M/s. Tata Teleservices Ltd., New Delhi V. ACIT, New Delhi

ITA 3328/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3095 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 08-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: SPARSH BHARGAVA; RACHNA YADAV
• Keywords: Double taxation relief; Principle of natural justice; Opportunity of cross examination; Deemed to accrue or arise in india; Additional evidence; Permanent establishment; Reasonable cause; Non compliance
• Section: 5(2); 201(1)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH E, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NOS. 3328 TO 3332/DEL./2015 AND S.A. NO. 315 TO 319/DEL./2015 ASSESSMENT YEARS: 2007-08 TO 2011-12 M/S. TATA TELESERVICES LTD., 2A, OLD SHWAR NAGAR, MATHURA ROAD, NEW DELHI. PAN AAACT2438A (APPELLANT) VS. INCOME - TAX OFFICER, WARD 51(5), NEW DELHI (RESPONDENT) ASSESSEE BY SH. SPARSH BHARGAVA, ADVOCATE & MS. RACHNA YADAV, ADVOCATE REVENUE BY SH. S.R. SENAPATI, SR. DR ORDER PER L.P. SAHU, A.M.: ALL THESE APPEALS AT THE INSTANCE OF ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF THE LD. CIT(A)-41, NEW DELHI DATED 13.03. 2015 FOR A.YRS. 2007-08 TO 2010-11 AND DATED 12.03.2015 FOR A.Y. 2011-12. THE ASSESSEE HAS ALSO MOVED STAY PETITIONS IN ALL THESE APPEALS. 2. SINCE ISSUE(S) INVOLVED IN ALL THESE APPEALS ARE COMMON AND THE ASSESSEE HAS RAISED COMMON GROUNDS, ALL THE APPEALS WERE HEA RD TOGETHER AND ARE, THEREFORE, BEING DISPOSED OF BY THIS CONSOLIDATED O RDER. FOR THE SAKE OF DATE OF HEARING 15.02.2018 DATE OF PRONOUNCEMENT 1503 .2018 ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 2 CONVENIENCE AND BREVITY, WE TAKE UP THE APPEAL IN I TA NO. 338/DEL./2015 FOR A.Y. 2007-08 FIRST. THE GROUNDS RAISED IN THIS APPE AL READ AS UNDER : A. THAT THE LD. CIT (A) GROSSLY ERRED IN HOLDING THA T THE APPELLANT WAS DUTY BOUND TO DEDUCT TAX AT SOURCE UNDER SECTION 194H FR OM THE DISCOUNTS ALLOWED TO ITS DISTRIBUTORS ON BULK SALE OF STARTER KITS AND RECHARGE VOUCHERS (RCVS) UNDER SECTION 194H OF THE INCOME- TAX ACT, 1 961 ('IT ACT') AND CONSEQUENTLY HOLD IT TO BE AN ASSESSEE IN DEFAULT U NDER SECTION 201 OF THE ACT. I. THAT THE LD CIT (A) GROSSLY ERRED IN NOT APPR ECIATING THAT THE PROVISIONS OF SECTION 194H OF THE ACT WOULD APPLY O NLY AT THE TIME OF PAYMENT/CREDIT TO PAYEE'S ACCOUNT AND THAT THE DISC OUNT ALLOWED IS NOT PAYMENT/CREDIT MADE TO THE CHANNEL PARTNERS ACC OUNT; II. THAT THE LD. CIT (A) GROSSLY ERRED IN NOT A PPRECIATING THAT SECTION 194H WOULD NOT APPLY AS THE DISCOUNT ALLOWE D DOES NOT QUALIFY AS INCOME CHARGEABLE TO TAX UNDER THE ACT I N THE HANDS OF THE PAYEE IN THE FACTS AND CIRCUMSTANCES OF PRESENT CAS E; III. THAT THE LD CIT (A) ERRONEOUSLY CLASSIFIED THE DISCOUNT GIVEN BY THE APPLICANT TO ITS CHANNEL PARTNERS AT THE TIME O F BULK SALE OF STARTER KITS AND RCVS AS COMMISSION/BROKERAGE; IV THAT THE LD. CIT (A) COMPLETELY ERRED IN HOLD ING THAT THE PRINCIPAL-AGENT RELATIONSHIP EXISTED BETWEEN THE AP PELLANT AND ITS CHANNEL PARTNERS WITHOUT APPRECIATING THAT THE STAR TER KITS/RCVS WERE SOLD IN BULK ON A PRINCIPAL TO PRINCIPAL BASIS ; V. THAT THE LD. CIT (A) COMPLETELY FAILED TO APPRECIA TE THAT THE GOODS SOLD IN BULK TO ITS CHANNEL PARTNERS HAVE BEE N ACCEPTED AS A VALID 'SALE' TRANSACTION BY THE SALES TAX/VAT AUTHORI TIES AND HENCE THE SAME COULD NOT BE CONSIDERED DIFFERENTLY BY THE TAX AUTHORITIES; VI. THAT THE LD. CIT (A) COMPLETELY FAILED TO A PPRECIATE THE RULING OF THE KARNATAKA HIGH COURT PASSED IN FAVOUR IN APP ELLANT'S OWN CASE WHERE THE APPELLANT'S FACTS AS DISTINGUISHED FROM O THER OPERATORS' FACTS HAVE BEEN NOTED AND IT HAS BEEN HELD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194H. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 3 VII. THAT THE LD CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER FOR ALLOWING RELIEF WHEREIN PAYEES HAVE DISCHARGED APPROPRIATE TAXES OVER THEIR TAXABLE INCOME AS DECLARED; B. THAT THE LD. CIT (A) GROSSLY ERRED IN CONCLUDING T HAT THE APPELLANT IS AN 'ASSESSEE IN DEFAULT' FOR ALLEGED NON DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194 J OF THE ACT ON INTERCONN ECT USAGE CHARGES PAID BY THE APPELLANT TO OTHER TELECOM OPERATORS; I. THAT THE LD. CIT (A) COMPLETELY FAILED TO APP RECIATE THAT THERE WAS NO HUMAN INTERVENTION WHILE CONCLUDING A SUCCES SFUL CALL, FOR WHICH ALONE PAYMENT WAS MADE BY THE APPELLANT TO OT HER OPERATOR, II. THAT THE LD. CIT (A) COMPLETELY FAILED TO A PPRECIATE THE FACT THAT NO HUMAN INTERVENTION OF THE NATURE OF MANAGERIAL O R CONSULTANCY SERVICES IN ANY CASE WAS INVOLVED IN PROVIDING INTE RCONNECT USAGE CHARGES; III. THAT THE LD. CIT (A) COMPLETELY FAILED TO A PPRECIATE THAT THERE WAS NO USE OF EQUIPMENT BY THE APPELLANT OF THE OTH ER OPERATOR AND THEREFORE, THE PAYMENT MADE BY THE APPELLANT TO THE OTHER OPERATORS WOULD NOT BE REGARDED AS 'FEE FOR TECHNICAL SERVICES ' IV. THAT THE LD CIT (A) COMPLETE Y FAILED IN AP PRECIATING THAT THE PAYMENT FOR INTERCONNECTION WAS FOR USE BY THE OTHE R OPERATOR OF A STANDARD FACILITY; C. THAT THE LD. CIT (A) COMPLETELY FAILED IN APPRECIA TING THAT THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH IN ITA NO S. 309/JP/2012, 502, 503, 505 & 505/JP/2011 FOR THE AYS 2006-07 TO 2009- 10 IN THE APPLICANT'S OWN CASE HAS HELD THAT THE APPLICANT WAS NOT LIABLE TO DEDUCT TDS ON THE DISCOUNTS OFFERED TO THE CHANNEL PARTNERS. D. THAT THE LD. CIT (A) GROSSLY ERRED IN PASSING THE IMPUGNED ORDER IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE BY N OT GRANTING AN OPPORTUNITY TO THE APPELLANT TO INDEPENDENTLY CROSS EXAMINE THE TECHNICAL EXPERT'S OPINION ON INTERCONNECT USAGE CHARGES, IF ANY, AS D IRECTED BY THE HONOURABLE SUPREME COURT IN CASE OF BHARTI CELLULAR LIMITED ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 4 E. THAT THE LD CIT (A) ERRED IN CONSTRUING AND RELYIN G ON THE CROSS- EXAMINATION IN THE CASE OF VODAFONE WEST LTD. F. THAT THE LD. CIT (A) ERRED IN NOT APPRECIATING T HAT AS PER THE DECISION IN CIT VS BHARTI CELLULAR [2011] 330 ITR 239, EXAMINATIO N AND CROSS EXAMINATION OF EXPERT HAD TO BE CONDUCTED IN THE FA CTS/CASE OF THE APPELLANT AND THAT THE APPELLANT WAS TO BE GRANTED AN OPPORTUNITY TO ADDUCE ITS EVIDENCE; G. THAT THE LD, CIT (A) HAS GROSSLY ERRED IN IGNORI NG THE C.A. CERTIFICATES AVAILABLE IN RESPECT OF MTNL, HUTCHISON ESSAR AND TA TA COMMUNICATION. H. THAT THE LD. CIT (A) GROSSLY ERRED IN LEVYING INTE REST UNDER SECTION 201(1A) OF THE ACT; I. THAT THE LD. CIT (A) GROSSLY ERRED IN NOT CONSIDER ING THE CONTENTIONS AND GROUNDS RAISED BY THE APPELLANT. 3. THE COMMON ISSUES INVOLVED IN ALL THESE APPEALS PERTAIN TO (I) THE DEMAND RAISED AGAINST THE ASSESSEE UNDER SECTION 20 1(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ALLEGED FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT, IN RESPECT OF DISCOUNT GIVEN TO THE DISTRIBUTORS TOWARDS STARTER KITS AND RECHARGE VOUC HERS AND (II) THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A), ON ALLEGED FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE ACT, IN RESPECT OF PAYMENTS MADE TOWARDS ROAMING SERVICE PROVIDED BY OTHER TELECOM S ERVICE PROVIDERS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF PROVIDING TELECOMMUNICATION SERVICES ACROSS THE COUNTRY. THE ASSESSEE HAS BEEN PROVIDING POST-PAID AND PRE-PAID TELECOMMUNICA TION SERVICES THROUGH VARIOUS CHANNEL PARTNERS (DISTRIBUTORS) UNDER THE A GREEMENTS ENTERED BETWEEN THEM. THE MODUS OPERANDI OF ASSESSEES BUSINESS IS THAT IT SELLS ITS PRODUCTS, I.E., STARTER KITS AND PRE-PAID VOUCHERS TO DISTRIBUTORS IN BULK AGAINST ADVANCE ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 5 PAYMENTS. ACCORDING TO THE ASSESSEE THE STARTER KIT S AND THE RECHARGE COUPON VOUCHERS ARE SOLD TO ITS VARIOUS DISTRIBUTORS AS PE R THE TERMS OF BUSINESS AGREEMENTS ON PRINCIPAL TO PRINCIPAL BASIS AT A DIS COUNTED PRICE THAN MRP WITH THE AGREED RIDER THAT NO PRODUCT SHALL BE SOLD AT A PRICE MORE THAN MRP AND THUS, SUCH TRANSACTIONS ARE NOT LIABLE FOR TDS U/S. 194H OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, THE DISCOUNT, I.E., THE DIFF ERENCE BETWEEN THE MRP AND THE SELLING PRICE, TO THE DISTRIBUTOR AMOUNTED TO PAYME NT OF COMMISSION TO THE DISTRIBUTORS WHICH WAS LIABLE TO TDS U/S. 194H OF T HE ACT. THE ASSESSING OFFICER FURTHER NOTICED THAT DISCOUNTS ON PRE-PAID SIM CARD S/RECHARGE COUPONS HAD ALREADY BEEN HELD TO BE SUBJECTED TO TDS AS COMMIS SION WITHIN THE MEANING OF SECTION 194H. THE ASSESSING OFFICER FOLLOWING THE S IMILAR STAND TAKEN IN THE CASE OF ASSESSEE FOR F.Y. 2004-05 AND F.Y. 2009-10 AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF IDEA CELLU LAR LTD., 325 ITR 148, HELD THE DISCOUNTS ALLOWED ON STARTER KITS LIABLE TO TDS AND SINCE THE ASSESSEE FAILED TO DEDUCT THE TAX AT SOURCE, HELD THE ASSESSEE IN DEFA ULT ON THIS COUNT, DETERMINING THE TOTAL LIABILITY AND INTEREST THEREON AT RS.2,15 ,45,233/- U/S. 194H OF THE ACT VIDE ASSESSMENT ORDER DATED 30.03.2011. 5. FURTHER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID ROAMING CHARGES TO OTHER OPERATORS FOR USING THEIR NETWORK, BUT NO TDS WAS DEDUCTED ON SUCH INTERCONNECT USAGE CHARGES (IUC), BEING THE FE E FOR TECHNICAL SERVICES, AS PER SECTION 194J OF THE ACT. THE DETAILS OF SUCH PA YMENTS, ON WHICH NO TDS WAS MADE BY ASSESSEE ARE AS UNDER : SL. NO. NAME OF OPERATOR AMOUNT OF IUC PAID 1. HUTCHISON ESSAR 12,06,69,183 2. MTNL 19,67,57,060 3. RELIANCE COMMUNICATION 15,62,20,843 ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 6 THE ASSESSING OFFICER RELYING ON THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., IN CIV IL APPEAL NO. 6692 DATED 12.08.2010, CONSIDERING THE DETAILED CONTENTIONS OF THE ASSESSEE, EXTENSIVE EXERCISE CARRIED OUT BY ASSESSING OFFICER IN ASSESS MENT PROCEEDINGS FOR F.Y. 2002-03 WITH THE HELP OF EXPERTS AND THE CIRCULAR O F CBDT ON ALTERNATE PLEA OF ASSESSEE, TREATED THE ASSESSEE IN DEFAULT FOR NOT D EDUCTING TDS U/S. 194J OF THE IT ACT ON THE IMPUGNED IUC AND CALCULATED THE TAX L IABILITY AND INTEREST ON ABOVE PAYMENTS MADE FOR IUC AT RS.6,41,33,290/- VID E ASSESSMENT ORDER. 6. THE ASSESSEE ASSAILED THE ORDER OF ASSESSING OFF ICER IN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE DETAILED SUBM ISSIONS OF ASSESSEE, VARIOUS CASE LAWS AND ATTENDING CIRCUMSTANCES OF THE CASE, AFFIRMED THE ORDER OF ASSESSING OFFICER. THE FINDINGS REACHED BY THE LD. CIT (A) READ AS UNDER : 5. DECISION IN APPEAL:- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND HAVE ALSO GONE THROUGH THE ORDER DATED 30.03.20 11 PASSED IN THIS CASE. THE APPELLANT HAS RAISED 16 GROUNDS OF APPEAL. THE TWO CORE ISSUES RAISED IN THE APPEAL BEFORE ME IS WITH RESPECT TO THE APPLICABILITY OF P ROVISIONS OF (A) SECTION 194H ON THE DISCOUNTS GIVEN ON MARKETING & DISTRIBUTION OF PROD UCTS I.E. SUKS/RCVS ETC. (B) SECTION 194J ON PAYMENT OF LUC/ROAMING CHARGES. 6. GROUND NO. 1.4 TO 10: 6.1 THE CORE ISSUE IN THESE GROUNDS IS WITH RESPECT TO THE APPLICABILITY OF PROVISION OF SECTION 194H ON DISCOUNTS GIVEN ON MARKETING AND DI STRIBUTION OF THE PRODUCT I.E. START UP KITS (SDKS), RECHARGE VOUCHERS,(RCVS/EVCS) ETC. 6.2 A REMAND REPORT WAS CALLED FROM THE AO WITH RES PECT TO THE CORE ISSUE UNDER DISPUTE FOR THE RELEVANT YEAR. VIDE REMAND REPORT D ATED 04.02.2014 AND 02.06.2014 THE AO OBSERVED THAT AS PER THE AGREEMENT WITH THE DISTRIBUTORS, THE DISCOUNT GRANTED TO DISTRIBUTORS ON SALE OF RCVS/SUKS ETC. ARE COMMI SSION AND SHOULD BE SUBJECTED TO TDS U/S 194H OF THE ACT. VIDE SUBMISSION DATED 11.0 2.2015, THE APPELLANT FILED A REJOINDER TO THE REMAND REPORT WHEREIN IT STATED TH AT: 'WE DRAW ATTENTION OF YOUR HONOUR THAT THE AO HAS F AILED TO APPRECIATE THE TRUE FACTS THAT THE PRIMARY AGREEMENT WITH THE CHANNEL PARTNER S IS TO BUY & SELL APPELLANTS PRODUCTS ON A PRINCIPAL TO PRINCIPAL BASIS AND ANY A NCILLARY OR CONNECTED SERVICES APART FROM THE PRIMARY ARRANGEMENT WOULD FALL UNDER SERVI CE AREA FOR WHICH THEY WOULD BE REMUNERATED IN FORM OF COMMISSION OR INCENTIVES. TH E APPELLANT SELL ITS PRODUCT TO THE CHANNEL PARTNERS ALLOWING DISCOUNT ON THE PRIMARY T RANSACTION. APPELLANT HAS BEEN ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 7 DEDUCTING APPROPRIATE TDS ON ALL COMMISSION / INCEN TIVES OR CREDITS ALLOWED TO THE CHANNEL PARTNERS, IT WOULD BE INCORRECT ON THE PART OF LD. AO TO CONNECT AND RELATE THESE ANCILLARY SERVICES TO BE CONNECTED WITH THE PRIMARY TRANSACTION AS THE CHANNEL PARTNER UNDER THE AGREEMENT DOES NOT PROVIDE ANY SERVICES T O THE APPELLANT RELATING TO THE PRIMARY TRANSACTION. UNDER THE AGREEMENT THE CHANNE L PARTNER PURCHASE APPELLANT PRODUCTS ON BULK AND GENERATES HIS INCOME FROM FURT HER SALE OF THESE PRODUCTS TO ITS RETAILERS / CUSTOMERS. THE VERY FUNDAMENTAL REQUIRE MENT OF 194H IN THE TRANSACTION BETWEEN THE APPELLANT AND THE DISTRIBUTORS IS MISSING AS THE DISCOUNT CANNOT BE EQUATED AS INCOME IN THE HANDS OF THE DISTRIBUTORS. DISTRIBU TORS MAKE ITS INCOME ON FURTHER SALE OF THESE PRODUCTS IN THE MARKET. THE SERVICES THAT HAVE BEEN RENDERED BY THE CHANNEL PARTNERS ARE THOSE WHICH ARE THE TERMS OF LICENSE C ONDITIONS TO BE ADHERED BY ANY OPERATOR UNDER THE LICENSE AGREEMENT ISSUED BY THE DEPARTMENT OF TELECOMMUNICATION. FOR THESE SERVICES THE CHANNEL PARTNERS ARE REMUNER ATED IN THE FORM OF COMMISSION / INCENTIVES / CREDITS ON WHICH' THE APPELLANT HAS BEE N DEDUCTING TDS APPROPRIATELY AS REQUIRED UNDER THE ACT' 6.3 THE APPELLANT HAS QUOTED THE JUDGMENT OF HON'BL E GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATES VS. UNION OF IND IA (2002) 124 TAXMAN 628 (GUJ) AND MOTHER DAIRY INDIA LTD. VS. ITO (DELH I) (2009) 28 SOT 43 (DELHI), AND HAS STATED THAT 'THERE IS SALE OF THE PRODUCTS INBUILT FOR WHICH UPFRONT PAYMENT IS MADE AND ACCORDINGLY AN AGREED DISCOUNT AS PER THE MARKET CONDITION IS ALLOWED. THERE IS A TRANSACTION OF SALE AND PAYMENT OF APPLI CABLE SALES TAX/VAT ON GOODS INVOLVED IN THE TRANSACTION. IN CASE OF THE TRANSAC TION OF SALE OF GOODS I.E. SIM CARDS ETC. THE APPELLANT RECOGNISES THE SALE REVENUE ON T HE INVOICING OF THESE GOODS TO THE CHANNEL PARTNERS AND IN CASE OF RECHARGE VOUCHERS, AS PER THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BASED THE USAGE OF THE TALK T IME. 6.4 THE APPELLANT HAS FURTHER CONTENDED THAT THE FA CTS OF ITS CASE ARE DIFFERENT FROM THAT OF IDEA CELLULAR LTD. (325 IR 148 (DEL)} AS TH E APPELLANT TATA TELESERVICES LTD. (TTSL) IS ENGAGED IN THE BUSINESS OF TRADING IN TEL ECOM PRODUCTS AND MAKES BULK SALE OF SIM CARDS AND RECHARGES VOUCHERS, TO DISTRIBUTOR S WHO FURTHER SELL THESE PRODUCTS TO END CUSTOMERS CHARGING VAT ON SIM CARDS ETC. 6.5 THE ASSESSMENT ORDER DATED 30.03.2011 AS WELL A S THE WRITTEN SUBMISSION OF THE APPELLANT IS EXAMINED AND THE ISSUE HAS ALSO BEEN D ISCUSSED THREADBARE DURING APPELLATE PROCEEDINGS WITH THE ID AR OF THE APPELLA NT. AFTER GOING THROUGH AIL THE FACTS AND MATERIAL BEFORE ME I OBSERVE THAT THE APPELLANT IS A TELECOMMUNICATION SERVICE PROVIDER IN RESPECTIVE TELECOM CIRCLE UNDER LICENCE S GRANTED BY THE DEPARTMENT OF TELECOMMUNICATION, GOVT. OF INDIA. IN ORDER TO PROV IDE TELECOM SERVICES, THE APPELLANT SELLS SERVICE PRODUCTS SUCH AS STARTER KITS, SIM CA RDS AND RECHARGE COUPON VOUCHERS (RCVS). TO DISTRIBUTE THESE PRODUCTS, THE APPELLANT ENTERS INTO BUSINESS ARRANGEMENT WITH VARIOUS DISTRIBUTORS OR CHANNEL PARTNERS FOR B OTH ITS PREPAID & POST PAID PRODUCTS. 6.6 IN ORDER TO COME TO A DEFINITE CONCLUSION O N THE ISSUE AT HAND, I PROPOSE TO FIRST LOOK AT THE SCOPE AND AMBIT OF SECTION 194H OF THE ACT AND THEN ANALYSE THE TRANSACTION BETWEEN THE APPELLANT AND CHANNEL PARTN ERS AS TO WHETHER IT FALLS WITHIN ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 8 THE PURVIEW OF THE SAID SECTION. IN THIS CONTEXT, I T WOULD BE NECESSARY TO EXTRACT THE RELEVANT PORTIONS OF SECTION 194H OF THE ACT. THE S AID PROVISION READS AS UNDER:- '194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIND U UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2O01, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL AT THE TIME OF CREDIT OF SUCH INCOM E TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE IS SUE OF A CHEQUE OR DRAFT OF BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF TEN PERCENT: PROVIDED PROVIDED PROVIDED 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 SERVICES 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 A SSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES; (II) ............... (III) ............... (IV). 6.7 THE PROVISIONS OF SECTION 194H SUGGESTS THAT EX CEPT FOR A SITUATION WHICH IS ENCOMPASSED BY THE SECOND PROVISO, IT APPLIES TO AL L PERSONS OTHER THAN AN INDIVIDUAL OR AN HUF WHO IS RESPONSIBLE FOR PAYING ON OR AFTER 01.06.2001 TO A RESIDENT ANY INCOME BY WAY OF COMMISSION TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE, THAT IS, THE RE CIPIENT OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY ISSUE OF CHEQUE OR DRAFT OR BY ANY OTHER MODE. IN OTHER WORDS WHERE A PERSON PAYS TO A RESIDENT INCOME WHIC H IS OF THE NATURE OF COMMISSION THEN THAT PERSON IS OBLIGED TO DEDUCT TAX AT SOURCE AT ANY OF THE SAID STAGES, THAT IS, EITHER AT THE TIME OF CREDIT OF SUCH INCOME/COMMISS ION OR AT THE TIME OF PAYMENT WHICH MAY TAKE THE FORM OF CASH, CHEQUE, DRAFT OR B Y ANY OTHER MODE. 6.8 COMMISSION UNDER EXPLANATION (I) TO SECTION 194 H OF THE ACT IS DEFINED IN AN INCLUSIVE MANNER. COMMISSION UNDER THE DEFINITION I NCLUDES PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACT ING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICE IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TR ANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING (NOT BEING SECURITIES). I T TAKES INTO ACCOUNT A SITUATION WHERE A PERSON RENDERS SERVICES TO ANOTHER PERSON FOR WHI CH THE PERSON RENDERING SERVICE EITHER RECEIVES OR IS ENTITLED TO RECEIVE, DIRECTLY OR INDIRECTLY, PAYMENT FROM THAT ANOTHER PERSON TO WHOM THE SERVICE IS RENDERED. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 9 6.9 IT IS CLEAR THAT THE TRANSACTION, IN ISSUE, WOULD FALL WITHIN THE PROVISIONS OF SECTION 194H ONLY IF THERE IS; (I) A PRINCIPLE-AGENT RELATIONSHIP BETWEEN TATA TEL ESERVICES LTD. (TTSL) AND CHANNEL PARTNERS; (II) THE PAYMENTS MADE BY TTSL TO CHANNEL PARTNERS , WHO IS A RESIDENT IS AN INCOME BY WAY OF COMMISSION; (III) THE INCOME BY WAY OF COMMISSION SHOULD BE PAI D BY TTSL TO CHANNEL PARTNERS FOR SERVICES RENDERED BY THE LATTER OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS AND, (IV) THE INCOME BY WAY OF COMMISSION MAY BE RECEIVED OR BE RECEIVABLE BY THE CHANNEL PARTNERS FROM TTSL EITHER DIRECTLY OR I NDIRECTLY. 6.10 THUS FIRST QUESTION THAT NEEDS TO BE ANSWERE D IS WHETHER THERE EXISTS A PRINCIPAL AND AGENT RELATIONSHIP BETWEEN TTSL AND ITS CHANNEL PARTNERS. FOR THIS PURPOSE IT WOULD BE RELEVANT TO ANALYSE THE DEFINITION OF AN A GENT IN SECTION 182 OF THE CONTRACT ACT. SECTION 182 OF THE ACT STATES THAT:- 'AN AGENT IS A PERSON EMPLOYED TO DO ANY ACT FOR AN OTHER OR TO REPRESENT ANOTHER IN DEALINGS WITH THIRD PERSONS. THE PERSON FOR WHOM SA ID ACT IS DONE, OR WHO IS SO REPRESENTED, IS CALLED THE PRINCIPAL.' 6.11 IT IS CLEAR FROM THE DEFINITION THAT AN AGENCY COMES INTO EXISTENCE WHERE ONE PERSON IS VESTED WITH THE AUTHORITY OR CAPACITY TO CREATE A LEGAL RELATIONSHIP BETWEEN PERSON REFERRED TO AS A PRINCIPAL AND AN OUTSIDE TH IRD PARTY. THEREFORE, THE BASIC AND ESSENTIAL REQUISITES OF AN AGENCY ORDINARILY WOULD BE THAT: (I) THE AGENT MAKES THE PRINCIPAL ANSWERABLE TO THI RD PERSONS WHEREBY THE PRINCIPAL CAN SUE THIRD PARTIES DIRECTLY AND RENDERS HIMSELF, THAT IS, THE PRINCIPAL, LIABLE TO BE SUED DIRECTLY BY THE THIRD PARTIES. (REFERENCE: VAR SHA ENGINEERING PVT. LTD VS VIJAY TRADERS & ORS AIR 1983 GUJ 166 AT PAGES 168-169, PA RA 5). (II) THE PERSON WHO PURPORTS TO ENTER INTO A TRANSA CTION ON BEHALF OF THE PRINCIPAL WOULD HAVE THE POWER TO CREATE, MODIFY OR TERMINATE CONTRACTUAL RELATIONSHIP BETWEEN HIS PRINCIPAL, THAT IS, THE PERSON WHOM HE REPRESENTS, AND THE THIRD PARTIES. (REFERENCE: P. KRISHNA BHATTA & ORS. VS. MUNDILA GA NAPATHI BHATTA (DIED) & ORS. AIR 1955 MAD 648 AT PAGE 651, PARA 36). (III) AN AGENT, THOUGH BOUND BY INSTRUCTIONS GIVEN TO HIM BY THE PRINCIPAL DOES NOT WORK UNDER THE DIRECT CONTROL AND SUPERVISION OF TH E PRINCIPAL, THE AGENT THUS USES HIS OWN DISCRETION TO ACT ON BEHALF OF THE PRINCIPA L SUBJECT TO THE LIMITS TO HIS AUTHORITY PRESCRIBED BY THE PRINCIPAL. (REFERENCE: LAKSHMINAR AYAN RAM GOPAL & SON LTD I/STHE GOVERNMENT OF HYDERABAD AIR 1954 SC 364 AT PAGE 367 , PARAGRAPHS 11 & 12. THIS CITED WITH THE APPROVAL IN QAMAR SHAFFI TYABJI VS T HE COMMISSIONER/ EXCESS PROFIT TAX, HYDERABAD (1960) 39 ITR 611 (SC) AT PAGES 615 & 616. 6.12 IN ORDER TO APPLY THE ABOVE TEST TO THE NATURE OF TRANSACTION BETWEEN TTSL AND CHANNEL PARTNERS, IT WOULD BE NECESSARY TO PERUSE T HE VARIOUS CLAUSES OF THE AGREEMENT BETWEEN TTSL AND ITS CHANNEL PARTNERS. TT SL HAS PUT ON RECORD SUCH AS ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 10 AGREEMENT BETWEEN IT AND M/S GOEL AGENCIES, 1/40, P UNJABI BAGH (W) NEW DELHI- 110026. THE AGREEMENT BROADLY DEFINES THE ARRANGEME NT IN THE FOLLOWING MANNER:- (I) TTSL APPOINTS CHANNEL PARTNERS FOR THE MARKETIN G, DISTRIBUTION OF ITS PRODUCT AND SERVICES (CLAUSE 'N' OF SUB SECTION 1. DEFINITION) IN THE GEOGRAPHICAL LIMITS SPECIFIED BY TTSL, SUBJECT TO TERMS AND CONDITIONS LAID DOWN BY TTSL. (II) THE CHANNEL PARTNER WILL ALSO PAY AN INTEREST FREE SECURITY DEPOSIT AND [CLAUSES 6.1,4 AND 8.5 (VIII) WHICH IS DETERMINED BY TTSL. (III) FULL LEGAL RIGHTS AND INTEREST IN ALL THE PRO DUCT AND SERVICES SHALL REMAIN AT ALL TIMES WITH TTSL (CLAUSE 1(H), 1(1)] AND ALL IPR INC LUDING TRADEMARKS, DESIGN ETC. WILL BE THE EXCLUSIVE PROPERTY OF TTSL AND THE CHANNEL P ARTNER WILL NOT HAVE ANY RIGHT/OWNERSHIP ON IT (CLAUSE 13.1). (IV) CHANNEL PARTNERS SHALL APPOINT RETAILERS/DEALE RS IN THE SERVICE AREA AS PER THE APPROVAL OF TTSL (CLAUSE 8.4 (VI)). (V) TTSL RESERVES EXCLUSIVE RIGHT TO BRING ABOUT CH ARGES IN TERMS AND CONDITION OF THE AGREEMENT WITH CHANNEL PARTNERS (CLAUSE 2.3), (VI) MARKETING STANDARDS WILL BE AS PER THE SPECIFI CATION LAID DOWN BY TTSL {CLAUSE 8.5 (II),(IV)(V),(VI). (VII) THE CHANNEL PARTNERS SHALL NOT MISUSE THE CON FIDENTIAL INFORMATION ABOUT CONSUMERS COLLECTED BY IT AND TRADE SECRETS OF TTSL (CLAUSE 8.4 (V)). (VIII) THE RATES AND VALUES OF SIM CARDS/RECHARGE V OUCHERS ETC. SHALL BE AS PER THE POLICY OF TTSL AND SHALL BE SUBJECTED TO CHANGE/MOD IFICATION, AT THE SOLE DISCRETION OF TTSL. CHANNEL PARTNERS SHALL REMAIN BOUND BY THE PR ICES AS FIXED OR CHARGED BY TTSL (CLAUSE 8.7, 8.8). (IX) TTSL WILL LAY DOWN THE TARGETS AND ALSO LAY DO WN PERFORMANCE CRITERIA AND THE FUNCTIONING OF CHANNEL PARTNERS WILL BE JUDGED BY T TSL ON THE BASIS OF THESE CRITERIA. (CLAUSE 9). (X) TTSL SHALL HAVE THE EXCLUSIVE RIGHT TO TERMINAT E THE BUSINESS ARRANGEMENT BY WRITTEN NOTICE TO CHANNEL PARTNERS AND THEN THE CHA NNEL PARTNERS SHALL RETURN TO TTSL ALL INFORMATION OF CUSTOMERS/SUBSCRIBERS AND OTHER MATERIAL PERTAINING TO PRODUCTS AND SERVICES (CLAUSE 14.1 (II), (III), (IV), (V), ( VI)) 6.13 IT IS ALSO RELEVANT TO POINT OUT THAT THE AGREEMENT THAT THE APPELLANT HAS ENTERED I NTO WITH ITS CHANNEL PARTNERS ARE IN RELATION TO BOTH PRODUCTS AND ANCILLARY SERVICES . A PARTICULAR CHANNEL PARTNERS IS MARKETING & DISTRIBUTING BOTH. MOREOVER THE DISCOUN TS ARE OFFERED ON PURCHASE OF PRODUCTS I.E. SIM CARDS/RECHARGE VOUCHERS, FOR FURT HER DISTRIBUTION. 6.14 THE OWNERSHIP/LEGAL AND EQUITABLE TITLE AND IN TEREST IN SIM CARDS/RECHARGE VOUCHERS REMAINS WITH THE APPELLANT. THE DISTRIBUTO RS ARE SUPPOSED TO STORE THE SIM ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 11 CARDS/RECHARGE COUPONS IN SUCH A WAY AS TO CLEARLY INDICATE AT ALL TIMES THAT THESE ARE OWNED BY TTSL AND IS NOT ALLOWED TO REMOVE, OBSCURE , DELETE ANY MARK PLACED ON THE SIM CARDS. THE DISTRIBUTOR IS ALSO NOT FREE TO SELL THE SIMILAR PRODUCTS OFFERED BY COMPETITORS COMPANY. 6.15 ALSO THE OWNER OF THE SIM CARDS/RECHARGE COUPO NS IS THE APPELLANT AS IT IS OPERATING UNDER THE RIGHT OF A LICENCE AGREEMENT EN TERED INTO WITH DOT. THE SIM CARDS IS IN THE NATURE OF A KEY TO THE CONSUMER TO HAVE ACCESS TO THE TELEPHONE NETWORK ESTABLISHED AND OPERATED BY THE APPELLANT. SINCE THE SIM CARDS IS ONLY A DEVICE TO HAVE ACCESS TO THE MOBILE PHONE NETWORK T HERE IS NO QUESTION OF PASSING OF ANY OWNERSHIP OR TITLE OF THE GOODS FROM THE APPELL ANT TO THE DISTRIBUTOR OR FROM THE DISTRIBUTORS TO THE ULTIMATE CONSUMER. THE CHANNEL PARTNERS OR DISTRIBUTOR IS ONLY ACTING AS A LINK IN THE CHAIN OF SERVICE PROVIDERS. FOR THIS THE DISTRIBUTORS ARE MAKING ADVANCE PAYMENT FOR THE DELIVERY OF SIM CARDS AND O THER PRODUCTS. 6.16 IT IS PERTINENT TO NOTE THAT EVEN IF THE DISTR IBUTOR MAKES BULK PURCHASE OF SIM CARDS/RECHARGE VOUCHERS, THE RIGHT TO USE THESE PRO DUCTS TO GET ACCESS TO THE PHONE NETWORK OF THE APPELLANT IS GIVEN ONLY TO THE ULTIM ATE CONSUMER WHO ACTIVATES THE CONNECTION BY USING THE SECRET NUMBER PROVIDED IN T HE SIM CARDS. 6.17 IT IS ONLY FOR THE ULTIMATE CONSUMER OR THE AP PELLANT WHO HAS THE AUTHORITY TO UNCOVER THE SECRET NUMBER AND ACTIVATE THE SIM CARD S. THUS THE ARGUMENT GIVEN BY THE APPELLANT THAT ONCE DELIVERY OF SIM CARDS IS TA KEN, IT BECOMES THE ABSOLUTE PROPERTY OF THE DISTRIBUTORS IS FALLACIOUS AND MISC ONCEIVED. 6.18 THE VARIOUS CLAUSES OF THE AGREEMENT MENTION ED ABOVE CLEARLY INDICATE THAT OWNERSHIP OF THESE PRODUCTS ARE NEVER TRANSFERRED T O THE CHANNEL PARTNERS. HENCE THE TRANSACTION IN QUESTION IS NOT SALE & PURCHASE BETW EEN THE APPELLANT AND CHANNEL PARTNERS. THE CHANNEL PARTNERS ARE APPOINTED AS DIS TRIBUTORS AND ARE OFFERED DISCOUNT ON THE PRODUCTS, THE DISCOUNTS THUS ARE IN THE NATU RE OF COMMISSION OR BROKERAGE. 6.19 FROM THE ABOVE DISCUSSION ON VARIOUS PARAMETER S OF THE AGREEMENT, IT IS ALSO ESTABLISHED THAT THE CHANNEL PARTNERS ACTS ON BEHAL F OF TTSL WHEREBY A LEGAL RELATIONSHIP IS ESTABLISHED BETWEEN TTSL AND THE TH IRD PARTY I.E. THE CONSUMERS. BY ENTERING INTO SUCH A LEGAL RELATIONSHIP ON BEHALF O F THE PRINCIPAL AND BY ISSUING THE PRODUCTS TO A THIRD PARTY THROUGH AUTHORIZED RETAIL ERS THE CHANNEL PARTNER MAKES TTSL LIABLE TO A LEGAL ACTION BY THE CELL PHONE USE RS I.E. THE THIRD PARTIES. SIMILARLY BY VIRTUE OF SUCH A TRANSACTION I.E. BY THE CHANNEL PA RTNERS TO THIRD PARTIES, THE PRINCIPAL I.E. TTSL IS ENABLED TO SUE THE THIRD PARTY WHICH I S THE CELL PHONE USER OR AUTHORIZED RETAILERS. IT IS ALSO EVIDENT FROM A READING OF CLA USES 1(H), 8.4, 13.1 AND 18,1 OF THE AGREEMENT, THAT THE CELL PHONE CONNECTION OR RECHAR GE COUPONS AND OTHER PRODUCT AT ALL TIMES, REMAIN THE PROPERTY OF TTSL. 6.20 TTSL ALSO RESERVES THE RIGHT TO APPOINT ONE OR MORE DISTRIBUTORS IN A GIVEN AREA AND CAN REVIEW THE COMMISSION STRUCTURE AND OTHER T ERMS AND CONDITION ON THE BASIS OF CHANGES IN TELECOM. MARKET WHICH THE CHANNEL PAR TNERS WILL HAVE TO ABIDE TO (CIAUSE 2.1, 2.2, 2.3). THE CHANNEL PARTNERS IS NOT INDEPENDENT IN MAKING DECISION ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 12 WITH RESPECT TO MARKETING AND DISTRIBUTION STANDARD S, APPOINTMENT OF DEALERS/RETAILERS, PLACE OF BUSINESS BUT HAS TO CAR RY OUT ITS DUTIES AS UNDERLINED BY TTSL IN ITS OPERATIONAL MANUAL (CLAUSE 8.5 (II) (IV ) (VI) (VII) (IX)) ANY NEGLIGENCE ON PART OF THE CHANNEL PARTNERS IN MARKET AND DISTRIBU TION OF SERVICE PRODUCTS WOULD RENDER IT LIABLE TO TTSL, THE SERVICE PROVIDER (CLA USE 14.1) 6.21 PERUSAL OF CLAUSES 8.1, 8.5 (II), (IV), (VI), (VII), (IS), 8.8 & 8.10 CLEARLY INDICATE THAT THE CHANNEL PARTNERS HAS NO RIGHT OVER THE PRODUCT. HENCE THE CLAIM OF THE APPELLANT THAT THERE IS A PRINCIPAL TO PRINCIPAL RELATIONSHIP BETWEEN TTSL AND THE CHANNEL PARTNERS IS FALLACIOUS. 6.22 AS A MATTER OF FACT, SINCE THE SIM CARDS/REC HARGE COUPON ETC ARE ISSUED BY CHANNEL PARTNERS ON BEHALF OF TTSL, WHO IS THE PROV IDER OF CELL PHONE CONNECTIONS AND OTHER ANCILLARY SERVICES, IT HOLDS THE CHANNEL PART NERS HARMLESS AND IS OBLIGED TO INDEMNIFY THE CHANNEL PARTNERS FOR ANY LOSS CAUSED ON ACCOUNT OF ANY FAILURE TO PROVIDE SUCH SERVICE CONTRACTED FOR BY THE CHANNEL PARTNERS ON BEHALF OF TTSL (CLAUSE 14.2). 6.23 VIDE SUBMISSION DATED 11.02.2015, THE APPELLAN T HAS STATED THAT, IT HAS DULY DEDUCTED TDS ON ALL PAYMENTS MADE TOWARDS SERVICES RENDERED BY THE CHANNEL PARTNERS WHICH ARE IN THE NATURE OF COMMISSION. IN ADDITION TO THE SERVICES RENDERED, THERE ARE CERTAIN DISTINCT AND SEPARATE TRADING TRANSACTIONS WHERE THE CHANNEL PARTNERS HAVE MADE BULK-PURCHASE OF THE APPELLANT'S PRODUCTS AFTER MAKING THE FULL PAYMENT BEFORE TAKING THE DELIVERY OF THE SAID PRODUCTS. AT THE TI ME OF THE BULK PURCHASES OF THESE PRODUCTS THE APPELLANT HAS ALLOWED THE CASH DISCOUN TS ON WHICH IT HAS A REASONABLE CAUSE AND A BONAFIDE BASED ON THE LEGAL POSITIONS THA T THERE IS NO APPLICATION OF TDS UNDER THE ACT. UNDER NO CIRCUMSTANCES CAN THE AFORE SAID TWO TRANSACTIONS BE CLUBBED TOGETHER TO HOLD THAT DISCOUNT/MARGIN SO ALLOWED TO THE CHANNEL PARTNERS IS COMMISSION FOR THEIR SERVICES BEING RENDERED TO BE COVERED UNDER SECTION 194H.' 6.24 IN VIEW OF THE ABOVE SUBMISSION IT WOULD BE RE LEVANT TO ANALYSE WHETHER ANY INCOME WAY OF COMMISSION HAS BEEN PAID BY THE APPEL LANT TO THE CHANNEL PARTNERS, IT IS NOT DISPUTED THAT ANY AMOUNT WHICH THE CHANNEL P ARTNERS WOULD RECEIVE OVER AND ABOVE THE VALUE OF RCVS/SUKS AND OTHER ANCILLARY PR ODUCT, CHARGED BY TTSL WOULD BE ASSESSED IN THE HANDS OF THE CHANNEL PARTNERS AS PR OFITS, GAINS OR INCOME. VIDE SUBMISSION DATED 11.02.2015, THE ID AR HAS TWISTED THE FACTS AS PER HIS CONVENIENCE. IT HAS BEEN CLAIMED THAT THE NATURE OF TRANSACTION BETWEEN CHANNEL PARTNERS AND TTSL ARE 'TRADING TRANSACTION' WHEREBY CHANNEL PARTNERS MAKE BULK PURCHASE OF THE PRODUCTS AFTER MAKING FULL PAYMENTS BEFORE TAKING D ELIVERING OF THE PRODUCTS ON WHICH DISCOUNTS ARE OFFERED. THUS THE ID AR HAS TRIED TO CLAIM THAT THE RELATIONSHIP BETWEEN THE APPELLANT AND ITS CHANNEL PARTNERS ARE LIKE THA T OF A MANUFACTURER AND ITS WHOLESALERS. THIS CLAIM IS ILLOGICAL AS IN VIEW OF THE AGREEMENT (SUPRA) BETWEEN TTSL AND CHANNEL PARTNERS, THE SIM CARDS/RCVS CONTINUE T O REMAIN THE PROPERTY OF TTSL IN THE PRESENT CASE THE CHANNEL PARTNERS ARE FUNCTI ONING AS DISTRIBUTORS WHO ARE IN A PRINCIPAL TO AGENT RELATIONSHIP WITH THE TTSL WHERE AS IN CASE OF WHOLESALERS THERE IS NO RELATIONSHIP WITH THE MANUFACTURES. THE ID AR OF THE APPELLANT HAS MINGLED ALL THESE POSITIONS SO AS TO JUSTIFY THE CLAIM OF THE A PPELLANT. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 13 6.25 THE CONTENTION THAT MONIES CHARGED OVER AND AB OVE THE DISCOUNTED VALUE CHARGED BY TTSL FROM THE CHANNEL PARTNERS ARE IN TH E NATURE OF DISCOUNT RATHER THAN COMMISSION IS NOT TENABLE. THE FACT THAT THIS IS A PAYMENT WHICH THE CHANNEL PARTNERS RECEIVES FROM THE RETAILERS BY VIRTUE OF SALE OF TH E ITEMS OF WHICH TTSL IS THE OWNER, AT A POINT TILL THE TRANSACTION IS MADE, CLEARLY ESTAB LISHES THAT IT IS A COMMISSION AND NOT DISCOUNT. THE WORD 'DISCOUNT 1 IS NORMALLY USED TO DESCRIBE A DEDUCTION FROM THE FULL AMOUNT OR VALUE OF SOMETHING ESPECIALLY A PRICE, WH EREAS A COMMISSION IS DEFINED IN EXPLANATION (I) TO SECTION 194H AS ANY PAYMENT RECE IVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY BY AN AGENT FOR SERVICES RENDERED ACTING ON BEHALF OF THE PRINCIPAL. IN VIEW OF THE FACT THAT THE PAYMENT EARNED BY THE CHANNEL PARTNERS IS INEXTRICABLY LINKED TO THE SALE OF THE SUKS/RCVS, IT CANNOT BUT LEAD TO TH E CONCLUSION THAT THE PAYMENT EARNED OVER AND ABOVE THE DISCOUNTED VALUE FIXED BY TTSL IS INDIRECTLY, A COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT. THIS IS ESPECIALLY SO, AS AT NO POINT IN TIME (AS DISCUSSED ABOVE) THE CHANNEL PARTNERS OBTA IN PROPRIETARY RIGHTS TO THE SUKS/RCVS THE PRICE FIXED BY TTSL AND PAID BY CHANN EL PARTNERS ARE MERELY ADVANCE PAYMENTS TO BE COLLECTED FROM RETAILERS ON WHICH TH E CHANNEL PARTNERS HAVE ALREADY GOT A DEDUCTION. THE VALUE OR PRICE OF THE SUKS/RCV S RECEIVED BY THE CHANNEL PARTNERS FOR THE SERVICES PROMISED BY TTSL BY VIRTU E OF ITS OPERATIONAL FACILITY IS CHARGED FROM THE RETAILERS, WHO IS TURN CHARGE THE SAME FROM CUSTOMERS, IN TRUST OF SERVICE PROMISED BY TTSL. THUS THE MONEY CHARGED BY THE CHANNEL PARTNERS IS COMMISSION WITHIN THE MEANING OF SECTION 194H OF TH E ACT. THE TRANSACTION IS A . SINGULAR TRANSACTION WHICH IS EXECUTED BETWEEN THE CHANNEL PARTNERS WHILE ACTING ON BEHALF OF THE PRINCIPAL CELL PHONE SERVICE PROVIDER OR TTSL, IN SELLING THE SUKS/RCVS TO A THIRD PARTY (THROUGH RETAILERS) WHICH IS THE C ELL PHONE USER, AND THEREBY CREATING A LEGAL RELATIONSHIP BETWEEN THE PRINCIPAL I.E. TTSL AND THE THIRD PARTY WHICH IS THE CUSTOMER WHO PURCHASES CELL PHONE CONNECTION. 6.26 THE CONTENTION OF THE APPELLANT THAT THE DELHI HIGH COURT JUDGMENT IN THE CASE OF IDEA CELLULAR LTD., 325 ITR 145 (DEL) IS NOT APPLIC ABLE TO THE PRESENT CASE, IS ALSO NOT ACCEPTABLE AS IN VIEW OF ANALYSIS AND DISCUSSIONS I N THE PRECEDING PARAS BY ME. I HOLD THAT THE FACTS OF THE PRESENT CASE ARE VERY MUCH SI MILAR TO THAT OF THE CASE OF IDEA CELLULAR. 6.27 AFTER CONSIDERING THE ARGUMENTS PUT FORTH BY T HE APPELLANT DURING APPELLATE PROCEEDINGS AND AFTER PERUSING THE PROVISION OF THE AGREEMENT, IT LEAVES NO DOUBT WHATSOEVER THAT THE RELATIONSHIP BETWEEN TTSL AND C HANNEL PARTNERS IS THAT OF A PRINCIPAL AND AGENT. I HAVE ALSO CONSIDERED THE JUD GMENT OF DELHI, KOLKATA & KERALA HIGH COURT IN THE CASE OF IDEAL CELLULAR LTD. 325 ITR 148 (DEL), BHARTI CELLU LAR LTD. VS ACIT 244 CTR 185 (CAL) AND VODAFONE ESAAR CELLULAR LTD. VS ACIT (2009) 317 ITR (AT) 234 (COCHIN), I HOLD THAT THE DISCOUNTS ALLOWED AND INCENTIVES GIVE N BY THE APPELLANT TO ITS CHANNEL PARTNERS ON SALE OF ITS PR ODUCTS IS IN THE NATURE OF COMMISSION AND THE SAME ATTRACTS THE PROVISION OF SECTION 194H OF THE ACT. DURING APPELLATE PROCEEDINGS THE ID AR HAS QUOTED THE JUDGMENT OF KA RNATAKA HIGH COURT WHICH IS IN FAVOUR OF APPELLANT. IT WOULD BE PERTINENT TO STATE THAT THE SAID JUDGMENT HAS NOT BEEN ACCEPTED BY REVENUE AND THE JUDICIAL PRONOUNCEMENT HAS BEEN CONTENDED BEFORE THE SUPREME COURT. THE SLP PROPOSED BY REVENUE HAS BEEN ADMITTED BY THE APEX COURT ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 14 WHICH PROVES THAT THE ISSUE IS ALIVE AND DEBATABLE. CONSIDERING ALL THESE FACTS, GROUND NO. 1, 4 TO 10 ARE DISMISSED. ON THE SECOND ISSUE, THE LD. CIT(A) OBSERVED AS U NDER : 11. GROUND NO. 12.13.14 & 15:- IN RESPECT OF THESE GROUNDS LD AR OF THE APPELLANT PLEADED THAT THE AO RAISED DEMAND ON ACCOUNT OF TDS LIABILITY U/S 194J ON PAYMENT MADE FOR INTERCONNECT USAGE CHARGES (IUC) TO OTHER OPERATORS. THE APPELLANT HAS ALSO CONTENDED IN GROUND NO. 14, THAT THE AO DID NOT PRO VIDE THE APPELLANT WITH THE OPPORTUNITY TO CROSS EXAMINE THE STATEMENT OF TECHN ICAL EXPERTS. 11.1 IN THE REMAND REPORT DATED 04.02.2014 AND 02.0 6.2014 THE AO HAS SUBMITTED THAT: THE APPLICABILITY OF SECTION 194J OF THE ACT ON THE PAY MENTS TOWARDS INTERCONNECT USAGE CHARGES (IUC) WAS INFLICTED PURELY BASED ON THE STATEMENT OF EXPERT R ECORDED TO ASCERTAIN THE HUMAN INTERVENTION DURING THE PROCESS OF CARRIAGE OF CALLS THROUGH INTERCONNECT OF NETWORKS OF TWO OPERATORS. ALSO, IT WAS STATED BEFORE THE ID CIT(A) THAT THE APPELLANT WAS DENIED PROPER OPPORTUNITY TO CROS S EXAMINE THE EXPERTS WHO HAVE ASSERTED THE INVOLVEMENT OF HUMAN ON THE SAID PROCESS. SECONDLY, IT WAS SUBMITTED THAT, WITHOUT PREJUDICE ON NON APPLICATION OF ANY TDS ON IUC PAYOUTS, AUDITED CERTIFICATES/SELF RELEVANT TAXES BY VARIOUS PAYEES AND SAME MAY BE ACCEPTED AS ADDITIONAL EVIDENCE. FURTHER, IT IS SUBMITTED THAT, AS HAS BEEN DIRECTED B Y THE HON'BLE APEX COURT IN THE CASE OF VODAFONE ESSAR MOBILE SERVICE LTD. (ONE OF THE PE TITIONERS) IN CIVIL APPEAL NO. 6692 DATED 12.08.2010 FOR F.Y. 2002-03, STATEMENT OF EXP ERTS ON THE RELEVANT FIELD WAS RECORDED ON OATH ADMINISTERED BY THE ACIT, CIRCLE-5 1(1), NEW DELHI AND TAKEN BY SHRI TANAY KRISHNA [GROUP LEADER (PROJECT PLANNING), C-D077 & SHRI ASHOK MITTAL [GROUP LEADER(CLH),C-DOT} ON 29.09.2010. BASED ON THE ABOVE STATEMENT, ORDER U/S 201 OF THE ACT WAS PASSED IN FY 2002-03 IN THE CASE OF VODAFON E ESSAR MOBILE SERVICES WHICH CATEGORICALLY ELUCIDATES THE VAST EXERCISE OF OBTAIN ING EXPERTS OPINION THOUGH WAS NOT CARRIED OUT IN THE CASE OF TATA TELESERVICES LTD. P ROMINENCE COULD VERY WELL BE DRAWN IN THE CASE OF TATA TELESERVICES LTD. AS WELL CONSIDER ING THE BACKDROP OF THE CASE. NEVERTHELESS, CONSIDERING THE PAUCITY OF TIME LEFT DURING THE PROCEEDINGS U/S 201(1) OF THE ACT OF FY 2006-07, THE EXPERT'S OPINION WAS NOT CROSS EXAMINED BY M/S TATA TELESERVICES LTD. FOR THE FOLLOWING CONVINCING REAS ON: IT IS PERTINENT TO REPORT HERE THAT, CONSIDERIN G THE NON COMPLIANCE DURING THE COURSE OF PROCEEDINGS U/S 201(1) OF THE ACT, THE THEN AO H AD TO ISSUE A LETTER DATED 11.03.2011 ON THIS COUNT AND THE CASE WAS AGAIN FIXED FOR HEAR ING FOR 14.03.2011 ALONGWITH A REMARK THEREWITH THAT THE PROCEEDINGS WOULD BE COMP LETED BASED ON MATERIAL AVAILABLE ON RECORD. IN RESPONSE TO THE LETTER DATED 11.03.2011, THE ARS OF M/S TATA TEIESERVICES LTD. FILED ITS LETTER DATED 17.03.2011 WHEREIN IT WAS EMPHASIZ ED THAT THE ISSUE OF NOTICE U/S 201(1) OF THE ACT WAS BAD IN LAW CONSIDERING THE PROVISIONS OF SECTION 201(3) OF THE ACT AND ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 15 REQUESTED TO WITHDRAW THE SAME. NO DETAILS WHATSOEV ER WITH REGARD TO THE DETAILS OF TDS ON IUC WERE FILED. SUBSEQUENTLY, THE THEN AO VIDE LETTER DATED 18.03.2 011, REJECTED THE OBJECTIONS RAISED TO THE ISSUANCE OF NOTICE U/S 201(1) OF THE ACT AND DIRECTED TO DEDUCTOR COMPANY TO COMPLY WITH THE REQUIREMENTS AND THE CASE WAS ADJOU RNED TO 22.03.2011. AGAIN, VIDE LETTER DATED 23.03.2011, IT WAS SUBMITTE D THAT DURING THE FY 2006-07, THE COMPANY WAS OPERATING TELECOM SERVICES UNDER CD MA TECHNOLOGY WHICH DID NOT PROVIDE ANY ROAMING FACILITY TO ITS SUBSCRIBERS ON A NY OTHER OPERATOR'S NETWORK AND HENCE THERE WERE NO INTER-OPERATOR NETWORK AND HENC E THERE WERE NO INTER-OPERATOR PAYMENTS FOR ROAMING CHARGES N THIS ACCOUNT AND ON REQUEST, THE CASE WAS ADJOURNED ON 25.03.2011. YET AGAIN, VIDE ORDER SHEET ENTRY DATED 25.03. 2011, THE ARS WERE ASKED AS TO WHETHER ANY TAX WAS DEDUCTED U/S 194J OF THE ACT ON IUC CHA RGES AND THE CASE WAS FURTHER ADJOURNED TO 28.03.2011. FURTHER, DURING THE PROCEEDINGS U/S 201(1) OF T HE ACT, THE THEN AO CORRECTLY RECORDED HER DISPLEASURE IN ORDER SHEET ENTRY DATED 28.03.20 11 OVER THE ACTION OF ARS OF THE DEDUCTOR COMPANY IN NOT COMPLYING WITH THE REQUIREM ENTS AS CALLED FOR REPEATEDLY WITH REFERENCE TO THE DETAILS OF TDS ON IUC CHARGES. THE THEN AO FURTHER CONVEYED THE LIMITATION OF THE PROCEEDINGS WHICH WAS DULY ACKNOW LEDGED BY THE ARS VIDE ORDER SHEET ENTRY DATED 28.03.2011 AND THE CASE WAS AGAIN ADJOU RNED TO 29.03.2011. THE THEN AO VIDE ORDER SHEET ENTRY DATED 29.03.2011 OBSERVED THAT THE TAX U/S 194J OF THE ACT WAS PARTLY DEDUCTED ON UC AND HENCE, REQ UIRED THE ARS TO SHOW CAUSE AS TO WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAU LT. ACCORDINGLY, THE CASE WAS ADJOURNED TO 30.03.201 1. THE REPLY FILED VIDE LETTER DATED 30.03.2011 W ERE DULY CONSIDERED AND WAS TAKEN ON RECORD AND DULY DISCUSSED N PARAGRAPH NO. 4 OF THE ORDER U/S 201(1)/201(1A) OF THE ACT PASSED ON 30.03.2011. FROM THE ABOVE, IT CAN BEEN SEEN THAT, DESPITE OF NO N COMPLIANCE ON VARIOUS DATES DURING PROCEEDINGS U/S 201(1) OF THE ACT IN FY 2006-07, TH E ARS OF THE DEDUCTOR COMPANY DISCLOSED THE DETAILS OF TDS ON IUC FOR THE FIRST T IME IN ITS .LETTER DATED 29.03.2011. TILL THEN, THE DEDUCTOR COMPANY NEVER PROVIDED ANY DETAI L WITH RESPECT OF THE TDS ON IUC CHARGES, RATHER THE DEDUCTOR COMPANY DENIED THE APP LICABILITY OF TDS ON IUC CHARGES TILL 23.03.201 1.THEREFORE, IT IS CLEAR THAT THE DEDUCTO R COMPANY HAD DRIVEN THE PROCEEDINGS TO THE FAG-END OF THE FY. IT CAN ALSO BE SEEN FROM T HE ABOVE FACTS THAT THE REVENUE DID NOT DENY THE OPPORTUNITY OF CROSS EXAMINATION OF THE EX PERT'S OPINION DURING THE PROCEEDINGS, BUT IT WAS THE ARS OF THE DEDUCTOR COMP ANY ,IV/70 HAD TAKEN THE PROCEEDINGS TILL 30.03.2011 BY NOT COMPLYING WITH T HE REQUIREMENTS DURING THE PROCEEDINGS AND NOT DISCLOSING AND PROVIDING THE TD S MADE ON IUC CHARGES TILL 29.03.2011. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 16 IN VIEW OF THE FACTS, DURING THE APPELLATE PROCEEDI NGS, THE DEDUCTOR COMPANY HAS NO GROUND TO TAKE THE PLEA OF GRANTING NO OPPORTUNITY TO CROSS EXAMINE THE EXPERT'S OPINION ON IUC. THIS GROUND MAY KINDLY BE REJECTED ACCORDING LY CONSIDERING THE FACTS OF THE CASE.' 11.2 AFTER CONSIDERING THE REMAND REPORT AND THE RE JOINDER FILED BY THE APPELLANT IT IS OBSERVED THAT DURING ASSESSMENT PROCEEDINGS U/S 201 (1)/201(1A) OF THE ACT, THE AO NOTICED THAT TTSL HAS NOT DEDUCTED TDS ON ACCOUNT O F PAYMENT TO VARIOUS PARTIES FOR THE IUC PAID TO THEM. THE LD AO CONSIDERED THE SUBM ISSION OF THE APPELLANT WHICH WAS FILED DURING ASSESSMENT PROCEEDINGS AND GAVE A DETA ILED FINDING AND ALSO CONSIDERED THE DIRECTION OF HON'BLE SUPREME COURT IN CIVIL APP EAL NO. 6692 DATED 12.08.2010. FOLLOWING THE HON'BLE COURT DECISION THE AO CONSIDE RED THE EXPERT OPINION RECORDED BY ACIT, CIRCLE-51(1), NEW DELHI IN ORDER PASSED U/ S 201(1) DATED 13.12.2010 FOR F.Y. 2002-03, WHICH IS DETAILED FROM PAGES 7 TO 20 OF TH E ASSESSMENT ORDER. 11.3 IT IS OBSERVED FROM PERUSAL OF PAGE 6 AND 7 OF THE ASSESSMENT ORDER DATED 30.03.2011 THAT THE APPELLANT WAS REGULARLY APPEARI NG BEFORE THE AO AND COULD HAVE GIVEN OPINION ON THE SUBJECT. MOREOVER THE RELEVANT FINDINGS IN THE EXERCISE CARRIED OUT CONSEQUENCE TO THE DIRECTION OF THE APEX COURT BY ACIT, CIRCLE-51 (1) WAS RELIED UPON BY THE AO AS THE FACTS OF THE PRESENT CASE WAS SIMILAR TO THAT OF VODAFONE ESSAR MOBILE SERVICE LTD. 11.4 PERUSAL OF DETAILS SUBMITTED DURING APPELLATE PROCEEDINGS AS WELL AS R _ AO'S ORDER DATED 30.03.2011, IT IS OBSERVED THAT THE ENT IRE PROCESS OF CARRIAGE AND TRANSFER OF CALLS FROM THE NETWORK OF ONE OPERATOR TO ANOTHE R THOUGH BEING - AN AUTOMATED PROCESS UNDERTAKEN BY A SERIES OF HIGHLY ADVANCED T ELECOM NETWORK EQUIPMENT, STILL REQUIRES CONSTANT HUMAN INTERVENTION IN FORM OF CON FIGURATION, INSTALLATION, TESTING ETC. IN THE ORDER TO MAKE THE PROCESS OF CARRIAGE O F CALLS EFFECTIVELY OPERATIONAL. MOREOVER AFTER ANALYSING THE REASON WHY EXPERT OPIN ION WAS NOT CROSS VERIFIED BY TTSL GIVEN BY THE AO IN REMAND REPORT. I SEE NO REA SON TO INTERFERE WITH THE OBSERVATIONS OF THE AO IN THIS CONNECTION. 11.5 THUS I OBSERVE THAT THE ID AO HAS CORRECTLY TA KEN THE VIEW THAT TDS IS REQUIRED TO BE DEDUCTED ON PAYMENTS MADE TO VARIOUS PARTIES/SER VICE PROVIDERS FOR ILJC CHARGES AS THE SAME CONSTITUTES FEES FOR TECHNICAL SERVICES U/S 194J OF THE IT. ACT. THEREFORE GROUND NO. 12 TO 15 STAND DISMISSED. 11.6 HOWEVER, BEFORE ME DURING APPELLATE PROCEEDING S, THE ID AR HAS TAKEN THE ALTERNATIVE PLEA (GROUND NO. 5) THAT THE IN THE CAS E OF OPERATORS TO WHOM PAYMENTS TOWARDS IDC CHARGES HAVE BEEN MADE, TDS HAS NOT BEE N DEDUCTED AS THE DEDUCTEES INCOME WERE EXEMPTED FROM TDS. VIDE SUBMISSION DATE D 12.03.2015, THE AR HAS FILED COPIES OF TAX EXEMPTION CERTIFICATE ISSUED U/S 197 OF THE ACT IS FAVOUR OF BHARTI AIRTEL LTD., M/S BSNL, M/S RELIANCE INFOCOM LTD. & M/S IDE A CELLULAR LTD. IN THE CASE OF HUTCHISON ESSAR (TO WHOM PAYMENT OF RS. 12,06,69,18 3/- HAS BEEN MADE), TATA COMMUNICATION (TO WHOM PAYMENT OF RS. 44,10,85,189A HAS BEEN MADE) AND RELIANCE COMMUNICATION (TO WHOM PAYMENT OF RS. 15,62,20;843/ - HAS BEEN MADE) NO EVIDENCE IS BROUGHT ON RECORD TO PROVE THAT TDS HAS BEEN DED UCTED OR THE EXEMPTION U/S 197 IS ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 17 NOT AVAILABLE HENCE THE PAYMENTS MADE ON ACCOUNT OF IUC CHARGES FOR THESE SERVICE PROVIDERS WOULD BE SUBJECT TO TDS U/S 194J. FOR NON DEDUCTION OF TDS U/S 194J IN THE CASE OF PAYMENT OF IUC CHARGES TO RELIANCE COMMUNIC ATION, HUTCHISON ESSAR AND TATA COMMUNICATION, THE APPELLANT WILL BE CONSIDERED ASS ESSEE IN DEFAULT U/S 201(1) OF THE ACT. 7. THE LD. AR OF THE ASSESSEE FILED A DETAILED WRITTEN SYNOPSIS BEFORE US, WHICH WE THINK APPROPRIATE TO REPRODUCE HEREUNDER: DEDUCTION UNDER SECTION 194J 1. THE ISSUE OF DEDUCTION OF TAX AT SOURCE ON INT ER-CONNECT USAGE CHARGES ('IUC') WHICH A TELECOM OPERATOR PAYS TO ANOTHER HAS BEEN DECIDED BY THIS TRIBUNAL IN THE CASE OF BHARTI AIRTEL V. ITO (TDS) [2016] 60 TAXMANN.COM 22 3 (DELHI TRI). FURTHER, THE DECISIONS OF THE BANGALORE AND JAIPUR TRIBUNAL IN F AVOUR OF THE ASSESSEE HAVE BEEN AFFIRMED BY THE HON'BLE KARNATAKA HIGH COURT IN CIT, BANGALORE V. VODAFONE SOUTH LTD [2016] 72 TAXMANN.COM 347 (KAR) AND M/S HINDUST AN COCO-COLA BEVERAGES V. JAIPUR (DECISION DATED 11.07.2017 IN DB ITA 205/200 5). THE DECISIONS OF MUMBAI TRIBUNAL, KOLKATA TRIBUNAL AND PATNA TRIBUNAL ARE A LSO IN FAVOUR OF THE ASSESSEE. THUS DEMAND FOR NON-DEDUCTION OF TDS ON IUC UNDER SECTIO N 194J IS NOT PROPER. THIS TRIBUNAL IN CASE OF BHARAT SANCHAR NIGAM LTD., VS. ADDL. CIT, NEW DELHI , IN ITA NO. 920/DEL./2017 DECISION DATED 25.10.2017 {'THE BSNL TRIBUNAL CASE') HAS ALSO HELD THAT SECTION 194J IS NOT ATTRACTED TO THE IUC PAYME NTS AND THAT THERE IS NO LIABILITY TO DEDUCT TAX. THUS, THE ISSUE BE DECIDED IN FAVOUR OF THE APPELLANT AND APPEAL BE ALLOWED. DEDUCTION UNDER SECTION 194H 2. THE APPELLANT IN COURSE OF ITS BUSINESS SUPPLY THE SIM CARDS AND RECHARGE VOUCHERS TO ITS DISTRIBUTORS (ALSO REFERRED TO AS THE CHANNE L PARTNERS). THAT THE PRIMARY AGREEMENT WITH THE CHANNEL PARTNERS IS TO BUY & SEL L APPELLANT'S PRODUCTS ON A PRINCIPAL TO PRINCIPAL BASIS [CLAUSE 2.4 OF THE DISTRIBUTOR A GREEMENT @PG. 83 OF THE PAPER BOOK]; THE APPELLANT SELLS ITS PRODUCT TO CHANNEL PARTNERS ALLOWING DISCOUNT ON THE PRIMARY TRANSACTION, WHICH THE CHANNEL PARTNERS WER E FREE TO SELL TO SUB-CHANNEL PARTNERS/RETAILERS AT ANY PRICE NOT EXCEEDING THE M AXIMUM RETAIL PRICE (MRP). THERE IS NO PAYMENT NOR ANY SUM CREDITED BY THE APPELLANT TO THE CHANNEL PARTNERS, AS THE AMOUNT UNDER CONSIDERATION IS DISCOUNT ALLOWED AT T HE TIME OF SALE OF STARTER KITS AND RECHARGE VOUCHERS. THE PURCHASE OF THESE PRODUCTS A RE ACCOUNTED AT NET PRICE PAID. 3. UNDER THE AGREEMENT, THE CHANNEL PARTNERS PURC HASE APPELLANT'S PRODUCTS IN BULK AND GENERATES INCOME FROM FURTHER SALE OF THESE PRO DUCTS TO THEIR RETAILERS/CUSTOMERS. THE DISCOUNT ALLOWED TO THE CHANNEL PARTNERS CANNOT BE EQUATED AS INCOME IN THE HANDS OF THE DISTRIBUTORS AND THEREFORE, THE VERY FUNDAME NTAL REQUIREMENT OF SECTION 194H IS MISSING. [@PG. 445-446 OF THE PAPER BOOK; ALSO RECORDED IN THE CIT(A)'S ORDER @PG. 52-53]. 4. THERE IS A TRANSACTION OF SALE AND PAYMENT OF APPLICABLE SALES TAX/VAT ON GOODS INVOLVED IN THE TRANSACTION. THE SALES TAX AUTHORIT Y IS ASSESSING AND COLLECTING SALES ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 18 TAX/VAT ON THE SALE OF PRODUCTS TO THE DISTRIBUTOR WHICH SUBSTANTIATE THAT THERE IS SALE. [@PG 448-449, 452 OF THE PAPER BOOK]. 5. THE KARNATAKA HIGH COURT IN BHARTI AIRTEL LTD. VS. CIT, ANR., [2015] 372 ITR 33 (KARN) WHILE CONSIDERING AN IDENTICAL ISSUE IN THE FACTS O F THE APPELLANT HAS INTER ALIA HELD THAT 'RIGHT TO SERVICE CAN BE SOLD' AND AS SUC H THE SUPPLY OF SIM CARDS AND RECHARGE VOUCHERS CAN BE ON THE BASIS OF PRINCIPAL TO PRINCI PAL AND IN THE FACTS OF THE CASE, THERE WOULD NOT BE A RELATIONSHIP OF AGENCY. THE HON'BLE HIGH COURT HAS FURTHER HELD THAT WHERE THE TRANSACTION IS RECORDED NET OF DISCOUNT P RICE, THERE SHALL BE NO LIABILITY TO DEDUCT TAX. SIMILAR VIEW HAS BEEN TAKEN BY THE RAJA STHAN HIGH COURT IN THE CASE OF THE APPELLANT ITSELF IN M/S HINDUSTAN COCO-COLA BEVERAGES V. JAIPUR (DECISION D ATED 11.07.2017 IN DB ITA 205/2005). 6. THE KARNATAKA HIGH COURT IN BHARTI AIRTEL LTD. (SUPRA) DISTINGUISHED THE OTHER DECISIONS AT PARAS 56 TO 58 TO HOLD THAT PRINCIPAL TO PRINCIPAL RELATIONS EXISTS IN THE FACTS BEFORE THEM AS THE RIGHT TO SERVICE, BEING THE PREP AID TALK TIME, IS BEING SOLD TO THE DISTRIBUTOR WHO THEN FURTHER SELLS IT OR USES IT FO R HIMSELF AND EARNS AN INCOME ONLY WHEN THE SAME IS SOLD IS FOR A PROFIT (REFER TO PAR A 59 AND 62). 7. FURTHER, IT IS SUBMITTED THAT THE KARNATAKA HI GH COURT HAS GIVEN AN EXPLICIT FINDING (AT PARA 62) THAT THERE IS A SALE OF TRANSFER OF RI GHT TO SERVICE AS PER THE AGREEMENTS BEFORE THEM WHICH ESTABLISH THAT THERE EXISTS A PRI NCIPAL TO PRINCIPAL RELATIONSHIP BETWEEN THE ASSESSEES AND THE DISTRIBUTORS. 8. THE DECISION OF THE HON'BLE DELHI HIGH COURT I N CIT VS. IDEA CELLULAR, [2010] 325 ITR 148 (DELHI) ('IDEA CELLULAR') IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE, FOLLOWING ARE THE POINTS OF DIFFERENCES BETWEEN THE TWO TRANSACTIONS/ CASES: I. NO ARGUMENT THAT THE 'RIGHT TO AVAIL SERVIC E CAN BE SOLD' WAS EVER RAISED OR CONSIDERED BY THE HON'BLE HIGH COURT IN IDEA CELLUL AR (SUPRA). THE DECISION IN IDEA PROCEEDED ON THE BASIS THAT THE TRANSACTION WAS ONE OF SERVICE AND SERVICE CAN ONLY BE RENDERED AND NOT SOLD. THE ISSUE THAT A RIGHT TO AV AIL SERVICE CAN BE TRADED WAS NEITHER RAISED NOR CONSIDERED BY THE COURT. IF A POINT IS N OT RAISED OR CONSIDERED, THE JUDGMENT CANNOT BE SAID TO HAVE DECIDED THAT ISSUE. II. THE DISCOUNTS ALLOWED TO THE CHANNEL PARTN ERS ARE AT THE TIME OF BULK-PURCHASE OF THE APPELLANT'S PRODUCTS BY THE CHANNEL PARTNERS ON A PRINCIPAL TO PRINCIPAL BASIS, HOWEVER, IN IDEA CELLULAR, COUNSEL FOR BOTH THE PAR TIES AGREED THAT DETERMINATION OF ELEMENT OF AGENCY WAS THE ESSENCE OF THE DISPUTE. III. IN THE IDEA CELLULAR(SUPRA) THE TRANSACTI ON WAS NOT THAT OF SALE AND PURCHASE AS THE OWNERSHIP OF THE SIM CARDS REMAINED WITH THE ASSESS EE AND THERE WAS NO PAYMENT OF ANY SALES TAX/VAT, HOWEVER, IN THE APPELLANT'S CASE THE TRANSACTION UNDER CONSIDERATION IS A TRADING TRANSACTION, THE OWNERSH IP OF THE SIM CARDS ARE DULY TRANSFERRED AT THE TIME OF SALE TO THE CHANNEL PART NERS AS EVIDENT FROM THE INTENT AND CONDUCT OF THE BUSINESS AND THERE IS DUE DISCHARGE OF SALES TAX/VAT ON THE SALE OF GOODS. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 19 IV. FURTHER, IN IDEA CELLULAR (SUPRA) THE DIST RIBUTORS WERE NOT ALLOWED TO APPOINT RETAILERS WITHOUT APPROVAL OF IDEA AND IDEA CAN TER MINATE THE AGREEMENT WITH THE DISTRIBUTORS UNILATERALLY, HOWEVER, IN THE APPELLAN T'S CASE HERE THE RELATIONSHIP IS THAT OF PRINCIPAL TO PRINCIPAL THESE CONDITIONS DOES NOT EX IST. NOTHING IN THE AGREEMENT DEEMS TO CONSTITUTE DISTRIBUTORS AS AN AGENT, EMPLOYEE OR PARTNER OF THE JOINT VENTURE OR AFFILIATE OF THE APPELLANT IN ANY MANNER. THE DISTR IBUTORS SHALL HAVE NO AUTHORITY TO BIND THE APPELLANT IN ANY RESPECT. V. IN CASE OF IDEA CELLULAR, LEGAL TITLE AND I NTEREST OF THE PRODUCTS HAVE NEVER BEEN TRANSFERRED TO THE DISTRIBUTORS AND REMAINS WITH TH E IDEA. FURTHER, DISTRIBUTORS ARE ALSO BOUND WITH SPECIFIC CONDITIONS REGARDING THE STORAG E/DISPLAY OF THE PRODUCTS, HOWEVER, IN THE APPELLANT'S CASE THE TITLE IS PASSED TO THE DISTRIBUTOR IMMEDIATELY ON THE ACCEPTANCE OF DELIVERY TO THE DISTRIBUTOR'S WAREHOU SE AND THERE ARE NO CONDITIONS REGARDING STORAGE/DISPLAY OF PRODUCTS. [REFER TO SU BMISSION DATED 11.02.2015 @PG. 452-456 OF THE PAPER BOOK]. VI. IN CASE OF IDEA CELLULAR, THERE WAS NEITHE R A SEPARATE PAYMENT NOR DEDUCTION OF TAX ON ACTIVITIES CARRIED OUT ON BEHALF OF IDEA. WHEREA S, IN THE PRESENT FACTS, IT IS UNDISPUTED THAT SEPARATE AMOUNTS ON WHICH IDS HAS BEEN DEDUCTE D HAS BEEN PAID. A CHART DISTINGUISHING THE CASE OF IDEA CELLULAR (S UPRA) FROM THE CASE OF THE APPELLANT IS PRODUCED BELOW FOR REFERENCE: SR. NO. HEADING EXTRACT OF DELHI HC IDEA JUDGMENT IN THE CASE OF IDEA CELLULAR LIMITED ('IDEA') IN THE CASE OF TATA TELESERVICES LIMITED ('TTSL') 1. BUSINESS MODEL PARA 2: 'THE ASSESSE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING CELLULAR TELEPHONE NETWORK THROUGH A CARD CALLED SUBSCRIBER IDENTIFICATION MODULE (SIM) - IDEA IS A TELECOM OPERATOR I.E. HOLDER OF TELECOM LICENSES, ISSUED BY DEPARTMENT OF TELECOMMUNICATION, GOVERNMENT OF INDIA. - IDEA IS ENGAGED IN THE BUSINESS OF RENDERING TELECOM SERVICES THROUGH ITS OWN TELECOM NETWORK. - FOR RENDERING ITS SERVICES, IDEA APPOINTS DISTRIBUTORS AND TRANSFER 'SIM CARDS' & 'RECHARGE COUPONS' ('PRODUCTS) TO DISTRIBUTORS WITHOUT RELINQUISHING THE RIGHTS OF TITLE AND INTEREST. - TTSL IS ENGAGED IN THE BUSINESS OF TRADING IN TELECOM PRODUCTS. - TTSL SELLS IN BULK SIM CARDS ('SUK') & RECHARGE VOUCHER ('RCV'} - TTSL SELL AFORESAID SUK PRODUCTS TO DISTRIBUTORS BY SHIFTING THE TITLE SHIP RIGHT IN THE PRODUCT. - DISTRIBUTORS FURTHER SELL THE PRODUCTS TO RETAILERS AND FINALLY RETAILERS SELL THESE PRODUCTS TO END CUSTOMERS CHARGING VAT THE SUKS. - IN PURSUANT TO EACH SALE ALL RIGHTS OF TITLE/ INTEREST AND RISK FOR LOSS ARE TRANSFERRED. (DISCUSSED IN DETAIL IN ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 20 - DISTRIBUTORS FURTHER APPOINT RETAILERS WITH THE PERMISSION OF IDEA AND THE AFORESAID PRODUCTS FINALLY TRANSFERRED TO CUSTOMER THROUGH RETAILERS. POINT NO. 2) 2 TRANSFER OF TITLE AND RISK PARA 8: 'FULL LEGAL AND EQUITABLE TITLE AND INTEREST IN PREPAID SIM CARD AND RECHARGE COUPONS DELIVERED TO THE DISTRIBUTORS AT ALL TIME REMAINS WITH THE ASSESSE.' 'THE DISTRIBUTORS STORE THE SIM CARD AND RECHARGE COUPONS IN SUCH A WAY AS TO CLEARLY INDICATE AT ALL TIMES THAT THE PREPAID SIM CARD/ RECHARGE COUPONS ARE OWNED BY ICL AND IS NOT ALLOWED TO REMOVE, OBSCURE OR DELETE ANY MARK PLACED ON PREPAID SIM CARD/ RECHARGE COUPONS/' - IN CASE OF IDEA, LEGAL TITLE AND INTEREST OF THE PRODUCTS HAVE NEVER BEEN TRANSFERRED TO DISTRIBUTORS AND REMAINS WITH IDEA. FURTHER, DISTRIBUTORS ARE ALSO BOUND WITH SPECIFIC CONDITIONS REGARDING STORAGE/DISPLAY OF THESE PRODUCTS. - IN CASE OF TTSL, TITLE AND RISK OF LOSS OR DAMAGE TO THE PRODUCTS PASSED TO THE DISTRIBUTOR IMMEDIATELY UPON ACCEPTANCE OF DELIVERY AT THE DISTRIBUTOR'S WAREHOUSE. THERE ARE NO CONDITIONS REGARDING STORAGE/DISPLAY OF PRODUCTS. - THE ABOVE FACT IS DOCUMENTED IN DISTRIBUTOR AGREEMENT. - TTSL WILL SHIP THE PRODUCTS AS PER THE PURCHASE ORDERS ('PO') RAISED BY THE DISTRIBUTOR AND THE PRODUCTS WILL BE SHIPPED BY TTSL 'FREE ON ROAD' ('FOR') DESTINATION BASIS TO THE DISTRIBUTOR'S DESIGNATED WAREHOUSE OR LOCATION SPACE ON THE DISTRIBUTOR'S PO. TTSL WILL BE RESPONSIBLE FOR ALL FREIGHT CHARGES AND INSURANCE COVER TILL THE PRODUCTS REACH THE DISTRIBUTOR'S WAREHOUSE. - TITLE AND RISK OF LOSS OR DAMAGE IN THE PRODUCTS WILL PASS TO THE DISTRIBUTOR UPON ACCEPTANCE OF DELIVER AT THE DISTRIBUTORS WAREHOUSE. THE DISTRIBUTOR SHOULD NOT REJECT THE PRODUCTS ONCE SHIPPED BY TTSL PURSUANT TO PO ISSUED BY THE DISTRIBUTOR. 3. RELATIONSHIP WITH DISTRIBUTOR PARA 8: PMA IS ALLOWED TO APPOINT THE THE HONBLE HC HOLD THAT RELATIONSHIP BETWEEN IDEA AND -IN CASE OF TTSL, WHICH RELATIONSHIP IS PRINCIPAL TO PRINCIPAL, THESE CONDITIONS ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 21 RETAILS ONLY AFTER THE WRITTEN APPROVAL FROM THE ASSESSEE. THE PMA HAS TO PROVIDE MONTHLY SALES REPORTS RETURN AND OTHER INFORMATION RELATING TO BUSINESS COMPANY RESERVES THE RIGHT TO TERMINATE THE AGREEMENT UNILATERALLY DISTRIBUTORS IS OF PRINCIPAL AND AGENT BASED ON CERTAIN CONDITIONS WHICH GENERALLY PREVAIL IN AGENCY RELATIONSHIP -DISTRIBUTORS ARE NOT ALLOWED TO APPOINT RETAILERS WITHOUT APPROVAL OF IDEA. -DISTRIBUTORS HAVE TO PROVIDE MONTHLY REPORTS TO IDEA. IDEA CAN TERMINATE THE AGREEMENT WITH DISTRIBUTORS UNILATERALLY. DO NOT EXIST. -THE DISTRIBUTOR ACKNOWLEDGES THAT THE DISTRIBUTOR IS APPOINTED FOR THE PURPOSE OF PERFORMING THE OBLIGATIONS OF THE DISTRIBUTOR AS SET OUT IN THE AGREEMENT. NOTHING IN THE AGREEMENT DEEM TO CONSTITUTE A DISTRIBUTOR AS AN AGENT EMPLOYEE OR PARTNER OR JOINT VENTURE OR AFFILIATE OF TTSL IN ANY MANNER. THE DISTRIBUTOR SHALL HAVE NO AUTHORITY TO BIND TTSL IN ANY RESPECT WHATSOEVER AND SHALL NOT HOLD ITSELF OUT AS OWNED BY OR ASSOCIATED WITH TTSL OTHER THAN AS AN INDEPENDENT DISTRIBUTOR AUTHORIZED AND PERMITTED TO PROMOTE, MARKET, DISTRIBUTE AND SELL THE PRODUCT IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT. NONE OF THE EMPLOYEES OF THE DISTRIBUTOR SHALL BE CONSTRUED OR DEEMED TO BE THE EMPLOYEES OR AGENT OF TTSL AT ANY TIME AND THE DISTRIBUTOR AGREES TO INDEMNIFY TTSL AGAINST ANY CLAIM, ACTION OR LOSS OR DAMAGES WHATSOEVER IN THIS CONNECTION. 4. PAYMENT OF SALES TAX/VAT PARA 8: THE TRANSACTION IN QUESTION WAS NOT THAT OF SALE AND PURCHASE BETWEEN THE ASSESSEE AND THE PMAS AND FOR THIS REASON, NO SALES TAX WAS EVEN PAID. THE HONBLE HC HAS CONSIDERED PAYMENT OF SALES TAX, INTER ALIA, AS ONE OF THE DETERMINANT TO DECIDE THE RELATIONSHIP. IT HAS BEEN HELD THAT TRANSACTION IN QUESTION IS NOT SALE AND PURCHASE AS NO SALES TAX HAS EVEN BEEN PAID. -TTSL TRANSFERS THESE PRODUCTS TO ITS CONSIGNMENT AGENT UNDER STOCK TRANSFER NOTE OF VARIOUS LOCATIONS AT PAN INDIA LEVEL. THE APPELLANT DULY REFLECTS THESE STOCK TRANSFERS IN ITS VAT RETURN FOR WHICH THE CONSIGNMENT AGENT PROVIDES F-FORM, ISSUED BY STATE VAT DEPARTMENT IN FAVOUR OF THE APPELLANT. -THEREFORE, CONSIGNMENT AGENT ACTING ON BEHALF OF THE APPELLANT SELLS THESE PRODUCTS TO DISTRIBUTORS UNDER VALID TAX INVOICE AFTER CHARGING APPLIED VAT. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 22 THEREFORE, THE CONCLUSIONS OF THE HON'BLE DELHI HIG H COURT IN IDEA CELLULAR (SUPRA) WILL NOT APPLY IN THE PRESENT CASE. RELIANCE IN THIS REG ARD MAY BE PLACED ON THE FOLLOWING: O UNION OF INDIA VS. CHAJJU RAM, (2003) 5 SCC 56 8 @ PARA 23 STATES THAT 'A DECISION IS AN AUTHORITY FOR WHAT IT DECIDES AND NO T WHAT CAN BE LOGICALLY DEDUCED THEREFROM. IT IS EQUALLY WELL SETTLED THAT A LITTLE DIFFERENCE IN FACTS OR ADDITIONAL FACTS MAY LEAD TO A DIFFERENT CONCLUSION. O CCE VS. ALNOORI TOBACCO PRODUCTS AND ANR., (20 04) 6 SCC 186- THE HON'BLE SUPREME COURT OF INDIA RELYING ON ITS EARLIER DECIS ION AND SOME ENGLISH DECISIONS BY THE HOUSE OF LORDS HELD THAT A DECISION CANNOT BE RELIE D UPON IF THE FACTUAL SITUATION OF THE DECISION RELIED UPON IS DIFFERENT FROM THAT OF THE CASE IN DISCUSSION. THE COURT FURTHER HELD THAT 'CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITION AL OR DIFFERENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN TWO CASES. DIS POSAL OF CASES BY BLINDLY PLACING RELIANCE ON A DECISION IS NOT PROPER' (REFER TO PARAS 11 TO 14). O BHARAT SANCHAR NIGAM V. UNION OF INDIA (2006) 3 SCC 1 THERE IS NO CONSTRUCTIVE RES JUDICATA IN TAX PROCEE DINGS. WHERE A NEW GROUND IS URGED, THE COURT HAS TO CONSIDER IT ON MERITS IF IT HAS NO T BEEN RAISED EARLIER. (PARA 16, 20) IF THE PARTIES INTEND THAT THE SIM CARD WOULD BE A SEPARATE OBJECT OF SALE, IT WOULD BE OPEN TO THE SALES TAX AUTHORITY TO LEVY SALES TAX. (PARA 87) 9. FURTHER, DECISION IN THE CASE OF BHARAT SANCHAR NIGAM LTD., VS. ADDL. CIT, NEW DELHI, IN ITA NO. 920/DEL./2017 DECIDED ON 25.10.20 17 ('THE BSNL TRIBUNAL CASE') CANNOT BE MADE APPLICABLE TO THE APPELLANT W.R.T LI ABILITY UNDER SECTION 194H OF THE ACT, AS: I. IN THE APPELLANT'S CASE THE TRANSACTION UND ER CONSIDERATION IS A TRANSACTION OF SALE AND APPLICABLE SALES TAX/VAT ON SIM CARDS HAS BEEN PAID BY THE APPELLANT. THIS FACT WAS NEITHER UNDER CONSIDERATION IN THE BSNL TRIBUNAL CASE (SUPRA) NOR IDEA CELLULAR (SUPRA). THUS, WHERE THE PARTIES TO A CONTRACT HAVE CONSIDER ED THE SALE OF SIM CARDS AND RECHARGE VOUCHERS AS SALE, THE SAME CANNOT BE C ONSIDERED AS A SERVICE IN VIEW OF DECISION OF THE HON'BLE SUPREME COURT IN BSNL (SUPRA) (PARA 87). II. THE HON'BLE TRIBUNAL IN BSNL TRIBUNAL CASE (SUPRA) HAS NOT CONSIDERED THE VIEW TAKEN BY THE RAJASTHAN HIGH COURT IN THE CASE OF TH E APPELLANT ITSELF IN COMMISSIONER OF INCOME TAX (TDS), JAIPUR VS. M/S TATA TELESERVIC ES LIMITED, (DECISION DATED 11.07.2017 IN DB ITA NO. 124,125,126,131 AND 132 OF 2015) WHEREIN IDENTICAL TERMS AND CONDITIONS, THE HON'BLE RAJASTHAN HIGH CO URT IN APPELLANT'S OWN CASE HAS HELD THAT THE AGREEMENT IS ONE OF PRINCIPAL TO PRIN CIPAL. IT IS PERTINENT TO NOTE THAT THE AGREEMENTS IN BSNL TRIBUNAL CASE/ IDEA CELLULAR (SUPRA) ARE DIFFERENT FROM THE AGREEMENT OF THE APPELLANT. III. THE APPELLANT IN THE PRESENT CASE HAS BEE N DEDUCTING APPROPRIATE IDS ON ALL COMMISSION/INCENTIVES OR CREDITS ALLOWED TO THE CHA NNEL PARTNERS FOR ANY ANCILLARY OR CONNECTED SERVICES APART FROM THE PRIMARY ARRANGEME NT. [@PG. 445 OF THE PAPER ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 23 BOOK], WHEREAS, NO SUCH DEDUCTION/DECLARATION WAS MADE BY THE ASSESSEE IN THE BSNL TRIBUNAL CASE. IV. THE ARGUMENT THAT 'RIGHT TO AVAIL SERVICE' CAN BE SOLD WAS NEITHER RAISED NOR ARGUED BEFORE THE HON'BLE DELHI HIGH COURT IN IDEA CELLULAR (SUPRA) AND AS SUCH CANNOT BE CONSIDERED AS RATIO DECIDENDI WHICH IS BINDING ON THE HON'BLE TRIBUNAL. RELIANCE CAN BE PLACED ON THE DECISION OF THE HON'B LE SUPREME COURT IN COMMISSIONER OF INCOME TAX VS. SUN ENGINEERING WORKS (P) LTD. (1 992) 4 SCC 363, WHEREIN THE HON'BLE APEX COURT OBSERVED AS BELOW: 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUE STION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT... A DE CISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS R ENDERED AND WHITE APPLYING THE DECISION TO A LATER CASE, THE COURTS MUST CAREFULLY TRY TO A SCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORD S OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CO NSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONINGS.' FURTHER, IT IS SUBMITTED THAT THE HON'BLE TRIBUNAL, KOLKATA BENCH IN VODAFONE EAST LTD. VS. DOT, (TDS) IN ITA NOS. 1499-1502/KOL/2015 AND 1 36-137/KOL/2016 DECISION DATED 26.10.2017, DECIDED THE ISSUE IN THE ASSESSEE'S FAVOUR ON THE B ASIS OF THE AGREEMENT IN QUESTION AND HAS HELD THAT THE TRANSAC TION BETWEEN THE ASSESSEE AND THE DISTRIBUTOR FOR RECHARGE COUPONS WAS IN THE NATURE OF SALE AND PURCHASE. THEREFORE, THE AMOUNT OF DISCOUNT CANNOT BE EQUATED WITH THE COMMI SSION AS ENVISAGED UNDER SECTION 194H OF THE ACT. THEREFORE, THE DECISION OF THE HON'BLE TRIBUNAL IN BSNL TRIBUNAL CASE (SUPRA) WILL NOT APPLY IN THE PRESENT CASE. 10. IT IS SUBMITTED THAT THE SALE OF RIGHT TO SERVI CE IS AKIN TO SALE OF GOODS AND TRADEABLE COMMODITY. THEREFORE, THE CASES RELIED UPON BY THE ASSESSEES IN BHARTI AIRTEL LTD. VS. CIT (SUPRA) BEING CIT VS. MOTHER DAIRY INDIA LTD. [2013] 358 ITR 218 (DELHI), CIT VS QATAR AIRWAYS, [2012] 20 TAXMANN.COM 598 (BOMBAY ), AND AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF INDIA, [2002] 257 ITR 202 (GUJ) AFFIRMED BY THE SUPREME COURT IN ITS ORDER DATED 06.09.2012 IN CIVI L APPEAL NO. 10270 OF 2003 BEING CIT VS AHMEDABAD STAMP VENDORS WHEREIN IT IS HELD THAT A PRINCIPAL TO PRINCIPAL RELATION EXISTS WHEN A DISTRIBUTOR SELLS PRODUCTS ACQUIRED AT A DISCOUNT ARE SQUARELY APPLICABLE IN THE PRESENT CASE. 11. THE DECISION OF THE KERALA HIGH COURT IN VODAFONE ESSAR CELLULAR LTD. ASSISTANT COMMISSIONER OF INCOME TAX, [2011] 332 ITR 255 (KER ) IS NO LONGER GOOD LAW AFTER THE ORDER OF THE SUPREME COURT DATED 06.09.2012 IN CIVIL APPEAL NO. 10270 OF 2003 BEING CIT VS AHMEDABAD STAMP VENDORS. IT IS SUBMITTED THAT THE ORDER OF THE SUPREME COURT DATED 06.09.2012 IN CIVIL APPEAL NO. 10270 OF 2003 BEING CIT VS AHMEDABAD STAMP VENDORS EFFECTIVELY OVERRULES THE DECISION OF THE KERALA HI GH COURT DATED 17.8.2010 IN VODAFONE ESSAR CELLULAR LTD. ASSISTANT COMMISSIONER OF INCOME TAX, [2011] ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 24 332 ITR 255 (KER), WHERE THE KERALA HIGH COURT HAD DOUBTED ITS OWN DEC ISION IN KERALA STATE STAMP VENDORS ASSOCIATION VS OFFICE OF THE AC COUNTANT-GENERAL AND ORS.[2006] 282 ITR 7 (KER), WHICH IN TURN HAD RULED UPON AHMEDABAD STAMP VENDORS CASE. ONCE THE HON'BLE SUPREME COURT HAS UPHELD THE AHMEDABAD STAMP VENDORS, THE CONTRARY VIEW EXPRESSED IN VODAFONE ESSAR CELLULAR CANNOT BE SAID TO BE GOOD LAW. 12. THE KERALA HIGH COURT WHILE CONCLUDING THAT THE RE EXISTS A PRINCIPAL TO AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND ITS DISTRIBUT ORS (AT PAGE 10 OF THE CASE) HAS SPECIFICALLY DISAGREED WITH REASONING OF THE GUJARA T HIGH COURT IN AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF INDIA, [2002] 257 ITR 202 (GUJ). 13. AS PER THE PRINCIPLE OF DOCTRINE OF MERGER (REF ER TO KUNHAYAMMED & ORS VS STATE OF KERALA & ANR, (2000) 6 SCC 359 @ PARA 44) VIDE THE ORDER OF THE SUPREME COURT DATED THE 06.09.2012 THE DECISION OF THE GUJARAT HI GH COURT IN AHEMDABAD STAMP VENDORS CASE (SUPRA) STANDS AFFIRMED AND THE DECISION OF THE KERALA HIGH COURT STANDS OVERRULED. 14. THE DECISION OF THE CALCUTTA HIGH COURT IN BHARTI CELLULAR V. ASST CIT [2011] 12 TAXMANN.COM 30 (CAL) IS SIMILARLY DISTINGUISHABLE ON FACTS. RELIANCE IS ALSO PLACED ON THE DECISION OF THE KOLKATA BENCH IN VODAFONE EAST LTD, VS. DOT, (IDS) IN ITA NOS. 1499-1502/KOL/2015 AND 136-137/KOL/2016 DECISION DA TED 26.10.2017. 8. ON THE OTHER HAND, THE LD. DR RELYING ON THE ORDERS OF THE AUTHORITIES BELOW, ALSO FILED A WRITTEN SYNOPSIS, WHICH READS A S UNDER : 1. IN GIST, THE APPELLANT ASSESSEE HAS RAISED GRO UNDS OF APPEAL ON THE ISSUES OF TAX DEDUCTION AT SOURCE U/S 194H OF IT ACT 1961 FROM TH E DISCOUNTS ALLOWED TO ITS DISTRIBUTORS ON BULK SALE OF STARTER KITS AND RECHA RGE VOUCHERS (RCVS) AND THE SAID APPELLANT ASSESSEE HAS ALSO RAISED GROUNDS OF APPEA L ON THE ISSUES OF TAX DEDUCTION AT SOURCE U/S 194J OF IT ACT 1961 ON INTERCONNECT USAG E CHARGES PAID BY THE APPELLANT TO OTHER TELECOM OPERATORS. 2. LD. AO (ASSESSING OFFICER) WHILE FOLLOWING THE DIRECTION OF HON'BLE SUPREME COURT IN CIVIL APPEAL NO. 6692 DATED 12.08.2010 IN THE CA SE VODAFONE ESSAR MOBILE SERVICES LTD. HAS CONSIDERED THE EXPERT OPINION OF TWO C-DOT OFFICIALS SHRI TANAY KRISHNA ,GROUP LEADER ( PROJECT PLANNING) & SHRI ASHOK MITT AL ,GROUP LEADER (CLH),C-DOT ON 29.09.2010 BY EXAMINATION AND CROSS-EXAMINATION TO FIND OUT EXTENT & NATURE OF HUMAN INTERVENTIONS' WHICH IS INEVITABLE ON AN ASSO RTMENT OF AREAS DURING THE PROCESS OF TECHNICAL OPERATIONS FOR INTERCONNECTION AND THE ASSESSING OFFICER WHILE CONSIDERING ALL FACTS AND CIRCUMSTANCES HAS RIGHTLY AND CORRECTLY ON FACTS AND LAW HOLD THAT THE APPELLANT ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194J READ WITH EXPLANATION 2 OF SECTION 9(1)(VII) OF IT ACT 1961 O N INTERCONNECT USAGE CHARGE TO OTHER TELECOM OPERATORS. 3. LD. CIT (A), FOR EXAMPLE, IN APPEAL NO 639/14-15 DATED 13.03.2015 FOR FINANCIAL YEAR 2006-07 AT PARA 11.4/PAGE 21 HAS STATED ' PERUSAL OF DETAILS SUBMITTED DURING ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 25 APPELLATE PROCEEDINGS AS WELL AS AO'S ORDER DATED 3 0.03.2011, IT IS OBSERVED THAT THE ENTIRE PROCESS OF CARRIAGE AND TRANSFER OF CALLS FR OM THE NETWORK OF ONE OPERATOR TO ANOTHER THOUGH BEING AN AUTOMATED PROCESS UNDERTAKEN BY A SERIES OF HIGHLY ADVANCED TELECOM NETWORK EQUIPMENT, STILL REQUIRED CONSTANT HUMAN INTERVENTION IN FORM CONFIGURATION, INSTALLATION, TESTING ETC. IN THE OR DER TO MAKE THE PROCESS OF CARRIAGE OF CALLS EFFECTIVELY OPERATIONAL .MOREOVER AFTER ANALY SING THE REASON WHY EXPERT OPINION WAS NOT CROSS VERIFIED BY TTSL GIVEN BY THE AO IN R EMAND REPORT. I SEE NO REASON TO INTERFERE WITH THE OBSERVATIONS OF THE AO IN THIS C ONNECTION.' HENCE, CONSIDERING THE FACTS AND LAW, THE LD. AO HAS CORRECTLY APPLIED PRO VISION OF SECTION U/S 194J READ WITH EXPLANATION 2 OF SECTION 9(1)(VII) OF IT ACT 1961 WHICH WAS LEGALLY & FACTUALLY SUPPORTED BY LD. CIT (A). 4. THE APPELLANT ASSESSEE HAS TAKEN ALTERNATIVE PLEA (GROUND NO.5 ) BEFORE LD.CIT(A) THAT IN THE CASE OF OPERATORS TO WHOM PAYMENTS TOWA RDS IUC CHARGES HAVE BEEN MADE, TDS HAS NOT BEEN DEDUCTED AS THE DEDUCTEES INCOME W ERE EXEMPTED FROM TDS BY FOLLOWING THE RATIOS DECIDED IN HINDUSTAN COCA COLA BEVERAGE (P) LTD. 293 ITR 226 (SC). HOWEVER, THE APPELLANT ASSESSEE COULD NOT SUB MIT ANY EVIDENCE TO PROVE THAT TDS HAS BEEN DEDUCTED OR THE EXEMPTION U/S 197 OF I .T. ACT 1961 IS NOT AVAILABLE HENCE THE PAYMENTS MADE ON ACCOUNT OF IUC CHARGES F OR THESE SERVICE PROVIDERS WOULD BE SUBJECT TO TDS U/S 194J. FOR NON DEDUCTION OF TDS U/S 194J IN THE CASE OF PAYMENT OF IUC CHARGES TO RELIANCE COMMUNICATION, H UTCHISON ESSAR AND TATA COMMUNICATION, THE APPELLANT WILL BE CONSIDERED ASS ESSEE IN DEFAULT U/S 201( 1) OF I.T. ACT 1961. THE AO AT PARA 5.2 OF HIS ORDER DATED 30. 03.2011 FOR FINANCIAL YEAR 2006-07 U/S 201(1)R.W.S. 201(1A) OF IT ACT 1961 HAS HELD TH AT THE APPELLANT ASSESSEE DID NOT PRODUCE ANY NO TDS CERTIFICATE U/S 197 OF IT ACT AN D ALSO DID NOT PRODUCE A CERTIFICATE AND PROVE THAT DEDUCTEE-ASSESSEE HAD IN FACT PAID TDS ON BEHALF OF SAID APPELLANT ASSESSEE AND AS SUCH CBDT CIRCULAR NO. 8/ 2009 HAS NOT BEEN FOLLOWED AND THE STANDS TAKEN BY LD. AO AND SUPPORTED BY LD. CIT (A) ON THE ISSUES OF SECTION 194J OF I.T. ACT 1961 HOLD GOOD & LEGALLY VALID & FACTUA LLY CONSISTENT /REASONABLE AGAINST APPELLANT ASSESSEE. 5. THE APPELLANT ASSESSEE AT GROUNDS OF APPEAL ( D & F)( FOR EXAMPLE F.Y.2006-07) HAS RAISED THAT NO EXAMINATION AND CROSS EXAMINATIO N OF EXPERTS HAS BEEN DONE IN ITS CASE BEFORE LD. AO AND NOR BEFORE LD. CIT(A) REGARD ING ISSUES U/S 194J OF I.T. ACT 1961 AND IF AT THIS STAGE THE EXAMINATION AND CROSS EXAMINATION OF EXPERTS IS TO BE ALLOWED TO THE APPELLANT ASSESSEE , THEN SAME SHOUL D BE DONE BEFORE LD. AO, OR LD. CIT(A). 6. REGARDING THE GROUNDS OF APPEAL ON THIS ISSUES U/S 194H OF I.T. ACT 1961 FROM THE DISCOUNTS ALLOWED TO ITS DISTRIBUTORS ON BULK SALE OF STARTER KITS AND RECHARGE VOUCHERS (RCVS), IT IS RESPECTFULLY SUBMITTED THAT BY CONSID ERING ALL FACTS AND LAWS BOTH BY LD. AO AND LD. CIT(A) HAVE CATEGORICALLY HOLD THAT THE RELATIONSHIP BETWEEN TTSL AND CHANNEL PARTNERS (DISTRIBUTORS) IS THAT OF A PRINCIPAL AND AGENT AND SINCE ON THE SAME ISSUES, THE REVENUE HAS PREFERRED SLP BEFORE H ON'BLE APEX COURT AGAINST KARNATAKA HIGH COURT DECISION ON THE ISSUE OF APPLI CATION OF SECTION 194H OF I.T. ACT 1961, IN APPELLANT ASSESSEE'S OWN CASE WHICH HAS BE EN ADMITTED BEFORE THE HON'BLE SUPREME COURT IN C.A. NO. 004939-004940/2015 ON 06. 05.2015 & SLP (C) NO. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 26 017439-017440/2015 ON 02.07.2015, WHICH CLEARLY PRO VE THAT THE ISSUE OF APPLICATION OF SECTION 194H IS ALIVE AND DEBATABLE AND SUBJUDICE FOR REVENUE BEFORE THE HON'BLE APEX COURT AND SO IT IS SUBMITTED THAT THE ORIGINAL ORDER OF THE LD. AO WHEREIN LD. AO HAS TAKEN STAND ON APPLICATION OF S. 194H OF I.T. ACT 1961 SHOULD BE UPHELD. LD. CIT(A) AT PARA 6.27 IN APPEAL NO. 641/1 4-15 DATED 13.03.2015 FOR F.Y. 2008-09 AT PAGE 16 HAS STATED.. 'I HAVE ALSO CONSIDERED THE JUDGMENT OF DELHI, KOTKATA & KERALA HIGH COURT IN THE CASE OF IDEAL CELLULAR LTD. 325 ITR 148 (DEL), BHARTI CELLULAR LTD. VS. ACIT 244 CTR 185 (CAT) AND VODAFO NE ESSAR CELLULAR LTD. VS. ACIT (2009) 317 ITR (AT) 234 (COCHIN), I HOLD THAT THE D ISCOUNTS ALLOWED AND INCENTIVES GIVEN BY THE APPELLANT TO ITS CHANNEL PARTNERS ON SALE OF ITS PRODUCTS IS IN THE NATURE OF COMMISSION AND THE SAME ATTRACTS THE PROVISION OF S ECTION 194H OF THE ACT'. 7. RECENTLY IN BHARAT SANCHAR NIGAM LTD., VS. ADDL. CI T,RANGE-4, NEW DELHI, IN ITA NO. 920/DEL/2017 DECIDED ON 25.10.2017, THE HON'BLE BENCH OF ITAT, NEW DELHI HAS HELD ..(PARA 11 OF SAID ORDER ) 'APPARENTLY, THEREFORE, LEGALISTICALLY BOTH THE HON'BLE HIGH COURTS HAVE EXPRESSED A DIVERGENT OPINION IN THE MA TTER. SINCE THE APPELLANT BEFORE US IS FROM DELHI, WE ARE OBLIGATED TO FOLLOW THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. PARTIES BEFORE US HAVE ALSO ELABORATED UPON THE FACT THAT THERE IS A DISTINCTION IN TERMS AND CONDITIONS OF DISTRIBUTION AGREEMENT IN THE INST ANT CASE AND THE FACTS AS EXISTING BEFORE BOTH THE HON'BLE HIGH COURTS ABOVE, HOWEVER WE F IND NO REASON TO DELIBERATE UPON THIS ASPECT SINCE ON THE LEGAL ASPECT ITSELF T HE DECISION OF HON'BLE DELHI HIGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT IS AGAINST T HE APPELLANT. WE ARE THEREFORE COMPELLED TO HOLD THAT THE DISCOUNT ON PREPAID PROD UCTS OFFERED BY THE APPELLANT IS IN NATURE OF 'COMMISSION' WHICH DOES ATTRACT RIGORS OF SECTION 194H.' 8. HENCE, THE ORDERS OF THE LD. ASSESSING OFFICER & CONFIRMED BY LD. CIT(A) ON ISSUES OF APPLICATION OF S.194H & S.194J OF I.T. ACT 1961 BASED ON CORRECT FACTS & LAWS INCLUDING JURISDICTIONAL HON'BLE HIGH COURT DECISIO N IN IDEAL CELLULAR LTD. 325 ITR 148 (DEL) MAY BE UPHELD & APPEALS OF APPELLANT ASSESSEE MAY BE DISMISSED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO G ONE THROUGH THE DECISIONS RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIV E AND THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE STAND OF THE ASSES SEE ON THE FIRST ISSUE IS MAINLY BASED ON THE DECISION OF HONBLE KARNATAKA H IGH COURT IN THE CASE OF (1) BHARTI AIRTEL LTD. (2) VODAFONE ESSAR SOUTH LTD. VS . DCIT AND TATA TELESERVICES LTD. VS. CIT, 372 ITR 33 (KARN) WHEREAS THE STAND O F THE REVENUE IS BASED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF IDEA CELLULAR (SUPRA). AS COULD BE SEEN, THE ASSESSING OFFICER HA S TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT ALLEGING NONDEDUCTION OF TAX A T SOURCE UNDER SECTION 194H, ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 27 ON THE REASONING THAT IT HAS PAID COMMISSION TO THE DISTRIBUTORS FOR SELLING THE STARTER KITS /PREPAID SIM CARD/ RECHARGE VOUCHERS. IT IS AN ADMITTED FACT THAT THE MRP DECIDED BY THE ASSESSEE OF ITS ABOVE PRODUC TS IS MORE THAN THE AMOUNT ALLEGED TO HAVE BEEN RECEIVED FROM THE CHANNEL PART NERS (DISTRIBUTORS). WHAT IS TO BE ADJUDICATED IS WHETHER THE IMPUGNED TRANSACTI ONS OF STARTER KITS/PRE-PAID RECHARGE VOUCHERS WERE THE TRANSACTIONS OF PURCHASE AND SALE ON PRINCIPAL TO PRINCIPAL BASIS OR ON PRINCIPAL-TO-AGENT BASIS. I T IS AN ADMITTED POSITION OF LAW THAT IN THE FORMER CASE, THE ASSESSEE SHALL NOT BE LIABLE FOR TDS, BUT IN LATTER SITUATION, THE PROVISIONS OF SECTION 194H WOULD COM E INTO PLAY. THE ANSWER TO THE ABOVE TWO SITUATIONS WOULD DECIDE WHETHER THE D ISCOUNT GIVEN TO THE DISTRIBUTOR WAS IN THE NATURE OF COMMISSION OR NOT. WE HAVE BEEN ADDRESSED AT LENGTH BY BOTH THE PARTIES ON THE STRENGTH OF THESE TWO DECISIONS. FIRST CORE QUESTION TO BE SEEN IN THIS SCENARIO IS WHETHER THE RE IS ANY VARIANCE IN VIEWS EXPRESSED BY BOTH THESE HIGH COURT DECISIONS. HONB LE JURISDICTIONAL HIGH COURT IN CASE OF IDEA CELLULAR (SUPRA) CONCLUDED THAT THE RELATIONSHIP BETWEEN PARTIES IN THAT CASE WAS PRINCIPAL TO AGENT OBSERVING AS UN DER : 23. WE, THUS, COME BACK TO THE CENTRAL QUESTION, WHICH IS TO BE ADDRESSED VIZ. THE NATURE OF RELATIONSHIP. REVERTING BACK TO THIS ASPE CT, IN THE PRESENT CASE, WE ARE OF THE OPINION THAT THE LEGAL RELATIONSHIP IS ESTABLIS HED BETWEEN THE ASSESSEE AND THE ULTIMATE CONSUMER/SUBSCRIBER, WHO IS SOLD THE SIM C ARD BY THE AGENTS FURTHER APPOINTED BY THE PMAS WITH THE CONSENT OF THE ASSES SEE. IT IS CREATED BY : (A) ACTIVATION OF THE SAID SIM CARD BY THE ASSESSEE IN THE NAME OF THE CONSUMER/SUBSCRIBER. (B) SERVICE PROVIDED BY THE ASSESSEE TO THE SUBSCRI BER. FURTHER, DEALINGS BETWEEN THE SUBSCRIBERS AND THE ASSESSEE IN RELATION TO THE SAID SIM CARD INCLUDING ANY COMPLAINT, ETC. FOR IMPROPER SERVICE/DEFECT IN SERV ICE. (C) ENTERING INTO THE ULTIMATE AGREEMENT BETWEEN TH E SUBSCRIBER AND THE ASSESSEE (CL. 15 OF THE AGREEMENT). ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 28 IT IS TO BE BORNE IN MIND THAT THE NATURE OF SERVIC E PROVIDED BY THE ASSESSEE TO THE ULTIMATE CONSUMERS/SUBSCRIBERS, WHETHER IT IS PREPA ID OR POST-PAID SIM CARD REMAINS THE SAME. IN THE INSTANT CASE, THE SIM CARD S ARE PREPAID, WHICH ARE SOLD BY THE ASSESSEE TO THE CONSUMERS THROUGH THE MEDIUM OF PMAS. IN THE CASE OF POST- PAID, SIM CARD TRANSACTION IS ENTERED INTO DIRECTLY BETWEEN THE ASSESSEE AND THE SUBSCRIBER AND THE SUBSCRIBER IS SENT BILL PERIODIC ALLY DEPENDING UPON THE USER OF THE SIM CARD FOR THE PERIOD IN QUESTION. IN BOTH TH E CASES, LEGAL RELATIONSHIP IS CREATED BETWEEN THE SUBSCRIBER AND THE ASSESSEE THA T TOO BY ENTERING INTO SPECIFIC AGREEMENT BETWEEN THESE TWO PARTIES. 24. IN CONTRAST, THE LEGAL POSITION WHEN THE GOODS ARE SOLD BY PRINCIPAL TO ITS DISTRIBUTORS CREATING 'PRINCIPAL AND PRINCIPAL' REL ATIONSHIP WOULD BE ENTIRELY DIFFERENT. ON THE SALE OF GOODS, THE OWNERSHIP PASS ES BETWEEN THE MANUFACTURER AND THE DISTRIBUTORS. IT IS THE RESPONSIBILITY OF T HE DISTRIBUTOR THEREAFTER TO SELL THOSE GOODS FURTHER TO THE CONSUMERSTHE ULTIMATE U SERS. THE PRINCIPAL/MANUFACTURER DOES NOT COME IN PICTURE AT ALL. OF COURSE, HE MAY BE LIABLE FOR SOME ACTION BY THE CONSUMER BECAUSE OF D EFECTIVE GOODS, ETC., WHICH IS THE RESULT OF OTHER ENACTMENTS CONFERRING CERTAIN R IGHTS ON THE CONSUMER OR COMMON LAW RIGHTS IN HIS FAVOUR AS AGAINST THE MANU FACTURER. WE MAY ALSO POINT OUT THAT IN ITS CLASSIC JUDGMENT IN THE CASE OF BHA RAT SANCHAR NIGAM LTD. & ANR. VS. UNION OF INDIA & ORS. (2006) 201 CTR (SC) 346 : AIR 2006 SC 1383, THE SUPREME COURT HELD THAT ELECTROMAGNETIC WAVES OR RADIO OF F REQUENCIES ARE NOT GOODS AND WITH THE SALE THEREOF SALES-TAX ACT IS NOT ATTRACTE D, THOUGH THE DECISION WAS RENDERED IN THE CONTEXT OF LIABILITY OF SALES-TAX. 25. NO DOUBT, AS PER CL. 6(A) OF THE AGREEMENT, PMA IS SUPPOSED TO MAKE THE PAYMENT IN ADVANCE. THAT WOULD NOT MAKE ANY DIFFEREN CE TO THE NATURE OF TRANSACTION IN VIEW OF CL. 25(D) OF THE AGREEMENT, WHICH STIPULATES AS UNDER : '25(D). UPON THE TERMINATION OR EXPIRATION OF THIS AGREEMENT FOR ANY REASON, PMA SHALL DISCONTINUE THE MARKETING/DISTRIBUTING/OFFERI NG FOR SALE, IDEA CHITCHAT PREPAID SERVICES, AND SHALL FORTHWITH RETURN TO ICL THE ENTIRE STOCK OF PREPAID SIM CARDS/RECHARGE COUPONS REMAINING WITH HIM AND/OR HI S AUTHORIZED RETAILER. ICL SHALL PAY TO PMA FOR SUCH PREPAID SIM CARDS/RECHARG E COUPONS RECEIVED BY IT FROM THE DISTRIBUTOR.' 26. THUS, EVEN IF ADVANCE PAYMENT IS MADE BY THE PMA ON RECEIPT OF THE SIM CARDS, QUA THOSE SIM CARDS, IT DOES NOT AMOUNT TO 'SALE' O F GOODS. THE PURPOSE IS TO ENSURE THAT THE PAYMENT IS RECEIVED IN RESPECT OF T HOSE SIM CARDS, WHICH ARE ULTIMATELY SOLD TO THE SUBSCRIBERS IN AS MUCH AS UN SOLD SIM CARDS ARE TO BE RETURNED TO THE ASSESSEE AND THE ASSESSEE IS REQUIR ED TO MAKE PAYMENT AGAINST ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 29 THEM. THIS IS AN ANTITHESIS OF 'SALE'. THERE CANNOT BE ANY SUCH OBLIGATION TO RECEIVE BACK THE UNSOLD STOCKS. FURTHER, CL. 25(F) LAYS DOWN THAT ON TERMINATION OF AGREEMENT, PMA OR ITS AUTHORIZED RETAILER APPOINTED BY IT, IS NOT ENTITLED TO ANY COMPENSATION FOR COST OR EXPENSES INCURRED BY IT IN EITHER SETTING UP OR PROMOTION OF ITS BUSINESS, ETC. NO SUCH CLAUSE WAS REQUIRED I N CASE OF 'SALE'. (TO BE TAKEN FROM AOS ORDER......) 27. WE MAY NOW REFER TO THE THREE DECISIONS OF VARIOUS BENCHES OF THE TRIBUNAL HOLDING WHICH HAVE TAKEN THE VIEW CONTRARY TO THE O NE HELD BY THE TRIBUNALS IN IMPUGNED DECISION. IN VODAFONE ESSAR CELLULAR LTD. (SUPRA), COCHIN BENCH HAS DISCUSSED THE ISSUE MUCH ELABORATELY IN THE FOLLOWI NG MANNER : '33. THE ASSESSEE COMPANY HAS MADE A LOT OF RELIANCE ON THE CONTENTION REGARDING THE FREEDOM OF PRICING. IT IS THE CASE OF THE ASSES SEE COMPANY THAT THE DISTRIBUTORS ARE FREE TO FIX THE SELLING PRICE BUT THE PRICE SHO ULD NOT EXCEED THE MRP. THE REVENUE SAYS THAT THERE IS NO SUCH FREEDOM IN FIXIN G THE SALE PRICE. AS FAR AS THE PRESENT CASE IS CONCERNED, EARLIER IT WAS BPL AND T HEREAFTER BPLHUTCH AND NOW IT IS M/S VODAFONE ESSAR CELLULAR LTD. IN THE EARLI ER TWO OCCASIONS, THERE WAS NO CLAUSE ON PRICING IN THE AGREEMENTS ENTERED INTO BE TWEEN THE PREDECESSORS OF THE ASSESSEE COMPANY AND THE DISTRIBUTORS. IT IS IN THE LATEST AGREEMENT BETWEEN THE ASSESSEE AND ITS DISTRIBUTORS THAT THE CLAUSE ON PR ICING HAS BEEN INSERTED THAT THE DISTRIBUTORS ARE FREE TO DETERMINE THE ULTIMATE SAL E PRICE SUBJECT TO MRP. 34. WE DO NOT THINK THAT THIS SO-CALLED PRICING FRE EDOM IS SO CRUCIAL IN EXAMINING THE EXACT NATURE OF THE BUSINESS RELATION BETWEEN T HE ASSESSEE COMPANY AND ITS DISTRIBUTORS. THE PRICING FACTOR IS ALSO A MATTER OF MUTUAL CONSENT BETWEEN THE PARTIES. EVEN IN THE CASE OF AN AGENCY, THERE CAN B E A CLAUSE BY WHICH AN AGENT IS AUTHORIZED TO SELL THE GOODS FOR A PRICE LESS THAN THE MRP. EVEN IN A CASE OF PRINCIPAL-TO-PRINCIPAL, THERE MAY BE A CLAUSE THAT THE DISTRIBUTOR CANNOT SELL A PRODUCT FOR A PRICE LESS THAN THE MRP UNLESS A CONS ENT IS GIVEN BY THE MANUFACTURER. THE MATTER OF PRICING IN BOTH THE CASE S, I.E., PRINCIPAL-TO-PRINCIPAL AND PRINCIPAL TO AGENTS CAN BE A MATTER OF MUTUAL C ONSENT BETWEEN THE PARTIES AND EVEN A MATTER OF NEGOTIATION AFTER THE EXECUTIO N OF THE AGREEMENT. THERE ARE NO HARD AND FAST RULES OF ANY LEGAL PROPOSITION AS FAR AS THESE MATTERS ARE CONCERNED. 51. IT IS OBVIOUS THAT A SERVICE CAN ONLY BE RENDER ED AND CANNOT BE SOLD. THE OWNER OF THE SIM CARDS AND RECHARGE COUPONS IS THE ASSESS EE COMPANY, M/S VODAFONE ESSAR CELLULAR LTD. THIS IS BECAUSE THE ASSESSEE CO MPANY IS OPERATING UNDER THE RIGHT OF A LICENCE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OF INDIA. NOBODY ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 30 ELSE CAN BE GIVEN THE RIGHT TO OPERATE AS CELLULAR TELEPHONE SERVICE PROVIDERS. THE ULTIMATE SERVICE IS PROVIDED BY THE ASSESSEE COMPAN Y TO EVERYONE AND EVERYWHERE. THE SIM CARD IS IN THE NATURE OF A KEY TO THE CONSUM ER TO HAVE ACCESS TO THE TELEPHONE NETWORK ESTABLISHED AND OPERATED BY THE A SSESSEE COMPANY ON ITS OWN BEHALF. SINCE THE SIM CARD IS ONLY A DEVICE TO HAVE ACCESS TO THE MOBILE PHONE NETWORK, THERE IS NO QUESTION OF PASSING OF ANY OWN ERSHIP OR TITLE OF THE GOODS FROM THE ASSESSEE COMPANY TO THE DISTRIBUTOR OR FRO M THE DISTRIBUTOR TO THE ULTIMATE CONSUMER. THE DISTRIBUTORS ARE ACTING ONLY AS A LINK IN THE CHAIN OF SERVICE PROVIDERS. THE ASSESSEE COMPANY IS PROVIDING THE MOBILE PHONE SERVICE. IT IS THE ULTIMATE OWNER OF THE SERVICE SYSTEM. THE SER VICE IS MEANT FOR PUBLIC AT LARGE. IN BETWEEN PROVIDING OF THAT SERVICE, IT IS NECESSARY FOR THE COMPANY TO APPOINT DISTRIBUTORS TO MAKE AVAILABLE THE PREPAID PRODUCTS TO THE PUBLIC AS WELL AS TO LOOK AFTER THE DOCUMENTATION AND OTHER STATUT ORY MATTERS REGARDING THE MOBILE PHONE CONNECTION. SO, WHAT IS THE ESSENCE OF SERVICE PROVIDED BY THE DISTRIBUTORS ? THE ESSENCE OF SERVICE RENDERED BY TH E DISTRIBUTORS IS NOT THE SALE OF ANY PRODUCT OR GOODS. THE DISTRIBUTORS ARE PROVIDING FACILITIES AND SERVICES TO THE GENERAL PUBLIC FOR THE AVAILABILITY OF DEVICES LIKE SIM CARDS TO HAVE ACCESS TO THE MOBILE PHONE NETWORK OF THE ASSESSEE COMPANY. THEREF ORE, IT IS BEYOND DOUBT THAT ALL THE DISTRIBUTORS ARE ALWAYS ACTING FOR AND ON B EHALF OF THE ASSESSEE COMPANY. ONLY FOR THE REASON THAT THE DISTRIBUTORS ARE MAKIN G ADVANCE PAYMENT FOR THE DELIVERY OF SIM CARDS AND OTHER PRODUCTS AND DISTRI BUTORS ARE RESPONSIBLE FOR THE STOCK AND ACCOUNT OF THOSE CARDS, IT IS NOT POSSIBL E TO HOLD THAT THE DISTRIBUTORS ARE NOT ACTING FOR THE ASSESSEE COMPANY BUT THE DISTRIB UTORS ARE ACTING ON THEIR OWN BEHALF. SUCH A PROPOSITION IS INCONCEIVABLE IN THE FACTS OF THE PRESENT CASE. IT IS ALWAYS POSSIBLE FOR THE TELEPHONE COMPANY ITSELF TO PROVIDE ALL THESE SERVICES DIRECTLY TO THE CONSUMERS AS THE DEPARTMENT OF TELEC OM WAS DOING; BUT SUCH A DIRECT SERVICE IS NOT FEASIBLE NOWADAYS. THEREFORE, THE ASSESSEE HAS MADE OUT A BUSINESS SOLUTION TO APPOINT DISTRIBUTORS TO TAKE C ARE OF THE OPERATIONAL ACTIVITIES OF THE COMPANY FOR PROVIDING SERVICE. THE DISTRIBUTO R IS ONE OF THE IMPORTANT LINKS IN THAT CHAIN OF SERVICE. 52. ANOTHER IMPORTANT FEATURE IS THAT THE SIM CARDS STOCKED BY THE DISTRIBUTORS ARE STILL THE PROPERTY OF THE SERVICE PROVIDER, THE ASSESSEE COMPANY. THE PERMISSIVE RIGHT TO USE SIM CARDS TO GET ACCESS TO THE PHONE N ETWORK OF THE ASSESSEE COMPANY IS GIVEN ONLY TO THE ULTIMATE CONSUMER WHO ACTIVATE S THE CONNECTION BY USING THE SECRET NUMBER PROVIDED IN THE SIM CARD. IT IS ONLY FOR THE ULTIMATE CONSUMER OR THE ASSESSEE COMPANY WHO HAS THE AUTHORITY TO UNCOVER T HE SECRET NUMBER AND BRING THE CARD INTO ACTIVATION. THIS UNIQUE SITUATION NEGA TES THE ARGUMENT OF THE ASSESSEE COMPANY THAT ONCE DELIVERY OF THE SIM CARD IS TAKEN, IT IS THE ABSOLUTE PROPERTY OF THE DISTRIBUTORS. NO, THIS IS A MISCONC EPTION. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 31 56. IN THE CASE OF POST-PAID SCHEME, THE ASSESSEE C OMPANY IS TREATING THE BENEFITS ENJOYED BY A DISTRIBUTOR AS COMMISSION AND DEDUCTIN G TAX AT SOURCE. WHERE THE ASSESSEE COMPANY ITSELF ADMITS THAT IT IS LIABLE TO DEDUCT TAX AT SOURCE UNDER S. 194H IN RESPECT OF POST-PAID SERVICES RENDERED THRO UGH ITS DISTRIBUTORS, IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT THE SERVICES REN DERED BY THE ASSESSEE THROUGH THE DISTRIBUTORS ON PREPAID PACKAGE IS DIFFERENT FR OM THE POST-PAID PACKAGE SO AS TO QUALIFY THE FORMER FOR EXEMPTION FROM OPERATION OF S. 194H. 57. IT IS BEYOND ANY DISPUTE THAT THE ESSENCE OF SE RVICES RENDERED TO THE PREPAID AND POST-PAID CONSUMERS IS ONE AND THE SAME. THERE I S NO DIFFERENCE. THE ONLY DIFFERENCE IS TECHNICAL. THE DIFFERENCE EXISTS ONLY IN BILLING SYSTEM AND REVENUE COLLECTION, ETC. IN BOTH THE CASES ASSESSEE COMPANY IS PROVIDING THE SERVICE. DISTRIBUTORS ARE HELPING TO REACH SUCH SERVICES TO THE ULTIMATE CONSUMERS. IN BOTH THE SYSTEMS, THERE IS DOCUMENTATION. IN BOTH THE SY STEMS, THE DISTRIBUTORS RENDER SIMILAR TYPES OF SERVICES TO THE ASSESSEE COMPANY. OF COURSE ACCOUNTING THE REVENUE COLLECTION AND RELATED MATTERS ARE DIFFEREN T. THE ESSENCE OF POST-PAID AND PREPAID SERVICES RENDERED BY THE ASSESSEE COMPANY I S THE SAME AND THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CUSTOMERS IS ALSO THE SAME. THEREFORE, IF POST-PAID SCHEME IS SUBJECT TO S. 194H, IT IS QUITE UNLIKELY THAT PREPAID SYSTEM WOULD BE OUTSIDE THE PURVIEW OF S. 194H. 60. THE NEXT QUESTION IS WHETHER THE COMMISSION/BROK ERAGE ALLOWED BY THE ASSESSEE COMPANY AT THE STAGE OF RAISING THE INVOIC E IS EQUIVALENT TO PAYING OF COMMISSION/BROKERAGE TO THE DISTRIBUTORS. THE ASSESS EE HAS ALWAYS RAISED A CONTENTION, THAT TOO IN THE LIGHT OF THE JUDICIAL P RONOUNCEMENTS INCLUDING THAT OF M.S. HAMEED (SUPRA) THAT THE ASSESSEE COMPANY HAD N O OCCASION TO DEDUCT TAX AT SOURCE AS THE ASSESSEE COMPANY WAS NOT MAKING ANY P AYMENT TO THE DISTRIBUTORS OR CREDITING THE ACCOUNT OF THE DISTRIBUTORS FOR AN Y SERVICES RENDERED TO IT. BUT THAT OCCASION WAS REMOVED BY THE ASSESSEE ITSELF BY CONSCIOUS WORDINGS OF THE TERMS OF THE AGREEMENT. THE ASSESSEE COMPANY CAN COL LECT THE NET SALE PROCEEDS ALONG WITH TDS ELEMENT FROM THE DISTRIBUTORS WHILE D ISTRIBUTING THE PREPAID PRODUCTS TO THE DISTRIBUTORS. THE DISTRIBUTORS SHALL FILE THEIR RETURNS BEFORE THE CONCERNED AUTHORITIES AND DEPENDING UPON THE WORKIN G RESULTS, THEY CAN ADJUST THE TDS COLLECTED BY THE ASSESSEE COMPANY AGAINST TH EIR TAX LIABILITY OR THE REFUND DUE. THE FACT THAT THE DISTRIBUTORS MAY SOMETIME DEL IVER THE PRODUCTS FOR A PRICE LESS THAN THE MRP IS NOT AT ALL AN IMPEDIMENT IN DE DUCTING THE TAX AT SOURCE. THE DISTRIBUTORS MAY DELIVER THE PRODUCTS AT A LESSER P RICE, BUT EVEN THEN FOR THE PURPOSE OF S. 194H, AS IN THE ABOVE EXAMPLE, THE MA RGIN AVAILABLE TO THE DISTRIBUTOR IS RS. 20, WHICH IS TO BE TREATED AS CO MMISSION, AND THE ASSESSEE HAS TO CONSIDER THAT AMOUNT FOR THE PURPOSE OF QUANTIFYING THE ELEMENT OF TDS. THE ASSESSEE COMPANY HAS TO COLLECT THE NET PRICE ALONG WITH THE ABOVE-STATED TDS ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 32 ELEMENT. THEREFORE, THE ARGUMENT THAT THERE WAS NO O CCASION AS IN THE CASE OF M.S. HAMEED (SUPRA) HAS NO RELEVANCE HERE. THE SITUATION CONSIDERED BY THE HON'BLE HIGH COURT WAS DIFFERENT. IN THAT CASE ONE PARTY IS STATE GOVERNMENT. WITHOUT EXECUTING AN AUTHORITY IN CONFORMITY WITH THE STATU TORY AND ADMINISTRATIVE RULES, NOBODY CAN BECOME AN AGENT OF THE GOVERNMENT. FURTH ER, THE COURT HAS CONSIDERED THE SUBJECT TRANSACTION AS THAT OF PURCH ASE AND SALE OF GOODS. BUT, IN THE PRESENT CASE, THERE IS NO FAILURE OF ANY PROCED URAL PROVISIONS AS APPREHENDED BY THE ASSESSEE COMPANY. 65. WE HAVE COME TO THE ABOVE CONCLUSION SPECIFICAL LY ON THE FOLLOWING GROUNDS : (1) IN THE JUDGMENT OF THE HON'BLE HIGH COURT OF KE RALA IN THE CASE OF BPL MOBILE CELLULAR LTD. (SUPRA) IT HAS BEEN HELD THAT IN THE SUPPLY AND DELIVERY OF SIM CARDS AND OTHER RECHARGE COUPONS, THERE IS NO SALE AND PU RCHASE OF GOODS, BUT ONLY OF PROVIDING SERVICES; (2) THE HONBLE KERALA HIGH COURT IN THE CASE OF KER ALA STAMP VENDORS ASSOCIATION (SUPRA) HAVE TREATED THE SUBJECT TRANSA CTIONS AS TRANSACTIONS OF PURCHASE AND SALE OF GOODS; (3) THE ASSESSEE COMPANY AS A SERVICE PROVIDER IS AL WAYS THE OWNER OF THE ABOVE PRODUCTS WHICH IS MEANT ONLY AS DEVICES TO HAVE ACC ESS TO THE MOBILE PHONE NETWORK SYSTEM MAINTAINED AND OPERATED BY THE ASSES SEE COMPANY; (4) THE SERVICES PROVIDED BY THE ASSESSEE COMPANY TH ROUGH VARIOUS DISTRIBUTORS IS REGULATED BY LAW. CARRYING ON THE BUSINESS OF PROVI DING SERVICE IS SUBJECT TO SO MANY STATUTORY COMPLIANCE REQUIREMENTS, LIKE VERIFI CATION OF THE IDENTITY OF THE CONSUMER AND THE RELATED DOCUMENTATION, ETC. THE ASS ESSEE COMPANY IS HAVING ALL LAWFUL OBLIGATIONS TO A PREPAID CONSUMER, EVEN THOU GH THE DIRECT DEAL IS BETWEEN THE DISTRIBUTOR AND THE CONSUMER. THIS IS BECAUSE TH E DISTRIBUTOR DOES NOT HAVE ANYTHING TO PROVIDE AS SERVICE TO THE CONSUMER. TH ESE ARE ALL FEATURES OF AGENCY RELATIONSHIP. (5) OTHER MATTERS EXPLAINED BY THE ASSESSEE AS, THE RE WAS NO PAYMENT BY THE ASSESSEE IN CASH OR CHEQUE BY WAY OF COMMISSION TO THE DISTRIBUTORS OR NOT CREDITING THE ACCOUNTS OF THE DISTRIBUTORS FOR ANY COMMISSION, DELIVERING THE PRODUCTS ONLY AFTER GETTING THE PRICE IN FULL, ARE ALL MATTERS OF ASSSESSEES INDOOR MANAGEMENT. (6) SERVICE CANNOT BE SOLD OR PURCHASED AND IT CAN ONY BE PROVIDED. THE OPERATIONAL FEATURES EXPLAINED BY THE ASSESSEE COMP ANY ARE NECESSARY IN RUNNING ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 33 A MAMMOTH SYSTEM OF PROVIDING MOBILE TELEPHONE SERV ICES OVER A LARGE GEOGRAPHICAL AREA. THE DISTRIBUTORS PROVIDE ESSENTIA L SERVICES TO THE ASSESSEE COMPANY IN RUNNING SUCH A HUGE OPERATIONAL SYSTEM. THE DISTRIBUTORS ARE LINKING AGENTS IN THE CHAIN OF DELIVERY OF SERVICES TO CONS UMERS. THEREFORE, THE RELATIONSHIP IS NOT OF A PRINCIPAL-TO-PRINCIPAL.' 28. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE SAI D BENCH. IDENTICAL VIEW IS TAKEN BY CALCUTTA BENCH IN THE CASE OF ASSTT. CIT VS . BHARTI CELLULAR LTD. (2007) 108 TTJ (KOL) 38 : (2007) 294 ITR 283 (KOL)(AT). BOTH THESE BENCHES SPECIFICALLY REJECTED THE ARGUMENTS OF THE ASSESSEE BASED ON AHM EDABAD STAMP VENDORS ASSOCIATION (SUPRA), BHOPAL SUGAR INDUSTRIES LTD. ( SUPRA), KERALA STAMP VENDORS ASSOCIATION (SIC) AND BAJAJ AUTO LTD. (SUPRA) DISTI NGUISHING THOSE JUDGMENTS AND HOLDING THAT THEY ARE NOT APPLICABLE IN THE GIVEN S ITUATION. WE AGREE WITH THE SAME. 29. WE THUS ANSWER THE QUESTION, AS FORMULATED, IN FAV OUR OF THE REVENUE AND AGAINST THE ASSESSEE. AS A CONSEQUENCE, THESE APPEA LS ARE ALLOWED AND JUDGMENT OF THE TRIBUNAL ON THIS ASPECT IS SET ASIDE. NO COSTS. 10. IN VIEW OF THE ABOVE DECISION, IT IS SEEN THAT THE VITAL FEATURE WHICH HONBLE JURISDICTIONAL HIGH COURT HAS FOUND RELEVAN T IS THAT A LEGAL RELATIONSHIP IS ESTABLISHED BETWEEN THE TELEPHONE SERVICE PROVID ER AND THE CONSUMER I.E THE SUBSCRIBER TO ITS PRODUCTS. HONBLE JURISDICTIONAL HIGH COURT HAS ALSO FOLLOWED THE DICTUM OF HONBLE APEX COURT IN THE CASE OF BSN L VS UOI REPORTED IN AIR 2006 SC 1383 TO HOLD THAT THIS IS NOT A CASE FOR SA LE OF GOODS BUT A CASE OF PROVIDING TELEPHONE SERVICES AND HENCE THERE CAN BE NO SALE OF GOODS FROM THE SERVICE PROVIDER TO ITS DISTRIBUTOR SO AS TO CREATE A PRINCIPAL TO PRINCIPAL RELATIONSHIP. THE HONBLE JURISDICTIONAL HIGH COURT FURTHER OBSERVED THAT THE ASSESSEE COULD NOT BE ABLE TO DIFFERENTIATE THE NAT URE OF SERVICES PROVIDED ON POST-PAID SERVICES ON WHICH THE ASSESSEE HAS ADMITT ED TO HAVE PAID COMMISSION TO THE DISTRIBUTORS AND PREPAID SERVICES, ON WHICH THE ASSESSEE ADMITTED TO HAVE GIVEN DISCOUNT TO THE DISTRIBUTORS. THESE CRUC IAL FACTS AS CONSIDERED BY THE JURISDICTIONAL HIGH COURT ARE ALSO EXISTING IN THE CASE BEFORE US. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 34 11. CONTRARY TO ABOVE VIEW EXPRESSED BY HONBLE JUR ISDICTIONAL HIGH COURT, THE ASSESSEE HAS RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT (SUPRA) WHEREIN IT HAS BEEN HELD THAT A RIGHT TO SERVICE CA N BE SOLD AND THIS ASPECT WAS NOT CONSIDERED BY THE JURISDICTIONAL HIGH COURT. TH E RELEVANT OBSERVATIONS OF THE HONBLE KARNATAKA HIGH COURT READ AS UNDER: 56. IN THE IDEA CELLULAR LTD. CASE (SUPRA), THE D ELHI HIGH COURT PROCEEDED ON THE FOOTING THAT THE ASSESSEE IS PROVIDING THE M OBILE PHONE SERVICE. IT IS THE ULTIMATE OWNER OF THE SERVICE SYSTEM. THE SERVIC E IS MEANT FOR PUBLIC AT LARGE. THEY HAD APPOINTED DISTRIBUTORS TO MAKE AVAIL ABLE THE PRE-PAID PRODUCTS TO THE PUBLIC AND LOOK AFTER THE DOCUMENTA TION AND OTHER STATUTORY REQUIREMENTS REGARDING THE MOBILE PHONE C ONNECTION AND, THEREFORE, THE ESSENCE OF SERVICE RENDERED BY THE D ISTRIBUTOR IS NOT THE SALE OF ANY PRODUCT OR GOODS AND, THEREFORE, IT WAS HELD TH AT ALL THE DISTRIBUTORS ARE ALWAYS ACTING FOR AND ON BEHALF OF THE ASSESSEE COM PANY. 57. SIMILAR IS THE VIEW EXPRESSED BY THE KERALA HIG H COURT IN THE VODAFONE ESSAR CELLULAR LTD.'S CASE (SUPRA), WH ERE IT WAS HELD THAT, THE DISTRIBUTOR IS ONLY RENDERING SERVICES TO THE ASSES SEE AND THE DISTRIBUTOR COMMITS THE ASSESSEE TO THE SUBSCRIBERS TO WHOM ASS ESSEE IS ACCOUNTABLE UNDER THE SERVICE CONTRACT WHICH IS THE SUBSCRIBER CONNECTION ARRANGED BY THE DISTRIBUTOR FOR THE ASSESSEE. IN THAT CONTEXT I T WAS HELD THAT, DISCOUNT IS NOTHING BUT A MARGIN GIVEN BY THE ASSESSEE TO THE D ISTRIBUTOR AT THE TIME OF DELIVERY OF SIM CARDS OR RECHARGE COUPONS AGAINST A DVANCE PAYMENT MADE BY THE DISTRIBUTOR. 58. IN BOTH THE AFORESAID CASES, THE COURT PROCEEDE D ON THE BASIS THAT SERVICE CANNOT BE SOLD. IT HAS TO BE RENDERED. BUT, THEY DID NOT GO INTO THE QUESTION WHETHER RIGHT TO SERVICE CAN BE SOLD. 59. THE TELEPHONE SERVICE IS NOTHING BUT SERVICE. SI M CARDS, HAVE NO INTRINSIC SALE VALUE. IT IS SUPPLIED TO THE CUSTOME RS FOR PROVIDING MOBILE SERVICES TO THEM. THE SIM CARD IS IN THE NATURE OF A KEY TO THE CONSUMER TO HAVE ACCESS TO THE TELEPHONE NETWORK ESTABLISHED AN D OPERATED BY THE ASSESSEE-COMPANY ON ITS OWN BEHALF. SINCE THE SIM C ARD IS ONLY A DEVICE TO HAVE ACCESS TO THE MOBILE PHONE NETWORK, THERE IS N O QUESTION OF PASSING OF ANY OWNERSHIP OR TITLE OF THE GOODS FROM THE ASSESS EE-COMPANY TO THE DISTRIBUTOR OR FROM THE DISTRIBUTOR TO THE ULTIMATE CONSUMER. THEREFORE, THE SIM CARD, ON ITS OWN BUT WITHOUT SERVICE WOULD HARD LY HAVE ANY VALUE. A ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 35 CUSTOMER, WHO WANTS TO HAVE ITS SERVICE INITIALLY, HAS TO PURCHASE A SIM- CARD. WHEN HE PAYS FOR THE SIM-CARD, HE GETS THE MO BILE SERVICE ACTIVATED. SERVICE CAN ONLY BE RENDERED AND CANNOT BE SOLD. HO WEVER, RIGHT TO SERVICE CAN BE SOLD. WHAT IS SOLD BY THE SERVICE PROVIDER T O THE DISTRIBUTOR IS THE RIGHT TO SERVICE. ONCE THE DISTRIBUTOR PAYS FOR THE SERVICE, AND THE SERVICE PROVIDER, DELIVERS THE SIM CARD OR RECHARGE COUPONS , THE DISTRIBUTOR ACQUIRES A RIGHT TO DEMAND SERVICE. ONCE SUCH A RIG HT IS ACQUIRED THE DISTRIBUTOR MAY USE IT BY HIMSELF. 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 PROPERTY IN THE GOODS IS TR ANSFERRED AND GETS VESTED IN THE DISTRIBUTOR AT THE TIME OF THE DELIVERY THEN HE IS THEREAFTER LIABLE FOR THE SAME AND WOULD BE DEALING WITH THEM IN HIS OWN RIGHT AS A PRINCIPAL AND NOT AS AN AGENT. THE SELLER MAY HAVE FIXED THE M RP AND THE PRICE AT WHICH THEY SELL THE PRODUCTS TO THE DISTRIBUTORS BU T THE PRODUCTS ARE SOLD AND OWNERSHIP VESTS AND IS TRANSFERRED TO THE DISTR IBUTORS. HOWEVER, WHO EVER ULTIMATELY SELLS THE SAID RIGHT TO CUSTOMERS I S NOT ENTITLED TO CHARGE MORE THAN THE MRP. THE INCOME OF THESE MIDDLEMEN WOU LD BE THE DIFFERENCE IN THE SALE PRICE AND THE MRP, WHICH THEY HAVE TO S HARE AS PER THE AGREEMENT BETWEEN THEM. THE SAID INCOME ACCRUES TO T HEM ONLY WHEN THEY SELL THIS RIGHT TO SERVICE AND NOT WHEN THEY PURCHA SE THIS RIGHT TO SERVICE. THE ASSESSEE IS NOT CONCERNED WITH QUANTUM AND TIME OF ACCRUAL OF INCOME TO THE DISTRIBUTORS BY RESELLING THE PREPAID CARDS TO THE SUB- DISTRIBUTORS/RETAILERS. AS AT THE TIME OF SALE OF P REPAID CARD BY THE ASSESSEE TO THE DISTRIBUTOR, INCOME HAS NOT ACCRUED OR ARISE N TO THE DISTRIBUTOR, THERE IS NO PRIMARY LIABILITY TO TAX ON THE DISTRIBUTOR. IN THE ABSENCE OF PRIMARY LIABILITY ON THE DISTRIBUTOR AT SUCH POINT OF TIME, THERE IS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE. THE DIFFERENCE BET WEEN THE SALE PRICE TO RETAILER AND THE PRICE WHICH THE DISTRIBUTOR PAYS T O THE ASSESSEE IS HIS INCOME FROM BUSINESS. IT CANNOT BE CATEGORIZED AS C OMMISSION. THE SALE IS SUBJECT TO CONDITIONS, AND STIPULATIONS. THIS BY ITS ELF DOES NOT SHOW AND ESTABLISH PRINCIPAL AND AGENT RELATIONSHIP. ON GOING THROUGH THE ABOVE DECISIONS, IT IS APPAREN T THAT BOTH THE HONBLE HIGH COURTS HAVE EXPRESSED A DIVERGENT OPINION ON THE AS PECT OF TRANSFER OF SERVICE, INASMUCH AS THE HONBLE JURISDICTIONAL HIGH COURT H ELD THAT SERVICES CANNOT BE TRANSFERRED WHEREAS THE HONBLE KARNATAKA HIGH COUR T HELD THAT RIGHT TO SERVICE CAN BE TRANSFERRED. BUT SINCE THE APPELLANT BEFORE US HAILS FROM DELHI, WE ARE ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 36 OBLIGATED TO FOLLOW THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT. PARTIES BEFORE US HAVE ALSO ELABORATED UPON THE FACT THAT T HERE IS A DISTINCTION IN THE FACTS OF THE INSTANT CASE AND THE FACTS AS EXISTING BEFORE BOTH THE HONBLE HIGH COURTS ABOVE, HOWEVER WE FIND NO REASON TO DELIBERA TE UPON THIS ASPECT SINCE ON THE LEGAL ASPECT ITSELF THE DECISION OF HONBLE DELHI HIGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT IS AGAINST THE APPELLANT. WE ARE THEREFORE COMPELLED TO HOLD THAT THE DISCOUNT ON PREPAID PRODUCTS OFFERED BY THE APPELLANT IS IN NATURE OF COMMISSION WHICH DOES ATTRACT RIGORS OF SECTIO N 194H. 12. EVEN OTHERWISE, IN THE DECISION OF HONBLE KAR NATAKA HIGH COURT REPORTED IN (2015) 372 ITR 33 (KAR) (SUPRA), HONBLE HIGH C OURT REMITTED THE CASE BACK TO THE AO FOR DECIDING THE SAME AFRESH IN THE LIGHT OF FOLLOWING TWO ILLUSTRATIONS TO DECIDE THE APPLICABILITY OF SECTION 194H : IN THE FIRST INSTANCE, SALE IS ACCOUNTED FOR RS.10 0/-, WHICH IS THE FIRST ACCOUNT AND RS.80/- IS THE SECOND ACCOUNT AND THE T HIRD ACCOUNT IS RS.20/-. IT SHOWS THAT THE SALES IS FOR RS.100/-, COMMISSION IS GIVEN AT RS.20/- TO THE DISTRIBUTORS AND NET VALUE IS RS.80/-. THE ASSESSEE S SALE IS ACCOUNTED AT THE GROSS VALUE OF RS.100/- AND THEREAFTER, THE COMMISS ION PAID AT RS.20/-IS ACCOUNTED. THEREFORE, IN THOSE CIRCUMSTANCES OF THE CASE, THE ESSENCE OF THE CONTRACT OF THE ASSESSEE AND DISTRIBUTOR IS THAT OF SERVICE AND THEREFORE, SECTION 194H OF THE ACT IS ATTRACTED. HOWEVER, IN THE FIRST INSTANCE, IF THE ASSESSEE ACC OUNTED FOR ONLY RS.80/- AND ON PAYMENT OF RS.80/-, HE HANDS OVER THE PREPAID CA RD PRESCRIBING THE MRP AS RS.100/-, THEN AT THE TIME OF SALE, THE ASSESSEE IS NOT MAKING ANY PAYMENT. CONSEQUENTLY, THE DISTRIBUTOR IS NOT EARNI NG ANY INCOME. THIS DISCOUNT OF RS.20/- IF NOT REFLECTED ANYWHERE IN TH E BOOKS OF ACCOUNTS, IN SUCH CIRCUMSTANCES, SECTION 194H OF THE ACT IS NOT ATTRACTED. IF WE DELIBERATE UPON THE FACTS OF THE PRESENT CAS E ON THE ANVIL OF ABOVE ILLUSTRATIONS, GIVEN BY HONBLE KARNATAKA HIGH COUR T, WE FIND THAT THE ASSESSEE HAS NOT PRODUCED BEFORE US EITHER ANY SPECIMEN INVO ICE OR ANY ENTRY PASSED IN ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 37 THE BOOKS OF ACCOUNT IN RELATION THERETO OR ANY FIN ANCIAL STATEMENT FOR THE IMPUGNED YEAR SO AS TO COVER ITS CASE WITHIN ANY OF THE ABOVE TWO ILLUSTRATIONS REPRODUCED ABOVE. THEREFORE, THE CASE OF THE ASSESS EE DOES NOT STAND PROVED ON THE ANVIL OF ABOVE ILLUSTRATIONS GIVEN BY HONBLE K ARNATAKA HIGH COURT. 13. WE HAVE ALSO PERUSED THE COPY OF BUSINESS AGREE MENT ENTERED BETWEEN THE ASSESSEE AND ITS CHANNEL PARTNER (DISTRIBUTOR) M/S. GOEL AGENCIES PLACED AT PAGE NOS. 62 TO 154 OF THE PAPER BOOK. WE OBSERVE T HAT IN CLAUSE 10.1, IT HAS BEEN AGREED AS UNDER : IN CONSIDERATION OF DULY PERFORMING THE DUTIES AND OBLIGATIONS AS CONTEMPLATED HEREIN, CHANNEL PARTNER SHALL BE ENTIT LED TO THE CONSIDERATION AS SET FORTH IN SCHEDULE-B ATTACHED HEREWITH. SCHEDULE B PLACED AT PAGE NO. 127 OF THE PAPER BOO K SPEAKS OF THE CONSIDERATION AS PER APPENDIX 3 AND SCHEDULE B TO T HE AGREEMENT PLACED AT PAGE 140 OF THE PAPER BOOK READS AS UNDER : COMMISSION PAYABLE TO DISTRIBUTOR:- THE COMMISSION STRUCTURE FOR VARIOUS PERIODS SHALL BE INTIMATED TO THE DISTRIBUTOR FROM TIME TO TIME AND SHALL BE REVI SED AT THE SOLE DISCRETION OF TTL BASED ON MARKET/COMMERCIAL REQUIREMENTS. THE DISTRIBUTOR AGREES THAT THE COMMISSION STRUCTURE FOR VARIOUS PERIODS INTIMATED TO THE DISTRIBUTOR BY TTL SHALL BE BINDING ON IT AND SHALL NOT DISPUTE THE SAME FOR ANY REASON, WHATSOEVER. 14. FROM THE ABOVE NARRATION, IT IS APPARENT THAT T HE TRANSACTION RELATING TO COMMISSION IS AGREED BETWEEN THE ASSESSEE AND THE C HANNEL PARTNER/DISTRIBUTOR, BUT THE ASSESSEE HAS NOT BEEN ABLE TO ADDRESS AS TO FOR WHICH SEGMENT OF BUSINESS, BOTH THE PARTIES AGREED TO PAY AND RECEIVE COMMISSION. ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 38 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, AND R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF IDEA CELLULAR LTD. (SUPRA), WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE THEREBY CONFIRMING THE DECISION REACHED BY THE LD. CIT(A) ON THIS COUNT. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED ON THE FI RST ISSUE DESERVE TO BE DISMISSED. 16. ADVERTING TO THE SECOND ISSUE REGARDING NON-DED UCTING OF TDS ON PAYMENT OF IUC, KEEPING IN VIEW THE SIMILAR NATURE OF CHARGES, I.E., ROAMING CHARGES PAID, THIS BENCH OF TRIBUNAL IN THE CASE OF BHARAT SANCHAR NIGAM LTD. VS. ADDL. CIT (ITA NO. 920/DEL./2017 (SUPRA), THE ISSUE UNDER CONSIDERATION HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, OBSERVING A S UNDER : 17. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE MATERIAL AVAILABLE ON RECORD AND WE FIND THAT THE ISSUE IN DISPUTE IS DIR ECTLY COVERED BY THE DECISION OF ITAT IN CASE OF BHARTI AIRTEL LIMITED (SUPRA) . IN THAT CASE CO-ORDINATE BENCH OF THIS COURT AFTER DEEP EXAMINATION OF THE ISSUE I.E AFTER CONSI DERING AND GOING THROUGH THE PROCESS OF PROVIDING ROAMING SERVICES; EXAMINATION OF TECHNICAL EXPERTS AND ITS CROSS EXAMINATION AND ALSO OPINION OF HON'BLE THE THEN CH IEF JUSTICE OF INDIA MR. S.H. KAPADIA DATED 03 RD SEPTEMBER 2013, HAS HELD THAT PAYMENT OF IUC CHARG ES IS NOT FEE FOR TECHNICAL SERVICES OR ROYALTY WITHIN THE MEA NING OF ITS DEFINITION AS PER SECTION 9(1)(VI) AND 9(1)(VII) OF THE ACT. WHILE REACHING T HE ABOVE CONCLUSION THE CO-ORDINATE BENCH ALSO TOOK INTO CONSIDERATION RETROSPECTIVE AM ENDMENTS MADE TO SECTION 9 BY FINANCE ACT 2012. RELEVANT HEAD-NOTES OF THIS DECIS ION AS REPORTED IN (2016) 67 TAXMANN.COM 223(DEL) ARE REPRODUCED BELOW: SECTION 9 , READ WITH SECTIONS 194J AND 195, OF TH E INCOME-TAX ACT, 1961, READ WITH ARTICLE 12 OF MODEL OECD CONVENTION - INCOME - DEEM ED TO ACCRUE OR ARISE IN INDIA (ROYALTIES AND FEES FOR TECHNICAL SERVICES) - ASSES SMENT YEARS 2008-09 TO 2011- 2012 - ASSESSEE, AS PART OF ITS INTERNATIONAL LONG DISTANC E (ILD) TELECOM SERVICES BUSINESS, WAS RESPONSIBLE FOR PROVIDING SERVICES TO ITS SUBSCRIBERS IN RESPECT OF CALLS ORIGINATED/TERMINATED OUTSIDE INDIA - FOR PROVISION S OF ILD SERVICES, ASSESSEE WAS REQUIRED TO OBTAIN SERVICES OF FOREIGN TELECOM OPER ATORS (FTOS) - ILD OPERATORS WERE IN TURN BILLED BY FTOS IN FORM OF INTER-CONNECTED USAGE CHARGES(IUC) - THERE WAS NO MANUAL OR HUMAN INTERVENTION DURING PROCESS OF TRAN SPORTATION OF CALLS BETWEEN TWO NETWORKS - THIS WAS DONE AUTOMATICALLY, WITH HUMAN INTERVENTION BEING REQUIRED ONLY FOR INSTALLATION OF NETWORK WHICH COULD NOT BE SAID TO BE FOR INTER-CONNECTION OF A CALL - ASSESSEE MERELY DELIVERED CALLS THAT ORIGINATED ON ITS NETWORK TO INTER CONNECTION LOCATIONS OF FTO AND FTO CARRIED AND TERMINATED CAL LS ON ITS NETWORK - WHETHER THUS PAYMENT OF IUC BY ASSESSEE TO FTO IN CONNECTION WIT H ITS ILD TELECOM SERVICE BUSINESS ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 39 WAS NEITHER FTS UNDER SECTION 9(1)(VII), NOR ROYALT Y/PROCESS ROYALTY UNDER SECTION 9(1)(VI) - HELD, YES - WHETHER EVER RETROSPECTIVE A MENDMENT IN DOMESTIC LEGISLATION DOES NOT AFFECT ROYALTY DEFINITION UNDER DTAA, HENCE RET ROSPECTIVE INSERTION OF EXPLANATIONS 5 & 6 TO SECTION 9(1)(VI) ALSO COULD NOT HAVE ALTERED THIS POSITION - HELD, YES [PARAS 33, 44, 55, 56& 72][IN FAVOUR OF ASSESSEE] SECTION 9 OF THE INCOME-TAX ACT, 1961, READ WITH SE CTION 5 AND ARTICLE 7 OF MODEL OECD CONVENTION - INCOME - DEEMED TO ACCRUE OR ARISE IN INDIA (BUSINESS PROFITS) - ASSESSMENT YEARS 2008-09 TO 2011- 2012 -ASSESSEE MADE PAYMENT OF INTER-CONNECTED USAGE CHARGES(IUC) TO FOREIGN TELECOM OPERATORS (FT OS) IN CONNECTION WITH ITS ILD TELECOM SERVICE BUSINESS - PAYMENT IN QUESTION DID N OT ACCRUE OR ARISE TO 'FTOS' IN INDIA - ENTIRE BUSINESS OPERATIONS WERE CARRIED OUT OUTSIDE INDIA BY FTOS - FTOS ALSO DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA - WHETHER THUS NO INCOME COULD BE DEEMED TO ACCRUE OR ARISE TO FTO'S IN INDIA AND HENCE UNDE R ARTICLE 7 ALSO INCOME COULD NOT BE BROUGHT TO TAX IN INDIA - HELD, YES - WHETHER FURTHE R IN ABSENCE OF PERMANENT ESTABLISHMENT OF FTOS IN INDIA, PAYMENT OF 'IUC' TO FTOS COULD NOT BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER ANY OF CLAUSE OF SECTION 9( 1) READ WITH SECTION 5(2) - HELD, YES [PARAS 74 & 78][IN FAVOUR OF ASSESSEE] TO THE SIMILAR EFFECT ARE OTHER DECISIONS CITED BY LD AR. THE LD CIT(DR) HAS NOT BEEN ABLE TO CONTROVERT THE FACT THAT THE ISSUE IN DISPU TE IS NO MORE RES INTEGRA CONSIDERING THE ABOVE BINDING PRECEDENTS. MOREOVER, A PERUSAL O F SAMPLE AGREEMENT FOR PAYMENT OF IUC CHARGES BETWEEN BSNL AND CABLE & WIRELESS UK IN THE INSTANT CASE ALSO CLEARLY SHOWS THAT A STANDARD FACILITY FOR AVAILING INTERCO NNECTIVITY SERVICES WHILE ROAMING WAS AVAILED BY THE APPELLANT IN THE INSTANT CASE. T HIS DOES NOT REQUIRE ANY HUMAN INTERVENTION. RESPECTFULLY FOLLOWING THE ABOVE JUDI CIAL PRECEDENTS, WE HOLD THAT PAYMENT FOR IUC CHARGES IS NOT CHARGEABLE TO TAX IN INDIA IN THE HANDS OF THE NON- RESIDENT RECIPIENTS AND HENCE TDS WAS NOT DEDUCTIBL E AS PER PROVISIONS OF SECTION 195 OF THE ACT. THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) ON THIS ISSUE AND DECIDE THE SAME IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, RE SPECTIVE GROUNDS NOS. 7, 8 & 9 ARE ALLOWED. 17. SIMILARLY, ITAT MUMBAI BENCH IN THE CASE OF ASS ESSEE PLACED AT MUMBAI VIDE ORDER DATED 27.05.2016 (ITA NOS. 2043 TO 2045/ MUM/2014 A.YRS. 2009- 10 TO 2012-13) HAS DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE HOLDING THAT THE PROVISIONS OF ROAMING SERVICES DO NOT REQUIRE ANY H UMAN INTERVENTION AND THEREFORE, THE PAYMENT OF ROAMING CHARGES DOES NOT FALL UNDER THE NET OF TDS PROVISIONS U/S. 194J OF THE ACT. 18. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, THI S ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGL Y, THE ORDER OF THE LD. CIT(A) ITA NOS. 3328 TO 3332/DEL./2015 & SA NOS.315 TO 319 /DEL./2015 40 IS REVERSED ON THIS ISSUE. AS A RESULT, THE APPEAL OF THE ASSESSEE DESERVES TO BE PARTLY ALLOWED. THE ASSESSING OFFICER IS DIRECTED T O GIVE CONSEQUENTIAL EFFECT OF THIS ORDER WHILE WORKING OUT THE INTEREST U/S. 201( 1A) OF THE ACT. 19. SINCE THE FIRST ISSUE AND RELEVANT FACTS INVOLV ED IN REMAINING FOUR APPEALS OF THE ASSESSEE ARE IDENTICAL, THEREFORE, THE DECIS ION REACHED BY US ON THIS FIRST ISSUE, SHALL EQUALLY APPLY TO THE REMAINING APPEALS OF THE ASSESSEE ALSO. THE SECOND ISSUE IS INVOLVED ONLY IN APPEALS FOR A.YRS. 2007-08, 2008-09 AND 2009- 10. ACCORDINGLY, THE APPEALS FOR A.YRS. 2007-08 T O 2009-10 DESERVE TO BE PARTLY ALLOWED AND THE APPEALS FOR A.YRS. 2010-11 A ND 2011-12 DESERVE TO BE DISMISSED. 20. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR A.YRS. 2007-08 TO 2009-10 ARE PARTLY ALLOWED AND THE APPEALS FOR A.YRS. 2010- 11 AND 2011-12 ARE DISMISSED. THE STAY PETITIONS FILED BY THE ASSESSE E ARE, ACCORDINGLY, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2018 SD/- SD/- (BHAVNESH SAINI) ( L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.03.2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI