Vodafone Essar Gujarat Ltd., Ahmedabad V. The ACIT.,TDS Circle, Ahmedabad

ITA 386/AHD/2011

• Counselvise Citation: 38620514 RSA 2011
• Duration Of Justice: 4 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Difference of opinion; Relationship of principal and agent
• Section: 143(3); 201(1)

Judgement Text

I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM ] I.T.A. NO.: 386 / AHD / 11 ASSESSMENT YEAR: 2008 - 09 VODAFONE ESSAR GUJARAT LIMITED ......... ...... .... APPELLANT VODAFONE HOUSE CORPORATE R OAD, PRAHLAD NAGAR OFF C G ROAD, AHMEDABAD 380 051 [PAN: AAACF1190P ] VS. ASSISTANT COMMISSIONER OF INCOME TAX TDS CIRCLE, AHMEDABAD .RESPONDENT APPEARANCES BY: S N SOPARKAR AND DHINAL SHAH , FOR THE APPELLANT SUBHASH BAINS , FOR THE RESPON DENT D ATE OF CONCLUDING THE HEARING : APRIL 21 , 201 5 DATE OF PRONOUNCING THE ORDER : JULY 7 , 201 5 O R D E R PER PRAMOD KUMAR AM : 1. BY WAY OF THIS , THE ASSESSEE APPELLANT HAS CALLED INTO QUESTION THE CORRECTNESS OF ORDER DATED 31 ST DECEMBER 2010 PASSE D BY THE LEARNED CIT(A), IN THE MATTER OF TAX WITHHOLDING DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) READ WITH SECTION 194 H OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT Y EAR 2008 - 09 . 2. IN THE FIRST GROUND OF APPEAL, THE A SSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THE CIT(A) HAS ERRED IN UPHOLDING THE TAX LIABILITY OF RS 6,00,99,245 (EXCLUDING INTEREST UNDER SECTION 201(1A) OF THE ACT DETERMINED BY THE ASSISTANT COMMISSIONER OF INCOME TAX TDS BY TREATING THE APPELLANT AS AN ASSESSEE IN DEFAULT IN RESPECT OF NON DEDUCTION OF I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 2 OF 21 TAX AT SOURCE ON TRADE DISCOUNT OF RS 51,67,60,486 GRANTED TO PREPAID DISTRIBUTORS BY HOLDING THE SAME AS COMMISSION AND HENCE LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194H OF THE ACT. 3. THE A S SESSEE , ENGAGED IN THE BUSINESS OF PROVIDING MOBILE TELEPHONE SERVICES, WAS SUBJECTED TO A SURVEY ON ITS BUSINESS PREMISES ON 26 TH AUGUST 2008. DURING THE COURSE OF THIS SURVEY, IT WAS NOTED THAT THE ASSESSEE SELLS PRE - PAID VOUCHERS, OF VARIOUS FACE VALUE , TO ITS DISTRIBUTORS, AT A RATE LOWER THAN ITS FACE VALUE . IT WAS ALSO NOTED THAT THE THE DIFFERENCE (BETWEEN THE FACE VALUE AND THE PRICE AT WHICH IS SOLD) IS NOTHING BUT COMMISSION ON WHICH NO TAX HAS BEEN DEDUCTED . IT WAS ALSO NOTED THE RELATIONSHI P BETWEEN THE .... (APPELLANT) AND THE DISTRIBUTOR WAS ON PRINCIPAL AND AGENT BASIS, AND, THEREFORE, ANY AMOUNT PAID TO THE AGENT BY WAY OF THE MARGIN IS COMMISSION . IT WAS ALSO NOTED THAT UNDER SECTION 194H, A PERSON MAKING PAYMENT FOR COMMISSION HAS TH E OBLIGATION TO DEDUCT TAX AT SOURCE, BUT THE ASSESSEE HAS NOT COMPLIED WITH THIS STATUTORY OBLIGATION. IT WAS IN THIS BACKDROP THAT THE ASSESSEE WAS THAT THE PROCEEDINGS FOR TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT , I N THIS RESPECT, WERE INITIATED AGAINST THE ASSESSEE. DURING THE COURSE OF THESE PROCEEDINGS, IT WAS EXPLAINED BY THE ASSESSEE THAT THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND ITS DISTRIBUTORS, AND THAT THE ASSESSEE SELLS THE PRODUCTS, ON THE OUTRIGHT SALE BASIS THO UGH AT A DISCOUNTED PRICE, TO ITS DISTRIBUTORS WHO, IN TURN, ARE FREE TO SELL THE SAME TO THE RETAILER AT SUCH PRICE, AS THEY MAY DEEM EXPEDIENT, WITHIN THE MRP. IT WAS ALSO EXPLAINED THAT THE DISTRIBUTORS ARE MAKING ADVANCE PAYMENTS TO THE ASSESSEE, THAT THE DISTRIBUTORS ARE FREE TO DECIDE THEIR TERMS AND CONDITIONS OF DOING BUSINESS WITH THE RETAILERS, AND THAT, AS PER SPECIFIC PROVISIONS IN THE AGREEMENT ENTERED INTO BY THE ASSESSEE AND THE DISTRIBUTORS, THE ASSESSEE IS NOT RESPONSIBLE FOR CREATED BY TH E DISTRIBUTOR. THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTORS, IT WAS THUS HIGHLIGHTED, IS ON PRINCIPAL TO PRINCIPAL BASIS. IT WAS SUBMITTED THAT SINCE DISTRIBUTOR DOES NOT RENDER ANY SERVICE TO THE ASSESSEE, THE DIFFERENCE BETWEEN THE SALE P RICE AND THE MRP CANNOT BE TREATED AS DISCOUNT FOR THE PURPOSES OF SECTION 194H. CERTAIN I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 3 OF 21 JUDICIAL PRECEDENTS WERE ALSO CITED BY THE ASSESSEE TO SUPPORT HIS CASE BUT, FOR THE REASONS WE WILL SET OUT IN A SHORT WHILE, IT IS NOT REALLY NECESSARY TO GO INTO T HAT ASPECT OF THE MATTER. NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE ASSESSING OFFICER. HE PROCEEDED TO REJECT THESE SUBMISSIONS AND HOLD THE ASSESSEE AS AN ASSESSEE IN DEFAULT, FOR NOT DEDUCTING TAX AT SOURCE FROM COMMISSION ON SALE OF PREPAID AIRT IME, UNDER SECTION 201 OF THE INCOME TAX ACT, 1961. WHILE DOING SO, THE ASSESSING OFFICER OBSERVED AS FOLLOWS: THE ABOVE SUBMISSION OF THE ASSESSEE HAVE BEEN DULY CONSIDERED. HOWEVER, THE SAME IS NOT ACCEPTABLE ON THE FOLLOWING GROUNDS: - BEFORE MAKING AN Y CONCLUSION THAT DIFFERENCE BETWEEN MRP AND SALE PRICE TO DISTRIBUTOR IS COMMISSION OR RIOT IT IS NECESSARY TO ASCERTAIN THAT WHETHER THE NATURE OF BUSINESS ENTERED INTO BETWEEN THE COMPANY AND DISTRIBUTOR ARE SALE AND PURCHASE OF GOODS OR PROVIDING SERVI CE THROUGH VARIOUS DISTRIBUTORS/ AGENTS. THE H ON 'BLE HIGH COURTS OF KERALA WP NO. 29202/2001 IN THE CASE OF BPL MOBILE LTD. HELD THAT SIM CARD AS WELL AS RECHARGE COMPANY DELIVERED BY BPL MOBILE CELLULAR LTD IS TO BE CONSIDERED AS TRANSACTION BETWEEN SERV ICE PROVIDER & DISTRIBUTORS AND THE SAID TRANSACTION IS ONLY THAT OF SERVICE AND NOT SALE AND PURCHASE OF GOODS. IN THE PRESENT CASE THE DEDUCTOR IS DOING EXACTLY THE SAME BUSINESS. THEREFORE, IT IS NOT POSSIBLE TO HOLD THAT SIM CARD AND RECHARGE COUPON D ELIVERED BY THE COMPANY TO DISTRIBUTORS ARE GOODS BECAUSE THE RELATIONSHIP BETWEEN THE COMPANY AND DISTRIBUTORS IS TO PROVIDE SERVICE TO CUSTOMERS THROUGH DISTRIBUTORS. IT IS QUITE APPARENT THAT SERVICE CAN ONLY BE RENDERED AND NOT SOLD. THIS IS BECAUSE TH E COMPANY HAS RIGHT TO OPERATE OF CELLULAR TELEPHONE SERVICE PROVIDED AND ULTIMATE SERVICE IS PROVIDED BY THE COMPANY TO EVERY CUSTOMERS. THE DISTRIBUTORS ARE ACTING AND LINK IN THE CHAIN OF PROVIDING MOBILE SERVICE. ULTIMATE SERVICE ARE PROVIDED BY COMPAN Y TO THE PUBLIC AT LARGE. THEREFORE, ESSENCE OF SERVICE RENDERED BY THE DISTRIBUTORS ARE NOT SALE OF ANY PRODUCT OR GOODS. SINCE IT IS NOT POSSIBLE FOR THE COMPANY TO PROVIDE ALL THESE SERVICES DIRECTLY TO THE CUSTOMERS, THE DEDUCTOR HAS MADE OUT BUSINESS SOLUTION TO APPOINT DISTRIBUTORS TO TAKE CARE OF OPERATIONAL ACTIVITY OF THE COMPANY TO PROVIDE SERVICE AND THE DISTRIBUTOR IS IMPORTANT LINK IN THAT CHAIN OF SERVICE. MOREOVER, THE ESSENCE OF PREPAID CARD AND POSTPAID CARD, SIM CARD ETC ARE SAME TO PROVID E SERVICE TO CUSTOMERS AND DIFFERENCE IS OF BILLING. I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 4 OF 21 IN PREPAID CARD AMOUNT ARE RECEIVED IN ADVANCE WHEREAS, IN POSTPAID CARD BILLS ARE BEING RAISED AFTER PROVIDING THE SERVICE. THEREFORE, IF POSTPAID CARD IS SUBJECT TO SECTION 194H, IT IS QUITE UNLIKELY T HAT PREPAID SYSTEM WOULD BE OUTSIDE THE PURVIEW OF SECTION 194H. THIS VIEW HAS ALSO BEEN UPHELD BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V/S IDEA CELLULAR LIMITED IN APPEAL NO.2010 - TIOL - 139 - HC - DEL - IT IN WHICH IT IS HELD THAT IT IS A CASE OF PRINC IPAL AND AGENT RELATIONSHIP AND THE COMMISSION OFFERED IN FORM OF DISCOUNT ON PRE PAID SIM CARDS IS LIABLE TO TDS U/S 194H OF THE IT ACT. IN VIEW OF THE ABOVE FACTS AND CONSIDERING THE FINDINGS IN THE CASE OF M/S. BPL MOBILE CELLULAR LIMITED (WP NO. 29202 OF 2005), AND ALSO IN VIEW OF FINDING OF DELHI HIGH COURT, THE ESSENCE OF THE CONTRACT BETWEEN COMPANY AND DISTRIBUTORS IS THAT OF SERVICE AND MARGIN BETWEEN MRP AND SALE PRICE IS NOTHING BUT COMMISSION. THIS VIEW HAS ALSO BEEN UPHELD BY THE H ON 'BLE ITAT, COCHIN IN ITA NO. 106 TO 113/COCH/2007 IN THE CASE OF VODAFONE ESSAR CELLULAR LIMITED VS. ACIT, COCHIN (IN THE CASE OF DEDUCTOR ITSELF). THE H ON 'BLE ITAT HAS TAKEN INTO CONSIDERATION ALL RELEVANT FACTS AND THE DECISION CITED BY THE COMPANY AND HELD THAT T HERE IS NO RELATIONSHIP OF PRINCIPAL TO PRINCIPAL AND DIFFERENCE OF PRICE - IS NOTHING BUT COMMISSION. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED VIEW THAT DEDUCTOR IS LIABLE TO DEDUCT THE TAX AT SOURCE U/S.194H ON AMOUNT OF DIFFERENCE BETWEEN MRP AND SA LE PRICE PAID BY THE DISTRIBUTORS. THE SUCH DIFFERENCE IS WORKS OUT TO RS.51,67,60,486/ - . THEREFORE, THE DEDUCTOR IS TREATED AS DEEMED DEFAULTER U/S,201(1) OF THE I.T. ACT TO THE ABOVE EXTENT AND ALSO LIABLE TO CHARGE INTEREST U/S.201(1A) OF THE I.T. ACT . 4 . AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT MUCH SUCCESS. LEARNED CIT(A) EXTENSIVELY REPRODUCED FROM THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND THEN PROCEEDED TO DISMIS S THE GRIEVANCE OF THE ASSESSEE ON THE BASIS OF THE FOLLOWING REASONING: 2. 09 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS AS ADVANCED BY THE AR CAREFULLY AND I HAVE ALSO GONE THROUGH TH E VARIOUS DECISIONS CITED BY THE AR. THE DISPUTE IN TH IS GROUND IS WHETHER DISCOUNT OFFERED TO DISTRIBUTORS BY THE ASSESSEE CAN BE CONSIDERED TO BE COMMISSION SO AS TO SUBJECT TO TDS UNDER PROVISIONS OF SECTION 194H OF THE ACT. I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 5 OF 21 2.10 IN MY VIEW, THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF VODAFONE ESSAR CELLULAR LIMITED REPORTED AT 235 ITR 393. THE KERALA HIGH COURT HAS, IN PARAGRAPH 6, CATEGORICALLY HELD AS UNDER: ..BECAUSE WE HAVE CLEARLY FOUND THAT THE DISCOUNT PAID TO THE DISTRIBUTORS IS FOR SERV ICE RENDERED BY THEM AND THE SAME AMOUNTS TO 'COMMISSION' WITHIN THE MEANING OF THAT TERM CONTAINED UNDER EXPLN. (I) TO S. 194H OF THE ACT. THE IMPUGNED ORDERS ISSUED UNDER SS. 201(1) AND 201(1A) OF THE ACT ARE ONLY CONSEQUENTIAL ORDERS PASSED ON ACCOUNT O F DEFAULT COMMITTED BY THE ASSESSEE UNDER S. 194H AND, THEREFORE, THOSE ORDERS WERE RIGHTLY UPHELD BY THE TRIBUNAL. WE, THEREFORE, DISMISS ALL THE APPEALS FILED BY THE ASSESSEE. THUS, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HONBLE KERALA HIGH COURT (IN THE CASE OF THE GROUP COMPANY OF THE APPELLANT), I AM OF THE VIEW THAT DISCOUNT OFFERED BY THE APPELLANT TO ITS PREPAID DISTRIBUTORS IS IN THE NATURE OF COMMISSION WITHIN MEANINGS OF EXPLANATION (I) TO SECTION 194 H OF THE ACT. I, THEREFORE, HOLD THAT THE LEARNED AO HAS RIGHTLY HELD THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 H OF THE ACT ON COMMISSION GIVEN BY THE ASSESSEE. 5. THE ASSESSEE IS NOT SATISFIED WITH THE STAND SO TAKEN BY THE LEARNED CIT(A) AS WELL, AND IS IN F URTHER APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT WHAT IS SOLD BY THE ASSESSEE IS AIRTIME, WHETHER THROUGH THE PHYSICAL VOUCHERS OR THROUGH THE ELECTRONIC TRANSFER OF REFILL/ RECHARGE VALUE, TO ITS DISTRIBUTORS. IT IS THIS TRANSACTION WHICH IS SUBJECT MATTER OF DIFFERENT PERCEPTIONS, SO FAR AS TAX WITHHOLDING OBLIGATIONS OF THE SELLER ARE CONCERNED, OF THE PA RTIES BEFORE US. AS A MATTER OF FACT, THE ASSESSMENT ORDER ITSELF STATES THAT THE ASSESSEE HAS SOLD THE PRE - PAID VOUCHERS, OF VARIOUS FACE VALUE, TO ITS DISTRIBUTORS, AT A RATE LOWER THAN ITS FACE VALUE , AND THAT THE DIFFERENCE (BETWEEN THE FACE VALUE AND THE PRICE AT WHICH IS SOLD) IS NOTHING BUT COMMISSION ON WHICH NO TAX HAS BEEN DEDUCTED . THE SHORT I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 6 OF 21 ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER THE PROVISIONS OF SECTION 194H WI LL COME INTO PLAY IN RESPECT OF THE DIFFERENCE BETWE EN THE PRICE AT WHICH THE AIRTIME IS THUS SOLD TO THE DISTRIBUTORS AND ITS RECOMMENDED RETAIL PRICE TO THE END CONSUMERS. 8. THIS ISSUE IS NO LONGER RES INTEGRA . AS THE SAME BUSINESS MODEL, WITH NO OR PERIPHERAL VARIATIONS, HAS BEEN FOLLOWED BY ALMOST ALL THE OPERATORS IN THE MOBILE TELECOMMUNICATION INDUSTRY, THIS ISSUE HAS BEEN SUBJECT MATTER BEFORE VARIOUS FORUMS, AND MORE IMPORTANTLY, BEFORE VARIOUS HONBLE HIGH COURTS. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ABOVE ISSUE IN APPEAL IS SUBJECT MATT ER OF DIFFERENCE OF OPINION BY VARIOUS HONBLE NON - JURISDICTIONAL HIGH COURTS AND THAT WE DO NOT HAVE THE BENEFIT OF GUIDANCE BY HONBLE JURISDICTIONAL HIGH COURT. 9. THIS ISSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY HONBLE KARNATAKA HIGH COURTS CO MMON JUDGEMENT IN THE CASE S OF BHARTI AIRTEL LIMITED, TATA TELESERVICES LIMITED AND VOADFONE SOUTH LIMITED, REPORTED AS BHARTI AIRTEL LIMITED VS. DCIT [(2015) 372 ITR 33 (KAR)] WHEREIN THEIR LORDSHIPS HAVE, IN TER ALIA, OBSERVED AS FOLLOWS: 62. IN THE A PPEALS BEFORE US, THE ASSESSEES SELL PREPAID CARDS/VOUCHERS TO THE DISTRIBUTORS. AT THE TIME OF THE ASSESSEE SELLING THESE PRE - PAID CARDS FOR A CONSIDERATION TO THE DISTRIBUTOR, THE DISTRIBUTOR DOES NOT EARN ANY INCOME. IN FACT, RATHER THAN EARNING INCOME, DISTRIBUTORS INCUR EXPENDITURE FOR THE PURCHASE OF PREPAID CARDS. ONLY AFTER THE RESALE OF THOSE PREPAID CARDS, DISTRIBUTORS WOULD DERIVE INCOME. AT THE TIME OF THE ASSESSEE SELLING THESE PRE - PAID CARDS, HE IS NOT IN POSSESSION OF ANY INCOME BELONGING TO THE DISTRIBUTOR. THEREFORE, THE QUESTION OF ANY INCOME ACCRUING OR ARISING TO THE DISTRIBUTOR AT THE POINT OF TIME OF SALE OF PREPAID CARD BY THE ASSESSEE TO THE DISTRIBUTOR DOES NOT ARISE. THE CONDITION PRECEDENT FOR ATTRACTING SECTION 194H OF THE ACT IS THAT THERE SHOULD BE AN INCOME PAYABLE BY THE ASSESSEE TO THE DISTRIBUTOR. IN OTHER WORDS THE INCOME ACCRUED OR BELONGING TO THE DISTRIBUTOR SHOULD BE IN THE HANDS OF THE ASSESSEES. THEN OUT OF THAT INCOME, THE ASSESSEE HAS TO DEDUCT INCOME TAX THEREON AT THE RATE OF 10% AND THEN PAY THE REMAINING PORTION OF THE INCOME TO THE DISTRIBUTOR. IN THIS CONTEXT IT IS PERTINENT TO MENTION THAT THE ASSESSEE SELLS SIM CARDS TO THE DISTRIBUTOR AND ALLOWS A DISCOUNT I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 7 OF 21 OF RS.20/ - , THAT RS.20/ - DOES NOT REPRESENT THE INCOM E AT THE HANDS OF THE DISTRIBUTOR BECAUSE THE DISTRIBUTOR IN TURN MAY SELL THE SIM CARDS TO A SUB DISTRIBUTOR WHO IN TURN MAY SELL THE SIM CARDS TO THE RETAILER AND IT IS THE RETAILER WHO SELLS IT TO THE CUSTOMER. THE PROFIT 86 EARNED BY THE DISTRIBUTOR, S UB - DISTRIBUTOR AND THE RETAILER WOULD BE DEPENDENT ON THE AGREEMENT BETWEEN THEM AND ALL OF THEM HAVE TO SHARE RS.20/ - WHICH IS ALLOWED AS DISCOUNT BY THE ASSESSEE TO THE DISTRIBUTOR. THERE IS NO RELATIONSHIP BETWEEN THE ASSESSEE AND THE SUB - DISTRIBUTOR AS WELL AS THE RETAILER. HOWEVER, UNDER THE TERMS OF THE AGREEMENT, SEVERAL OBLIGATIONS FLOW IN SO FAR AS THE SERVICES TO BE RENDERED BY THE ASSESSEE TO THE CUSTOMER IS CONCERNED AND, THEREFORE, IT CANNOT BE SAID THAT THERE EXISTS A RELATIONSHIP OF PRINCIPAL AND AGENT. IN THE FACTS OF THE CASE, WE ARE SATISFIED THAT, IT IS A SALE OF RIGHT TO SERVICE. THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTOR IS THAT OF PRINCIPAL TO PRINCIPAL AND, THEREFORE, WHEN THE ASSESSEE SELLS THE SIM CARDS TO THE DISTRIBU TOR, HE IS NOT PAYING ANY COMMISSION; BY SUCH SALE NO INCOME ACCRUES IN THE HANDS OF THE DISTRIBUTOR AND HE IS NOT UNDER ANY OBLIGATION TO PAY ANY TAX AS NO INCOME IS GENERATED IN HIS HANDS. THE DEDUCTION OF INCOME TAX AT SOURCE BEING A VICARIOUS RESPONSIB ILITY, WHEN THERE IS NO PRIMARY RESPONSIBILITY , TH E ASSESSEE HAS NO OBLIGATION TO DEDUCT TDS. ONCE IT IS HELD THAT THE RIGHT TO SERVICE CAN BE SOLD THEN THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTOR WOULD BE THAT OF PRINCIPAL AND PRINCIPAL AND NOT PRINCIPAL AND AGENT. THE TERMS OF THE AGREEMENT SET OUT SUPRA IN UNMISTAKABLE TERMS DEMONSTRATE THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTOR IS NOT THAT OF PRINCIPAL AND AGENT BUT IT IS THAT OF PRINCIPAL TO PRINCIPAL. 63. IT WAS CO NTENDED BY THE REVENUE THAT, IN THE EVENT OF THE ASSESSEE DEDUCTING THE AMOUNT AND PAYING INTO THE DEPARTMENT, ULTIMATELY IF THE DEALER IS NOT LIABLE TO TAX IT IS ALWAYS OPEN TO HIM TO SEEK FOR REFUND OF THE TAX AND, THEREFORE, IT CANNOT BE SAID THAT SECTI ON 194H IS NOT ATTRACTED TO THE CASE ON HAND. AS STATED EARLIER, ON A PROPER CONSTRUCTION OF SECTION 194H AND KEEPING IN MIND THE OBJECT WITH WHICH CHAPTER XVII IS INTRODUCED, THE PERSON PAYING SHOULD BE IN POSSESSION OF AN INCOME WHICH IS CHARGEABLE TO TA X UNDER THE ACT AND WHICH BELONGS TO THE PAYEE. A STATUTORY OBLIGATION IS CAST ON THE PAYER TO DEDUCT THE TAX AT SOURCE AND REMIT THE SAME TO THE DEPARTMENT. IF THE PAYEE IS NOT IN POSSESSION OF THE NET INCOME WHICH IS CHARGEABLE TO TAX, THE QUESTION OF PA YER DEDUCTING ANY TAX DOES NOT ARISE. AS HELD BY THE APEX COURT IN BHAVANI COTTON MILLS LIMITEDS CASE, IF A PERSON IS NOT LIABLE FOR PAYMENT OF TAX AT ALL, AT ANY TIME, THE COLLECTION OF TAX FROM HIM, WITH A POSSIBLE CONTINGENCY OF REFUND AT A LATER STAGE WILL NOT MAKE THE ORIGINAL LEVY VALID. 64. IN THE CASE OF VODAFONE, IT IS NECESSARY TO LOOK INTO THE ACCOUNTS BEFORE GRANTING ANY RELIEF TO THEM AS SET OUT ABOVE. THEY I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 8 OF 21 HAVE ACCOUNTED THE ENTIRE PRICE OF THE PREPAID CARD AT RS.100/ - IN THEIR BOOKS OF AC COUNTS AND SHOWING THE DISCOUNT OF RS.20/ - TO THE DEALER. ONLY IF THEY ARE SHOWING RS.80/ - AS THE SALE PRICE AND NOT REFLECTING IN THEIR ACCOUNTS A CREDIT OF RS.20/ - TO THE DISTRIBUTOR, THEN THERE IS NO LIABILITY TO DEDUCT TAX UNDER SECTION 194H OF THE ACT . THIS EXERCISE HAS TO BE D ONE BY THE ASSESSING AUTHORITY BEFORE GRANTING ANY RELIEF. THE SAME EXERCISE CAN BE DONE EVEN IN RESPECT OF OTHER ASSESSEES ALSO. 65. IN THE LIGHT OF THE AFORESAID DISCUSSIONS, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE A UTHORITIES HOLDING THAT SECTION 194H OF THE ACT IS ATTRACTED TO THE FACTS OF THE CASE IS UNSUSTAINABLE. 10. AS WE TAKE NOTE OF THE VIEWS SO EXPRESSED BY HONBLE KARNATAKA HIGH COURT, WE MAY ALSO NOTE THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY, AMONGST OTHERS, HONBLE KERALA HIGH COURT, IN THE CASE OF VODAFONE ESSAR CELLULAR LTD VS. ACIT [(201 0 ) 332 ITR 255 (KER)] . THE SAME APPROACH HAS BEEN ADOPTED BY SOME VARIOUS OTHER HON BLE NO N JURISDICTIONAL HIGH COURTS AS WELL, SUCH AS IN THE CASES OF BHARTI CELLULAR LIMITED VS ACIT [(2013) 354 ITR 507 (CAL)] AND CIT VS IDEA CELLULAR LIMITED [(2010) 325 ITR 148 (DEL)]. IN THE CASE OF VODAFONE ESSAR CELLULAR LTD (SUPRA) T HEIR LORDSHIPS HAVE , INTER ALIA, OBSERVED AS FOLLOWS : - 4. THE MAIN QUESTION TO BE CONSIDERED IS WHETHER SECTION 194H IS APPLICABLE FOR THE 'DISCOUNT' GIVEN BY THE ASSESSEE TO THE DISTRIBUTORS IN THE COURSE OF SELLING SIM CARDS AND RECHARGE COUPONS UNDER PREPAID SCHEME AGAINST ADVANCE PAYMENT RECEIVED FROM THE DISTRIBUTORS. WE HAVE TO NECESSARILY EXAMINE THIS CONTENTION WITH REFERENCE TO THE STATUTORY PROVISIONS NAMELY, SECTION 194H . WHAT IS CLEAR FROM EXPLANATION (I) OF THE DEFINITION CLAUSE IS THAT COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR IND IRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR THE SERVICES RENDERED. WE HAVE ALREADY TAKEN NOTE OF OUR FINDING IN BPL CELLULAR'S CASE (SUPRA) ABOVEREFERRED THAT A CUSTOMER CAN HAVE ACCESS TO MOBILE PHONE SERVICE ONLY BY INSERTING SIM CARD IN H IS HAND SET (MOBILE PHONE) AND ON ASSESSEE ACTIVATING IT. BESIDES GETTING CONNECTION TO THE MOBILE NETWORK, THE SIM CARD HAS NO VALUE OR USE FOR THE SUBSCRIBER. IN OTHER WORDS, SIM CARD IS WHAT LINKS THE MOBILE SUBSCRIBER TO THE ASSESSEE'S NETWORK. THEREFO RE, SUPPLY OF SIM CARD, WHETHER IT IS TREATED AS SALE BY THE ASSESSEE OR NOT, IS ONLY FOR THE PURPOSE OF RENDERING CONTINUED SERVICES BY THE ASSESSEE TO THE SUBSCRIBER OF THE MOBILE PHONE. I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 9 OF 21 BESIDES THE PURPOSE OF RETAINING A MOBILE PHONE CONNECTION WITH A S ERVICE PROVIDER, THE SUBSCRIBER HAS NO USE OR VALUE FOR THE SIM CARD PURCHASED BY HIM FROM ASSESSEE'S DISTRIBUTOR. THE POSITION IS SAME SO FAR AS RECHARGE COUPONS OR E TOPUPS ARE CONCERNED WHICH ARE ONLY AIR TIME CHARGES COLLECTED FROM THE SUBSCRIBERS IN A DVANCE. WE HAVE TO NECESSARILY HOLD THAT OUR FINDINGS BASED ON THE OBSERVATIONS OF THE SUPREME COURT IN BSNL'S CASE ( SUPRA ) IN THE CONTEXT OF SALES TAX IN THE CASE OF BPL CELLULAR LTD. (SUPRA) SQUARELY APPLY TO THE ASSESSEE WHICH IS NOTHING BUT THE SUCCESS OR COMPANY WHICH HAS TAKEN OVER THE BUSINESS OF BPL CELLULAR LTD. IN KERALA. SO MUCH SO, THERE IS NO SALE OF ANY GOODS INVOLVED AS CLAIMED BY THE ASSESSEE AND THE ENTIRE CHARGES COLLECTED BY THE ASSESSEE AT THE TIME OF DELIVERY OF SIM CARDS OR RECHARGE COU PONS IS ONLY FOR RENDERING SERVICES TO ULTIMATE SUBSCRIBERS AND THE DISTRIBUTOR IS ONLY THE MIDDLEMAN ARRANGING CUSTOMERS OR SUBSCRIBERS FOR THE ASSESSEE. THE TERMS OF DISTRIBUTION AGREEMENT CLEARLY INDICATE THAT IT IS FOR THE DISTRIBUTOR TO ENROLL THE SUB SCRIBERS WITH PROPER IDENTIFICATION AND DOCUMENTATION WHICH RESPONSIBILITY IS ENTRUSTED BY THE ASSESSEE ON THE DISTRIBUTORS UNDER THE AGREEMENT. IT IS PERTINENT TO NOTE THAT BESIDES THE DISCOUNT GIVEN AT THE TIME OF SUPPLY OF SIM CARDS AND RECHARGE COUPONS , THE ASSESSEE IS NOT PAYING ANY AMOUNT TO THE DISTRIBUTORS FOR THE SERVICES RENDERED BY THEM LIKE GETTING THE SUBSCRIBERS IDENTIFIED, DOING THE DOCUMENTATION WORK AND ENROLLING THEM AS MOBILE SUBSCRIBERS TO THE SERVICE PROVIDER NAMELY, THE ASSESSEE. EVEN THOUGH THE ASSESSEE HAS CONTENDED THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DISTRIBUTORS IS PRINCIPAL TO PRINCIPAL BASIS, WE ARE UNABLE TO ACCEPT THIS CONTENTION BECAUSE THE ROLE OF THE DISTRIBUTORS AS EXPLAINED ABOVE IS THAT OF A MIDDLEMAN BETWEE N THE SERVICE PROVIDER NAMELY, THE ASSESSEE, AND THE CONSUMERS. THE ESSENCE OF A CONTRACT OF AGENCY IS THE AGENT'S AUTHORITY TO COMMIT THE PRINCIPAL. IN THIS CASE THE DISTRIBUTORS ACTUALLY CANVASS BUSINESS FOR THE ASSESSSEE AND ONLY THROUGH DISTRIBUTORS AN D RETAILERS APPOINTED BY THEM ASSESSEE GETS SUBSCRIBERS FOR THE MOBILE SERVICE. ASSESSEE RENDERS SERVICES TO THE SUBSCRIBERS BASED ON CONTRACTS ENTERED INTO BETWEEN DISTRIBUTORS AND SUBSCRIBERS. WE HAVE ALREADY NOTICED THAT THE DISTRIBUTOR IS ONLY RENDERIN G SERVICES TO THE ASSESSEE AND THE DISTRIBUTOR COMMITS THE ASSESSEE TO THE SUBSCRIBERS TO WHOM ASSESSEE IS ACCOUNTABLE UNDER THE SERVICE CONTRACT WHICH IS THE SUBSCRIBER CONNECTION ARRANGED BY THE DISTRIBUTOR FOR THE ASSESSEE. THE TERMINOLOGY USED BY THE A SSESSEE FOR THE PAYMENT TO THE DISTRIBUTORS, IN OUR VIEW, IS IMMATERIAL AND IN SUBSTANCE THE DISCOUNT GIVEN AT THE TIME OF SALE OF SIM CARDS OR RECHARGE COUPONS BY THE ASSESSEE TO THE DISTRIBUTORS IS A PAYMENT RECEIVED OR RECEIVABLE BY THE DISTRIBUTOR FOR THE SERVICES TO BE RENDERED TO THE ASSESSEE AND SO MUCH SO, IT FALLS WITHIN THE DEFINITION OF COMMISSION OR BROKERAGE UNDER EXPLANATION (I) OF SECTION 194H OF THE ACT. THE TEST TO BE APPLIED TO FIND OUT WHETHER EXPLANATION (I) OF SECTION 194H IS APPLICABLE OR NOT IS TO SEE WHETHER ASSESSEE HAS MADE ANY PAYMENT AND IF SO, WHETHER IT IS FOR I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 10 OF 21 SERVICES RENDERED BY THE PAYEE TO THE ASSESSEE. IN THIS CASE THERE CAN BE NO DISPUTE THAT DISCOUNT IS NOTHING BUT A MARGIN GIVEN BY THE ASSESSEE TO THE DISTRIBUTOR AT THE TIME OF DELIVERY OF SIM CARDS OR RECHARGE COUPONS AGAINST ADVANCE PAYMENT MADE BY THE DISTRIBUTOR. THE DISTRIBUTOR UNDOUBTEDLY CHARGES OVER AND ABOVE WHAT IS PAID TO THE ASSESSEE AND THE ONLY LIMITATION IS THAT THE DISTRIBUTOR CANNOT CHARGE ANYTHING MORE T HAN THE MRP SHOWN IN THE PRODUCT NAMELY, SIM CARD OR RECHARGE COUPON. DISTRIBUTOR DIRECTLY OR INDIRECTLY GETS CUSTOMERS FOR THE ASSESSEE AND SIM CARDS ARE ONLY USED FOR GIVING CONNECTION TO THE CUSTOMERS PROCURED BY THE DISTRIBUTOR FOR THE ASSESSEE. THE AS SESSEE IS ACCOUNTABLE TO THE SUBSCRIBERS FOR FAILURE TO RENDER PROMPT SERVICES PURSUANT TO CONNECTIONS GIVEN BY THE DISTRIBUTOR FOR THE ASSESSEE. THEREFORE, THE DISTRIBUTOR ACTS ON BEHALF OF THE ASSESSEE FOR PROCURING AND RETAINING CUSTOMERS AND, THEREFORE , THE DISCOUNT GIVEN IS NOTHING BUT COMMISSION WITHIN THE MEANING OF EXPLANATION (I) ON WHICH TAX IS DEDUCTIBLE UNDER SECTION 194H OF THE ACT. THE CONTENTION OF THE ASSESSEE THAT DISCOUNT IS NOT PAID BY THE ASSESSEE TO THE DISTRIBUTOR BUT IS REDUCED FROM T HE PRICE AND SO MUCH SO, DEDUCTION UNDER SECTION 194H IS NOT POSSIBLE ALSO DOES NOT APPLY BECAUSE IT WAS THE DUTY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE AT THE TIME OF PASSING ON THE DISCOUNT BENEFIT TO THE DISTRIBUTORS AND THE ASSESSEE COULD HAVE GIVEN D ISCOUNT NET OF THE TAX AMOUNT OR GIVEN FULL DISCOUNT AND RECOVERED TAX AMOUNT THEREON FROM THE DISTRIBUTORS TO REMIT THE SAME IN TERMS OF SECTION 194H OF THE ACT.' 11. THERE IS NO, AND THERE CANNOT BE ANY, DISPUTE ABOUT THE FUNDAMENTAL LEGAL POSITION THA T IN THE HIERARCHICAL JUDICIAL SYSTEM, THAT WE HAVE IN OUR COUNTRY, LOWER TIERS OF JUDICIAL HIERARCHY HAS TO RESPECTFULLY FOLLOW THE VIEWS EXPRESSED BY THE HIGHER TIERS OF JUDICIAL HIERARCHY. IN THE CASE OF ACIT VS DUNLOP INDIA LIMITED [(1985) 154 ITR 172 (SC)], HONBLE SUPREME COURT HAS OBSERVED, QUOTING THE HOUSE OF LORDS, AS FOLLOWS: WE DESIRE TO ADD AND AS WAS SAID IN CASSELL & CO. LTD. VS. BROOME (1972) AC 1027 (HL), WE HOPE IT WILL NEVER BE NECESSARY FOR US TO SAY SO AGAIN THAT 'IN THE HIERARCHICAL SYSTEM OF COURTS' WHICH EXISTS IN OUR COUNTRY, 'IT IS NECESSARY FOR LOWER TIER', INCLUDING THE HIGH COURT, 'TO ACCEPT LOYALLY THE DECISIONS OF THE HIGHER TIERS'. 'IT IS INEVITABLE IN A HIERARCHICAL SYSTEM OF COURTS THAT THERE ARE DECISIONS OF THE SUPREME APPELLATE TRIBUNAL WHICH DO NOT ATTRACT THE UNANIMOUS APPROVAL OF ALL MEMBERS OF THE JUDICIARY.... BUT THE JUDICIAL SYSTEM ONLY WORKS IF SOMEONE IS ALLOWED TO HAVE THE LAST WORD AND THAT LAST WORD, ONCE SPOKEN, IS LOYALLY ACCEPTED' (SEE OBSERVATIONS OF LOR D HAILSHAM AND LORD DIPLOCK IN BROOME VS. I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 11 OF 21 CASSELL). THE BETTER WISDOM OF THE COURT BELOW MUST YIELD TO THE HIGHER WISDOM OF THE COURT ABOVE. THAT IS THE STRENGTH OF THE HIERARCHICAL JUDICIAL SYSTEM 12. THE QUESTION WHETHER THE NON - JURISDICTIONAL HIGH CO URT BINDS THE TRIBUNAL BENCHES OR NOT CAME UP FOR CONSIDERATION BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GODAVARIDEVI SARAF [(1978) 113 ITR 589 (BOM)]. THAT WAS A CASE IN WHICH THEIR LORDSHIPS WERE IN SEISIN OF THE QUESTION AS TO 'WHETHER, O N THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN VIEW OF DECISION IN THE CASE OF A.M. SALI MARICAR & ANR. VS. ITO & ANR. [(1973) 90 ITR 116 (MAD)] THE PENALTY IMPOSED ON THE ASSESSEE UNDER S. 140A(3) WAS LEGAL ? THE SPECIFIC QUESTION BEFORE THEIR LORDSHIP S THUS WAS WHETHER THE TRIBUNAL, WHILE SITTING IN BOMBAY, WAS JUSTIFIED IN FOLLOWING THE MADRAS HIGH COURT DECISION. IT WAS IN THIS CONTEXT THAT HONBLE BOMBAY HIGH COURT CONCLUDED AS FOLLOWS: 'IT SHOULD NOT BE OVERLOOKED THAT IT ACT IS AN ALL INDIA STAT UTE, AND IF A TRIBUNAL IN MADRAS HAS TO PROCEED ON THE FOOTING THAT S. 140A(3) WAS NON - EXISTENT, THE ORDER OF PENALTY UNDER THAT SECTION CANNOT BE IMPOSED BY ANY AUTHORITY UNDER THE ACT. UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT, WHICH IS BINDING ON THE TRIBUNAL IN THE STATE OF BOMBAY (AS IT THEN WAS), IT HAS TO PROCEED ON THE FOOTING THAT THE LAW DECLARED BY THE HIGH COURT, THOUGH OF ANOTHER STATE, IS THE FINAL LAW OF THE LAND..AN AUTHORITY LIKE TRIBUNAL HAS TO RESPECT THE LA W LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION ON THAT ISSUE BY ANY OTHER HIGH COURT' 13. IN THE CASE OF CIT VS SHAH ELECTRICAL CORPORATION [(1994) 207 ITR 350 (GUJ)] , VIDE JUDGMENT DATED 23 RD JUNE 1993, THEIR LORDSHIPS HAD AN OCCASION TO CONSIDER THE AFORESAID VIEWS. IT WAS IN THIS CONTEXT THAT THEIR LORDSHIPS HAVE OBSERVED AS FOLLOWS: 3. WHAT IS CONTENDED BY THE LEARNED ADVOCATE FOR THE REVENUE IS THAT THE TRIBUNAL DECIDED THE APPEAL ON 26TH OCT. , 1976. BY THAT TIME, THE ANDHRA PRADESH HIGH COURT HAD UPHELD THE VALIDITY OF S. 140A(3). HE DREW OUR ATTENTION TO THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN KASHIRAM VS. ITO (1977) 107 ITR 825 (AP). I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 12 OF 21 FROM THE REPORT, IT APPEARS THAT THE SAID JUDGMEN T WAS DELIVERED ON 10TH DEC., 1975. THEREFORE, THE TRIBUNAL WAS NOT RIGHT IN PROCEEDING ON THE BASIS THAT ONLY THE MADRAS HIGH COURT JUDGMENT WAS IN THE FIELD AND, THEREFORE, IT WAS OPEN TO IT TO PROCEED ON THE BASIS THAT S. 140A(3) WAS NON - EXISTENT. HE AL SO SUBMITTED THAT FOR THAT REASON, THE TRIBUNAL WAS NOT RIGHT IN FOLLOWING THE JUDGMENT OF THE BOMBAY HIGH COURT IN GODAVARIDEVIS CASE (SUPRA). 4. IN OUR OPINION, THE LEGAL POSITION IS CORRECTLY STATED BY THE PUNJAB & HARYANA HIGH COURT IN CIT VS. VED PR AKASH (1989) 77 CTR (P&H) 116 : (1989) 178 ITR 332 (P&H) WHEN IT OBSERVED THAT 'UNLESS AND UNTIL THE SUPREME COURT OR THE HIGH COURT OF THE STATE IN QUESTION, UNDER ART. 226 OF THE CONSTITUTION, DECLARES A PROVISION OF THE ACT TO BE ULTRA VIRES, IT MUST BE TAKEN TO BE CONSTITUTIONALLY VALID AND TREATED AS SUCH'. 5. IN OUR OPINION, THE TRIBUNAL OF ANOTHER STATE WOULD BE JUSTIFIED IN PROCEEDING ON THE BASIS THAT THE PROVISION HAS CEASED TO EXIST BECAUSE IT HAS BEEN DECLARED AS ULTRA VIRES BY THE HIGH COURT O NLY WHEN THERE IS SOME MATERIAL TO SHOW THAT THE SAID DECISION HAS BEEN ACCEPTED BY THE DEPARTMENT. . (EMPHASIS BY UNDERLINING SUPPLIED BY US) 14. A LITTLE LATER, HOWEVER, WHILE DEALING WITH A MATERIALLY SIMILAR SITUATION, IN THE CASE OF CIT VS MAGA NLAL MOHANLAL PANCHAL (HUF) [(1994) 210 ITR 580 (GUJ)], VIDE JUDGMENT DATED 1 ST SEPTEMBER 1994, THEIR LORDSHIPS HAVE HELD AS FOLLOWS: .. AT THE TIME WHEN THE TRIBUNAL DECIDED THE APPEAL, THAT WAS THE ONLY DECISION IN THE FIELD AND, THEREFORE, IN VIEW OF WHAT THE BOMBAY HIGH COURT HAS HELD IN CIT VS. SMT. GODAVARIDEVI SARAF (1978) 113 ITR 589 (BOM) AND CIT VS. SMT. NIRMALABAI K. DAREKAR (1990) 186 ITR 242 (BOM), THE TRIBUNAL WAS BOUND TO FOLLOW THE SAID JUDGMENT OF THE MADRAS HIGH COUR. IT, THEREFORE, CAN NOT BE SAID THAT THE TRIBUNAL COMMITTED AN ERROR IN FOLLOWING THE SAID JUDGMENT OF THE MADRAS HIGH COURT. IN VIEW OF THE SAID DECISION OF THE MADRAS HIGH COURT, THE ONLY COURSE WHICH THE TRIBUNAL COULD HAVE FOLLOWED WAS TO DIRECT THE ITO TO CONSIDER THE PA RTIAL PARTITION ON THE MERITS AND PASS AN ORDER UNDER S. 171 FIRST AND THEN UNDER S. 143(3) OF THE ACT 15. IT IS CLEAR THAT, EXCEPT ON THE ISSUE OF LEGALITY OF THE STATUTORY PROVISION ITSELF, THE DECISIONS OF EVEN THE NON - JURISDICTIONAL HIGH COURTS ARE B INDING ON I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 13 OF 21 THE LOWER TIERS OF JUDICIAL HIERARCHY SUCH AS THIS TRIBUNAL. AS WE HOLD SO, WE ARE ALIVE TO THE SCHOOL OF THOUGHT THAT NON JURISDICTIONAL HIGH COURTS ARE NOT BINDING ON THE SUBORDINATE COURTS AND TRIBUNALS, AS ARTICULATED BY HONBLE PUNJAB & HARY ANA HIGH COURT IN THE CASE OF CIT VS. VED PRAKASH [(1989) 178 ITR 332 (P&H)] BUT THEN THAT WAS A CASE IN THE CONTEXT OF VALIDITY OF A STATUTORY PROVISION, I.E. 140A(3), COVERED BY THE RIDER TO THE GENERAL PROPOSITION. THIS EXCEPTION DOES NOT COME INTO PLAY IN THE PRESENT CASE AS WE ARE NOT, AND WE CANNOT BE, DEALING WITH THE CONSTITUTIONAL VALIDITY OF A PROVISION. CLEARLY, THEREFORE, THE VIEWS EXPRESSED BY HONBLE NON JURISDICTIONAL HIGH COURT, IN THE ABSENCE OF A DIRECT DECISION ON THAT ISSUE BY THE H ONBLE JURISDICTIONAL HIGH COURT, DESERVE UTMOST R ESPECT AND DEFERENCE. 16. THE DIFFICULTY, HOWEVER, ARISES IN THE CASE IN WHICH HONBLE NON JURISDICTIONAL HIGH COURTS HAVE EXPRESSED CONFLICTING VIEWS AND THE SUBORDINATE COURTS AND TRIBUNALS DONOT HAVE T HE BENEFIT OF GUIDANCE FROM HONBLE JURISDICTIONAL HIGH COURT. 17. IN OUR HUMBLE UNDERSTANDING OF THE LEGAL POSITION AND OF THE PROPRIETY , IT WILL BE WHOLLY INAPPROPRIATE FOR US TO CHOOSE VIEWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REAS ONABLENESS OF THE RESPECTIVE VIEWPOINTS, AS SUCH AN EXERCISE WILL DE FACTO AMOUNT TO SITTING IN JUDGMENT OVER THE VIEWS OF THE HONBLE HIGH COURTS - SOMETHING DIAMETRICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. OF COURSE, WHE N THE MATTER TRAVELS TO HONBLE JURISDICTIONAL HIGH COURT, THEIR LORDSHIPS, BEING UNFETTERED BY THE VIEWS OF A NON - JURISDICTIONAL HIGH COURT, CAN TAKE SUCH A CALL ON MERITS. THAT EXERCISE, AS WE UNDERSTAND, SHOULD NOT BE CARRIED OUT BY US. 18. THE CHOICE OF WHICH OF HONBLE HIGH COURT TO FOLLOW MUST, THEREFORE, BE MADE ON SOME OBJECTIVE CRITERION. WE HAVE TO, WITH OUR HIGHEST RESPECT OF ALL THE HONBLE HIGH COURTS, ADOPT AN OBJECTIVE CRITERION FOR DECIDING AS TO WHICH OF THE HONBLE HIGH COURT SHOULD BE FO LLOWED BY US. WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 14 OF 21 PRODUCTS LTD. [(1972) 88 ITR 192 (SC)] . HONBLE SUPREME COURT HAS LAID DOWN A PRINCIPLE THAT ' IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION S ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED ' ALTHOUGH THIS PRINCIPLE SO LAID DOWN WAS IN THE CONTEXT OF PENALTY, AND THEIR LORDSHIPS SPECIFICALLY STATED SO IN SO MANY WORDS, IT HAS BEEN CONSISTENTLY FOLLOWED FOR THE INTERPR ETATION ABOUT THE STATUTORY PROVISIONS AS WELL. IN ANOTHER SUPREME COURT JUDGMENT, PETRON ENGG. CONSTRUCTION (P) LTD. & ANR. VS. CBDT & ORS. [(1989) 175 ITR 523 (SC)] THE ABOVE PRINCIPLE OF LAW HAS BEEN REITERATED BY OBSERVING AS FOLLOWS: COUNSEL SU BMITS THAT WHEN TWO INTERPRETATIONS ARE POSSIBLE TO BE MADE, THE INTERPRETATION WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED. IN SUPPORT OF THAT CONTENTION, LEARNED COUNSEL HAS PLACED RELIANCE UPON A FEW DECISIONS OF THIS COURT IN CIT VS. MADHO PR ASAD JATIA (1976) 105 ITR 179 (SC); CIT VS. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) AND CIT VS. KULU VALLEY TRANSPORT CO. P. LTD. (1970) 77 ITR 518 (SC) : THE ABOVE PRINCIPLE OF LAW IS WELL - ESTABLISHED AND THERE IS NO DOUBT ABOUT THAT. 19. H AVING NOTED THE LEGAL POSITION AS ABOVE, IT IS APPROPRIATE, FOR THE SAKE OF COMPLETENESS, TO NOTE THE EXCEPTION TO THIS GENERAL RULE AS WELL. HONBLE SUPREME COURT HAD, HOWEVER, SOME OCCASIONS TO DEVIATE FROM THIS GENERAL PRINCIPLE OF INTERPRETATION OF TAX ING STATUTE WHICH CAN BE CONSTRUED AS EXCEPTIONS TO THIS GENERAL RULE. IT HAS BEEN HELD THAT THE RULE OF RESOLVING AMBIGUITIES IN FAVOUR OF TAX - PAYER DOES NOT APPLY TO DEDUCTIONS, EXEMPTIONS AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINLY AUTHORISED. THIS EXCEPTION, LAID DOWN IN LITTMAN VS. BARRON 1952(2) AIR 393 AND FOLLOWED BY APEX COURT IN MANGALORE CHEMICALS & FERTILIZERS LTD. VS. DY. COMMR. OF CT (1992) SUPPL. (1) SCC 21 AND NOVOPAN INDIA LTD. VS. CCE & C 1994 (73) ELT 769 (SC) , HAS BEEN SUMMED UP IN THE WORDS OF LORD LOHEN, 'IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX - PAYER DOES NOT APPLY TO A PROVISION GIVING TAX - PAYER RELIEF IN CERTAIN CASES FROM A SECTION CLEARLY IMPOSING LIABILITY'. THIS EXCEPTION HAS BEEN ALS O REITERATED BY HONBLE SUPREME COURT IN THE CASE OF OIL & NATURAL GAS COMMISSION VS CIT (CIVIL A PPEAL NO. 730 OF 2007, JUDGMENT DATED 1 ST I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 15 OF 21 JULY 2015; REPORTED IN WWW.ITATONLINE.ORG ) . HOWEVER, IN THE PRESENT CASE, THIS EXCEPTION HAS NO APPLICATION. THE RULE OF RESOLVING AMBIGUITY IN FAVOUR OF THE ASSESSEE DOES NOT ALSO APPLY WHERE THE INTERPRETATION IN FAVOUR OF ASSESSEE WILL HAVE TO TREAT THE PROVISIONS UNCONSTITUTIONAL, AS HELD IN THE MATTER OF STATE OF M.P. VS. DADABHOYS NEW CHIRMIRY PONRI HILL COLLIERY CO. LTD. AIR 1972 (SC) 614. THAT IS WHAT HONBLE JURISDICTIONAL HIGH COURT HAS ALSO HELD IN THE CASE OF SHAH ELECTRICAL CORPORATION (SUPRA). NONE OF THESE EXCEPTIONS, HOWEVER, ADMITTEDLY APPLY TO THE SITUATION THAT WE ARE DEALING WITH AT PRESENT. 20. TH ERE CAN BE NO DISPUTE ON THE PROPOSITION THAT IRRESPECTIVE OF WHETHER OR NOT THE JUDGMENTS OF HONBLE NON JURISDICTIONAL HIGH COURTS ARE BINDING ON US, THESE JUDGMENTS DESERVE UTMOST RESPECT WHICH IMPLIES THAT, AT THE MINIMUM, THESE JUDGMENTS ARE TO BE CON SIDERED REASONABLE INTERPRETATIONS OF THE RELATED LEGAL AND FACTUAL SITUATION. VIEWED THUS, WHEN THERE IS A REASONABLE INTERPRETATION OF A LEGAL AND FACTUAL SITUATION, WHICH IS FAVOURABLE TO THE ASSESSEE, SUCH AN INTERPRETATION IS TO BE ADOPTED BY US. IN OTHER WORDS, HONBLE NON JURISDICTIONAL HIGH COURTS JUDGMENT IN FAVOUR OF THE ASSESSEE, IN THE LIGHT OF THIS LEGAL PRINCIPLE LAID DOWN BY HONBLE SUPREME COURT, IS TO BE PREFERRED OVER THE HONBLE NON JURISDICTIONAL HIGH COURT NOT FAVOURABLE TO THE ASSES SEE. IN OUR HUMBLE UNDERSTANDING, IT IS ONLY ON THIS BASIS, WITHOUT SITTING IN VALUE JUDGMENT ON THE VIEWS EXPRESSED BY A HIGHER TIER OF JUDICIAL HIERARCHY , THAT THE CONFLICTING VIEWS OF HONBLE NON JURISDICTIONAL HIGH COURTS CAN BE RESOLVED BY US IN A TRA NSPARENT, OBJECTIVE AND PREDICTABLE MANNER. 21. IT IS VERY TEMPTING TO BELIEVE, OR PRETEND TO BELIEVE, THAT, IN THE ABSENCE OF DIRECT DECISION ON THE ISSUE BY THE HONBLE JURISDICTIONAL HIGH COURT, WE HAVE UNFETTERED DISCRETIONS IN EXERCISE OF OUR JUDIC IAL POWERS BUT THEN SUCH AN APPROACH WILL NOT ONLY BE CONTRARY TO SETTLED LEGAL POSITION, AS SET OUT ABOVE, BUT ALSO, IN A WAY, AN EXERCISE IN IMPROPRIETY. I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 16 OF 21 22. WE MAY ALSO MENTION THAT A SINGLE MEMBER BENCH OF THIS TRIBUNAL, IN THE CASE OF ITO VS BHARAT SANCHAR NIGAM LIMITED AND VICE VERSA ( ITA NO 170/HYD/2010 AND CO NO 10/HYD/10; ORDER DATED 5 TH JUNE 2015) HAS REACHED THE SAME CONCLUSION BUT THE REASONING ADOPTED, FOR FOLLOWING HONBLE KARNATAKA HIGH COURTS JUDGMENT IN THE CASE OF BHARTI AIRTEL LIMITE D (SUPRA), WAS STATED TO BE THAT SINCE NO JURISDICTIONAL HIGH COURT DECISION IS AVAILABLE AS ON DATE, THE LATEST DECISION OF KARNATAKA HIGH COURT, WHICH HAS CONSIDERED AND DISTINGUISHED EARLIER RULINGS OF OTHER HIGH COURTS, DESERVES TO BE FOLLOWED . OUR C ONCLUSION IS THE SAME BUT OUR DECISION TO FOLLOW HONBLE KARNATAK A HIGH COURT S JUDG MENT IS SIMPLY THIS JUDGMENT IS TO BE PREFERRED OVER, IN THE LIGHT OF SETTLED LEGAL PRINCIPLES SET OUT ABOVE, OTHER HONBLE HIGH COURT JUDGMENTS , BECAUSE IT IS FAVOURABLE TO THE ASSESSEE. WITH UTMOST RESPECT AND REVERENCE TO ALL THE HONBLE COURTS, IT IS NOT FOR US TO CHOOSE WHICH DECISION IS TO BE FOLLOWED BECAUSE OF ITS MERITS BECAUSE OF WHAT IT HAS DISCUSSED OR BECAUSE OF HOW IT HAS DISTINGUISHED OTHER HONBLE HIGH COUR TS OR BECAUSE OF ITS TIMING I.E . OF ITS BEING LATEST. EVEN WHEN A NON - JURISDICTIONAL HIGH COURT DISTINGUISHES ALL OTHER DECISIONS OF HONBLE HIGH COURTS BUT HOLDS A VIEW UNFAVOURABLE TO THE ASSESSEE, THAT DECISION CANNOT NORMALLY BE PREFERRED OVER A DECISI ON FROM ANOTHER HONBLE NON JURISDICTIONAL HIGH COURT DECISION, OF EQUAL STATURE, IN FAVOUR OF THE ASSESSEE. THAT IS, AS WE UNDERSTAND, CORRECT APPROACH TO THE MATTER AND THAT IS THE REASON WHY WE COME TO THE SAME CONCLUSION AS THE SMC DID BUT FOR ALTOGET HER DIFFERENT REASONS. 23. WE HAVE ALSO NOTED THAT MATERIAL FACTS OF THE CASE AND THE TERMS OF AGREEMENTS WITH THE DISTRIBUTORS ARE THE SAME AS WERE BEFORE HONBLE KARNATAKA HIGH COURT IN THE ABOVE CASE. A COMPARATIVE CHART OF THESE CLAUSES IS AS FOLLOWS : SL. NO. DISCLOSURE IN THE AGREEMENT AS HIGHLIGHTED IN THE HONBLE KARNATAKA HIGH COURTS JUDGMENT - RELEVANT EXTRACTS CORRESPONDING CLAUSE IN THE AGREEMENT OF THE ASSESSEE WITH ITS PRE - PAID DISTRIBUTORS I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 17 OF 21 1 THE AGREEMENT STIPULATES THAT THE DISTRIBUTO RS HAVE TO REPRESENT TO THE CUSTOMERS THAT THE DISTRIBUTORS AGREEMENT WITH THE CUSTOMERS/ITS DEALERS IS ON PRINCIPAL - TO - PRINCIPAL BASIS AND ASSESSEE IS NO WAY CONCERNED OR LIABLE TO THE CUSTOMERS/DEALERS OF THE DISTRIBUTOR PAGE 68. CLAUSE 17.2 SPECIFI CALLY PROVIDES THAT THE RELATIONSHIP CREATED BY THE AGREEMENT IS THAT OF A BUYER AND SELLER AND THAT THE AGREEMENT IS ON A PRINCIPAL TO PRINCIPAL BASIS AND NEITHER PARTY IS, NOR SHALL BE DEEMED TO BE, AN AGENT/PARTNER OF THE OTHER. IT IS ALSO PROVIDED T HAT NOTHING IN THE AGREEMENT SHALL BE CONSTRUED TO RENDER THE DISTRIBUTOR A PARTNER OR AGENT OF THE ASSESSEE 2 DISTRIBUTOR SHALL NOT MAKE ANY PROMISE, REPRESENTATION OR TO GIVE ANY WARRANTY OR GUARANTEE WITH RESPECT TO SERVICES AND PRODUCTS, WHO ARE NOT AUTHORIZED BY THE ASSESSEE PAGE 69. CLAUSE 1E OF ANNEXURE III TO THE AGREEMENT PROVIDES THAT THE DISTRIBUTOR SHALL NOT MAKE ANY PROMISES OR REPRESENTATION OR GIVE ANY WARRANTIES OR GUARANTEES IN RESPECT OF THE SERVICE TICKETS EXCEPT SUCH AS ARE CONSIS TENT WITH THOSE WHICH ACCOMPANY THE SERVICE TICKET OR AS EXPRESSLY AUTHORIZED BY THE ASSESSEE IN WRITING. 3 THAT THE INSURANCE LIABILITY FOR THE ENTIRE STOCK IN TRADE IN THE PREMISES AT THE ADDRESS UNDER REFERENCE WILL BE OF THE DISTRIBUTOR AND THE LIABI LITY FOR ANY LOSS OR DAMAGE DUE TO ANY FIRE, BURGLARY, THEFT ETC., WILL BE OF THE DISTRIBUTOR. PAGE 69. AS PER CLAUSE (IV) OF ANNEXURE II TO THE AGREEMENT, THE ASSESSEE IS NOT LIABLE FOR ANY LOSS, PILFERAGE OR DAMAGE TO THE RECHARGE VOUCHERS/SERVICE TI CKETS POST - DELIVERY OF THE SAME TO THE DISTRIBUTORS. THE ASSESSEE DOES NOT COMPENSATE THE DISTRIBUTORS FOR ANY UNSOLD STOCK 4 THE DISTRIBUTOR HAS NO EXPRESS OR IMPLIED RIGHT OR AUTHORITY TO ASSUME OR UNDERTAKE ANY OBLIGATION IN RESPECT OF OR ON IN THE NAME OF THE ASSESSEE. PAGE 70. DISTRIBUTOR DOES NOT HAVE AN AUTHORITY TO ASSUME OR CREATE ANY OBLIGATIONS VWLS BEHALF OR INCUR ANY LIABILITY ON BEHALF OF VWL OR ACCEPT ANY CONTRACT BINDING UPON VWL (CLAUSE 17.1 OF THE AGREEMENT). 5 CHANNEL PARTNER BE LIABLE TO PAY ALL THE TAXES SUCH AS SALES TAX, SERVICE TAX APPLICABLE AND PAYABLE IN RESPECT OF THE SUBJECT MATTER OF THIS AGREEMENT AND STATUTORY INCREASE IN RESPECT THEROF PAGE 72. THE DISTRIBUTOR SHALL PAY ALL LICENSES, FEE, TAXES, DUTIES, SALES TAX , SERVICE TAX AND ANY OTHER CHARGES, ASSESSMENTS PENALTIES WHETHER STATUTORY OR OTHERWISE LEVIED BY ANY AUTHORITY IN CONNECTION WITH THE OPERATION OF DISTRIBUTORS OFFICE (CLAUSE III(B) OF ANNEXURE III TO AGREEMENT). 6 AFTER SALE OF PRODUCTS DISTRIBUTOR /CHANNEL PARTNER CANNOT RETURN GOODS TO THE ASSESSEE FOR WHATEVER REASON PAGE 74. THE ASSESSEE SHALL NOT BE RESPONSIBLE FOR ANY POST DELIVERY DEFECT IN THE SERVICE TICKETS. NO REQUEST OF REFUND OF ANY MONEY SHALL BE ENTERTAINED BY THE ASSESSEE IN ANY C IRCUMSTANCES (CLAUSE E - ANNEXURE I). 7 DISTRIBUTORS ARE EVEN PREVENTED FROM MAKING ANY REPRESENTATION TO THE RETAILERS UNLESS AUTHORIZED BY THE ASSESSEE. THE DISTRIBUTOR SHALL NOT MAKE ANY PROMISES OR REPRESENTATIONS OR GIVE ANY WARRANTIES OR GUARANTEES IN RESPECT OF THE PRODUCTS (I.E. SIM CARS AND PRE - PAID VOUCHERS) (CLAUSE 1E ANNEXURE III). I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 18 OF 21 2 4 . IN THE LIGHT OF THE ABOVE DISCUSSIONS, AND PARTICULARLY AS TH E R E IS NO DISPUTE THAT THE FACTUAL MATRIX OF ALL THE CASES BEFORE THE HONBLE NON JURISDICTIONAL HI GH COURT S W ERE MATERIALLY THE SAME AS IN THIS CASE, IN CONFORMITY WITH THE ESTEEMED VIEWS OF HONBLE KARNATAKA HIGH COURT IN BHARTI AIRTLELS CASE (SUPRA) , AND HOLD AS FOLLOWS: (A) ON THE FACTS OF THE CASE, AND AS IS EVIDENT FROM A READING OF THE AGREE MENTS BEFORE US, T HE ASSESSEE HAS SOLD , BY WAY OF PREPAID VOUCHERS, E - TOP UPS AND PREPAID SIM CARDS, THE RIGHT TO SERVICE ON PRINCIPAL TO PRINCIPAL BASIS TO ITS DISTRIBUTORS. AS EVIDENT FROM THE TERMS AND CONDITIONS FOR SALE, PLACED AT PAGE 136 OF THE PA PER - BOOK, NOT ONLY THAT THE SALE WAS FINAL AND THE ASSESSEE W AS NOT RESPONSIBLE FOR ANY POST - DELIVERY DEFECTS IN THE SERVICES, IT WAS SPECIFICALLY AGREED THAT NO REQUEST OF REFUND OF ANY MONEY SHALL BE ENTERTAINED BY VEGL (I.E. THE ASSESSEE) UNDER ANY CIR CUMSTANCES . (B) THE FACT THAT THERE ARE CERTAIN CONDITIONS AND STIPULATIONS ATTACHED TO THE SALE OF THIS RIGHT OF SERVICE BY THE ASSESSEE TO HIS DISTRIBUTORS DOES NOT AFFECT THE CHARACTER OF SALE ON PRINCIPAL TO PRINCIPAL BASIS. ( C ) SECTION 194 H COM ES INTO PLAY ONLY IN A SITUATION IN WHICH ANY PERSON, ..RESPONSIBLE FOR PAYING .. TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION PAYS OR CREDITS SUCH INCOME BY WAY OF COMMISSION . HOWEVER, SINCE A T THE TIME OF THE ASSESSEE SELLING THESE RIGHTS FOR A CONSIDERATION TO THE DISTRIBUTOR, THE DISTRIBUTOR DOES NOT EARN ANY INCOME , THE PROVISIONS OF SECTION 194 H DONOT COME INTO PLAY ON THE TRANSACTION OF SALE OF THE RIGHT TO SERVICE BY THE ASSESSEE TO HIS DISTRIBUTORS. THE CONDITION PRECEDENT FOR ATTRACTING SECTION 194H OF I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 19 OF 21 THE ACT IS THAT THERE SHOULD BE AN INCOME PAYABLE BY THE ASSESSEE TO THE DISTRIBUTOR ( D ) SO FAR AS THE TRANSACTION OF SALE OF RIGHT TO SERVICE BY THE ASSESSEE TO HIS DISTRIBUTOR IS CONCERNED, WHILE IT HAS INCOME POTENTIAL AT A FUTURE P OINTS OF TIME (I.E. WHEN THIS RIGHT TO SERVICE IS SOLD AT A PROFIT BY THE DISTRIBUTOR), RATHER THAN EARNING INCOME, DISTRIBUTORS INCUR EXPENDITURE FOR THE PURCHASE OF PREPAID CARDS. THEREFORE, AT THE TIME OF THE ASSESSEE SELLING THESE PRE - PAID CARDS, HE IS NOT IN POSSESSION OF ANY INCOME BELONGING TO THE DISTRIBUTOR . ACCORDINGLY, THE QUESTION OF ANY INCOME ACCRUING OR ARISING TO THE DISTRIBUTOR AT THE POINT OF TIME OF SALE OF PREPAID CARD BY THE ASSESSEE TO THE DISTRIBUTOR DOES NOT ARISE . (E) IN A SITUAT ION IN WHICH THE ASSESSEE HAS CREDITED THE SALE PROCEEDS AT THE TRANSACTION VALUE (IN CONTRAST WITH THE TRANSACTION BEING SHOWN AT FACE VALUE AND THE DIFFERENCE BETWEEN FACE VALUE AND THE TRANSACTION VALUE CREDITED TO THE DISTRIBUTOR), THE TAX DEDUCTION LI ABILITY UNDER SECTION 194H DOES NOT ARISE. WHILE LEARNED COUNSEL FOR THE ASSESSEE HAS STATED AT THE BAR THAT THE SALE PROCEEDS ARE CREDITED AT THE TRANSACTION VALUE, THIS ASPECT OF THE MATTER IS TO BE VERIFIED BY THE ASSESSING OFFICER, AND IN CASE THE SALE S IS ACCOUNTED FOR AT THE FACE VALUE, TO THAT EXTENT, THE TAX WITHHOLDING LIABILITY IS TO BE SUSTAINED, 2 5 . GROUND NO. 1 IS THUS ALLOWED IN THE TERMS INDICATED ABOVE. 2 6 . IN GROUND NO. 2, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: APPLICABILITY OF PROVISIONS OF SECTION 194J OF THE ACT ON PAYMENTS TOWARDS NATIONAL ROAMING CHARGES THE CIT(A) HAS ERRED IN NOT HOLDING THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVIDING OF ROAMING FACILITIES TO THE APPELLANT BY THE OTHER TELECOM OPERATORS AR E NOT IN THE NATURE OF TECHNICAL SERVICES AND HENCE THE PROVISIONS OF SECTION 194 J I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 20 OF 21 ARE NOT APPLICABLE TO THE PAYMENTS MADE3 TO WARDS NATIONAL ROAMING CHARGES. 27. WE HAVE NOTED THAT THIS ISSUE HAS BEEN REMITTED BY THE CIT(A) TO THE FILE OF THE ASSESSING O FFICER FOR THE PURPOSES OF REDECIDING THE ISSUE IN THE LIGHT OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS BHARTI CELLULAR LIMITED [(2010) 330 ITR 239 (SC)] . AS HELD BY HONBLE SUPREME COURT, IN A SITUATION IN WHICH NO HUMAN INTERVENTION IS I NVOLVED, THESE SERVICES CANNOT BE CONSIDERED TO BE TECHNICAL SERVICES IN NATURE. THAT ASPECT, HOWEVER, IS TO BE EXAMINED BY THE AO, AS WAS DIRECTED BY HONBLE SUPREME COURT IN THE SAID CASE AS WELL. WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF THE CIT(A ). WE CONFIRM HIS FINDINGS AND DECLINE TO INTERFERE IN THE MATTER. 28. GROUND NO. 2 IS THUS ALLOWED. 29. IN GROUND NO. 3, THE ASSESSEE HAS RAISED GRIEVANCE AGAINST CIT(A)S DIRECTIONS FOR CERTAIN VERIFICATIONS IN RESPECT OF PAYMENTS OF TAXES BY THE DISTR IBUTORS, BUT, AS WE HAVE UPHELD THE GRIEVANCE OF THE ASSESSEE AGAINST THE VERY APPLICABILITY OF SECTION 194 H ON THE FACTS OF THIS CASE, THAT ASPECT OF THE MATTER IS RENDERED WHOLLY ACADEMIC AND INFRUCTUOUS. WE, THEREFORE, SEE NO NEED TO DEAL WITH THAT ASP ECT OF THE MATTER AT THIS STAGE. 30. GROUND NO. 3 IS DISMISSED AS INFRUCTUOUS. 31. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 7 TH DAY OF JULY, 2015. SD/XX SD/XX S . S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , THE 7 TH DAY OF JU LY , 201 5 I.T.A. NO .: 386 /AHD/11 ASSESSMENT YEAR: 2008 - 09 PAGE 21 OF 21 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT ( 3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD