VODAFONE DIGILINK LIMITED, Jaipur V. ITO, Jaipur

ITA 69/JPR/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2179 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA CIT DHK
• Keywords: Recovery proceedings; 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 BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NOS. 68 & 69/JP/2015 FU/KZKJ.K O'KZ@ ASSESSMENT YEARS : 2012-13 & 2013-14 VODAFONE DIGILINK LIMITED, (FORMERLY KNOWN AS VODAFONE ESSAR DIGILINK LIMITED), 5 TH FLOOR, GAURAV TOWERS, MALVIYA NAGAR, JAIPUR. CUKE VS. INCOME TAX OFFICER (TDS-2), JAIPUR. TAN NO. JPRA 02455 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 71/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEARS : 2014-15 A.C.I.T. (TDS), JAIPUR. CUKE VS. THE PRINCIPAL OFFICER, M/S VODAFONE DIGILINK LIMITED, 5 TH FLOOR, GAURAV TOWERS, MALVIYA NAGAR, JAIPUR. TAN NO. JPRA 02455 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : MS. ISHITA FARSAIYA (ADV) & SHRI TARUN GULATI (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/01/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 19/01/2018 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 2 VKNS'K@ ORDER PER: BENCH ITA NO. 68 & 69/JP/2015 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMPOSITE ORDER OF LD. CIT(A)-III, JAIPU R DATED 25/11/2014 FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14 RESPEC TIVELY AND THE ITA NO. 71/JP/2016 FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF LD. CIT(A)-III, JAIPUR DATED 30/11/2015 PERTAINING TO TH E A.Y. 2014-15. 2. ALL THESE APPEALS ARE BEING HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING PA SSED. 3. BEFORE WE PROCEED TO ADJUDICATE THE GROUNDS/ISSU ES RAISED BY THE ASSESSEE. IT IS PERTINENT TO MENTION THAT THE ASSES SEE APPROACHED THE HONBLE JURISDICTIONAL HIGH COURT IN CIVIL WRIT PET ITION NO. 15134/2017 AGAINST THE ORDER OF THIS TRIBUNAL DATED 09/12/2014 REFUSING TO GRANT STAY AGAINST THE OUTSTANDING DEMAND. WHILE DISPOSIN G OFF THE WRIT PETITION VIDE ORDER DATED 22 ND SEPTEMBER, 2017, THE HONBLE JURISDICTIONAL HIGH COURT DIRECTED THE TRIBUNAL TO D ECIDE THE APPEAL WITHIN A PERIOD OF TEN (10) WORKING DAYS FROM THE DAT E OF PRESENTATION OF THE CERTIFIED COPY OF THE ORDER OF THE HONBLE H IGH COURT. AFTER RECEIPT OF THE ORDERS OF THE HON'BLE HIGH COURT, THE HEARIN G OF THE APPEALS WAS PREPONDED TO 23/11/2017. HOWEVER, THE APPEAL FILES WE RE NOT AVAILABLE ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 3 AT JAIPUR BENCHES AS THE SAME WERE ALREADY SENT TO T HE HEAD OFFICE OF THE TRIBUNAL AT MUMBAI FOR CONSTITUTION OF SPECIAL B ENCH. ACCORDINGLY, AFTER DIRECTIONS OF THE HON'BLE HIGH COURT, THE APP EAL FILES WERE CALLED BACK FOR HEARING AND DISPOSAL OF THE APPEALS AND FI NALLY THESE APPEALS WERE HEARD ON 17/01/2018. 4. IN THE ASSESSEES APPEAL I.E. ITA 68/JP/2015 FO R THE A.Y. 2012-13, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 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 OR DER PASSED 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 OR DER OF THE LEARNED TDS OFFICER TREATING THE APPELLANT AS ASSE SSEE 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 O FFICER WITH RESPECT TO THE FAILURE OF DEDUCTEES TO PAY TAXES DI RECTLY, 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 THE ACT IN CONTRADICTION TO THE SETTLED PRINCIPLE ENUNCIATE D BY 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 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 4 LIABILITY 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 DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE UNDER S ECTION 194H OF THE ACT ON DISCOUNT EXTENDED TO THE DISTRIBUTORS OF ITS PRE-PAID SIM CARDS/ TALKTIME DURING THE SUBJECT FINANCIAL YE AR. 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 LEARNED TDS OFFICER THAT THE RELATIONSHIP BETWEEN THE APPEL LANT AND THE PRE-PAID DISTRIBUTORS IS NOT THAT OF PRINCIPAL TO PRINCIPAL AND THE DISCOUNT ALLOWED TO THEM IS IN NATURE OF COMMISSION LIABLE FOR TAX DEDUCTION AT SOURCE, AS ENVISAGED UNDER SECTION 194 H 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 PROVIS IONS OF SECTION 194H OF THE ACT WOULD BE APPLICABLE TO THE APPELLAN TS CASE WITHOUT TAKING COGNIZANCE OF THE FACT THAT THE APPE LLANT IS NOT RESPONSIBLE TO MAKE ANY PAYMENT/ CREDIT TO THE PREP AID DISTRIBUTORS TOWARDS THE DISCOUNT EXTENDED TO THEM AND RESPONSIBILITY/ OBLIGATION TO MAKE PAYMENT/ CREDIT IS A CONDITION 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 D ISCOUNT ALLOWED BY THE APPELLANT IS NOT INCOME IN THE HANDS OF ITS DISTRIBUTORS AND THAT INCOME, IF ANY, ARISES ONLY W HEN THE PRE-PAID SIM CARDS/ TALKTIME IS FURTHER DISTRIBUTED BY THE D ISTRIBUTORS. 2.5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE F ACT THAT THERE IS NO FLOW OF MONIES FROM THE APPELLANT TO THE DISTRIB UTOR OF PRE- ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 5 PAID SIM CARD/ TALKTIME BUT RATHER FROM THE DISTRIB UTOR TO THE APPELLANT, AND HENCE, THE PROVISIONS OF SECTION 194 H 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 D IFFERENCE BETWEEN 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 SERVICE PROVIDER, A PRE-PAID RECHARG E VOUCHER ENTITLES THE HOLDER TO RECEIVE TELECOM SERVICES EQU IVALENT TO THE VALUE EMBEDDED IN IT, AND HENCE, THE TERMS SIM CAR D AND PRE- PAID RECHARGE VOUCHER CANNOT BE USED INTER-CHANGEA BLY. 3. GROUND NO. 3- THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE ACT ON ROAMING CHARGES PA ID TO OTHER TELECOM OPERATORS 3.1 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 WAS REQUIRED TO DEDU CT TAX UNDER SECTION 194J OF THE ACT ON ROAMING CHARGES PAID/PAY ABLE BY THE APPELLANT TO OTHER TELECOM OPERATORS, DURING THE SU BJECT 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 R OAMING FACILITY IS A STANDARD AUTOMATED FACILITY WHICH CANNOT BE CO NSTRUED AS FEE FOR TECHNICAL SERVICES (FTS) FOR THE PURPOSES OF THE ACT AND HENCE, 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 FA CT THAT NO HUMAN INTERVENTION, WHICH IS SINE QUA NON FOR A SER VICE TO QUALIFY AS TECHNICAL SERVICE, IS INVOLVED IN PROVISION OF R OAMING SERVICES 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 STATEME NT OF TECHNICAL EXPERT RECORDED BY THE INCOME-TAX AUTHORI TIES IN ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 6 COIMBATORE DURING PROCEEDINGS CONDUCTED IN THE CASE OF A GROUP COMPANY OF THE APPELLANT - VODAFONE CELLULAR LIMITE D ON THE SAME ISSUE, WHEREIN IT HAS BEEN CLEARLY OBSERVED TH AT ROAMING FACILITY IS AN AUTOMATIC FACILITY AND DOES NOT INVO LVE 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 PAY MENT MUST BE DONE HAVING REGARD TO THE DOMINANT PURPOSE/INTENTIO N OF THE PAYMENT. 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 PUR ELY ON A CONSERVATIVE BASIS AND DOES NOT ALTER THE NATURE OF ROAMING CHARGES AND THUS, DOES NOT LEAD TO A CONCLUSION THA T SUCH CHARGES QUALIFY AS FTS. 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 LE ARNED CIT(A) HAS FAILED TO APPRECIATE THAT NO DEMAND CAN BE RAIS ED UNDER SECTION 201(1) OF THE ACT SINCE TAXES WOULD HAVE BE EN PAID BY THE RECIPIENT PARTIES AND SUCH AN ACTION OF THE LEARNED TDS OFFICER HAS RESULTED IN DOUBLE RECOVERY OF TAXES, WHICH IS AGAI NST THE RULES OF TAXATION PRINCIPLES. 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 TH E DETAILS OF PAYEES (VIZ PERMANENT ACCOUNT NUMBER, ADDRESS) SUBM ITTED 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 MUMBAI BENCH OF ITAT IN THE CASE OF VODAFONE ESSAR LIMITED (ITA NOS. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 7 6058, 6059, 6060/MUM/2009) (DECEMBER 2010) (MUMBAI TRIBUNAL) WHEREIN THE ITAT DIRECTED THE ASSESSING O FFICER TO INVOKE HIS POWERS UNDER THE ACT AND VERIFY PAYMENT OF TAXES BY THE PAYEES FROM THE RESPECTIVE ASSESSING OFFICERS A SSESSING THE PAYEES WITH THE HELP OF THE PERMANENT ACCOUNT NUMBE RS 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 SECTION 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 SECTION 201(1 A) OF THE ACT SHOULD BE COMPUTE D FROM THE DUE DATE OF PAYMENT OF WITHHOLDING TAX BY THE APPEL LANT TO THE DATE OF PAYMENT OF TAXES 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 CIRCUM STANCES OF THE CASE. 5. GROUND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION AS IT DEPENDS ON THE OUTCOME OF THE OTHER GROUNDS RAISED BY THE ASSESSEE. 6. GROUND NO.2 OF THE APPEAL IS REGARDING THE LIABI LITY OF DEDUCTION OF TAX AT SOURCE U/S 194H OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 8 AND CONSEQUENTIAL LIABILITY TO PAY TAX AS THE ASSES SEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT IN RESPECT OF DISCOUNT EXTENDED TO THE DISTRIBUTORS FOR PRE-PAID SIM CARDS AND RECHARGE CO UPONS. 7. WE HAVE HEARD THE LD AR AS WELL AS THE LD CIT DR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE N OTE THAT THIS ISSUE OF LIABILITY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE I N RESPECT OF DISCOUNT ALLOWED TO THE DISTRIBUTORS ON PRE PAID SIM CARDS AN D RECHARGE VOUCHERS HAS BEEN CONSIDERED BY THE HONBLE JURISDICTIONAL H IGH 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 JUDGMENT DATED 11 /7/2017 WHEREIN THE HON'BLE HIGH COURT HAS FRAMED THE QUESTION OF L AW AS UNDER: '1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S. 194H OF THE IT ACT, AS THE RELATION BETWEEN ASSESSEE AND DISTRIBUTOR IS THAT OF PRINCIPAL TO AG ENT. 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 DISTRIBUTORS. 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. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 9 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, TDS U/S. 194J IS APPLICABLE ON ROAMING CHARGES PAID FOR FACI LITIES PROVIDED 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: 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 AS SESSEE WAS LIABLE TO WITHHOLD TAX AT SOURCE UNDER S. 194H OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS. 19,74,842/- (INCLUDING INTEREST) I N RESPECT OF SALES TO ITS DISTRIBUTORS, WHICH ARE ON PRINCIPAL TO PRINCIP AL BASIS AND WHEREIN PROPERTY IN THE GOODS IS TRANSFERRED TO THE DISTRIB UTOR'. 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 PROVISIONS OF SECTION 194H, THE TRIBUNAL WHILE CONSIDERING THE EV IDENCE ON RECORD, IN OUR CONSIDERED OPINION, HAS MISDIRECTED ITSELF I N CONSIDERING THE CASE FROM AN ANGLE OTHER THAN THE ANGLE WHICH WAS R EQUIRED TO BE CONSIDERED BY THE TRIBUNAL UNDER THE INCOME TAX ACT . THE TRIBUNAL HAS TRAVELLED BEYOND THE PROVISIONS OF SECTION 194H WHERE THE CONDITION PRECEDENT IS THAT THE PAYMENT IS TO BE MA DE BY THE ASSESSEE AND THEREAFTER HE IS TO MAKE PAYMENT. IN S PITE OF OUR SPECIFIC QUERY TO THE COUNSEL FOR THE DEPARTMENT, IT WAS NOT POINTED OUT THAT ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 10 ANY AMOUNT WAS PAID BY THE ASSESSEE COMPANY. IT WAS ONLY THE ARRANGEMENT BY WHICH THE AMOUNT WHICH WAS TO BE REC EIVED WAS REDUCED 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, SI NCE THE AMOUNT 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. ASSUMING WITHOUT ADMITTING, IF THE CONTENTION WHICH HAS BEEN RAISED BEFORE THE TRIBUNAL IS ACCEPTED, THE SAME CAN BE AT THE MOST E XPENSES WHICH ARE NOT ALLOWABLE UNDER THE INCOME TAX ACT, IF AT ALL C LAIMED WITHOUT PROPER BASIS BUT TO CONCLUDE THAT THEY ARE COVERED UNDER SECTION 194H AND THE INCOME TAX OR THE TDS IS REQUIRED TO BE DED UCTED IS NOT CORRECT AND ACCORDINGLY DISALLOWANCE ON THAT BASIS IS NOT C ORRECT. IN OUR CONSIDERED OPINION, FROM WHICH AMOUNT OF TAX IS TO BE DEDUCTED IS DOUBTFUL PROPOSITION INASMUCH AS THE MANAGEMENT INF ORMATION 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 M ADE HERE-IN- ABOVE, THE ARRANGEMENT WHICH HAS BEEN MADE BETWEEN THE COMPANY AND THE DISTRIBUTOR IS ON PRINCIPAL TO PRIN CIPAL BASIS AND THE RESPONSIBILITY IS ON THE BASIS OF AGREEMENT ENTERED INTO BETWEEN THE PARTIES. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 11 (II) REGARDING MRP, THE FINDINGS WHICH ARE ARRIVED AT IS A PRICE WHICH HAS BEEN FIXED BY THE ASSESSEE COMPANY AND OT HER EXPENSES, 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 REST RICTION BY THE ASSESSEE TO GIVE COMMISSION AMOUNT TO THE RETAI LER. (IV) REGARDING AREA OF OPERATION, IT IS THE BUSINES S POLICY OF THE ASSESSEE TO GIVE DISTRIBUTOR-SHIP FOR A PARTICULAR AREA. ONLY ON THAT BASIS, IT WILL BE ERRONEOUS TO HELD THAT IT IS ON PRINCIPAL TO PRINCIPAL BASIS. FOR DECIDING THE RELATION-SHIP ON PRINCIPAL TO PRINCIPAL BASIS, THE CRITERIA WILL NOT BE OF AREA O F OPERATION BUT AGREEMENT ENTERED INTO BETWEEN THE PARTIES. (V) REGARDING THE CHANGE IN PRICE IT IS ALWAYS BETW EEN THE ASSESSEE OR THE COMPANY AND THE DISTRIBUTOR TO DECIDE WHO WI LL ABSORB 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 MANU FACTURER WILL INVITE CRIMINAL LIABILITY. TO AVOID ANY CRIMIN AL LIABILITY OR ANY ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 12 CRIMINAL ACT IS DONE FOR TAKING BACK THE GOODS, WIL L 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 PRAC TICE. (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 FRO M PRINCIPAL 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 ALLOW ANY SPECIAL ALLOWANCE OR EXPENSES TO PROMOTE THE SALE. IN A COMPETITIVE WORLD TO PROMOTE THE SALE, IF THE DISTR IBUTOR IS NOT GIVEN ANY 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 ASSESSEE. (S.A. BUILDERS VS. COMMISSIO NER 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 DECID E THE RELATION- 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 AN AGENT, THEREFORE, IN OUR CONSIDERED OPINION, THE PROVISIONS OF SECTIO N 194H HAVE ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 13 WRONGLY BEEN INVOKED, AND THEREFORE, THE FIRST ISSU E IS ANSWERED IN FAVOUR OF ASSESSEE AND AGAINST THE DEPARTMENT. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08 TO 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. 8. THE GROUND NO. 3 OF THE APPEAL IS REGARDING THE L IABILITY OF THE ASSESSEE TO DEDUCT TDS U/S 194J OF THE ACT IN RESPEC T OF THE ROAMING CHARGES PAID BY THE ASSESSEE. 9. WE HAVE HEARD THE LD AR AND LD. CIT DR AND CONSI DERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES O WN 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 UNDER: 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 APPLICABLE TO THE CASES IN HAND. FOR READY REFERENCE, WE ARE HEREBY REPRODUCING THE FACTS MENTIONED IN PARA 3 OF THE ORDER PASSED BY TH E AO TDS. THE SAME ARE AS UNDER :- ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 14 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 A O FOR FRESH ADJUDICATION. FIRSTLY, THE MATTER IS PENDING BEFORE THE AO AND THUS THE ISSUE HAS NOT REACHED FINALITY IN THAT CASE. SE CONDLY, THE FACTS OF THIS CASE ARE ENTIRELY DIFFERENT FROM THE PRESEN T CASE. THE ISSUE UNDER CONSIDERATION IN THE CASE RELIED BY THE ASSES SEE ABOVE WAS PAYMENT OF PART ACCESS / INTERCONNECT CHARGES WHERE AS IN THE PRESENT CASE, THE ISSUE IS REGARDING PAYMENT OF ROA MING CHARGES. FURTHER, IN THE ABOVE CASE, THE HONBLE COURT FOUND THAT THERE WAS NO INVOLVEMENT OF HUMAN INTERFACE IN PROVIDING INTE RCONNECT/PART ACCESS FACILITY WHEREAS IN PRESENT CASE THERE IS NE CESSARILY HUMAN INTERFACE INVOLVED IN PROVIDING ROAMING SERVICE. TH ERE IS NO DOUBT THAT THERE IS INTENSIVE USE OF SOPHISTICATED MACHIN ES AND MODERN TECHNOLOGY BUT SIMULTANEOUSLY THERE IS CONSTANT INV OLVEMENT OF HUMAN MIND AND SKILL WHICH IS REQUIRED FOR PROVIDIN G ROAMING SERVICES. FOR EXAMPLE, THERE IS REQUIREMENT OF TECH NICAL AND SKILLED EMPLOYEES FOR FOLLOWING PROCEDURES INVOLVED IN PROV IDING 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 ASSES SEE 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 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 15 NOT AUTOMATIC. BUT IT IS FULLY SUPPORTED BY SERVICE S OF PERSONNEL AND REQUIRES HUMAN APPLICATION OF MIND ALONG WITH TECHN ICAL EQUIPMENTS. THE FACTS MENTIONED IN THE ORDER OF THE TRIBUNAL I N 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 EQUIPMENT 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 194J R EAD WITH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THE LD AR EXPLAINE D THE ROAMING SERVICE AND SUBMITTED THAT HEXACOM SUBSCRIBER IN JAIPUR TRA VELS OF MUMBAI SWITCHES ON HIS MOBILE DEVICE AFTER REACHING MUMBAI . WHERE THE SUBSCRIBER TRAVELS BY LAND HE AUTOMATICALLY RECEIVE S A MESSAGE TRANSFERRING TO THE ROAMING NETWORK ON VISITING ANO THER TELECOM, CIRCLE. * 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 SUBSCRIPTION . * 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 HEX ACOM JAIPUR. * ALTERNATIVELY, A CALLED FROM JAIPUR MAKES A CALL TO HEXACOMS SUBSCRIBER WHICH IS ROUTED TO THE HOME NETWORK OF HEXACOM SUBS CRIBER IN JAIPUR. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 16 * 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 VISITI NG 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). * 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 SUBSCRI BER IS BILLED AS PER THE TARIFF SUBSCRIBED. * THE ENTIRE PROCESS IS AUTOMATIC. IT IS CONCLUDED THAT THE ABOVE TRANSACTION FLOW TH AT 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 BEING RECOVERED FROM THE ROAMING SUBSCRIBER, THE VISITING CIRCLE SENDS THE A IR 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 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 17 USE OF CEREBRAL FACULTIES IN THE PROVISION OF TECHN ICAL 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 B ECAUSE IT USES VARIOUS INSTRUMENTS SUCH AS MSC (MOBILE SWITCHING C ENTRE), VLR (VISITOR LOCATION REGISTER), RADIO NETWORK, TOWERS, BTC ETC. BUT THE SYSTEM IS OPERATED/MANAGED BY THE HIGHLY SKILLED PR OFESSIONALS. THE ASSESSEES ARGUMENT WAS THAT THE ROAMING SERVICE IS MANAGED AUTOMATICALLY BY MACHINES AND PAYMENT FOR ROAMING C HARGES ARE NOT FEES FOR TECHNICAL SERVICES. IN CASE OF FAULT IN A BREAKDOWN OF A SYSTEM, THE PROFESSIONAL PEOPLE ARE REQUIRED TO MONITOR THE TELECOM NETWORK TO BE IN A ROBUST CONDITION IN ORDER TO DO BUSINESS FOR SELF. THIS MONITORING DOES NOT HAVE ANY CONNECTION WITH ROAMIN G CHARGES PAID BY THE SUBSCRIBER. IF A TELECOM NETWORK BREAKS DOWN THERE IS NO BUSINESS AND THUS NO PAYMENT. EXISTENCE OF IMSI IS ONLY A FACILITY TO COMMUNICATE AND DOES NOT RESULT THE ROAMING SERVICE S 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 NET WORK ONLY TO ENSURE BREAK DOWN FREE SERVICE TO THE SUBSCRIBER. THE NETW ORK OWNER HAS TO MAINTAIN FOR ITSELF, ITS NETWORK IN ROBUST CONDITIO N. THE TECHNICAL SUPPORT OF THE STAFF IS REQUIRED TO MAINTAIN THE EQ UIPMENT AND ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 18 GAZETTES BUT IT IS NOT A SERVICE FOR ROAMING FACILI TY PROVIDED TO THE SUBSCRIBER. THERE IS COMMERCIAL ARRANGEMENT TO CONN ECT THE TECHNICAL NETWORKS BASICALLY TO BE ABLE TO DO BUSINESS. IN FA CT DOT MANDATES THAT IT SHOULD BE SO CONNECTED. THERE IS NO PAYMENT MADE FOR CONNECTING THE NETWORKS. PAYMENTS ARE MADE FOR CALL S 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. BHART I CELLULAR LTD. 319 ITR 139 (DEL) WHEREIN IT HAS BEEN HELD BY THE HONBLE D ELHI HIGH COURT THAT ROAMING SERVICES NOT INVOLVING HUMAN INTERFERE NCE AND IS NOT TECHNICAL SERVICES AS CONTEMPLATED UNDER EXPLANATIO N 2 TO SECTION 9(1)(VII) OF THE ACT AND NOT LIABLE FOR TAX DEDUCTI ON AT SOURCE U/S 194J OF THE ACT. THIS VIEW HAS BEEN EARLIER HELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD. VS . DCIT (2001) 251 ITR 53 (MAD) ORDER DATED 23/2/2001 WHEREIN THE HON BLE HIGH COURT HAS HELD THAT PROVISIONS OF CELLULAR MOBILE TELEPHO NE 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 A CT. HE FURTHER RELIED ON THE DECISION IN THE CASE OF JAIPUR VIDYU T VITRAN LIMITED VS. DCIT (2009) 123 TTJ 888 (JP TRIB) WHEREIN IT HAS BE EN HELD THAT SECTION 194J WOULD HAVE APPLICATION ONLY WHEN THE TECHNOLOG Y OR TECHNICAL KNOWLEDGE OF PERSON IS MADE AVAILABLE TO OTHER AND NOT WHERE BY USING TECHNICAL SYSTEMS, SERVICES ARE RENDERED TO O THERS. RENDERING OF SERVICES BY ALLOWING USE OF TECHNICAL SYSTEM IS DIF FERENT FROM CHARGING FEES FOR TENDERING TECHNICAL SERVICES. THE APPLICAB ILITY OF SECTION 194J WOULD COME INTO EFFECT ONLY WHEN BY MAKING PAYMENT OF FEE FOR TECHNICAL SERVICES, ASSESSEE ACQUIRES CERTAIN SKILL /KNOWLEDGE/INTELLECT WHICH CAN BE FURTHER USED BY HIM FOR ITS OWN PURPOS E/RESEARCH. WHERE FACILITY IS PROVIDED BY USE OF MACHINE/ROBOT OR WHE RE SOPHISTICATED ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 19 EQUIPMENTS ARE INSTALLED AND OPERATED WITH A VIEW T O EARN INCOME BY ALLOWING THE CUSTOMERS TO AVAIL OF THE BENEFIT BY U SER OF SUCH EQUIPMENT, THE SAME DOES NOT RESULT IN THE PROVISIO N 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. 1301 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 PAYM ENTS MADE FOR UTILIZING SUCH SERVICES WAS NOT IN THE NATURE OF TE CHNICAL SERVICES GOVERNED BY SECTION 194J OF THE ACT. HE FURTHER REL IED ON THE DECISION OF ITAT AHMADABAD BENCH IN THE CASE OF CANARA BANK VS. ITO 305 ITR (AT) 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 DECISION OF HONBLE BANGALORE ITAT IN THE CASE OF B ANGALORE ELECTRICITY SUPPLY CO. LTD. VS. ITO(TDS) ORDER DATED 16/3/2012 2012(20) ITR (TRIB) 265 WHEREIN PAYMENT MADE BY STATE LOAD DISPA TCH CENTER (SLDC) IS HELD NOT LIABLE TO BE DEDUCTED TDS U/S 19 4J OF THE ACT. THE LD AR FURTHER RELIED ON THE DECISION OF HONBLE MUMBAI ITAT IN THE CASE OF MAHARASTRA STATE ELECTRICITY DISTRIBUTION CO. LT D. 25 TAXMAN 164, SIEMENS LIMITED 30 TAXMANN.COM 200, ITAT KOLKATA BE NCH DECISION IN THE CASE OF RIGHT FLORISTS PVT. LIMITED ITA NO. 133 6/KOL/2011 AND ITA DELHI BENCH DECISION IN THE CASE OF DELHI TRANSCO L TD. (ITA NO. 755(DEL)/2011 A.Y. 2005-06. HE ALSO RELIED ON THE D ECISION IN THE CASE OF DCIT VS. PARASRAMPURIA SYNTHETICS LTD. 20 SOT 24 8 (DELHI). THE REVENUE FILED APPEAL AGAINST THE ORDER OF HONBLE D ELHI HIGH COURT IN ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 20 THE CASE OF BHARTI CELLULAR LTD. BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT HAS HELD AS UNDER:- IN CASES REQUIRING EXAMINATION BY TECHNICAL EXPERT S, THE DEPARTMENT OUGHT NOT TO PROCEED ONLY BY THE CONTRAC TS PLACED BEFORE THE OFFICERS. WITH THE EMERGENCE OF OUR COUN TRY AS ONE OF THE BRIC COUNTRIES AND WITH TECHNOLOGICAL ADVANCEME NT, THE DEPARTMENT OUGHT TO EXAMINE TECHNICAL EXPERTS SO TH AT THE MATTERS COULD BE DISPOSED OF EXPEDITIOUSLY. FURTHER, THIS W OULD ENABLE THE APPELLATE FORUM, INCLUDING THE SUPREME COURT, TO DE CIDE THE LEGAL ISSUES 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/ACCES S/PORT CHARGES TO BSNL/MTNL, THE QUESTION WHETHER THE CELL ULAR PROVIDER HAS RENDERED TECHNICAL SERVICES AND HAS TO DEDUCT TAX AT SOURCE, DEPENDED ON WHETHER THE CHARGES WERE FOR TECHNICAL SERVICES, AND THIS INVOLVED DETERMINATION OF WHETHE R ANY HUMAN INTERVENTION WAS INVOLVED, WHICH COULD NOT BE DETERMINED WITHOUT TECHNICAL ASSISTANCE. 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 T HIS ISSUE AND ADMITTED THAT ROAMING SERVICES DOES NOT REQUIRE ANY HUMAN INTERVENTION, IT OPERATES AUTOMATICALLY. THE LD AR ALSO DRAWN OUR ATTENTION ON INDEPENDENT OPINION TAKEN FROM DIRECTO R CMAI, EX- DIRECTOR (C&M), BSNL, EX-MEMBER TELECOM COMMISSION 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 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 21 APPELLANT ALSO TAKEN OPINION FROM FORMER CHIEF JUST ICE OF INDIA MR. KAPADIA ON IUC POST TECHNICAL EXAMINATION, CROSS EX AMINED AND REEXAMINATION. WHO ALSO OPINED THAT HON'BLE SUPREME COURT DECISION DATED 12/08/2010 IS AN ORDER NOT JUDGMENT AS THE PR INCIPLE OF LAW WAS NOT RES-INTEGRA. THE WORD TECHNICAL SERVICES HAVE G OT TO BE READ IN NARROW SINCE AS HELD BY THE VARIOUS HONBLE HIGH CO URTS AND THE TRIBUNAL BY APPLYING PRINCIPLES OF NOSITUR A SOCII S PARTICULAR BECAUSE THE WORD TECHNICAL SERVICE IN SECTION 9(1)(VII) REA D WITH EXPLANATION-2 IN BETWEEN WORD MANAGERIAL CONSULTANCY SERVICES. FI NALLY HE OPINED THAT SUCH SETTING UP/INSTALLATION, REPAIRING, SERVI CING, MAINTENANCE ARE SEPARATE ACTIVITIES, THEY ARE BACK OFFICE FUNCTIONS AND ARE REQUIRE HUMAN INTERVENTION. BUT THE ROAMING PROCESS BETWEEN PARTICIPATING ENTITIES IS FULLY AUTOMATIC AND DOES NOT REQUIRE AN Y HUMAN INTERVENTION. ACCORDINGLY, THE INTERCONNECTED USES CHARGE WILL NOT ATTRACT THE PROVISIONS OF SECTION 194J READ WITH SE CTION 9(1)(VII) READ WITH EXPLANATION-2 THERETO. THEREFORE, 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 SERVICES, WHICH IS IDENTICAL TO THE ASSESSEES CASE. THE FACTS OF T HE CASE HAS BEEN DEMONSTRATED BY THE AR THAT THE ASSESSEE WAS ISSUIN G BILL ON NET AMOUNT ON MRP HAS BEEN FIXED ON PREPAID CARD SOLD. THE ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 22 ASSESSEE HAS NOT TRANSFERRED ANY INCOME TO THE DIST RIBUTOR BUT THE DISTRIBUTOR WAS ALLOWED TO AVAIL THE AIRTIME TO THE EXTENT OF MRP PRICE. IN BOOKS OF ACCOUNT, THE ASSESSEE HAD CR EDITED THESE RECEIPTS ON NET BASIS. THE FINDING ON THE CASE OF T ATA TELE SERVICES IS REPRODUCED AS UNDER: 2.23. WE FIND MERIT IN THE CONTENTION OF LD. COUNSE L THAT THERE IS NO JURISDICTIONAL HIGH COURT JUDGMENT ON THIS IS SUE. HONBLE KARNATAKA HIGH COURT JUDGMENT IS ELABORATE, DETAILE D, CONSIDERS THE PREVIOUS DELHI AND KERALA HIGH COURT JUDGMENT AGAINST THE ASSESSEE AND IS LATEST COMPREHENSIVE AD JUDICATION ON THE ISSUE. EVEN IF IT IS HELD THAT THERE EXIST D IVERGENCE OF JUDICIAL OPINION A VIEW FAVOURABLE TO THE ASSESSEE IS TO BE ADOPTED AS HELD BY HONBLE SUPREME COURT IN VEGETAB LE PRODUCTS LTD. AND VATIKA TOWNSHIP CASE (SUPRA). FRO M THIS ANGLE ALSO IN THESE FACTS AND CIRCUMSTANCES HONBLE KARNA TAKA 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 T O PRINCIPAL BASIS; THE CONSIDERATION RECEIVED BY ASSE SSEE IS SALE PRICE 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, ASSESSEE CANNOT BE HELD IN DEFAULT; IMPU GNED DEMAND RAISED APPLYING SEC. 194H IS QUASHED. ASSESSEES GROUNDS ARE ALLOWED. 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. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 23 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. THUS, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE 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 BEFORE 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 HIGH 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. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 24 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 ASSESS EES OWN CASE AS WELL AS THE JUDGMENT OF THE HONBLE JURISDICTIONAL H IGH COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST TH E REVENUE. THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE ARE SET ASID E. 10. GROUNDS NO. 4 AND 5 OF THE APPEAL ARE GENERAL I N NATURE AND CONSEQUENTIAL TO THE GROUNDS NO. 2 AND 3 OF THE APP EAL, THEREFORE, STANDS ADJUDICATED IN TERMS OF GROUNDS NO. 2 AND 3. 11. IN THE ASSESSEES APPEAL I.E. ITA 69/JP/2015 FO R THE A.Y. 2013-14, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 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 OR DER PASSED 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 OR DER OF THE LEARNED TDS OFFICER TREATING THE APPELLANT AS ASSE SSEE 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 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 25 COURT), AS THERE IS NO FINDING BY THE LEARNED TDS O FFICER WITH RESPECT TO THE FAILURE OF DEDUCTEES TO PAY TAXES DI RECTLY, 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 THE ACT IN CONTRADICTION TO THE SETTLED PRINCIPLE ENUNCIATE D BY 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 LIABILITY 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 DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE UNDER S ECTION 194H OF THE ACT ON DISCOUNT EXTENDED TO THE DISTRIBUTORS OF ITS PRE-PAID SIM CARDS/ TALKTIME DURING THE SUBJECT FINANCIAL YE AR. 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 LEARNED TDS OFFICER THAT THE RELATIONSHIP BETWEEN THE APPEL LANT AND THE PRE-PAID DISTRIBUTORS IS NOT THAT OF PRINCIPAL TO PRINCIPAL AND THE DISCOUNT ALLOWED TO THEM IS IN NATURE OF COMMISSION LIABLE FOR TAX DEDUCTION AT SOURCE, AS ENVISAGED UNDER SECTION 194 H 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 PROVIS IONS OF SECTION 194H OF THE ACT WOULD BE APPLICABLE TO THE APPELLAN TS CASE WITHOUT TAKING COGNIZANCE OF THE FACT THAT THE APPE LLANT IS NOT RESPONSIBLE TO MAKE ANY PAYMENT/ CREDIT TO THE PREP AID DISTRIBUTORS TOWARDS THE DISCOUNT EXTENDED TO THEM AND ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 26 RESPONSIBILITY/ OBLIGATION TO MAKE PAYMENT/ CREDIT IS A CONDITION 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 D ISCOUNT ALLOWED BY THE APPELLANT IS NOT INCOME IN THE HANDS OF ITS DISTRIBUTORS AND THAT INCOME, IF ANY, ARISES ONLY W HEN THE PRE-PAID SIM CARDS/ TALKTIME IS FURTHER DISTRIBUTED BY THE D ISTRIBUTORS. 2.5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE F ACT THAT THERE IS NO FLOW OF MONIES FROM THE APPELLANT TO THE DISTRIB UTOR OF PRE- PAID SIM CARD/ TALKTIME BUT RATHER FROM THE DISTRIB UTOR TO THE APPELLANT, AND HENCE, THE PROVISIONS OF SECTION 194 H 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 D IFFERENCE BETWEEN 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 SERVICE PROVIDER, A PRE-PAID RECHARG E VOUCHER ENTITLES THE HOLDER TO RECEIVE TELECOM SERVICES EQU IVALENT TO THE VALUE EMBEDDED IN IT, AND HENCE, THE TERMS SIM CAR D AND PRE- PAID RECHARGE VOUCHER CANNOT BE USED INTER-CHANGEA BLY. 3. GROUND NO. 3- NO DEMAND UNDER SECTION 201(1) OF THE ACT CAN BE RECOVERED FROM THE APPELLANT 3.1 WITHOUT PREJUDICE TO GROUND NOS. 1 TO 2 ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LE ARNED CIT(A) HAS FAILED TO APPRECIATE THAT NO DEMAND CAN BE RAIS ED UNDER SECTION 201(1) OF THE ACT SINCE TAXES WOULD HAVE BE EN PAID BY THE RECIPIENT PARTIES AND SUCH AN ACTION OF THE LEARNED TDS OFFICER HAS RESULTED IN DOUBLE RECOVERY OF TAXES, WHICH IS AGAI NST THE RULES OF TAXATION PRINCIPLES. 3.2 WITHOUT PREJUDICE TO GROUND NO. 3.1, 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 ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 27 RELATING TO PAYMENT OF TAXES BY THE PAYEES BASIS TH E DETAILS OF PAYEES (VIZ PERMANENT ACCOUNT NUMBER, ADDRESS) SUBM ITTED BY THE APPELLANT. 3.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN IGNORING THE RULING OF THE MUMBAI BENCH OF ITAT IN THE CASE OF VODAFONE ESSAR LIMITED (ITA NOS. 6058, 6059, 6060/MUM/2009) (DECEMBER 2010) (MUMBAI TRIBUNAL) WHEREIN THE ITAT DIRECTED THE ASSESSING O FFICER TO INVOKE HIS POWERS UNDER THE ACT AND VERIFY PAYMENT OF TAXES BY THE PAYEES FROM THE RESPECTIVE ASSESSING OFFICERS A SSESSING THE PAYEES WITH THE HELP OF THE PERMANENT ACCOUNT NUMBE RS OF THE PAYEES FURNISHED BY THE ASSESSEE. 4. GROUND NO. 4 - NO INTEREST UNDER SECTION 201(1A) OF THE ACT CAN BE CHARGED 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED TDS OFFICER HAS ERRED IN CHARGING INTEREST UNDER SECTION 201 (1 A) OF THE ACT. 4.2 WITHOUT PREJUDICE TO GROUND NO. 4.1, ON THE FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW, CONSEQUENTIAL INTEREST UNDER SECTION 201(1 A) OF THE ACT SHOULD BE COMPUTE D FROM THE DUE DATE OF PAYMENT OF WITHHOLDING TAX BY THE APPEL LANT TO THE DATE OF PAYMENT OF TAXES 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 CIRCUM STANCES OF THE CASE. 12. GROUND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION AS IT DEPENDS ON THE OUTCOME OF THE OTHER GROUNDS RAISED BY THE ASSESSEE. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 28 13. GROUND NO. 2 OF THE APPEAL IS REGARDING THE LIA BILITY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE U/S 194H OF THE AC T ON DISCOUNT ALLOWED TO DISTRIBUTORS IN PRE PAID SIM CARDS AND RE CHARGE VOUCHERS. THIS GROUND IS COMMON TO THE GROUND NO. 2 OF THE AS SESSEES APPEAL FOR THE A.Y. 2012-13. IN VIEW OF OUR FINDINGS ON THIS IS SUE IN THE APPEAL OF THE ASSESSEE FOR THE A.Y. 2012-13, THIS GROUND OF A PPEAL HAS BEEN DISPOSED OFF IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 14. GROUNDS NO. 3 AND 4 OF THE APPEAL ARE GENERAL I N NATURE AND CONSEQUENTIAL TO THE GROUND NO. 2 OF THE APPEAL, TH EREFORE, STANDS ADJUDICATED IN TERMS OF GROUNDS NO. 2. 15. IN THE REVENUES APPEAL I.E. ITA 71/JP/2016 FOR THE A.Y. 2014-15, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194H OF THE I. T. ACT, 1961 AS THE RELATION BETWEEN ASSESSEE AND DISTRIBUTOR IS TH AT OF PRINCIPAL TO AGENT. II) THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DEMAND U/S 201(1) FOR NON DEDUCTION OF TDS U/S 194H OF THE I.T. ACT, 1961 ON THE COMMISSION PAYMENT TO VARIOUS DISTRIBUTORS. 16. THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL I S COMMON TO THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 2 OF THE APPEAL FOR THE A.YS. ITA 68 & 69/JP/2015 & 71/JP/2016_ VODAFONE DIGILINK LTD. VS ITO (TDS) 29 2012-13 AND 2013-14. IN VIEW OF OUR FINDINGS ON THIS ISSUE FOR THE A.Y. 2012-13 AND 2013-14, THE GROUNDS OF REVENUES APPEA L ARE DISMISSED. 17. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/01/2018. SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 19 TH JANUARY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- VODAFONE DIGILINK LIMITED, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- (I) THE ITO (TDS-2), JAIPUR. (II) THE A.C.I.T. (TDS), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 68 & 69/JP/2015 & 71/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR