Vodafone Cellular Ltd., Pune V. Additional Commissioner of Income-tax,

ITA 793/PUN/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7130 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-12-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUNDAN
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! ' # , $% &' #' , ' # '( BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWAS THY, JM '%. / ITA NOS. 788 TO 793/PUN/2015 * +* / ASSESSMENT YEARS : 2007-08 TO 2012-13 VODAFONE CELLULAR LIMITED, F.P. NO. 27, S. NO. 21, THE METROPOLITAN, OLD MUMBAI - PUNE HIGHWAY, SHIVAJI NAGAR, PUNE - 411005 PAN : AAACB8614L ....... / APPELLANT /VS. ADDITIONAL COMMISSIONER OF INCOME TAX, TDS RANGE, PUNE / RESPONDENT ASSESSEE BY : SHRI SALIL KAPOOR & SHRI RAJAT SONI REVENUE BY : SHRI RAJESH KUNDAN / DATE OF HEARING : 21-02-2017 / DATE OF PRONOUNCEMENT : 23-02-2017 , / ORDER PER VIKAS AWASTHY, JM : THESE SIX APPEALS FILED BY THE ASSESSEE FOR THE ASSESS MENT YEARS 2007-08 TO 2012-13 ARE DIRECTED AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-10, PUNE FOR THE RESPECTIVE ASSESSM ENT YEARS CONFIRMING THE LEVY OF PENALTY U/S. 271C OF THE INCOME TAX ACT, 1961 2 ITA NOS. 788 TO 793/PUN/2015, A.YS. 2007-08 TO 2012-13 (HEREINAFTER REFERRED TO AS THE ACT). ALL THE IMPUGNED ORDERS ARE DATED 24-04-2015. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE COMPANY IS A SUBSIDIARY OF VODAFONE INDIA LIMITED (FORMERLY KNOWN AS VODAFONE ESSAR CELLULAR LTD.). THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF PROVIDING CELLULAR MOBILE TELEPH ONE SERVICES IN THE TELECOM CIRCLES OF MAHARASHTRA AND GOA (EXCLUDING M UMBAI). THE ASSESSEE COMPANY PROVIDES PRE-PAID AND POST-PAID T ELEPHONY SERVICES TO ITS SUBSCRIBERS. UNDER PRE-PAID SERVICES THE SUBSCRIBERS PAY UPFRONT FOR PURCHASE OF RECHARGE COUPONS AND SIM CARDS . IN CASE OF POST-PAID SERVICES THE SIM CARD IS GIVEN FREE OF COST AND THE SUBSCRIBERS PAY AS PER THE BILL GENERATED AFTER USE OF S ERVICES. A SURVEY ACTION U/S. 133A OF THE ACT WAS CONDUCTED AT THE BUSIN ESS PREMISES OF ASSESSEE ON 23-04-2008 FOR VERIFICATION OF THE COMPLIANCES UNDER TDS PROVISIONS. DURING THE COURSE OF SURVEY IT WAS FOUND THAT THE ASSESSEE COMPANY WAS PAYING COMMISSION TO ALL THE DEALERS EXCEPT D ISTRIBUTORS. IT WAS EXPLAINED THAT THE SALE IS MADE TO THE DISTRIBUTOR AT MRP LESS TRADE MARGIN AND TARGET BASED INCENTIVES WHICH ARE GIVEN TO THEM IN THE FORM OF TOPUP. THE INVOICES RAISED ON DISTRIBUTORS AN D FRANCHISE ARE AT MRP MINUS THE APPLICABLE TRADE MARGINS AND INCLUSIVE OF APPLICABLE TAXES. THE ABOVE TRADE MARGINS WERE NOT REFLEC TED IN THE INVOICES AS BILLING WAS DONE ON NET AMOUNT. THE SURVEY T EAM AFTER GOING THROUGH THE DISTRIBUTORSHIP AGREEMENTS, FOUND THAT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE DISTRIBUTOR WAS THAT OF A PRINCIPAL AND AN AGENT. THE ASSESSING OFFICER HELD THAT SUP PLY AND DELIVERY OF SIM CARDS DID NOT CONSTITUTE SALE AND PURCHA SE BUT 3 ITA NOS. 788 TO 793/PUN/2015, A.YS. 2007-08 TO 2012-13 PROVISION OF SERVICES. THE ASSESSING OFFICER AFTER PLACING RELIANCE ON TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME TAX VS. IDEA CELLULAR LTD. REPORTED AS 325 ITR 14 8 AND THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF VODAFO NE ESSAR CELLULAR LTD. VS. ACIT REPORTED AS 332 ITR 255 HELD THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 194H OF THE ACT BY NOT DEDUCTING TAX AT SOURCE ON TRADE DISCOUNT. THE PENALTY PROCEE DINGS U/S. 271C OF THE ACT WERE INITIATED IN ALL THE IMPUGNED ASSESSMENT Y EARS. THE ASSESSING OFFICER VIDE SEPARATE ORDER OF EVEN DATE I.E. 28- 03-2015 LEVIED PENALTY U/S. 271C OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194H OF THE ACT. THE PENALTY LEV IED DURING ASSESSMENT YEARS UNDER APPEAL ARE AS UNDER : SR. NO. ASSESSMENT YEAR PENALTY U/S. 271C 1 2007 - 08 ` 68,81,311/ - 2 2008 - 09 ` 2,71,24,546/ - 3 2009 - 10 ` 5,74,61,489/ - 4 2010 - 11 ` 6,35,89,628/ - 5 2011 - 12 ` 5,81,69,952/ - 6 2012 - 13 ` 6,61,20,451/ - AGGRIEVED BY THE ORDER LEVYING PENALTY U/S. 271C, THE ASS ESSEE FILED APPEALS FOR THE RESPECTIVE ASSESSMENT YEARS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF I NCOME TAX (APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE A ND UPHELD THE ORDERS LEVYING PENALTY U/S. 271C OF THE ACT. NOW, THE A SSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL IMPUGNING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE LEVY OF PENALTY. 4 ITA NOS. 788 TO 793/PUN/2015, A.YS. 2007-08 TO 2012-13 3. SHRI SALIL KAPOOR & SHRI RAJAT SONI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ORDER LEVYING PENALTY U/S. 2 71C FOR THE ASSESSMENT YEARS UNDER APPEAL ARE LIABLE TO BE SET ASIDE AS THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS DELETED THE QUANTUM A DDITION. THE LD. AR REFERRING TO THE ORDER OF CO-ORDINATE BENCH COMMON FOR ITA NOS. 817, 818, 1577, 1578, 1961 & 1962/PUN/2013 FOR THE ASSES SMENT YEARS 2007-08 TO 2012-13 DECIDED ON 04-01-2017 SUBMIT TED THAT THE TRIBUNAL HAS DELETED THE ADDITION U/S. 201(1) AND 201(1A) OF THE ACT. THE DEMAND RAISED IN THE ASSESSMENT YEAR 2007-08 HAS BEEN DELETED ON THE GROUND THAT THE ORDER PASSED U/S. 201(1) AND 20 1(1A) OF THE ACT IS ITSELF BARRED BY LIMITATION. IN RESPECT OF OTHER ASSESSM ENT YEARS I.E. ASSESSMENT YEARS 2008-09 TO 2012-13 THE TRIBUNAL HAS HELD THAT SALE OF SIM CARDS/RECHARGE COUPONS AT DISCOUNT RATE TO DIST RIBUTOR IS NOT COMMISSION AND THEREFORE, NOT LIABLE TO TDS PROVISIONS U/S. 1 94H OF THE ACT. THE LD. AR CONTENDED THAT THOUGH THE TRIBUNAL HAS REMITTED THE MATTER BACK TO THE ASSESSING OFFICER FOR VERIFICATION A S TO HOW THE SALE PRICE AND SALE DISCOUNT IS TREATED IN THE BOOKS AND WHETHER THE SALE DISCOUNT IS REFLECTED IN THE BOOKS, BUT IN PRINCIPLE THE TRIBUNAL AFTER FOLLOWING THE ORDER OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF BHARTI AIRTEL LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX RE PORTED AS 372 ITR 33 HAS CONCLUDED THAT THE PROVISIONS OF SECTION 194H ARE NOT ATTRACTED IN RESPECT OF SALE OF SIM CARDS/RECHARGE COUP ONS AT DISCOUNT RATES TO THE DISTRIBUTORS. THE LD. AR SUBMITTED THAT TH E PATNA BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 76-77/PA T/2012 FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 DECIDED ON 30-11-2016 HAS TAKEN A SIMILAR VIEW BY FOLLOWING THE RATIO LAID DOWN BY H ONBLE KARNATAKA HIGH COURT. THE PATNA BENCH OF THE TRIBUNAL HAS NOT 5 ITA NOS. 788 TO 793/PUN/2015, A.YS. 2007-08 TO 2012-13 REMITTED THE ISSUE BACK FOR FURTHER VERIFICATION. SIMILARLY, A HMEDABAD BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 3 86/AHD/2011 FOR THE ASSESSMENT YEAR 2008-09 DECIDED ON 07-07-2015 HAS HELD THAT THE PROVISIONS OF SECTION 194H ARE NOT ATTRACTED. THE V ARIOUS BENCHES OF THE TRIBUNAL HAVE TAKEN CONSISTENT VIEW THAT THE PROVISIONS OF S ECTION 194H ARE NOT APPLICABLE AS THERE IS NO QUESTION OF DEMAND U/S. 201(1) AND 201(1A) OF THE ACT. 3.1 THE LD. AR FURTHER RAISED THE PLEA OF REASONABLE CAUSE . IN SUPPORT OF HIS SUBMISSIONS HE PLACED RELIANCE ON THE DECISIO N OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ELI LILLY & CO. (INDIA) (P.) LTD. REPORTED AS 312 ITR 225. 3.2 FURTHER, TO FORTIFY HIS CONTENTIONS THE LD. AR CONTENDE D THAT WHERE THERE IS A DIFFERENCE IN VIEW TAKEN BY THE ASSESSEE AND THAT OF THE ASSESSING OFFICER AND BOTH THE VIEWS ARE EQUALLY FORCEFUL, PENAL PROVISIONS ARE NOT ATTRACTED. TO SUPPORT THIS CONTENTIO N, THE LD. AR PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUN AL IN THE CASE OF L & T JOHN DEERE (P.) LTD. VS. ASSISTANT COMMISSIO NER OF INCOME TAX REPORTED AS 120 ITD 497. 4. ON THE OTHER HAND SHRI RAJESH KUNDAN REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISS IONER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY. HOWEV ER, THE LD. DR FAIRLY ADMITTED THAT THE CO-ORDINATE BENCH OF THE T RIBUNAL HAS DELETED THE QUANTUM ADDITION IN THE CASE OF ASSESSEE FOR ASSESSMENT YEARS UNDER APPEAL. 6 ITA NOS. 788 TO 793/PUN/2015, A.YS. 2007-08 TO 2012-13 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS ON WHICH THE LD . AR OF THE ASSESSEE HAS PLACED RELIANCE. THE PENALTY U/S. 271C HAS BEEN LEVIED IN RESPECT OF VIOLATION OF PROVISIONS OF SECTION 194H OF THE AC T. ADDITIONS WERE MADE IN THE HANDS OF ASSESSEE U/S. 201(1) AND 201(1 A) OF THE ACT ON ACCOUNT OF ALLEGED NON-DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF COMMISSION TO DISTRIBUTORS. THE QUANTUM ADDITION TRAVELLED UP TO THE TRIBUNAL. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NOS . 817, 818, 1577, 1578, 1961 & 1962/PUN/2013 FOR THE ASSESSMENT YE ARS 2007-08 TO 2012-13 DECIDED ON 04-01-2017 HAS DELETED THE ADDITION IN APPEALS FILED BY THE ASSESSEE. THE APPEAL OF ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 WAS ALLOWED, AS THE ORDER PASS ED BY ASSESSING OFFICER U/S. 201(1) AND 201(1A) OF THE ACT WAS BAR RED BY LIMITATION. IN RESPECT OF OTHER ASSESSMENT YEARS I.E. ASSES SMENT YEARS 2008-09 TO 2012-13, THE TRIBUNAL HELD THAT SALE OF SIM CARDS/RECHARGE COUPONS AT DISCOUNTED RATE TO DISTRIBUTORS IS NOT COMM ISSION AND THEREFORE, NOT LIABLE TO TDS PROVISIONS U/S. 194H OF THE ACT . ALTHOUGH THE TRIBUNAL HAS REMITTED THE MATTER BACK TO THE FILE OF A SSESSING OFFICER TO VERIFY THE MANNER IN WHICH THE BOOKS OF ACCOUNT ARE MAINTAINED AND WHETHER THE SALE DISCOUNT IS REFLECTED IN TH E BOOKS. HOWEVER, IN PRINCIPLE THE TRIBUNAL HAS DELETED THE ADDITION HOLDING THAT THERE IS NO PAYMENT OF COMMISSION, HENCE, THE PROVISIONS OF SECTION 194H ARE NOT ATTRACTED. VARIOUS BENCHES OF THE TRIBUNA L IN ASSESSEES OWN CASE HAVE TAKEN CONSISTENT VIEW HOLDING THAT THE T DS PROVISIONS U/S. 194H ARE NOT APPLICABLE IN RESPECT OF SALE OF SIM CARD S/RECHARGE COUPONS AT DISCOUNTED RATES TO THE DISTRIBUTORS. 7 ITA NOS. 788 TO 793/PUN/2015, A.YS. 2007-08 TO 2012-13 6. ONCE, THE SUBSTRATUM FOR LEVY OF PENALTY HAS ERODED T HERE IS NO QUESTION FOR SUSTAINING THE PENALTY. SINCE, THE CO-ORDINA TE BENCH OF TRIBUNAL HAS DELETED THE QUANTUM ADDITION IN ALL THE ASSE SSMENT YEARS UNDER APPEAL, UNDER SUCH CIRCUMSTANCES THERE IS NO QUE STION OF LEVY OF PENALTY. ACCORDINGLY, THE IMPUGNED ORDERS ARE SET ASIDE AND ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 23 RD DAY OF FEBRUARY, 2017. SD/- SD/- ( / ANIL CHATURVEDI) ( ! / VIKAS AWASTHY) ' ! / ACCOUNTANT MEMBER # ! / JUDICIAL MEMBER ' / PUNE; $% / DATED : 23 RD FEBRUARY, 2017 RK , - ./& 0&+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. & & ' () / THE CIT(A)-10, PUNE 4. THE CIT(TDS), PUNE 5. *+ ,- , & ,- , . ./ , ' / DR, ITAT, B BENCH, PUNE. 6. +01 23 / GUARD FILE. // // TRUE COPY// &'4 / BY ORDER, 5 %6 / ASSISTANT REGISTRAR, & ,- , ' / ITAT, PUNE