M/s Bharti Airtel Limited, Chandigarh V. ACIT (TDS), Chandigarh

ITA 216/CHANDI/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4939 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Question of law; Non-deduction of tax; Relationship of principal and agent
• Section: 133A; 194C; 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.340/CHD/2013 (ASSESSMENT YEAR : 2009-10) M/S BHARTI AIRTEL LIMITED, VS. THE INCOME TAX OFFICER, PLOT NO.21, I.T. PARK, TDS-II, CHANDIGARH. SECTOR 26, CHANDIGARH. PAN: AAACB2894G TAN: PTLB10577A ITA NO.216/CHD/2013 (ASSESSMENT YEAR : 2007-08) M/S BHARTI AIRTEL LIMITED, VS. THE A.C.I.T.(TDS), PLOT NO.21, I.T. PARK, CHANDIGARH. SECTOR 26, CHANDIGARH. PAN: AAACB2894G TAN: PTLB10577A & ITA NO.217/CHD/2013 (ASSESSMENT YEAR : 2010-11) M/S BHARTI AIRTEL LIMITED, VS. THE A.C.I.T.(TDS), PLOT NO.21, I.T. PARK, CHANDIGARH. SECTOR 26, CHANDIGARH. PAN: AAACB2894G TAN: PTLB10577A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL BHALLA RESPONDENT BY : SHRI RAM MOHAN SINGH, CIT DR DATE OF HEARING : 19.03.2018 DATE OF PRONOUNCEMENT : 30.05.2018 ORDER PER ANNAPURNA GUPTA, A.M.: ALL THE ABOVE APPEALS HAVE BEEN PREFERRED BY THE SA ME ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. COMMISS IONER OF INCOME TAX(APPEALS), CHANDIGARH [HEREINAFTER REFERR ED TO AS CIT(APPEALS)] DATED 1.1.2013, 26.12.2012 AND 26.1 2.2012 2 RELATING TO ASSESSMENT YEARS 2009-10, 2007-08 AND 2 010-11 RESPECTIVELY. 2. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES TH AT THE ISSUE INVOLVED IN ALL THE CAPTIONED APPEALS WAS COMMON AND IDENTICAL. THEREFORE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE WE SHALL BE DEALING WITH THE APPEAL OF THE ASSESSEE IN ITA NO.340/CHD/2013 R ELATING TO ASSESSMENT YEAR 2009-10 AS THE LEAD CASE AND TH E DECISION RENDERED THEREIN WILL APPLY MUTATIS AND MU TANDIS TO OTHER APPEALS ALSO. ITA NO.340/CHD/2013 : 4. BRIEFLY STATED THE ASSESSEE IS A TELECOMMUNICATI ON SERVICE PROVIDER. TDS INSPECTION/SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE ON 20.1.2010, DURING THE COURSE OF WHICH IT WAS NOTICE D THAT THE PERSON RESPONSIBLE (PR) HAD NOT DEDUCTED TAX AT SOURCE FROM THE PAYMENT MADE TOWARDS INCENTIVES ON PREPAID SIM CARDS SOLD TO DISTRIBUTORS AND ALSO ON THE ROAMING CHARGES PAID TO OTHER SERVICE PROVIDERS. THE AO HELD THAT T HE ASSESSEE WAS LIABLE TO DEDUCT TAX ON BOTH THE PAYME NTS SINCE THE INCENTIVES PAID TO DISTRIBUTORS WAS IN TH E NATURE OF COMMISSION REQUIRING TDS U/S 194H OF THE ACT ,WH ILE THE ROAMING CHARGES PAID TO OTHER TELECOMMUNICATION PRO VIDERS WAS IN THE NATURE OF SERVICE CHARGES PAID REQUIRING TDS U/S 194C OF THE ACT. ACCORDINGLY THE ASSESSEE WAS HELD TO BE AN 3 ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE AND CONSEQUENTLY DEMAND WAS CREATED ON THE ASSESSEE U /S 201(1)/(1A) OF THE ACT AS UNDER: SECTION DEMAND U/S 201(1) DEMAND U/S 201(1A) TOTAL 194C RS.422489/- RS.101197/- RS.523686/- 194H RS.50465972/- RS.5468432/- RS.55934404/- GRAND TOTAL RS.50888461/- RS.5569629/- RS.56458090/ - 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.C IT(A) WHO HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON THE INCENTIVES PAID TO DISTRIBUTORS ON SALE OF PREPAID SIM CARDS, BUT AT THE SAME TIME ACCEPTED THE ASSESSEES CONTENT ION THAT IN CASE TAXES WERE PAID BY THE PAYEE DISTRIBUTORS O N THE SAID INCENTIVES, THE ASSESSEE COULD NOT BE TREATED TO BE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE. ACCORDINGL Y HE DIRECTED THE AO TO VERIFY THIS FACT AND GRANT RELIE F TO THE ASSESSEE TO THE EXTENT IT IS ABLE TO DEMONSTRATE TH E SAME. VIS-A-VIS TDS ON ROAMING CHARGES, THE LD.CIT(A) RES TORED THE ISSUE TO THE AO TO ADJUDICATE THE SAME IN THE L IGHT OF THE DIRECTION GIVEN BY THE APEX COURT IN THE CASE O F BHARTI CELLULAR LTD. 193 TAXMAN 97 TO DETERMINE WHETHER TH E SAID PAYMENT QUALIFIED AS FEES FOR TECHNICAL SERVICES A S PER SECTION 194J OF THE ACT. LD.CIT(A) ALSO REITERATED HIS DECISION ON THE ISSUE OF TDS ON INCENTIVES GIVEN TO DISTRIBUTORS, THAT THE ASSESSEE COULD NOT BE TREA TED TO BE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE IF THE P AYEES HAD PAID TAXES ON THE SAME AND GAVE IDENTICAL DIRECTION TO THE AO TO VERIFY THE SAID FACT AND GRANT RELIEF TO THE ASSESSEE ACCORDINGLY. 4 6. AGGRIEVED BY THE SAME THE ASSESSE HAS COME UP IN APPEAL BEFORE US. 7. GROUND NO.1 TO 1.3 RAISED BY THE ASSESSEE ARE ON THE ISSUE RELATING TO TDS ON INCENTIVES PAID TO DISTRIB UTORS ON SALE OF CARDS U/S 194 H OF THE ACT, AND READ AS UND ER: 1) THE LEARNED INCOME TAX OFFICER, TDS-II (AO) HAD ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE INCOME TAX ACT TO THE DISCOUNT GIVEN TO DISTRIBUTORS ON SALE OF PRE- PAID PRODUCTS, BEING, 'RIGHT TO USE AIRTIME FOR A SPECIFIED VALUE'. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 1.1) THE LEARNED AO HAD ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 1.2) THE LEARNED AO HAD ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPANY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTING TO RS.50,465,972/- U/S 194H ON THE DIFFERENCE BETWEEN THE DISTRIBUTOR'S PRICE AND SALE PRICE OF THE PREPAID CARD ALLEGING THE DIFFERENCE TO BE IN THE NATURE OF COMMISSION. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED AO 1.3 THE LEARNED AO HAD ERRED BOTH ON FACTS AND IN LAW DEMANDING THE TAX AMOUNTING TO RS.50,465,972/-, IN SPITE OF THE FACT THAT THE AMOUNT HAS BEEN SUBJECT TO TAX IN THE HANDS OF DISTRIBUTORS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN NOT CONSIDERING THE INFORMATION FILED BY THE COMPANY TO SUBSTANTIATE THAT THE DISTRIBUTOR HAS ALREADY PAID TAX ON THE DISPUTED AMOUNT. . 8. DURING THE COURSE OF HEARING BEFORE US THE LD. C OUNSEL FOR ASSESSEE, AT THE OUTSET, STATED THAT GROUND NO. 1.3 RAISED WAS NOT BEING PRESSED SINCE THE LD.CIT(APPEALS) HAD AGREED 5 WITH THE CONTENTION OF THE ASSESSEE THAT SINCE THE PAYEES HAD PAID TAXES ON THE IMPUGNED INCOME THE ASSESSEE SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT FOR NOT DE DUCTING TAX AT SOURCE. THE LD. COUNSEL FOR ASSESSEE CONCEDE D THAT THE LD.CIT(APPEALS) HAD RESTORED THE ISSUE TO THE A SSESSING OFFICER TO ONLY VERIFY THE FACT OF PAYMENT OF TAXES BY THE PAYEES ON THE SAID INCOME. THE LD. COUNSEL FOR ASSE SSEE, THEREFORE, STATED THAT NOT BEING AGGRIEVED BY THE S AID ACTION OF THE CIT(APPEALS) IT WAS NOT PRESSING THE GROUND NO.1.3 RAISED BEFORE US. ACCORDINGLY, GROUND NO.1.3 IS TRE ATED AS DISMISSED. 9. THEREAFTER, LD.COUNSEL FOR THE ASSESEE POINTED O UT THAT BOTH THE AO AND THE CIT(A) HAD RESTED THEIR CASE HO LDING THE ASSESSEE LIABLE TO DEDUCT TAX ON INCENTIVES PAI D TO DISTRIBUTORS ON SALE OF CARDS, RELYING UPON THE DEC ISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONE R OF INCOME TAX VS M/S IDEA CELLULAR LTD.(2010) 325 ITR 148(DEL) AND THE DECISION OF THE HON'BLE KERALA HIG H COURT IN THE CASE OF M/S VODAFONE ESSAR CELLULAR LTD. VS ASSISTANT COMMISSIONER OF INCOME TAX,(2010) 235 ITR 393 (KER), WHEREIN IT WAS HELD THAT THE DISCOUNT GIVEN BY THE ASSESSEE TO THE DISTRIBUTORS ON PREPAID CARDS WAS COMMISSION WITHIN THE MEANING OF EXPLANATION-1 TO S ECTION 194H OF THE ACT. 10. THE LD. COUNSEL FOR ASSESSEE STATED THAT SINCE THEN THE HON'BLE KARNATAKA HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S BHARTI AI RTEL LTD., 6 VS. COMMISSIONER OF INCOME TAX & ANR.(2015) 372 ITR 33 (KAR). COPY OF THE SAID ORDER WAS PLACED BEFORE US. REFERRING TO THE SAME, THE LD. COUNSEL FOR ASSESSEE POINTED O UT THAT THE HON'BLE KARNATAKA HIGH COURT HAD CONSIDERED THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF M/S IDEA CELLULAR LTD. (SUPRA) AND THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF M/S VODAFONE ESSAR LTD. (SUPRA) AND HAD HELD THAT IN BOTH THE SAID CASES TH E COURTS HAD PROCEEDED ON THE BASIS THAT THE SERVICES COULD NOT BE SOLD BUT HAD TO BE RENDERED AND THEREFORE COULD NOT BE ON PRINCIPAL TO PRINCIPAL BASIS AND THEY DID NOT GO I NTO THE QUESTION WHETHER THE RIGHT TO SERVICE COULD BE SOLD . THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE HON'BLE H IGH COURT THEREAFTER PROCEEDED TO HOLD THAT THE TRANSAC TION BETWEEN THE TWO WAS THE SALE OF RIGHT TO SERVICE AN D THERE WAS NO SERVICES INVOLVED IN THE SAID TRANSACTION AN D FURTHER THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTR IBUTORS WAS THAT OF PRINCIPAL TO PRINCIPAL AND, THEREFORE, INCENTIVES GIVEN TO THE DISTRIBUTORS WAS NOT IN THE NATURE OF COMMISSION FOR THE PURPOSE OF TAX DEDUCTION AT SOUR CE U/S 194H OF THE ACT. THE LD. COUNSEL FOR ASSESSEE FURTH ER POINTED OUT THAT EVEN THE HON'BLE RAJASTHAN HIGH CO URT IN THE CASE OF BHARTI HEXACOM LTD. DT.11-07-17,REPORTE D IN 87 TAXMANN.COM 295(RAJ). WHICH WAS A SUBSIDIARY OF THE ASSESSEE, HAD DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE. FURTHER THE LD. COUNSEL FOR ASSESSEE POINTED OUT TH AT VARIOUS BENCHES OF THE I.T.A.T. HAD DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE FOLLOWING THE AFORESAID DECI SIONS OF 7 THE HON'BLE KARNATAKA HIGH COURT AND HON'BLE RAJAST HAN HIGH COURT: 1) M/S BHARTI HEXACOM LIMITED VS ITO (TDS)-II ITA NO.656/JP/2010 DT.12-06-15 2) M/S TATA TELE SERVICES LIMITED ITA NO.309/JP/2012,502 TO 505/JP/2011 DATED 13.3.2015 3) M/S BHARTI HEXACOM LIMITED VS DCIT (TDS) ITA NOS.258 TO 262/GAU/2013 DATED 29.6.2015 4) VODAFONE ESSAR GUJARAT LIMITED VS ACIT ITA NO.386/AHD/11 DATED 7.7.2015. 11. THE LD. COUNSEL FOR ASSESSEE FURTHER POINTED OU T THAT THERE WAS NO JURISDICTIONAL HIGH COURT DECISION ON THE ISSUE AND IN SUCH A SITUATION THE PRINCIPLE OF CONS TRUCTION OF LAW DEMANDED THAT THE DECISION FAVOURING THE ASSESSEE/BENEFICIAL TO THE ASSESSEE SHOULD BE FOLLO WED. THE LD. COUNSEL FOR ASSESSEE STATED THAT THE I.T.A.T. A HMEDABAD BENCH IN THE CASE OF VODAFONE ESSAR GUJARAT LIMITED (SUPRA) AND I.T.A.T. GAUHATI BENCH IN THE CASE OF M /S BHARTI HEXACOM LIMITED (SUPRA) HAD DECIDED THE ISSU E ON THIS PRINCIPLE ONLY. THE LD. COUNSEL FOR ASSESSEE A LSO DREW OUR ATTENTION TO THE DECISION OF THE HON'BLE APEX C OURT IN THIS REGARD IN THE CASE OF CIT VS VEGETABLE PRODUCT S LIMITED, 88 ITR 192 (SC) AND CIT,(CENTRAL)-I VS VAT IKA TOWNSHIP PVT. LTD., 367 ITR 466. THE LD. COUNSEL FO R ASSESSEE, THEREFORE, STATED THAT THE ORDER OF THE LD.CIT(APPEALS) TREATING THE ASSESSEE AS AN ASSESSE E IN DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE ON THE I NCENTIVES PAID TO DISTRIBUTORS ON SALE OF PREPAID CARDS U/S 1 94H THEREFORE NEEDED TO BE SET ASIDE. 8 12. THE LD. DR, ON THE OTHER HAND THOUGH CONCEDED T HAT THERE WERE DIVERGENT VIEWS ON THE ISSUE, RELIED UPO N THE ORDER OF THE LD.CIT(APPEALS). 13. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND HAV E ALSO GONE THROUGH THE DECISIONS REFERRED TO BEFORE US. THE ISSUE FOR CONSIDERATION BEFORE US IS VIS--VIS THE NATURE OF TRANSACTION BETWEEN THE ASSESSEE TELECOMMUNICATION SERVICES PROVIDER AND ITS DISTRIBUTORS IN SO FAR AS IT RELATES TO SALE OF PREPAID SIM CARDS AND WHETHER THE DISCOU NT OF PRICE GIVEN TO THE DISTRIBUTORS ON SUCH SALE OF PRE PAID SIM CARDS IS IN THE NATURE OF COMMISSION ATTRACTING THE PROVISIONS OF SECTION 194H OF THE ACT. AS POINTED O UT TO US, THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF THE ASSESSEE ITSELF, WHILE DEALING WITH AN IDENTICAL IS SUE IN APPEAL AGAINST THE DEMAND RAISED U/S 201(1) AND 201 (1A) OF THE ACT, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E. THE HON'BLE HIGH COURT HELD THAT THERE WAS NO RELATIONS HIP OF PRINCIPAL AND AGENT BETWEEN THE ASSESSEE AND ITS DISTRIBUTORS AND THE TRANSACTION WAS THAT OF SALE O F RIGHT TO SERVICE ON A PRINCIPAL TO PRINCIPAL BASIS.; THE HON 'BLE HIGH COURT HELD THAT WHEN THE ASSESSEE SOLD SIM CARD TO DISTRIBUTORS HE WAS NEITHER PAYING ANY COMMISSION B Y SUCH SALE, NOR ANY INCOME ACCRUED IN THE HANDS OF THE DISTRIBUTORS WHICH CONDITION WAS PRECEDENT FOR ATTR ACTING SECTION 194H OF THE ACT. THE HON'BLE HIGH COURT, T HEREFORE, HELD THAT THE ASSESSEE WAS NOT UNDER ANY OBLIGATION TO PAY ANY TAX AS NO INCOME WAS GENERATED IN HIS HANDS AND 9 DEDUCTION OF INCOME TAX AT SOURCE BEING A VICARIOUS RESPONSIBILITY THERE WAS NO OBLIGATION TO DEDUCT TD S IN THE ABSENCE OF A PRIMARY RESPONSIBILITY TO PAY TAX. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT IN THIS REGARD A RE AS UNDER: FROM THE AFORESAID CLAUSES, IT IS CLEAR THAT THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENCY. ON THE CONTRARY, IT IS EXPRESSLY STATED THAT THE RELATIONSHIP IS THAT OF PRINCIPAL TO PRINCIPAL. S ECONDLY THE DISTRIBUTOR/CHANNEL PARTNER HAS TO PAY CONSIDERATION FOR THE PRODUCT SUPPLIED AND IT IS TREATED AS SALE CONSIDER ATION. THERE IS A CLAUSE, WHICH SPECIFICALLY STATES THAT AFTER SUC H SALE OF PRODUCTS, THE DISTRIBUTOR/CHANNEL PARTNER CANNOT RETU RN THE GOODS TO THE ASSESSEE FOR WHATEVER REASON. IT IS THE CHANNEL PARTNER AND THE DISTRIBUTOR WHO HAVE TO INSURE THE PRODUCTS AND THE GODOWNS AT THEIR COST. THEY ARE EVEN PREVENT ED FROM MAKING ANY REPRESENTATION TO THE RETAILERS UNLESS AUT HORIZED BY THE ASSESSEE. WHAT IS GIVEN BY THE ASSESSEE TO ITS DISTRIBUTOR/ CHANNEL PARTNER IS A TRADE DISCOUNT. IT IS NOT COMMISSION. 52. IN QATAR AIRWAYS CASE IT WAS HELD THAT, WHEN THE AI RLINES SELL THE AIR TICKETS IT WOULD HAVE NO INFORMATION ABOUT THE EXACT RATE AT WHICH THE TICKETS WOULD ULTIMATELY BE S OLD BY THEIR AGENTS SINCE THE AGENTS HAD BEEN GIVEN DISCRET ION TO SELL THE TICKETS AT ANY RATE BETWEEN THE FIXED MINIMUM CO MMERCIAL PRICE AND THE PUBLISHED PRICE. THE QUESTION OF DEDUC TING ANY TAX AT SOURCE WOULD NOT ARISE. 53. IN THE AHMEDABAD STAMP VENDORS ASSOCIATION CASE ALSO, IT WAS HELD THAT, WHEN THE LICENSED STAMP VENDORS TOOK DELIVERY OF STAMP PAPERS ON PAYMENT OF FULL PRICE LESS DISCO UNT AND THEY SELL SUCH STAMP PAPERS TO RETAIL CUSTOMERS, NE ITHER OF THE TWO ACTIVITIES CAN BE TERMED AS THE SERVICE IN T HE COURSE OF BUYING OR SELLING OF GOODS. DISCOUNT GIVEN TO THE STA MP VENDORS IS FOR PURCHASING THE STAMPS IN BULK QUANTITY AND THE SAID AMOUNT IS IN THE NATURE OF CASH DISCOUNT AND, T HEREFORE, SUCH A TRANSACTION IS A SALE. THEREFORE, THE DISCOUNT MADE AVAILABLE TO THE LICENSED STAMP VENDORS DOES NOT FALL WITHIN THE EXPRESSION COMMISSION OR BROKERAGE UNDER SE CTION 194H OF THE ACT. 54. IN THE MOTHER DAIRYS CASE REFERRED TO SUPRA, IT W AS HELD THAT, THE CONCESSIONAIRE PURCHASES THE MILK FROM THE DAIRY WHICH RAISES A BILL ON THE CONCESSIONAIRE AND THE AMO UNT HE HAS PAID FOR. THE DAIRY MERELY FIXED THE MRP AT WHIC H THE CONCESSIONAIRE CAN SELL THE MILK. UNDER THE AGREEMENT THE CONCESSIONAIRE CANNOT RETURN THE MILK UNDER ANY CIRCUMSTANCE, WHICH IS ANOTHER CLEAR INDICATION THAT THE RELATIONSHIP WAS THAT OF PRINCIPAL TO PRINCIPAL. EVEN IF THE MILK GETS SPOILED FOR ANY REASON AFTER DELIVERY IS TAKEN, THAT IS TO 10 THE ACCOUNT OF THE CONCESSIONAIRE AND THE DAIRY IS NOT RESPONSIBLE FOR THE SAME. THE CONCESSIONAIRE BECOMES THE OWNER OF THE MILK AND THE PRODUCTS ON TAKING DELIVER Y OF THE SAME FROM THE DAIRY. HE THUS PURCHASED THE MILK AND T HE PRODUCTS FROM THE DAIRY AND SOLD THEM AT THE MRP. THE DIFFERENCE BETWEEN THE MRP AND THE PRICE WHICH HE PA YS TO THE DAIRY IS HIS INCOME FROM BUSINESS. IT CANNOT BE CATEGO RIZED AS COMMISSION. THE LOSS AND GAIN IS OF THE CONCESSION AIRE. THE DAIRY MAY HAVE FIXED THE MRP AND THE PRICE AT WHICH THEY SELL THE PRODUCTS TO THE CONCESSIONAIRE BUT THE PRODUCTS ARE SOLD AND OWNERSHIP VESTS AND IS TRANSFERRED TO THE CONCESSIONAIRES. THE SALE IS SUBJECT TO CONDITIONS, AND STIPULATIONS. THIS BY ITSELF DOES NOT SHOW AND ESTAB LISH PRINCIPAL AND AGENT RELATIONSHIP. THE SUPERVISION AND CONTROL REQUIRED IN CASE OF AGENCY IS MISSING. THEREFORE, IT WAS HELD THAT THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGEN T AND THE CONSIDERATION PAID TO THE CONCESSIONAIRE IS NOT COMMISS ION. 55. IN THE SINGAPORE AIRLINES CASE, THE RELATIONSHIP OF PRINCIPAL AND AGENT WAS NOT IN DISPUTE. AT NO POINT IN TIME THE T RAVEL AGENT OBTAINS PROPRIETARY RIGHTS TO THE TRAFFIC DOCU MENTS/AIR TICKETS. THERE IS NO VALUE OR PRICE PAID BY HIM ON WHI CH THE TRAVEL AGENT GETS A DEDUCTION. THE PRICE OR VALUE IS R ECEIVED BY THE ASSESSEE-AIRLINE THROUGH THE MEDIUM OF THE TRAV EL AGENT FROM THE PASSENGER WHICH IS ALSO ONE OF THE FACETS O F THE SERVICES OFFERED BY THE TRAVEL AGENT. THE PRICE OR V ALUE OF THE TRAFFIC DOCUMENT RECEIVED BY THE TRAVEL AGENT FOR AN D ON BEHALF OF THE ASSESSEE-AIRLINE IS HELD IN TRUST. THUS THE MONEY RETAINED BY THE TRAVEL AGENT IS COMMISSION. THE AIRLIN E PAID STANDARD COMMISSION TO THE TRAVEL AGENT ON WHICH ASS ESSEE- AIRLINE DEDUCT TAX AT SOURCE. THE DISPUTE WAS ONLY I N RESPECT OF THE MONEY OR MONIES WHICH THE TRAVEL AGENT RETAIN S OVER AND ABOVE THE NET FARE. IN THAT CONTEXT, THE DELHI HIG H COURT HELD THAT, UNDER AN AGREEMENT ONLY ONE RELATIONSHIP EXISTS AND THE TRANSACTION IS A SINGULAR TRANSACTION WHICH IS EXECUTED BETWEEN THE TRAVEL AGENT WHILE ACTING ON BE HALF OF THE PRINCIPAL AIRLINE IN SELLING THE TRAFFIC DOCUMENTS /AIR TICKETS TO A THIRD PARTY WHO IS A PASSENGER AND, THEREFORE, T HE SECOND LEG OF THE TRANSACTION CANNOT BE DIFFERENT FROM THE FIRST LEG OF THE TRANSACTION. 56. IN THE IDEA CELLULAR LIMITEDS CASE, THE DELHI HIGH CO URT PROCEEDED ON THE FOOTING THAT THE ASSESSEE IS PROVI DING THE MOBILE PHONE SERVICE. IT IS THE ULTIMATE OWNER OF THE SERVICE SYSTEM. THE SERVICE IS MEANT FOR PUBLIC AT LARGE. THE Y HAD APPOINTED DISTRIBUTORS TO MAKE AVAILABLE THE PRE-PAI D PRODUCTS TO THE PUBLIC AND LOOK AFTER THE DOCUMENTATION AND OTHER STATUTORY REQUIREMENTS REGARDING THE MOBILE PHONE CO NNECTION AND, THEREFORE, THE ESSENCE OF SERVICE RENDERED BY TH E DISTRIBUTOR IS NOT THE SALE OF ANY PRODUCT OR GOODS AND, THEREFORE, IT WAS HELD THAT ALL THE DISTRIBUTORS ARE AL WAYS ACTING FOR AND ON BEHALF OF THE ASSESSEE COMPANY. 57. SIMILAR IS THE VIEW EXPRESSED BY THE KERALA HIGH COURT IN THE VODAFONE ESSAR CELLULAR LIMITEDS CASE, WHERE IT WAS H ELD THAT, THE DISTRIBUTOR IS ONLY RENDERING SERVICES TO TH E ASSESSEE 11 AND THE DISTRIBUTOR COMMITS THE ASSESSEE TO THE SUBS CRIBERS TO WHOM ASSESSEE IS ACCOUNTABLE UNDER THE SERVICE CONTR ACT WHICH IS THE SUBSCRIBER CONNECTION ARRANGED BY THE D ISTRIBUTOR FOR THE ASSESSEE. IN THAT CONTEXT IT WAS HELD THAT, DI SCOUNT IS NOTHING BUT A MARGIN GIVEN BY THE ASSESSEE TO THE DI STRIBUTOR AT THE TIME OF DELIVERY OF SIM CARDS OR RECHARGE COUP ONS AGAINST ADVANCE PAYMENT MADE BY THE DISTRIBUTOR. 58. IN BOTH THE AFORESAID CASES, THE COURT PROCEEDED ON THE BASIS THAT SERVICE CANNOT BE SOLD. IT HAS TO BE RENDE RED. BUT, THEY DID NOT GO INTO THE QUESTION WHETHER RIGHT TO SERVICE CAN BE SOLD. 59. THE TELEPHONE SERVICE IS NOTHING BUT SERVICE. SIM CARDS, HAVE NO INTRINSIC SALE VALUE. IT IS SUPPLIED TO THE CU STOMERS FOR PROVIDING MOBILE SERVICES TO THEM. THE SIM CARD IS I N THE NATURE OF A KEY TO THE CONSUMER TO HAVE ACCESS TO T HE TELEPHONE NETWORK ESTABLISHED AND OPERATED BY THE AS SESSEE- COMPANY ON ITS OWN BEHALF. SINCE THE SIM CARD IS ONLY A DEVICE TO HAVE ACCESS TO THE MOBILE PHONE NETWORK, TH ERE IS NO QUESTION OF PASSING OF ANY OWNERSHIP OR TITLE OF THE GOODS FROM THE ASSESSEE-COMPANY TO THE DISTRIBUTOR OR FROM THE DISTRIBUTOR TO THE ULTIMATE CONSUMER. THEREFORE, THE SIM CARD, ON ITS OWN BUT WITHOUT SERVICE WOULD HARDLY HAVE ANY VALUE. A CUST OMER, WHO WANTS TO HAVE ITS SERVICE INITIALLY, HAS TO PURCHASE A SIM- CARD. WHEN HE PAYS FOR THE SIM-CARD, HE GETS THE MOBI LE SERVICE ACTIVATED. SERVICE CAN ONLY BE RENDERED AND CANNOT BE SOLD. HOWEVER, RIGHT TO SERVICE CAN BE SOLD. WHAT IS SOLD BY THE SERVICE PROVIDER TO THE DISTRIBUTOR IS THE RIGH T TO SERVICE. ONCE THE DISTRIBUTOR PAYS FOR THE SERVICE, AND THE SE RVICE PROVIDER, DELIVERS THE SIM CARD OR RECHARGE COUPONS, T HE DISTRIBUTOR ACQUIRES A RIGHT TO DEMAND SERVICE. ONCE SUCH A RIGHT IS ACQUIRED THE DISTRIBUTOR MAY USE IT BY HIMSE LF. HE MAY ALSO SELL THE RIGHT TO SUB-DISTRIBUTORS WHO IN TURN MAY SELL IT TO RETAILERS. IT IS A WELL-SETTLED PROPOSITION THAT IF THE P ROPERTY IN THE GOODS IS TRANSFERRED AND GETS VESTED IN THE DIS TRIBUTOR AT THE TIME OF THE DELIVERY THEN HE IS THEREAFTER LIABLE F OR THE SAME AND WOULD BE DEALING WITH THEM IN HIS OWN RIGHT A S A PRINCIPAL AND NOT AS AN AGENT. THE SELLER MAY HAVE FIXE D THE MRP AND THE PRICE AT WHICH THEY SELL THE PRODUCTS TO THE DISTRIBUTORS BUT THE PRODUCTS ARE SOLD AND OWNERSHIP VESTS AND IS TRANSFERRED TO THE DISTRIBUTORS. HOWEVER, WHO EVER ULTIMATELY SELLS THE SAID RIGHT TO CUSTOMERS IS NOT EN TITLED TO CHARGE MORE THAN THE MRP. THE INCOME OF THESE MIDDLEM EN WOULD BE THE DIFFERENCE IN THE SALE PRICE AND THE MRP , WHICH THEY HAVE TO SHARE AS PER THE AGREEMENT BETWEEN THE M. THE SAID INCOME ACCRUES TO THEM ONLY WHEN THEY SELL THIS RIGHT TO SERVICE AND NOT WHEN THEY PURCHASE THIS RIGHT TO SE RVICE. THE ASSESSEE IS NOT CONCERNED WITH QUANTUM AND TIME OF AC CRUAL OF INCOME TO THE DISTRIBUTORS BY RESELLING THE PREPA ID CARDS TO THE SUB-DISTRIBUTORS/RETAILERS. AS AT THE TIME OF SALE O F PREPAID CARD BY THE ASSESSEE TO THE DISTRIBUTOR, INCOME HAS NOT ACCRUED OR ARISEN TO THE DISTRIBUTOR, THERE IS NO PR IMARY LIABILITY TO TAX ON THE DISTRIBUTOR. IN THE ABSENCE O F PRIMARY LIABILITY ON THE DISTRIBUTOR AT SUCH POINT OF TIME, THE RE IS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE. TH E 12 DIFFERENCE BETWEEN THE SALE PRICE TO RETAILER AND THE PRICE WHICH THE DISTRIBUTOR PAYS TO THE ASSESSEE IS HIS I NCOME FROM BUSINESS. IT CANNOT BE CATEGORIZED AS COMMISSION. THE SALE IS SUBJECT TO CONDITIONS, AND STIPULATIONS. THIS BY ITSEL F DOES NOT SHOW AND ESTABLISH PRINCIPAL AND AGENT RELATIONSHIP. 60. THE FOLLOWING ILLUSTRATION MAKES THE POINT CLEAR: ON DELIVERY OF THE PREPAID CARD, THE ASSESSEE RAISES INVOICES AND UPDATES THE ACCOUNTS. IN THE FIRST INSTANCE, SALE IS ACCOUNTED FOR RS.100/-, WHICH IS THE FIRST ACCOUNT AND RS.80/- IS THE SECOND ACCOUNT AND THE THIRD ACCOUNT IS RS.20 /-. IT SHOWS THAT THE SALES IS FOR RS.100/-, COMMISSION IS GIV EN AT RS.20/- TO THE DISTRIBUTORS AND NET VALUE IS RS.80/-. TH E ASSESSEES SALE IS ACCOUNTED AT THE GROSS VALUE OF RS.1 00/- AND THEREAFTER, THE COMMISSION PAID AT RS.20/-IS ACCO UNTED. THEREFORE, IN THOSE CIRCUMSTANCES OF THE CASE, THE ES SENCE OF THE CONTRACT OF THE ASSESSEE AND DISTRIBUTOR IS THA T OF SERVICE AND THEREFORE, SECTION 194H OF THE ACT IS ATTRACTED. 61. HOWEVER, IN THE FIRST INSTANCE, IF THE ASSESSEE AC COUNTED FOR ONLY RS.80/- AND ON PAYMENT OF RS.80/-, HE HANDS OVER THE PREPAID CARD PRESCRIBING THE MRP AS RS.100/-, THEN AT THE TIME OF SALE, THE ASSESSEE IS NOT MAKING ANY PAYMENT. CONSEQUENTLY, THE DISTRIBUTOR IS NOT EARNING ANY INCOM E. THIS DISCOUNT OF RS.20/- IF NOT REFLECTED ANYWHERE IN THE B OOKS OF ACCOUNTS, IN SUCH CIRCUMSTANCES, SECTION 194H OF THE A CT IS NOT ATTRACTED. 62. IN THE APPEALS BEFORE US, THE ASSESSEES SELL PREPAID CARDS/VOUCHERS TO THE DISTRIBUTORS. AT THE TIME OF TH E ASSESSEE SELLING THESE PRE-PAID CARDS FOR A CONSIDERATION TO THE DISTRIBUTOR, THE DISTRIBUTOR DOES NOT EARN ANY INCOME . IN FACT, RATHER THAN EARNING INCOME, DISTRIBUTORS INCUR EXPENDI TURE FOR THE PURCHASE OF PREPAID CARDS. ONLY AFTER THE RESALE O F THOSE PREPAID CARDS, DISTRIBUTORS WOULD DERIVE INCOME. AT THE TIME OF THE ASSESSEE SELLING THESE PRE-PAID CARDS, HE IS NOT IN POSSESSION OF ANY INCOME BELONGING TO THE DISTRIBUTO R. THEREFORE, THE QUESTION OF ANY INCOME ACCRUING OR ARI SING TO THE DISTRIBUTOR AT THE POINT OF TIME OF SALE OF PREP AID CARD BY THE ASSESSEE TO THE DISTRIBUTOR DOES NOT ARISE. THE CONDITION PRECEDENT FOR ATTRACTING SECTION 194H OF THE ACT IS THAT THERE SHOULD BE AN INCOME PAYABLE BY THE ASSESSEE TO THE DISTRIBUTOR. IN OTHER WORDS THE INCOME ACCRUED OR BE LONGING TO THE DISTRIBUTOR SHOULD BE IN THE HANDS OF THE ASSES SEES. THEN OUT OF THAT INCOME, THE ASSESSEE HAS TO DEDUCT INCOM E TAX THEREON AT THE RATE OF 10% AND THEN PAY THE REMAINI NG PORTION OF THE INCOME TO THE DISTRIBUTOR. IN THIS CONTEXT IT IS PERTINENT TO MENTION THAT THE ASSESSEE SELLS SIM CARDS TO THE DIST RIBUTOR AND ALLOWS A DISCOUNT OF RS.20/-, THAT RS.20/- DOES NOT REPRESENT THE INCOME AT THE HANDS OF THE DISTRIBUTO R BECAUSE THE DISTRIBUTOR IN TURN MAY SELL THE SIM CARDS TO A S UB- DISTRIBUTOR WHO IN TURN MAY SELL THE SIM CARDS TO THE RETAILER AND IT IS THE RETAILER WHO SELLS IT TO THE CUSTOMER. THE PROFIT EARNED BY THE DISTRIBUTOR, SUB-DISTRIBUTOR AND THE RE TAILER WOULD BE DEPENDANT ON THE AGREEMENT BETWEEN THEM AND ALL 13 OF THEM HAVE TO SHARE RS.20/- WHICH IS ALLOWED AS DISCO UNT BY THE ASSESSEE TO THE DISTRIBUTOR. THERE IS NO REL ATIONSHIP BETWEEN THE ASSESSEE AND THE SUB-DISTRIBUTOR AS WELL AS THE RETAILER. HOWEVER, UNDER THE TERMS OF THE AGREEMENT, SE VERAL OBLIGATIONS FLOW IN SO FAR AS THE SERVICES TO BE REN DERED BY THE ASSESSEE TO THE CUSTOMER IS CONCERNED AND, THEREFORE , IT CANNOT BE SAID THAT THERE EXISTS A RELATIONSHIP OF PRINCIPAL AND AGENT. IN THE FACTS OF THE CASE, WE ARE SATISFIED THA T, IT IS A SALE OF RIGHT TO SERVICE. THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTOR IS THAT OF PRINCIPAL TO PRINCIPA L AND, THEREFORE, WHEN THE ASSESSEE SELLS THE SIM CARDS TO TH E DISTRIBUTOR, HE IS NOT PAYING ANY COMMISSION; BY SUCH SALE NO INCOME ACCRUES IN THE HANDS OF THE DISTRIBUTOR AND H E IS NOT UNDER ANY OBLIGATION TO PAY ANY TAX AS NO INCOME IS GENERATED IN HIS HANDS. THE DEDUCTION OF INCOME TAX AT SOURCE BEING A VICARIOUS RESPONSIBILITY, WHEN THERE IS NO PRIMARY RES PON SIBILITY, THE ASSESSEE HAS NO OBLIGATION TO DEDUCT TD S. ONCE IT IS HELD THAT THE RIGHT TO SERVICE CAN BE SOLD THEN THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUT OR WOULD BE THAT OF PRINCIPAL AND PRINCIPAL AND NOT PRINCIPAL A ND AGENT. THE TERMS OF THE AGREEMENT SET OUT SUPRA IN UNMISTA KABLE TERMS DEMONSTRATE THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTOR IS NOT THAT OF PRINCIPAL AND AGEN T BUT IT IS THAT OF PRINCIPAL TO PRINCIPAL. 63. IT WAS CONTENDED BY THE REVENUE THAT, IN THE EVEN T OF THE ASSESSEE DEDUCTING THE AMOUNT AND PAYING INTO THE DEPARTMENT, ULTIMATELY IF THE DEALER IS NOT LIABLE TO TAX IT IS ALWAYS OPEN TO HIM TO SEEK FOR REFUND OF THE TAX AND , THEREFORE, IT CANNOT BE SAID THAT SECTION 194H IS NO T ATTRACTED TO THE CASE ON HAND. AS STATED EARLIER, ON A PROPER CONSTRUCTION OF SECTION 194H AND KEEPING IN MIND THE OBJECT WITH WHICH CHAPTER XVII IS INTRODUCED, THE PERSON P AYING SHOULD BE IN POSSESSION OF AN INCOME WHICH IS CHARGE ABLE TO TAX UNDER THE ACT AND WHICH BELONGS TO THE PAYEE. A S TATUTORY OBLIGATION IS CAST ON THE PAYER TO DEDUCT THE TAX A T SOURCE AND REMIT THE SAME TO THE DEPARTMENT. IF THE PAYEE IS NOT IN POSSESSION OF THE NET INCOME WHICH IS CHARGEABLE TO TAX, THE QUESTION OF PAYER DEDUCTING ANY TAX DOES NOT ARISE. AS HELD BY THE APEX COURT IN BHAVANI COTTON MILLS LIMITEDS CASE, IF A PERSON IS NOT LIABLE FOR PAYMENT OF TAX AT ALL, AT ANY T IME, THE COLLECTION OF TAX FROM HIM, WITH A POSSIBLE CONTINGENCY OF REFUND AT A LATER STAGE WILL NOT MAKE THE ORIGINAL LEVY VALID . 64. IN THE CASE OF VODAFONE, IT IS NECESSARY TO LOOK I NTO THE ACCOUNTS BEFORE GRANTING ANY RELIEF TO THEM AS SET OUT ABOVE. THEY HAVE ACCOUNTED THE ENTIRE PRICE OF THE PREPAID CARD AT RS.100/- IN THEIR BOOKS OF ACCOUNTS AND SHOWING THE D ISCOUNT OF RS.20/- TO THE DEALER. ONLY IF THEY ARE SHOWING RS.80 /- AS THE SALE PRICE AND NOT REFLECTING IN THEIR ACCOUNTS A CREDIT OF RS.20/- TO THE DISTRIBUTOR, THEN THERE IS NO LIABILITY T O DEDUCT TAX UNDER SECTION 194H OF THE ACT. THIS EXERCISE HAS TO BE DONE BY THE ASSESSING AUTHORITY BEFORE GRANTING ANY RELIEF. THE SAME EXERCISE CAN BE DONE EVEN IN RESPECT OF OT HER ASSESSEES ALSO. 14 65. IN THE LIGHT OF THE AFORESAID DISCUSSIONS, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE AUTHORITIES HOLDIN G THAT SECTION 194H OF THE ACT IS ATTRACTED TO THE FACTS O F THE CASE IS UNSUSTAINABLE. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 14. FURTHER WE FIND THAT EVEN THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF M/S BHARTI HEXACOM LIMITED (SU PRA), STATED TO BE A SUBSIDIARY OF THE ASSESSEE, HELD THA T THE DISCOUNT PAID TO DISTRIBUTORS WAS NOT IN THE NATURE OF COMMISSION AS ENVISAGED U/S 194H OF THE ACT AND THU S THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE ON T HE SAME. THE I.T.A.T. JAIPUR BENCH FOLLOWING THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF M/S BHA RTI HEXACOM LIMITED (SUPRA) DELETED THE DEMAND RAISED O N IDENTICAL ISSUE IN THE CASE OF M/S BHARTI HEXACOM L IMITED (SUPRA) IN A SUBSEQUENT ASSESSMENT YEAR. FURTHER WE NOTE THAT THE I.T.A.T. GAUHATI BENCH HAS ALSO AFFIRMED T HE AFORESAID PROPOSITION OF LAW IN THE MATTER OF THE A SSESSEE ITSELF I.E. BHARTI AIRTEL LIMITED IN ITS ORDER DAT ED 22.2.2018 IN ITA NOS.59 TO 62/GUAHATI/2012 RELATING TO ASSESS MENT YEARS 2006-07 TO 2009-10. THEREFORE, WE FIND THAT T HE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY VARIO US HIGH COURTS AND VARIOUS BENCHES OF THE I.T.A.T. IN THE C ASE OF THE ASSESSEES GROUP CONCERNS ONLY WHEREIN THE BUSI NESS MODEL IS MORE OR LESS OF IDENTICAL NATURE. THE SAI D DECISIONS ARE THEREFORE APPLICABLE TO THE FACTS OF THE PRESENT CASE. MOREOVER, FOR DECIDING THE ISSUE BEFORE US , WHEN NO DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I S AVAILABLE ON THE ISSUE AND WHERE THERE ARE DECISION S OF NON- JURISDICTIONAL HIGH COURT EXPRESSING THE CONTRARY V IEW, THE 15 SETTLED LEGAL PRINCIPLE IS THAT THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE ADOPTED, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD ., 88 ITR 192 (SC) AND CIT VS. VATIKA TOWNSHIP PVT. LTD., 367 ITR 466 (SC). 15. IN VIEW OF THE AFORESAID, UPON CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND APPL YING THE PRINCIPLES LAID DOWN IN THE JUDICIAL PRECEDENT CITE D BEFORE US WE HOLD THAT THE SALE OF PREPAID SIM CARDS BY TH E ASSESSEE TO THE DISTRIBUTORS ARE ON PRINCIPAL TO PR INCIPAL BASIS AND HENCE OUT SIDE THE AMBIT OF SECTION 194H OF THE ACT. THEREFORE, THE ASSESSEE WAS NOT REQUIRED TO DE DUCT TAX ON THE SAME AND, THEREFORE, COULD NOT BE HELD TO BE AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE . THE DEMAND RAISED ON THE ASSESSEE U/S 201(1) AND 201(1A ) OF THE ACT IS, THEREFORE, DIRECTED TO BE DELETED. 16. GROUND OF APPEAL NOS.1 TO 1.2 ARE THEREFORE, AL LOWED WHILE GROUND NO.1.3 IS DISMISSED. 17. GROUND NOS.2 TO 2.1 RELATE TO THE ISSUE OF TDS ON ROAMING CHARGES AND READ AS UNDER: 2) THE LEARNED AO HAD ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1961 TO THE TRANSACTION OF NATIONAL AND INTERNATIONAL ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS ON ACCOUNT OF ROAMING CHARGES INCURRED BY THE APPELLANT'S SUBSCRIBER ON THEIR NETWORK AND CREATING A DEMAND OF RS.4,22,489/- HOLDING THE ASSESSEE COMPANY TO BE IN DEFAULT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT DELETING THE DEMAND RAISED U/S 194C / 201(1) AND HAS ERRED IN RESTORING 16 THE MATTER BACK TO THE FILE OF THE AO TO DETERMINE T HE APPLICABILITY OF SECTION 194J OF THE ACT.\ 2.1) THE LEARNED AO HAD ERRED BOTH ON FACTS AND IN LAW IN NOT TAKING COGNIZANCE OF THE CERTIFICATE ISSUED BY TH E INCOME TAX DEPARTMENT U/S 195(2) OF THE INCOME TAX ACT IN RESPECT OF THE CHARGES PAID TO INTERNATIONAL TELECOM COMPANIES ON ACCOUNT OF THE CHARGES INCURRED BY THE SUBSCRIBER OF THE ASSESSEE COMPANY WHILE ROAMING IN INTERNATIONAL TERRITORY, ACCEPTING THAT SUCH PAYMENTS WERE NOT SUBJECT TO WITHHOLDING TAX U/S 195. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN RESTORING THE MATT ER BACK TO THE FILE OF AO. 18. DURING THE COURSE OF HEARING BEFORE US LD.COU NSEL FOR THE ASSESSEE POINTED OUT THAT THE AO HAD HELD THE A SSESSEE LIABLE TO TDS ON ROAMING CHARGES PAID TO OTHER TELECOMMUNICATION SUBSCRIBERS, WHICH WAS PAID ON AC COUNT OF THE SUBSCRIBERS OF THE ASSESSEE COMPANY USING SE RVICE OF OTHER TELECOMMUNICATION SUBSCRIBERS TO MAKE CALLS, FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S BHARAT SANCHAR NIGAM LTD. & ANOTHER VS. UNION OF INDIA & OTHERS, 282 ITR 273, WHEREIN THE PROVIDING OF MOBILE CONNECTION WAS HELD TO BE IN TH E NATURE OF SERVICE CONTRACT. LD.COUNSEL FOR THE ASSESEE THE REAFTER POINTED OUT THAT THE LD.CIT(A), WHILE ADJUDICATING THE ISSUE, NOTED THAT THE ISSUE OF TAX DEDUCTION AT SOURCE ON THE DOMESTIC ROAMING CHARGES HAD BEEN EXAMINED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS M/S BHA RATI CELLULAR (2010) 193 TAXMAN 97, OPINING THAT IT WAS NECESSARY TO FIND OUT IF ANY HUMAN INTERVENTION WAS INVOLVED AT ANY STAGE SO AS TO DETERMINE WHETHER TH E SERVICES RENDERED WERE IN THE NATURE OF TECHNICAL S ERVICES WARRANTING TAX DEDUCTION AT SOURCE U/S 194J OF THE ACT. THE LD.CIT(APPEALS) HAD NOTED THAT THE HON'BLE SUPR EME 17 COURT HAD GIVEN DIRECTIONS TO THE CBDT TO THE EFFEC T THAT THE DEPARTMENT NEEDS NOT PROCEED ON THE ISSUE ONLY BY THE CONTRACTS PLACED BEFORE THE OFFICERS BUT SHOULD EXA MINE TECHNICAL EXPERTS WHICH WOULD COOPERATE IN DISPOSIN G OFF THE ISSUE EXPEDITIOUSLY AND FURTHER ENABLE THE APPELLAT E FORUMS TO DECIDE THE LEGAL ISSUES BASED ON THE FACTUAL FOU NDATION. THE LD.CIT(APPEALS) ALSO NOTED THAT THE HON'BLE APE X COURT WAS OF THE VIEW THAT THE MATTER SHOULD RECEIVE FRES H CONSIDERATION IN THE HANDS OF THE ASSESSING OFFICER . LD.COUNSEL FOR THE ASSESEE POINTED OUT THAT CONSIDE RING THE AFORESAID DECISION OF THE APEX COURT, THE CIT(APPEA LS), HAD DIRECTED THE ASSESSING OFFICER IN THE PRESENT CASE TO TAKE A FRESH DECISION ON THE ISSUE. SIMILARLY, LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT ON THE CONTENTION RAISED BY THE ASSESSEE THAT SINCE THE PAYEES HAD PAID TAXES ON TH E INCOMES RECEIVED, THE ASSESSEE COULD NOT BE HELD AS AN ASSESSEE/PAYER IN DEFAULT FOR NON DEDUCTING TAX AT SOURCE, THE LD.CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO GIVE A FRESH OPPORTUNITY TO THE ASSESSEE TO SUBMIT REQUISI TE DETAILS AND FURTHER DIRECTED THAT THE DEMAND BE REDUCED TO THE EXTENT THE DETAILS WERE PRODUCED BEFORE THE ASSESSI NG OFFICER. 19. LD. COUNSEL FOR ASSESSEE THEREAFTER STATED THA T IT HAD NO GRIEVANCE AGAINST THE AFORESAID DIRECTIONS OF TH E LD.CIT(APPEALS) SINCE THE LD.CIT(APPEALS) HAD ONLY RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR CONSIDERING THE SAME AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE HON'BL E APEX COURT IN THE CASE OF M/S BHARATI CELLULAR (SUPRA) O N THE 18 ISSUE OF TDS ON ROAMING CHARGES AND ALSO ON THE ALT ERNATE CONTENTION RAISED BY THE ASSESSEE OF NO TAX TO BE D EDUCTED AT SOURCE WHERE PAYEES HAVE PAID TAXES ON THE SAME, FOR VERIFICATION OF FACTS RELATING TO THE SAME. THE LD. COUNSEL FOR ASSESSEE STATED THAT IT WAS, THEREFORE, MAKING NO ARGUMENTS ON THE GROUNDS RAISED IN 2 TO 2.1 BEFORE US. IN VIEW OF THE SAME, GROUND OF APPEAL NOS.2 TO 2. 1 ARE TREATED AS DISMISSED. 20. IN EFFECT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.216/CHD/2013 : 21. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) THE LEARNED ACIT (IDS), CHANDIGARH [AO] HAS ERRED BOTH ON FACTS AND IN LAW; IN APPLYING THE PROVISIONS OF SECTION 194] OF THE INCOME TAX ACT, 1961 TO THE TRANSACTION OF NATIONAL ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS ON ACCOUNT OF ROAMING CHARGES INCURRED BY THE APPELLANT'S SUBSCRIBER ON THEIR NETWORK. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRE D BOTH ON FACTS AND IN LAW IN IGNORING THE FACTUAL EVI DENCE PLACED BEFORE HIM TO SHOW THAT THERE IS NO TECHNICAL SERVICES RENDERED WITHIN THE MEANING OF SECTION 194] OF THE ACT AS EVIDENT FROM THE EXAMINATION OF THE TECH NICAL EXPERT, AND FURTHER ERRED IN NOT ADJUDICATING ON TH E ISSUE BUT RESTORING IT BACK TO THE FILE OF THE ASSESSING O FFICER. 2. THE AO HAS ERRED BOTH ON FACTS AND IN LAW IN DEMANDING THE TAX AMOUNTING TO RS. 12,54,601/-, IN SPITE OF T HE FACT THAT THE AMOUNT HAS BEEN SUBJECT TO TAX IN THE HAND S OF OTHER TELECOM OPERATORS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON F ACTS AND IN LAW IN IMPOSING THE REQUIREMENT OF FURNISHING CERTIFICATE FROM THE AUDITOR OF THE DEDUCTEES TO CE RTIFY THE FACT THAT THE DISPUTED AMOUNT HAS BEEN TAKEN INTO ACCOUNT BY OTHER TELECOM OPERATORS IN COMPUTING THEI R INCOMES AND TAX HAS ALREADY BEEN PAID ON THE SAME B Y OTHER TELECOM OPERATORS. 3. THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LAW IN CHARGING INTEREST OF RS.6,02,208/- U/S 201(1 A) OF T HE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS 19 FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED AO. 22. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES T HAT THE SOLE ISSUE IN THE PRESENT CASE PERTAINS TO TAX DEDUCTION AT SOURCE ON ROAMING CHARGES PAID BY THE ASSESSEE T O OTHER TELECOMMUNICATION SERVICE PROVIDERS. IT WAS SUBMITT ED BY BOTH THE PARTIES THAT THE FACTS OF THE CASE AND THE ISSUE IN THE PRESENT CASE WERE IDENTICAL TO THAT RAISED IN G ROUND NOS.2 TO 2.1 IN ITA NO.340/CHD/2013 OF THE ASSESSEE S APPEAL. LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT ITS CONTENTIONS MADE IN GROUND NO.2 TO 2.1 OF ASSEESSES APPEAL IN ITA NO.340/CHD/2013, ARE REITERATED HEREIN ALSO. CONSIDERING THE ABOVE SINCE ADMITTEDLY THE FACTS AN D ISSUES INVOLVED IN THE GROUNDS RAISED BEFORE US AS ABOVE A RE IDENTICAL TO THAT IN GROUND NOS.2 TO 2.1 OF THE ASS ESSEES APPEAL IN ITA NO.340/CHD/2013, AND ALSO THE PLEADIN GS OF THE LD.COUNSEL FOR THE ASSESSEE. OUR DECISION RENDE RED THEREIN AT PARA 19 OF OUR ORDER ABOVE WILL APPLY T O THE ABOVE GROUNDS ALSO, FOLLOWING WHICH THE GROUND NOS. 1 TO 3 RAISED BY THE ASSESSEE ARE DISMISSED. THE APPEAL OF THE ASSESSEE IS, THEREFORE, DISMISSE D. ITA NO.217/CHD/2013 : 23. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) THE LEARNED ASSTT. COMMISSIONER OF INCOME TAX ( TDS) (AO) HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE INCOME TAX ACT TO THE DISCOUNT GIVEN TO DISTRIBUTORS ON SALE OF PRE-PAID PRODUCTS, BEING, 'RIGHT TO USE AIRTIME FOR A SPECIF IED VALUE'. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LA W IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFI CER. 20 1.1) THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LA W IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPA NY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINS T THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 1.2) THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPANY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTING TO RS.38,034,952/- U/S 194H ON THE DIFFERENCE BETWEEN THE DISTRIBUTOR'S PRICE AND SALE PRICE OF THE PREPAID CARD ALLEGING THE DIFFERENCE T O BE IN THE NATURE OF COMMISSION. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ER RED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED AO. 1.3) THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LAW DEMANDING THE TAX AMOUNTING TO RS.38,034,952/-, IN SPITE OF THE FACT THAT THE AMOUNT HAS BEEN SUBJECT TO TAX IN THE HANDS OF DISTRIBUTORS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN NOT CONSIDERING THE INFORMATION FILED BY TH E COMPANY TO SUBSTANTIATE THAT THE DISTRIBUTOR HAS ALREAD Y PAID TAX ON THE DISPUTED AMOUNT. 2) THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LA W IN CHARGING INTEREST OF RS.91,28,390/- U/S 201(1 A) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLD ING THE ACTION OF THE LEARNED AO. 24. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES T HAT THE SOLE ISSUE IN THE PRESENT CASE PERTAINS TO TAX DEDUCTION AT SOURCE ON INCENTIVES PAID TO DISTRIBUTORS ON SAL E OF PREPAID SIM CARDS. IT WAS SUBMITTED BY BOTH THE PAR TIES THAT THE FACTS OF THE CASE AND THE ISSUE IN THE PRE SENT CASE WERE IDENTICAL TO THAT RAISED IN GROUND NOS.1 TO 1. 3 IN ITA NO.340/CHD/2013 OF THE ASSESSEES APPEAL. CONSIDERI NG THE ABOVE SINCE ADMITTEDLY THE FACTS AND ISSUES INVOLVE D IN THE GROUNDS RAISED BEFORE US AS ABOVE ARE IDENTICAL TO THAT IN GROUND NOS.1 TO 1.3 OF THE ASSESSEES APPEAL IN ITA NO.340/CHD/2013, OUR DECISION RENDERED THEREIN AT P ARA 15 & 16 OF OUR ORDER ABOVE WILL APPLY TO THE ABOVE GROUNDS 21 ALSO, FOLLOWING WHICH THE GROUND NOS.1, 1.1, 1.2 & 2 ARE ALLOWED WHILE GROUND NO. 1.3 RAISED BY THE ASSESSEE IS DISMISSED. THE APPEAL OF THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED. 25. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN I TA NO.340/CHD/2013 & ITA NO.217/CHD/2013 ARE PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IN ITA NO.216/CHD/2013 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 30 TH MAY, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH