VODAFONE DIGILINK LIMITED, Jaipur V. ITO, Jaipur

ITA 67/JPR/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2026 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA CIT DHK
• Keywords: Recovery proceedings; Question of law; Non-deduction of tax; Relationship of principal and agent
• Section: 201(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH HKKXPUN] YS[ KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 67/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. VODAFONE DIGILINK LTD., (FORMERLY KNOWN AS VODAFONE ESSAR DIGILINK LIMITED) 5 TH FLOOR, GAURAV TOWERS, MALVIYA NAGAR, JAIPUR. CUKE VS. THE INCOME TAX OFFICER (TDS) - 2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ T AN NO. JPRA 02455 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : MS. ISHITA FARSAIYA (ADV.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06.03.2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 08/03.2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25 TH NOVEMBER, 2014 OF LD. CIT (A)-III, JAIPUR ARISING FROM THE ORDER PASSED UNDER SECTION 201(1)/201(1A) OF THE I.T. ACT, 1961 FOR TH E ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. GROUND NO. 1 - THE ORDER PASSED BY THE LEARNED TDS OFFICER IS BAD IN LAW 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT HOLDING THAT THE ORDER PASS ED BY THE TDS OFFICER IS BAD-IN-LAW. 1.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT HOLDING THAT THE ORDER OF T HE LEARNED TDS OFFICER 2 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. TREATING THE APPELLANT AS ASSESSEE IN DEFAULT IS BAD IN LAW IN VIEW OF THE PROVISIONS OF SEC. 201(1) READ WITH SECTION 191 OF THE ACT AND THE JUDGEMENT OF JAGRAN PRAKASHAN LIMITED VS DCIT(TDS) (21 TAXMAN.COM 489) (ALLAHABAD HIGH COURT), AS THERE IS NO FINDING BY THE LEARNED TDS OFFICER WITH RESPECT TO THE FAILURE OF DEDUCTEES TO PAY TAXES DIRECTLY, WHICH IS A JURISDICTIONAL PRE-REQUISITE. 1.3 WITHOUT PREJUDICE TO GROUND NO 1.2 ABOVE, ON TH E FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) HAS ERRED IN NOT HOLDING THE ORDER OF THE LEARNED TDS OFFICER AS BAD IN LAW IN SO FAR IT SEEKS TO RECOVER TAX DEMAND UNDER SECTION 201 OF TH E ACT IN CONTRADICTION TO THE SETTLED PRINCIPLE ENUNCIATED B Y ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LIMITED (SUPRA) THAT THE PAYER CANNOT BE HELD LIABLE FOR PAYMENT OF THE TAX DEMAND IN CASES INVOLVING NON-DEDUCTION OF TAX AT SOURCE AND ONLY INTEREST LI ABILITY UNDER SECTION 201(1 A) OF THE ACT, IF ANY, CAN BE LEVIED IN SUCH CASES. 2. GROUND NO. 2 - THE APPELLANT IS NOT LIABLE TO DEDUC T TAX ON DISCOUNT EXTENDED TO ITS PRE-PAID DISTRIBUTORS ON D ISTRIBUTION OF PRE-PAID SIM CARDS/ TALKTIME 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED TDS OFFICER THAT THE APPELLANT IS TO BE TREATED AS AN ASSESSEE IN DEFAU LT FOR NON-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON D ISCOUNT EXTENDED TO THE DISTRIBUTORS OF ITS PRE-PAID SIM CARDS/ TALKTIM E DURING THE SUBJECT FINANCIAL YEAR. 2.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE DECISION OF THE LEAR NED TDS OFFICER THAT THE RELATIONSHIP BETWEEN THE APPELLANT AND THE PRE- PAID DISTRIBUTORS IS NOT THAT OF PRINCIPAL TO PRINCIPAL AND THE DISCOU NT ALLOWED TO THEM IS IN NATURE OF COMMISSION LIABLE FOR TAX DEDUCTION AT SO URCE, AS ENVISAGED UNDER SECTION 194H OF THE ACT. 2.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 194H OF THE ACT WOULD BE APPLICABLE TO THE APPELLANTS CASE WITHOUT TAKING COGNIZANCE OF THE FACT THAT THE APPELLANT IS NOT RESPONSIBLE T O MAKE ANY PAYMENT/ CREDIT TO THE PREPAID DISTRIBUTORS TOWARDS THE DISC OUNT EXTENDED TO THEM AND RESPONSIBILITY/ OBLIGATION TO MAKE PAYMENT/ CRE DIT IS A CONDITION 3 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. PRECEDENT FOR APPLICATION OF SECTION 194H OF THE AC T, WHICH IS ABSENT IN THE PRESENT CASE. 2.4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT DISCOUNT ALLOWED BY THE APPELLANT IS NOT INCOME IN THE HANDS OF ITS DISTRIB UTORS AND THAT INCOME, IF ANY, ARISES ONLY WHEN THE PRE-PAID SIM CARDS/ TA LKTIME IS FURTHER DISTRIBUTED BY THE DISTRIBUTORS. 2.5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE RE IS NO FLOW OF MONIES FROM THE APPELLANT TO THE DISTRIBUTOR OF PRE-PAID S IM CARD/ TALKTIME BUT RATHER FROM THE DISTRIBUTOR TO THE APPELLANT, AND H ENCE, THE PROVISIONS OF SECTION 194H OF THE ACT FAIL TO APPLY. 2.6 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE DIFFERENCE BE TWEEN A SIM CARD AND A PRE-PAID RECHARGE VOUCHER SINCE WHILE A SIM CARD ENABLES A SUBSCRIBER TO GET CONNECTED TO THE NETWORK OF THE TELECOM SERV ICE PROVIDER, A PRE- PAID RECHARGE VOUCHER ENTITLES THE HOLDER TO RECEIV E TELECOM SERVICES EQUIVALENT TO THE VALUE EMBEDDED IN IT, AND HENCE, THE TERMS SIM CARD AND PRE-PAID RECHARGE VOUCHER CANNOT BE USED INTE R-CHANGEABLY. 3. GROUND NO. 3- THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE ACT ON ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED TDS OFFICER THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX UNDER SECTION 194J OF THE ACT ON ROAMING CHARGES PAID/PAYABLE BY THE APPELLANT TO OT HER TELECOM OPERATORS, DURING THE SUBJECT FINANCIAL YEAR. 3.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT ROAMING F ACILITY IS A STANDARD AUTOMATED FACILITY WHICH CANNOT BE CONSTRUED AS FEE FOR TECHNICAL SERVICES (FTS) FOR THE PURPOSES OF THE ACT AND HE NCE, SECTION 194J OF THE ACT IS NOT APPLICABLE. 3.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT NO HUMAN INTERVENTION, WHICH IS SINE QUA NON FOR A SERVICE T O QUALIFY AS TECHNICAL 4 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. SERVICE, IS INVOLVED IN PROVISION OF ROAMING SERVIC ES AND THEREFORE, ROAMING CHARGES CANNOT BE CONSTRUED AS FTS FOR THE PURPOSES OF THE ACT. 3.4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN MISAPPLYING THE STATEMENT OF TE CHNICAL EXPERT RECORDED BY THE INCOME-TAX AUTHORITIES IN COIMBATOR E DURING PROCEEDINGS CONDUCTED IN THE CASE OF A GROUP COMPAN Y OF THE APPELLANT - VODAFONE CELLULAR LIMITED ON THE SAME ISSUE, WHER EIN IT HAS BEEN CLEARLY OBSERVED THAT ROAMING FACILITY IS AN AUTOMA TIC FACILITY AND DOES NOT INVOLVE ANY HUMAN INTERVENTION. 3.5 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW AND WITHOUT PREJUDICE TO GROUNDS 3.1 TO 3.4, THE LEARNE D CIT(A) HAS ERRED IN NOT HOLDING THAT CHARACTERIZATION OF A PAYMENT MUST BE DONE HAVING REGARD TO THE DOMINANT PURPOSE/INTENTION OF THE PAY MENT. 3.6 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A)/ TDS OFFICER HAS ERRED IN NOT APPRECIATING THE FACT THAT DEDUCTION OF TAX AT SOURCE FROM INTERCONNECT CHARGES, WAS PURELY ON A C ONSERVATIVE BASIS AND DOES NOT ALTER THE NATURE OF ROAMING CHARGES AN D THUS, DOES NOT LEAD TO A CONCLUSION THAT SUCH CHARGES QUALIFY AS F TS. 4. GROUND NO. 4- NO DEMAND UNDER SECTION 201(1) OF THE ACT CAN BE RECOVERED FROM THE APPELLANT 4.1 WITHOUT PREJUDICE TO GROUND NOS. 1 TO 3 ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) HAS FAILED TO APPRECIATE THAT NO DEMAND CAN BE RAISED UNDER SECTI ON 201(1) OF THE ACT SINCE TAXES WOULD HAVE BEEN PAID BY THE RECIPIENT P ARTIES AND SUCH AN ACTION OF THE LEARNED TDS OFFICER HAS RESULTED IN D OUBLE RECOVERY OF TAXES, WHICH IS AGAINST THE RULES OF TAXATION PRINC IPLES. 4.2 WITHOUT PREJUDICE TO GROUND NO. 4.1, ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HA S ERRED IN NOT DIRECTING THE LEARNED TDS OFFICER TO VERIFY THE AFO RESAID FACT RELATING TO PAYMENT OF TAXES BY THE PAYEES BASIS THE DETAILS OF PAYEES (VIZ PERMANENT ACCOUNT NUMBER, ADDRESS) SUBMITTED BY THE APPELLANT. 4.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN IGNORING THE RULING OF THE MUMB AI BENCH OF ITAT IN THE CASE OF VODAFONE ESSAR LIMITED (ITA NOS. 6058, 6059, 6060/MUM/2009) (DECEMBER 2010) (MUMBAI TRIBUNAL) WH EREIN THE 5 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. ITAT DIRECTED THE ASSESSING OFFICER TO INVOKE HIS P OWERS UNDER THE ACT AND VERIFY PAYMENT OF TAXES BY THE PAYEES FROM THE RESPECTIVE ASSESSING OFFICERS ASSESSING THE PAYEES WITH THE HELP OF THE PERMANENT ACCOUNT NUMBERS OF THE PAYEES FURNISHED BY THE ASSESSEE. 5. GROUND NO. 5- NO INTEREST UNDER SECTION 201(1A) OF THE ACT CAN BE CHARGED 5.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED TDS OFFICER HAS ERRED IN CHARGING INTEREST UNDER SE CTION 201(1 A) OF THE ACT. 5.2 WITHOUT PREJUDICE TO GROUND NO. 5.1, ON THE FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW, CONSEQUENTIAL INTEREST UNDER S ECTION 201(1 A) OF THE ACT SHOULD BE COMPUTED FROM THE DUE DATE OF PAYMENT OF WITHHOLDING TAX BY THE APPELLANT TO THE DATE OF PAYMENT OF TAXE S BY THE PAYEE/RECIPIENT OF SUCH INCOME. ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EAC H OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THE APPELLANT PRAYS THAT APPROPRIATE RELIEF BE GRA NTED BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES O F THE CASE. 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPEC IFIC ADJUDICATION. GROUND NO. 2 IS REGARDING APPLICABILITY OF SECTION 194H IN RESPECT OF DISCOUNT ALLOWED TO THE DISTRIBUTORS ON DISTRIBUTIO N OF PRE-PAID SIM CARDS/TALK TIME. 3. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED AND DECIDED BY THIS BENCH OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14 VIDE ORDER DATED 19 TH JANUARY, 2018 IN ITA NOS. 68 & 6 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. 69/JP/2015 AND 71/JP/2016 AND THE OBSERVATIONS OF THE TRIBUNAL IN PARA 7 ARE AS UNDER :- 7. WE HAVE HEARD THE LD AR AS WELL AS THE LD CIT D R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE OF LIABILITY OF THE ASSESSEE TO DEDUCT T AX AT SOURCE IN RESPECT OF DISCOUNT ALLOWED TO THE DISTRIBUTORS ON PRE PAID SIM CARDS AND RECHARGE VOUCHERS HAS BEEN CONSIDERED BY THE HONBL E JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE A.Y. 2007 -08 TO 2009-10 IN D.B. INCOME TAX APPEAL NO. 99 TO 105/2016 VIDE JUDG MENT DATED 11/7/2017 WHEREIN THE HON'BLE HIGH COURT HAS FRAMED THE QUESTION OF LAW AS UNDER : '1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT WHETHER THE ASSESSEE IS L IABLE TO DEDUCT TDS U/S. 194H OF THE IT ACT, AS THE RELATION BETWEEN AS SESSEE AND DISTRIBUTOR IS THAT OF PRINCIPAL TO AGENT. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE TRIBUNAL HAS ERRED IN LAW IN DELETING THE DEMAND U/S. 201(1) FOR NON DEDUCTION OF TDS U/S 194H ON COMMISSION PAYMENT TO VARIOUS DISTR IBUTORS. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES 'OF THE C ASE, THE TDS IS APPLICABLE U/S. 194J ON ROAMING CHARGES PAID FOR FA CILITY PROVIDED BY SERVICE PROVIDER AS THIS INTERCONNECTION IS MANAGED /CONTROLLED MONITORED BY HUMAN INTERVENTION. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, TDS U/S. 194J IS APPLICABLE ON ROAMING CHARGES PAID FOR FACILITIES P ROVIDED BY SERVICE PROVIDERS. 5. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE TRIBUNAL HAS ERRED IN DELETING THE INTEREST U/S. 201(1A) ON THE TAX DEMAND RAISED UNDER SECTION 201(1) OF THE ACT.' WHILE DECIDING THE ABOVE SAID QUESTIONS OF LAW, THE HON'BLE HIGH COURT HAS HELD IN PARA 43 TO 48 AS UNDER: 7 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. 43. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. 44. NOW, THE FIRST QUESTION WHICH HAS COME UP FOR O UR CONSIDERATION IS, WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED TRIBUNAL WAS RIGHT AND JUSTIFIED IN HOLDING THAT ASSESSEE WAS LI ABLE TO WITHHOLD TAX AT SOURCE UNDER S. 194H OF THE INCOME TAX ACT, 1961 AM OUNTING TO RS. 19,74,842/- (INCLUDING INTEREST) IN RESPECT OF SALE S TO ITS DISTRIBUTORS, WHICH ARE ON PRINCIPAL TO PRINCIPAL BASIS AND WHEREIN PRO PERTY IN THE GOODS IS TRANSFERRED TO THE DISTRIBUTOR'. 45. TAKING INTO ACCOUNT THE PROVISIONS OF SECTION 1 82 OF THE CONTRACT ACT AND THE ARRANGEMENT WHICH HAS BEEN ENTERED INTO BET WEEN THE COMPANY AND THE DISTRIBUTOR AND TAKING INTO ACCOUNT THE PRO VISIONS OF SECTION 194H, THE TRIBUNAL WHILE CONSIDERING THE EVIDENCE ON RECORD, IN OUR CONSIDERED OPINION, HAS MISDIRECTED ITSELF IN CONSIDERING THE CASE FROM AN ANGLE OTHER THAN THE ANGLE WHICH WAS REQUIRED TO BE CONSIDERED BY THE TRIBUNAL UNDER THE INCOME TAX ACT. THE TRIBUNAL HAS TRAVELLED BEYO ND THE PROVISIONS OF SECTION 194H WHERE THE CONDITION PRECEDENT IS THAT THE PAYMENT IS TO BE MADE BY THE ASSESSEE AND THEREAFTER HE IS TO MAKE P AYMENT. IN SPITE OF OUR SPECIFIC QUERY TO THE COUNSEL FOR THE DEPARTMENT, I T WAS NOT POINTED OUT THAT ANY AMOUNT WAS PAID BY THE ASSESSEE COMPANY. IT WAS ONLY THE ARRANGEMENT BY WHICH THE AMOUNT WHICH WAS TO BE RECEIVED WAS RE DUCED AND NO AMOUNT WAS PAID AS COMMISSION. 46. IN THAT VIEW OF THE MATTER, IF WE LOOK AT THE P ROVISIONS OF SECTION 194H AND EVEN IF EXPLANATION IS TAKEN INTO CONSIDERATION , THERE IS NO OCCASION OF INVOKING PROVISIONS OF SECTION 194H, SINCE THE AMOU NT IS NOT PAID BY THE ASSESSEE. 47. TAKING INTO ACCOUNT THE CONCLUSION WHICH HAS BE EN ARRIVED AT BY THE TRIBUNAL IS MISDIRECTED IN VIEW OF THE ( ARRANGEMENT WHICH HAS BEEN ARRIVED AT BETWEEN THE COMPANY AND THE DISTRIBUTOR. ASSUMIN G WITHOUT ADMITTING, IF THE CONTENTION WHICH HAS BEEN RAISED BEFORE THE TRI BUNAL IS ACCEPTED, THE 8 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. SAME CAN BE AT THE MOST EXPENSES WHICH ARE NOT ALLO WABLE UNDER THE INCOME TAX ACT, IF AT ALL CLAIMED WITHOUT PROPER BASIS BUT TO CONCLUDE THAT THEY ARE COVERED UNDER SECTION 194H AND THE INCOME TAX OR TH E TDS IS REQUIRED TO BE DEDUCTED IS NOT CORRECT AND ACCORDINGLY DISALLOWANC E ON THAT BASIS IS NOT CORRECT. IN OUR CONSIDERED OPINION, FROM WHICH AMOU NT OF TAX IS TO BE DEDUCTED IS DOUBTFUL PROPOSITION INASMUCH AS THE MA NAGEMENT INFORMATION SYSTEM WHICH HAS BEEN SOUGHT TO BE RELIED UPON FOR ALLEGING THAT EXPENDITURE HAS BEEN CLAIMED COULD NOT HAVE BEEN RE LIED UPON BY THE TRIBUNAL OR THE AUTHORITIES UNDER THE INCOME TAX AC T. (I) THE FINDINGS WHICH ARE GIVEN BY THE TRIBUNAL RE GARDING DISTRIBUTOR BEING AGENT IN VIEW OF THE DISCUSSION MADE HERE-IN- ABOVE, THE ARRANGEMENT WHICH HAS BEEN MADE BETWEEN THE COMPANY AND THE DISTRIBUTOR IS ON PRINCIPAL TO PRINCIPAL BASIS AND THE RESPONSIBILITY IS ON THE BASIS OF AGREEMENT ENTERED INTO BETWEEN THE PAR TIES. (II) REGARDING MRP, THE FINDINGS WHICH ARE ARRIVED AT IS A PRICE WHICH HAS BEEN FIXED BY THE ASSESSEE COMPANY AND OTHER EXPENS ES, NAMELY; COMMISSION GIVEN TO THE RETAILER AND EVERYTHING IS TO BE MANAGED BY THE DISTRIBUTOR. IN THAT VIEW OF THE MATTER, THE RESTRICTIONS WHICH ARE PUT FORWARD WILL NOT DECIDE THE RELATION-SHIP OF PRINCIPAL AND AGENT . (III) THE DISTRIBUTOR HAS ALL RIGHTS TO REDUCE HIS MARGIN. HE CAN INCREASE THE MARGIN OF RETAILER AND WILL REDUCE THE MARGIN FROM 10% TO ANYTHING BETWEEN 1% TO 10%. THERE IS NO RESTRICTION BY THE A SSESSEE TO GIVE COMMISSION AMOUNT TO THE RETAILER. (IV) REGARDING AREA OF OPERATION, IT IS THE BUSINES S POLICY OF THE ASSESSEE TO GIVE DISTRIBUTOR-SHIP FOR A PARTICULAR AREA. ONLY O N THAT BASIS, IT WILL BE ERRONEOUS TO HELD THAT IT IS ON PRINCIPAL TO PRINCI PAL BASIS. FOR DECIDING 9 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. THE RELATION-SHIP ON PRINCIPAL TO PRINCIPAL BASIS, THE CRITERIA WILL NOT BE OF AREA OF OPERATION BUT AGREEMENT ENTERED INTO BET WEEN THE PARTIES. (V) REGARDING THE CHANGE IN PRICE IT IS ALWAYS BETW EEN THE ASSESSEE OR THE COMPANY AND THE DISTRIBUTOR TO DECIDE WHO WILL ABSO RB THE LOSS. IN THAT VIEW OF THE MATTER, THE FINDINGS ARRIVED A T BY THE TRIBUNAL IS ERRONEOUS. (VI) REGARDING THE RETURN OF GOODS AFTER EXPIRY DAT E, IT IS ALWAYS THE UNDERSTANDING BETWEEN THE MANUFACTURER AND COMPANY THAT THE PRODUCT IS NOT FOR PREPARATION OR CONSUMED BEFORE E XPIRY DATE, THE CONSUMED ITEMS CANNOT BE ALLOWED OTHERWISE MANUFACT URER WILL INVITE CRIMINAL LIABILITY. TO AVOID ANY CRIMINAL LIABILITY OR ANY CRIMINAL ACT IS DONE FOR TAKING BACK THE GOODS, WILL NOT DETER THE RELATION-SHIP OF PRINCIPAL TO PRINCIPAL BASIS. (VII) REGARDING SUPERVISION, IT IS ALWAYS FOR THE M ANUFACTURER AND THE COMPANY TO LOOK INTO THE MATTER THAT HIS DISTRIBUTO R OR SUB- DISTRIBUTOR OR RETAILER WILL NOT INDUCT IN MAL PRACTICE. (VIII) REGARDING GOODS SOLD TO THE DISTRIBUTOR, IT IS ALWAYS A MATTER OF CONTRACT HOW FURTHER GOODS WILL BE DISTRIBUTED. RES TRICTION ON SUB- DISTRIBUTOR WILL NOT CHANGE THE TRANSACTION FROM PR INCIPAL TO PRINCIPAL. (IX) REGARDING EXPENSES WHICH ARE DESCRIBED BY THE TRIBUNAL AND ONE OF THE REASON IS THAT IT IS ALWAYS FOR THE ASSESSEE TO ALL OW ANY SPECIAL ALLOWANCE OR EXPENSES TO PROMOTE THE SALE. IN A COM PETITIVE WORLD TO PROMOTE THE SALE, IF THE DISTRIBUTOR IS NOT GIVEN A NY ENCOURAGEMENT, THE BUSINESS WILL NOT GROW. IN THAT VIEW OF THE MATTER, IN VIEW OF THE OBSERVA TIONS THE SUPREME COURT, THE INCOME TAX OFFICER CANNOT ENTER INTO THE SHOES OF THE 10 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. ASSESSEE. (S.A. BUILDERS VS. COMMISSIONER OF INCOME TAX (2007) 288 ITR 1 (SC). (X) REGARDING PROVIDING A VEHICLE IT WAS VERY CLEAR THAT BY PROVIDING VEHICLE AND GETTING LIST OF EXPENSES WILL NOT DECIDE THE RE LATION-SHIP OF PRINCIPAL AND AGENT. 48. IN OUR CONSIDERED OPINION, SECTION 194H PRE-SUP POSES THE PAYMENT TO BE MADE TO THE THIRD PARTY NAMELY, DISTRIBUTOR OR T HE AGENCY AND IF ON A CLOSE SCRUTINY OF SECTION 182, DISTRIBUTOR IS NOT A N AGENT, THEREFORE, IN OUR CONSIDERED OPINION, THE PROVISIONS OF SECTION 194H HAVE WRONGLY BEEN INVOKED, AND THEREFORE, THE FIRST ISSUE IS ANSWERED IN FAVOUR OF ASSESSEE AND AGAINST THE DEPARTMENT. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08 T O 2009-10, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CON SEQUENTLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE. WE NOTE THAT THE ISSUE INVOLVED IN THE YEAR UNDER C ONSIDERATION IN RESPECT OF DEDUCTION OF TDS UNDER SECTION 194H IS IDENTICAL TO THE ASSESSMENT YEARS 2012-13 AND 2013-14 (SUPRA) AND ACCORDINGLY BY FOLLOWING TH E DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AS WELL AS THE JUDGMENT OF TH E HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. GROUND NO. 3 IS REGARDING DEDUCTION OF TDS UNDER SE CTION 194J IN RESPECT OF ROAMING CHARGES PAID TO OTHER TELECOM OP ERATORS. 4. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN 11 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14 AND THE TRIBUNAL HAS DECIDED THE ISSUE IN PARA 9 BY OBSERVING AS UNDER :- 9. WE HAVE HEARD THE LD AR AND LD. CIT DR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2004-05 TO 2010-11 IN ITA NO. 75 TO 81/JP/2013 VIDE ORDER DATED 05/2/2016. THE FINDINGS OF THIS TRIBUNAL IS AS UNDE R: 3.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE PRESENT APPE AL AND AS THAT OF THE APPEAL BEARING NO. 656/JP/2010 ARE SAME AND, THEREF ORE, THE JUDGMENT PASSED BY THE COORDINATE BENCH IS EQUALLY APPLICABL E TO THE CASES IN HAND. FOR READY REFERENCE, WE ARE HEREBY REPRODUCING THE FACTS MENTIONED IN PARA 3 OF THE ORDER PASSED BY THE AO TDS. THE SAME ARE AS UNDER :- THE ASSESSEE HAS RELIED ON THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF BHARTI CELLULAR LTD. ON THE BASIS OF WHICH THE HONBLE APEX COURT HAS REMANDED THE MATTER TO THE AO FOR FR ESH ADJUDICATION. FIRSTLY, THE MATTER IS PENDING BEFORE THE AO AND TH US THE ISSUE HAS NOT REACHED FINALITY IN THAT CASE. SECONDLY, THE FACTS OF THIS CASE ARE ENTIRELY DIFFERENT FROM THE PRESENT CASE. THE ISSUE UNDER CONSIDERATION IN THE CASE RELIED BY THE ASSESSEE AB OVE WAS PAYMENT OF PART ACCESS / INTERCONNECT CHARGES WHEREAS IN TH E PRESENT CASE, THE ISSUE IS REGARDING PAYMENT OF ROAMING CHARGES. FURT HER, IN THE ABOVE CASE, THE HONBLE COURT FOUND THAT THERE WAS NO INV OLVEMENT OF HUMAN INTERFACE IN PROVIDING INTERCONNECT/PART ACCE SS FACILITY WHEREAS IN PRESENT CASE THERE IS NECESSARILY HUMAN INTERFACE INVOLVED IN PROVIDING ROAMING SERVICE. THERE IS NO DOUBT THA T THERE IS INTENSIVE USE OF SOPHISTICATED MACHINES AND MODERN TECHNOLOGY BUT SIMULTANEOUSLY THERE IS CONSTANT INVOLVEMENT OF HUM AN MIND AND SKILL WHICH IS REQUIRED FOR PROVIDING ROAMING SERVICES. F OR EXAMPLE, THERE IS 12 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. REQUIREMENT OF TECHNICAL AND SKILLED EMPLOYEES FOR FOLLOWING PROCEDURES INVOLVED IN PROVIDING ROAMING SERVICES : - 1. TO MAINTAIN AND OPERATE CUSTOMER CARE CENTRE ROUND THE CLOCK FOR THE SUBSCRIBERS OF ASSESSEE COMPANY. 2. TO IMPLEMENT GSM SERVICES IN ACCORDANCE WITH THE GS M SPECIFICATIONS. 3. SETTLEMENT OF BILLS. 4. TO MONITOR TECHNICAL ASPECTS CONCERNING BOTH THE PR E-COMMERCIAL AND COMMERCIAL PHASES OF GSM NATIONAL ROAMING. 5. TO IMPLEMENT FRAUD PREVENTION PROCEDURES. ALL THE ABOVE ACTIVITIES REQUIRE CONSTANT HUMAN INV OLVEMENT FOR MONITORING AND FOR UNHINDERED OPERATIONS. MOREOVER , SERVICE TAX ACT HAS ALSO RECOGNIZED THE ROAMING AS SERVICE FOR THE PURPOSE OF SERVICE TAX VIDE THE FINANCE BILL, 2007. THUS THE RELIANCE ON THE DECISION IN THE CASE OF BHARTI CELLULAR LIMITED PLACED BY THE A SSESSEE IS MISPLACED. HERE IT IS ALSO PERTINENT THAT THE DEFINITION OF FEES FOR TECHNICAL SERVICES IS VERY WIDE. IT COVERS WITHIN ITS AMBIT ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES RENDERED BY A PER SON. THE SERVICE OF THIS NATURE INVOLVES HUMAN SKILL AS WELL AS COMPUTE RIZED MACHINES. IT IS NOT AUTOMATIC. BUT IT IS FULLY SUPPORTED BY SERV ICES OF PERSONNEL AND REQUIRES HUMAN APPLICATION OF MIND ALONG WITH TECHN ICAL EQUIPMENTS. THE FACTS MENTIONED IN THE ORDER OF THE TRIBUNAL IN ITA NO. 656/JP/2010 AT PARA 9 ARE TO THE FOLLOWING EFFECT :- 9. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE L D AR OF THE ASSESSEE HAS SUBMITTED THAT THE REVENUES PROPOSITIO N IS THAT THOGH THE ROAMING HAPPENS AUTOMATICALLY BUT BECAUSE EQUIP MENT IS USED TO RENDER THE ROAMING SERVICE, BECAUSE TECHNICAL MANPO WER IS NEEDED TO OPERATE AND MAINTAIN THE TECHNICAL EQUIPMENT THEREF ORE, ROAMING PER SE IS RENDERING OF TECHNICAL SERVICES AND THEREFORE , THE AMOUNT PAID FOR ROAMING IS TECHNICAL FEE IN TERMS OF SECTION 19 4J READ WITH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THE LD AR EXPLAINED THE ROAMING SERVICE AND SUBMITTED THAT HEXACOM SUBSCRIB ER IN JAIPUR TRAVELS OF MUMBAI SWITCHES ON HIS MOBILE DEVICE AFT ER REACHING MUMBAI. WHERE THE SUBSCRIBER TRAVELS BY LAND HE AUT OMATICALLY RECEIVES A MESSAGE TRANSFERRING TO THE ROAMING NETW ORK ON VISITING ANOTHER TELECOM, CIRCLE. 13 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. * VISITING NETWORK (E.G. AIRTEL IN MUMBAI) LOCATES MOBILE DEVICE AND IDENTIFIES THAT IT IS NOT REGISTERED WITH ITS SYSTE MS, I.E. VLR. * VISITING NETWORK AUTOMATICALLY CONTACTS HOME NETW ORK OF HEXACOM SUBSCRIBER, I.E. HLR AND GETS SERVICE INFORMATION A BOUT ROAMING DEVICE USING IMSI NUMBER-IMSI NUMBER IS A UNIQUE SUBSCRIBE R IDENTITY NUMBER GRANTED TO THE CUSTOMER AT THE TIME OF SUBSC RIPTION. * VISITING NETWORK MAINTAINS TEMPORARY SUBSCRIBER R ECORD FOR THE SAID MOBILE DEVICE AND PROVIDES AN INTERNAL TEMPORARY PH ONE NUMBER FROM BACKEND SYSTEM TO THE MOBILE DEVICE WHICH IS NOT VI SIBLE TO HUMAN. * HOME NETWORK ALSO UPDATES ITS REGISTER TO INDICAT E THAT THE MOBILE IS ON VISITOR NETWORK SO THAT INFORMATION SENT TO THA T DEVICE IS CORRECTLY ROUTED. * THE HEXACOMS SUBSCRIBER IN MUMBAI, WHO IS TEMPOR ARILY REGISTERED AS AIRTELS SUBSCRIBER MAKES CALLS IN MUMBAI AND THE M INUTES ARE REGISTERED IN HIS IDENTITY FOR WHICH HE HAS TO PAY THROUGH HEXACOM JAIPUR. * ALTERNATIVELY, A CALLED FROM JAIPUR MAKES A CALL TO HEXACOMS SUBSCRIBER WHICH IS ROUTED TO THE HOME NETWORK OF H EXACOM SUBSCRIBER IN JAIPUR. * HOME NETWORK THEN FORWARDS ALL INCOMING CALLS TO THE TEMPORARY PHONE NUMBER WHICH TERMINATES AT THE DEVICE OF ROAM ING, SUBSCRIBER (IN MUMBAI) WHO IS NOW USING THE SERVICES OF THE VI SITING NETWORK (I.E. AIRTEL): * THE ENTIRE PROCESS ABOVE IS AUTOMATIC AND DOES NO T INVOLVE ANY HUMAN INTERVENTION AT ANY STAGE. BILLING PROCESS * USAGE OF ROAMING SUBSCRIBER IN VISITED NETWORK IS CAPTURED IN A FILE CALLED TP, I.E. TRANSFERRED ACCOUNT PROCEDURE FOR G SM/CIBER, I.E., CELLULAR INTER-CARRIER BILLING EXCHANGE RECORD FOR. * TAP FILE CONTAINS DETAILS OF CALLS MADE BY SUBSCR IBER, VIZ., LOCATION, CALLING PARTY, TIME OF CALL AND DURATION, ETC. * TAP/CIBER FILES ARE RATED AS PER TARIFFS CHARGED BY VISITING NETWORK OPERATOR. * SUCH TAP/CIBER FILE IS TRANSFERRED TO HOME NETWOR K OF SUBSCRIBER (I.E. TO HEXACOM). 14 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. * HOME NETWORK (I.E. HEXACOM) THEN BILLS THESE CALL S TO THE HEXACOMS SUBSCRIBER AND PAYS ROAMING CHARGES BASED ON THE TA P TO THE VISITED NETWORK OPERATOR (I.E. AIRTEL). THE ROAMING OPERATO R CHARGES AS PER THE ROAMING AGREEMENT WITH HEXACOM, WHEREAS THE SUB SCRIBER IS BILLED AS PER THE TARIFF SUBSCRIBED. * THE ENTIRE PROCESS IS AUTOMATIC. IT IS CONCLUDED THAT THE ABOVE TRANSACTION FLOW THA T THE SERVICE OF PROVIDING AIRTIME BY VISITING TELECOM CIRCLE IS DIR ECTLY TO THE SUBSCRIBER AND NOT TO HEXACOM. THE SUBSCRIBER OF HEXACOM USES THE NETWORK SET UP BY THE VISITING CIRCLE AND INSTEAD OF AMOUNT BEI NG RECOVERED FROM THE ROAMING SUBSCRIBER, THE VISITING CIRCLE SENDS T HE AIR MINUTES TO BE RECOVERED FROM THE ROAMING SUBSCRIBER TO THE HOME C IRCLE FOR RECOVERY FROM THE SUBSCRIBER WHO HAD VISITED THE VISITING CI RCLE. TECHNICAL FEES * IT IS AN ACCEPTED FACT THAT TECHNICAL SERVICE CAN BE SAID TO HAVE BEEN RENDERED IF THERE IS AN INVOLVEMENT OF HUMAN ELEMEN T OR THERE HAVE BEEN USE OF CEREBRAL FACULTIES IN THE PROVISION OF TECHNICAL SERVICES BY THE RECIPIENT OF FEE. * THIS IS SO BECAUSE THE WORD TECHNICAL COMES IN BETWEEN THE WORDS MANAGERIAL AND CONSULTANCY SERVICES. BASED UPON T HE PRINCIPLES OF NOSITUR A SOCIIS THERE HAS TO BE AN ELEMENT OF MA NUAL INTERVENTION AT THE TIME WHEN THE SERVICE IS BEING RENDERED. * TECHNICAL SERVICES SHOULD HAVE A FACT SITUATION O F IMPARTING TECHNICAL KNOWLEDGE INVOLVING OR CONCERNING APPLIED AND INDUS TRIAL SCIENCE. THE LD AR FURTHER ARGUED THAT FINDING OF THE LD CIT (A) ARE BASED ON CONTRACT BETWEEN TWO OPERATORS BUT CONTRACT HAS NO RELEVANCY ON THE NATURE OF THE SERVICE WHETHER TECHNICAL OR OTHERWIS E. THE LD CIT(A) PARTLY ACCEPTED THAT ROAMING PROCESS IS TECHNICAL BECAUSE IT USES VARIOUS INSTRUMENTS SUCH AS MSC (MOBILE SWITCHING CENTRE), VLR (VISITOR LOCATION REGISTER), RADIO NETWORK, TOWERS, BTC ETC. BUT THE SYSTEM IS OPERATED/MANAGED BY THE HIGHLY SKILLED PROFESSIONAL S. THE ASSESSEES ARGUMENT WAS THAT THE ROAMING SERVICE IS MANAGED AU TOMATICALLY BY MACHINES AND PAYMENT FOR ROAMING CHARGES ARE NOT FE ES FOR TECHNICAL SERVICES. IN CASE OF FAULT IN A BREAKDOWN OF A SYST EM, THE PROFESSIONAL PEOPLE ARE REQUIRED TO MONITOR THE TELECOM NETWORK TO BE IN A ROBUST 15 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. CONDITION IN ORDER TO DO BUSINESS FOR SELF. THIS MO NITORING DOES NOT HAVE ANY CONNECTION WITH ROAMING CHARGES PAID BY THE SUB SCRIBER. IF A TELECOM NETWORK BREAKS DOWN THERE IS NO BUSINESS AND THUS N O PAYMENT. EXISTENCE OF IMSI IS ONLY A FACILITY TO COMMUNICATE AND DOES NOT RESULT THE ROAMING SERVICES PROVIDED ON A STANDARD FACILITIES TO BE A TECHNICAL SERVICE. THE WHOLE ROAMING PROCESS IS AUTOMATICALLY AND THERE IS NO HUMAN INTERFERENCE IN IT. THE HUMAN INTERFERENCE IS REQUIRED TO MAINTAIN THE ROBUST NETWORK ONLY TO ENSURE BREAK DOWN FREE S ERVICE TO THE SUBSCRIBER. THE NETWORK OWNER HAS TO MAINTAIN FOR I TSELF, ITS NETWORK IN ROBUST CONDITION. THE TECHNICAL SUPPORT OF THE STAF F IS REQUIRED TO MAINTAIN THE EQUIPMENT AND GAZETTES BUT IT IS NOT A SERVICE FOR ROAMING FACILITY PROVIDED TO THE SUBSCRIBER. THERE IS COMME RCIAL ARRANGEMENT TO CONNECT THE TECHNICAL NETWORKS BASICALLY TO BE ABLE TO DO BUSINESS. IN FACT DOT MANDATES THAT IT SHOULD BE SO CONNECTED. THERE IS NO PAYMENT MADE FOR CONNECTING THE NETWORKS. PAYMENTS ARE MADE FOR CALLS WHICH THE ROAMING SUBSCRIBER MAKES. IF NO CALLS ARE MADE NO P AYMENT IS MADE IN SPITE OF THE FACT THAT THE NETWORKS ARE INTER CONNE CTED. HE FURTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. BHARTI CELLU LAR LTD. 319 ITR 139 (DEL) WHEREIN IT HAS BEEN HELD BY THE HONBLE DELHI HIGH COURT THAT ROAMING SERVICES NOT INVOLVING HUMAN INTERFERENCE AND IS NO T TECHNICAL SERVICES AS CONTEMPLATED UNDER EXPLANATION 2 TO SECTION 9(1)(VI I) OF THE ACT AND NOT LIABLE FOR TAX DEDUCTION AT SOURCE U/S 194J OF THE ACT. THIS VIEW HAS BEEN EARLIER HELD BY THE HONBLE MADRAS HIGH COURT IN TH E CASE OF SKYCELL COMMUNICATIONS LTD. VS. DCIT (2001) 251 ITR 53 (MAD ) ORDER DATED 23/2/2001 WHEREIN THE HONBLE HIGH COURT HAS HELD T HAT PROVISIONS OF CELLULAR MOBILE TELEPHONE FACILITY TO SUBSCRIBE IS NOT A TECHNICAL SERVICE. DEDUCTION OF TAX AT SOURCE NEED NOT TO BE MADE FROM SUBSCRIPTIONS U/S 194J OF THE ACT. HE FURTHER RELIED ON THE DECISION IN THE CASE OF JAIPUR VIDYUT VITRAN LIMITED VS. DCIT (2009) 123 TTJ 888 ( JP TRIB) WHEREIN IT HAS BEEN HELD THAT SECTION 194J WOULD HAVE APPLICATION ONLY WHEN THE TECHNOLOGY OR TECHNICAL KNOWLEDGE OF PERSON IS MAD E AVAILABLE TO OTHER 16 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. AND NOT WHERE BY USING TECHNICAL SYSTEMS, SERVICES ARE RENDERED TO OTHERS. RENDERING OF SERVICES BY ALLOWING USE OF TE CHNICAL SYSTEM IS DIFFERENT FROM CHARGING FEES FOR TENDERING TECHNICA L SERVICES. THE APPLICABILITY OF SECTION 194J WOULD COME INTO EFFEC T ONLY WHEN BY MAKING PAYMENT OF FEE FOR TECHNICAL SERVICES, ASSESSEE ACQ UIRES CERTAIN SKILL/KNOWLEDGE/INTELLECT WHICH CAN BE FURTHER USED BY HIM FOR ITS OWN PURPOSE/RESEARCH. WHERE FACILITY IS PROVIDED BY USE OF MACHINE/ROBOT OR WHERE SOPHISTICATED EQUIPMENTS ARE INSTALLED AND OP ERATED WITH A VIEW TO EARN INCOME BY ALLOWING THE CUSTOMERS TO AVAIL O F THE BENEFIT BY USER OF SUCH EQUIPMENT, THE SAME DOES NOT RESULT IN THE PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR A FEE. THEREFORE, HE AR GUED THAT IN ROAMING CHARGES PAID BY THE ASSESSEE TO THE OTHER OPERATORS ARE NOT FEES FOR TECHNICAL SERVICES. THE LD AR FURTHER RELIED ON THE DECISION IN THE CASE OF IGATE COMPUTER SYSTEMS LTD. VS. DCIT IN ITA NO. 130 1 TO 1303& 1616/PN/2013 FOR A.Y. 2007-08 TO 2010-11 WHEREIN TH E HONBLE PUNE BENCH OF ITAT HAD CONSIDERED WHETHER ANY HUMAN INTE RVENTION IS REQUIRED FOR PROVIDING THE DATA LINK SERVICES AND A RE LIABLE TO BE DEDUCTED TDS U/S 194J OF THE ACT AND HELD THAT PAYMENTS MADE FOR UTILIZING SUCH SERVICES WAS NOT IN THE NATURE OF TECHNICAL SERVICE S GOVERNED BY SECTION 194J OF THE ACT. HE FURTHER RELIED ON THE DECISION OF ITAT AHMADABAD BENCH IN THE CASE OF CANARA BANK VS. ITO 305 ITR (A T) 189 WHEREIN MICR CHARGES PAID TO SBI HELD NOT TO BE COVERED U/S 194J READ WITH SECTION 9(1)(VII) EXPLANATION-2. HE ALSO RELIED ON THE DECI SION OF HONBLE BANGALORE ITAT IN THE CASE OF BANGALORE ELECTRICITY SUPPLY CO. LTD. VS. ITO(TDS) ORDER DATED 16/3/2012 2012(20) ITR (TRIB) 265 WHEREIN PAYMENT MADE BY STATE LOAD DISPATCH CENTER (SLDC) I S HELD NOT LIABLE TO BE DEDUCTED TDS U/S 194J OF THE ACT. THE LD AR FURT HER RELIED ON THE DECISION OF HONBLE MUMBAI ITAT IN THE CASE OF MAHA RASTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. 25 TAXMAN 164, S IEMENS LIMITED 30 TAXMANN.COM 200, ITAT KOLKATA BENCH DECISION IN THE CASE OF RIGHT FLORISTS PVT. LIMITED ITA NO. 1336/KOL/2011 AND ITA DELHI BENCH DECISION 17 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. IN THE CASE OF DELHI TRANSCO LTD. (ITA NO. 755(DEL) /2011 A.Y. 2005-06. HE ALSO RELIED ON THE DECISION IN THE CASE OF DCIT VS. PARASRAMPURIA SYNTHETICS LTD. 20 SOT 248 (DELHI). THE REVENUE FIL ED APPEAL AGAINST THE ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF BH ARTI CELLULAR LTD. BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COUR T HAS HELD AS UNDER:- IN CASES REQUIRING EXAMINATION BY TECHNICAL EXPERT S, THE DEPARTMENT OUGHT NOT TO PROCEED ONLY BY THE CONTRACTS PLACED B EFORE THE OFFICERS. WITH THE EMERGENCE OF OUR COUNTRY AS ONE OF THE BRI C COUNTRIES AND WITH TECHNOLOGICAL ADVANCEMENT, THE DEPARTMENT OUGH T TO EXAMINE TECHNICAL EXPERTS SO THAT THE MATTERS COULD BE DISP OSED OF EXPEDITIOUSLY. FURTHER, THIS WOULD ENABLE THE APPEL LATE FORUM, INCLUDING THE SUPREME COURT, TO DECIDE THE LEGAL IS SUES BASED ON THE FACTUAL FOUNDATION. HELD ACCORDINGLY, REMANDING THE MATTERS FOR DETERMI NATION WITH TECHNICAL ASSISTANCE, THAT IN THESE CASES, IN WHICH A CELLULAR PROVIDER UNDER AN AGREEMENT PAYS INTERCONNECT/ACCESS/PORT CH ARGES TO BSNL/MTNL, THE QUESTION WHETHER THE CELLULAR PROVID ER HAS RENDERED TECHNICAL SERVICES AND HAS TO DEDUCT TAX AT SOURCE, DEPENDED ON WHETHER THE CHARGES WERE FOR TECHNICAL SERVICES, AN D THIS INVOLVED DETERMINATION OF WHETHER ANY HUMAN INTERVENTION WAS INVOLVED, WHICH COULD NOT BE DETERMINED WITHOUT TECHNICAL ASS ISTANCE. DECISION OF THE DELHI HIGH COURT IN CIT V. BHARTI C ELLULAR LTD. [2009] 319 ITR 139 SET ASIDE AND MATTER REMANDED TO THE ASSESSING OFFICER WITH DIRECTIONS. AFTER THIS DECISION, THE LD ASSESSING OFFICER EXAMI NED THE TECHNICAL EXPERT OF THE C-DOT ON 29/09/2010 IN RESPECT OF IUC AND WHICH WERE CROSS EXAMINED ON 04/10/2010 BY M/S BHARTI CELLULAR LIMITED, DELHI . THE TECHNICAL EXPERTS REEXAMINED ON 04/10/2010 ON THIS ISSUE AND ADMITTED THAT ROAMING SERVICES DOES NOT REQUIRE ANY HUMAN INTERVENTION, IT OPERATE S AUTOMATICALLY. THE LD AR ALSO DRAWN OUR ATTENTION ON INDEPENDENT OPINION TAKEN FROM DIRECTOR CMAI, EX-DIRECTOR (C&M), BSNL, EX-MEMBER TELECOM CO MMISSION ON 24/12/2010 AND ADMITTED THAT WHOLE INTERCONNECTED U SES PROCESS, NO MANUAL INTERVENTION IS REQUIRED. HE FURTHER DRAWN O UR ATTENTION ON PAGE NO. 651 TO 652 FOR POSTPAID AS WELL AS PREPAID ROAMING CHARGES CHARGED BETWEEN THE OPERATORS FROM MR. KAPOOR SINGH GULIANI. THE AP PELLANT ALSO TAKEN 18 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. OPINION FROM FORMER CHIEF JUSTICE OF INDIA MR. KAPA DIA ON IUC POST TECHNICAL EXAMINATION, CROSS EXAMINED AND REEXAMINATION. WHO ALSO OPINED THAT HON'BLE SUPREME COURT DECISION DATED 12/08/2010 IS AN ORDER NOT JUDGMENT AS THE PRINCIPLE OF LAW WAS NOT RES-INTEGRA. THE WO RD TECHNICAL SERVICES HAVE GOT TO BE READ IN NARROW SINCE AS HELD BY THE VARIO US HONBLE HIGH COURTS AND THE TRIBUNAL BY APPLYING PRINCIPLES OF NOSITUR A S OCIIS PARTICULAR BECAUSE THE WORD TECHNICAL SERVICE IN SECTION 9(1)(VII) READ WI TH EXPLANATION-2 IN BETWEEN WORD MANAGERIAL CONSULTANCY SERVICES. FINALLY HE OP INED THAT SUCH SETTING UP/INSTALLATION, REPAIRING, SERVICING, MAINTENANCE ARE SEPARATE ACTIVITIES, THEY ARE BACK OFFICE FUNCTIONS AND ARE REQUIRE HUMAN INT ERVENTION. BUT THE ROAMING PROCESS BETWEEN PARTICIPATING ENTITIES IS F ULLY AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTION. ACCORDINGLY, TH E INTERCONNECTED USES CHARGE WILL NOT ATTRACT THE PROVISIONS OF SECTION 1 94J READ WITH SECTION 9(1)(VII) READ WITH EXPLANATION-2 THERETO. THEREFOR E, HE PRAYED TO DELETE THE ADDITION. IF WE EXAMINE THE ISSUE IN BOTH THE MATTERS, A IRRE SISTIBLE CONCLUSION ABOUT THE LIS INVOLVED IN BOTH THE APPEALS ARE THE SAME. ACCORDINGLY, WE HAVE NO HESITATION TO APPLY THE REASONING GIVEN IN ITA NO. 656/JP/2010 TO THE PRESENT SET OF FACTS. FOR THE SAKE OF CLARITY, WE ARE HERE BY REPRODUCING PARA 6 OF THE SAID ORDER AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. RECEN TLY THIS BENCH HAS DECIDED SIMILAR ISSUE IN THE CASE OF TATA TELE SERV ICES, WHICH IS IDENTICAL TO THE ASSESSEES CASE. THE FACTS OF THE CASE HAS B EEN DEMONSTRATED BY THE AR THAT THE ASSESSEE WAS ISSUING BILL ON NET AM OUNT ON MRP HAS BEEN FIXED ON PREPAID CARD SOLD. THE ASSESSEE HAS N OT TRANSFERRED ANY INCOME TO THE DISTRIBUTOR BUT THE DISTRIBUTOR WAS A LLOWED TO AVAIL THE AIRTIME TO THE EXTENT OF MRP PRICE. IN BOOKS OF ACC OUNT, THE ASSESSEE HAD CREDITED THESE RECEIPTS ON NET BASIS. THE FINDI NG ON THE CASE OF TATA TELE SERVICES IS REPRODUCED AS UNDER: 19 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. 2.23. WE FIND MERIT IN THE CONTENTION OF LD. COUNSE L THAT THERE IS NO JURISDICTIONAL HIGH COURT JUDGMENT ON THIS ISSUE. H ONBLE KARNATAKA HIGH COURT JUDGMENT IS ELABORATE, DETAILED, CONSIDE RS THE PREVIOUS DELHI AND KERALA HIGH COURT JUDGMENT AGAINST THE AS SESSEE AND IS LATEST COMPREHENSIVE ADJUDICATION ON THE ISSUE. EVE N IF IT IS HELD THAT THERE EXIST DIVERGENCE OF JUDICIAL OPINION A VIEW F AVOURABLE TO THE ASSESSEE IS TO BE ADOPTED AS HELD BY HONBLE SUPREM E COURT IN VEGETABLE PRODUCTS LTD. AND VATIKA TOWNSHIP CASE (S UPRA). FROM THIS ANGLE ALSO IN THESE FACTS AND CIRCUMSTANCES HONBLE KARNATAKA HIGH COURT JUDGMENT IS APPLICABLE TO THE ASSESSEES CASE . RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT: A. THE RELATIONSHIP BETWEEN ASSESSEE AND ITS DISTRIBUT ORS QUA THE SALE OF IMPUGNED PRODUCTS IS ON PRINCIPAL TO PRINCI PAL BASIS; THE CONSIDERATION RECEIVED BY ASSESSEE IS SALE PRIC E SIMPLICITER. B. THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENT BET WEEN ASSESSEE AND DISTRIBUTORS AS HELD BY AUTHORITIES BE LOW THEIR ORDERS ARE REVERSED. C. LOOKING AT THE TRANSACTION BEING OF SALE/PURCHA SE AND RELATIONSHIP BEING OF PRINCIPAL TO PRINCIPAL THE DI SCOUNT DOES NOT AMOUNT TO COMMISSION IN TERMS OF SEC. 194H, THE SAME IS NOT APPLICABLE TO THESE TRANSACTIONS. THEREFORE, AS SESSEE CANNOT BE HELD IN DEFAULT; IMPUGNED DEMAND RAISED A PPLYING SEC. 194H IS QUASHED. ASSESSEES GROUNDS ARE ALLOWE D. BY RESPECTFULLY FOLLOWING OUR OWN DECISION ON SIMIL AR FACT, WE REVERSE THE ORDER OF THE LD CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE ON THIS GROUND. 3.3. IN THE LIGHT OF ABOVE, RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH IN THE MATTER OF M/S. BHARTI HEXACOM LTD. FOR THE ASSESSMENT YEAR 2009-10, WE HEREBY REVERSE THE ORDER OF LD. CI T (A) AND ALLOW THE APPEALS OF THE ASSESSEE RELATING TO GROUND NOS. 2, 3 & 4. HAVING ALLOWED THE APPEALS, WE DEEM IT APPROPRIATE TO PUT CAVEAT TO THE EFFECT THAT IN CASE THE HONBLE SUPREME COURT IN TH E MATTER OF VODAFONE DECIDES THE ISSUE OF ROAMING CHARGES AGAIN ST THE ASSESSEE, THE AO OR ANY OTHER OFFICER AUTHORIZED IN THIS BEHA LF MAY MOVE AN APPROPRIATE APPLICATION. 20 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. THUS, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE BY HOLDING THAT THE FEE PAID FOR ROAMING CHARGES DOES NOT FALL IN THE AMBIT OF FEE FOR TECHNICAL SERVICES AS NO HUMAN INTERVENT ION IS REQUIRED IN PROVIDING THE ROAMING SERVICES BY THE MOBILE SERVIC E PROVIDER. THE REVENUE CHALLENGED THIS ORDER OF THE TRIBUNAL BEFOR E THE HON'BLE HIGH COURT AND THE HON'BLE HIGH COURT VIDE DECISION DATE D 11/7/2017 BY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF CIT TDS, BANGALORE VS VODAFONE SOUTH LTD. (2016) 241 TAXMAN 497 (KAR) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSES SEE AND AGAINST THE REVENUE IN PARA 53 TO 55 AS UNDER: 53. REGARDING SECTION 194J OF THE ACT, THE IN VEW OF THE KERELA HIGH COURT DECISIONS, THE ISSUE IS ANSWERED IN FAVOUR OF THE A SSESSEE AND THIRD ISSUE EVEN AS PER THE STATUTORY DEFINITION, THERE I S NO SERVICE AND SECTIONS 201 AND 194H WOULD NOT APPLY IN VIEW OF TH E AGREEMENT AS REFERRED HEREINABOVE. 54. IN VIEW OF THE AGREEMENT THE ISSUE REGARDING 19 4H AND 194J AS HELD IN OTHER CASES, BOTH THE ISSUES ARE ANSWERED IN FAVOUR OF THE ASSESSEE. VODAFONE 55. ISSUES REGARDING SECTIONS 194H, 194J AND 201 OF THE ACT, THEY ARE ANSWERED IN FAVOUR OF ASSESSEE. THUS, IN VIEW OF THE ORDERS OF THIS TRIBUNAL IN ASS ESSEES OWN CASE AS WELL AS THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE ARE SET ASIDE. FOLLOWING THE EARLIER ORDERS OF THIS TRIBUNAL, WE D ECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 21 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR. 5. GROUND NOS. 4 & 5 ARE CONSEQUENTIAL AND ACCORDIN GLY STAND DISPOSED OFF IN TERMS OF THE FINDINGS IN GROUND NOS. 2 & 3. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 08/03/2 018. SD/- SD/- ( HKKXPUN ) ( FOT; IKY JKWO ( BHAGCHAND ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 08/03/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- VODAFONE DIGILINK LTD., JAIPUR. 2. THE RESPONDENT THE ITO (TDS-2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 67/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 22 ITA NO. 67/JP/2015 M/S. VODAFONE DIGILINK LTD., JAIPUR.