BSNL, PGMTD, JAIPUR, Jaipur V. ITO, Jaipur

ITA 817/JPR/2010

• Counselvise Citation: 81723114 RSA 2010
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-12-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 21-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL; D C SHARMA
• Assessee Lawyers: SANJIV PANDEY
• Keywords: Opportunity of being heard; Additional evidence
• Section: 131; 2

Judgement Text

ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 817/JP/2010 ASSESSMENT YEAR: 2009-10 TAN : JPRB 02674 A M/S. BHARAT SANCHAR NIGAM LTD. VS. THE ITO THRU CAO/ O/O PGMTD TDS-2 JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJIV PANDEY DEPARTMENT BY: SHRI D.C. SHARMA & SHRI A.K. KHAN DELWAL DATE OF HEARING: 01-09-2014 DATE OF PRONOUNCEMENT: 31-10-2014 ORDER PER R.P. TOLANI, JM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)- III, JAIPUR DATED 23-03-2010 FOR THE ASSESSMENT YEA R 2009-10, VARIOUS GROUNDS ARE RAISED IN ITS APPEAL WHICH IN EFFECT RA ISES FOLLOWING TWO ISSUES. (I) BECAUSE THE LD. CIT(A) ERRED IN LAW AS WELL AS THE FACTS IN UPHOLDING THE ORDER OF THE AO THAT THE APP ELLANT CONTRAVENED THE PROVISIONS OF SECTION 194H OF THE I NCOME TAX ACT, 1961 AND FURTHER CREATING A DEMAND OF RS. 30,5 2,359/- AS THE ALLEGED SHORT DEDUCTION OF TAX AT SOURCE U/S 21 0(1) OF THE INCOME TAX ACT, 1961. (II) BECAUSE THE LD. CIT(A) ERRED IN LAW AS WELL AS THE FACTS IN UPHOLDING THE ORDER OF THE AO IN CHARGING/ LEVYING OF ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 2 INTEREST U/S 201(1A) OF RS. 1,80,771/- CONTRARY TO THE PROVISIONS OF AW AND FACTS ON RECORD. THE INTEREST DEMAND ILLE GALLY CREATED IS THUS LIABLE TO BE DELETED IN FULL. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I.E. M/S BHARAT SANCHAR NIGAM LTD. (FOR SHORT BSNL) IS A PUBLIC SECTOR U NDERTAKING WHICH PROVIDING TELECOMMUNICATION SERVICES IN INDIA. THE COMPANY SELLS ITS RECHARGE COUPONS WHICH IS CLAIMED TO HAVE BEEN DONE AS PER BSNL MARKETING CELL LETTER NO. 27/04/MKTG DATED 13-12-20 07. THE ASSESSEE CLAIMED THAT THE SALE OF RECHARGE COUPONS TO FRANCH ISEES WAS ON PRINCIPAL TO PRINCIPAL BASIS WHICH DID NOT REQUIRE ANY LIABILITY OF DEDUCTION OF TDS U/S 194H OF THE ACT. THE ITO-TDS -2, JAIPUR ISSUED SHOW CAUSE NOTICE PROPOSING THAT RECHARGE COUPONS WERE PROVIDED ON CO MMISSION MEANING THEREBY AN ELEMENT OF AGENCY EXISTED BETWEEN BSNL A ND THE FRANCHISEE, THE COMMISSION PAID TO FRANCHISEES WAS, THEREFORE, LIAB LE FOR TDS. THE ASSESSEE FILED DETAILED REPLY TO THE SHOW CAUSE NOTICE; LD. ITO-TDS HOWEVER, HELD THE SAME TO BE COVERED FOR TDS DEDUCTION U/S 194H OF TH E ACT AND LIABLE FOR PAYMENT OF TDS AS RAISED IN THE GROUNDS OF APPEAL A ND FURTHER INTEREST THEREON U/S 201(1A) OF THE ACT. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHERE IT EXPLAINED FROM THE FRANCHISEE AGREEMENT T O THE EFFECT THAT ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 3 RECHARGE COUPONS WERE SOLD ON PRINCIPAL TO PRINCIPA L BASIS AT A DISCOUNTED PRICE WHICH WAS NOT IN THE NATURE OF COMMISSION. T HERE IS A MATERIAL DIFFERENCE BETWEEN SALE TO A PRINCIPAL AND THROUGH AGENT. RECHARGE COUPONS WERE SOLD AT A DISCOUNTED PRICE ON MRP TO MAINTAIN UNIFORMITY IN SALE PRICE AND DISCOUNT POLICY SO THAT RECHARGE COUPONS ARE SO LD AT FIXED MRP ALL OVER INDIA. THE ASSESSEE RELIED ON THE DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF IDEA CELLULAR LTD. VS DCIT (2009) 121 TTJ 352. IT WAS FURTHER PLEADED THAT THE INCOME EARNED BY THE FRANCHISE IS LIABLE TO INCOME TAX IN THEIR RESPECTIVE RETURNS OF INCOME ON WHICH REGULAR TAX IS PAID BY THEM. THEREFORE, THERE IS NO LOSS OF REVENUE AND ASSESSEE CANNOT BE DEEMED IN DEFAULT IN THIS BEHALF. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BE VERAGES (P) LTD. 293 ITR 226. 2.3 THE LD. CIT(A) HOWEVER, REJECTED BOTH THE PLEAS OF THE ASSESSEE BY FOLLOWING OBSERVATIONS. 2.3.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE AND SUBMISSIONS OF LD. A.R. I HAVE ALSO GONE THROUG H THE RELEVANT MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS RELIED UPON BY THE LD. AR IN SUPPORT OF THIS GROUND OF APP EAL. HOWEVER, IT IS OBSERVED THAT THE MAIN ISSUE INVOLVE D IN THIS GROUND OF APPEAL IS AS TO WHETHER THE APPELLANT ASS ESSE WAS LIABLE TO MAKE TDS U/S 194-H OF THE I.T. ACT ON THE AMOUNT OF ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 4 DISCOUNT ALLOWED BY IT TO ITS FRANCHIESEES/DSAS, WI TH REFERENCE TO THE SALE OF PREPAID RECHARGE COUPONS AND OTHER P RODUCTS, WHICH IS DIRECTLY COVERED AGAINST THE APPELLANT BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S IDEA CELLULAR LTD. REPORTED AT 35 DTR (DELHI) 219. IN TH E SAID DECISION, HONBLE DELHI HIGH COURT HAS HELD THAT TH E TRANSACTION BETWEEN THE ASSESSEE, A CELLULAR OPERAT OR, AND THE PREPAID MARKET ASSOCIATES (PMAS) APPOINTED BY IT WH EREBY SIM CARDS/RECHARGE COUPONS ARE ULTIMATELY SOLD TO THE S UBSCRIBERS THROUGH THE LATTER DOES NOT AMOUNT TO SALE OF GOODS AND, THEREFORE, THE DISCOUNT OFFERED BY THE ASSESSEE TO THE DISTRIBUTORS ON PAYMENTS MADE BY THE LATTER FOR THE SIM CARDS/RECHARGE COUPONS, WHICH ARE EVENTUALLY SOLD T O THE SUBSCRIBERS AT THE LISTED PRICE, IS COMMISSION AND IT IS SUBJECT TO TDS U/S 194-H OF THE I.T. ACT. THEREFORE, RESPECTFU LLY FOLLOWING THE AFORESAID DECISION OF HONBLE DELHI HIGH COURT, IT IS HELD THAT THE DISCOUNT OFFERED BY THE APPELLANT, WITH RE FERENCE TO THE SALE OF PREPAID RECHARGE COUPONS AND OTHER PRODUCTS TO ITS FRANCHISEES/DSAS, WAS IN THE NATURE OF COMMISSION A ND THAT THE APPELLANT WAS LIABLE TO MAKE TDS U/S 194-H FROM THE AFORESAID DISCOUNT OFFERED BY IT TO ITS FRANCHIESEES/DSAS. 2.3.2 FURTHER, AS FAR AS THE OTHER CONTENTION OF L D. AR THAT SINCE THE CONCERNED RECIPIENTS OF THE DISCOUNT HAD FILED THEIR RETURNS OF INCOME AND PAID DUE TAX THEREON, I F ANY, AND HENCE, NO LIABILITY U/S 201(1)201(1A) WAS REQUIRED TO BE CREATED AGAINST THE APPELLANT, IS CONCERNED, I FIND THAT THE SAME IS NOT ACCEPTABLE IN THE ABSENCE OF ANY RELEVANT EV IDENCE. IN THIS REGARD, IT IS OBSERVED THAT THE LD. AR HAS PRO DUCED THE COPIES OF THE ACKNOWLEDGEMENTS OF THE RETURNS OF IN COME FILED FOR A.Y. 2009-10 BY M/S. STEEL INDIA, M/S NAGAUR AG ROTECH LTD, M/S THE SUPERIORS, M/S ACME CONDUCTORS PVT. LTD. AN D M/S. K.K. ELECTRO TRADE PVT. LTD. FURTHER, LD. AR HAS AL SO PRODUCED TWO CONFIRMATIONS FROM M/S USHA AGENCIES AND M/S. K ANISHKA SYSTEMS PVT. LTD., WHEREIN IT IS STATED THAT THOSE PARTIES HAD MADE PURCHASED OF PREPAID SIM CARDS AND RECHARGE CO UPONS (OF THE SUMS MENTIONED) FROM THE APPELLANT AND HAD FILE D THEIR RETURNS OF INCOME. HOWEVER, LD. AO HAS COMMENTED IN HIS REMAND REPORT THAT FROM THE SAID DOCUMENTS, IT IS N OT ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 5 KNOWN/PROVED AS TO WHETHER THE AFORESAID RECIPIENTS OF THE DISCOUNT FROM THE APPELLANT HAD OFFERED THE AMOUNT OF DISCOUNT RECEIVED, AS THEIR INCOME AND PAID TAX THEREON. IN THE RESPECT, IT IS OBSERVED THAT IT IS THE RESPONSIBILITY OF THE AP PELLANT TO PROVE, TO THE SATISFACTION OF THE AO, THAT THE CONCERNED RECIPIENTS/DEDUCTEES HAD SHOWN THE INCOME RECEIVED FROM THE APPELLANT IN THEIR COMPUTATION OF INCOME AND HAD PA ID TAX THEREON. THEREFORE, ON THESE FACTS, IT IS HELD THAT THE APPELLANT IS NOT ENTITLED TO ANY RELIEF U/S 201(1)/201(1A) OF TH E I.T. ACT. ACCORDINGLY, THE ACTION OF THE LD. AO IN CREATING T HE DEMAND OF RS.3233130/- U/S. 201(1)/201(1A) OF THE I.T. ACT AG AINST THE APPELLANT IS CONFIRMED. CONSEQUENTLY, THIS GROUND O F APPEAL IS REJECTED. 2.4 AGGRIEVED, THE ASSESSEE IS BEFORE US. 2.5 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT IT IS A WELL KNOWN FACT THAT RECHARGE COUPONS ARE SOLD BY THE ASSESSEE TO T HE FRANCHISEE ON PRINCIPAL TO PRINCIPAL BASIS BY A UNIFORM SALE POLI CY. THERE EXISTS NO ELEMENT OF AGENCY TO MAINTAIN UNIFORMITY OF PRICES. THE ASS ESSEE SELLS DISCOUNTED RECHARGE COUPONS AND IT HANDS OVER THE COUPONS TO T HE FRANCHISE AS PRINCIPAL AND THE PROPERTY IN THE GOODS IS IMMEDIAT ELY TRANSFERRED ON SUCH DELIVERY. THE FRANCHISEES PURCHASE THE RECHARGE COU PONS IN BULK, THE PROPERTY THEREIN STANDS TRANSFERRED TO THEM ON DELI VERY THEREOF. THE DISCOUNT IS A COMMERCIAL WORD WHICH DENOTES FIXED AMOUNT AND THE FRANCHISE EARNS IT AS INCOME THEREON. THERE IS NO ELEMENT OF AGENCY WH ATSOEVER. ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 6 2.6 THE ASSESSEE HAS FILED THE ADDITIONAL EVIDENCE BEFORE US UNDER RULE 29 OF ITAT RULES, 1963 IN THE FORM OF CIRCULAR NO.131 DATED 15-04-2008. AFTER HEARING BOTH THE PARTIES, THE SAME IS ADMITTED BEIN G THE OFFICIAL DOCUMENT OF A PUBLIC SECTOR UNDERTAKING. 2.7 APROPOS ADDITIONAL EVIDENCE, IT IS CONTENDED TH AT IN THIS CIRCULAR M/S. BSNL HAS CATEGORICALLY EXPLAINED THAT RECHARGE COUP ONS ARE SOLD ON PRINCIPAL TO PRINCIPAL BASIS AND THE WORD DISCOUNT TANTAMOUNT TO TRADE DISCOUNT. 2.8 THE LD. COUNSEL FOR THE ASSESSEE IN FAIRNESS FI LED A COPY OF THE ORDER U/S 251 OF THE ACT GIVING EFFECT TO THE APPELLATE O RDER LD. CIT(A), DEHRADUN IN THE ASSESSMENT OF DEHRADUN UNIT WHICH IS REPRODU CED AS UNDER. 1.2 THE SUBMISSION HAS BEEN CONSIDERED. THE A ASS ESSEE HAS NOT DISPUTED THE CONTENTION REGARDING DEDUCTIBILITY OF TAX ON THE PAYMENTS IN QUESTIONS. EVEN OTHERWISE, HON'BLE HIGH COURT APPEAR TO BE OF UNANIMOUS VIEW THAT THE PAYMENTS AR E OF THE NATURE OF COMMISSION AND TAX IS DEDUCTIBLE ON THE SAME. IN THIS REGARD, THE FOLLOWING DECISIONS MAY BE REFERRE D TO:- 1. BHARATI CELLULAR LTD. VS. ACIT , 244 185 (CAL.) 2. CIT VS. IDEA CELLULAR LTD., 325 ITR 128 (DEL.) 3. VODAFONE ESSAR CELLULAR LTD. VS. ACIT 332 ITR 255 (KER.) HENCE, THE LIMITED ISSUE FOR CONSIDERATION IN THIS APPEAL IS WHETHER, GIVEN THE FACTS AND CIRCUMSTANCES OF THE C ASE DISCUSSED ABOVE, THE ASSESSEE CAN BE HELD TO BE ASS ESSEE IN ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 7 DEFAULT IN RESPECT OF TAX DEDUCTIONS ON THE PAYMEN T OF COMMISSION PAID/ CREDITED TO ITS FRANCHISEES. IT IS FURTHER OBSERVED THAT IN THIS CASE IN RESPONS E TO SUMMON U/S 131 OF THE ACT, THE FRANCHISEES APPEARED BEFORE THE AO AND THE Y HAVE BEEN FOUND TO HAVE FILED THEIR INCOME TAX RETURNS BY PAYING TAX O N THE INCOME EARNED FROM RECHARGE COUPONS BY FOLLOWING OBSERVATIONS. AL THE ABOVE CONCERNS HAVE FILED THEIR COPIES OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR THE FINANCI AL YEARS 2008-09 AND 2009-10. PERUSAL OF THE ACCOUNTS FILED FOR THESE FINANCIAL YEARS REVEALED THAT ABOVE FRANCHISEE HAVE ACCOUNTED FOR THE RECEIPTS IN THEIR BOOKS OF ACCOUNT AND PAID TAX DUE ON THEIR INCOME. A CERTIFICATE TO THE EFFECT THAT THE DISCOUNT ALLOWED BY THE BSNL AGAINST SALE OF SIM CARDS AND OTHER PRO DUCTS HAVE DULY BEEN INCORPORATED IN THE BOOKS OF ACCOUNT OF F RANCHISEES, HAS BEEN RECEIVED AND PLACED ON FILE. ACCORDINGLY, FOLLOWING THE DECISION OF HINDUSTAN COCA COLA BEVERAGE PCT LT D. VS. CIT, NO FURTHER ACTION IS CALLED FOR IN THE CASE OF THE ASSESSEE ON THIS GROUND. AS REGARDS CHARGING OF INTEREST U/S 201(1A) OF I.T. ACT , 1961, FOLLOWING THE DECISION OF LD. CIT(A)-1, DEHRA DUN VIDE ORDER DATED 25-01-2012 REFERRED TO ABOVE, THE SAME IS BEING CHARGED. THE AMOUNT OF INTEREST PAYABLE IS RS. 14,3 90/- WHICH THE ASSESSEE IS LIABLE TO PAY U/S 201(1A)/ 251 OF T HE I.T. ACT, 1961. 2.9 THE LD. DR CONTENDS THAT BEFORE ITO, HARIDWAWR THAT THE ASSESSEE ITSELF HAS ACCEPTED THAT FRANCHISE COMMISSION IS LI ABLE FOR TDS. HOWEVER, ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 8 ON ENQUIRY FROM FRANCHISEES, IT WAS FOUND THAT THEY HAD PAID THE TAX THEREON AND IN VIEW OF THE DECISION OF HON'BLE SUPREME COU RT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS CIT, 293 ITR 226, THE ASSESSEE HAS NOT BEEN HELD IN DEFAULT VIS.A VIS TDS . HOWEVE R, INTEREST THEREON HAS BEEN HELD TO BE CHARGEABLE. IN THIS CASE THERE IS N O EXAMINATION OF FRANCHISEES/ DEALERS ABOUT THE PAYMENT OF TAX AT TH EIR END. THE ORDERS OF THE LOWER AUTHORITIES ARE RELIED ON. 2.10 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. BHARAT SANCHAR NIGAM LTD. HAS VARIOUS BRANCHES ALL OVER INDIA AND AT HARIDWAR, IT APPEARS THAT THE ASS ESSEE HAS ACCEPTED ITS LIABILITY OF TDS. HOWEVER, FROM THE CIRCULAR NO 131 DATED 15-04-2008 REFERRED ABOVE IT EMERGES THAT AS PER POLICY OF THE BSNL RECHARGE COUPONS WERE SOLD TO FRANCHISEES ON PRINCIPAL TO PRINCIPAL BASIS. IN ANY CASE, THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT FRANCHISEES/ DEALERS HAVE PAID INCOME TAX ON THE RECHARGE COUPONS DISCOUNT. IN VIEW THERE OF, WE ARE INCLINED TO SET ASIDE THE ENTIRE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE DE NOVO AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . ITA NO. 817/JP/2010 M/S. BHARAT SANCHAR NIGAM LTD. VS. ITO , TDS -2, JAIPU R 9 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 -1 0-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 31 ST OCT. 2014 *MISHRA COPY FORWARDED TO:- 1. M/S. BHARAT SANCHAR NIGAM LTD., JAIPUR 2. THE ITO , TDS -2, JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT 5..THE LD. DR 6.THE GUARD FILE (IT NO. 817/JP/2010) BY ORDER AR ITAT, JAIPUR