Idea Cellular Limited, Ahmedabad V. The Income tax Officer, TDS-4, Ahmedabad

ITA 2868/AHD/2010

• Counselvise Citation: 286820514 RSA 2010
• Duration Of Justice: 4 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: RONAT DOSHI
• Keywords: Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE S/SHRI G. D. AGRAWAL, V.P. AND RAJPAL YADA V, J.M. ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09,2009-10, 2010-11 IDEA CELLULAR LTD., 4 TH FLOOR, ABHIJEET-III, NEAR MITHAKHALI 6 TH ROAD, ELLISBRIDGE, AHMEDABAD-380006. VS INCOME-TAX OFFICER, TDS-4, AHMEDABAD. (APPELLANT) (RESPONDENT) PA NO.AAACB 21000A APPELLANT BY SHRI RONAT DOSHI, AR RESPONDENT BY SHRI B. L. YADAV, SR.DR DATE OF HEARING: 13/5/2015 DATE OF PRONOUNCEMENT: 15/5/2015 O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER. PRESENT THREE APPEALS ARE DIRECTED AT THE INSTANCE OF ASSESSEE AGAINST THE SEPARATE ORDERS OF EVEN DATE I.E. 10.8. 2010 PASSED BY THE LD. CIT(A) IN AYS 2008-09 TO 2010-11. THE GROUNDS O F APPEAL TAKEN BY THE ASSESSEE IN ALL THESE THREE YEARS ARE NOT IN CONSONANCE OF RULE-8 OF I.T.A.T. RULES, 1963 RATHER THEY ARE DESC RIPTIVE AND ARGUMENTATIVE IN NATURE. IT HAS TAKEN 4 MAIN GROUND S AND IN EACH ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 2 MAIN GROUND, IT HAS TAKEN THREE SUB-GROUNDS. HOWEVE R, ITS GRIEVANCE REVOLVES AROUND THE SINGLE ISSUE I.E., WHETHER THE LD. AO IS JUSTIFIED IN TREATING THE DISCOUNT OFFERED BY THE ASSESSEE TO PR E-PAID DISTRIBUTORS IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE I.T .ACT, 1961 AND ACCORDINGLY JUSTIFIED IN HOL DING THE ASSESSEE AS SSESSEE IN DEFAULT FOR NON-DEDUCTION OF TAX UN DER SECTION 194H OF THE ACT. IT FURTHER PLEADED THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE CONCLUSION OF THE AO FOR TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT AND CONSEQUENTLY LEVYING INTEREST UNDER S ECTION 201(1A) OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TELECOM SERVICE PROVIDER ENGAGED IN PROVIDING SERVICES IN G UJARAT CIRCLE. IN THE COURSE OF ITS BUSINESS IT APPOINTS PRE-PAID DIS TRIBUTORS. A SURVEY WAS CARRIED IN THE BUSINESS PREMISES OF THE ASSESSE E ON 18.8.2008 TO ASCERTAIN WHETHER THE ASSESSEE COMPANY IS DEDUCT ING PROPER TAXES AT SOURCE ON COMMISSION PAYMENT OR NOT. ACCOR DING TO THE AO, DURING THE COURSE OF SURVEY, IT IS SEEN THAT THE DE DUCTOR COMMITTED VARIOUS DEFAULTS FOR NON-DEDUCTION AND LESS DEDUCTI ON UNDER VARIOUS PROVISIONS OF TDS. HE FURTHER OBSERVED THAT ASSESSE E HAS SOLD PRE- ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 3 PAID VOUCHERS OF VARIOUS FACE VALUE TO ITS DISTRIBU TORS AT LOWER THAN ITS FACE VALUE. THE DIFFERENCE IS NOTHING BUT COMMISSIO N ON WHICH NO TDS HAS BEEN DEDUCTED. THE RELATION BETWEEN THE DED UCTOR AND THE DISTRIBUTORS WAS ON PRINCIPLE AND AGENT BASIS AND, THEREFORE, ANY AMOUNT PAID TO AGENT BY WAY OF MARGIN IS COMMISSION . HE WORKED OUT THE COMMISSION PAYMENT AS UNDER :- SL.NO. F.Y. AMOUNT OF COMMISSION RS. 1. 2007-08 190,704,484/- 2. 2008-09 270,113,473/- 3. 2009-10(UPTO FEB 10) 291,471,745/- TOTAL 752,289,702/- ACCORDING TO THE AO SECTION 194H CONTEMPLATES THAT FOR COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEI VABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED., THE DEFINITION OF COMMISSION ALSO STAT ES THAT EVEN IF THE AMOUNT IS RECEIVED INDIRECTLY BY A PERSON ACTIN G ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED, IT AMOUNTS TO COMMISSION/BROKERAGE WHICH ATTRACTS TDS UNDER SECTI ON 194H OF THE ACT. THE LD. AO HAS CONFRONTED THE ASSESSEE AND THE REAFTER TREATED ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 4 IT IN DEFAULT. THE LD. AO HAS CALCULATED THE AMOUNT UNDER SECTION 201(1) AND INTEREST UNDER SECTION 201(1A) :- F.Y. 201(1) 201(1A) TOTAL DEMAND 2007-08 21604779 6333102 27,937,881 2008-09 30603857 5271105 35,874,962 2009-10 31211523 1913478 33,125,001 TOTAL 83420159 13517685 96,937,844 IN THIS WAY, THE LD. AO HAS WORKED OUT THE DEMAND B Y A COMMON ORDER DATED 25.3.2010 PASSED UNDER SECTION 201(1) & 201(1A) OF THE I.T. ACT, 1961 FOR AY 2008-09, 2009-10 & 2010-11. 3. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT AN IDENTICAL ISSUE HAD COME UP BEFORE THE HON BLE DELHI HIGH COURT IN ASSESSEES OWN CASE. HONBLE COURT HAS HEL D THAT ON SALE OF PRE-PAID VOUCHERS, TDS OUGHT TO BE DEDUCTED. THE JU DGMENT IS REPORTED IN 325 ITR 148 (DELHI). HONBLE KERALA HIG H COURT HAS ALSO DECIDED THE ISSUE AGAINST THE ASSESSEE IN THE CASE OF VODAFONE ESSAR CELLULAR LIMITED VS. ACIT 332 ITR 255. HONBL E CALCUTTA HIGH ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 5 COURT HAS ALSO DECIDED AGAINST THE ASSESSEE IN THE CASE OF BHARTI CELLULAR LTD. VS. ACIT 244 CTR 185 (CAL). ALL THESE HIGH COURTS CONCLUDED THAT DISCOUNT SHOULD BE CONSIDERED AS CO MMISSION AND SAME WOULD BE LIABLE FOR WITH-HOLDING TAX U/S 194H OF THE ACT. HE FURTHER CONTENDED THAT RECENTLY HONBLE KARNATAKA H IGH COURT HAS CONSIDERED ALL THESE DECISIONS IN THE CASES OF BHAR TI AIRTEL LTD., VODAFONE ESSAR SOUTH LTD., AND TATA TELESERVICES LT D. RENDERED IN ITA NOS.637-744, 256-263, 158-163 OF 2013. THE HON BLE COURT OBSERVED THAT HONBLE KERALA HIGH COURT IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. AND HONBLE DELHI HIGH COURT IN THE CASE OF ASSESSEE (IDEA CELLULAR LTD.) PROCEEDED ON THE BASI S THAT SERVICES CANNOT BE SOLD AND IT IS TO BE RENDERED. HONBLE KA RNATAKA HIGH COURT IS OF THE OPINION THAT RIGHT TO SERVICE CAN BE SOLD AND, THEREFORE, THE INCOME ACCRUES TO THE PRE-PAID DISTRIBUTORS ONLY WH EN THEY SELL THIS RIGHT TO SERVICE AND NOT WHEN THEY PURCHASE THIS RI GHT TO SERVICE FROM THE CELLULAR COMPANIES. AT THE TIME OF SALE OF PRE- PAID CARDS BY THE ASSESSEE TO THE PRE-PAID DISTRIBUTORS INCOME HAS NO T ACCRUED OR ARISEN TO THE PRE-PAID DISTRIBUTORS AND THERE IS NO PRIMARY LIABILITY TO TAX ON THE PRE-PAID DISTRIBUTORS. THE LD. COUNSEL P OINTED OUT THAT ALL THESE DECISIONS HAVE TRAVELLED TO THE HONBLE SUPR EME COURT. THE ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 6 APPEALS AT THE END OF THE ASSESSEE AS WELL AS AT TH E END OF REVENUE WERE TAKEN UP FOR REGULAR HEARING AFTER ADMISSION. NOW THE APPEALS ARE FIXED IN THE MONTH OF SEPTEMBER. HE POINTED OUT THAT WHEN THERE IS A CONFLICT OF OPINION ON A PARTICULAR ISSUE AMON GST VARIOUS HIGH COURTS THEN THE VIEW FAVOURABLE TO THE ASSESSEE OUG HT TO BE FOLLOWED. HE SUBMITTED THAT THE DECISION OF HOBLE KARNATAKA HIGH COURT IS IN FAVOUR OF THE ASSESSEE AND, THEREFORE, THIS VIEW BE FOLLOWED. FOR BUTTRESSING HIS CONTENTION, HE RELIED UPON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD . REPORTED IN 82 ITR 192 (SC). 5. ON THE OTHER HAND THE LD. DR CONTENDED THAT DECI SION OF HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE IS AGAINST IT, THEREFORE, NO OTHER DECISION DESERVES TO BE FOLLOWE D. 6. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CES, WE FIND THAT THERE IS DIVERGENCE OF OPINION ON THIS ISSUE A MONGST HONBLE HIGH COURTS. THE CONTROVERSY WOULD ULTIMATELY BE SI LENCED BY THE HONBLE SUPREME COURT. THEREFORE, WE DEEM IT APPROP RIATE TO SET ASIDE THE IMPUGNED ORDERS AND RESTORE THESE ISSUES TO THE FILE OF LD. ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 7 AO FOR RE-ADJUDICATION. THE LD. AO SHALL TAKE INTO CONSIDERATION THE DECISION OF HONBLE SUPREME COURT IN ASSESSEES OWN CASE FOR DELHI CIRCLE OR ANOTHER CASE LAW AVAILABLE AT THAT POINT OF TIME. IT IS NEEDLESS TO SAY THAT OBSERVATIONS MADE BY US WILL N OT IMPAIR OR INJURE THE CASE OF AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DIFFERENCE/EXPLANATION OF THE ASSESSEE. THE LD. AO SHALL PROVIDE OPPORTUNITY OF HEARING TO THE ASSESSEE AND DECIDE T HE ISSUES IN ACCORDANCE WITH LAW. 7. IN THE RESULT, ALL THE THREE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/5/2015 SD/- SD/- (G. D. AGRAWAL) VICE PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER MAHATA/- ITA NOS.2868 TO 2870/AHD/2010 ASST. YEARS 2008-09 TO 2010-11 8 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 13/5/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 14/5/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: