M/s Kamdhenu Trading Co., Cuttack V. CIT, Cuttack

ITA 347/CTK/2013

• Counselvise Citation: 34722114 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Relationship of principal and agent
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 347/CTK/2013 : (ASST. YEAR : 2008 - 09) M/S. KAMADHENU TRADING CO. SAMANTASAHI, CUTTACK 753 001. PAN : AABFK4521H (APPELLANT) VS. COMMISSIONER OF INCOME TAX, ARUNODAY BLDG., LINK ROAD, CUTTACK (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : ANIL SHARMA, DR DATE OF HEARING : 29/01/2015 DATE OF PRONOUNCEMENT : 02 /0 3 /2015 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT, CUTTACK DT. 28.3.2013 PASSED U/S 263. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE, THEREFORE, DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR. 2. AFTER HEARING THE LD. DR WE NOTED THAT THE ASSESSEE HAS SUBMITTED ITS RETURN OF INCOME AT RS. 18,97,805/ - . THE ASSESSMENT WAS COMPLETED U/S 143(3) DETERMINING THE TOTAL INCOME AT RS. 19,33,805/ - . CIT CALLED FOR THE RECORDS AND AFTER CALLING FOR THE RECOR DS NOTED THAT DURING THE IMPUGNED ASSESSMENT YEAR BSNL HAS ALLOWED DISCOUNT/COMMISSION FOR MOBILE TELEPHONE SERVICES TO THE ASSESSEE AMOUNTING TO RS. 91,43,182/ - AGAINST WHICH THE ASSESSEE CLAIMED EXPENDITURE IN THE NATURE OF COMMISSION/DISCOUNT ALLOWED TO ITS RETAILER AMOUNTING TO RS. 22,38,059/ - AS DISCOUNT/C - TOP AND RS. 48,69,367/ - AS RCV 2 ITA NO. 347/CTK/2013 (A.Y : 2008 - 09) DISCOUNT. BSNL HAD DEDUCTED TDS FROM THE COMMISSION/DISCOUNT ALLOWED TO THE ASSESSEE FOR MARKETING ITS MOBILE SIM CARD/RECHARGE VOUCHERS. THE ASSESSEE, IN HIS OPINION , WAS EQUALLY REQUIRED UNDER THE LAW TO DEDUCT TAX AT SOURCE FROM ITS PAYMENT MADE TO THE RETAILERS FOR MARKETING BSNL SIM CARDS/COUPONS IN ACCORDANCE WITH THE STATUTORY PROVISIONS OF SEC. 194H OF THE INCOME TAX ACT. SINCE THE ASSESSEE HAD NOT DEDUCTED AN Y TAX AT SOURCE U/S 194H FROM THE COMMISSION PAYMENT OF RS. 71,07,426/ - , THEREFORE, CIT INVOKED JURISDICTION U/S 263 AND ISSUED SHOW CAUSE TO THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE SUBMITTED A DETAILED REPLY AND CONTENDED THAT THE AO HAS DULY EXA MINED THE ISSUE, THERE WAS NO PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THE DISTRIBUTOR AND THE RETAILERS AND THE ASSESSEE HAS SIMPLY GIVEN DISCOUNT; NOT COMMISSION. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AHMED ABAD STAMP VENDORS ASSOCIATION VS. UNION OF INDIA, 275 ITR 202 AND IT WAS CONTENDED THAT THERE WAS NO ERROR IN THE ORDER OF THE AO. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE CUTTACK BENCH OF THE ITAT DT. 28.9.2012 IN ITA NO. 354/CTK/2012 IN WHICH IT WAS HELD THAT THE DISCOUNT RECEIVED BY THE RETAILERS IS NOT TO BE SUBJECTED TO TDS U/S 194H. CIT DID NOT AGREE AND SET ASIDE THE ORDER AND DIRECTED THE AO TO RE - EXAMINE THE MATTER WHETHER THE IMPUGNED AMOUNT PAID TO THE RETAILERS REPRESENTS DISCOUNT OR C OMMISSION. 3. FROM THE STATEMENT OF FACTS WE NOTED THAT THE AO HAD ASKED FOR ASSESSEES EXPLANATION AS TO THE NATURE OF THE TRANSACTION WITH THE RETAILER. THE ASSESSEE FILED A DETAILED NOTE COVERING 25 PAGES CLARIFYING THAT THE PAYMENT TO THE RETAILERS WERE IN THE NATURE OF DISCOUNT AND THEREFORE TDS PROVISIONS U/S 194H WOULD NOT BE APPLICABLE. THE AO COMPLETED THE ASSESSMENT AND DID NOT INVOKE THE PROVISIONS OF SEC. 4 0(A)(IA). FROM THE PROVISIONS OF SEC. 263 IT IS APPARENT THAT BOTH THE CONDITIONS THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED. IF THE AO HAS 3 ITA NO. 347/CTK/2013 (A.Y : 2008 - 09) TAKEN ONE OF THE POSSIBLE VIEWS WHICH IS NOT UNSUSTAINABLE IN LAW, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AO IS ERRONEOUS. NO DOUBT, IN THE CASE OF IDEA CELLULAR LTD., 189 TAXMANN.COM 118 THE HON'BLE DELHI HIGH COURT HAS TAKEN THE VIEW THAT COMMISSION PAID BY CELLULAR TELEPHONE COMPANY TO DISTRIBUTOR ON SALE OF PREPAID SIM CARDS IS LIABLE TO TDS U/S 194H. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BHARTI CELLULAR LTD., 200 TAXMANN.COM 254 BUT THOSE CASES RELATE TO SELLING OF SIM CARDS BY THE CELLULAR C OMPANIES TO THE DISTRIBUTORS. 4. THE CASE BEFORE US RELATES TO SELLING OF SIM CARDS TO THE RETAILERS. IN THE CASE OF CELLULAR COMPANIES AND THE DISTRIBUTORS, THERE IS ALWAYS A RELATIONSHIP OF PRINCIPAL AND AGENT BUT WHEN A DISTRIBUTOR SELLS THE SIM CAR D TO THE RETAILERS THERE CAN BE OR CANNOT BE A RELATIONSHIP OF PRINCIPAL AND AGENT. THEREFORE, IT CANNOT BE ONLY VIEW THAT THE DISCOUNT GIVEN BY THE DISTRIBUTOR TO THE RETAILERS IS A COMMISSION. IT IS A CASE WHERE THERE MAY BE TWO VIEWS POSSIBLE. UNDER THESE FACTS, IN OUR OPINION, THE ORDER PASSED BY THE AO CANNOT BE REGARDED TO BE ERRONEOUS. WE ALSO NOTED FROM PG. 43 TO 57 OF THE PAPER BOOK THAT THE ASSESSEE HAS ON A QUERY FROM THE AO DULY EXPLAINED THAT IT IS A CASE OF GIVING DISCOUNT. RS. 100/ - COUP ON WAS RECEIVED BY THE ASSESSEE @ RS. 90/ - WHICH THE ASSESSEE USED TO SELL TO THE DEALERS @ RS. 92/ - . EVEN THE PROVISIONS OF SEC. 194H WERE DULY EXPLAINED. THIS IS A CLEAR - CUT CASE WHERE THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS. WE ALSO NOTED FROM PG. 60 TO 65 OF THE PAPER BOOK WHICH CONTAINS THE ORDER OF ITAT, CUTTACK BENCH DT. 28.9.2012 IN ITA NO. 354/CTK/2012 IN THE CASE OF M/S. PAREEK ELECTRICALS THAT THE CUTTACK BENCH OF ITAT HAS TAKEN THE VIEW THAT SUCH AMOUNT REPRESENTS TRADE DISCOUNT AND THE PR OVISIONS OF SEC. 194H ARE NOT APPLICABLE AND THE TRIBUNAL HAS DELETED THE DISALLOWANCE MADE U/S 40(A)(IA). THE AO HAS NOT MADE ANY DISALLOWANCE ON THE SUBMISSION OF THE ASSESSEE. THEREFORE, IN OUR OPINION, IT IS NOT A CASE WHERE THE 4 ITA NO. 347/CTK/2013 (A.Y : 2008 - 09) ORDER PASSED BY THE A O CAN BE REGARDED TO BE ERRONEOUS. WE, THEREFORE, QUASH THE ORDER PASSED U/S 263. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 6. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BEN CH AT CUTTACK ON 02 /0 3 /2015. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 02 /03/ 201 5 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ,