Appeal details
Counselvise Citation
[2018] 121 COUNSELVISE.COM (IT) 5593 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 year(s) 2 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-04-2018
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
20-06-2017
Assessment Year
2005-2006
Appeal Filed On
09-02-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: BENCH C NEW DELHI BEFORE SRI R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 800/DEL/2011 A.Y. 2005-06 IDEA CELLULAR LTD. VS. ACIT A-68, SECTOR-64 CIRCLE-50(1) NOIDA NEW DELHI NEW DELHI PAN : AAACB2100P (APPELLANT) (RESPONDENT) REVENUE BY : SH. S.L.ANURAGI, SR. DR ASSESSEE BY : SH. RONAK DOSHI, FCA DATE OF HEARING: 11.04 . 2018 DATE OF PRONOUNCEMENT : 16.04.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAIN ST ORDER DATED 03.03.2010 PASSED BY LD. CIT (A)-XXIV, NEW DE LHI FOR ASSESSMENT YEAR 2005-06 ON FOLLOWING GROUNDS OF AP PEAL: GROUND I: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN TREATING DISCOUNT OFFERED BY THE APPELLANT TO THE DISTRIBUTORS IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT AND ACCORDINGLY, ERRED IN HOLDING THE APPELLANT AS AN ASSESSEE IN DEFAULT FOR ALLEG ED NON-DEDUCTION OF TAX AT SOURCE U/S 201 R.W.S 194H OF THE INCOME TAX ACT, 1961 ('THE ACT). HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT A PRINCIPAL TO AGENT RELATIONSHIP IS A SINE QUO NON TO INVOKE SECTION 19 4H OF THE ACT. HOWEVER, ON THE FACTS THE RELATIONSHIP BETWEEN THE APPELLANT AND 2 ITA NO. 800.DEL.2011 (IDEA CELLULAR LTD.) DISTRIBUTORS IS ON PRINCIPAL TO PRINCIPAL BASIS. THE APPELLANT THEREFORE PRAYS THAT THE DISCOUNT OFF ERED TO THE. DISTRIBUTORS CANNOT BE REGARDED AS COMMISSION AS ENVISAGED U/S 194H OF THE ACT AND ACCORDINGLY THE ORDER PASSED U/ S 201 R.W.S 194H OF THE ACT OUGHT TO BE QUASHED. WITHOUT PREJUDICE TO GROUND I: GROUND II: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO WITHOUT APP RECIATING THE FACT THAT THERE WAS NO CREDIT OR PAYMENTS OF ANY COMMISS ION TO THE DISTRIBUTORS AND THEREFORE THERE CAN BE NO LIABILIT Y OR DUTY TO DEDUCT TAX. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT , WHEN TDS PROVISION ITSELF DO NOT APPLY TO THE APPELLANTS CASE, THE AP PELLANT CAN NOT BE HELD LIABLE TO DEDUCT TAX. THE APPELLANT THEREFORE PRAYS THAT IT CAN NOT BE R EGARDED AS ASSESSEE IN DEFAULT FOR ALLEGED NON DEDUCTION OF TAX U/S 19 4H OF THE ACT. WITHOUT PREJUDICE TO GROUND I & II: GROUND III: THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN RAISING A DEMAND ON THE APPELLANT U/S 201(1) OF THE ACT BY TREATING AS ASSESSEE IN DEFAULT WITHOUT APPRECIATING THE FACTS THAT PAYEES WOULD HAVE ALREADY PAID TAXES ON THEIR INCOME. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO RECO MPUTE THE DEMAND AFTER CONSIDERING THE TAXES PAID BY RECIPIENT, IF A NY AND THUS TO THAT EXTENT BE ABSOLVED OF ITS LIABILITY TO PAY DEMAND U /S. 201 & 201(1 A) OF THE ACT. GROUND IV: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN HOLDING THE APPELLANT AS AN 'ASSESSEE IN DEFAULT U/S 201 OF THE INCOME TAX ACT, 1961 ('THE ACT) AND CONSEQUENTLY LEVYING INTEREST U/S 201(1 A) OF THE ACT. THE APPELLANT DENIES ITS LIABILITY TO SUCH INTEREST . WITHOUT PREJUDICE TO THE ABOVE, IF IN THE EVENT THE APPELLANT BE HELD AS ASSESSEE IN DEFAULT U/S 201 R.W.S 194H OF THE ACT , THEN INTEREST U/S 201(1 A) OF THE ACT BE CALCULATED AFTER CONSIDERING TAXES (SELF ASSESSMENT TAX / ADVANCE TAX) PAID BY THE RECIPIENT . GROUND V: THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER AND / O R AMEND, WITHDRAW ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE M/S IDEA CELLULAR LTD. (HEREINAFTER RE FERRED TO AS ASSESSEE OR ICL) IS A CELLULAR SERVICE PROVI DER HAVING OPERATIONS IN DELHI NCR AMONG OTHER PLACES. THE AO HAS HELD 3 ITA NO. 800.DEL.2011 (IDEA CELLULAR LTD.) THAT THE TRANSACTION BETWEEN ICL AND ITS PREPAID DI STRIBUTERS (OR PREPAID MARKET ASSOCIATES PMA) IS THAT OF PRINCI PAL TO AGENT AT ALL TIMES AND SUCH PMA IS SELLING PREPAID SIM CARD / RECHARGE COUPON ON BEHALF OF ICL. THEREFORE, DISCOUNTS/BONUS OFFERED TO THE PREPAID DISTRIBUTOR WOULD FIT INTO DEFINITION O F COMMISSION FOR THE SERVICE RENDERED AND TAX WAS REQUIRED TO BE DED UCTED AT SOURCE BY ICL U/S 194H. AS THE ASSESSEE HAD NOT DIS CHARGED ITS OBLIGATION U/S 194H OF THE ACT, IT IS LIABLE TO PAY SHORTFALL U/S 201(1) AND RESULTANT INTEREST U/S 201(1A) OF THE AC T. THE TOTAL SHORTFALL ON THIS ACCOUNT U/S 201(1) R.W.S. 194H FO R THE FINANCIAL YEAR UNDER CONSIDERATION CAME TO RS. 62,00,145/- AN D INTEREST U/S 201(1A) WAS CALCULATED AT RS. 17,67,027/-. 3. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFE RRED APPEAL BEFORE LD. CIT (A) WHO CONFIRMED THE ADDITION MADE BY LD. AO. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS I N APPEAL BEFORE US NOW. 4. ASSESSEE IS AGGRIEVED ON THE FOLLOWING ISSUES: 1. THE IMPUGNED ORDER IS BAD IN LAW AND ON FACTS A ND THERE DOES NOT EXIST PRINCIPAL AND AGENT RELATIONSHIP BETWEE N THE APPELLANT AND PREPAID SIM DISTRIBUTORS. 2. THAT ORDER IS UNTENABLE IN LAW AS NO PAYMENT OF COMMISSION IS MADE AS ENVISAGED WITHIN THE PROVISIO NS OF SECTION 194H OF THE ACT. 3. THAT ORDER VIOLATES LEGAL PRINCIPLE OF PRECEDEN CE AS THE AO ERRED IN NOT FOLLOWING THE ORDER OF CIT(A) PASSED O N THE SAME ISSUE IN ITS OWN CASE FOR THE CIRCLE OF ANDHRA PRAD ESH. 4. THAT THE AO ERRED IN NOT ACCEPTING THE CONTENTI ON OF THE ASSESSEE THAT DECISION OF HONBLE DELHI TRIBUNAL IN THE CASE OF 4 ITA NO. 800.DEL.2011 (IDEA CELLULAR LTD.) SINGAPORE AIRLINES LIMITED V. ACIT (ITA NO. 58/DEL/ 2003) AS ACCEPTED BY HONBLE MUMBAI TRIBUNAL IN THE CASE OF KOREAN AIRLINES (ITA NO. 1979/MUM/2003) IS APPLICABLE TO T HE ASSESSEES CASE. 5. AO ERRED IN NOT CONSIDERING THAT AS SIM DISTRIBU TORS HAD ALREADY ACCOUNTED FOR THE DISCOUNT (COMMISSION) IN THEIR INCOME AND HENCE DEDUCTION OF TAX AT SOURCE U/S 194H WOULD AMOUNT TO DOUBLE TAXATION. 6. THE AO ERRED IN CHARGING INTEREST U/S 201(1A) ON ALLEGED SHORT DEDUCTION OF TAX WITHOUT HOLDING THAT ASSESSE E WAS IN DEFAULT AS PER THE RELEVANT PROVISIONS OF THE ACT . 5. AT THE OUTSET LD. AR SUBMITTED THAT ALL THE ABOV E ISSUE STANDS SQUARELY COVERED BY ORDER OF HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE IN CIT VS IDEA CELLULAR LTD . FOR ASSESSMENT YEAR 2003-04 AND 2004-05 REPORTED IN (2010) 189 TAXMANN 118 . 6. WE HAVE PERUSED THE ABOVE REFERRED ORDER PASSED HONBLE DELHI HIGH COURT AND OBSERVED THAT HONBLE COURT DECIDED THE ISSUE IN FAVOUR OF REVENUE BY OBSERVING AS UNDER: THUS, EVEN IF ADVANCE PAYMENT IS MADE BY THE PMA ON RECEIPT OF THE SIM CARDS, QUA THOSE SIM CARDS, IT DOES NOT AMOUNT TO SALE OF GOODS. THE PURPOSE IS TO ENSURE THAT THE PAYMENT IS RECEIV ED IN RESPECT OF THOSE SIM CARDS, WHICH ARE ULTIMATELY SOLD TO THE S UBSCRIBER INASMUCH AS UNSOLD SIM CARDS ARE TO BE RETURNED TO THE ASSES SEE AND THE ASSESSEE IS REQUIRED TO MAKE PAYMENT AGAINST THEM. THIS IS AN ANTITHESIS OF SALE. THERE CANNOT BE ANY SUCH OBLI GATION TO RECEIVE BACK THE UNSOLD STOCKS. FURTHER, CLAUSE 25(F) LAYS DOWN THAT ON TERMINATION OF AGREEMENT, PMA OR ITS AUTHORISED RETAILER APPOIN TED BY IT, IS NOT ENTITLED TO ANY COMPENSATION FOR COST OR EXPENSES I NCURRED BY IT IN EITHER SETTING UP OR PROMOTION OF ITS BUSINESS, ETC . NO SUCH CLAUSE WAS REQUIRED IN CSE OF SALE. 5 ITA NO. 800.DEL.2011 (IDEA CELLULAR LTD.) 28. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE SAID BENCH. IDENTICAL VIEW IS TAKEN BY CALCUTTA BENCH IN THE CA SE OF ASSTT. CIT V. BHARTI CELLULAR LTD. [2007] 105 ITD 129. BOTH THESE BENCHES SPECIFICALLY REJECTED THE ARGUMENTS OF THE ASSESSEE BASED ON AHM EDABAD STAMP VENDORS ASSOCIATION (SUPRA), BHOPAL SUGAR INDUSTRIE S LTD.S CASE (SUPRA), KERALA STATE STAMP VENDORS ASSOCIATION V. OFFICE OF ACCOUNTANT GENERAL [2006] 150 TAXMAN 30 (KER.) AND BAJAJ AUTO LTD.S CASE (SUPRA) DISTINGUISHING THOSE JUDGMENTS AND HOLDING THAT TH EY ARE NOT APPLICABLE IN THE GIVEN SITUATION. WE AGREE WITH TH E SAME. 29. WE THUS ANSWER THE QUESTION, AS FORMULAT ED, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. AS A CONSEQUENCE, THESE APPEALS ARE ALLOWED AND JUDGMENT OF THE TRIBUNAL ON THIS AS PECT IS SET ASIDE. NO COSTS. 7. RESPECTFULLY FOLLOWING THE SAME, WE ARE OF CONSI DERED OPINION THAT PAYMENTS MADE BY ASSESSEE WAS IN NATUR E OF COMMISSION ON WHICH TDS WAS LIABLE TO U/S 194 OF TH E ACT. ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE STANDS D ISMISSED. 8. IN THE RESULT APPEAL FILED BY THE ASSESSEE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/04/ 2018. SD/- SD/- (R.K.PANDA) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 16 TH APRIL, 2018 BINITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY - BY ORDER, 6 ITA NO. 800.DEL.2011 (IDEA CELLULAR LTD.) ASSISTANT REGISTRAR ITAT DELHI BENCHES S.NO. DETAILS DATE 1 DRAFT DICTATED ON 13.04.2018 2 DRAFT PLACED BEFORE AUTHOR 13.04.2018 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON 16.04.2018 7 FILE SENT TO BENCH CLERK 16.04.2018 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R. 10 DATE OF DISPATCH OF ORDER
