LWAYS THE OWNER OF THE ABOVE PRODUCTS WHICH IS MEANT ONLY AS DEVICES TO HAVE AC CESS TO THE MOBILE PHONE NETWORK SYSTEM MAINTAINED AND OPERATED BY THE ASSESSEE-COM PANY ; (4) THE SERVICES PROVIDED BY THE ASSESSEE-COMPANY T HROUGH VARIOUS DISTRIBUTORS IS REGULATED BY LAW. CARRYING ON THE BUSINESS OF PRO VIDING SERVICE IS SUBJECT TO SO MANY STATUTORY COMPLIANCE REQUIREMENTS, LIKE VERIFICATIO N OF THE IDENTITY OF THE CONSUMER AND THE RELATED DOCUMENTATION, ETC. THE ASSESSEE-COMP ANY IS HAVING ALL LAWFUL OBLIGATIONS TO 5 ITA 1477/K/2011 DUTTA TELECOM AGENCY A.Y. 08-09 A PRE-PAID CONSUMER, EVEN THOUGH THE DIRECT DEAL IS BETWEEN THE DISTRIBUTOR AND THE CONSUMER. THIS IS BECAUSE THE DISTRIBUTOR DOES NO T HAVE ANYTHING TO PROVIDE 'AS SERVICE' TO THE CONSUMER. THESE ARE ALL FEATURES OF AGENCY RELATIONSHIP. (5) OTHER MATTERS EXPLAINED BY THE ASSESSEE AS, THE RE WAS NO PAYMENT BY THE ASSESSEE IN CASH OR CHEQUE BY WAY OF COMMISSION TO THE DISTRI BUTORS OR NOT CREDITING THE ACCOUNTS OF THE DISTRIBUTORS FOR ANY COMMISSION, DELIVERING T HE PRODUCTS ONLY AFTER GETTING THE PRICE IN FULL, ARE ALL MATTERS OF ASSESSEE'S INDOOR MAN AGEMENT. (6) SERVICE CANNOT BE SOLD OR PURCHASED AND IT CAN ONLY BE PROVIDED. THE OPERATIONAL FEATURES EXPLAINED BY THE ASSESSEE-COMPANY ARE NE CESSARY IN RUNNING A MAMMOTH SYSTEM OF PROVIDING MOBILE TELEPHONE SERVICES OVE R A LARGE GEOGRAPHICAL AREA. THE DISTRIBUTORS PROVIDE ESSENTIAL SERVICES TO THE AS SESSEE-COMPANY IN RUNNING SUCH A HUGE OPERATIONAL SYSTEM. THE DISTRIBUTORS ARE LINKING AG ENTS IN THE CHAIN OF DELIVERY OF SERVICES TO CONSUMERS. THEREFORE, THE RELATIONSHIP IS NOT OF A PRINCIPAL TO PRINCIPAL.' AS THE FACTS ARE IDENTICAL IN THE PRESENT CASE AND WHAT WAS BEFORE HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR LTD. (SUPRA) AND HONBLE KERALA HIGH COURT IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. AND PRINCIPLE LAID DOWN IN THES E TWO CASE LAWS, RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDERS OF THE LOWER AUTHORITIES AND THE APPEAL OF ASSESSEE IS DISMISSED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. 8. ORDER PRONOUNCED IN OPEN COURT ON 31.05.2012 SD/- SD/- , #! #! #! #! $'# $'# $'# $'# , (PRAMOD KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( / / / /) )) ) DATED : 31ST MAY, 2012 !01 $&23 $4! JD.(SR.P.S.) . 5 $$ 6(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT DUTTA TELECOM AGENCY, P.O. BAGDANGA, P .S. KANDI , DIST. MURSHIDABAD, PIN-742137 2 -+, / RESPONDENT, JCIT, RANGE-MURSHIDABAD. 3 . $.& ( )/ THE CIT(A), KOLKATA 4. $.& / CIT, KOLKATA 5 . !>$? $& / DR, KOLKATA BENCHES, KOLKATA - $/ TRUE COPY, .&/ BY ORDER, # '3 /ASSTT. REGISTRAR .