BHARTI HEXACOM LTD., Jaipur V. ITO, Jaipur

ITA 251/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99500 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Period of limitation; Non-deduction of tax; Relationship of principal and agent
• Section: 201(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NOS. 251,252,253,254,255 &256/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2004-05, 2005-06,2006-07,2007-08 , 2008- 09 & 2008-09 M/S. BHARTI HEXACOM LTD. K-21, MALVIYA NAGAR, C-SCHEME, JAIPUR CUKE VS. THE ITO TDS -2, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACH 1766 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL , CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 20 /11/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV, AM THE ASSESSEE HAS FILED THE ABOVE APPEALS AGAINST T HE COMMON ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 18-12-2012 FOR THE ASSESSMENT YEAR 2004-05 TO 2008-09. IN ALL THE APPEALS THE GROUNDS ARE COMMON EXCEPT FOR ADDITIONAL GROUND ON LIMITATION IN RESPECT OF A.Y. 2004-05, 2005-06 AND 2006-07. FOR THE SAKE OF CONVENIENCE, THE GROU NDS RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 ARE TAKEN UP FOR ADJUDICATION WHICH ARE AS UNDER:- ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 2 1. THE LEARNED INCOME TAX OFFICER, TDS-2 (AO) HAS E RRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 19 4H OF THE INCOME TAX ACT, 1961 TO THE DISCOUNT GIVEN TO DISTRIBUTORS ON SALE OF PRE-P AID PRODUCTS, BEING, 'RIGHT TO USE AIRTIME FOR A SPECIFIED VALUE'. THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOL DING THE ACTION OF THE LEARNED ASSESSING OFFICER. 1.1 THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE D ISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ER RED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER. 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 T O BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTING TO RS. 837,842/- U/S 194H ON THE DIFFERENCE BETWEEN THE DISTRIBUTOR'S PRICE AND SALE PRICE OF THE PREPA ID CARD ALLEGING THE DIFFERENCE TO BE IN THE NATURE OF COMMISSION. THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOL DING THE ACTION OF THE LEARNED AO. 1.3 THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN L AW IN DEMANDING THE TAX AMOUNTING TO RS. 837,842/-, IN SPITE OF THE FAC T THAT THE AMOUNT HAS BEEN SUBJECT TO TAX IN THE HANDS OF DISTRIBUTOR. THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LA W IN IGNORING THE INFORMATION FILED BY THE COMPANY TO SUBSTANTIATE THAT DISTRIBUT OR HAS ALREADY PAID TAX ON THE DISPUTED AMOUNT. 2. THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LA W IN APPLYING THE PROVISIONS OF SECTION 194J OF THE INCOME TAX ACT, 1 961 TO THE TRANSACTION OF ROAMING CHARGES. THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED AO. 2.1 THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN L AW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPANY T O BE DEFAULT IN RESPECT OF NON- DEDUCTION OF TAX AMOUNTING TO RS. 4,494,507 U/S 194 J ON THE AMOUNT PAID TO OTHER TELEPHONY OPERATORS FOR ROAMING CHARGES INCURRED BY THE APPELLANT'S SUBSCRIBERS ON THE NETWORK OF SUCH OTHER TELEPHONE OPERATORS BECAU SE SUCH PAYMENT ARE NOT FOR TECHNICAL SERVICES AND DO NOT FALL WITHIN THE PROVI SIONS OF SECTION 194J OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED A O. 3. THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LA W IN CHARGING INTEREST OF RS. 4,905,761/- U/S 201(1A) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACT S AND IN UPHOLDING THE ACTION OF THE LD. AO ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 3 4. THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LA W IN PASSING AN ORDER U/S 201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 FOR A PERIOD BEYOND FOUR FINANCIAL YEARS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACT ION OF THE LEARNED AO. 2. AT THE OUTSET, THE LD. AR OF THE CONTENDS THAT G ROUND NO. 1 TO 1.2 ARE COVERED BY THE ORDER OF THIS COORDINATE BENCH I N ASSESSEE'S OWN CASE (IN ITA NO. 656/JP/2010 FOR THE ASSESSMENT YEAR 200 9-10.) AND SINCE THERE IS NO CHANGE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION, THE EARLIER DECISION OF THE COORDINATE BENCH SHOULD BE FOLLOWED . 3. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUT HORITIES BUT HE COULD NOT CONTROVERT THE ARGUMENTS OF THE LD. AR RE GARDING MATTER BEING COVERED BY THE ORDER OF THE COORDINATE BENCH (SUPRA ). 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE EARLI ER ORDER OF THE COORDINATE BENCH IN ASSESSEE'S OWN CASE (IN ITA NO. 656/JP/2010 FOR THE ASSESSMENT YEAR 2009-10) AND OBSERVED THAT THIS ISS UE HAS BEEN DEALT WITH BY THE COORDINATE BENCH BY ALLOWING THESE GROU NDS VIDE PARA 6 OF ITS ORDER AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. R ECENTLY THIS BENCH HAS DECIDED SIMILAR ISSUE IN THE CASE OF TATA TELE SERVICES, WHICH IS IDENTICAL TO THE ASSESSEES CASE. THE FACTS OF THE CASE HAS BEEN DEMONSTRATED BY THE AR THAT THE ASSESSEE WAS ISSUIN G BILL ON NET AMOUNT ON MRP HAS BEEN FIXED ON PREPAID CARD SOLD. THE ASS ESSEE HAS NOT TRANSFERRED ANY INCOME TO THE DISTRIBUTOR BUT THE D ISTRIBUTOR WAS ALLOWED TO AVAIL THE AIRTIME TO THE EXTENT OF MRP PRICE. IN BOOKS OF ACCOUNT, THE ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 4 ASSESSEE HAD CREDITED THESE RECEIPTS ON NET BASIS. THE FINDING ON THE CASE OF TATA TELE SERVICES IS REPRODUCED AS UNDER:- 2.23. WE FIND MERIT IN THE CONTENTION OF LD. COUNS EL THAT THERE IS NO JURISDICTIONAL HIGH COURT JUDGMENT ON THIS ISSUE. H ONBLE KARNATAKA HIGH COURT JUDGMENT IS ELABORATE, DETAILE D, CONSIDERS THE PREVIOUS DELHI AND KERALA HIGH COURT JUDGMENT AGAINST THE ASSESSEE AND IS LATEST COMPREHENSIVE AD JUDICATION ON THE ISSUE. EVEN IF IT IS HELD THAT THERE EXIST DIVE RGENCE OF JUDICIAL OPINION A VIEW FAVOURABLE TO THE ASSESSEE IS TO BE ADOPTED AS HELD BY HONBLE SUPREME COURT IN VEGETABLE PRODUCTS LTD. AND VATIKA TOWNSHIP CASE (SUPRA). FROM THIS ANGLE ALSO IN THESE FACTS AND CIRCUMSTANCES HONBLE KARNATAKA HIGH COURT JUDG MENT IS APPLICABLE TO THE ASSESSEES CASE. RESPECTFULLY FOL LOWING THE SAME WE HOLD THAT:- A. THE RELATIONSHIP BETWEEN ASSESSEE AND ITS DISTR IBUTORS QUA THE SALE OF IMPUGNED PRODUCTS IS ON PRINCIPAL TO PRINCI PAL BASIS; THE CONSIDERATION RECEIVED BY ASSESSEE IS SALE PRICE SI MPLICITER. B. THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN ASSESSEE AND DISTRIBUTORS AS HELD BY AUTHORITIES BELOW THEIR ORDERS ARE REVERSED. C. LOOKING AT THE TRANSACTION BEING OF SALE/PURCHA SE AND RELATIONSHIP BEING OF PRINCIPAL TO PRINCIPAL THE DI SCOUNT DOES NOT AMOUNT TO COMMISSION IN TERMS OF SEC. 194H, THE SAM E IS NOT APPLICABLE TO THESE TRANSACTIONS. THEREFORE, ASSESS EE CANNOT BE HELD IN DEFAULT; IMPUGNED DEMAND RAISED APPLYING SE C. 194H IS QUASHED. ASSESSEES GROUNDS ARE ALLOWED. BY RESPECTFULLY FOLLOWING OUR OWN DECISION ON SIMIL AR FACT, WE REVERSE THE ORDER OF THE LD CIT(A) AND ALLOW THE AP PEAL OF THE ASSESSEE ON THIS GROUND. 5. IN THE LIGHT OF THE ABOVE, RESPECTFULLY FOLLOWIN G THE DECISION OF COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR THE ASS ESSMENT YEAR 2009-10 (SUPRA), WE REVERSE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE RELATING TO GROUND NO. 1 TO 1.2. ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 5 6. NOW WE TAKE UP GROUND NO. 1.3 OF THE ASSESSEE RE GARDING DEMANDING THE TAX OF RS. 8,37,842/- WHICH IS ALREAD Y SUBJECTED TO TAX IN THE HANDS OF THE DISTRIBUTOR. 7. WE HAVE ALREADY HELD WHILE DECIDING GROUND NO. 1 TO 1.2 THAT THE MARGIN PAID TO THE DISTRIBUTOR IS NOT A COMMISSION WHICH IS LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194H. WHEN THERE IS NO COMMISSION, THE LIABILITY FOR DEDUCTION OF TAX AT SOURCE DOES NOT A RISE AT FIRST PLACE . IN ANY CASE, THE LD. CIT(A) HAS GIVEN A SPECIFIC DIRECTION THE ALTERNATIVE PLEA OF THE APPELLANT WAS ALLOWED IN VIEW OF THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF M/S. HINDUSTAN COCA COLA BEVER AGES (P) LTD. (293 ITR 226). AO IS DIRECTED TO ALLOW THE BENEFIT OF TA XES PAID BY THE DEDUCTEES AFTER DUE VERIFICATION. HOWEVER , THE LD. AR HAS NOT POINTED OUT AS TO HOW THE SAID DIRECTION CAUSES PREJUDICE T O THE ASSESSEE. HENCE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. 8. NOW WE TAKE UP THE GROUND NO. 2 AND 2.1 OF THE A SSESSEE AGAINST CONFIRMING THE ADDITION U/S 194J OF THE ACT FOR NOT DEDUCTING TAX ON ROAMING CHARGES PAID BY THE ASSESSEE TO OTHER TELEC OM OPERATORS. ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 6 9. THE LD. AR CONTENDED THAT GROUND NO. 2 AND 2.1 I N ALL THE APPEALS ARE ALSO COVERED BY THE ORDER OF THIS COORDINATE BE NCH IN ASSESSEE'S OWN CASE (IN ITA NO. 656/JP/2010 FOR THE ASSESSMENT YEA R 2009-10.) 10. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES BUT HE COULD NOT CONTROVERT THE ARGUMENTS OF THE ASSESSEE REGARDING COVERING THIS ISSUE BY THE ORDER OF THE COORDINATE BENCH (SUPRA). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE EARLI ER ORDER OF THE COORDINATE BENCH IN ASSESSEE'S OWN CASE (IN ITA NO. 656/JP/2010 FOR THE ASSESSMENT YEAR 2009-10.) AND OBSERVED THAT THIS IS SUE HAS ALREADY BEEN DEALT WITH BY THE COORDINATE BENCH BY ALLOWING THES E GROUNDS VIDE PARA 11 OF ITS ORDER AS UNDER:- 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. A FTER GOING THROUGH THE ORDER OF THE ASSESSING OFFICER, LD CIT(A); SUBM ISSIONS OF THE ASSESSEE AS WELL AS GOING THROUGH THE PROCESS OF P ROVIDING ROAMING SERVICES; EXAMINATION OF TECHNICAL EXPERTS BY THE A CIT TDS, NEW DELHI IN THE CASE OF BHARTI CELLULAR LTD.; THEREAFTER CRO SS EXAMINATION MADE BY M/S BHARTI CELLULAR LTD.; ALSO OPINION OF HONB LE THE THEN CHIEF JUSTICE OF INDIA MR. S.H. KAPADIA DATED 03/09/2013 AND ALSO VARIOUS JUDGMENTS GIVEN BY THE ITAT AHMADABAD BENCH IN THE CASE OF CANARA BANK ON MICR AND PUNE BENCH DECISION ON DATA LINK S ERVICES. WE FIND THAT FOR INSTALLATION/SETTING UP/REPAIRING/SERVICIN G/MAINTENANCE CAPACITY AUGMENTATION ARE REQUIRE HUMAN INTERVENTION BUT AFT ER COMPLETING THIS PROCESS MERE INTERCONNECTION BETWEEN THE OPERATORS IS AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTION. THE TERM I NTER CONNECTING USER CHARGES (IUC) ALSO SIGNIFIES CHARGES FOR CONNE CTING TWO ENTITIES. THE COORDINATE BENCH ALSO CONSIDERED THE HON'BLE SU PREME COURT DECISION IN THE CASE OF BHARTI CELLULAR LTD. IN THE CASE OF I-GATE ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 7 COMPUTER SYSTEM LTD. AND HELD THAT DATA LINK TRANSF ER DOES NOT REQUIRE ANY HUMAN INTERVENTION AND CHARGES RECEIVED OR PAID ON ACCOUNT OF THIS IS NOT FEES FOR TECHNICAL SERVICES AS ENVISAGED IN SECTION 194J READ WITH SECTION 9(1)(VII) READ WITH EXPLANATION-2 OF THE AC T. IN CASE BEFORE US, THE ASSESSEE HAS PAID ROAMING CHARGES I.E. IUC CHAR GES TO VARIOUS OPERATORS AT RS. 10,18,92,350/-. RESPECTFULLY FOLLO WING ABOVE JUDICIAL PRECEDENTS, WE HOLD THAT THESE CHARGES ARE NOT FEES FOR RENDERING ANY TECHNICAL SERVICES AS ENVISAGED IN SECTION 194J OF THE ACT. THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) AND ASSESSEES A PPEAL IS ALLOWED ON THIS GROUND ALSO. 12. IN THE LIGHT OF THE ABOVE, RESPECTFULLY FOLLOWI NG THE DECISION OF COORDINATE BENCH IN ASSESSEE'S OWN CASE FOR THE ASS ESSMENT YEAR 2009-10 (SUPRA), WE REVERSE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE RELATING TO GROUND NO. 2 AND 2.1. 13. GROUND NO. 3 OF THE ASSESSEE IS REGARDING CHARG ING OF INTEREST OF RS. 49,05,761/- U/S 201(1A). WE HAVE ALREADY HELD I N DECIDING GROUND NO. 1 AND 2 (SUPRA) THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE. THEREFORE, THERE CANNOT BE ANY LIABILITY OF INTERES T U/S 201(1A). THIS GROUND NO. 3 OF THE ASSESSEE IS THEREFORE, ALLOWED. 14. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE, THE DECISION TAKEN BY US FOR THE ASSESSMENT YEAR 2004-0 5 (ITA NO. 251/JP/2013) PERTAINING TO GROUND NO. 1 TO 3 SHALL APPLY MUTATIS MUTANDIS IN ALL THE APPEALS FOR THE ASSESSMENT YEAR 2005-06 TO 2008-09 (ITA NOS. 252 TO 256/JP/2013). 15. GROUND NO. 4 OF THE ASSESSEE IS SPECIFIC TO A.Y . 2004-05 TO 2006- 07 AND PERTAINS TO ORDERS PASSED BY THE AO BEING BA RRED BY LIMITATION AND ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 8 UPHOLDING THE SAME BY THE LD. CIT(A) FOR THE FINANC IAL YEARS 2003-04 TO 2005-06. 16. THE ASSESSEE HAS TAKEN UP THIS GROUND BEFORE THE LD . CIT(A) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) HAS GIVEN HIS FINDINGS AT PARA 5.2 ON PAGES 14 TO 16 OF HIS ORDER WHICH IS REPRODUCED AS UNDER:- 5.2 I HAVE DULY CONSIDERED THE SUBMISSION OF THE LD. AR AND THE MATERIAL AVAILABLE ON RECORDS. THE TIME LIMIT FOR PASSING THE ORDER U/S 201(1) HAS BEEN PROVIDED BY T HE FINANCE ACT 2009 W.E.F. 01-04-2010. THE MEMORANDUM EXPLAINING T HE PROVISIONS OF THE FINANCE BILL 2009 CLEARLY PROVIDE S THAT THE AMENDMENT WILL APPLY TO SUCH ORDERS PASSED ON OR AF TER 01-03- 2010. HENCE THE PROVISIONS OF SECTION 201(3) ARE AP PLICABLE TO THE IMPUGNED ORDER. PROVISO TO SUB-SECTION (3) OF SECTI ON 201 PROVIDES THAT AN ORDER U/S 201(1) FOR A F.Y. COMMENCING ON O R BEFORE 01-04- 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE 31-04-2 011. MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2009 ALSO STATES THAT TO PROVIDE SUFFICIENT TIME FOR PEN DING CASES, TIME LIMIT HAS BEEN EXTENDED UPTO 31-03-2011. IN THE INSTANT CASE, THE PROCEEDINGS FOR F.Y. 2003-04 TO 2005-06 WERE INITIA TED ON 25-11- 2008 AND WERE PENDING BEFORE THE AMENDMENT MADE BY FINANCE ACT 2009. HENCE, ALL THESE PROCEEDINGS WERE ALLOWED TO BE COMPLETED BY 31-03-2011 IN TERMS OF PROVISO TO SECT ION. 201(3) OF THE ACT. ACCORDINGLY, THE ORDER U/S 201(1) PASSED O N 24-03-2011 FOR F.Y. 2003-04 TO 2005-06 WERE WITHIN THE LIMITAT ION PERIOD AND WERE VALID. IT IS PERTINENT TO MENTION HERE THAT TH E APPELLANT HAS WRONGLY MENTIONED THE DATE OF INITIATION OF PROCEE DINGS AS 22-02- 2011. IT IS EVIDENT FROM RECORDS AS MENTIONED IN OR DER U/S 201(1) DATED 24-03-2011 THAT THE FIRST SHOW CAUSE NOTICE W AS ISSUED ON 25-11-2008 AND FURTHER NOTICES WERE ISSUED ON 17-09 -2010, 27-12- 2010 AND 22-02-2011. THE DECISION OF SPECIAL BENCH, MUMBAI IN THE CASE O F MAHINDRA AND MAHINDRA LTD. WAS DELIVERED ON 09-04-2 009 I.E. BEFORE THE AMENDMENT BROUGHT BY FINANCE ACT 2009. S INCE THE AMENDMENT PRESCRIBED THE SPECIFIC LIMITATION FOR OR DER U/S 201(1), THE TRIBUNALS DECISION IS NO MORE APPLICABLE. SIMI LARLY, THE OTHER ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 9 DECISIONS RELIED UPON BY THE LD. AR WERE DELIVERED WITHOUT CONSIDERING THE AMENDMENT MADE IN SECTION 201 OF TH E ACT BY FINANCE ACT 2009. HENCE, THE SAME ARE NOT RELEVANT TO DECIDE THIS ISSUE. IN VIEW OF THE ABOVE DISCUSSION, THE ORDER U/S 201( 1) DATED 24-03-201 FOR F.Y. 2003-04 TO 2005-06 IS A VALID OR DER, PASSED WITHIN THE LIMITATION PRESCRIBED U/S 201(3) OF THE ACT. THE GROUND RAISED BY THE APPELLANT IS ACCORDINGLY DISMISSED. [EMPHASIS SUPPLIED] 17. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT IT IS NOT UNDER DISPUTE THAT THE PROVISION OF NEWLY INSERTED SUB-SECTION 3 TO SECTION 201 IS APPLICABLE IN THE INSTANT CASE. HOWEVER, AT THE SAME TIME, SECTION 201(3) TALKS ABOUT TIME LIMIT FOR COMPLETION OF PRO CEEDINGS AND IS SILENT ABOUT THE INITIATION OF THE PROCEEDINGS. AS FAR AS INITIATION OF PROCEEDING, THE LD. AR RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF NHK JAPAN BROADCASTING CORPORATION 305 ITR 137 A ND HAS DRAWN A SPECIFIC REFERENCE TO PARA 19 TO 21 AND 25 OF ITS O RDER WHICH IS REPRODUCED AS UNDER:- 19. EVEN THOUGH THE PERIOD OF THREE YEARS WOULD BE A REASONABLE PERIOD AS PRESCRIBED BY S. 153 OF THE AC T FOR COMPLETION OF PROCEEDINGS, WE HAVE BEEN TOLD THAT THE TRIBUNAL HAS, IN A SERIES OF DECISIONS, SOME OF WHICH HAVE BEEN MENTIONED IN THE ORDER WHICH IS UNDER CHALLENGE BEFORE US, TAKEN THE VIEW THAT FOUR YEARS WOULD BE REASONABLE PERIOD OF TIME FOR INITIATING A CTION, IN A CASE WHERE NO LIMITATION IS PRESCRIBED. 20. THE RATIONAL FOR THIS SEEMS TO BE QUITE CLEAR- IF THERE IS A TIME LIMIT FOR COMPLETING THE ASSESSMENT, THEN THE TIME LIMIT FOR INITIATING THE PROCEEDINGS MUST BE THE SAME, IF NOT LESS. ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 10 NEVERTHELESS, THE TRIBUNAL HAS GIVEN A GRATER PERIO D FOR COMMENCEMENT OR INITIATION OF PROCEEDINGS. 21. WE ARE NOT INCLINED TO DISTURB THE TIME LIMIT O F FOUR YEARS PRESCRIBED BY THE TRIBUNAL AND ARE OF THE VIEW THAT IN TERMS OF THE DECISION OF SUPREME COURT IN BHATINDA DIST. COOP. M IL P. UNION LTD. (SUPRA) ACTION MUST BE INITIATED BY THE COMPET ENT AUTHORITY UNDER THE IT ACT, WHERE NO LIMITATION IS PRESCRIBED AS IN S. 201 OF THE ACT WITHIN THE PERIOD OF FOUR YEARS . 25. WE MAY ALSO NOTE THAT UNDER S. 191 OF THE ACT, THE PRIMARY LIABILITY TO PAY TAX IS ON THE PERSON WHOSE INCOME IT IS, THAT IS THE DEDUCTEE. OF COURSE, A DUTY IS CAST UPON THE DEDUCT OR, THAT IS THE PERSON WHO IS MAKING THE PAYMENT TO THE DEDUCTEE, T O DEDUCT TAX SOURCE BUT IF HE FAILS TO DO SO, IT DOES NOT WASH A WAY THE LIABILITY OF THE DEDUCTEE. IT IS STILL THE LIABILITY OF DEDUCTEE TO PAY THE TAX. IN THAT SENSE, THE LIABILITY OF THE DEDUCTOR IS A VICA RIOUS LIABILITY AND, THEREFORE, HE CANNOT BE PUT IN SITUATION WHICH WOUL D PREJUDICE HIM TO SUCH AN EXTENT THAT THE LIABILITY WOULD REMAIN H ANGING ON HIS HEAD FOR ALL TIMES TO COME IN THE EVENT THE IT DEPA RTMENT DECIDES NOT TO TAKE ANY ACTION TO RECOVER THE TAX EITHER BY PASSING AN ORDER U/S 201 OF THE ACT ON THROUGH MAKING AN ASSESSMENT OF INCOME OF THE DEDUCTEE.[EMPHASIS SUPPLIED] 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY THE SHOW CAUSE NOTI CE, BY VIRTUE OF WHICH, THE SUBJECT PROCEEDINGS WERE INITIATED, WAS ISSUED BY AO ON 25 TH NOV. 2008 FOR ALL THE YEARS PURSUANT TO WHICH A CON SOLIDATED ORDER U/S 201(1)/ 201(1A) WAS PASSED ON 24 TH MARCH 2011. IT IS NOT UNDER DISPUTE THAT FOR THE RELEVANT YEAR UNDER CONSIDERATION (F.Y . 2003-04, 2004-05 AND 2005-06), THE PROVISIONS OF AMENDED SECTION 201 OF THE ACT ARE ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 11 APPLICABLE. THE PROVISION OF SECTION 201(3) RELEVAN T FOR PRESENT DISCUSSION ARE REPRODUCED AS UNDER:- NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) DEEM ING A PROVISION TO BE AN ASSESSEE IN DEFAULT FOR FAILURE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX FROM A PERSON RESIDENT IN INDIA , AT ANY TIME AFTER THE EXPIRY OF :- (I) TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE STATEMENT IS FILED IN A CASE WHERE THE STATEMEN T REFERRED IN SECTION 200 HAS BEEN FILED; (II) FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH PAYMENT IS MADE OR CREDIT IS GIVE IN ANY OTHER CASE . PROVIDED THAT SUCH ORDER FOR A FINANCIAL YEAR COMME NCING ON OR BEFORE THE 1ST DAY OF APRIL 2007 MAY BE PASSE D AT ANY TIME ON OR BEFORE THE 31 ST DAY OF MARCH 2011. 19. IN THE CONTEXT OF ABOVE FACTS OF ISSUANCE OF SH OW CAUSE AND SUBSEQUENT PASSING OF ORDER UNDER SECTION 201(1)/ 2 01(1A), WHAT NEEDS TO BE EXAMINED IS WHETHER PROVISO TO SECTION 201(3) IS APPLICABLE IN THE INSTANT CASE AS INVOKED BY AO AND UPHELD BY THE LD. CIT(A). IT IS NOTED THAT PROVISION OF SECTION 201(3) READ WITH PROVISO WERE INTRODUCED BY FINANCE ACT, 2009 W.E.F. 01-04-2010. AT THAT POINT IN TIME, THE SUBJECT PROCEEDING HAD ALREADY BEEN INITIATED (BY ISSUANCE OF SHOW CAUSE NOTICE DATED 25-11-2008) AND WERE PENDING FOR COMPLETION. THEREAFTER, THE PROCEEDINGS WERE COMPLETED BY PASSING AN ORDER ON 2 4-03-2011, WELL BEFORE THE DUE DATE AS PRESCRIBED IN THE PROVISO TO SECTION 201(3) I.E, ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 12 BEFORE 31-03-2011. IN LIGHT OF THAT, PROVISO TO SEC TION 201(3) IS CLEARLY APPLICABLE IN THE INSTANT CASE AND THE SAME HAS BEE N DULY COMPLIED WITH BY THE AO. ACCORDINGLY, THE PROCEEDINGS FOR THE SUB JECT YEARS HAVE BEEN DULY COMPLETED WITHIN THE PRESCRIBED TIME LIMIT AS PER SECTION 201(3) READ WITH THE PROVISO AND WE DO NOT SEE ANY INFIRMITY IN THIS REGARD 20. NOW COMING TO THE ARGUMENTS OF THE ASSESSEE THA T SECTION 201(3) ONLY PROVIDES THE LIMITATION FOR COMPLETING THE PRO CEEDINGS BY PASSING THE ORDER AND NOT FOR INITIATION OF PROCEEDINGS. FO R INITIATION OF PROCEEDINGS, LD. AR DREW REFERENCE TO THE DECISIO N OF HON'BLE DELHI HIGH COURT IN THE CASE OF NHK JAPAN BROADCASTING CO RPORATION 305 ITR 137 WHICH PROVIDES THAT PROCEEDINGS MUST BE INITIAT ED WITHIN FOUR FINANCIAL YEAR FROM THE END OF THE RELEVANT FINANCI AL YEARS AND SUBMITTED THAT THE PRINCIPLES LAID DOWN BY HON'BLE DELHI HIG H COURT SHOULD BE APPLIED IN THE INSTANT CASE. 21. IN THIS REGARD, IT IS BE NOTED THAT LEGISLATURE HAS BROUGHT IN SPECIFIC LIMITATION PROVISION FOR THE FIRST TIME IN SECTION 201 W.E.F. 01-04-2010 FOR PASSING AN ORDER WITHIN THE PRESCRIBED TIME LIMIT O F CLOSE OF THE RELEVANT FINANCIAL YEAR AND PRIOR TO THAT, LIMITATION WAS GU IDED BY PRINCIPLE OF REASONABLENESS AS LAID DOWN BY THE COURTS FROM TIME TO TIME. IF THE ORDER HAS TO BE PASSED WITHIN THE PRESCRIBED TIME LIMIT A ND THE PROCEEDINGS ARE ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 13 TO BE COMPLETED, IT IS BUT NATURAL THAT THERE HAS T O BE AN INITIATION OF PROCEEDINGS BY ISSUANCE OF A SHOW CAUSE AND THE PER IOD OF INITIATION CANNOT BE BEYOND THE PERIOD OF COMPLETION OF PROCEE DINGS. SECONDLY, THE LEGISLATURE IN ITS WISDOM HAS DECIDED NOT TO PRESCR IBE A SPECIFIC TIME LIMIT FOR INITIATION AND HAS ONLY PROVIDED FOR PERIOD OF COMPLETION OF PROCEEDINGS. THE SAME IS THUS INBUILT IN THE OVERAL L PERIOD OF LIMITATION AS PRESCRIBED . IN VIEW OF THAT, IN CONTEXT OF SECTION 201(3), TWO YEARS FROM THE END OF THE FINANCIAL YEAR, IN A CASE WHERE THE STATEMENT REFERRED IN SECTION 200 HAS BEEN FILED, WOULD BE THE REASONABLE PERIOD FOR INITIATION AND COMPLETION OF PROCEEDINGS; AND FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH PAYMENT IS MADE OR CREDIT I S GIVEN, WOULD BE THE REASONABLE PERIOD FOR INITIATION AND COMPLETION OF PROCEEDINGS IN ANY OTHER CASE. AT THE SAME TIME, WHAT SHOULD NOT BE L OST SIGHT OF IS THE PROVISO TO SECTION 201(3) WHICH PROVIDES FOR EXTEND ED PERIOD OF LIMITATION IN RESPECT OF PENDING MATTERS FOR THE FI NANCIAL YEARS ENDING ON OR BEFORE APRIL 1, 2007. THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2009 ALSO STATES THAT TO PROVIDE S UFFICIENT TIME FOR PENDING CASES, TIME LIMIT HAS BEEN EXTENDED UPTO 31 -03-2011. IN OUR VIEW, THE LEGISLATURE HAS CARVED OUT AN EXCEPTION F OR SUCH PENDING CASES OF THE RELEVANT FINANCIAL YEARS AND THE SAID TIME L IMIT CANNOT BE CURTAILED AS THE SAME WILL RESULT IN MAKING THE PROVISO INFRU CTUOUS. IN OUR VIEW, ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 14 APPLYING THE PRINCIPLE OF HARMONIOUS CONSTRUCTION, WHERE THE PROCEEDINGS HAVE ALREADY BEEN INITIATED FOR ANY FINANCIAL YEAR COMMENCING ON OR BEFORE APRIL 1, 2007 AND THE SAME WAS PENDING COMPL ETION WHEN PROVISION OF SECTION 201(3) WERE INTRODUCED IN THE STATUE I.E, AS ON 1 APRIL 2010, AND THEREAFTER THE PROCEEDINGS WERE COMPLETED WELL BEFORE 31 MARCH 2011, THE PROCEEDINGS CANNOT BE HELD TO BE BA RRED BY LIMITATION. IN THE INSTANT CASE, THE PROCEEDINGS WERE INITIATED FOR ALL THE YEARS UNDER CONSIDERATION ON 25-11-2008 WELL BEFORE 1 APRIL 20 10 AND THEREAFTER, THE SAME WERE COMPLETED ON 24-3-2011 WELL BEFORE 31 ST MARCH 2011. HENCE, THE SAID PROCEEDINGS CANNOT BE HELD TO BE BARRED BY LIMITATION. 22. THE DECISION OF HONBLE DELHI HIGH COURT IN CAS E OF NHK JAPAN BROADCASTING CORPORATION 305 ITR 137 AND EVEN SUBSE QUENT DECISION OF SPECIAL BENCH IN CASE OF MAHINDRA AND MAHINDRA DATE D 09.04.2009 (ITA NOS.2606, 2607, 2613 AND 2614/MUMBAI/2000) AND THER EAFTER HONBLE BOMBAY HIGH COURT IN CASE OF MAHINDRA AND MAHINDRA (ITA NO.3489 OF 2009) HAVE BEEN RENDERED WHERE NO LIMITATION HAS BE EN PRESCRIBED IN SECTION 201 AND WERE DELIVERED WITHOUT CONSIDERING THE AMENDMENT MADE IN SECTION 201 OF THE ACT BY FINANCE ACT 2009. HEN CE, THE SAID DECISIONS CANNOT ADVANCE THE CAUSE OF THE ASSESSEE IN THE PRE SENT CASE. ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 15 23. IN LIGHT OF ABOVE, CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE PROCEEDINGS FOR THE FINANCIAL YEARS (F.Y. 2003-04, 2004-05 AND 2005-06) ARE NOT BARRED BY LIMITATION. HENCE, THIS COMMON G ROUND OF APPEAL TAKEN BY THE ASSESSEE FOR THESE YEARS ARE DISMISSED. 24. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 /11/201 5. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20/11/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- BHARTI HEXACOM LTD. , JAIPUR 2. IZR;FKHZ@ THE RESPONDENT-THE ITO, TDS -2, JAIPUR ,JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.251/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 16 FOR GROUND NO. 1.3. THIS IS AN ALTERNATE GROUND INA SMUCH AS THE LD. AR CONTENDED THAT IF THE GROUND NO. 1 TO 1.2 IS NOT ALLOWED EVEN THEN N O TAX LIABILITY CAN BE IMPOSED ON THE ASSESSEE INASMUCH AS THE DISTRIBUTOR HAD PAID TAX O N THE MARGIN PROVIDED TO THEM WHICH IS TERMED BY THE AO AS COMMISSION. FOR THIS LD. AR RL IED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF HINDUSTAN COCCACOL .. ITA NO. 251/JP/2013 BHARTI HEXACOM LTD. VS. ITO, TDS -2, JAIPUR 17