M/s. Idea Cellular Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 807/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7618 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Question of law; Non-deduction of tax
• Section: 133A; 201(1); 12; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO S . 807 & 808 /P U N/20 1 6 / ASSESSMENT YEAR S : 20 1 2 - 1 3 & 2013 - 14 M/S. IDEA CELLULAR LIMITED, 11/1, SHARDA CENTRE, ERANDWANE, PUNE 411004 . / APPELLANT PAN: AAACB2100P VS. THE DY. COMMISSIONER OF INCOME TAX (TDS) - 1, PUNE . / RESPONDENT ASSESSEE BY : SHRI RONAK G. DOSHI REVENUE BY : SHRI RAJEEV KUMAR / DATE OF HEARING : 0 7 . 0 5 . 201 8 / DATE OF PRONOUNCEMENT: 14 . 05 . 201 8 / ORDER PER SU SHMA CHOWLA, JM: BOTH T HE APPEAL S FILED BY THE ASSESSEE ARE AGAINST SEPARATE ORDER S OF CIT(A), PUNE - 10 , BOTH DATED 2 9 .0 1 .201 6 RELATING TO ASSESSMENT YEAR S 20 1 2 - 1 3 AND 2013 - 14 AGAINST RESPECTIVE ORDERS PASSED UNDER SECTION 201(1)/201(1A) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 ITA NO S . 807 & 808 /P U N/201 6 M/S. IDEA CELLULAR LTD. 2 . BOTH THE APPEAL S OF ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORD ER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.807/PUN/2016, RELATING TO ASSESSMENT YEAR 2012 - 13 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - GROUND NO.1: NON - DEDUCTION OF TAX AT SOURCE (TDS) UNDER SECTION 194H OF THE ACT ON DISCOUNT ALLOWED TO THE PRE - PAID DISTRIBUTORS (THE DISTRIBUTORS): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER PASSED BY THE TDS OFFICER UNDER SECTION 201(1)/201(1A) OF THE ACT BY TREATING 'DISCOUNT' OFFERED BY THE APPELLANT TO THE DISTRIBUTORS AS 'COMMISSION' AND THEREBY TREATING THE APPELLANT AS AN 'A SSESSEE IN DEFAULT' UNDER SECTION 201(1) R W S 194H OF THE ACT. 2. THE APPELLANT MOST HUMBLY PRAYS THAT THE DISCOUNT ALLOWED TO THE DISTRIBUTORS BE HELD AS NOT LIABLE TO TDS UNDER SECTION 194H OF THE ACT AS THE RELATIONSHIP BETWEEN THE APPELLANT AND ITS D ISTRIBUTORS IS ON PRINCIPAL - TO - PRINCIPAL BASIS AND, THUS, THE DEMAND RAISED IN THE IMPUGNED ORDER IN RESPECT OF THE ALLEGED FAILURE TO DEDUCT TAX UNDER SECTION 194H OF THE ACT BE DELETED. WITHOUT PREJUDICE TO GROUND NO. I : GROUND NO. II : 1. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE OBSERVATIONS OF THE TDS OFFICER BY TREATING THE APPELLANT AS AN 'ASSESSEE IN DEFAULT' UNDER SECTION 201(1) OF THE ACT, WITHOUT APPRECIATING THAT IT IS A SETTLED LEGAL PO SITION THAT, IF TDS MACHINERY FAILS, THE APPELLANT CANNOT BE TREATED AS AN 'ASSESSEE IN DEFAULT' UNDER SECTION 201(1) OF THE ACT. 2. THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT - A . SECTION 194H OF THE ACT WAS NEVER INTENDED TO APPLY TO CASES WHERE A PER SON IS NEITHER MAKING ANY PAYMENT TO ANOTHER PERSON NOR CREDITING ANY SUM TO THE ACCOUNT OF ANOTHER PERSON NOR CAN IT IMPLY THAT THERE IS PAYMENT OR CREDIT. B . IT IS IMPOSSIBLE FOR THE APPELLANT TO DETERMINE THE AMOUNT OF INCOME OF THE DISTRIBUTOR ON WHICH T AX OUGHT TO HAVE BEEN DEDUCTED AND THEREFORE THE PROVISIONS OF SECTION 194H OF THE ACT FAIL. 3. THE APPELLANT THUS PRAYS THAT IN THE ABSENCE OF ANY 'PAYMENT OR CREDIT' TO THE DISTRIBUTORS, THE APPELLANT SHOULD NOT BE TREATED AS AN 'ASSESSEE IN DEFAULT' UN DER SECTION 201 R.W.S. 194H OF THE ACT AND CONSEQUENTLY ORDER PASSED BY TDS OFFICER TREATING THE APPELLANT AS AN 'ASSESSEE - IN - DEFAULT' BE HELD AS BAD - IN - LAW AND BE SET ASIDE. 3 ITA NO S . 807 & 808 /P U N/201 6 M/S. IDEA CELLULAR LTD. WITHOUT PREJUDICE TO GROUND NO. I AND II : GROUND NO. III : 1. ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT IN THE ABSENCE OF ANY DECISION OF THE JURISDICTIONAL TRIBUNAL AND HON'BLE HIGH COURT IT IS IMPERATIVE TO FOLLOW THE DECISION OF THE HON'BLE DELHI HIGH COURT RENDERED IN APPELL ANT'S OWN CASE FOR DELHI/ NORTH CIRCLES. 2. THE LD. CIT(A), WHILE FOLLOWING THE DECISION OF 'NON - JURISDICTIONAL' HIGH COURT, FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT IT IS A SETTLED LEGAL POSITION THAT IN THE ABSENCE OF ANY DECISION OF THE JURISDI CTIONAL TRIBUNAL AND HIGH COURT, WHERE TWO VIEW ARE POSSIBLE ON A PARTICULAR ISSUE AND THAT HIGH COURTS OF DIFFERENT JURISDICTIONS HAVE RENDERED DIVERGENT VIEWS, THEN IT IS IMPERATIVE TO FOLLOW THE VIEW WHICH IS FAVOURABLE TO THE APPELLANT. 3. THE APPELLA NT THUS PRAYS THAT WHERE TWO VIEWS ARE POSSIBLE IN RESPECT OF THE ISSUE OF TDS APPLICABILITY TO DISCOUNT TO PREPAID DISTRIBUTORS, THE VIEW WHICH IS FAVORABLE TO THE APPELLANT SHOULD BE ADOPTED AND ACCORDINGLY THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE AP PELLANT. WITHOUT PREJUDICE TO ABOVE GROUNDS: GROUND NO. IV: LEVY OF INTEREST UNDER SECTION 20 0( 1A) OF THE ACT: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE TDS OFFICER IN HOLDING THE APPELLANT AS 'ASSESSEE IN DEFAULT' UNDER SECTION 201(1) OF THE ACT AND THEREBY LEVYING THE INTEREST UNDER SECTION 201(1A) OF THE ACT. 5. THE APPELLANT PRAYS THAT THE INTEREST LEVIED UNDER SECTION 201(1A) OF THE ACT BE DELETED OR BE APPROPRIATELY REDUCED. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN BOTH THE APPEALS IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.1041, 1042 & 1953 TO 1955/PUN/2013, RELATING TO ASSESSMENT YEARS 2007 - 08 TO 2011 - 12 AND ITA NOS.1867 TO 1870/PUN/2014, RELATING TO ASSESSMENT YEARS 2007 - 08 TO 2010 - 11, ORDER DATED 04.01.2017. HE FURTHER POINTED OUT THAT THE ASSESSING OFFICER GIVING EFFECT TO THE ORDER OF TRIBUNAL HAS DETERMINED THE DEM AND UNDER SECTION 201(1) AND INTEREST PAYABLE UNDER SECTION 201(1A) OF THE ACT AT NIL. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE ISSUE STANDS COVERED IN ASSESSEES FAVOUR BY THE HONBLE HIGH COURT OF KARNATAKA IN BHARTI AIRTEL VS. DCIT REPORTED IN 372 ITR 33 (KAR) AND BY THE HONBLE HIGH COURT OF RAJASTHAN IN 4 ITA NO S . 807 & 808 /P U N/201 6 M/S. IDEA CELLULAR LTD. ASSESSEES OWN CASE IN ITA NOS.90/2018 AND 92/2018 VIDE JUDGMENT DATED 12.04.2018. HE ALSO PLACED ON RECORD LIST OF DECISIONS OF VARIOUS BENCHES OF TRIBUNAL IN WHICH THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, RELIED ON THE ORDERS OF AUTHORITIES BELOW. HE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COUR T OF DELHI IN THE CASE OF IDEA CELLULAR LTD. VIDE DECISION DATED 19.02.2010. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING GSM BASED MOBILE TELEPHON Y SERVICES IN MAHARASHTRA AND GOA CIRCLES. SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON 23.04.2008 FOR VERIFICATION OF COMPLIANCE OF TDS PROVISIONS FOR FINANCIAL YEARS 2006 - 07 AND 2007 - 08. SUBSEQUENTLY, ORDER UNDER SECTION 201(1)/201(1A) OF THE ACT WAS PASSED FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 ON 24.03.2011 ON THE ISSUE OF NON DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON DISCOUNT TO PRE - PAID DISTRIBUTORS. LATER ON, THE PROCEEDINGS FOR ASSESSMENT YEARS 2009 - 10 TO 2012 - 13 WERE PICKED UP FOR VERIFICATION AND ORDERS WERE PASSED FOR NON DEDUCTION OF TAX UNDER SECTION 194H OF THE ACT. THE ASSESSING OFFICER FURTHER NOTES THAT EVEN FOR ASSESSMENT YEAR 2013 - 14, DETAILS WERE CALLED FOR. FOR BOTH THE YEARS UNDER APPEAL I.E. ASSESSMENT YEARS 2012 - 13 AND 2013 - 14, THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE DEFAULTED IN NON DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON DISCOUNT TO PRE - PAID DISTRIBUTORS. THE ASSESSING OFFICER RELYING ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF IDEA CELLULAR LTD. (SUPRA), HELD THE ASSESSEE TO BE IN DEFAULT AND RAISED THE DEMAND UNDER SECTION 201(1) AND 201(1A) 5 ITA NO S . 807 & 808 /P U N/201 6 M/S. IDEA CELLULAR LTD. OF THE ACT AT 10,06,05,528/ - IN ASSESSMENT YEAR 2012 - 13 AND 10,76,02,180/ - FOR ASSESSMENT YEAR 2013 - 14. 7. THE CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 8. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2007 - 08 TO 2011 - 12 (SUPRA) VIDE ORDER DATED 04.01.2017 HAD DECIDED THE ISSUE AND HAD APPLIED THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF BHARTI AIRTEL VS. DCIT (SUPRA) AND HELD AS UNDER: - 21. NO DECISION OF THE JURISDICTIONAL HIGH COURT ON THIS ISSUE BROUGHT TO OUR NOTICE. SINCE THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE CASE BEFORE THE HONBLE KARNATAKA HIGH COURT, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT, WE HOL D THAT SALE OF SIM CARDS/RECHARGE COUPONS AT DISCOUNTED RATE TO DISTRIBUTORS IS NOT COMMISSION AND THEREFORE NOT LIABLE TO TDS U/S.194H OF THE I.T. ACT. HOWEVER, THE HONBLE HIGH COURT WHILE HOLDING SO HAS REMITTED THE MATTER BACK TO THE ASSESSING AUTHORIT Y ONLY TO FIND OUT HOW THE BOOKS ARE MAINTAINED AND HOW THE SALE PRICE AND THE SALE DISCOUNT IS TREATED AND WHETHER THE SALE DISCOUNT IS REFLECTED IN THEIR BOOKS. IF THE ACCOUNTS ARE NOT REFLECTED AS SET OUT ABOVE IN PARA 60 OF THE ORDER, SECTION 194H IS N OT ATTRACTED. THEREFORE, IN LINE OF THE ABOVE OBSERVATION OF THE HONBLE HIGH COURT WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR NECESSARY VERIFICATION. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. THE TRIBUNAL HAD REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY HOW THE BOOKS WERE MAINTAINED AND HOW SALE PRICE AND THE SALE DISCOUNT WAS TREATED AND WHETHER SALE DISCOUNT WAS REFLECTED IN THE BOOKS OF ACCOUNT. THE TRIBUNAL THUS , HELD THAT IF THE ACCOUNTS WERE NOT REFLECTED AS SET OUT IN PARA 60 OF THE HONBLE HIGH COURT OF KARNATAKA, THE PROVISIONS OF SECTION 194H OF THE ACT WERE NOT ATTRACTED. 10. THE ASSESSING OFFICER GIVING EFFECT TO THE ORDER PASSED BY THE TRIBUNAL DATED 04 .01.2017 HAS REDUCED THE DEMAND RAISED UNDER SECTION 201(1) OF THE ACT AND INTEREST CHARGED UNDER SECTION 201(1A) OF THE ACT AT NIL VIDE SEPARATE ORDERS 6 ITA NO S . 807 & 808 /P U N/201 6 M/S. IDEA CELLULAR LTD. PASSED FOR ASSESSMENT YEARS 2007 - 08 TO 2011 - 12, SEPARATE ORDERS DATED 18.09.2017. THE LEARNED AUTHORIZ ED REPRESENTATIVE FOR THE ASSESSEE HAS FILED COPIES OF SAID ORDERS ON RECORD. IT MAY ALSO BE POINTED OUT THAT THE HONBLE HIGH COURT OF RAJASTHAN IN CIT VS. IDEA CELLULAR LTD. (SUPRA) VIDE JUDGMENT DATED 12.04.2018 HAS RELIED ON EARLIER DECISION OF THE SA ID HONBLE HIGH COURT IN ASSESSEES OWN CASE IN INCOME TAX APPEAL NO.96/2016 IN CIT (TDS), JAIPUR VS. M/S. IDEA CELLULAR LTD. AND HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. THE QUESTION OF LAW WHICH WAS FRAMED IN THE APPEAL WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS UNDER SECTION 194H OF THE ACT AS THE RELATION BETWEEN THE ASSESSEE AND DISTRIBUTOR WAS THAT OF PRINCIPAL AND AGENT AND WHETHER THE TRIBUNAL HAD ERRED IN LAW IN DELETING DEMAND UNDER SECTIO N 201(1) OF THE ACT FOR NON DEDUCTION OF TAX UNDER SECTION 194H OF THE ACT ON COMMISSION PAYMENTS TO VARIOUS DISTRIBUTORS. 11. THE ISSUE ARISING BEFORE US IS SIMILAR TO THE ISSUE BEFORE THE PUNE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS. EVEN THE ASSESSING OFFICER WHILE RAISING DEMAND IN THE HANDS OF ASSESSEE HAD RELIED ON EARLIER ORDERS PASSED IN THE CASE OF ASSESSEE STARTING FROM ASSESSMENT YEAR 2006 - 07, WHICH IS CONSEQUENT TO SURVEY OPERATION CARRIED OUT AT THE PREMISES OF ASSESSEE TO CHECK EVASION OF PAYMENT OF TDS UNDER SECTION 194H OF THE ACT. SINCE THE ISSUE IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE AND ALSO BY THE HONBLE HIGH COURT OF RAJASTHAN AGAIN IN ASSESSEES OWN CASE AND THE HONBLE HIGH COURT OF KARNATAKA (SUPRA), WE FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD . ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO FOLLOW THE DIRECTIONS OF TRIBUNAL IN EARLIER YEARS AND CARRY OUT VERIFICATION EXERCISE AS MENTIONED IN PARA 60 OF THE ORDER OF THE HON BLE HIGH COURT OF KARNATAKA AND APPLIED BY THE PUNE BENCH OF TRIBUNAL IN PARA 21. ACCORDINGLY, THE ISSUE IS REMITTED BACK TO THE FILE OF ASSESSING 7 ITA NO S . 807 & 808 /P U N/201 6 M/S. IDEA CELLULAR LTD. OFFICER FOR CARRYING OUT THE NECESSARY VERIFICATION. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED AS INDICATED ABOVE. 1 2 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS 14 TH DAY OF MAY , 201 8 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 14 TH MAY , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPE LLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), PUNE - 10 ; 4. THE CIT(TDS), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE