M/s Bharat Sanchar Nigam Limited., Kolkata V. D.C.I.T TDS Cir - 57,kolkata, Kolkata

ITA 367/KOL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70480 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 25-02-2013
• Court: TRIBUNAL
• Department Lawyers: DR SWETABH SUMAN
• Assessee Lawyers: S M SURANA
• Keywords: Charitable institution; Relationship of principal and agent
• Section: 201(1)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NOS. 367 TO 369/KOL/2013 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEARS: 2008-09 TO 2010-11 M/S. BHARAT SANCHAR NIGAM LTD. VS. DEPUTY COMMIS SIONER OF INCOME-TAX, (PAN:AABCB5576G) TDS, CIRCLE-57, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 11.12.2013 DATE OF PRONOUNCEMENT: 19.12.2013 FOR THE APPELLANT: SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT: DR. SWETABH SUMAN, CIT $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THESE THREE APPEALS BY ASSESSEE ARE ARISING OUT OF ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO. 168-169/CIT(A)-I/C-57/11-12 DATED 13.12.2012 AN D NO. 170/CIT(A)-I/C-57/11-12 DATED 14.12.2012. ASSESSMENTS WERE FRAMED BY DCIT, CIRCL E-57, KOLKATA U/S. 201(1)/201(1A) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR ASSESSMENT YEAR 2008-09 TO 2010-11 VIDE HIS SEPARATE ORDERS DATED 31.03.2011. 2. THE ONLY COMMON ISSUE IN THESE THREE APPEALS OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF DCIT, CIRCLE-57, KOLKATA I N TREATING THE ASSESSEE IN DEFAULT U/S. 201(1) FOR NON-DEDUCTION OF TDS AND THEREAFTER, CHARGING O F INTEREST U/S. 201(1A) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED COMMON GROUND IN ALL THE THREE YEARS EXCEPT THE QUANTUM. RELEVANT GROUNDS RAISED IN AY 2008-09 IN ITA NO. 367/K/2013 READS AS UNDER: 1. FOR THAT THE ORDERS OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-57 (TDS) AND THE APPELLATE ORDER DATED 18.01.2013 PASSED BY THE LD. CIT(A)-1 ARE ARBITRARY, ILLEGAL AND VOID AB INITIO. 2. FOR THAT THE PETITIONER HAS NEVER VIOLATED THE P ROVISION OF LAW AND DEDUCTED TAX ON COMMISSION OF RS.21,20,87,178/- ALLOWED TO HIS FRAN CHISEES. BUT THE PETITIONER HAS NOT ALLOWED ANY DISCOUNT TO ITS FRANCHISEES FOR THE YEA R IN CONSIDERATION AND THEREFORE THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE. THEREFO RE THE ACTION OF THE APPELLATE AUTHORITY IS CHALLENGED. APPELLATE AUTHORITY HAS PARTIALLY M ODIFIED BUT THE ASSESSING AUTHORITY HAS RAISED THE REVISION DEMAND NOTICE BASED ON ORIGINAL DEMAND PRIOR APPEAL, WHICH IS ERRONEOUS. 2 ITA NO.367- 369/K/2013 BHARAT SANCHAR NIGAM LTD.., AY:2008-09 TO 2010-11 3. FOR THAT THE APPELLATE AUTHORITY HAS NOT CORRECT LY PASSED HIS ORDER NOR HE HAS DIRECTED THE ASSESSING AUTHORITY CLEARLY THE QUANTUM OF MODI FICATION, THROUGH ALL THE COPIES OF RETURNS IN FORM 26Q AND PAID CHALLANS WITH AUDITED FINAL ACCOUNTS WERE PRODUCED AT APPEAL. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FAIR LY CONCEDED THAT ON COMMISSION THE ISSUE IS COVERED BY THE DECISION OF HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF BHARATI CELLULAR LTD. VS. ACIT & ANR. (2013) 354 ITR 507 (CAL). LD . COUNSEL ALSO STATED THE FACTS THAT IN THE YEAR 2007 THE FRANCHISEE SALES AND DISTRBUTON POL ICY OF BSNL WAS AMENDED AND AFTER SUCH AMENDMENTS WERE MADE, SALES AND DISTRIBUTION POLICY ENVISAGED TWO TYPES OF RELATIONSHIP BETWEEN BSNL AND ITS FRANCHISEES. THE FIRST RELATIO NSHIP IS THAT OF A PRINCIPAL AND AN AGENT. WHEN THE FRANCHISEE SELL BSNL SIM CARDS OR PROVIDE BSNL LAND LINE OR MOBILE POST-PAID CONNECTIONS THE FRANCHISEES ACT AS AN AGENTS OF BSN L. IN CASE OF SIM CARDS, LANDLINE OR MOBILE POST-PAID CONNECTIONS THE FRANCHSEES GET THE SUBSC RIBERS IDENTIFIED, DO THE DOCUMENTATON WORK AND ENROLL THE SUBSCRIBERS WITH BSNL. THE SIM CARDS , LANDLINE OR MOBILE POST-PAID CONNECTIONS ARE ACTIVATED AND BECOME USABLE ONLY AFTER PROPER I DENTIFCATION. IT HAS BEEN ACKNOWLEDGED BY BSNL THAT WHEN THE FRANCHISEES SELL BSNL SIM CARDS OR PROVIDES BSNL IANDLINE OR MOBLE POST-PAID CONNECTIONS THE FRANCHISEES ACT AS AGENTS OF BSNL. LANDLINE OR MOBILE POST PAID CONNECTIONS THE FRANCHISEES ACT AS AGENTS OF BSNL. CONSEQUENTLY, BSNL DEDUCTS TAX AT SOURCE UNDER SECTION 194H FROM THE COMMISSION THAT WAS PAI D TO THE FRANCHISEES FOR SELLING BSNL SIM CARDS OR PROVIDING BSNL LANDLINE OR MOBILE POST PAID CONNECTION. HOWEVER, WHEN THE FRANCHISEES PURCHASE BSNL CASH CA RDS (SUCH AS RECHARGE COUPONS, ITC, FLPP, ETC.) FROM BSNL AND SELL SUCH ITEMS TO T HE RETALERS OR CUSTOMERS THE FRANCHISEES DO NOT ACT AS AGENTS OF BSNL. ON THE CONTRARY, BSNL SE LLS ITS CASH CARDS TO ITS FRANCHISEES AND THE TRANSACTION BETWEEN BSNL AND ITS FRANCHISEES IN RES PECT OF BSNL CASH CARDS TAKE PLACE ON A PRINCIPAL-TO-PRINCIPAL BASIS. SO FAR AS BSNL IS CON CERNED, THE SALE OF BSNL CASH CARDS IS COMPLETED WHEN THE FRANCHISEES MAKE PAYMENT FOR THE CASH CARDS AND BSNL DELIVERS THE CARDS TO THE FRANCHISEES. LD. COUNSEL STATED THAT IN CASE OF CASH CARDS THE DOCUMENTATION AND IDENTIFICATION PROCEDURES ARE NOT NECESSARY. THE FR ANCHISEES SIMPLY SELL THE CASH CARDS TO THE SUBSCRIBERS/CUSTOMERS. THUS, IN CASE OF CASH CARDS TWO SEPARATE TRANSACTIONS OF SALE TAKE PLACE. THE FIRST SALE IS MADE BY BSNL TO ITS FRANCHISEES. THE SECOND SALE IS MADE BY THE FRANCHISEES TO THE SUBSCRIBERS/CUSTOMERS. NOW, IT IS WELL SETTLED THAT IN CASE OF SALE THE TRANSACTION TAKES PLACE ON PRINCIPAL-TO-PRINCIPAL BASIS AND THERE CANNOT BE ANY PRINCIPAL-AGENT RELATIONSHIP BETWEEN A SELLER AND A BUYER. 3 ITA NO.367- 369/K/2013 BHARAT SANCHAR NIGAM LTD.., AY:2008-09 TO 2010-11 4. LD. COUNSEL ALSO ARGUED THAT AS FAR AS COMMISSIO N IS CONCERNED, THE ISSUE IS COVERED BUT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTHAN COCA COLA BREVERAGE PVT. LTD. 293 ITR 226 THAT THE RECIPIENTS HAVE PAID TAX ON INCOME EMBEDDED IN THESE PAYMENTS, THE TAXES CANNOT ONCE AGAIN BE RECOVERED FROM THE ASSESSEE. FOR THIS, HE ALSO RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF RAM AKRISHNA VEDANTA MATH VS. ITO IN ITA NOS. 477, 478 & 479/K/2012, AY 2005-06 TO 2006-07 A ND 2008-09 DATED 31.07.2012, WHEREIN THE SIMILAR PRINCIPLE IS LAID DOWN AND THE RELEVANT PORTION READS AS UNDER: 4. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPA SS OF MATERIAL FACTS. THE ASSESSEE BEFORE US IS A CHARITABLE TRUST, SET UP IN THE YEAR 1939, DOING SIGNIFICANT PUBLIC SERVICE. DURING THE RELEVANT PERIOD, THE ASSESSEE HAS MADE S EVERAL PAYMENTS, IN RESPECT OF BOOK BINDING CHARGES, PRINTING CHARGES, ADVERTISEMENT AN D PUBLICITY AND BUS HIRE CHARGES ETC, BUT HAD NOT DEDUCTED TAX AT SOURCE FROM THESE PAYME NTS. ON THESE FACTS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO W HY THE ASSESSEE NOT BE TREATED AS ASSESSEE IN DEFAULT IN RESPECT OF SUCH NON DEDUCTIO N OF TAX AT SOURCE AND THE SAME NOT BE RECOVERED FROM THE ASSESSEE UNDER SECTION 201(1), A LONG WITH INTEREST UNDER SECTION 201(1A). THE STAND OF THE ASSESSEE IS THAT THE RECI PIENTS HAVE PAID TAX ON INCOME EMBEDDED IN THESE PAYMENTS, AND IN THE LIGHT OF HON BLE SUPREME COURTS DECISION IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT LTD VS CI T (293 ITR 226), THE TAXES CANNOT ONCE AGAIN BE RECOVERED FROM THE ASSESSEE. THIS CON TENTION IS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE IS NOT ABLE TO PROVE THAT TAXES ON INCOME EMBEDDED IN THESE PAYMENTS HAVE BEEN DULY BEEN PAID BY THE R ECIPIENTS. THE ASSESSEES REQUEST TO THE ASSESSING OFFICER TO USE HIS STATUTORY POWERS TO CORROBORATE FROM THE PAYERS WHETHER THEY HAVE PAID TAX ON THEIR ACCOUNT WAS ALSO REJEC TED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SUCCESS. THE ASSES SEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 6. LEARNED COUNSELS VEHEMENT RELIANCE IS ON HONBL E ALLAHABAD HIGH COURTS JUDGMENT IN THE CASE OF JAGRAN PRAKASHAN LTD VS DCIT [ (2012 ) 21 TAXMANN.COM 489 ALL] WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLO WS: ..IT IS CLEAR THAT DEDUCTOR CANNOT BE TREATED AN ASSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. IN THE PRESENT CASE, THE INCOME TAX AUTHORITIES HAD NOT ADVERTED TO THE EXPLANATION TO SECTION 191 NOR HAD APPLIED THEIR MIND AS TO WHETHER THE ASSESSEE HAS ALSO FAILED TO PAY S UCH TAX DIRECTLY. THUS, TO DECLARE A DEDUCTOR, WHO FAILED TO DEDUCT THE TAX AT SOURCE AS AN ASSESSEE IN DEFAULT, CONDITION PRECEDENT IS THAT ASSESSEE HAS ALSO FAILED TO PAY T AX DIRECTLY. THE FACT THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY IS THUS, FOUNDATIONAL AN D JURISDICTIONAL FACT AND ONLY AFTER FINDING THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY, DEDUC TOR CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX.. 7. IT IS THUS ARGUED THAT THE ONUS IS ON THE REVENU E TO DEMONSTRATE THAT THE TAXES HAVE NOT BEEN RECOVERED FROM THE PERSON WHO HAD THE PRIMARIL Y LIABILITY TO PAY TAX, AND IT IS ONLY WHEN THE PRIMARY LIABILITY IS NOT DISCHARGED THAT V ICARIOUS RECOVERY LIABILITY CAN BE INVOKED. LEARNED COUNSEL CONTENDS THAT ONCE ALL THE DETAILS OF THE PERSONS TO WHOM PAYMENTS HAVE BEEN MADE, IT IS FOR THE ASSESSING OF FICER, WHO HAS ALL THE POWERS TO REQUISITION THE INFORMATION FROM SUCH PAYERS AND FR OM THE INCOME TAX AUTHORITIES, TO ASCERTAIN WHETHER OR NOT TAXES HAVE BEEN PAID BY TH E PERSONS IN RECEIPT OF THE AMOUNTS FROM WHICH TAXES HAVE NOT BEEN WITHHELD. IT IS LEAR NED COUNSELS SUBMISSION THAT AS A 4 ITA NO.367- 369/K/2013 BHARAT SANCHAR NIGAM LTD.., AY:2008-09 TO 2010-11 RESULT OF HONBLE ALLAHABAD HIGH COURTS JUDGMENT I N THE CASE OF JAGARAN PRAKASHAN (SUPRA), THIS PARADIGM SHIFT IN THE INTERPRETATION OF SECTION 201(1) HAS BEEN BROUGHT ABOUT. 8. THE PLEA IS INDEED WELL TAKEN. LEARNED COUNSEL I S QUITE RIGHT IN HIS SUBMISSION THAT, AS A RESULT OF THE JUDGMENT OF HONBLE ALLAHABAD HIGH CO URT IN JAGRAN PRAKASHANS CASE (SUPRA) AND IN THE ABSENCE OF ANYTHING CONTRARY THE RETO FROM HONBLE JURISDICTIONAL HIGH COURT, THERE IS A PARADIGM SHIFT IN THE MANNER IN W HICH RECOVERY PROVISIONS UNDER SECTION 201(1) CAN BE INVOKED. AS OBSERVED BY THEIR LORDSHI PS, THE PROVISIONS OF SECTION 201(1) CANNOT BE INVOKED AND THE TAX DEDUCTOR CANNOT BE T REATED AN ASSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. ONCE THIS FINDING ABOUT THE NON PAYMENT OF TAXES BY THE RECIPIENT IS HELD TO A CONDITION PRECEDENT TO INVOKING SECTION 201(1), THE ONUS IS ON THE ASSESSING OFFICER TO DEM ONSTRATE THAT THE CONDITION IS SATISFIED. NO DOUBT THE ASSESSEE HAS TO SUBMIT ALL SUCH INFORM ATION ABOUT THE RECIPIENT AS HE IS OBLIGED TO MAINTAIN UNDER THE LAW, ONCE THIS INFORM ATION IS SUBMITTED, IT IS FOR THE ASSESSING OFFICER TO ASCERTAIN WHETHER OR NOT THE T AXES HAVE BEEN PAID BY THE RECIPIENT OF INCOME. THIS APPROACH, IN OUR HUMBLE UNDERSTANDING, IS IN CONSONANCE WITH THE LAW LAID DOWN BY HONBLE ALLAHABAD HIGH COURT. 9. IT IS IMPORTANT TO BEAR IN MIND THAT THE LAPSE O N ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE IS TO BE VISITED WITH THREE DIFFERENT CONSEQ UENCES PENAL PROVISIONS, INTEREST PROVISIONS AND RECOVERY PROVISIONS. THE PENAL PROVI SIONS IN RESPECT OF SUCH A LAPSE ARE SET OUT IN SECTION 271 C. SO FAR AS PENAL PROVISIONS AR E CONCERNED, THE PENALTY IS FOR LAPSE ON THE PART OF THE ASSESSEE AND IT HAS NOTHING TO DO W ITH WHETHER OR NOT THE TAXES WERE ULTIMATELY RECOVERED THROUGH OTHER MEANS. THE PROVI SIONS REGARDING INTEREST IN DELAY IN DEPOSITING THE TAXES ARE SET OUT IN SECTION 201(1A) . THESE PROVISIONS PROVIDE THAT FOR ANY DELAY IN RECOVERY OF SUCH TAXES IS TO BE COMPENSATE D BY THE LEVY OF INTEREST. AS FAR AS RECOVERY PROVISIONS ARE CONCERNED, THESE PROVISIONS ARE SET OUT IN SECTION 201(1) WHICH SEEKS TO MAKE GOOD ANY LOSS TO REVENUE ON ACCOUNT O F LAPSE BY THE ASSESSEE TAX DEDUCTOR. HOWEVER, THE QUESTION OF MAKING GOOD THE LOSS OF RE VENUE ARISES ONLY WHEN THERE IS INDEED A LOSS OF REVENUE AND THE LOSS OF REVENUE CAN BE TH ERE ONLY WHEN RECIPIENT OF INCOME HAS NOT PAID TAX. THEREFORE, RECOVERY PROVISIONS UNDER SECTION 201(1) CAN BE INVOKED ONLY WHEN LOSS TO REVENUE IS ESTABLISHED, AND THAT CAN O NLY BE ESTABLISHED WHEN IT IS DEMONSTRATED THAT THE RECIPIENT OF INCOME HAS NOT P AID DUE TAXES THEREON. IN THE ABSENCE OF THE STATUTORY POWERS TO REQUISITION ANY INFORMAT ION FROM THE RECIPIENT OF INCOME, THE ASSESSEE IS INDEED NOT ALWAYS ABLE TO OBTAIN THE SA ME. THE PROVISIONS TO MAKE GOOD THE SHORTFALL IN COLLECTION OF TAXES MAY THUS END UP BE ING INVOKED EVEN WHEN THERE IS NO SHORTFALL IN FACT. ON THE OTHER HAND, ONCE ASSESSEE FURNISHES THE REQUISITE BASIC INFORMATION, THE ASSESSING OFFICER CAN VERY WELL AS CERTAIN THE RELATED FACTS ABOUT PAYMENT OF TAXES ON INCOME OF THE RECIPIENT DIRECTLY FROM T HE RECIPIENTS OF INCOME. IT IS NOT THE REVENUES CASE BEFORE US THAT, ON THE FACTS OF THIS CASE, SUCH AN EXERCISE BY THE ASSESSING OFFICER IS NOT POSSIBLE. IT DOES PUT AN ADDITIONAL BURDEN ON THE ASSESSING OFFICER BEFORE HE CAN INVOKE SECTION 201(1) BUT THATS HOW HONBLE HI GH COURT HAS VISUALIZED THE SCHEME OF ACT AND THATS HOW, THEREFORE, IT MEETS THE END OF JUSTICE. LD. COUNSEL FOR THE ASSESSEE STATED THAT SIMILAR DI RECTION MAY BE GIVEN IN THIS CASE OF ASSESSEE COMPANY. 5. WE FIND THAT THE ISSUE IS COVERED BY THE DECISIO N OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHARATI CELLULAR LTD. (SUPRA) (FROM HEAD NO TES), WHEREIN IT IS HELD AS UNDER: IN ORDER TO HOLD THE ASSESSEE IS LIABLE FOR DEDUCT ING TAX AT SOURCE UNDER SECTION 194H OF THE INCOME-TAX ACT, 1961, WHETHER THE RELATIONSHIP BETWEEN THE ASSESSEE AND ITS 5 ITA NO.367- 369/K/2013 BHARAT SANCHAR NIGAM LTD.., AY:2008-09 TO 2010-11 FRANCHISEES CREATED BY THE AGREEMENT IS OF A PRINCI PAL AND AGENT HAS TO BE GATHERED FROM THE NATURE OF THE CONTRACT, ITS TERMS AND CONDITION S, AND THE TERMINOLOGY USED BY THE PARTIES IS NOT DECISIVE OF THE RELATIONSHIP. THE CO URT IS TO EXAMINE WHETHER AFTER DELIVERY OF THE GOODS TO THE BUYER, THE SELLER HAS RETAINED THE CONTROL OR RIGHT OF REGULATION IN ANY FORM WITH REGARD TO THE MODE OF DEALINGS OF THE BUY ER, IN OTHER WORDS, WHETHER THE BUYER HAS SUBSTANTIALLY UNFETTERED CHOICE TO DEAL WITH TH E PROPERTY PURCHASED IN ANY MANNER HE LIKES. SOMETIMES THE SELLER UNDER THE CONTRACT OR E NACTMENT PRESCRIBES CERTAIN REGULATORY MEASURES TO PREVENT ABUSE OF THE RARE ARTICLES AND GOODS EVEN AFTER SALE BUT SUCH MEASURE CANNOT BE ASCRIBED TO BE ATTRIBUTES OF THE RELATIONSHIP OF PRINCIPAL AND AGENT. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDI NG CELLULAR MOBILE TELEPHONE SERVICES THROUGH ITS FRANCHISEES BY SELLING TO THEM STARTER PACK AND RECHARGEABLE COUPONS, SIM AND PRE-PAID CARDS WHICH WERE PURCHASED BY THE FRAN CHISEES ENGAGED BY THE ASSESSEE AT A RATE BELOW THE MARKET PRICE ON SUCH SIM CARDS AND SOLD TO RETAILERS BY WHOM THEY WERE ULTIMATELY SOLD TO CUSTOMERS. THE ASSESSING OFFICER HELD THAT THE FRANCHISEES AND THE ASSESSEE MAINTAINED THE PRINCIPAL AND AGENT RELATIO NSHIP AND, THEREFORE, ANY PAYMENT MADE TO THEM WAS LIABLE FOR DEDUCTION OF TAX AT SOU RCE UNDER SECTION 194H. THE COMMISSIONER (APPEALS) HELD THAT THERE WAS NO PRINC IPAL AND AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND ITS DISTRIBUTORS, AND THEIR BUSINE SS ACTIVITIES AND ENTITIES WERE INDEPENDENT. THE TRIBUNAL REVERSED THE FINDINGS OF THE COMMISSIONER (APPEALS). ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE SALIENT FEATURES OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE FRANCHISEES WERE (I) THE PROPERTY IN THE START UP PACK AND PRE-PAID COUPONS EVEN AFTER TRANSFER AND DELIVERY TO THE FRANCHISEES REMAINED W ITH THE ASSESSEE, (II) THE FRANCHISEE REALLY ACTED AS A FACILITATOR OR INSTRUMENTALITY OF PROVIDING SERVICES BY THE ASSESSEE TO THE ULTIMATE SUBSCRIBER, (III) THE FRANCHISEE HAD NO FR EE CHOICE TO SELL IT AND EVERYTHING WAS BEING REGULATED AND GUIDED BY THE ASSESSEE, AND (IV ) THE RATE AT WHICH THE FRANCHISEE SOLD TO RETAILERS AND THAT AT WHICH THE ASSESSEE SOLD TO THE FRANCHISEE, WAS ALSO REGULATED AND FIXED BY THE ASSESSEE. FROM THE CONDITIONS IN CLAUS ES 16, 16.1, 16.2 AND 16.3 OF THE AGREEMENT, IT EMERGED THOUGH THE NOMENCLATURE HAD B EEN USED AS FRANCHISEE, THE AGREEMENT WAS ESSENTIALLY THAT OF THE PRINCIPAL AND AGENT ALBEIT THE STIPULATION IN CLAUSE 16.2. IN THE REAL SENSE, THE FRANCHISEE ACTED ON BE HALF OF THE ASSESSEE FOR SELLING START UP PACKS AND PRE-PAID RECHARGE COUPONS TO THE CUSTOMER S OF THE ASSESSEE. THERE HAD BEEN INDIRECT PAYMENT BY THE ASSESSEE TO THE FRANCHISEE OF THE COMMISSION AND THE COMMISSION WOULD ATTRACT TAX DEDUCTION AT SOURCE UNDER SECTION 194H. 6. BUT, NOW HONBLE SUPREME COURT IN THE CASE OF HI NDUSTHAN COCA COLA BREVERAGE PVT. LTD. (SUPRA) HAS ALSO LAID DOWN THE PRINCIPLE THAT ONCE THE RECIPIENTS HAVE PAID TAX ON INCOME EMBEDDED IN THESE PAYMENTS THEN THE TAX CANNOT ONCE AGAIN BE RECOVERED FROM THE ASSESSEE BY TREATING THE ASSESSEE IN DEFAULT FOR NON DEDUCTION OF TDS. ACCORDINGLY, WE SET ASIDE THESE THREE APPEALS OF THE ASSESSEE COMPANY TO THE FILE OF AO T O FIND OUT THE RECIPIENTS AS THE ASSESSEE HAS FILED COMPLETE DETAIL BEFORE US REGARDING COMMISSIO N I.E. NAME OF THE DEALER, PAN, ADDRESS AND COMMISSION PAID FROM PAGES 6 TO 13 OF ASSESSEES PA PER BOOK. LET THE AO VERIFY THE FACTUAL POSITION OF PAYMENT OF TAXES BY RECIPIENTS AND IN C ASE THE TAXES ARE PAID BY RECIPIENTS BY INCLUDING THE INCOME THE ASSESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT FOR NON-DEDUCTION OF TDS U/S. 201 OF THE ACT. HOWEVER, THE DIFFERENTIAL INTEREST CAN BE CHARGED U/S. 201(1A) OF THE 6 ITA NO.367- 369/K/2013 BHARAT SANCHAR NIGAM LTD.., AY:2008-09 TO 2010-11 ACT AS PRINCIPLE LAID DOWN IN THE CASE OF RAMAKRISH NA VEDANTA MATH (SUPRA). ALL THESE APPEALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEALS OF ASSESSEE ARE ALLOWED F OR STATISTICAL PURPOSES. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH DEC., 2013. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19TH DECEMBER, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT M/S. BHARAT SANCHAR NIGAM LTD., WEST BE NGAL TELECOM CIRCLE, 1, COUNCIL HOUSE STREET, KOLKATA-70 0 001. 2 ./,- / RESPONDENT DCIT, TDS CIRCLE-57, KOLKATA. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .