ITO, CHURU V. M/s. Gunjan Enterprises, CHURU

ITA 165/JODH/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7848 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 03-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Relationship of principal and agent
• Section: 43B; 143(3); 11

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JODHPUR BENCH: J ODHPUR ( BEFORE SHRI H ARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ) I.T.A. NO. 165 /JODH/201 2 (A.Y. 200 8 - 09 ) ITO, VS M/S. GUNJAN ENTERPRISES, WARD - 1, NEAR RAM MANDI R, CHURU. CHURU. PAN NO. AAFFG5560N (APPELLANT) (RESPONDENT) ASSESSEE BY : - SHRI SURESH OJHA. DEPARTMENT BY : - SHRI MAHESH KUMAR - D.R. DATE OF HEARING : 16 /0 9 /201 4 DATE OF PRONOUNCEMENT : 22 / 0 9 /2014 O R D E R P E R HA RI OM MARATHA, J.M. : THIS APPEAL OF THE REVENUE, FOR A.Y. 2008 - 09 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), DATED 06.01.2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS IN MOBILES, RECHARGE COUPONS ETC. FOR A.Y. 2008 - 09, IT FILED ITS RETURN OF INCOME (ROI) ON 29.09.2008, 2 DECLARING TOTAL INCOME OF RS. 1,36,760/ - . AS AGAINST THE DECLARED INCOME ASSESSMENT HAS BEEN COMPLETED U/S 143(3) ON 24.12.2010 AT A TOTAL INCOME OF RS. 75,98,406/ - . THE COMPUTATION OF INCOME HAS BEEN DONE BY THE A.O. AS UNDER : - RETURNED INCOME RS. 1,36,760/ - ADD: 1. ADDITION U/S 68, AS DISCUSSED RS. 4,95,000/ - 2. DISALLOWANCE OF INTEREST, AS DISCUSSED RS. 5,256/ - 3. ADDITION ON A/C OF EXCESS CLAIM OF REMUNERATION, AS DISCUSSED. RS. 17,500/ - 4. DISALLOWANCE OF BAD DEBTS, AS DISCUSSED. RS. 13,046/ - 5. DISALLOWANCE U/S 40(A)(IA), AS DISCUSSED RS. 65,21,044/ - 6. COMMISSION / SCHEME DISALLOWED, AS DISCUSSED RS. 4,09,800/ - T OTAL RS. 75,98,406/ - ROUNDED OFF RS. 75,98,410/ - 2.1 AGGRIEVED, THE ASSESSEE - F I RM PREFERRED APPEAL AND LD. CIT(A) HAS DELETED MOST OF THE ADDITIONS. THE REVENUE IS AGGRIEVED AND HAS CHALLENGED THE DEL ETION OF ADDITION OF RS. 65,21,044/ - MADE U/S 40(A)(IA) AND RESTRICTION OF ADDITION OF RS. 4,09,800/ - TO RS. 1 LAKH AGAINST OTHERS, BY RAISING THE FOLLOWING GROUNDS OF APPEAL : - (I) THE CIT(A) HAS PASSED A PERVERSE ORDER IN DELETING THE ADDITION OF R S.65,21,044/ - MADE UNDER SEC. 40(A)(IA) FOR NON - DEDUCTION OF TDS U/S 194H, BY RELYING ON THE ORDER IN CASE OF ONE 3 SH. SHRAWAN KUMAR AGARWAL FOR THE ASSESSMENT YEAR 2007 - 08, EVEN WHEN THE FACTS AND CIRCUMSTANCES WERE DIFFERENT. (II) THE CIT(A) HAS PASSED A PERVERSE ORDER BY OBSERVING THAT THE FACTS AND CIRCUMSTANCE OF THE ASSESSEE WERE SIMI L AR & IDENTICAL AS IN CASE OF SH. SHRAWAN KUMAR AGARWAL WITHOUT GIVING REASONS/DETAILS TO ARRIVE AT THIS CONCLUSION. (III) THE ORDER OF THE CIT(A) IS PERVERSE AND ER RONEOUS IN RESTRICTING THE DISALLOWANCE OF RS. 4,09,800/ - TO RS. 1 LAKH EVEN WHERE THE ENTIRE COMMISSION HAD BEEN PAID IN CASH EXCEEDING RS. 2500/ - . (IV) THE CIT(A) HAS ERRED IN DIRECTING THE AO TO RE - COMPUTE REMUNERATION TO PARTNERS ON THE BASIS OF ENH ANCED BOOK PROFITS, EVEN WHEN IT WAS NOT JUSTIFIED IN FACTS & CIRCUMSTANCES OF THE CASE. (V) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, WITHDRAW OR INSERT ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL . 2.2 WE HAV E HEARD RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE RECORD. 4 2.3 THE FACTS OF GROUNDS NO. (I) AND (II) OF THIS APPEAL ARE CLEARLY EXPLAINED BY THE FOLLOWING PORTION OF AOS ORDER WHICH HAS BEEN EXTRACTED IN THE APPELLATE ORDER AT PAGE 3 AND IN PARA 3.1 'I N COMPUTATION OF INCOME THE ASSESSEE CLAIMED TDS OF RS. 9,22,433/ - . ON EXAMINATION IF FOUND THAT DURING THE YEAR THE ASSESSEE RECEIVED COMMISSION OF RS. 85,70,044/ - FROM VODAFONE ESSAR DIGILINK LTD. AND OUT OF THIS COMMISSION, ON RS. 83,57,617 / - THE PAYEE COMPANY DEDUCTED TDS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194H OF THE I.T. ACT, 1961. IN SUPPORT OF THIS, THE ASSESSEE PRODUCED TDS CERTIFICATE ISSUED BY THE PAYEE COMPANY. THAT COMMISSION WAS PAID FOR ACTIVATING THE SIM BY RETAILERS O R ASSISTANT DISTRIBUTORS. THE DISCOUNT/SCHEME AND COMMISSION A/C OF THE ASSESSEE WAS CALLED FOR AND EXAMINED. AFTER EXAMINATION, THE FOLLOWING FACTS CAME INTO LIGHT. (I) THE ASSESSEE SINCE BEGINNING OF THE YEAR STARTED GIVING COMMISSION IN THE NAME OF RS. 85,70,044/ - FROM VODAFONE ESSAR DIGILINK LTD. AND OUT OF THIS COMMISSION, ON RS. 83,57,617/ - THE PAYEE COMPANY DEDUCTED TDS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194H OF THE I.T. ACT, 1961. IN SUPPORT OF THIS, THE ASSESSEE PRODUCED TDS CERTIFICATE I SSUED BY THE PAYEE COMPANY. THAT COMMISSION WAS PAID FOR ACTIVATING THE SIM BY RETAILERS OF ASSISTANT DISTRIBUTORS. THE DISCOUNT/SCHEME AND COMMISSION A/C OF THE ASSESSEE WAS CALLED FOR AND EXAMINED. AFTER EXAMINATION, THE FOLLOWING FACTS CAME INTO LIGHT. 5 (I) THE ASSESSEE SINCE BEGINNING OF THE YEAR STARTED GIVING COMMISSION IN THE NAME OF SCHEME' TO ITS CUSTOMERS FORM ITS OWN A/C WITHOUT RECEIVING THE AMOUNT FORM THE COMPANY. THE ASSESSEE HAS DISTRIBUTED AMOUNT OF RS. 19,29,822/ - UPTO 30.06.2007 AS AGAINST T HIS THE ASSESSEE HAS RECEIVED RS. 2,01,833/ - AS DISCOUNT FIRST TIME FROM COMPANY ON 05.06.2007. THEREAFTER, THE COMPANY STARTED GIVING HIM COMMISSION ONLY FROM 01.07.2007. HENCE THE CONTENTION OF THE ASSESSEE THAT HE IS TRANSFERRING THE COMMISSION RECEIVED FORM COMPANY IS NOT CORRECT. (II) UP TO THE YEAR END, AS PER BOOKS OF THE ASSESSEE AMOUNT EQUAL TO THIS COMMISSION CLAIMED BY ASSESSEE DISTRIBUTED TO ITS FOUR ASSISTANT DISTRIBUTORS AND RETAILERS IN THE SHAPE OF THE DISCOUNT/SCHEME. BUT ONLY IN THE CASE FOUR ASSISTANT DISTRIBUTORS IT FOUND DISTRIBUTED THROUGH BOOK ADJUSTMENT, IN REMAINING CASES, THE ASSESSEE PAID DISCOUNT/SCHEME IN CASH TO ITS CUSTOMERS WHICH ARE NOT FULLY SUBJECT MATTER OF VERIFICATION. ( I V ) THE ASSESSEE HAS NOT MADE TDS ON THE DISCOUNT/SCHEM E AMOUNT TRANSFERRED TO THE ASSISTANT DISTRIBUTORS AND RETAILERS. NEITHER TREATED THE COMMISSION RECEIVED AS PURCHASE NOT THE DISTRIBUTION OF COMMISSION AS SALE. ( V) THE ASSESSEE NEITHER CREDITED NOR DEBITED COMMISSION AMOUNT RECEIVED FROM COMPANY IN HIS T RADING AND P&L A/C. THE ASSESSEE IN ITS BOOKS OF A/C MAINTAINED A SEPARATE DISCOUNT ACCOUNT WHEREIN ALL THE CREDIT AND DEBIT ENTRIES ENTERED BY HIM 6 DURING THE YEAR AND AT THE YEAR END IT HAS SQUARED UP THIS A/C. ON EXAMINATION OF DISCOUNT A/C THE COMMISSIO N OF RS. 85,70,045/ - RECEIVED FROM VODAFONE ESSAR DIGILINK LTD IS FOUND TO BE DISTRIBUTED BY ASSESSEE TO ITS ASSISTANT DISTRIBUTORS AND RETAILERS IN THE FOLLOWING MANNER. IN THIS REGARD IT IS FOUND THAT THE NON DEDUCTION OF TAX ON COMMISSION DISTRIBUTED BY THE ASSESSEE IS A FAULT OF THE ASSESSEE U/S 40(A) (IA) OF THE I T. ACT, 1961. ACCORDINGLY A SHOW CAUSE ISSUED TO THE ASSESSEE ON 30.11.2010 SPECIFICALLY ASKING TO HIM THAT THE WHOLE AMOUNT OF COMMISSION EXPENSES CLAIMED BY HIM SHOULD NOT BE DISALLOWED. T HE CONTENTION OF THE ASS ESSEE IS NOT ACCEPTABLE IN THE L IGHT OF LAW AS PROVIDED IN SECTION 194H OF THE IT ACT 1961. THE ASSESSEE IS LIABLE TO DEDUCT TAX @ 10 % ON THE COMMISSION OR BROKERAGE PAID DURING THE YEAR EXCEEDING RS. 25,00/ - . FOR BETTER INTERPRETA TION THE SECTION 194H OF THE IT AC T, 1961 IS REPRODUCED HEREUNDER: COMMISSION OR BROKERAGE 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCO ME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE P A YEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY 7 ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME - TAX THEREON AT THE RATE OF [TEN] PER CENT: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION IN A CASE WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED TWO THOUSAND FIVE HUNDRED RUPEES : PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH COMMIS SION OR BROKERAGE IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME - TAX UNDER THIS SECTION:] PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION ON ANY COMMISSION OR BROKERAGE PAYABLE BY BHARAT SANCHAR NIGAM LIMITED OR MAHANAGAR TELEPHONE NIGAM LIMITED TO THEIR PUBLIC CALL OFFICE FRANCHISEES.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION , (I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR 8 SE RVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES; (II) THE EXPRESSION PROFESSIONAL SERVI CES MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA; (III) THE EXPRESSION SECURITIES SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF1956)91; (IV) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHER CA LLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY .] THE ASSESSEE MERE ON THE GROUND THAT HE WAS A MEDIATOR ON BEHALF OF COMPANY FOR DISTRIBUTING THE COMMISSION TO ITS ASSISTANT DISTRIBUTORS AND RETAILERS COULD NOT GET RID FROM HIS LEGAL LIABILITY. AS IT IS CLEARED FORM EXPLANATION (I) ABOVE THAT 9 COMMISS ION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OF RECEIVABLE, DIRECTLY OR INDIRECTLY NOT BEING SECURITIES. CONSIDERING THE FACTS IT IS H E LD THAT ASSESSEE WAS LIABLE TO DEDUCT TAX ON DISCOUNT/SCHEME PAID BY HIM TO RETAILERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194H OF THE ACT. IN CASE OF DEFECT/FAILURE OF ITS PART THE AMOUNT IS NOT DEDUCTIBLE AS EXPENDITURE BY VIRTUE OF SECTION 40(A) (IA) OF THE I.T. ACT, 1961. FOR BETTER INTERPRETATION SECTION 40 (A) (IA) IS REPRODUCED HEREUNDER: (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB - CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR C ARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C! PTER XV1I - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID , (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS Y EAR, ON OR BEFORE THE DUE DATE SPECIFIED IN SUB SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR:] [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN D EDUCTED 10 (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.] EXPLANATION. FOR THE PURPOSES OF THIS SUB - CLAUSE , (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB - SECTION (1) OF SECTION 9; (HI) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194 J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SEC TION 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) TO THE EXPLANATION TO SECTION 194 - 1; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB - SECTION (1) OF SECTION 9; 11 CONSIDERING THE ABOVE FACTS, COMMISSION OF RS. 43,75 ,556 / - PAID TO ASSISTANT DISTRIBUTORS AND COMMISSION OF RS. 21,45,488/ - PAID TO RETAILERS (OVER & ABOVE RS. 2,500/ - FOR THE FINANCIAL YEAR) WHICH COMES TO TOTAL OF RS. 65, 21, 044/ - IS TREATED AS AMOUNT NOT DEDUCTIBLE U/S 40(A) (IA) OF THE I. T. ACT, 1961 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 2.4 THE LD. CIT(A) HAS TAKEN THE DECISIONS ON THIS ISSUE BY OBSERVING AS UNDER: - 3.3. I HAVE DULY CONSIDERED THE RIVAL STANDS OF THE AO AND THE LD. AR, I.R.O., THE ABOVE ISSUES. THE FACTS OF THE CASE ARE T HAT THE ASSESSEE IS A DISTRIBUTOR OF VODAFONE ESSAR DIGILINK LTD. AND SELLING THE SIM AND RECHARGE COUPON TO THE CONSUMER WITH THE HELP OF ITS RETAILER AND ASSISTANT DISTRIBUTOR. THE ASSESSEE RECEIPTS COMMISSION/DISCOUNT FROM THE PRINCIPAL COMPANY, I.R.O., THE SALE OF THE ABOVE PRODUCTS AND ALSO PARTS WITH THE SAME TO ITS SUB DISTRIBUTORS, FOR SUBSEQUENT SALE MADE THROUGH THE ACTUAL USERS. THE CORE CONTROVERSY OF THE ISSUE UNDER CONSIDERATION IS THE NATURE OF THE PAYMENT MADE TO THE RETAILER/ASSISTANT DISTR IBUTORS BY THE AO; TOWARDS THE SALE OF THE PREPAID SIM CARD AND RECHARGE COUPON OF THE PRINCIPAL CELLULAR COMPANY I.E. VODAFONE ESSAR DIGILINK LTD. AS PER THE AOS UNDERSTANDING, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE UNDER CONSIDERATION, THE APPELLANT WAS LIABLE TO DEDUCT TDS U/S. 194H OF THE IT ACT, ON THE COMMISSION/DISCOUNT PAID TO ITS SUB AGENTS. ON THE OTHER HAND THE LD. AR SUBMITTED THAT THE NATURE OF TRANSACTION UNDER CONSIDERATION, IS NOT OF ANY SERVICE PROVIDING 12 CONTRACT BUT IT AMOUNT S TO AN ACTUAL PURCHASES AND SALES OF GOODS/PRODUCT I.E. SIM CARDS. HE ALSO ARGUED THAT FOR TERMING ANY PAYMENT AS COMMISSION/BROKERAGE, THERE MUST BE EXISTENCE OF RELATIONSHIP OF PRINCIPAL AND AGENT IN BETWEEN THE ASSESSEE AND THE PAYEE, AS SUCH. HE ALSO CONTENDED THAT THE RETAILER - CLIENTS OF THE APPELLANT ARE MAKING OUTRIGHT PURCHASE OF THE SIM CARDS/RECHARGING CARD COUPON ETC., THEREFORE, THE TRANSACTIONS OF SUCH NATURE ARE OF IN BETWEEN PRINCIPAL TO PRINCIPAL ONLY. IN THIS REGARD, HE ALSO SUBMITTED THAT UNLIKE HAVING AN AGREEMENT WITH M/S. VODAFONE ESSAR DIGILINK LTD., THERE IS NO SUCH WRITTEN AGREEMENT EXISTS IN BETWEEN THE ASSESSEE AND ITS RETAILER/SUB DISTRIBUTORS AND THE ASSESSEE WAS HAVING NO CONTROL OVER THE CONDUCT OF BUSINESS SUCH ENTITIES, THERE FORE, THERE IS NO PRINCIPAL AND AGENT RELATIONSHIP CAN BE ATTRIBUTED TO SUCH ARRANGEMENT. IN VIEW OF THE SAME, IT WAS PRAYED THAT NO LIABILITY OF DEDUCTION OF TDS U/S. 194H OF IT ACT WAS EXISTED TOWARDS THE REVENUE SHARING SCHEME, IN BETWEEN THE APPELLANT AND ITS RETAILER - CLIENTS, AS DISCUSSED ABOVE. 3.3.1 I HAD CONSIDERED THE TOTALITY OF THE FACTS AND LEGAL ASPECTS ATTACHED TO THE ISSUE UNDER CONSIDERATION. IN THIS REGARD, IT IS FOUND THAT MY PREDECESSOR, I.E. THEN CIT(A) - III , JAIPUR HAD OCC ASION TO DEALT - WITH AND DECIDED THE SIMILAR ISSUE, IN ANOTHER CASE OF SH. SHARWAN KUMAR AGARWAL FOR A.Y. 2007 - 08. WHILE DISPOSING SUCH APPEAL (NO . 204/JPR/09 - 10), THE CIT(A) - III , VIDE HIS ORDER DATED 15 - 09 - 2010, HAS GIVEN HIS FINDINGS CUM OBSERVATIONS AS UNDER: - 13 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF LD. AR. ON PERUSAL OF THE RELEVANT RECORDS, I FIND THAT THE NATURE OF THE RELATIONSHIP BETWEEN THE BSNL AND THE APPELLANT ASSESSEE (FRANCHISEE OF BSNL) WAS DIFFERENT, AS COMPARED TO THE NATURE OF THE 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 DETAILED TERMS AND CONDITIONS OF FRANCHISEE - SHIP CONTAINED IN THE AGREEMENT DAT ED 21.3.2005, ENTERED INTO BETWEEN THE BSNL AND THE APPELLANT, WHICH WAS SUBSEQUENTLY MODIFIED, VIDE ANOTHER AGREEMENT DATED 13.11.2006. THEREFORE, THE APPELLANT WAS OBLIGED TO FULFILL ALL THE TERMS AND CONDITIONS OF THAT AGREEMENT AND, IN A WAY, WAS UNDER THE SUPERVISION AND CONTROL OF BSNL, WHILE PERFORMING 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 TO BE TREATED AS THAT OF A PRINCIPAL AND AGENT AND THUS, THE COMMISSION/DISCOUNT PAID BY THE BSNL TO THE APPELLANT FELL IN THE AMBIT OF THE PROVISIONS OF S.194 - H OF THE I.T. ACT. IN THIS REGARD, IT IS NOTICED THAT THE BSNL HAD ALSO TREATED THE AFORESAID COMMISSION / DISCOUNT GIVEN TO THE APPE LLANT AS COMMISSION AND HAD ALSO MADE TDS THEREON U/S 194 - H OF THE I.T. ACT. HOWEVER, ON GOING THROUGH 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 14 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 CONTROL OF THE APPELLANT OVER THE RETAILERS, AFTER THE SALE OF THE RECHARGE COUPONS ETC. BY THE APPELLANT TO THE RETAILERS. FURTHER, IT IS ALSO OBSERVED THAT MOST OF THE APPELLANTS SALES OF RECHARGE COUPONS ETC. TO THE RETAILERS ARE IN CASH AND, THEREAFTER, THERE IS HARDLY ANY OBLIGATION OF THE RETAILERS TOWARDS THE APPELLANT. THEREFORE, ON THESE FACTS, THE RELATIONSHIP BETWEEN THE APPELLANT AND HIS RETAILERS IS TO BE TREATED AS THAT OF PRINCIPAL TO PRINCIPAL AND NOT THAT OF A PRINCIPAL AND AGENT. HENCE, IT IS HELD THAT THOUGH THE APPELLANT SOLD THE BSNL PRODUCTS TO THE RETAILERS AT A PRI CE, WHICH WAS LOWER THAN THE MRP (AFTER PASSING ON A PART OF HIS COMMISSION AS A DISCOUNT TO THE RETAILERS), YET AS THE RELATIONSHIP BETWEEN THE APPELLANT AND HIS RETAILERS WAS THAT OF PRINCIPAL TO PRINCIPAL, THE PROVISIONS OF S. 194 - H OF THE I. T. ACT WER E NOT APPLICABLE, IN RESPECT OF THE AFORESAID SALE OF THE BSNL PRODUCTS BY THE APPELLANT TO HIS RETAILERS. THUS, IT IS HELD THAT AS THE APPELLANT WAS NOT LIABLE TO MAKE TDS, IN RESPECT OF THE SALE DISCOUNT GIVEN BY HIM TO HIS RETAILERS, THE IMPUGNED DISALL OWANCE OF RS. 91,83,554/ - MADE BY THE LD. AO U/S 40(A)(IA) OF THE I. T. ACT IS NOT SUSTAINABLE. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE IMPUGNED ADDITION AND CONSEQUENTLY, THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 15 SUBSEQUENTLY, AS ALSO INFORMED B Y THE LD. AR IT IS GATHERED THAT THE HONBLE ITAT JAIPUR BENCH B JAIPUR, VIDE ITS ORDER DATED 21 - 10 - 2011 (ITA NO.1401/JP/2010), WHILE DISPOSING THE ABOVE CASE (NAMELY SH. SHARWAN KUMAR AGARWAL FOR A.Y. 2007 - 08), HAS CONFIRMED THE ABOVE FINDINGS OF THE CI T(A) - III, VIZ. THE ISSUE UNDER CONSIDERATION. IN THIS REGARD, IT IS NOTEWORTHY THAT THE FACTS AND CIRCUMSTANCES AND THE ISSUE UNDER CONSIDERATION OF THE PRESENT APPELLATE PROCEEDING ARE SIMILAR AND IDENTICAL TO THE ABOVE CASE OF SH. SHARWAN KUMAR AGARWAL, AS SUCH. UNDER SIMILAR CIRCUMSTANCES, THE COURTS HAVE HELD THAT THE PRINCIPAL OF JUDICIAL DISCIPLINE DEMANDS THAT THE DECISIONS OF HIGHER WISDOM, GIVEN I.R.O., THE COMMON ISSUE, SHOULD BE FOLLOWED BY THE SUBORDINATE AUTHORITIES, IN OTHER CASES INVOLVING T HE SAME MATTER. IN OTHER WORDS, FOR THE SAKE OF BETTER JUDICIAL ADMINISTRATION AND UNITY, THE DECISIONS GIVEN BY JURISDICTIONAL TRIBUNAL/COURTS ARE BENDING IN NATURE ON THE LOWER APPELLATE / ADMINISTRATIVE AUTHORITIES. THE ABOVE RATIOS HAVE BEEN ECHOED IN THE FOLLOWING DECISIONS: - I. DUNLOP INDIA LTD. - 154ITR172 (SC) II. BANK OF BARODA - 256 ITR 385 (BOM) ACCORDINGLY, WHILE FOLLOWING THE PRINCIPAL OF JUDICIAL DISCIPLINE, IT IS HELD THAT THE APPELLANT HAS NO LIABILITY TO DEDUCT TDS U/S. 194H OF THE IT ACT, I.R.O., THE SALE DISCOUNT EXTENDED TO HIS RETAILER - CLIENTS, AS THEIR TRANSACTIONS AMOUNT TO ENTERED IN BETWEEN PRINCIPAL TO PRINCIPAL AND NOT PRINCIPAL TO AGENT, AS 16 ENVISAGED BY THE AO. IN VIEW OF THE SAME, THE DISAL LOWANCE OF RS. 65,21,044/ - , MADE U/S. 40(A)(IA) IN THIS REGARD, IS HEREBY DELETED. CONSEQUENTLY, THIS GROUND OF APPEAL IS UPHELD. 2.5 BEFORE US BOTH THE PARTIES REITERATED THEIR EARLIER STAND. THE LD. D.R. H A S DEFACED ORDER OF AO AND HAS SUPPORTED THE GR OUNDS OF APPEAL RAISED IN THIS APPEAL. ON THE OTHER HAND LD. A.R. SHRI OJHA HAS DEFENDED THE ORDER OF LD. CIT(A), AND HAS FURTHER PRODUCED HIS WRITTEN SUBMISSIONS, WHICH READS AS UNDER: - I WANT TO SUBMIT THAT ON LAST DATE OF HEARING THE HONBLE BENCH DIR ECTED TO SUBMIT THE BRIEF ON THE ARGUMENT ARGUED ON THE DATE OF HEARING REGARDING PRECEDENT AND BINDING NATURE OF THE ORDER OF COORDINATE BENCH BECAUSE THE APPEAL IN HAND IS COVERED BY THE ORDER OF JAIPUR BENCH, SPECIALLY LOW APPEAL WAS SUBMITTED AGAINST T HE ORDER HONBLE TRIBUNAL AND AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). FIRST OF ALL I WANT TO SUBMIT THAT THE AN AFFIDAVIT OF ASSESSEE HAS ALREADY BEEN SUBMITTED ALONG WITH WRITTEN SUBMISSION IN WHICH IT WAS STATED THAT THE DEPARTMENT OF INCOME - TAX NOT WENT IN THE APPEAL BEFORE THE HONBLE HIGH COURT, AGAINST THE ORDER OF HONBLE TRIBUNAL IN CASE OF SH. SHRAWAN KUMAR AGARWAL ON THE BASIS THEREOF THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE, THIS SHOWS THAT THE DEPARTMENT ACCEPTED THE VIEW TAKEN BY THE HONBLE JAIPUR TRIBUNAL. 17 IN THIS CONNECTION THE JUDGMENT OF HONBLE SUPREME COURT REPORTED IN 266 ITR PAGE 99 BERGER PAINTS INDIA LTD. VS. COMMISSIONER OF INCOME - TAX. THE RELEVANT PORTION IS BEING REPRODUCED HEREUNDER: THE DECISION IN LAKHANP AL NATIONAL LTD.'S CASE [1986] 162 ITR 240 (GUJ), WHICH CLEARLY LAID DOWN THE INTERPRETATION OF SECTION 43B WAS FOLLOWED BY THE JUDGMENTS OF THE MADRAS HIGH COURT AND BOMBAY HIGH COURT AND WAS AGAIN FOLLOWED BY THE DECISION OF THE SPECIAL BENCH OF THE INCO ME - TAX APPELLATE TRIBUNAL, NONE OF WHICH HAVE BEEN CHALLENGED. IN THESE CIRCUMSTANCES, THE PRINCIPLE LAID DOWN IN UNION OF INDIA V. KILUMUDINI NARAYAN DALAI [2001] 249 ITR 219 (SC); CIT V. NARENDRA DOSHI [2002] 254 ITR 606 (SC) AND CIT V. SHIVSAGAR ESTATE [2002] 257 ITR 59 (SC) CLEARLY APPLIES. WE SEE NO 'JUST CAUSE' AS WOULD JUSTIFY DEPARTURE FROM THE PRINCIPLE. HENCE, IN OUR VIEW, THE REVENUE COULD NOT HAVE BEEN ALLOWED TO CHALLENGE THE PRINCIPLE LAID DOWN IN LAKHANPAL NATIONAL LTD.'S CASE [1986] 162 ITR 240 (GUJ), WHICH WAS FOLLOWED BY THE INSPECTING ASSISTANT COMMISSIONER IN THE CASE OF THE ASSESSEE IN THE THREE ASSESSMENT YEARS IN QUESTION. WE ARE, THEREFORE, OF THE VIEW THAT THE COMMISSIONER, THE INCOME - TAX APPELLATE TRIBUNAL AND THE CALCUTTA HIGH COU RT ERRED IN PERMITTING THE REVENUE TO RAISE A CONTENTION CONTRARY TO WHAT WAS LAID DOWN BY THE GUJARAT HIGH COURT IN LAKHANPAL NATIONAL LTD. 'S CASE [1986] 162 ITR 240. THIS DECISION HAS BEEN 18 SUBSEQUENTLY FOLLOWED BY THE DECISIONS OF THE BOMBAY HIGH COURT IN CIT V. BHARAT PETROLEUM CORPORATION LTD. [2001] 252 ITR 43 AND THE MADRAS HIGH COURT IN CHEMICALS AND PLASTICS INDIA LTD. V. CIT [2003] 260 ITR 193 AS WELL AS THE DECISION OF THE SPECIAL BENCH IN INDIAN COMMUNICATION NETWORK PVT. LTD. V. IAC [1994] 206 ITR (AT) 96 (DELHI), WHICH HAVE ALL REMAINED UNCHALLENGED. I FURTHER WANT TO SUBMIT THAT THE ORDER IN CASE OF SH. RAMSHWARUP DEEDWANA WAS ALSO SUBMITTED PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS - III) JAIPUR. THE DEPARTMENT EVEN NOT WENT IN THE APP EAL BEFORE THE INCOME - TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR. THIS ALSO SHOWS THAT THE POINT OF ISSUE INVOLVED HAS BEEN ACCEPTED BY THE DEPARTMENT. THUS, IS CLEARLY APPLICABLE BECAUSE IN CASE OF SH. SHRAWAN KUMAR AGARWA L AND SH. RAM SWARUP, THE DEP ARTMENT NOT PREFERRED ANY APPEAL, THEREFORE, ATTENDED FINALITY AND AS SUCH THE DEPARTMENT CANNOT FILE ANY APPEAL ON THE SAME GROUND BEFORE THE HONBLE TRIBUNAL. HENCE, THE JUDGMENT O F HONBLE SUPREME COURT REFERRED ABOVE IS APPLICABLE IN TOTO. I FURTHER WA NT TO DRAW YOUR KIND ATTENTION TOWARDS THE FACT THAT JUST FOR THE SAKE OF ARGUMENT IT IS ACCEPTED THAT THERE ARE TWO VIEWS IN THAT CASE THE VIEW WHICH IS FAVORABLE TO THE SUBJECT HAS TO BE ACCEPTED. IN THIS RESPECT I WANT TO SUBMIT THAT THE JUDGMENT OF SUP REME COURT REPORTED IN 88 ITR 192 IS APPLICABLE. 19 THE HONBLE SUPREME COURT JUDGMENT IN CASE OF CIT VS. VEGETABLE PRODUCT LTD. 88 ITR PAGE 192 WHEN TWO NOS. OF INTERPRETATIONS ARE POSSIBLE - ONE IS IN FAVOUR OF THE ASSESSEE MUST BE ADOPTED. THE JUDGMENT OF HONBLE SUPREME COURT IS ALSO IN FAVOUR OF THE ASSESSEE. NOW, YOU WILL OBSERVE THAT THE TWO JUDGMENTS OF HONBLE SUPREME COURT ARE DIRECTLY APPLICABLE IN CASE OF THE ASSESSEE - FIRST IS WHEN THE DEPARTMENT IS ACCEPTED ONE THING IN ONE ASSESSEE DIFFERENT V IEW CANNOT BE TAKEN AND ANOTHER IS THAT WHEN TWO JUDGMENTS ARE THERE IN THAT CASE THE VIEW WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD HAVE BEEN ACCEPTED. IN VIEW OF ABOVE MENTIONED FACTS AND CIRCUMSTANCES IT IS PRAYED THAT THE CASE OF THE ASSESSEE MAY KIND LY BE TREATED AS COVERED BY THE ORDER OF JODHPUR BENCH DELIVERED IN CASE OF SH. SHRAWAN KUMAR AGARWAL. NOW, I WISH TO RELY UPON THE JUDGMENT OF HONBLE SUPREME COURT REFERRED ABOVE. THE JUDGMENT OF SUPREME COURT REPORTED IN 88 ITR PAGE 192 REFERRED ABOVE I N WHICH IT WAS HELD THAT WHEN TWO NUMBERS OF VIEWS OF INTERPRETATION ARE PERMISSIBLE IN THAT CASE ONE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE SHOULD HAVE BEEN ACCEPTED. THE JUDGMENT OF HONBLE SUPREME COURT IS DIRECTLY APPLICABLE IN CASE OF THE ASSESSEE HI MSELF. IT WILL BE WORTHWHILE TO DRAW YOUR KIND ATTENTION TOWARDS THE FACT THAT PROVISION OF SECTION 40 (A) (IA) IS CONTROVERSIAL NOW - A - DAYS, BUT EVEN IN THESE CONTROVERSY THE JUDGMENT OF SUPREME COURT HAS BEEN FOLLOWED. 20 I WANT TO DRAW YOUR ATTENTION TOWA RDS THE INCOME TAX APPELLATE TRIBUNAL CHENNAI ITA NO. 2076(MDS)/2012 - ASSESSMENT YEAR : 2009 - 10; C.O. NO. 155 (MDS)/2013 IN - ITA NO. 2076 (MDS)/2012 THE INCOME TAX OFFICER VS. M/S THEEKATHIR PRESS THIS ORDER OF HONBLE BENCH IS AFTER DELIVERING THE JUDGMEN T OF KOLKATA HIGH COURT AND MUMBAI TRIBUNAL. THE HONBLE TRIBUNAL OBSERVED AS UNDER: WE FIND THAT THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAME TIME, WE FIND THAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GU JARAT HIGH COURT ARE AGAINST THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE RULE OF JUDICIAL PRECEDENCE DEMANDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED, AS HELD BY THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HONBLE SUPREME COURT, WE HAVE TO FOLLOW THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT, WHICH IS IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) A PPLIES ONLY TO THOSE AMOUNTS PAYABLE AND NOT TO THOSE AMOUNTS 'PAID. ACCORDINGLY, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE PRESENT CASE. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 21 IN THESE FACTS AND CIRCUMS TANCES YOU WILL OBSERVE THAT THE ORDER OF THE INCOME - TAX APPELLATE TRIBUNAL JAIPUR BENCH JAIPUR ON WHICH THE CIT (A - III) JAIPUR RELIED IS APPLICABLE IN TOTO. IT IS REQUESTED TO KINDLY TREAT IT COVERED BY THE ORDER AS EXPRESSED IN THE OPEN BENCH KINDLY DECI DES ONLY THIS ISSUE WHETHER IN THESE FACTS AND CIRCUMSTANCES THE ISSUE IS COVERED BY THE ORDER OF JAIPUR BENCH IN VIEW OF THE JUDGMENT OF SUPREME COURT REFERRED ABOVE. I AM NOT ARGUING THE APPEAL ON MERITS BECAUSE AS EXPRESSED BY THE HONBLE BENCH FIRST TH IS ISSUE SHALL BE DECIDED WHETHER HAS TO BE TREATED AS COVERED OR NOT. IN VIEW OF ABOVE MENTIONED FACT AND CIRCUMSTANCES YOU WILL OBSERVE THAT THE ORDER OF HONBLE JAIPUR BENCH MAY KINDLY BE FOLLOWED. I RESERVED MY RIGHT IN RESPECT OF ARGUMENT ON MERITS. I T IS, THEREFORE, PRAYED THAT FIRST THIS ISSUE MAY KINDLY BE DECIDED AS PER THE ORDER OF TRIBUNAL DISCUSS IN COURSE OF HEARING. 2.6 AFTER CONSIDERING THE RIVAL STANDS, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS FOLLOW ED THE TRIBUNAL ORDER IN ARRIVING AT HIS CONCLUSION AND HENCE WE DONT NEED TO DEVIATE FROM HIS REASONING IN THE LIGHT OF CONTENTIONS RAISED IN THE WRITTEN SUBMISSIONS 22 SUBMITTED BY LD. A.R. ACCORDINGLY, WE CONFIRM THE IMPUGNED DELETION AND DISMISS GROUND NO. ( I ) AND (II) OF THIS APPEAL. 3. THE FAC TS OF GROUND NO. (III) OF THE REVENUES APPEAL ARE THAT THE ASSESSEE HAS CLAIMED PAYMENT OF RS. 21,45,488/ - AS COMMISSION. THE A.O HAS DISALLOWED A SUM OF RS. 4,29,097/ - [EXCEEDING RS. 2,500/ - ] AND SIMILARLY OUT OF COMMISSION CLAIMED AT RS. 20,49,000/ - HE HAS DISALLOWED RS. 4,09,800/ - [BELOW RS. 2,500/ - ]. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS. 1 LAKHS ONLY. 4. BOTH THE PARTIES HAVE REITERATED THEIR ARGUMENTS. IN FACT, THE ADDITIONS MADE BY THE A.O SEEM TO BE BASELESS AND UNJUSTIFIABLE. HOWEVER, THE ASSESSEE IS NOT IN APPEAL, THEREFORE, WE CONFIRM THE FINDING OF THE LD. CIT(A) GIVEN IN PARA 4.3 OF HIS ORDER AND CANNOT ALLOW GROUND NO. (II) OF REVENUES APPEAL. 5. REGARDING GROUND NO. (IV), NO MATERIAL ARGUMENTS WERE R AISED. THEREFORE, THIS GROUND IS ALSO DISMISSED. 6. GROUND NO. (V) IS FORMAL IN NATURE. 23 7. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 165/JU/2012 FOR A.Y. 2008 - 09 STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND SEPTEMBER , 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND SEPTEMBER , 2014 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR SENIOR PRIVATE SECRETARY ITAT, JODHPUR