M/s. Bharti Airtel Limited, Jammu V. The Income Tax Officer, Jammu

ITA 95/ASR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2218 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Keywords: Question of law; Non-deduction of tax; Relationship of principal and agent
• Section: 80HHC; 194C; 201(1); 68; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. ASSESSMENT YEAR 93(ASR)/2012 2006-07 94(ASR)/2012 2007-08 95(ASR)/2012 2008-09 96(ASR)/2012 2009-10 97(ASR)/2012 2010-11 M/S. BHARTI AIRTEL LIMITED VS. INCOME TAX OFFICER (TDS), CIRCLE OFFICE, SOUTH BLOCK, JAMMU. GANDHI NAGAR, JAMMU. (APPELLANT) (RESPONDENT) PAN: AAACB2894G APPELLANT BY:SH.ANIL BHALLA, CA RESPONDENT BY:SH. R.L.CHHANALIA, DATE OF HEARING: 10/04/2013 DATE OF PRONOUNCEMENT:22/04/2013 ORDER PER BENCH ; THESE FIVE APPEALS OF THE ASSESSEE ARISE FROM ONE CONSOLIDATED ORDER OF CIT(A), JAMMU, DATED 26.12.2001 FOR THE ASSESSME NT YEARS 2006-07 TO 2010-11. 2. IN ITA NO.93(ASR)/2012 FOR THE ASSESSMENT YEAR 2 006-07, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 2 1. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE IN COME TAX ACT TO THE TRANSACTION OF SUPPLY OF PREPAID VOUCHERS TO THE DISTRIBUTORS. THE LD. CIT(A) HAS FURTHER ERRED BO TH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER. 1.1 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDI NG THE ACTION OF THE ASSESSING OFFICER. 1.2 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPA NY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTI NG TO RS.2,875,880/- U/S 194H OF THE ACT ON THE DIFFEREN CE BETWEEN THE PRICE AT WHICH THE PREPAID CARD IS SOLD TO THE DISTRIBUTOR AND THE PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAYMENT OF COMMISSION. THE LD. CI T(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER. 1.3 THAT APPELLANT IS AGGRIEVED BY THE ORDER OF THE AO (TDS) TO RECOVER THE TAX OF RS.2,875,880/- INSPITE OF THE F ACT THAT SUCH TAX HAVE BEEN PAID BY THE DISTRIBUTOR ON THE CORRE SPONDING INCOME DECLARED BY HIM. 1.4 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN CHARGING INTEREST OF RS.1,754,290 U/S 201(IA) OF T HE ACT. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUND OF APPEAL AT A LATER STAGE. 3. IN ITA NO.94(ASR)/2012 FOR THE ASSESSMENT YEAR 2 007-08, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE IN COME TAX ACT TO THE TRANSACTION OF SUPPLY OF PREPAID VOUCHERS TO THE 3 DISTRIBUTORS. THE LD. CIT(A) HAS FURTHER ERRED BO TH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER. 1.1 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDI NG THE ACTION OF THE ASSESSING OFFICER. 1.2 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPA NY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTI NG TO RS.25,696,000/- U/S 194H OF THE ACT ON THE DIFFERE NCE BETWEEN THE PRICE AT WHICH THE PREPAID CARD IS SOLD TO THE DISTRIBUTOR AND THE PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAYMENT OF COMMISSION. THE LD. CI T(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER. 1.3 THAT APPELLANT IS AGGRIEVED BY THE ORDER OF THE AO (TDS) TO RECOVER THE TAX OF RS.25,696,000/- INSPITE OF THE FACT THAT SUCH TAX HAVE BEEN PAID BY THE DISTRIBUTOR ON THE CORRE SPONDING INCOME DECLARED BY HIM. 1.4. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN CHARGING INTEREST OF RS.10,913,240/- U/S 201(IA) OF THE ACT. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN L AW IN UPHOLDING THE ACTION OF THE A.O. 2 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LA W IN APPLYING THE PROVISIONS OF SECTION 194H OF THE INC OME TAX ACT TO THE TRANSACTION OF DOMESTIC ROAMING CHARGES PAI D TO THIRD PARTY SERVICE PROVIDERS. THE LD. CIT(A) HAS FURTH ER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. 2.1 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPA NY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTI NG TO RS.26,072/- U/S 194C ON THE AMOUNT PAID TO OTHER T ELEPHONY OPERATORS FOR ROAMING SERVICES INCURRED BY THE APP ELLANTS SUBSCRIBERS ON THE NET WORK OF SUCH OTHER TELEPHO NE OPERATORS (SERVICE PROVIDERS) WITHOUT APPRECIATING THAT SUC H PAYMENT IS NOT FOR ANY WORK UNDERTAKING FOR THE ASSESSEE COMP ANY AND DO NOT FALL WITHIN THE PROVISION OF SECTION 194C OF T HE ACT. 4 2.2. THAT LD. CIT(A) HAS FURTHER ERRED BOTH ON FACT S AND IN LAW IN UPHOLDING THE ACTION OF THE LD. A.O. 2.3 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN DEMANDING THE TAX AMOUNTING TO RS.26,072/- INSPITE OF THE FACT THAT THE AMOUNT HAS BEEN SUBJECT TO TAX IN THE HAN DS OF THE OTHER TELEPHONY OPERATORS. 2.4. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN CHARGING INTEREST OF RS.10,788/-- U/S 201(1A) OF T HE ACT. THE LD. CIT(A) HAS FURTHER ERRED ON FACT AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUND OF APPEAL AT A LATER STAGE. 4. IN ITA NO.95(ASR)/2012 FOR THE ASSESSMENT YEAR 2 008-09, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE IN COME TAX ACT TO THE TRANSACTION OF SUPPLY OF PREPAID VOUCHERS TO THE DISTRIBUTORS. THE LD. CIT(A) HAS FURTHER ERRED BO TH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER. 1.1 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDI NG THE ACTION OF THE ASSESSING OFFICER. 1.2 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPA NY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTI NG TO RS.42,118,084/- U/S 194H OF THE ACT ON THE DIFFERE NCE BETWEEN THE PRICE AT WHICH THE PREPAID CARD IS SOLD TO THE DISTRIBUTOR AND THE PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAYMENT OF COMMISSION. THE LD. CI T(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER. 5 1.3 THAT APPELLANT IS AGGRIEVED BY THE ORDER OF THE AO (TDS) TO RECOVER THE TAX OF RS.42,118,084/- INSPITE OF THE FACT THAT SUCH TAX HAVE BEEN PAID BY THE DISTRIBUTOR ON THE CORRE SPONDING INCOME DECLARED BY HIM. 2. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN L AW IN CHARGING INTEREST OF RS.13,317,186 U/S 201(IA) OF THE ACT. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE GROUND OF APPEAL AT A LATER STAGE. 5. IN ITA NO.96(ASR)/2012 FOR THE ASSESSMENT YEAR 2 009-10, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE IN COME TAX ACT TO THE TRANSACTION OF SUPPLY OF PREPAID VOUCHERS TO THE DISTRIBUTORS. THE LD. CIT(A) HAS FURTHER ERRED BO TH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER. 1.1 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDI NG THE ACTION OF THE ASSESSING OFFICER. 1.2 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPA NY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTI NG TO RS.31,296,725/- U/S 194H OF THE ACT ON THE DIFFERE NCE BETWEEN THE PRICE AT WHICH THE PREPAID CARD IS SOLD TO THE DISTRIBUTOR AND THE PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAYMENT OF COMMISSION. THE LD. CI T(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER. 1.3 THAT APPELLANT IS AGGRIEVED BY THE ORDER OF THE AO (TDS) TO RECOVER THE TAX OF RS.31,296,725/- INSPITE OF THE FACT THAT SUCH TAX HAVE BEEN PAID BY THE DISTRIBUTOR ON THE CORRE SPONDING INCOME DECLARED BY HIM. 6 2. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN L AW IN CHARGING INTEREST OF RS.6,047,465 U/S 201(IA) OF T HE ACT. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE GROUND OF APPEAL AT A LATER STAGE. 6. IN ITA NO.97(ASR)/2012 FOR THE ASSESSMENT YEAR 2 010-11, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE IN COME TAX ACT TO THE TRANSACTION OF SUPPLY OF PREPAID VOUCHERS TO THE DISTRIBUTORS. THE LD. CIT(A) HAS FURTHER ERRED BO TH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER. 1.1 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN TREATING THE BUSINESS RELATIONSHIP BETWEEN THE COMPANY AND THE DISTRIBUTOR AS PRINCIPAL TO AGENT AS AGAINST THE ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDI NG THE ACTION OF THE ASSESSING OFFICER. 1.2 THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPA NY TO BE IN DEFAULT IN RESPECT OF NON-DEDUCTION OF TAX AMOUNTI NG TO RS.2,36,33,763/- U/S 194H OF THE ACT ON THE DIFFER ENCE BETWEEN THE PRICE AT WHICH THE PREPAID CARD IS SOLD TO THE DISTRIBUTOR AND THE PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAYMENT OF COMMISSION. THE LD. CI T(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER. 1.4 THAT APPELLANT IS AGGRIEVED BY THE ORDER OF THE AO (TDS) TO RECOVER THE TAX OF RS.2,36,55,763/- INSPITE OF THE FACT THAT SUCH TAX HAVE BEEN PAID BY THE DISTRIBUTOR ON THE CORRE SPONDING INCOME DECLARED BY HIM. 2. THE LD. AO(TDS) HAS ERRED BOTH ON FACTS AND IN L AW IN CHARGING INTEREST OF RS.2,026,423/- U/S 201(IA) OF THE ACT. THE LD. CIT(A) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE A.O. 7 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE GROUND OF APPEAL AT A LATER STAGE. 7. SINCE THE FACTS IN ALL THE APPEALS ARE IDENTICAL AND THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE ARE ALSO COMMON FOR ALL THE FIVE APPEALS OF THE ASSESSEE. THE ONLY DIFFERENCE IN EACH APPEAL IS THE AMOUNT INVOLVED WITH RESPECT TO THE COMMISSION, TAX DEDUCTIBLE, PER IOD OF DEFAULT AND INTEREST CHARGEABLE UNDER SECTION 201/201(1A) OF THE INCOME TAX ACT, 1961. DURING THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS TAKEN ONE DIFFERENT GROUND WITH REGARD TO NON-DEDUCTION OF TAX ON FEE PAID TO ANOTHER OPERATOR FOR ROAMING CHARGES WHICH SHALL BE DEALT SEPARATELY IN THIS CONSOLIDATED ORDER ITSELF. 8. FIRST OF ALL, WE TAKE UP COMMON ISSUES IN ALL TH E APPEALS OF THE ASSESSEE IN ITA NOS.93 TO 97 (ASR)/2012, WHICH INCL UDE ALL THE GROUNDS IN ALL THE APPEALS MENTIONED HEREINABOVE OF THE ASSESS EE AS UNDER (EXCEPT A SEPARATE GROUND FOR THE ASSESSMENT YEAR 2007-08 MEN TIONED HEREINABOVE): 9. FIRST OF ALL, WE TAKE UP THE APPEAL OF THE ASSES SEE IN ITA NO.93(ASR)/2012 FOR THE FINANCIAL YEAR 2005-06 PERT AINING TO ASSESSMENT YEAR 2006-07 AND OUR DECISION HEREIN BELOW IN THIS APPEAL SHALL BE APPLICABLE IN ALL OTHER APPEALS IN THE COMMON GROUN DS IN ALL OTHER APPEALS MENTIONED HEREIN ABOVE. 8 10. THE BRIEF FACTS IN THE GROUNDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 ARE THAT DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE WHO IS TERMED AS PERSON RESPONSIBLE (PR) HAS DECLARED GROS S REVENUE I.E. SALE OF SIMS AND RECHARGE COUPONS. THE ASSESSEE WAS GIVEN A SHOW CAUSE NOTICE AS TO WHY DIFFERENCE OF SALE AMOUNT AND MARKET VALU E MAY NOT BE TREATED AS COMMISSION PAID TO THE DISTRIBUTOR AND SHOW CAUSE AS TO WHY AMOUNT OF SUCH TAX DEDUCTIBLE ALONGWITH INTEREST U/S 201(IA) MAY NOT BE CHARGED FROM YOU. THEREAFTER, THE EXPLANATION OF THE ASSESSEE AN D THE FINDINGS OF THE A.O. AS PER PAGE 1 TO 4 OF THE ORDER ARE REPRODUCED FOR THE SAKE OF CLARITY AS UNDER: 2.1 IN RESPONSE TO ABOVE, THE PR VIDE HIS REPLY R ECEIVED ON 23.04.2010 FURNISHED DETAILS OF MAXMUM SERVICE CHA RGE (MSC), DISTRIBUTOR PRICE AND DIFFERENCE. IN THE SAID DETA IL THE PR HAS STATED TO HAVE CHARGED RS.33,85,46,683/- FROM THE DISTRIBUT ORS FOR THE GOODS OF THE VALUE OF RS.38,95,46,683/- AND BALANCE AMOUNT OF RS.5,08,10,665/- WAS IN THE SHAPE OF COMMISSION GI VEN TO THE DISTRIBUTOR. THE PR HAS OBJECTED TO TREATING THE DIFFERENCE AS COMMISSION IN HIS ABOVE REPLY AS UNDER: AS REGARDS TDS ON PREPAID MARGIN WE SUBMIT THAT NO INCOME ACCRUES OR IS PAID TO THE DISTRIBUTOR. IN THIS REG ARD REFERENCE CAN BE MADE TO THE COMPLETE PREPAID BUSINESS WHICH HAS B EEN EXPLAINED HEREINAFTER. IT IS EVIDENT FROM THE PERUSAL OF BUS INESS MODEL THAT PRICE OF THE SALE OF THE PREPAID PRODUCT IS AT THE DISCR ETION OF THE DISTRIBUTOR. THE COMPANY IS RAISING AN INVOICE OF THE DISTRIBU TOR FOR THE PREPAID SERVICE OFFERING IN THE FORM OF SIM CARDS/RECHARGE S VOUCHERS/V-TOP UP ETC. SUPPLIED TO THE DISTRIBUTOR AND DISTRIBUTO R MAKES PAYMENT IN ADVANCE OR SIMULTANEOUSLY WITH THE PURCHASE OF THE SAME. IN THE SAID REPLY THE PR HAS ALSO GIVEN DETAILS REG ARDING SUBSTANCE OF THE TRANSACTION AND ITS ACCOUNTING ENTRIES IN THE BOOKS OF ACCOUNT IN RESPECT OF PREPAID AS WELL AS POSTPAID RECEIPTS. I N THE CASE OF PR THE SUBSTANCE OF THE TRANSACTIONS IN RESPECT OF PREPAI D BUSINESS HAS BEEN GIVEN AS UNDER IN SUPPORT OF HIS MAIN CONTENTION T HAT RELATIONSHIP 9 BETWEEN THE PR AND THE DISTRIBUTOR ARE OF PRINCIPA L TO PRINCIPAL WHEREAS IN THE CASE OF POST PAID THE RELATIONSHIP IS THAT OF PRINCIPAL TO AGENT: 1. INDENT IS RECEIVED FROM THE DISTRIBUTOR FOR SUP PLY OF SPECIFIED QUANTITY. 2. SUK/RECHARGE COUPONS ISSUED TO THE DISTRIBUTOR AT THE DISTRIBUTOR PRICE I.E. NET OF DISCOUNT. 3. THE PAYMENT OF THE INVOICE IS GENERALLY RECEIVE D FROM DISTRIBUTOR EITHER IN ADVANCE OR SIMULTANEOUSLY W ITH THE SUPPLY OF GOODS. 4. THE DISTRIBUTOR IN TURN SELLS THE SUKS/RCS TO I TS RETAILERS IN THE AREA; 5. THE RETAILER SELLS SUCH PRODUCTS WHICH IN FACT IS A RIGHT TO ENJOY THE SPECIFIED AIR TIME SERVICE PROVIDED BY THE AP PELLANT COMPANY. 6. THE REVENUE COMPONENT IN THE SUK/RCS IS BOOKED IN THE ACCOUNT AT THE TIME OF SALE TO THE DISTRIBUTOR. 7. THE MONEY COLLECTED BY THE DISTRIBUTOR FROM THE RETAILERS OR BY THE RETAILERS FROM THE CUSTOMERS IS ON THEIR OWN ACCOUNT AND NOT ON BEHALF OF BHARTI AIRTEL LIMITED. 8. IN A TYPICAL EXAMPLE IF THE VALUE OF SUK/RC IS SAY RS.1600 I.E. ITS MAXIMUM SERVICE CHARGE (MSC) WHICH IS AKIN TO MAXIMUM RETAIL PRICE (MRP), THEN THE COMPANY WILL SELL SU CH PRODUCTS AT SAY RS.1500 TO THE DISTRIBUTOR AND COLLECTS RS.15 00 FROM HIM. THE DISTRIBUTOR IN TURN MAY SELL THE RETAILER AT RS.1530/- OR WHATEVER PRICE AT HIS DISCRETION, KEEPING IN VIEW THE COMPETITIVE PRESSURE, THUS KEEPING A MARGIN/SPREA D OF RS.30/- RESPECTIVELY WHICH IS HIM INCOME FROM TRADING.. THE RETAILER WILL IN TURN EITHER SELL IT AT RS.15 90/- AS HIS DISCRETION, KEEPING IN VIEW THE COMPETITIVE PRES SURE, SO HOWEVER THE MAXIMUM PRICE DOES NOT EXCEEDS RS.160 0. WHATEVER RETAILERS RECOVER OVER RS.1530/- WILL BE HIS INCOME FROM TRADING. THE INCOME FOR THE RETAILER IN THE EXAMPLE ABOVE WILL SPREAD BETWEEN THE PRICE PAID BY HIM TO THE DISTRIBUTOR AND THAT RECOVERED FROM THE CUSTOMER. 9. REVENUE IS BOOKED IN THE ACCOUNTS FOR THE AMOUNT RE COVERED FROM THE DISTRIBUTOR AND NOT THE AMOUNT RECOVERED B Y THE DISTRIBUTOR FROM THE SUBSCRIBER. 10. THE TALK TIME GETS ACTIVATED INSTANTLY, AS SOON AS SUK IS SUPPLIED TO END CUSTOMER. 10 2.2. THE PR HAS ALSO ARGUED HIS CASE BY RELYING ON THE VARIOUS JUDGMENTS. THE PR HAS MAINLY RELIED ON THE JUDGMEN T OF THE ITAT, DELHI BENCH AND HYDERABAD BENCH IN THE CASE OF IDEA CELLULAR. IN ADDITION TO ABOVE THE PR HAS ALSO RELIED ON SOME OF THE FOLLOWING MAIN JUDGMENTS. (I) AHMEDABAD STAMP VENDORS ASSOCIATION LTD. V. UOI 925 7 ITR 202) (II) HARIHAR COTTON PRESS FACTORY V. CIT (196) 29 ITR 59 4 (III) BHOPAL SUGAR INDUSTRIES LTD. VS. STO 40 STC 42 (IV) KERALA STATE STAMP VENDORS ASSOCIATION(2006)282ITR 7 (KER.) IN THE NUT SHELL THE PR HAS OBJECTED TO THE APPLICA BILITY OF PROVISIONS OF SECTION 194H TO THE DIFFERENCE BETWEEN SALE PRIC E AND DISTRIBUTOR PRICE TO BE TREATED AS COMMISSION STATING THAT THE TRANSACTIONS BETWEEN THE COMPANY AND THE DISTRIBUTOR OF PREPAID PRODUCTS IS ON PRINCIPAL TO PRINCIPAL BASIS. 2.3. THE ABOVE ARGUMENT DO NOT SUPPORT THE PR IN ES TABLISHING THAT IN CASE OF PREPAID RECEIPTS THE RELATIONSHIP BETWEE N THE PR AND THE DISTRIBUTOR WERE OF PRINCIPAL TO PRINCIPAL IN VIEW OF THE FOLLOWING FACTS: (I) THE DISTRIBUTORS ARE APPOINTED FOR DISTRIBUTING THE PRODUCTS OF THE PR IN A DEFINED GEOGRAPHICAL AREA; (II) THE DISTRIBUTOR CAN PURCHASE PRODUCTS AT DISCOUNTED RATE FIXED BY THE ASSESSEE AND THE PR CAN ALSO OFFER OTHER INC ENTIVES AND COMMISSION BASED ON SALES PERFORMANCE. (III) THAT THE DISTRIBUTOR IS BOUND TO DISPLAY, SELL AND DEAL WITH ONLY THE PRODUCTS OF THE PR; (IV) THE DISTRIBUTORS CANNOT SELL THE PRODUCT FOR THE PR ICE BEYOND THE MRP. (V) THE DISTRIBUTOR HAS TO ADHERE TO CERTAIN BRAND IMAG E GUIDELINES, INFORM STOCK MOVEMENTS AND STOCK REPORTS AND PERMIT THE AUTHORIZED AGENTS OF THE ASSESSEE TO INSPECT THE ST OCK AND THESE RESTRICTIONS CLEARLY SHOWED THAT THE DISTRIBUTORS A RE ACTING AS THE AGENTS OF THE PRS COMPANY. (VI) THE DISTRIBUTOR IS ALSO GIVEN THE RESPONSIBILITY OF ENSURING PROPER IDENTITY VERIFICATION OF CUSTOMERS, WHICH ME ANS THAT THE DISTRIBUTORS ARE VERY MUCH ACTING FOR AND ON BEHALF OF THE PRS COMPANY. (VII) THE PROPERTY IN THE SIM CARDS AND RE-CHARGE COUPON S DO NOT PASS FROM THE ASSESSEE COMPANY TO THE DISTRIBUTORS FOR THE REASON THAT THE MOBILE TELEPHONE SERVICES ARE ALWA YS PROVIDED 11 BY THE PRS COMPANY AND IT CANNOT BE PROVIDED BY TH E DISTRIBUTORS ON THEIR OWN; (VIII) THE ESSENCE OF A CONTRACT OF AGENCY, AS DISTINGUIS HED FROM A CONTRACT OF AGENCY, AS DISTINGUISHED FROM A CONTRAC T OF SALE IS THAT AN AGENT AFTER TAKING DELIVERY OF THE PROPERTY DOES NOT SELL IT AS HIS OWN PROPERTY BUT SELLS THE SAME AS THE PROPE RTY OF THE PRINCIPAL AND UNDER HIS INSTRUCTIONS AND DIRECTIONS . IN THE INSTANT CASE, THE ITEM INVOLVED IS INEXTRICABLY LIN KED TO A SET OF SERVICES, WHICH ARE IDENTIFIED AND SOLD UNDER A BRA ND NAME. A DISTRIBUTOR OF THE ASSESSEE FOR AIRTEL PREPAID CARD S DOES NOT SELL THEM AS HIS OWN PROPERTY BUT AS THAT OF THE COMPANY . WHAT IS BEING DELIVERED IS NOT A MERE PHYSICAL ITEM BUT AN ACCESS TO THE CELLULAR NETWORK, WHICH IS THE PROPERTY OF THE PRS COMPANY FOR ALL TIMES. (IX) WHILE FREEDOM OF PRICING IS NOT THE SOLE DETERMINAT IVE FACTOR FOR A PRINCIPAL TO PRINCIPAL RELATIONSHIP, IT IS PERTIN ENT TO NOTE THAT THERE WAS NO FREEDOM OF PRICING AS PER THE AGREEMEN TS EXISTED BETWEEN THE DISTRIBUTORS AND THE ASSESSEE. (X) IN A PRINCIPAL TO PRINCIPAL SALE TRANSACTION, THE D ISTRIBUTOR BECOMES OWNER OF GOODS AND EXERTS FULL CONTROL OVER THE OPERATIONS THEREON; IN THE INSTANT CASE, VARIOUS RE STRICTIONS AND CONDITIONS IMPOSED ON THE DISTRIBUTORS RENDER THEM MERE AGENTS AND NOT INDEPENDENT PRINCIPALS.; (XI) IN A DISCOUNT SALE, ONCE GOODS ARE SOLD THERE CANNO T BE ANY RESTRICTION BY ONE PRINCIPAL ON ANOTHER AS TO HOW A ND WHERE TO SELL THESE GOODS. THE DISTRIBUTORSHIP AGREEMENTS IN THE INSTANT CASE CLEARLY DENOTE A GEOGRAPHICAL AREA OF OPERATIO N AND THE MANNER IN WHICH THE GOODS SHOULD BE SOLD. (XII) IN CASE OF PURCHASE ON DISCOUNT THERE CANNOT BE ANY RESTRICTION ON THE MANNER IN WHICH THE STOCK PURCHASED BY THE P RINCIPAL IS TO BE KEPT, NOR IS THERE ANY RIGHT FOR ONE PRINCIPA L TO INSPECT THE STOCK OR CALL FOR REPORTS OF STOCK MOVEMENTS. THIS IS NOT TRUE IN THE INSTANT CASE. (XIII) A SIGNIFICANT CAUSE IN THE DISTRIBUTORSHIP AGREEMEN TS IS THAT OF BRAND EXCLUSIVELY. THEREFORE, ONCE A DISTRIBUTOR SI GNS THE AGREEMENT, HE BECOMES AN EXCLUSIVE REPRESENTATIVE OF THE ASSESSEE COMPANY. (XIV) IN THE INSTANT CASE THE NATURE OF THE GOODS IS DIFF ERENT FROM ORDINARY PHYSICAL GOODS/COMMODITIES. SIM CARDS MEAN S CARDS USED FOR ACCESSING OR AVAILING OF THE PREPAID CELLU LAR MOBILE 12 TELEPHONY SERVICE. THE PRODUCTS ARE NOT MERE PHYSIC AL COMMODITIES BUT RATHER TIED TO CERTAIN SERVICES, VI Z CELLULAR MOBILE SERVICES. WHAT IS BEING TRADED IN THE FORM O F SIM/RE- CHARGE COUPONS IS ONLY A TOKEN; THE ACTUAL ITEMS IN VOLVED ARE SERVICES THAT INCLUDE ACCESS TO A CELLULAR MOBILE T ELEPHONY NETWORK. WHILE THERE MAY BE A PHYSICAL COMMODITY I N THE FORM OF SIM CARD OR RE-CHARGE COUPON/SLIPS, THE ACTUAL PRODUCT IS THE NON-PHYSICAL GOODS/SERVICES INVOLVED SUCH AS AC CESS TO THE CELLULAR NETWORK AND A TOPUP. THEREFORE, THE DISTRI BUTORS ARE ACTING ALL THE TIMES ON BEHALF OF THE PR. THE DISTR IBUTORS ARE EXCLUSIVELY MARKETING THE GOODS AND SERVICES IN CON NECTION WITH MOBILE TELEPHONY OF ASSESSEES BRAND CONFORMI NG TO THE DISPLAY GUIDELINES, SALE GUIDELINES AND STOCK MAINT ENANCE AS WELL AS CUSTOMER IDENTIFICATION, VERIFICATION AND D OCUMENTATION. 2.4. THERE ARE CLEAR CUT FINDINGS ON THE ABOVE ISSU E GIVEN BY THE DIFFERENT COURTS IN FAVOUR OF REVENUE. IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. VS. ASSTT. COMMISSIONER DECIDED BY IT AT, COCHI BENCH IN I.T.A. NOS. 106 TO 113/COCH/2009 DATED 30.04.200 9 THE ISSUE REGARDING APPLICABILITY OF PROVISIONS OF SECTION 19 4H ON THE DIFFERENCE BETWEEN MRP AND AMOUNT CHARGED FROM THE DISTRIBUTOR TREATING THE SAME AS COMMISSION HAS BEEN DECIDED IN FAVOUR OF RE VENUE AFTER GIVING DETAILED REASONING. 11. THE A.O. REPRODUCED THE ORDER OF THE ITAT, COCH IN BENCH IN THIS REGARD AT PAGES 5 TO 10 OF ITS ORDER VIDE PARA 2.4. VIDE PARA 2.5 OF HIS ORDER, THE AO OBSERVED THAT THE ASSESSEE PR HAS RELIED MAI NLY ON THE DECISION OF IDEA CELLULAR DECIDED BY THE ITAT, DELHI BENCH AND HYDERABAD BENCH. AGAINST THE SAID DECISIONS, THE REVENUE HAS GONE I N APPEAL BEFORE THE HONBLE DELHI HIGH COURT, WHICH WERE ADMITTED BY TH E HONBLE DELHI HIGH COURT ON THE FOLLOWING QUESTION OF LAW: 13 WHETHER ON A TRUE AND CORRECT APPRECIATION OF THE R ELATIONSHIP BETWEEN THE ASSESSEE AND ITS DISTRIBUTOR, THE LEAR NED INCOME TAX APPELLATE TRIBUNAL ERRED IN HOLDING THAT THE PAYM ENTS PAID BY THE ASSESSEE IS NOT COMMISSION AS ENVISAGED UNDER SECT ION 194 OF THE ACT? 12. THE HONBLE DELHI HIGH COURT VIDE ORDER DATED 1 9 TH FEB; 2010 IN ITA NOS. 145 & 784 OF 2009 ANSWERED THE ABOVE QUESTION OF LAW IN FAVOUR OF REVENUE. THE RELEVANT PART OF THE DECISION OF HONB LE DELHI HIGH COURT AS REPRODUCED BY THE A.O. AT PAGE 11 IS REPRODUCED FOR THE SAKE OF CLARITY AS UNDER: 28. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE SAID BENCH. IDENTICAL VIEW IS TAKEN BY CALCUTTA BENCH IN THE C ASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. BHARTI CELLULAR LTD . [(2007) 294 ITR (AT) 283 (KOLKATA)]. BOTH THESE BENCHES SPECIFICAL LY REJECTED THE ARGUMENTS OF THE ASSESSEE, BASED ON AHMEDABAD STAM P VENDORS ASSOCIATION (SUPRA), KERALA STAMP VENDORS ASSOCIA TION (SUPRA) AND BAJAJ AUTO LTD. (SUPRA) DISTINGUISHING THOSE JUDG MENTS AND HOLDING THAT THEY ARE NOT APPLICABLE IN THE GIVEN SITUATIO N. WE AGREE WITH THE SAME. 29. WE THUS ANSWER THE QUESTION, AS FORMULATED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. AS A CONSEQUENCE , THESE APPEALS ARE ALLOWED AND JUDGMENT OF THE TRIBUNAL ON THIS A SPECT IS SET ASIDE. NO COSTS. 13. VIDE PARA 2.6, IT WAS OBSERVED BY THE A.O. THAT IN THE CASE OF THE ASSESSEE PR ITSELF, ITAT, BENCH OF CALCUTTA IN ASSE SSEES OWN CASE VIDE ORDER DATED 04.04.2006 FOR THE ASSESSMENT YEAR 2003 -04 HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF REVENUE. THE BRIEF FAC TS AND THE FINDINGS OF THE ITAT BENCH OF CALCUTTA HAVE BEEN REPRODUCED BY THE A.O. VIDE PARA 2.6 OF 14 HIS ORDER AT PAGES 11 TO 21 OF HIS ORDER. ULTIMATEL Y, THE AO VIDE PARA 2.7 OF HIS ORDER OBSERVED THAT THE ASSESSEE PR HAS FAILED TO DEDUCT TAX ON SUCH COMMISSION AND THE AMOUNT OF TAX DEDUCTIBLE IS CHA RGED FROM ASSESSEE PR U/S 201(1) ALONGWITH INTEREST THEREON U/S 201(1A) OF THE ACT. THE RELEVANT PART OF THE A.O. ORDER CONTAINED IN PARA 2.7, FOR T HE SAKE OF CLARITY IS REPRODUCED AS UNDER: 2.7. IN VIEW OF THE ABOVE FACTS AND DECISIONS OF VARIOUS COURTS THE DIFFERENCE BETWEEN MRP AND AMOUNT CHARGED FROM THE DISTRIBUTORS IS TREATED AS COMMISSION LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194H OF THE INCOME TAX ACT, 1961. THE AMOUNT OF SUCH CO MMISSION DURING THE FINANCIAL YEAR UNDER CONSIDERATION WAS RS.5,08 ,10,665/- ON WHICH TAX DEDUCTIBLE @ 5.66% COMES TO RS.28,75,880/-. AM OUNT OF SAID TAX AND INTEREST THEREON IS WORKED OUT IN THE FOLLOWIN G CHART: YEAR COMMISSION TDS @ TAX DEDUCTIBLE PERIOD OF DEFAULT U/S 201(1A) IN MONTHS INTEREST CHARGEABLE U/S 201(IA) TOTAL AMOUNT OF TAX & INTT. 2005- 06 5,08,10,665 5.66% 2875880 61 1754290 4630170 SINCE THE PR HAS FAILED TO DEDUCT ANY TAX ON SUCH COMMISSION THE AMOUNT OF TAX DEDUCTIBLE IS CHARGED FROM THE PR U/ S 10(1) ALONGWITH INTEREST THEREON U/S 201(1A) OF THE INCOME TAX ACT , 1961. 14. AS REGARDS THE APPLICABILITY OF THE DECISION O F HINDUSTAN COCA COLA BEVERAGES LTD. VS. CIT REPORTED IN 293 ITR 226 AND THE INSTRUCTION OF 15 BOARD IN F.NO. 275/201/95-IT(B) DATED 29 JANUARY, 1 997, THE A.O. OBSERVED VIDE PARA 3.1 & 3.2 AS UNDER: 3.1. THE ABOVE ARGUMENTS OF THE PR HAVE BEEN CONSIDERED. AS MENTIONED BY THE PR IN THE ABOVE ARGUMENTS, THE HO NBLE DELHI HIGH COURT HAS OBSERVED THAT WHERE THE ASSESSEE HAS FUR NISHED CONFIRMATIONS FROM PAYEES TO FORM OF THEIR PANS/AC KNOWLEDGMENT OF THEIR RETURNS AND DECLARATION TO THE EFFECT THAT THEY HAD INCLUDED AMOUNT RECEIVED FROM THE ASSESSEE AS THEIR INCOME AND HAD PAID TAXES THEREON, THE ASSESSEE COULD NOT BE TREATED AS ASSE SSEE IN DEFAULT IN TERMS OF SECTION 201(1). FURTHER, THE INSTRUCTION F.NO.275/201/95- IT(B) DATED 29 JANUARY, 1997 ISSUED BY CBDT READS AS UNDER: I AM DIRECTED TO STATE THAT THE BOARD IS OF THE VIEW THAT NO DEMAND VISUALIZED U/S 201(1) OF THE ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER INCHARGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST U/S 201(IA) OF TH E ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DECUTEEE ASSESSEE OR THE L IABILITY TO CHARGE INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF P AYMENT OF TAXES BY THE DEDUCTEE ASSESSEE OR THE LIABILITY OF PENALTY U/S 271C OF THE I.T. ACT.: 3.2.IN BOTH THE CASES I.E. JUDGMENT OF HONBLE DEL HI HIGH COURT AND INSTRUCTIONS ISSUE BY THE BOARD THE PR WAS LIABLE TO SATISFY THE UNDERSIGNED BY FURNISHING THE REQUIRED PROOF THAT THE TAXES ON THE AMOUNT RECEIVED FROM THE PR HAS BEEN PAID BY THE D ISTRIBUTOR WHICH HE HAS FAILED TO DO. IN VIEW OF THESE FACTS THE PL EA OF THE PR CANNOT BE ACCEPTED AND AMOUNT DEDUCTIBLE U/S 194H OF THE INC OME TAX ACT ON THE COMMISSIONER IS BEING CHARGED FROM THE PR U/S 201(1) ALONGWITH INTEREST U/S 201(1A). 15. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS, THE A .O. RAISED DEMAND RECOVERABLE FROM THE PR U/S 201(1) AND INTEREST U/ S 201(IA) IN THE IMPUGNED ORDER IN THE COMPUTATION MADE AT PAGE 22 O F HIS ORDER.. 16 16. THE AO ACCORDINGLY MAKING THE IDENTICAL ORDER B EING ON THE IDENTICAL FACTS COMPUTED THE COMMISSION AND TAX DEDUCTIBLE FO R THE DIFFERENT YEARS AND THE INTEREST RECOVERABLE ON DIFFERENT AMOUNTS IN TH E COMPUTATIONAL PART OF SEPARATE ORDER IN DIFFERENT YEARS. 17. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OBSERVED VIDE PARA 3.1 TO 4.2 AT PAGE 5 & 6 OF HIS ORDER, WHICH FOR TH E SAKE OF CLARITY IS REPRODUCED AS UNDER: 3.1 THERE IS HARDLY ANY DISPUTE ABOUT THE NATURE OF TRANSACTIONS. THE ISSUE BEFORE THE VARIOUS JUDICIAL AUTHORITIES WAS WHETHER THE DIFFERENCE IN THE HANDS OF DISTRIBUTOR AMOUNTED TO COMMISSION U/S 194H OF THE I.T. ACT ON WHICH TDS WAS DEDUCTIBLE. THE HEAVY RELIANCE OF ASSESSEE IN THE CASE OF M/S. IDEA CELL ULAR IS DECIDED BY THE HONBLE ITAT, HYDERABAD IS FOUND TO BE MISPLACED A S IN THE CASE OF ASSESSEE ITSELF, THE HONBLE ITAT, KOLKATA AFTER D ETAILED DISCUSSION AND ANALYSIS ABOUT THE AGREEMENTS MADE BY ASSESSEE WITH DISTRIBUTORS HAS HELD THAT THE SURPLUS IN THE HANDS OF DISTRIBU TORS ARE NOTHING BUT COMMISSION. IT WAS ALSO DISCUSSED IN THE SAID OR DER THAT PRIOR TO ASSESSMENT YEAR 2002-03 THE ASSESSEE ITSELF HAD BE EN DEDUCTING THE TDS ON SUCH AMOUNTS. BESIDES THIS CASE, IN CASES O F OTHER CELLULAR, OPERATORS ALSO DECIDED BY HONBLE KOLKATA ITAT AND THE HIGH COURT OF DELHI, THE DECISIONS AGAINST RESPECTIVE ASSESSE ES ARE AVAILABLE. 3.2. DURING THE COURSE OF HEARING IT WAS BROUGHT T O THE NOTICE OF THE COUNSELS OF THE ASSESSEE THAT THE DECISION OF HON BLE ITAT (CAL.) IN ASSESSEES OWN CASE HAS BEEN AFFIRMED BY THE HONB LE HIGH COURT OF CALCUTTA IN THEIR DECISION DATED 19.05.2011 REPORT ED IN 61 DTR (CAL.) 225 AS DULY NOTED AT ORDER SHEET DATED 07.12.2011. THE SAME REMAINS UNREFUTED. IT IS ALSO A MATTER OF RECORDS THAT HON BLE DELHI HIGH COURT IN CASE OF M/S. IDEA CELLULAR LTD. 230 CTR (DEL) 4 3 AND THE HONBLE KERALA HIGH COURT IN THE CASE OF M/S. VODAFONE ESS AR 235 CTR (KER) 393 HAS ALSO HELD SIMILARLY. 17 3.3. THE COUNSELS OF ASSESSEE DURING THE COURSE OF PROCEEDINGS BEFORE ME HAS CONTENDED IN THE ALTERNATIVE THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF M/S. HINDUSTAN COCA COLA BEVERAGES LTD. 293 ITR AND THE CBDT INSTRUCTION F .NO.275/201/95- IT (B) DATED 29.01.1997 THE ASSESSEE MAY NOT BE TR EATED IN DEFAULT TO THE EXTENT TAX IS ALREADY RECOVERED FROM THE DISTR IBUTORS. THEY ALSO FILED A LIST OF 205 SUCH DISTRIBUTORS. 4. I HAVE CONSIDERED THIS PLEA ALSO AND FIND IN AB SENCE OF ANY EVIDENCE AS TO THEIR RETURNS FILES, TAX PAID AND T HE DUE ACCOUNTING OF SUCH COMMISSION IN THEIR RESPECTIVE BOOKS OF ACCOU NTS, THE DECISION CANNOT BE APPLIED. HERE, I WOULD LIKE TO COMPLETEL Y AGREE WITH THE A.O. WHO IN HIS ASSESSMENT ORDER, ON THIS ISSUE, H AS RIGHTLY HELD THAT THE ASSESSEE P/R HAD TO SATISFY THE A.O. IN THIS R EGARD AS TO HOW THE TAXES WERE ALREADY PAID BY THE DISTRIBUTORS. HOWEV ER, THE ASSESSEE WOULD BE FREE TO APPROACH A.O. AS AND IF SUCH EVI DENCE ARE IN ITS POSSESSION FOR APPROPRIATE LEGAL RELIEF, IF APPLIC ABLE. 4.1 IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING T HE DECISIONS OF HONBLE HIGH COURTS OF CALCUTTA, DELHI AND KERALA, THE ACTION OF A.O. IS AFFIRMED AND ALL THE APPEALS ON THIS ISSUE ARE DISMISSED. 4.2. IN THE RESULT, APPEAL IS DISMISSED IN RESPECT OF ALL THE ASSESSMENT YEARS EXCEPT 2007-08 ON WHICH INVOLVES ANOTHER ISS UE AND WHICH IS DISCUSSED BELOW. 18. AS REGARDS THE ISSUE ON ACCOUNT OF NON-DEDUCTIO N OF T.D.S. FEE PAID TO ANOTHER OPERATORS FOR ROAMING CHARGES, DURING THE A SSESSMENT YEAR 2007-08, THE BRIEF FACTS ARE THAT BEFORE THE A.O. THE P.R. HAS CONTENDED THAT NO TDS WAS REQUIRED TO BE DEDUCTED U/S 194J OF I.T.ACT IN VIEW OF THE DECISION OF M/S. SKY CELL COMMUNICATION LTD. 251 ITR53 (MAD.) A ND BHARTI CELLULAR LTD. 2008-TIOL-557 HC-DEL. THE NATURE OF TRANSACTIO N IN RELATION TO ROAMING FACILITY WAS EXPLAINED AS UNDER: 18 THUS, EFFECTIVELY THE SUBSCRIBER IS USING THEIR SER VICES OF THE OTHER NETWORK WHILE HE IS ROAMING. FOR THE SERVICES USED BY HIM IN THE OTHER NETWORK A BILL IS RAISED WHICH IS TO BE RECOVERED THROUGH THE HOME NETWORK BY NETWORK SERVICE PROVIDER. THE HOME NETWORK THEN RECOVER THIS CHARGE THROUGH THE MONTHLY BILL OF THE SUBSCRIBER. THE AMOUNT DUE TO THE NET WORK VISITED BY THE SUBS CRIBER IS THAN PAID THROUGH A MONTHLY SETTLEMENT OF PROCEDURE. IT IS CLEAR FROM THE ABOVE TRANSACTION FLOW THAT T HE SERVICE OF PROVIDING AIRTIME BY VISITING TELECOM CIRCLE IS DI RECTLY TO THE SUBSCRIBER AND NOT TO AIRTEL. THE SUBSCRIBER OF BH ARTI AIRTEL LIMITED USES THE NETWORK SET UP BY THE VISITING CIRCLE AND INSTEAD OF AMOUNT BEING RECOVERED FROM THE ROAMING SUBSCRIBER, THE V ISITING CIRCLE SENDS THE AMOUNT OF RECOVERED TO THE HOME CIRCLE FOR REC OVERY FROM THE SUBSCRIBER WHO HAD VISITED THE VISITING CIRCLE. 18.1. THE AO RELYING ON A DECISION OF HONBLE SUPRE ME COURT IN CASE OF M/S. BHARAT SANCHAR NIGAM LTD. VS. UNION OF INDIA 2 82 ITR 273 ON M/S. KURUKSHETRA DARPAN (P) LTD. 160 TAXMAN 344 AND ALSO THE CASE OF M/S. ACC LTD; 120 ITR 444 DECIDED BY THE HONBLE SUPREME COURT HAD HELD THAT ROAMING CHARGES WERE SUBJECT TO DEDUCTION OF TAXES AT SOURCE. 19. THE LD. CIT(A) VIDE PARA 6 TO 6.3 OF HIS ORDER OBSERVED AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D THE ISSUE INVOLVED. IT CANNOT BE DENIED THAT ROAMING FACILIT Y IS SERVICE PROVIDED TO CUSTOMERS. IN THE AREAS WHERE THERE IS NO SERVI CE OF THE ASSESSEE, IT TAKES THE SERVICES OF OTHER OPERATORS FOR THE SAME UNDER AGREEMENT WITH THEM WHICH ARE UNDERTAKEN BY THE ASSESSEE ITS ELF AND NOT THE CUSTOMERS. 6.1 CUSTOMERS HAVE NOTHING TO DO WITH OTHER OPERAT ORS AND ARE CONCERNED WITH ASSESSEE COMPANY WHO BILLS THEM AND REIMBURSES OTHER OPERATORS. IN VIEW OF THIS THE CONTENTION OF ASSESSEE THAT OTHER 19 OPERATORS PROVIDE SUCH FACILITY TO CUSTOMERS IS NO T ACCEPTABLE. ROAMING FACILITY IS ONLY A PART OF ENTIRE PACKAGE OF SERVICES WHICH GOES WITH THE CONNECTION OF A MOBILE PHONE. THE CA SE OF M/S. SKY CELL COMMUNICATIONS LTD. AS RELIED BY THE ASSESSEE IS IN RESPECT OF APPLICATION OF SECTION 194J OF I.T.ACT, NOT APPLIC ABLE IN THIS CASE AS THE A.O. HAS APPLIED THE PROVISIONS OF SECTION 194 C OF THE I.T.ACT. 6.2. THE ARRANGEMENT BETWEEN ASSESSEE AND OTHER CO MMUNICATION OPERATORS TO PROVIDE ROAMING FACILITY IS NOTHING B UT A WORK UNDERTAKEN BY THEM FOR ASSESSEE UNDER A CONTRACT OR ARRANGEME NT AGREED UPON BY BOTH THE PARTIES. FURTHER, THE RELIANCE OF A.O. IN THE RATIO OF THE CASE OF M/S. BHARAT SANCHA NIGAM LTD. DECIDED BY THE SUPRE ME COURT 282 ITR 273 IS ALSO VALID. IN THIS CASE THE HONBLE SU PREME COURT HAS HELD AS UNDER: T HE LICENSE CLEARLY MANIFESTS THAT IT IS ONE FOR PRO VIDING TELECOMMUNICATION SERVICE AND NOT FOR SUPPLY OF AN Y GOODS OR TRANSFER OF RIGHT TO USE ANY GOODS. IT IS EXPRESSLY PROHIBI TS TRANSFER OR ASSIGNMENT THE INTEGRITY OF LICENSE CANNOT BE BROK EN INTO PIECES NOR CAN THE TELECOMMUNICATION SERVICE RENDERED BY THEM BE SO MUTILATED. NOT ONLY THIS POSITION FLOWS FROM THE TERMS OF CON TRACT, THIS ALSO FLOWS FROM SECTION 4 OF THE INDIAN TELEGRAPH ACT WHICH P ROVIDES FOR GRANT OF LICENSE ON SUCH CONDITIONS AND IN CONSIDERATION O F SUCH PAYMENTS AS IT THINKS FIT, TO ANY PERSON TO ESTABLISH, MAINT AINER WORK AT TELEGRAPH. THE INTEGRITY OF ESTABLISHING, MAINTAI NING AND WORKING IS NOT BE MUTILATED. 6.3. IN VIEW OF THE ABOVE DISCUSSIONS, I HOLD THAT ROAMING CHARGES PAID BY THE ASSESSEE TO OTHER OPERATORS ATTRACT TD S PROVISIONS U/S 194C OF I.T.ACT AND THE ACTION OF THE A.O. IS HERE BY CONFIRMED.. 20. AS REGARDS THE APPLICATION OF DECISION IN THE CASE OF M/S. HINDUSTAN COCA COLA LTD; THE LD. CIT(A) VIDE PARA 6.4 OF HIS ORDER OBSERVED AS UNDER: 6.4. AS FAR AS THE APPLICATION OF THE CASE OF M/S . HINDUSTAN COCA COLA LTD. IS CONCERNED IT IS SIMILARLY HELD AS HEL D BY ME IN RESPECT OF COMMISSION CHARGES. THE ASSESSEE WOULD BE FREE TO APPROACH THE A.O. AS AND IF SUCH EVIDENCES ARE PRODUCED BEFORE HIM A ND APPLY FOR APPROPRIATE RELIEF, IF APPLICABLE. 20 21. THE LD. COUNSEL FOR THE ASSESSE, MR. ANIL BHALL A, CA SUBMITTED WRITTEN SUBMISSIONS, WHICH WERE READ OUT DURING THE COURSE OF HEARING BEFORE US, ARE REPRODUCED FOR THE SAKE OF CLARITY A S UNDER: 2.1 THE ISSUE REVOLVES AROUND THE QUESTION AS TO WHETHER THE ASSESSEE COMPANY IS IN A RELATIONSHIP OF PRINCIPAL TO PRINCIPAL WITH ITS DISTRIBUTOR OF PREPAID PRODUCTS SOLD TO SUCH DIS TRIBUTOR. - PREPAID PRODUCT CAPTURES THE RIGHT TO USE AIRTIM E OF A SPECIFIED VALUE (PARA 4 OF THIS SYNOPSIS) - THIS RIGHT TO USE AIRTIME IS CAPABLE OF BEING SOLD AND TRANSFERRED. - THE PROVISIONS OF SECTION 194H OF THE ACT DO NOT APPLY TO THIS SITUATION. 2.2 THIS ISSUE HAS BEEN DECIDED BY DIFFERENT HIGH COURTS IN FAVOUR OF REVENUE ON GROUNDS AND FACTS WHICH CAN BE DISTI NGUISHED. 2.2.1 THERE IS ALSO A DECISION OF HON'BLE I.T.A.T. , HYDERABAD 125 ITD 222 [ PB 204 ] IN FAVOUR OF THE ASSESSEE. 2.2.2 THERE IS NO DECISION OF JURISDICTIONAL HIGH COURT, AND IN VIEW OF A RECENT SUPREME COURT DECISION IN THE MATTER O F AHMEDABAD STAMP VENDORS THIS ISSUE IS BEING AGITATED STRONGL Y BEFORE THIS HON'BLE BENCH. 2.2.3 ADDITIONALLY, THERE IS A DECISION OF BOMBAY HIGH COURT IN QUTAR AIRWAYS 332 ITR 253 (BOM.) [ PB 355-356 ] WHICH LAYS DOWN THE TRIGGER FOR APPLICATION OF SECTION 194H OF THE ACT. 2.2.4 IN THIS CONTEXT THE DECISION OF GUJARAT HIGH COURT IN AHMEDABAD VENDORS ASSOCIATION 257 ITR 202 (GUJ.) [ PB 339-349 ] IS OF GREAT SIGNIFICANCE. THIS DECISION OF THE GUJARAT HIGH COURT HAS BEEN A FFIRMED BY THE HON'BLE SUPREME COURT RECENTLY, AFTER THE DECISION S OF THESE HIGH COURTS 2012 TIOL 68-SC-IT. [ PB 94-95 ] DECISION OF HONBLE SUPREME COURT IN AHMEDABAD STAMP VENDORS ASSOCIATION - 21 PRINCIPLE IN DECISION OF GUJARAT HIGH COURT NOT CONSIDERED IN PROPER CONTEXT. HOW IS THE RELATIONSHIP OF PRINCIPAL TO PRINCIPAL ESTABLISHED? 2.3 THE DECISION OF KOCHI TRIBUNAL IN THE CASE OF VODAFONE ESSAR CELLULAR 217 ITR (AT) 234 COCHIN DID NOT FOLLOW TH E DECISION OF THE AHMEDABAD STAMP VENDORS ASSOCIATION ON THE GROUND THAT THE STAMP TRANSACTIONS HAVE BEEN TREATED AS TRANSACTIONS OF PURCHASE AND SALE OF GOODS. IT WILL BE SHOWN THAT INDEED THERE IS PURCH ASE AND SALE OF RIGHT TO USE TALKTIME. 2.3.1 THE DECISION OF THE KERALA HIGH COURT IN VOD AFONE ESSAR CELLULAR LTD. 332 ITR 255 [ PB 357-369 ], AS PER PARA 6, 12 TH LINE STATES: QUOTE THE SECOND DECISION OF THIS COURT PERTAINS TO SAL E OF STAMP PAPER BY THE LICENSED STAMP VENDORS WHEREIN ALSO THE FINDIN G OF THIS COURT FOLLOWING THE DECISION OF THE GUJARAT HIGH COURT I N AHMEDABAD STAMP VENDORS CASE ((SUPRA)) IS THAT THE TRANSACTI ON IS SALE OF GOODS AND SO MUCH SO, NO DEDUCTION OF TAX IS CALLED FOR UNDER SECTION 194G OF THE ACT. FIRSTLY, THE KERELA HIGH COURT HAS REFERRED TO INC URRED SECTION OF 194G WHICH IS NOT RELEVANT IN THE CASE OF AHMEDABA D STAMP VENDORS ASSOCIATION. THEREIN ALSO THE ISSUE WAS IN REGARD TO 194H. SECONDLY, THE AHMEDABAD STAMP VENDORS ASSOCIATION HAS BEEN DISTINGUISHED ON FACTS STATING THAT THEIR STAMPS W ERE BEING SOLD AND THE TRANSACTION WAS SALE OF GOODS. 2.3.2 DECISION OF DELHI HIGH COURT IN IDEA CELLULA R 325 ITR 148 (DELHI) [ PB 315-338 ] HAS RELIED UPON THE PRINCIPAL THAT SERVICES CANNOT BE SOLD. THEREFORE AHMEDABAD STAMP VENDORS CASE CANNOT BE FOLLOWED. AT P 170 QUOTE SERVICES CANNOT BE SOLD OR PURCHASED AND IT CAN O NLY BE PROVIDED. THE OPERATIONAL FEATURES EXPLAINED BY THE ASSESSEE -COMPANY ARE NECESSARY IN RUNNING A MAMMOTH SYSTEM OF PROVIDING MOBILE TELEPHONE SERVICES OVER A LARGE GEOGRAPHICAL AREA. THE DISTRIBUTORS 22 PROVIDE ESSENTIAL SERVICES TO THE ASSESSEE-COMPANY IN RUNNING SUCH A HUGE OPERATION SYSTEM. THE DISTRIBUTORS ARE LINKIN G AGENTS IN THE CHAIN OF DELIVERY SERVICES TO CONSUMERS. THEREFORE, THE RELATIONSHIP IS NOT OF A PRINCIPAL TO PRINCIPAL. 2.3.3 DECISION OF KOLKATA HIGH COURT BHARTI CELL ULAR LIMITED (ERSTWHILE MOBITEL LIMITED) 12 TAXMAN.COM 30) [PB 370-376]. DECISION OF GUJARAT HIGH COURT HAS BEEN THRUST ASI DE WITHOUT DETAILED DISCUSSING ON THE PRINCIPLES ENUNCIATED IN AHMEDAB AD STAMP VENDORS GUJARAT HIGH COURT DECISION. IMPORTANT CONSIDERATION FOR FOLLOWING THE DECISION OF AHMEDABAD STAMP VENDORS ASSOCIATION 2.4 RECENT DECISION OF HON'BLE SUPREME COURT IN AHMEDABAD STAMPT VENDORS. 2.4.1 REFERENCE IS INVITED TO THE DECISION OF THE HONBL E SUPREME COURT WHICH HAS AFFIRMED TE DECISION OF HONBLE GU JARAT HIGH COURT IN AHMEDABAD STAMP VENDORS DECISION REPORTED IN 25 7 ITR 202 (GUJ) (PB 339-349). 2.4.2. THE GUJARAT HIGH COURT DECISION WAS RENDERE D AFTER ANALYZING SECTION 194H OF THE ACT. THE COURT HELD THAT THE P URCHASE OF STAMP PAPERS FOR A DISCOUNT VARYING BETWEEN 0.5% TO 4% O F THE FACE VALUE OF THE STAMP PAPERS DID NOT ACTUALLY AMOUNT TO PAYMEN T OF COMMISSION TO THE STAMP VENDORS EVEN THOUGH THERE WERE SEVERA L RESTRICTIONS PLACED ON THE STAMP VENDORS REGARDING THE MANNER I N WHICH THE LICENSED STAMP VENDORS CAN CARRY ON THEIR BUSINESS . THE COURT IN THAT CASE WHILE OBSERVING THAT THERE IS NO PAYMENT OF C OMMISSION BY THE GOVERNMENT TO THE STAMP VENDOR BROUGHT OUT THE DIS TINCTION BETWEEN THE DISCOUNT OFFERED AT THE TIME OF PURCHASE OF A PRODUCT AND THE COMMISSION WHICH PRINCIPAL PAYS TO HIS AGENT AND H ELD THAT SUCH DISCOUNT WAS NOT COMMISSION. 2.4.3 AFTER DISCUSSING VARIOUS CASE LAWS SPECIFIC ALLY BHOPAL SUGAR INDUSTRIES VS. STO (1997) 40 STC 52 (SUPREME COURT ) [ PB 142-155 ] THE DIFFERENCE BETWEEN RELATIONSHIP OF AGENCY AND SALE BETWEEN PRINCIPAL TO PRINCIPAL WAS DETERMINED. 23 2.4.4 THE HON'BLE GUJARAT HIGH COURT ALSO HELD THA T THE RESTRICTIONS IMPOSED ON THE DISTRIBUTOR VENDOR WERE OF NO CONSE QUENCE FOR THE DETERMINATION OF THE RELATIONSHIP PRINCIPAL TO PRI NCIPAL, WHICH WAS WHAT WAS CONFIRMED BY THE HON'BLE SUPREME COURT IN BHOPAL SUGAR INDUSTRIES. (DISCUSSED IN PB 145) HON'BLE GUJARAT HIGH COURT NOTED THE FOLLOWING ON PB 347 PARA 13- QUOTE THERE IS NO DISPUTE ABOUT THE FACT THAT THE LICENS ED VENDOR HAS TO PAY THE PRICE OF THE STAMP PAPERS LESS THE DISCOUNT AT THE RATES PROVIDED IN APPENDIX III TO THE RULES, WHICH RATES VARY FROM 0 .5 PER CENT TO 4 PER CENT. IT IS NOT THAT THE STAMP VENDORS COLLECT THE STAMP PAPERS FROM THE GOVERNMENT, SELLS THEM TO THE RETAIL CUSTOMERS AND THE DEPOSITS THE SAME PROCEEDS WITH THE GOVERNMENT LESS THE DISCOUN T. THE LIABILITY OF THE STAMP VENDOR TO PAY THE PRICE LESS THE DISCOUN T IS NOT DEPENDENT UPON OR CONTINGENT TO SALE OF THE STAMP PAPERS BY THE LICENSED VENDOR. THE LICENSED VENDOR WOULD NOT BE ENTITLED TO GET A NY COMPENSATION OR REFUND OF THE PRICE IF THE STAMP PAPERS WERE TO BE LOST OR DESTROYED. THE HON'BLE HIGH COURT ALSO NOTED ON PB 348 PARA 1 5- QUOTE THE CRUCIAL QUESTION IS WHETHER OWNERSHIP IN THE STAMP PAPERS PASSES TO THE STAMP VENDOR WHEN THE TREASURY OFFICER DELI VERS STAMP PAPERS ON PAYMENT OF PRICE LESS DISCOUNT. THE RULES THEMS ELVES CONTEMPLATE THAT WHAT THE LICENSED VENDOR DOES, WHILE TAKING D ELIVERY OF THE STAMP PAPERS FROM THE GOVERNMENT OFFICES, IS PURCHASING THE STAMP PAPERS. CLAUSE (B) OF SUB-RULE (2) OF RULE 24 INDICATES TH AT THE DISCOUNT WHICH THE LICENSED VENDOR HAD OBTAINED FROM THE GOVERNME NT WAS ON PURCHASE OF THE STAMP PAPERS. THE STRINGENCY OF TH E RESTRICTIONS CONTAINED IN THE RULES IS NOT ON ACCOUNT OF THE FA CT THAT THE OWNERSHIP OVER THE STAMP PAPERS IS NOT TRANSFERRED TO THE LI CENSED VENDORS WHEN THEY DELIVER THE STAMP PAPERS ON PAYMENT OF PRICE LESS DISCOUNT, BUT THE STRINGENCY OF THE CONDITIONS IS ON ACCOUNT OF THE NATURE OF THE STAMP PAPERS AS SUCH STAMP PAPERS ARE USED IN TRAN SACTION RELATING TO VALUABLE PROPERTIES FOR THE PURPOSE OF CREATING, T RANSFERRING AND EXTINGUISHING THE INTEREST IN VALUABLE PROPERTIES. JUDICIAL NOTICE CAN BE TAKEN OF THE FACT ABOUT THE IMPORTANT, IF NOT PARA MOUNT, ROLE BEING PLAYED BY STAMP PAPERS IN OUR LEGAL SYSTEM. 24 2.4.5 THEREFORE THE HON'BLE HIGH COURT WAS OF THE OPINION THAT EVEN THOUGH STAMP PAPERS ARE USED IN TRANSACTION RELATI NG TO VALUABLE PROPERTIES, OBVIOUSLY AT A LATER DATE, BUT ON THE BASIS OF TRANSACTION MODEL THE OWNERSHIP IN THE STAMP PAPER PASSES TO T HE STAMP VENDOR AT THE FIRST STAGE. 2.4.6 AS ALREADY MENTIONED DECISION OF HON'BLE HI GH COURT HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT. SIMILARITY IN THE AHMEDABAD STAMP VENDORS ASSOCIATION TRANSACTION WITH THE PREPAID BUSINESS TRANSACTION 2.5 THE TRANSACTION OF PREPAID CARD IS NO DIFFERE NT FROM THE TRANSACTION OF STAMPS AS PER THE FACTS NOTED IN 25 7 ITR 202 (GUJ.). [PB 339-349]. 2.5.1 WHAT IS BEING TRANSFERRED IS RIGHT TO USE A IRTIME. THE FACT THAT SERVICES WILL BE RENDERED BY ANOTHER PARTY IS OF NO CONSEQUENCE TO DETERMINE PRINCIPAL TO PRINCIPAL RELATIONSHIP. RI GHT TO USE THE SERVICES IS A VALUABLE TRANSFERABLE RIGHT. WHOEVE R HAS THIS PRODUCT CAN MADE A CALL AND GET IN TOUCH. 2.5.2 WHAT IS IMPORTANT TO BE NOTED HERE IS THAT T HE STAMP PAPER IS A MERE ACKNOWLEDGEMENT OF PAYMENT HAVING BEING MADE TO THE GOVERNMENT OF INDIA, AND THE PURCHASER OF STAMP PA PER TAKES OVER THIS RIGHT OF HAVING PAID THE STAMP DUTY OR RIGHT TO USE THE STAMP OF SPECIFIED VALUE, THE VALUE OF WHICH HAD BEEN PAID BY THE STAMP DUTY VENDOR IN BULK AT THE TIME OF FIRST PURCHASE FROM THE GOVERNMENT AUTHORITIES. 2.5.3 THIS CONTRACT OF HAVING PAID THE DUTY AND H AVING RECEIVED THE DUTY IS TAKEN OVER BY THE ULTIMATE BUYER OF STAMPS FROM THE STAMP VENDOR. IT IS ACKNOWLEDGED THAT THERE IS A TIME GAP BETWEE N THE TRANSFER OF STAMP FOR VALUE FROM THE GOVERNMENT TO THE STAMP V ENDOR AND FROM THE STAMP VENDOR TO THE CUSTOMER AND THE POINT OF TIME OF AFFIXING OF STAMP AT A LATER DATE CONSEQUENT TO A TRANSACTIO N NEEDING STAMP DUTY. 2.5.4 THE STAMP PAPER BECOMES A VALID TRANSACTIONA L EVIDENCE AT A LATER DATE AT THE POINT OF TIME THE TRANSACTION WH ICH NEEDS TO BEAR STAMP DUTY, STANDS EXECUTED OR CULMINATED. 25 2.5.5 AT THAT POINT OF TIME A NOTIONAL ENTRY HAPPE NS AUTOMATICALLY BY WAY OF AN ADJUSTMENT. 2.5.6 THE OBLIGATION TO PAY STAMP DUTY BY THE PART IES TO THE TRANSACTION IS SQUARED OFF WITH THE GOVERNMENT WHO HAS TO RECEIVED SUCH PAYMENT OF STAMP DUTY. GOVERNMENT THE SUPPLIE D OF STAMP PAPER BECOMES THE PRIME PARTY AND HAS A RELATIONSHIP WIT H THE PURCHASE OF STAMP AND THE STAMP VENDOR IS EXCLUDED. 2.5.7 THIS DORMANT STAMP DUTY THE VALUE OF WHICH H AD BEEN PAID BY STAMP VENDOR ACTUALLY BECOMES LIVE AT THE TIME OF TRANSACTION WHICH IS AT A STAGE LATER TO THE FIRST PURCHASE OF STAMP DU TY BY THE STAMP VENDOR. 2.5.8 PREPAID CARD 2.5.8.1 THIS FACT SITUATION IS SIMILAR TO THE TRAN SACTION WHEN PREPAID DISTRIBUTOR PAYS TO THE COMPANY A CERTAIN AMOUNT, A QUID PRO QUO OF WHICH IS THE TRANSFER OF THE RIGHT TO USE TALK TIM E TO THE DISTRIBUTOR IN BULK. 2.5.8.2 LIKE THE STAMP PAPER WHICH IS DORMANT SO I S THE PREPAID CARD DORMANT. 2.5.8.3 LIKE THE STAMP PAPER, WHERE THE HON'BLE G UJARAT COURT HAD NOTED THAT PAYMENT WAS MADE IN ADVANCE, OWNERSHIP WAS TRANSFERRED TO STAMP VENDOR, THE OWNERSHIP WAS IN THE FORM OF RIGHT TO USE THE STAMP VALUE, HERE ALSO PAYMENT IS MADE IN ADVANCE BY THE DISTRIBUTOR OF PREPAID CARDS FROM THE RIGHT TO USE AIRTIME FOR A SPECIFIED VALUE AND BECOMES ABSOLUTE OWNER OF SUCH RIGHT. 2.5.8.4 THE DISTRIBUTOR CAN THEN TRANSFER THIS R IGHT TO USE TALK TIME TO A RETAILER TO SELL IT TO THE CUSTOMER. 2.5.8.5 THE RIGHT TO USE TALK TIME BECOMES LIVE L IKE THE STAMP PAPER AT THE TIME WHEN THE CUSTOMER PUTS A REQUISITE CODE A ND THEN IS ENTITLED TO USE TALK TIME OF A SPECIFIED QUANTITY, WHICH I S SUPPLIED AT A LATER STAGE BY THE TELECOM SERVICE PROVIDER. 2.5.8.6 AS IN THIS CASE OF STAMP PAPER WHERE THE GOVERNMENT IS ONE PARTY TO THE TRANSACTION OF STAMP PAPER EVEN THOUG H THE STAMP VENDOR WOULD HAVE SOLD IT TO THE CUSTOMER WHO IS THE OTH ER PARTY, THE CUSTOMER, WHO HAS TO ENTER INTO A TRANSACTION. 2.5.8.7 SIMILARLY, IN THE CASE OF PREPAID CARDS O NE PARTY IS THE TELECOM SERVICE PROVIDER AND IN THE INTERIM THE PREPAID CA RD HAVING THE RIGHT TO USE TALK TIME IS TRANSFERRED FROM ONE PARTY (D ISTRIBUTOR) TO THE OTHER TO THE END CUSTOMER FOR HIS USE. 26 2.5.8.8 LIKE IT HAS BEEN NOTED BY THE GUJARAT HIG H COURT THAT NO COMMISSION WAS PAID BY THE GOVERNMENT, HERE ALSO T HERE IS NO PAYMENT OF THE IMPUGNED AMOUNT BY THE COMPANY TO T HE DISTRIBUTOR. 2.5.9 THE OBJECTIVE OF THIS EXERCISE OF COMPARISON IS TO SHOW THAT SINCE THE HON'BLE SUPREME COURT HAS CONFIRMED THE DECISION OF AHMEDABAD HIGH COURT IT HAS TO BE GIVEN LOT OF CRE DENCE AND ACCEPTED AS A PRECEDENCE, AND BECAUSE OF THE SIMIL ARITY IT HAS TO BE HELD THAT THE APPELLANT COMPANY HAS ONLY PROVIDED DISCOUNT AND NOT COMMISSION TO THE DISTRIBUTOR OF PREPAID CARDS. 2.5.10 ANOTHER FACTOR CONSIDERED BY THE HON'BLE HIGH COURT OF AHMEDABAD IS THAT NO SALES TAX IS LEVIED ON THE TR ANSFER OF STAMP PAPER. 2.5.10.1 IN THE CASE OF PREPAID CARD SINCE SERVIC E TAX IS APPLICABLE SALES TAX IS NOT LEVIABLE. 2.5.10.2 THE ABSENCE OF CHARGING OF SALES TAX CAN NOT TAKE AWAY OF DILUTE THE SUBSTANCE OF TRANSACTION OF TRANSFER OF RIGHT TO USE TALK TIME. ABSENCE OF SALES TAX DOES NOT MAKE THIS PRO DUCT, ANY LESSER PRODUCT THAN THE ONE ON WHICH SALES TAX IS LEVIED. THIS MERCHANDISE IS CAPABLE OF BEING TRANSFERRED EVEN THOUGH SALES TAX IS NOT LEVIED. 2.5.11 IT IS SUBMITTED THAT AS IN THE CASE OR AH MEDABAD STAMP VENDORS ASSOCIATION THE VALUE OF STAMP DUTY IS C APTURED IN A STAMP, WHICH BECOMES OPERATIONAL AT A LATER STAGE WHEN TH E DISTRIBUTOR GIVES IT TO THE PARTY WANTING TO USE IT FOR A TRANSACTIO N. AS SOON AS THE TRANSACTION IS ENTERED IN A AT A LATER STAGE THE S TAMP BECOMES OPERATIONAL. SIMILARLY, IN THE CASE OF PREPAID CARD DISTRIBUTOR , THE RIGHT TO USE AIRTIME WHICH IS CAPTURE IN A SIM CARD LIKE A COCA -COLA BOTTLE IS TRANSFERRED AND WHICH BECOMES OPERATIONAL WHEN TH E END OF CUSTOMER WANTS TO USE IT. 2.5.12 IT IS THEREFORE SUBMITTED THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT ON AN, IDENTICAL TRANSACTION MODE, THE DISCOUNT ENJOYED BY THE DISTRIBUTOR OF PREPAID CAR D IS NOT A COMMISSION FOR THE PURPOSE OF SECTION 194H OF THE ACT. SUMMARY 3. PREPAID PRODUCT ? 27 3.1 THIS PREPAID PRODUCT WHICH GIVES A RIGHT TO USE AIRTIME OF A SPECIFIED VALUE, CAN BE TAKEN AS GOOD OR MER CHANDISE CAPABLE OF BEING TRANSFERRED. 3.1.1 IT IS SIMILAR TO THE PRODUCT DESCRIBED BY TH E GUJARAT HIGH COURT [257 ITR 2002 (GUJ)]. THERE ALSO THERE IS A RIGHT TO UTILIZE THE VALUE CAPTURED IN THE STAMP FOR ENTERING INTO AND ESTABL ISHING A TRANSACTION/AGREEMENT. SUCH GOODS IN THE FORM OF S TAMPS CANNOT BE SOLD FURTHER, BUT A PREPAID PRODUCT CAN BE. IN FAC T A PREPAID PRODUCT IS BETTER PLACED FROM THE POINT OF VIEW OF TRADING. IMPORTANT- WHAT IS MERCHANDISE? 3.1.2 THAT THE CONCEPT OF MERCHANDISE HAS CHANGED BECAUSE OF TECHNOLOGICAL ADVANCEMENT HAS BEEN RECOGNIZED BY T HE HON'BLE SUPREME COURT IN THE MATTER OF B. SURESH 313 ITR 149 (S.C.). [PB 165-169]. [NOT CONSIDERED BY THE HIGH COURTS REFER RED TO BY CIT(A)] 3.1.3 THE ASSESSEE, WHO HAD BOUGHT RIGHTS OF VARIO US DECODERS, RECORDED MOVIES ON BETA-CAM TAPES AND TRANSFERRED THEM AS TELECASTING RIGHTS TO STAR TV FOR FIVE YEARS AND CLAIMED THE B ENEFIT OF THE DEDUCTION UNDER SECTION 80HHC OF THE INCOME-TAX AC T, 1961, IN RELATION TO THE PROFIT THEREFROM. 3.1.4 THE ASSESSING OFFICER (A.O.) HELD THAT THE A SSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80HHC, INTER ALIA, ON TH E GROUND THAT THE EXPORT WAS NOT OF MERCHANDISE OF GOODS AS CONTEMPL ATED UNDER SECTION 80HHC, BUT WAS MERELY AN EXPORT OF RIGHTS IN THE FILM. 3.1.5 BEFORE THE HON'BLE SUPREME COURT, REVENUE, S UBMITTED THAT THE ASSESSEE IN THIS CASE WAS NOT ENGAGED IN THE EXPOR T OF GOODS AND MERCHANDISE; THAT THE FILMS RECORDED ON BETA-CAM T APES DID NOT QUALIFY EITHER AS GOODS OR MERCHANDISE. IN THIS CONNEC TION, IT WAS URGED THAT THE BETA-CAM TAPE (CASSETTE) WAS ONLY A MEDIU M OF TRANSFER; THAT THERE WAS NO SALE OF THE FILM IN BETA-CAM FORMAT AND THE ASSESSEE HAD ONLY TRANSFERRED THE RIGHT TO USE FOR A PERIOD OF FIVE YEARS AND SINCE THE TITLE REMAINED WITH THE ASSESSEE, THE IM PUGNED TRANSACTION FELL OUTSIDE SECTION 80HHC. 3.1.6 IT WAS HELD AT PAGE 154: [PB 168-169] 28 THE BASIC REQUIREMENT OF SECTION 80HHC IS EARNING IN FOREIGN EXCHANGE AND RETENTION OF PROFITS FOR EXPORT BUSIN ESS. PROFITS ARE EMBEDDED IN THE INCOME EARNED. EARNING OF INCOME DEPENDS ON SALE OF GOODS AND SERVICES. TODAY THE DIFFERENT BE TWEEN THE TWO IS GETTING BLURRED WITH GLOBALIZATION AND CROSS-BORDE R TRANSACTION. TODAY WITH TECHNOLOGICAL ADVANCEMENT ON HAS TO CHA NGE OUR THINKING REGARDING CONCEPTS LIKE GOODS, MERCHANDIS E AND ARTICLES. IN THE CASE OF B. SURESH, THE ASSESSEE HAD BOUGHT RIGHTS OF VARIOUS DECODERS AND HAD RECORDED MOVIES ON BETA-CAM TAPES WHICH WERE TRANSFERRED AS TELECASTING RIGHTS TO START T.V. FO R FIVE YEARS (IT HAS A LIMITED LIFE). HENCE, SUCH RIGHT WOULD CERTAINLY FALL IN THE CATEGORY OF ARTICLE OF TRADE AND COMMERCE, HENCE, MERCHANDI SE. UNQUOTE [EMPHASIS SUPPLIED] 3.1.7 IT IS THEREFORE CLEAR THAT THE CONCEPT OF GOODS HAS UNDERGONE A CHANGE AND IN THIS CONTEXT THE RIGHT TO USE AIR TIME AND THE PROMISE TO PROVIDE AIRTIME IS A PRODUCT OR MERCH ANDISE CAPABLE OF BEING TRANSFERRED FROM SERVICE PROVIDER TO THE DISTRIBUTOR FROM THE DISTRIBUTOR TO THE RETAILED AND FROM THE RETAI LER TO THE CUSTOMER. THE HON'BLE SUPREME COURT HAS HELD THAT RIGHT WOULD BE CLASSIFIED AS MERCHANDISE. 3.1.8 IT IS OF NO CONSEQUENCE THAT THE SERVICE TO BE PROVED WHICH IS CAPTURE IN THE START UP PACK IS TO BE DELIVERED AT A LATER STAGE. IMPORTANT 3.1.9 REFERENCE IS DRAWN TO THE SHOW THAT HP USE T HIS PRODUCT TO TRANSFER AND GIVE AWAY AS A PRIZE.[PB 81] IMPORTANT FACT SITUATION TO DETERMINE THE RELATIONSHIP OF PRINCIPLA TO PRINCIPAL 3.1.10 THE PREPAID PRODUCT IS DELIVERED ON PAYME NT BEING RECEIVED IN ADVANCE FROM DISTRIBUTOR. 3.1.10.1 THE RISKS AND REWARDS ARE THAT OF DISTRI BUTOR AND IN CASE THERE IS ANY LOSS, PILFERAGE OR DAMAGE THE DISTRIBUTOR W OULD BE RESPONSIBLE FOR SUCH LOSS, PILFERAGE OR DAMAGE. THIS PROVES TH AT THE PROPERTY IN THIS CASE STANDS TRANSFERRED. 29 3.1.11 REFERENCE IS INVITED TO THE AGREEMENT AT PB 48. PLEASE REFER TO DEFINITION 1(A) AT PAGE 49, PARA 3(C), 4(A), 4(B) AT PAGE 52, PARA 6M, 6N AT PAGA 57, PARA 18 AT PAGE 65 AND PARA 28 AT P AGE 73- THIS PROVES THE NATURE OF RELATIONSHIP BETWEEN THE COMPANY AND DISTRIBUTORS IS PRINCIPAL TO PRINCIPAL. 3.1.11.1 A.O. HAS NOTED AT PAGE 3 PARA 2.3 THAT T HERE ARE OBLIGATIONS BY WAY OF CONTROL IMPOSED BY THE COMPANY. THIS WIL L NOT ALTER THE RELATIONSHIP OF PRINCIPAL TO PRINCIPAL AS HELD BY SUPREME COURT IN BHOPAL SUGAR- 40 STC 42 (SC) [PB 142-155]. 3.1.12 REFERENCE IS INVITED TO THE SAMPLE OF CHAL LAN AND INVOICE RAISED BY THE COMPANY ON THE DISTRIBUTORS TO SHOW THAT A PRODUCE OR MERCHANDISE WHICH HAS TO RIGHT TO USE TALK TIME UP TO A SPECIFIED VALUE HAS BEEN SOLD. PB 79-80. QUESTION- WHETHER RIGHT TO USE AIRTIME FOR SPECIFIRED VALIE CAN BE TRADED IN? 3.2 WHETHER IN THIS PREPAID PRODUCT THERE CAN BE A TRADE SIMILAR IN NATURE TO A TRADE OF GOODS? 3.3 IT IS CLEAR THAT THE PREPAID PRODUCT IS FACTUA LLY RIGHT TO USE AIRTIME AND PROMISE TO PROVIDE AIRTIME. 3.4 IN THIS CONTEXT THE DECISION OF THE HON'BLE SU PREME COURT IN THE MATTER OF B. SURESH 313 ITR 149 (SC) WHICH WAS NOT NOTED BY ANY OF THE HIGH COURTS NEEDS TO BE FOLLOWED. [PB 165-169] . 3.5 THE DECISION OF THE HIGH IN AHMEDABAD STAMP VE NDORS -257 ITR 202 (GUJ.) AS APPROVED BY THE HON'BLE SUPREME COURT IS OF GREAT IMPORTANCE AND IT APPLIES TO THE PROPOSITION WHIC H IS BEING MADE OUT. 3.6 THE HINDUSTAN PETROLEUM ADVERTISEMENT SUBSTANT IATES THIS FACT. PB 81. 4 NATURE OF PREPAID PRODUCT - THE PREPAID PRODUCT IS CAPTURED IN THE PREPAID S TART UP PACK. - IT CAPTURES THEREIN THE RIGHT TO USE AIRTIME TO THE EXTENT OF SPECIFIED MINUTES OR A PROMISE TO PROVIDE SPECIFIE D MINUTES OF AIRTIME TO THE OWNER OF THE START UP PACK. 30 - IT IS SOLD TO DISTRIBUTORS ON RECEIPT OF ADVANCE PAYMENT. - IT IS NOT ANY PROVISION OF ELECTRO MAGNETIC WAVES , BUT IT IS A RIGHT TO ENABLE THE PREPAID CUSTOMER TO EXPEND THE MINUTES PAID FOR. - THE START UP PACK COMPRISES OF SIM CARD AND IN TH IS SIM IS CAPTURED THE RIGHT TO USE AIRTIME FOR SPECIFIED MIN UTES. - THE PROPERTY IN THE SIM CARD REMAIN THAT OF THE C OMPANY AND IT IS SIMILAR TO A BOTTLE OF SOFT DRINK. - THE SIM CARD CAN BE RECHARGED WITH ADDITIONAL AIR TIME AS IN THE CASE OF SOFT DRINK BOTTLE. - THIS RIGHT TO USE AIRTIME FOR A SPECIFIED MINUT E OR THE PROMISE TO DELIVER SUCH AIRTIME IS A PRODUCT WHIC H IS TRANSFERRED ON PAYMENT OF MONEY FROM THE ASSESSEE C OMPANY TO THE DISTRIBUTOR AT A PRICE SAY RS. 97/-. THIS PRODU CT IS THE RIGHT TO USE AIRTIME TO THE EXTENT OF RS. 100/- AND A PROMIS E TO DELIVER AIRTIME TO THE EXTENT OF RS. 100/- BY THE ASSESSEE COMPANY. - THE DISTRIBUTOR SELLS THIS PRODUCT TO A RETAILER TO SAY RS. 98/- AND RETAILER IN TURN SELLS THIS PRODUCT TO THE CONSUMER . (THE PRICING IS LEFT TO THE RETAIL CHAIN AS PER COMPETITION AND MARKET FORCES). - THE DISTRIBUTOR IS ALSO PAID TURNOVER TARGET ACHI EVEMENT INCENTIVE. - RIGHT TO USE AIRTIME IS NOT A PRODUCT IN THE CO NVENTIONAL SENSE, BUT IT IS A PRODUCT OR MERCHANDISE IN VIEW O F THE TECHNOLOGICAL DEVELOPMENT. - THIS TRADE TRANSACTION CREATES A RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. 4.1 RIGHT TO USE AIRTIME IS A PRODUCT- IMPORTANT TO SHOW THAT RIGHT TO USE AIRTIME IS A TRANSFERABL E PRODUCT- PB 81 SHOWS A SCHEME ISSUED BY HINDUSTAN PETROLEUM. RI GHT TO USE AIRTIME IS A PRIZE AND IN THE SAME FAMILY OF TH E OTHER PRIZES. THIS IS A PRODUCT WHICH CAN BE DELIVERED AS A PRIZE . IMPORTANT PROPOSITION ON NON- APPLICABILITY OF SECTION 194H OF THE ACT BOMBAY HIGH COURT 4.2 REFERENCE IS INVITED TO THE DECISION OF MUMBAI HIGH COURT IN QUATAR AIRWAYS 332 ITR 253 (BOM) PB 355-356 ON F ACTS THIS IS IDENTICAL AND THE INTERPRETATION DESERVES TO BE FO LLOWED. IN THE CASE OF RIGHT TO USE AIRTIME THE PRICE CHARGED BY EACH SU BSEQUENT SELLER 31 CANNOT BE KNOWN AS THE PRICING IS LEFT TO THE RETA IL CHAIN, AND THE INCOME IS NOT DETERMINABLE. 5 SUBSTANCE OF THE TRANSACTION ANNEXURE A AT PAGE 30 OF THIS SYNOPSIS. 5.1 CASE LAWS EXPLAINING THE RELATIONSHIP OF PRINCIPAL TO PRINCIPAL ANNEXURE B AT PAGE 35 OF THIS SYNOPSIS. 6 IMPORTANCE OF HONBLE SUPREME COURT DECISION RELIANCE IS PLACED ON THE DECISION OF HYDERABAD TRI BUNAL IN THE CASE OF IDEA CELLULAR LTD. 125 ITD 222 [PB 204-228] FOR THE PROPOSITION THAT THE NORMATIVE EFFECT OF DECISIONS OF THE HON'B LE SUPREME COURT ARE FAR GREATER THAN ANY OTHER DECISION. THE HON'BL E TRIBUNAL ON THE BASIS OVERRULED THE DECISION OF KOLKATA TRIBUNAL IN BHARTI CELLULAR LIMITED . THIS PROPOSITION HAS ALSO BEEN CONFIRMED BY THE HON 'BLE INCOME TAX APPELLATE TRIBUNAL, PUNE IN THE CASE OF FOSTERS IND IA 115 TTJ 346 [PB 194-200]. THERE ALSO THE DECISION OF KOLKATA TRIBUNAL WAS O VERRULED. THE DECISIONS OF THE HON'BLE SUPREME COURT WHICH N EED TO BE TAKEN INTO CONSIDERATION ARE: 6.1 THE HONBLE SUPREME COURT IN AHMEDABAD STAMP VENDORS ASSOCIATION 2012-TIOL-68-SUPREME COURT-IT[PB 94-95] 6.1.1 THIS DECISION OF THE HONBLE SUPREME COURT HAS COME AFTER THE DECISION OF THE HIGH COURT OF DELHI AND KERELA AND KOLKATA AND BANGALORE TRIBUNAL AND HAS TO BE GIVEN FULL DUE AN D FOLLOWED. 6.1.2 WE REITERATE THAT THERE IS SIMILARITY IN THE BUSINESS MODEL BETWEEN THE BUSINESS OF SALE OF RIGHT TO USE AIRTI ME OF PREPAID CARDS AND THE TRANSACTION OF SUPPLYING STAMPS. THER E IS A RELATIONSHIP OF PRINCIPAL TO PRINCIPAL AND NOT PRINCIPAL TO AGEN T. 6.1.3 IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOC IATION WHERE THE VALUE OF STAMP DUTY IS CAPTURED IN THE STAMP, WHICH BECOMES OPERATIONAL AT A LATER STAGE WHEN THE DISTRIBUTOR O F STAMP GIVES IT TO THE PARTY WANTING TO USE IT FOR A TRANSACTION. THE STAM P VALUE BECOMES 32 OPERATIONAL WHEN AT A LATER DATE TRANSACTION REQUIR ING STAMPING IS ENTERED. 6.1.4 SIMILARLY IN CASE OF PREPAID CARD DISTRIBUTO R, THE RIGHT TO USE AIRTIME WHICH IS CAPTURED IN A SIM CARD LIKE A COC A-COLA BOTTLE IS TRANSFERRED AND WHICH BECOMES OPERATIONAL WHEN THE END CUSTOMER WANTS TO USE IT AT A LATER STAGE. 6.1.5 IN VIEW OF THIS DECISION OF THE HON'BLE SUPR EME COURT AND IN THE ABSENCE OF ANY DECISION OF THE JURISDICTIONAL H IGH COURT WE URGE THAT THE DECISION OF THE HON'BLE SUPREME COURT IN A HMEDABAD STAMP VENDORS ASSOCIATION BE GIVEN DUE EFFECT . 6.2 B. SURESH 313 ITR 149 [PB 165-169] HAS TO BE CONSIDERED WHICH HAS NOT BEEN CONSIDERED BY ANY OF THE HIGH COURTS REFERRED TO BY CIT(A). 6.2.1 THE HON'BLE SUPREME COURT RECOGNIZERS THE CH ANGE IN THE FORM OF MERCHANDISE AND GOODS IN VIEW OF THE TECHNOLOGIC AL DEVELOPMENT AND IN THE LIGHT OF THIS JUDGMENT RIGHT TO USE AIR TIME IMPREGNATED INTO THE PREPAID CARDS WILL BE CLASSIFIED AS A MERC HANDISE. 6.2.2 ONCE IT IS CONSIDERED AS MERCHANDISE AND GOO DS CAPABLE OF BEING TRANSFERRED, THE DECISION IN AHMEDABAD STAMP VENDORS ASSOCIATION CASE WILL BE OF GREAT SIGNIFICANCE. 6.2.3 ONE OF THE REASONS WHY DUE RECOGNITION HAS N OT BEEN GIVEN TO THE DECISION OF THE GUJARAT HIGH COURT IN AHMEDABAD STAMP VENDORS ASSOCIATION IS BECAUSE THE COURTS UNDERSTOOD THAT RIGHT TO USE AIRTIME WAS NOT GOODS AND NOT LEVIABLE TO SALE TAX, THEREFORE, THERE CANNOT BE A RELATIONSHIP IN THE BUSINESS TRANSACTIO N OF PRINCIPAL TO PRINCIPAL. 6.2.4 THIS DECISION OF THE HON'BLE SUPREME COURT T HROWS LIGHT ON THE CORRECT UNDERSTANDING OF THE FORM OF GOOD OR MERCHA NDISE AND IN VIEW OF THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN AHMEDABAD STAMP VENDORS ASSOCIATION 2012-TIOL-68-SC-IT [PB 9 4-95] READ WITH THE DECISION OF THE HON'BLE SUPREME COURT IN B. SURESH 313 ITR 149 [PB 165-169] IT HAS TO BE ACCEPTED THAT THE BUS INESS TRANSACTION BETWEEN THE COMPANY AND THE PREPAID CARD DISTRIBUTO R IS THAT OF PRINCIPAL TO PRINCIPAL AND THUS THE PROVISIONS OF S ECTION 194(H) WILL NOT APPLY. 6.2.5 THE FACT THAT SALES TAX CANNOT BE LEVIED CAN NOT PROVE FATAL TO THIS PROPOSITION. 33 6.3 BHOPAL SUGAR INDUSTRIES 40 STC 42 [PB 224-237] 6.3.1 IN THIS JUDGMENT THE BASIS FOR DETERMINATION OF THE RELATIONSHIP IN A TRANSACTION AS TO WHETHER PRINCIPAL TO PRINCI PAL OR PRINCIPAL TO AGENT HAS BEEN EXHAUSTIVELY EXPLAINED. 6.3.2 REFERENCE IS INVITED TO PAGE 36-37 PARA 1.9 TO 1.12 OF THIS SYNOPSIS WHERE THE EFFECTIVE PARAS OF THE HON'BLE SUPREME COURT HAVE BEEN DISCUSSED. 6.3.3 THE DECISION OF BHOPAL SUGAR INDUSTRIES 40 S TC 42 [PB 142- 145] HAS NOT BEEN CONSIDERED IN PROPER PERSPECTIVE BY THE I.T.A.T. DECISIONS REFERRED TO BY CIT(A), NOR BY THE HIGH C OURTS. THIS DECISION IS OF GREAT IMPORTANCE TO DETERMINE THE PRECONDITI ONS OF THE PRINCIPAL TO PRINCIPAL RELATIONSHIP. THIS HAS BEEN APPRECIAT ED BY THE HYDERABAD TRIBUNAL AND PUNE TRIBUNAL. THEREFORE, THIS DECISION OF THE HON'BLE SUPREME CO URT MUST BE FOLLOWED . PROPOSITION 7 DECISION OF OTHER HIGH COURTS ARE NOT BINDING ON TH IS HON'BLE TRIBUNAL. 7.1 CIT V. THANA ELECTRICITY SUPPLY LIMITED 206 IT R 727(BOM) THE DECISIONS OF THE HIGH COURT ARE BINDING ON THE SUBORDINATE COURTS AND AUTHORITIES OF TRIBUNALS UNDER ITS SUPERINTENDE NCE THROUGHOUT THE TERRITORIES IN RELATION TO WHICH IT EXERCISED JURIS DICTION. IT DOES NOT EXTEND BEYOND ITS TERRITORIAL JURISDICTION. 7.2 CONSOLIDATED PNEUMATIC TOOL CO. (INDIA) LTD. V . CIT 2009 ITR 277 (BOM.) THE DECISION OF ONE HIGH COURT IS NEITHER BINDING PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OUTS IDE ITS OWN TERRITORIAL JURISDICTION. THAT STATUS IS RESERVED O NLY FOR THE DECISION OF THE SUPREME COURT WHICH ARE BINDING ON ALL COURTS I N THE COUNTRY BY VIRTUE OF ARTICLE 141 OF THE CONSTITUTION OF INDIA. (SEE P. 282A, D, E) 34 7.3 GEOFFREY MANNERS AND CO. LTD. V. CIT 221 ITR 695- 696(BOM.) PRECEDENT HIGH COURT- DECISION OF HIGH COURT IS BINDING ON TRIBUNALS WITHIN ITS TERRITORIAL JURISDICTION BUTNOT ON TRIBUNALS OUTSIDE ITS TERRITORIAL JURISDICTION. 7.4 MAHINDRA & MAHINDRA LTD. (2009) 313 ITR (AT) 2 63 MUM SB IN SUCH A SITUATION TO ARGUE THAT A PARTICULAR HIG H COURT JUDGMENT OF THE NON-JURISDICTION HIGH COURT IS BINDING ON THE TRIBUNAL IS NOT ACCEPTABLE. THE HON'BLE BOMBAY HIGH COURT IN THANA ELECTRICITY SUPPLY LIMITED [1994] 206 ITR 727 HAS DISCUSSED TH E BINDING NATURE OF THE JUDICIAL PRECEDENTS. THE POSITION HAS BEEN SUMMARIZED IN PARAGRAPH 17 OF THE CASE BY LAYING DOWN THAT THE L AW DECLARED BY THE SUPREME COURT IS BINDING ON ALL THE COURTS IN INDI A. THE DECISION OF THE HIGH COURT IS BINDING ON THE SUBORDINATE COURT S AND THE AUTHORITIES OR THE TRIBUNALS UNDER ITS SUPERINTENDENCE THROUGH OUT THE TERRITORIES IN RELATION TO WHICH IT EXERCISES ITS JURISDICTION. I T HAS FURTHER BEEN HELD THAT THE DECISION OF THE HIGH COURT DOES NOT EXTEN D BEYOND ITS TERRITORIAL JURISDICTION. THE RELEVANT DISCUSSION ON THE BINDING NATURE OR OTHERWISE OF THE JUDGMENT OF A NON-JURISDICTION AL HIGH COURT HAS BEEN MADE IN PARAGRAPH (D) AS UNDER (PAGE 738 OF 2 06 ITR): (D) THE DECISION OF ONE HIGH COURT IS NEITHER BIN DING PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OUT SIDE ITS OWN TERRITORIAL JURISDICTION. IT IS WELL-SETTLED THAT THE DECISION OF A HIGH COURT WILL HAVE THE FORCE OF BINDING PRECEDENT ONL Y IN THE STATE OR TERRITORIES ON WHICH THE COURT HAS JURISDICTION. I N OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIGH COURT IT MAY, AT BEST, HAVE ONLY A PERSUASIVE EFFECT. BY NO AMOUNT OF STR ETCHING OF THE DOCTRINE OF STARE DECISIS CAN JUDGMENTS OF ONE HIG H COURT BE GIVEN THE STATUS OF A BINDING PRECEDENT SO FAR AS OTHER HIGH COURTS OR COURTS OR TRIBUNALS WITHIN THEIR TERRITORIAL JURISDICTION AR E CONCERNED. ANY SUCH ATTEMPT WILL GO COUNTER TO THE VERY DOCTRINE OF ST ARE DECISIS AND ALSO THE VARIOUS DECISIONS OF SUPREME COURT WHICH HAVE INTERPRETED THE SCOPE AND AMBIT THEREOF. THE FACT THAT THERE IS ON LY ONE DECISION OF ANY ONE HIGH COURT ON A PARTICULAR POINT OR THAT A NUMBER OF DIFFERENT HIGH COURTS HAVE TAKEN IDENTICAL VIEWS IN THAT REG ARD IS NOT AT ALL RELEVANT FOR THAT PURPOSE. WHATEVER MAY BE THE CON CLUSION, THE DECISIONS CANNOT HAVE THE FORCE OF BINDING PRECEDE NT ON OTHER HIGH 35 COURTS OR ON ANY SUBORDINATE COURTS OR TRIBUNALS W ITHIN THEIR JURISDICTION. THAT STATUS IS RESERVED ONLY FOR THE DECISIONS OF THE SUPREME COURT WHICH ARE BINDING ON ALL COURTS IN T HE COUNTRY BY VIRTUE OF ARTICLE 141 OF THE CONSTITUTION. SIMILAR POSITION HAS BEEN REITERATED AGAIN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CONSOLIDATED PNEUMATIC TOOL CO. (INDIA) LIMITED V. CIT [1994] 209 ITR 277 (BOM.) BY HOLDIN G THAT THE DECISION OF OTHER HIGH COURT IS NOT A BINDING PRE CEDENT FOR COURTS, AUTHORITIES OR TRIBUNALS OUTSIDE ITS TERRITORIAL J URISDICTION. AGAIN THE HON'BLE BOMBAY HIGH COURT IN GEOFFREY MANNERS AND CO. LTD. V. CIT [1996] 221 ITR 695 HAS FOLLOWED THE EARLIER TW O AFORENOTED JUDGMENTS FOR HOLDING THAT THE DECISIONS OF A HIGH COURT ARE NOT BINDING PRECEDENTS EITHER FOR OTHER HIGH COURTS OR TRIBUNALS OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIGH COURT. F ROM THE ABOVE JUDGMENTS OF THE HON'BLE JURISDICTION HIGH COURT, IT IS APPARENT THAT ONLY THE JUDGMENTS RENDERED BY THE HON'BLE SUPREME COURT OR THE JURISDICTIONAL HIGH COURT ARE BINDING ON THE TRIBU NAL. THE JUDGMENTS OF THE OTHER HON'BLE HIGH COURTS, THOUGH HAVE PERS UASIVE VALUE, BUT CANNOT HAVE A BINDING FORCE. 8. HIGH COURT DECISIONS DISTINGUISHED 8.1 DECISION OF THE DELHI HIGH COURT IN IDEA CELLULAR L IMITED 325 ITR 148 (DEL) [PB 315-338] THE BASIC PROPOSITION IN THE DELHI HIGH COURT WAS: - THAT IN THE CASE OF SUPPLY AND DELIVERY OF SIM CA RDS AND OTHER RECHARGE COUPONS, THERE IS NO SALE AND PURCHASE OF GOODS BUT ONLY SERVICES, - THAT DECISION OF THE AHMEDABAD HIGH COURT WAS NOT APPLICABLE AS IT COVERS THE TRANSACTIONS OF PURCHASE AND SALE OF GOODS, - THAT ON TERMINATION OF THE AGREEMENT THE STOCK WA S RETURNED BACK TO THE SERVICE PROVIDER. DISTINGUISHING FEATURES 8.1.1 IT HAS BEEN EXPLAINED THAT IN VIEW OF THE J UDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF B. SURESH 313 ITR 149 (S.C.) [PB 165-169], THE RIGHT TO USE AIRTIME IS A MERC HANDISE, CAPABLE OF BEING SOLD AND TRANSFERRED AND SERVICE CAN BE UNDE RSTOOD AS MERCHANDISE. 36 - TECHNOLOGICAL ADVANCEMENT IS RESULTING IN COMPLEX ITIES IN THE TAXING REGIME, AS TO DETERMINE WHETHER A TRANSFERRE D PRODUCT IN THE FORM OF A RIGHT IS EXIGIBLE TO INDIRECT TAX O R NOT. THIS IS ALWAYS GOING TO BE VEXED ISSUE. IN FACT TAXABILITY OF COMMERCE THROUGH I.T. IS KEE PING THE LIGHTS BURNING ALL OVER THE WORLD- B SURESH 313 ITR 149 (S .C.) - THE DECISION OF THE HON'BLE SUPREME COURT WAS NO T NOTICED BY DELHI HIGH COURT 8.1.2 THE FACT THAT NO SALES TAX OR VAT IS LEVIAB LE CANNOT PROVE FATAL TO THE CHARACTER OR MERCHANDISE IN RIGHT TO USE AIRTIME, OR TO A RELATIONSHIP OF PRINCIPAL TO PRINCIPAL BETWEEN TWO INDEPENDENT BUSINESS ENTITIES. 8.1.3 AHMEDABAD HIGH COURT DECISION IN 257 ITR 20 2 AS CONFIRMED BY HON'BLE SUPREME COURT APPLIES FOR THE REASONS EXPLAINED NEEDS TO BE APPLIED. THEREIN ALSO IN THE STAMP THERE IS A PROMISE TO DELIVER AND RECOGNIZE THE VALUE OF STAM P MENTIONED ON IT. 8.1.4 UNLIKE THE DELHI HIGH COURT IN IDEA CELLULA R 325 ITR 148 [PB 315-338] WHERE IT WAS NOTED AT PAGE 333-33 4, PARA 25,26 THAT STOCK WAS TO BE RETURNED BACK ON TERMINATION OF AR RANGEMENT, IT IS NOT SO IN THE CASE OF THE APPELLANT. 8.2 VODAFONE ESSER CELLULAR LIMITED VS. ASSISTANT COMMISSIONER OF INCOME TAX 332 ITR 255 (KER). [PB 357-369] DISTINGUISHING FEATURES 8.2.1 THE PRIME REASON IN THIS JUDGMENT WAS THE F ACT THAT THE KERALA HIGH COURT HAD IN THE CASE OF BPL MOBILE CE LLULAR LIMITED RENDERED A JUDGMENT IN A SALES TAX CASE WHEREIN IT WAS HELD THAT THERE IS NO SALES TAX LIABILITY ON SALE OF SIM CARDS AND RECHARGE COUPONS SOLD THROUGH THE DISTRIBUTORS AND IT DOES NOT INVO LVE SALE OF GOODS. IN SUCH CASE IT HAS BEEN HELD THAT THERE CANNOT BE A PRINCIPAL TO PRINCIPAL RELATIONSHIP THEREFORE PROVISIONS OF SECTION 194H WERE HELD APPLICABLE. 8.2.2 THE FACT THAT SUCH A PRODUCT IS NO EXIGIBLE TO VAT BECAUSE IT IS NOT A CONVENTIONAL PRODUCT IN VAT LA W, CANNOT PROVE FATAL TO A BUSINESS RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. 37 8.2.3 ACCOUNTING ENTRIES ANOTHER MAIN ISSUES CONSIDERED WAS THE ACCOUNTING ENTRIES PASSED. THE ACCOUNTING ENTRIES ARE ENTIRELY DIFFERENT IN TH E APPELLANTS CASE REFER PAGE 31 AND 32 OF THIS SYNOPSIS- FOR PREPAID ENTRIES BY APPELLANT PB PAGE 313 THE ACCOUNTING ENTRIES PASSED BY VODAFO NE KERALA. 8.2.4 BUSINESS RELATIONSHIP OF PRINCIPAL TO PRINCI PAL IS AN INDEPENDENT RELATIONSHIP ESTABLISHED BY CONDUCT OF THE PARTIES AND CANNOT BREAK DOWN ON ACCOUNT OF THE FACT THAT THE SERVICES OF T ELECOM CONNECTIVITY AND USE OF AIRTIME ARE TO BE PROVIDED BY TELECOM S ERVICE PROVIDER COMPANY AFTER THE PRODUCT HAS BEEN SOLD. 8.2.5 AS EXPLAINED THE PRODUCT WHICH HAS BEEN SOLD IS THE RIGHT TO USE AIRTIME FOR A SPECIFIED AMOUNT AND CONSEQUENT PRO MISE TO RENDER AIRTIME FOR THE USE BY THE ULTIMATE CUSTOMER. 8.2.6 BASICALLY PROMISE TO DELIVER OR RIGHT TO US E IS A PRODUCT AND THIS PRINCIPAL HAS BEEN FOLLOWED IN THE DECISION O F THE AHMEDABAD HIGH COURT 257 ITR 202 AFFIRMED BY THE HON'BLE SUP REME COURT. IT HAS ALSO BEEN FOLLOWED BY THE HON'BLE SUPREME COUR T IN B. SURESH 313 ITR 149 (S.C.). 9. KOLKATA DECISION DISTINGUISHED. 9.1 BHARTI CELLULAR LIMITED (ERSTWHILE MOBITEL LTD .) 2011-TIOL- 396-KOL-HC[PB 370-376] THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF BHARTI CELLULAR LIMITED 2011-TIOL-396-KOL-HIGH COURT CANNOT BE RELI ED UPON DISTINGUISHING FEATURES 9.1.1 THE DECISION IS BASED UPON THE UNDERSTANDIN G PROPERTY IN THE START UP PACK, PREPAID COUPONS AFTER EVEN T HE TRANSFER OF DELI VERY OF FRANCHISE REMAINS WITH THE APPELLANT ASSES SEE. 9.1.1.1 THIS IS INCORRECT BECAUSE IN THE START UP PACK THERE ARE TWO PRODUCTS SIM CARD THE CONTAINER LIKE COKE BOT TLE AND RIGHT TO USE AIRTIME. THE PROPERTY IN THE SIM CARD REMAINS WITH THE COMPANY BUT THE MERCHANDISE RIGHT TO USE AIRTIME WHICH I S IMPREGNATED IN THE SIM CARD IS WHAT IS TRANSFERRED. 38 ALSO FACTUAL INACCURACY 9.1.2 THE HON'BLE HIGH COURT HAS ALSO NOTED INCOR RECTLY THAT THE PAYMENT IS GIVEN BY THE FRANCHISE AFTER COLLEC TING THE SAME FROM RETAILER. [PB 376] 9.1.2.1 PARA 26 QUOTE 26. IT APPEARS FROM THE RECORDS IN THIS CASE THAT THE TRANSACTION IN CASE OF PREPAID SIM CARDS, AND RECHA RGEABLE COUPONS, SUFFICIENT STOCKS ARE TO BE KEPT BY FRANCH ISEE, AND THEN THE SAME ARE TO BE SOLD TO THE RETAILERS AT A RATE STIPULATED BY THE ASSESSEE, SAY AT RS. 324 AND THE RETAILER IS ALLOWED TO SELL IT TO THE ULTIMATE CUSTOMER AT THE MAXIMUM PRICE AG AIN FIXED BY THE ASSESSEE, SAY AT RS. 330/-. THE ASSESSEE IS TO REALIZE LESSER RATE SAY AT RS. 317/- PER SIM CARD FROM FRANCHISEE. THUS, DISCOUNT OF RS. 7 IS GIVEN. THEREFORE AFTER SELLIN G ALL THE SIM CARDS AND PRE-PAID COUPONS TO THE RETAILERS THE FRA NCHISEE IS TO MAKE PAYMENT OF SALE PROCEEDS TO THE ASSESSEE AFTER DEDUCTING A DISCOUNT OF RS. 7 PER SIM CARD. THUS THIS RECEIPT OF DISCOUNT AT THE RATE OF RS. 7 IS IN REAL SENSE COMMISSION PAID TO THE FRANCHISEES. HENCE ALL THE TRAPPINGS OF LIABILITY A S AGENT, OF THE FRANCHISEE TOWARDS ASSESSEE SUBSISTS. 9.1.2.2 FIRSTLY, THE DISTRIBUTOR CAN SELL AT ANY R ATE TO RETAILER AND TO THAT EXTENT THERE IS FACTUAL MISTAKE. 9.1.2.3 SECONDLY THE EXAMPLE OF PRICES IS INCORREC T. IT IS NOT POSSIBLE TO DETERMINE THE MARGIN EACH PERSON IN TH E DISTRIBUTOR CHAIN HAS KEPT. WITHOUT PREJUDICE AS PER THE HON'BLE HIGH COURT TH E IMPUGNED AMOUNT ON WHICH TAX IS NOT DEDUCTED IS RS. 7/- (32 4-317), IN FACT THE REVENUE IS SEEKING TO HOLD ASSESSEE IS DEFAULT ON RS. 13/- (330-317). 9.1.2.4 THIRDLY, THE HON'BLE HIGH COURT HAS ERRED ON FACTS TO SAY THAT THE FRANCHISEE COLLECTS THE PAYMENT FROM RET AILER AND GIVES TO THE COMPANY. IN FACT, THE DISTRIBUTOR HAS TO PAY IN AD VANCE AT THE TIME OF COLLECTING THE PREPAID PACK. REFER : BUSINESS MODEL ANNEXURE A- PAGE 30 OF TH IS SYNOPSIS, PARA 2.1 AND AGREEMENT CLAUSE 28 PARA 73. 39 9.1.2.5 ALL THESE FACTUAL ERRORS SHOW THAT THE HON 'BLE KOLKATA HIGH COURT DID NOT HAVE ANY BASIS TO DETERMINE THE SE INCORRECT FACTS WHICH HAVE BEEN RELIED UPON TO COME TO THE DECISIO N AGAINST THE COMPANY. [REFER I.T.A.T. -105 ITD 129 (KOL.)] CONTROL IMPOSED 9.1.3 THE SUBSTANCE OF THE TRANSACTION HAS BEEN I GNORED ON THE BASIS OF CONTROL CLAUSES OF THE AGREEMENT BY WHICH CONTROL IS IMPOSED UPON THE RETAILER FOR COMPLIANCE OF CONDITIONS. 9.1.3.1 AS ALREADY EXPLAINED THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF BHOPAL SUGAR AT PB PA GE 142 TO 155 AT PAGE 145 EXPLAINS THE CURRENT BUSINESS POLICIES OF CONTROL IMPOSED ON THE DISTRIBUTORS AND RETAILER BY THE MANUFACTURER, WHICH DOES NOT ALTER THE RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. 9.1.4 THE HON'BLE KOLKATA HIGH COURT HAS NOT CONS IDERED THE DECISION OF HON'BLE SUPREME COURT IN B. SURESH. 9.1.5 THE DECISION OF THE HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS HAS BEEN BRUSHED ASIDE BY THE HON'BL E HIGH COURT WITHOUT DETAILED DISCUSSIONS ON THE PRINCIPLES IN THE SAID JUDGMENT BY MERELY STATING AT PAGE 421 PARA 27 AS ON FACTUAL A NALYSIS THERE WAS NO PRINCIPAL TO PRINCIPAL RELATIONSHIP. WE HAVE INFACT SHOW THE TWO TRANSACTIONS ARE ABSOL UTELY SIMILAR. 10 SUMMARY 10.1 THE DECISIONS OF HON'BLE SUPREME COURT IN AH MEDABAD STAMP VENDORS ASSOCIATION, B. SURESH AND BHOPAL SU GAR INDUSTRIES HAVE TO BE KEPT IN PERSPECTIVE AND FOLLOWED. 10.2 THE COMPANY HAS APPOINTED DISTRIBUTORS IN RE GARD TO ITS PREPAID PRODUCT WHICH IS RIGHT TO USE SPECIFIED A IRTIME WHICH IS CAPTURED IN THE SIM CARD WHICH IS INCLUDED IN THE START UP PACK. THE PREPAID PRODUCT IS A MERCHANDISE WHICH IS NOT SUBJ ECT TO SALES TAX. 10.3 THAT BECAUSE IT IS NOT SUBJECT TO SALES TAX CANNOT PROVE FATAL TO CHARACTER OF MERCHANDISE, CAPABLE OF BEIN G TRANSFERRED TO THE RELATIONSHIP OF PRINCIPAL TO PRINCIPAL. 40 GROUNDS NO. 1.3 1. DOUBLE COLLECTION OF TAX 1.1 THE ASSESSEE COMPANY HAS RAISED A GROUND WITHO UT PREJUDICE THAT THE TAX CONSIDERED TO BE IN DEFAULT HAS ALREAD Y BEEN PAID BY THE DISTRIBUTOR AND IT CANNOT BE COLLECTED AGAIN FROM T HE ASSESSEE COMPANY. 1.2 THIS PROPOSITION IS BASED ON THE DECISION OF T HE HON'BLE SUPREME COURT IN HINDUSTAN COCA-COLA BEVERAGE PVT. LTD. 293 ITR 226 (PB PAGE 235 TO 237) WHEREIN IT WAS HELD THAT T AX COULD NOT BE RECOVERED ONCE AGAIN FROM THE ASSESSEE ONCE THE TAX HAS BEEN PAID BY THE DEDUCTEES (PB PAGE 34 TO 37). THE COMPANY HAD FILED DETAILS OF PERMANENT ACCOUNT NUMBER OF ALL THE DEDUCTEES. (PB PAGE 34 TO 37). 1.3 THE DECISION OF THE MUMBAI TRIBUNAL IN THE CAS E OF VODAFONE ESSAR LIMITED 9 ITR (TRIB.) 182 AT PAGE 216 (PB PAG E 256 TO 280 AT PARA 34 AT PAGE 279) IS REFERRED FOR THE PROPOSITIO N THAT WHERE THE PERMANENT ACCOUNT NUMBER IS MADE AVAILABLE TO THE A .O., IT WOULD NOT BE UNREASONABLE ON THE PART OF THE ASSESSEE TO ASK A.O. TO HAVE THE PAYMENTS VERIFIED FROM THE RECORDS OF THE A.O. S WITHIN WHOSE JURISDICTION THE PAYEES ARE ASSESSED. IN SUCH CASES , THE ASSESSEE COULD NOT BE HELD TO BE IN DEFAULT AND THE TAXES COULD NO T BE RECOVERED FROM THE ASSESSEE. THE ACTION OF THE A.O. IN HOLDING THE ASSESSEE COM PANY TO BE IN DEFAULT IN RESPECT OF TAX IS THEREFORE, CONTRARY TO THE LAW IN LAND. GROUND NO. 2 TO 2.2 APPLYING PROVISIONS OF SECTION 194J TO THE TRANSACTION OF ROAMING CHARGES RS. 26,072/- 1. FACTS AS TO ROAMING SERVICE ROAMING SERVICE. AIRTEL SUBSCRIBER IN AMRITSAR TRAVELLING TO JAIPUR SWITCHES ON HIS MOBILE DEVICE AFTER REACHING JAIPUR (IN CASE OF AIR TRAVEL). WHERE THE SUBSCRIBER TRAVELS BY LAND BE AUTOMATICALLY REC EIVES A MESSAGE 41 TRANSFERRING TO THE ROAMING NETWORK ON VISITING ANO THER TELECOM, CIRCLE. THE SUBSCRIBER HAS A CHOICE OF MANUAL NETWORK SELEC TION OR AUTOMATIC NETWORK SELECTION. UNDER AUTOMATIC NETWORK SELECTION, THE SERVICES OF THE MOST PREFERRED ROAMING PARTNER OF THE SUBSCRIBERS HOME NETWORK WILL BE SELECTED. UNDER, THE MANUAL SELECTION, THE SUBSCRIBER CAN CHO OSE THE ROAMING PARTNER WHOSE SERVICES HE WOULD LIKE TO USE OUT OF THE ONES WHICH ARE AVAILABLE IN THAT AREA (SUBSCRIBER C AN ONLY CHOOSE THE ROAMING PARTNER WITH WHOM AIRTEL HAS TIE-UP). VISITING NETWORK (E.G. HEXACOM) LOCATES MOBILE DEVI CE AND IDENTIFIES THAT IT IS NOT REGISTERED WITH ITS SYSTE M I.E. VLR. VISITING NETWORK AUTOMATICALLY CONTACTS HOME NETWOR K OF AIRTEL SUBSCRIBER I.E. HLR AND REQUESTS SERVICE INFORMATIO N ABOUT ROAMING DEVICE USING MSI NUMBER MSI NUMBER IS A U NIQUE SUBSCRIBER IDENTITY NUMBER GRANTED TO THE CUSTOMER AT THE TIME OF SUBSCRIPTION. 42 VISITING NETWORK MAINTAINS TEMPORARY SUBSCRIBER REC ORD FOR THE SAID MOBILE DEVICE AND PROVIDES AN INTERNAL TEMPORA RY PHONE NUMBER TO THE MOBILE DEVICE. HOME NETWORK ALSO UPDATES ITS REGISTER TO INDICATE THAT THE MOBILE IS ON VISITOR NETWORK SO THAT INFORMATION SENT TO T HAT DEVICE IS CORRECTLY ROUTED. THE ENTIRE PROCESS ABOVE IS AUTOMATIC AND DOES NOT INVOLVE ANY HUMAN INTERVENTION AT ANY STAGE. THE AIRTEL SUBSCRIBER IN AMRITSAR, WHO IS TEMPORARI LY REGISTERED AS HEXACOM SUBSCRIBER MAKES CALLS IN JAIPUR AND THE MI NUTES ARE REGISTERED IN HIS IDENTITY FOR WHICH HE HAS TO PAY THROUGH AIRTEL AMRITSAR. HOME NETWORK FORWARDS ALL INCOMING CALLS TO THE TEM PORARY PHONE NUMBER WHICH TERMINATES AT THE DEVICE OF ROAMING SU BSCRIBER (IN JAIPUR) WHO IS NOW USING THE SERVICES OF THE VISITI NG NETWORK (I.E. HEXACOM.): THE ENTIRE PROCESS ABOVE IS AUTOMATIC AND DOES NOT INVOLVE ANY HUMAN INTERVENTION AT ANY STAGE. BILLING PROCESS 43 USAGE OF ROAMING SUBSCRIBER IN VISITED NETWORK IS C APTURED IN A FILE CALLED TAP, I.E. TRANSFERRED ACCOUNT PROCEDURE FOR GSM/CIBER I.E. CELLULAR INTER-CARRIER BILLING EXCHANGE RECORD FOR. TAP FILE CONTAINS DETAILS OF CALLS MADE BY SUBSCRIB ER, VIZ., LOCATION, CALLING PARTY, TIME OF CALL AND DURATION, ETC. TAP/CIBER FILES ARE RATED AS PER TARIFFS CHARGED BY VISITING NETWORK OPERATOR. SUCH TPA/QBER FILE IS TRANSFERRED TO HOME NETWORK O F SUBSCRIBER (I.E. TO AIRTEL). HOME NETWORK (I.E. AIRTEL) THEN BILLS THESE CALLS T O THE AIRTEL SUBSCRIBER AND COLLECTS THE AMOUNT. THE AMOUNT SO C OLLECTED IS THEN REIMBURSED TO VISITING NETWORK IN JAIPUR. THE ENTIRE PROCESS IS AUTOMATIC. 2. YOU WOULD APPRECIATE THAT WHAT AIRTEL PAYS TO T HE OTHER MOBILE OPERATORS ARE THE ACTUAL AMOUNTS COLLECTED FROM AI RTEL MOBILE SUBSCRIBERS WHO WOULD HAVE USED THE NETWORK OF OTH ER MOBILE OPERATORS. THE PAYMENT OR REIMBURSEMENT MADE TO OTHER NETWORK OPERATORS THUS, DO NOT FALL INTO ANY CATEGORY OF TDS PROVISIONS. 3. ORDER OF CIT(A) 44 CIT(A) HAS CONFIRMED THAT ROAMING CHARGES ARE SUBJE CT TO TDS U/S 194C. CIT(A) HAS RELIED UPON THE FOLLOWING TWO JUDG MENTS. 3.1 M/S KURUKSHETRA DARPANS (P) LTD. VS. CIT, KARNAL 16 9 TAXMAN 344 PB PAGE 350-354:- WE SUBMIT THAT THE FACT IN KURUKSHETRA DARPANS WER E ENTIRELY DIFFERENT IN THE CASE MENTIONED BY THE A.O., WHICH CANNOT BE IN WAY APPLIED TO THE ROAMING CHARGES. 3.1.1 THE QUESTION IN THE AFORESAID CASE WAS THAT WHETHER PAYMENTS MADE BY THE ASSESSEE TO THE LICENSOR FOR OBTAINING TV SIGNAL FOR DISTRIBUTION THROUGH THE CABLE NETWORK OWNED BY THE ASSESSEE IS COVERED UNDER THE DEFINITION OF WORK WHICH INCLUDES BROADCASTING AND TELECASTING AS PROVIDED UNDER SECTION 194C OF THE I NCOME-TAX ACT, 1961. 3.1.2 A PERUSAL OF SECTION 194C EXPLANATION (IV) WILL SHOW THAT WORK HAS BEEN DEFINED AS FOLLOWS: (IV) WORK SHALL INCLUDE- (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION O F PROGRAMMES FOR SUCH BROADCASTING AND TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRAN SPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASES FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUP PLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATI ON OF A CUSTOMER 45 BY USING MATERIAL PURCHASED FROM A PERSON, OTHER TH AN SUCH CUSTOMER.] 3.1.3 THE CIT(A) HAS MISREAD THE PROVISIONS OF SEC TION 194C BECAUSE NOWHERE IN THE SECTION OR EXPLANATION THERE TO WORK HAS BEEN DEFINED TO INCLUDE ROAMING THE PROCESS WHICH HAS BEEN EXPLAINED ABOVE. THERE IS NO SIMILARITY AT ALL WITH THE WORK DESCRIBED IN THE EXPLANATION. 3.1.4 IN KURUKSHETRA DARPANS THE POINT OF CONTENTI ON WAS ALTOGETHER DIFFERENT WHICH BECOMES MORE EVIDENT FROM THE FOLLO WING QUOTE FROM THE JUDGMENT (PLEASE REFER PAGE 350-354 OF ADDITIONAL PAPER BOO K); QUOTE SRI SEHGAL, LEARNED COUNSEL FOR THE APPELLANT HAS .. .. THE ASSESSEE IS ONLY A SUBSCRIBER TO THE PROGRAMME WHICH IS ALREADY BEING BROADCASTED AND TELECASTED BY DIFFERENT TV CH ANNELS. THUS THE ASSESSEE IS NOT LIABLE TO MADE THE PAYMENT. IT HAS ALSO BEEN ARGUED BY THE COUNSEL FOR THE APPELLANT THAT THE TERM BROADC ASTING AND TELECASTING HAS NOTBEEN DEFINED ANYWHERE IN THE AC T AND THE LICENSORS CANNOT BE HELD TO BE IN THE BUSINESS OF B ROADCASTING AND TELECASTING AS PER THE MEANING OF THE TERM BROADCAS TING AND TELECASTING AS IT IS GENERALLY UNDERSTOOD IN THE CO MMON PARLANCE. 3.1.5 BASED ON THE ABOVE IT IS VERY MUCH CLEAR THA T IN THE MATTER OF KURUKSHETRA DARPANS (PR) LTD. ((SUPRA)), THE POINT OF CONTENTION WAS THAT WHETHER THE PAYMENTS MADE BY THE CABLE OPERATO R TO THE LICENSOR OF VARIOUS CHANNELS TANTAMOUNT TO PAYMENT FOR BROAD CASTING AND TELECASTING TO WHICH THE HON'BLE HIGH COURT OF PUNJ AB & HARYANA CONCLUDED AS UNDER; (PLEASE REFER PAGE 350-354 OF A DDTION PAPER BOOK); QUOTE PRESENTLY WE ARE CONCERNED WITH THE WORK AS WORK AS REFERRED TO IN CLAUSE-B OF EXPLANATION III BELOW SECTION 194C(2) O F THE ACT. IN TERMS OF THE SAID EXPLANATION, IT IS PROVIDED THAT EXPRESSION WORK SHALL INCLUDE INTER ALIA BROADCASTING AND TELECASTI NG INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING AND TELECASTING. 46 .. THE ESSENCE OF THE CONTRACT IS TO OBTAIN BROADCASTI NG AND TELECASTING OF TV CHANNELS AND THEREAFTER ITS DISTRIBUTION AMON GST ULTIMATE CUSTOMERS THROUGH THE CABLE NETWORK OF THE ASSESSEE . . FOR THE REASONS RECORDED ABOVE, WE HAVE NO HESITATI ON IN CONCLUDING THAT THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE A SSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE IN TERMS OF SECTIO N 194C OF THE ACT ON PAYMENTS MADE TO THE LICENSOR FOR OBTAINING TV SIGN ALS, CABLE TV NETWORK OWNED BY THE ASSESSED. 3.1.6 IT IS CLEAR THAT THE AFORESAID CASE CANNOT B E, BY ANY STRETCH OF IMAGINATION, APPLIED TO THE ROAMING TRANSACTIONS AS THE SAME WAS IN RELATION TO THE BROADCASTING AND TELECASTING WHICH IS CLEARLY COVERED UNDER SECTION 194C OF THE ACT. 3.2 THE CIT(A) HAS ALSO RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT SANCHAR NIGAM L IMITED (BSNL) 282 ITR 273. THIS INFERENCE OF THE CIT(A) IS TOTALLY MISPLACED AND OUT OF CONTEXT. THE ISSUED IN THE CASE OF BSNL WAS TO DETERMINE THE APPLICABILITY OF SALES TAX ON TELECOM SERVICES. 4 SUMMARY THE ACTION OF THE A.O. IS TRYING TO COVER PAYMENT MADE TO ANOTHER TELECOM COMPANY FOR AIRTIME USED BY THE SUBSCRIBE R OF THE ASSESSEE COMPANY WHEN VISITING THE NETWORK OF OTHER TELECOM SERVICE PROVIDER, AS PAYMENT FOR WORKS AS PROVIDED U/S 194C IS TOT ALLY MISPLACED AND NOT IN ACCORDANCE WITH LAW. GROUND NO. 2.3 DOUBLE COLLECTION OF TAX WITHOUT PREJUDICE WE SUBMIT THAT THE TELECOM OPERAT OR WHO HAS RECEIVED THE ROAMING CHARGES FROM BHARTI AIRTEN LIM ITED HAS PAID TAX ON THE INCOME EARNED BY HIM. IN THE CIRCUMSTANCES THE A.O. CANNOT RECOVER THE TA X IN REGARD TO WHICH THE ASSESSEE IS CONSIDERED TO BE IN DEFAULT. REFERENCE IS INVITED 47 TO DECISION OF SUPREME COURT IN HINDUSTAN COCA-COLA BEVERAGE (P) LTD. 293 226(S.C.). PB PAGE 235-237. 22. THE LD. DR. MR. R.L.CHHANALIA, ON THE OTHER HAN D, RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE INSTANT CASE, THERE IS NO DISPUTE TO THE NAT URE OF TRANSACTIONS ENTERED INTO BETWEEN THE ASSESSEE AND THE DISTRIBUTORS. AS REGARDS THE POST PAID RELATIONSHIP OF PRINCIPAL AND AGENTS, THERE IS NO D ISPUTE TO THE FACT. WHEREAS ASSESSEES CONTENTION WITH REGARD TO PRE-PAID BUSIN ESS BETWEEN THE ASSESSEE AND THE DISTRIBUTOR IS THAT OF PRINCIPAL TO PRINCIP AL BASIS. IN THIS REGARD, THE ASSESSEE VIDE PAGE 2 OF AOS ORDER HAS SUBMITTED IT S CONTENTIONS RELYING UPON THE DECISIONS OF VARIOUS COURTS OF LAW. THE A. O. DID NOT AGREE TO THE CONTENTIONS OF THE ASSESSEE FOR THE REASONS MENTION ED IN HIS ORDER VIDE PARA 2.3. OF HIS ORDER WHERE THE REASONS GIVEN BY THE A. O. IN PARA 2.3 (I), (II) & 2.3(XIV), WHERE THE A.O. HAS DEALT WITH EACH AND EV ERY CONTENTION OF THE ASSESSEE AND ACCORDINGLY WAS OF THE VIEW THAT THE A SSESSEE WITH REGARD TO PRE-PAID BUSINESS IS HAVING RELATIONSHIP OF PRINCIP AL AND AGENT AS THAT IN THE POST-PAID RELATIONSHIP. THE A.O. RELIED UPON THE DE CISION IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. VS. ACIT DECIDED BY TH E ITAT, COCHIN BENCH IN ITA NOS. 106 TO 113(COCH)/2009 DATED 30.04.2009, WHERE IT HAS BEEN 48 HELD THAT SECTION 194H IS CLEARLY APPLICABLE ON THE DIFFERENCE BETWEEN MRP AND AMOUNT CHARGED FROM THE DISTRIBUTOR TREATING TH E SAME AS COMMISSION WHICH HAS BEEN DECIDED IN FAVOUR OF THE REVENUE. FO R THE SAKE OF CLARITY, THE A.O. HAS REPRODUCED THE SAID DECISION OF COCHIN BEN CH OF ITAT (SUPRA) WHICH FOR THE SAKE OF CLARITY IS ALSO REPRODUCED AS UNDER: 25. THERE IS NO DISPUTE OR DIS-AGREEMENT REGARDING THE NATURE OF TRANSACTIONS ENTERED INTO BETWEEN THE ASS ESSEE AND ITS DISTRIBUTORS. THE ASSESSEE COMPANY, BY VIRTUE OF T HE LICENCE ISSUED BY THE DEPARTMENT OF TELECOMMUNICATIONS, GOVT. OF INDI A, IS ENGAGED IN PROVIDING MOBILE TELEPHONE SERVICES TO THE PUBLIC A T LARGE. THE GOVT. OF INDIA IS ALLOTTING THE LICENCE TO VARIOUS PARTI ES IN THE FILED ON THE BASIS OF GEOGRAPHICAL SPECIFICATIONS. THE ASSESSEE IS OPERATING ON ALL INDIA LEVEL AND THEREFORE PROVIDES SERVICES IN VARI OUS STATES. THE SERVICES PROVIDED BY THE ASSESSEE-COMPANY IN THE PU RPOSE OF SALES, ADMINISTRATION AND CONTROL. THE ASSESSEE COMPANY EI THER OF ITS OWN OR THROUGH OUTSOURCING ESTABLISHES THE INFRASTRUCTURE FACILITIES FOR PROVIDING CELLULAR SERVICES. 26. THE ASSESSEE IS OFFERING TWO TYPES OF SERVICES TO THE PUBLIC. THE FIRST OF ITS KIND IS POSTPAID MOBILE SERVICES WHERE BY THE CUSTOMERS ARE OPENING ACCOUNT WITH THE ASSESSEE COMPANY AND MAKES THE PAYMENT ON MONTHLY BASIS OR SO AGAINST THE BILLS ISSUED BY THE ASSESSEE COMPANY. IN THAT CASE, THE ASSESSEE COMPANY PROVID ES SERVICES TO ITS CUSTOMERS AT THE FIRST INSTANCE AND THEREAFTER ISSU ES BILLS AND REALIZES THE PROCEEDS. THE ASSESSEE COMPANY HAS APPOINTED A NUMBER OF DISTRIBUTORS TO MANAGE THE DISTRIBUTION BUSINESS OF POSTPAID MOBILE SERVICES, WHERE THE DISTRIBUTORS ARE SUPPOSED TO ID ENTIFY THE CUSTOMERS, ENSURE PROPER DOCUMENTATION OF THE CONNE CTION ON BEHALF OF THE ASSESSEE, ATTEND TO THE COMPLAINTS OF THE CU STOMERS, ACCOUNT FOR THE AIR TIME CONSUMED BY THE CUSTOMERS, AND CARRY O UT THE WORK OF RAISING BILLS AND COLLECTION OF THE PROCEEDS. IN TH IS SEGMENT OF ACTIVITY CARRIED ON BY THE ASSESSEE COMPANY, IT IS PAYING CO MMISSION TO THE DISTRIBUTORS FOR THE SERVICES RENDERED BY PAYMENT O R BY BOOK ENTRY. THEREFORE, THERE IS NO DISPUTE ABOUT THE APPLICABIL ITY OF SECTION 194H AS FAR AS THE POST PAID MOBILE TELEPHONE SERVICES A RE CONCERNED. 49 27 THE SECOND SEGMENT OF SERVICES RENDERED BY THE A SSESSEE IS THE PREPAID MOBILE SERVICES. IN PRE-PAID MOBILE SERVICE S, THE ASSESSEE IS DELIVERING THE ACCESS CARDS KNOWN AS SIM CARDS OF F IXED DENOMINATION COUPLED WITH SPECIFIC AIR TIME DURATIO N TO THE CUSTOMERS AT LARGE . THE CONSUMERS PAY IN ADVANCE AND USE SIM CARDS BY ACTIVATING THEIR MOBILE CONNECTION PROVIDED BY THE ASSESSEE COMPANY. IT APPEARS THAT IN VIEW OF THE DEVELOPMENTS IN MODE RN TECHNOLOGY, THERE ARE NUMBER OF PRODUCTS AND SERVICES AVAILABLE IN THE MARKET AND ALSO PROVIDED BY THE ASSESSEE COMPANY ALONGWITH SIM CARDS TO THE CONSUMERS AT LARGE. AS IN THE CASE OF POST-PAID SER VICES, IN THIS SEGMENT ALSO THE ASSESSEE COMPANY IS APPOINTING STA TE WIDE DISTRIBUTORS FOR IDENTIFYING THE CUSTOMERS AND DIST RIBUTING THE PRE- PAID PRODUCTS TO THE CONSUMERS. 28. THE DISTINCTION IN THE PRESENT CASE IS THAT THE CONSUMERS ARE PAYING IN ADVANCE TO THE DISTRIBUTORS, AS WELL AS T HE DISTRIBUTORS ARE PAYING IN ADVANCE TO THE ASSESSEE COMPANY. IN THE C ASE OF POSTPAID CELLULAR SERVICES, THE CUSTOMERS ARE PAYING AFTER AVAILING THE SERVICES AND THE DISTRIBUTORS ARE ALSO COLLECTING THE AMOUNT AND PAYING OVER TO THE ASSESSEE COMPANY AFTER RENDERING THE SERVICE S. 29. IN THE CASE OF PRE-PAID CELLULAR SERVICES, THE ASSESSEE APPOINTS AS NUMBER OF DISTRIBUTORS ON THE BASIS OF AGREEMENT S. AS ALREADY STATED, JUST LIKE CONSUMERS ARE PAYING IN ADVANCE F OR OBTAINING SIM CARDS FROM THE DISTRIBUTORS, THE DISTRIBUTORS ARE ALSO PAYING IN ADVANCE TO THE ASSESSEE COMPANY FOR GETTING THE PRE -PAID PRODUCTS. AGAINST SUCH ADVANCE PAYMENT, THE ASSESSEE COMPANY IS DELIVERING THE NECESSARY PRODUCTS TO THE DISTRIBUTORS. THE MAXIMUM RETAIL PRICE (MRP) IS MENTIONED ON EVERY PRODUCT. DISTRIBUTORS/R ETAILERS ARE NOT PERMITTED TO SELL THE PRODUCTS TO THE ULTIMATE CONS UMERS BEYOND THE MRP. THE ASSESSEE COMPANY IS DELIVERING THESE PRODU CTS TO THE DISTRIBUTORS FOR A SPECIFIED MARGIN. FOR EXAMPLE, I F THE MRP IS RS.100/- THE ASSESSEE COMPANY MAY DELIVER THE SAME TO ITS DISTRIBUTORS AT RS.80/-. THIS IS THE INVOICE PRICE OF THE ASSESS EE COMPANY. THE ASSESSEE COMPANY COLLECTS THIS INVOICE PRICE IN ADV ANCE FROM THE DISTRIBUTORS. THE DISTRIBUTORS ARE PERMITTED TO DEL IVER THESE PRODUCTS TO THE ULTIMATE CONSUMERS AT A PRICE OF THEIR CHOIC E BUT NOT EXCEEDING RS.100/- PER UNIT WHICH IS THE MRP. THE MARGIN EA RNED BY THE DISTRIBUTORS BEING THE DIFFERENCE BETWEEN THE SALE PRICE AND INVOICE PRICE IS THE REMUNERATION OF THE DISTRIBUTORS IN TH IS CHAIN OF TRANSACTIONS. THEREFORE, THE BASIC QUESTION TO BE DECIDED IN THESE APPEALS IS WHETHER THIS MARGIN OF THE DISTRIBUTORS IS COMMISSION OR 50 BROKERAGE COMING WITHIN THE PURVIEW OF SECTION 194H OF THE I.T. ACT, 1961 OR THE MARGIN IS A DISCOUNT AS CLAIMED BY THE ASSESSEE COMPANY WHICH IS OUTSIDE THE PURVIEW OF THAT SECTION. THE Q UESTIONS WHETHER THE ASSESSEE IS IN DEFAULT AND IS LIABLE TO PROCEED U/S 201(1) AND 201(1A) ARE ONLY CONSEQUENTIAL TO THE FINDING WHETHER THE M ARGIN OF THE DISTRIBUTORS IS A COMMISSION/BROKERAGE OR DISCOUNT. 32. A COMMERCIAL/BUSINESS AGREEMENT IS ALWAYS SUBJE CT TO VARIOUS RESTRICTIONS IMPOSED BY THE PARTIES INTER SE BUT NO T CONTRAVENING THE PROVISIONS OF ANY LAW. THE RESTRICTION SHOULD ACT A S A RESTRICTION ON TRADE. THE RESTRICTIONS CANNOT ACT AS UNLAWFUL REG ULATIONS ON THE PARTIES. IT IS PERMISSIBLE FOR THE PARTIES TO ENTER INTO SUCH CONTRACTS AND AGREEMENTS SO LONG AS THOSE TERMS AND CONDITION S ARE NOT VIOLATING PROVISIONS OF ANY LAW. 46. THEREFORE, IT IS NECESSARY FOR US TO EXAMINE AT THE OUTSET ITSELF, WHETHER THE NATURE OF BUSINESS TRANSACTIONS ENTERED INTO BETWEEN THE ASSESSEE-COMPANY AND ITS DISTRIBUTORS ARE SALE AND PURCHASE OF GOODS OR PROVIDING SERVICES THROUGH VARIOUS DISTRIBUTORS/ AGENTS. 48. THEREFORE, THE QUESTION WHETHER THE ASSESSEE CO MPANY AND THE DISTRIBUTORS ARE LINKED UP IN PROVIDING ANY SERVICE IS TO BE ANSWERED IN THE AFFIRMATIVE IN THE LIGHT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF M/S. BPL MOBILE CELL ULAR LTD. VS. STATE OF KERALA AND OTHERS IN WRIT PETITION NO.29202 OF 2005. THE COURT HAS HELD THAT THERE IS NO SALE OR PURCHASE OF GOODS . IN THE PRESENT CASE, THE ASSESSEE IS DOING EXACTLY THE SAME BUSINE SS. THEREFORE, IT IS NOT POSSIBLE TO HOLD THAT THE SIM CARDS AND RE-CHAR GE COUPONS DELIVERED BY THE ASSESSEE COMPANY TO ITS CONSUMERS AND MADE AVAILABLE BY THEM TO THE ULTIMATE CONSIDERS IN THE STATE OF KERALA ARE GOODS. 49. THE ABOVE RECENT JUDGMENT OF THE HONBLE HIGH C OURT ON THE NATURE OF THE TRANSACTION IS PARAMOUNT IN DECIDING THE ISSUE. WE MAY NOT BE ABLE TO PLACE MUCH RELIANCE ON THE JUDGMENTS OF HONBLE HIGH COURT IN THE CASE OF KERALA STATE STAMP VENDORS ASS OCIATION VS. OFFICE OF THE ACCOUNTANT GENERAL AND OTHERS 282 ITR 07 (KER.); M.S. HAMEED AND OTHERS VS. DIRECTOR OF STATE LOTTERIES A ND OTHERS 249 ITR 186 (KER.) AND THAT OF AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF INDIA 257 ITR 202(GUJ.) AND ALSO ON TH E DECISION OF THE DELHI BENCH IN THE CASE OF IDEA CELLULAR LTD. 121 T TJ 352 AND ALSO THAT OF HYDERABAD BENCH IN THE CASE OF M/S. IDEA CE LLULAR LTD; A COPY OF WHICH WAS PLACED BEFORE US AFTER THE CONCLUSION OF HEARING. THEREFORE, ALL THE CASE LAWS RELIED ON THE ASSESSEE WILL HAVE TO BE 51 VIEWED IN THE LIGHT OF THE JUDGMENT OF THE HONBLE HIGH COURT KERALA IN THE CASE OF M/S. BPL MOBILE CELLULAR LTD. WHERE THE COURT HAS HELD THAT THE RELATIONSHIP BETWEEN THE PREDECESSOR OF TH E ASSESSEE-COMPANY AND DISTRIBUTORS ARE RELATIONSHIP OF PARTIES INVOLV ED IN PROVIDING SERVICE OF PRE-PAID TELEPHONE SERVICES TO THE ULTIM ATE CONSUMERS. 50. WHILE RELYING ON THE ABOVE JUDICIAL PRONOUNCEME NTS, THE ASSESSEE COMPANY HAS VERY MUCH RELIED ON THE FLEXIB ILITY OF PRICING GIVEN TO THE DISTRIBUTORS AS PER THE LATEST AGREEME NT. IT IS THE CASE OF THE ASSESSEE COMPANY THAT THERE WAS NO OCCASION FOR THE ASSESSEE COMPANY TO MAKE ANY PAYMENT TO THE DISTRIBUTORS OR TO CREDIT THEIR ACCOUNTS FOR SERVICES RENDERED BY THEM. WHILE THE C ASE OF THE ASSESSEE COMPANY IS COMPARED TO THE CASE OF LOTTERY TICKETS AGENTS AND STAMP VENDORS, THERE ARE FEW VITAL DIFFERENCES. IN THE C ASE OF STAMP VENDORS, EVEN IF HE IS PURCHASING STAMP PAPER FROM THE GOVER NMENT DEPOT AT A DISCOUNTED PRICE, THE STAMP VENDORS CANNOT SELL THE STAMP PAPERS AT BELOW THE DENOMINATION PRINTED ON IT. THE STAMP WOR TH RS.100/- IS ALWAYS SOLD TO THE GENERAL PUBLIC AT RS.100/- AND N OT FOR ANY LESSER PRICE OR ANY DISCOUNT. GOVERNMENT REMUNERABLE AND S TAMP VENDORS BY PROVIDING A MARGIN WHICH IS GIVEN AT THE TIME O F THE DELIVERY OF THE STAMP PAPER ITSELF SO THAT NET AMOUNT RECEIVABLE BY THE GOVERNMENT IS COLLECTED INSTANTLY. EXCEPT FOR REALIZING THE MARGI N, THE STAMP VENDORS DO NOT HAVE ANY FREEDOM OF PRICE FIXATION. THIS IS ALMOST IN THE CASE OF LOTTERY TICKETS AS WELL. THEREFORE, THERE IS NO MUC H FORCE IN THE ARGUMENT OF THE ASSESSEE COMPANY THAT THE CASE OF T HE ASSESSEE IS ALWAYS DIFFERENT BECAUSE OF THE FREEDOM OF PRICING GIVEN TO THE DISTRIBUTORS. 51. IT IS OBVIOUS THAT A SERVICE CAN ONLY BE RENDER ED AND CANNOT BE SOLD. THE OWNER OF THE SIM CARDS AND RECHARGE COUPO NS IS THE ASSESSEE COMPANY. M/S. VODAFONE ESSAR CELLULAR LTD. THIS IS BECAUSE THE ASSESSEE COMPANY IS OPERATING UNDER THE RIGHT O F A LICENCE AGREEMENT ENTERED INTO WITH THE GOVT. OF INDIA. NOB ODY ELSE CAN BE GIVEN THE RIGHT TO OPERATE AS CELLULAR TELEPHONE SE RVICE PROVIDERS. THE ULTIMATE SERVICE IS PROVIDED BY THE ASSESSEE COMPAN Y TO EVERY ONE AND EVERY-WHERE. THE SIM CARD IS IN THE NATURE OF A KEY TO THE CONSUMER TO HAVE ACCESS TO THE TELEPHONE NETWORK ESTABLISHED AND OPERATED BY THE ASSESSEE COMPANY ON ITS OWN BEHALF. SINCE THE S IM CARD IS ONLY A DEVICE TO HAVE ACCESS TO THE MOBILE PHONE NETWORK, THERE IS NO QUESTION OF PASSING OF ANY OWNERSHIP OR TITLE OF TH E GOODS FROM THE ASSESSEE COMPANY TO THE DISTRIBUTOR OR FROM THE DIS TRIBUTOR TO THE ULTIMATE CONSUMER. THE DISTRIBUTORS ARE ACTING ONLY AS A LINK IN THE 52 CHAIN OF SERVICE PROVIDERS. THE ASSESSEE COMPANY IS PROVIDING THE MOBILE PHONE SERVICE. IT IS THE ULTIMATE OWNER OF THE SERVICE SYSTEM. THE SERVICE IS MEANT FOR PUBLIC AT LARGE. IN BETWEE N PROVIDING OF THAT SERVICE., IT IS NECESSARY FOR THE COMPANY TO APPOIN T DISTRIBUTORS TO MAKE AVAILABLE THE PRE-PAID PRODUCTS TO THE PUBLIC AS WELL AS TO LOOK AFTER THE DOCUMENTATION AND OTHER STATUTORY MATTERS REGARDING THE MOBILE PHONE CONNECTION. SO, WHAT IS THE ESSENCE OF SERVICE PROVIDED BY THE DISTRIBUTORS? THE ESSENCE OF SERVICE RENDERE D BY THE DISTRIBUTORS IS NOT THE SALE OF ANY PRODUCT OR GOOD S. THE DISTRIBUTORS ARE PROVIDING FACILITIES AND SERVICES TO THE GENERA L PUBLIC FOR THE AVAILABILITY OF DEVICES LIKE SIM CARDS TO HAVE ACCE SS TO THE MOBILE PHONE NETWORK OF THE ASSESSEE COMPANY. THEREFORE, I T IS BEYOND DOUBT THAT ALL THE DISTRIBUTORS ARE ALWAYS ACTING FOR AND ON BEHALF OF THE ASSESSEE COMPANY. ONLY FOR THE REASON THAT THE DIST RIBUTOR ARE MAKING ADVANCE PAYMENT FOR THE DELIVERY OF SIM CARDS AND O THER PRODUCTS AND DISTRIBUTORS ARE RESPONSIBLE FOR THE STOCK AND ACCOUNT OF THOSE CARDS, IT IS NOT POSSIBLE TO HOLD THAT THE DISTRIBU TORS ARE NOT ACTING FOR THE ASSESSEE COMPANY BUT THE DISTRIBUTORS ARE ACTIN G ON THEIR OWN BEHALF. SUCH A PROPOSITION IS IN-CONCEIVABLE IN THE FACTS OF THE PRESENT CASE. IT IS ALWAYS POSSIBLE FOR THE TELEPHONE COMPA NY ITSELF TO PROVIDE ALL THESE SERVICES DIRECTLY TO THE CONSUMERS AS THE DEPARTMENT OF TELECOM WAS DOING; BUT SUCH A DIRECT SERVICE IS NO T FEASIBLE NOW-A- DAYS. THEREFORE, THE ASSESSEE HAS MADE OUT A BUSINE SS SOLUTION TO APPOINT DISTRIBUTORS TO TAKE CARE OF THE OPERATIONA L ACTIVITIES OF THE COMPANY FOR PROVIDING SERVICE. THE DISTRIBUTOR IS O NE OF THE IMPORTANT LINKS IN THAT CHAIN OF SERVICE. 52. ANOTHER IMPORTANT FEATURE IS THAT THE SIM CARDS STOCKED BY THE DISTRIBUTORS ARE STILL THE PROPERTY OF THE SERVICE PROVIDER, THE ASSESSEE COMPANY. THE PERMISSIVE RIGHT TO USE SIM CARDS TO G ET ACCESS THE PHONE NETWORK OF THE ASSESSEE COMPANY IS GIVEN ONLY TO THE ULTIMATE CONSUMER WHO ACTIVATES THE CONNECTION BY USING THE SECRETE NUMBER PROVIDED IN THE SIM CARD. IT IS ONLY FOR THE ULTIM ATE CONSUMER OR THE ASSESSEE COMPANY WHO HAS THE AUTHORITY TO UN-COVER THE SECRETE NUMBER AND BRING THE CARD INTO ACTIVATION. THIS UNI QUE SITUATION NEGAGTES THE ARGUMENT OF THE ASSESSEE COMPANY THAT ONCE DELIVERY OF THE SIM CARD IS TAKEN, IT IS THE ABSOLUTE PROPERTY OF THE DISTRIBUTORS. NO, THIS IS A MIS-CONNECTION, DISTRIBUTORS ARE ACTI NG ON THE PLATFORM OF PRINCIPAL RELATIONSHIP. 53. DE-FACTO, THERE IS NO CASE OF ANY PURCHASE AND SALE IN THE MATTER OF PRE-PAID SIMC CARDS/RE-CHARGE COUPONS. AL L THESE 53 TECHNICAL PRODUCTS ARE ONLY DISTRIBUTED THROUGH DIS TRIBUTORS AND RETAILERS. ANY CONTRACTUAL OR LEGAL OBLIGATION IN RESPECT OF PROVIDING OF A PRE-PAID MOBILE TELEPHONE SERVICE IS IN FACT, BETWEEN THE ASSESSEE COMPANY AND THE ULTIMATE CONSUMER. 54. AS HELD BY THE HONBLE SUPREME COURT IN THE CAS E OF CIT VS. DURGA PRASAD MORE (1972) 82 ITR 540 HUMAN CONDUCT AND BEHAVIOUR HAVE TO BE SEEN IN ORDER TO DECIDE THE TRUE AND COR RECT NATURE OF THE TRANSACTION BETWEEN THE PARTIES. 55. THE BASIC FUNCTION OF THE ASSESSEE COMPANY IS D ELIVERY OF SERVICE RELATING TO MOBILE TELEPHONE SYSTEM. THE AS SESSEE IS OPERATING UNDER THE LICENCE ISSUED BY THE GOVT. OF INDIA. ASS ESSEE IS PROVIDING SERVICES ON POST-PAID BASIS AS WELL AS ON PRE-PAID BASIS. EVEN THOUGH POST-PAID AND PRE-PAID ARE TWO DIFFERENT METHODS EM PLOYED BY TELECOM OPERATORS FOR PROVIDING SERVICES AND COLLEC TING REVENUE, THE NATURE AND CONTENT OF THE SERVICE RENDERED UNDER BOTH THE METHODS IS ONE AND THE SAME. AS FAR AS THE ULTIMATE CONSUMER IS CONCERNED, THEY ARE GETTING THE SERVICE OF MOBILE TELEPHONE WHETHE R HE IS SUBSCRIBING TO THE SCHEME OF POST PAID OR THE SCHEME OF PRE-PAI D. 56. IN THE CASE OF POST-PAID SCHEME, THE ASSESSEE C OMPANY IS TREATING THE BENEFITS ENJOYED BY A DISTRIBUTORS AS COMMISSION AND DEDUCTING TAX AT SOURCE, WHERE THE ASSESSEE COMPANY ITSELF ADMITS THAT IT IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194H IN R ESPECT OF POST-PAID SERVICES RENDERED THROUGH ITS DISTRIBUTORS. IT IS T HE DUTY OF THE ASSESSEE TO PROVIDE THAT THE SERVICES RENDERED BY THE ASSESS EE THROUGH THE DISTRIBUTORS ON PREPAID PACKAGE IS DIFFERENT FROM THE POST PAID PACKAGE SO AS TO QUALIFY THE FORMER FOR EXEMPTION F ROM OPERATION OF SECTION 194H. 57. IT IS BEYOND ANY DISPUTED THAT THE ESSENCE OF S ERVICE RENDERED TO PREPAID AND POSTPAID CONSUMERS ARE ONE AND THE SAME . THERE IS NO DIFFERENCE. THE ONLY DIFFERENCE IS TECHNICAL. THE D IFFERENCE EXISTS ONLY IN BILLING SYSTEM AND REVENUE COLLECTION ETC. IN BO TH THE CASES, ASSESSEE COMPANY IS PROVIDING THE SERVICE. DISTRIBU TORS ARE HELPING TO REACH SUCH SERVICES TO THE ULTIMATE CONSUMERS. IN B OTH THE SYSTEM, THERE IS DOCUMENTATION. IN BOTH THE SYSTEM, THE DIS TRIBUTORS RENDER SIMILAR TYPES OF SERVICES TO THE ASSESSEE COMPANY. OF-COURSE, ACCOUNTING THE REVENUE COLLECTION AND RELATED MATTE RS ARE DIFFERENT. THE ESSENCE OF POST-PAID AND PRE-PAID SERVICES REN DERED BY THE ASSESSEE COMPANY IS THE SAME AND THE RELATIONSHIP B ETWEEN THE ASSESSEE AND THE CONSUMERS IS ALSO THE SAME. THEREF ORE, IF POST-PAID AND PRE-PAID SERVICES RENDERED BY THE ASSESSEE COMP ANY IS THE SAME 54 AND THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CUSTOMERS IS ALSO THE SAME. THEREFORE, IF POST-PAID SCHEME IS SUBJEC T TO SECTION 194H, IT IS QUITE UNLIKELY THAT PRE-PAID SYSTEM WOULD BE OU TSIDE THE PURVIEW OF SECTION 194H. 58. IN THE CASE OF PRE-PAID SCHEME, THE ULTIMATE CO NSUMER PAYS IN ADVANCE AND IN TURN DISTRIBUTORS ALSO PAY IN ADVANC E. IN THE POST-PAID SCHEME, THE ULTIMATE CONSUMER IS PAYING AFTER AVAIL ING THE SERVICE AND THE DISTRIBUTORS ARE ALSO PAYING AFTERWARDS IN ONE CASE MONEY IS RECEIVED IN ADVANCE AND IN THE OTHER CASE SERVICES ARE RENDERED IN ADVANCE. BILLING AND COLLECTION MAY BE DIFFERENT. BUT BILLING, COLLECTION ETC. ARE PERIPHERAL MATTERS. THESE MATTE RS DO NOT CHANGE THE BASIC CHARACTER OF THE TRANSACTION/SERVICE BETW EEN THE DISTRIBUTORS AND THE ASSESSEE COMPANY. UNDER BOTH T HE SCHEMES, THE CHARACTER OF THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE DISTRIBUTORS IS THE SAME,. THEREFORE, WE FIND IT DI FFICULT TO ACCEPT THE PROFOUND CONTENTION OF THE ASSESSEE COMPANY AGAINST THE APPLICATION OF SECTION 194H. 59. NOW FROM THE ACCOUNTING POINT OF VIEW ALSO, AS MENTIONED IN THE ASSESSMENT ORDER, THE ASSESSEE HAS DEBITED THE ACCOUNT FOR COMMISSION PAID TO DISTRIBUTORS. WHAT ARE THE ACCOU NTING ENTRIES PASSED BY THE ASSESSEE COMPANY DELIVERING THE PRE-P AID CARDS TO THE DISTRIBUTORS? THE ASSESSEE COMPANY IS CREDITING THE SALES ACCOUNT BY THE GROSS AMOUNT AND NOT BY NET PROCEEDS. FOR EXAMP LE, THE MRP OF A PRE-PAID CARD IS RS.100/-; MARGIN AVAILED BY THE D ISTRIBUTOR IS RS.20/- . THE NET PROCEEDS AVAILABLE TO THE ASSESSEE IS RS. 80/-. LET US SEE HOW THE ASSESSEE IS ACCOUNTING FOR THE ABOVE. WHEN THE SIM CARD IS GIVEN TO THE DISTRIBUTOR, THE ASSESSEE COMPANY IS CREDITI NG THE SALES ACCOUNT FOR AN AMOUNT OF RS.100/-. ASSESSEE IS DEBITING THE CASH ACCOUNT WITH RS.80/- BEING THE CASH PAID BY THE DISTRIBUTOR. ASS ESSEE COMPANY IS DEBITING THE COMMISSION ACCOUNT FOR RS.20/-. THIS I S THE MARGIN ENJOYED BY THE DISTRIBUTOR. AS FAR AS THE ASSESSEE COMPANY IS CONCERNED, IT HAS GIVEN A COMMISSION OF RS.20/-, TH E SECOND CASH IS ACCOUNTED FOR RS.80/- AND THE THIRD COMMISSION IS A CCOUNTED FOR RS.20/-. INSTEAD OF TREATING THE SALE AT THE NET VA LUE OF RS.80/- AND THEREAFTER DEBITING AN EXPENSES ACCOUNT FOR COMMISS ION PAID OF RS.20./-. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE FINDING OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF M/S/ BPL MOBILE CELLULAR LTD. (WRIT PETITIO N NO.29202 OF 2005) THAT THE ESSENCE OF THE CONTRACT BETWEEN TH E ASSESSEE AND THE DISTRIBUTOR IS THAT OF SERVICE, WE FIND THAT THE DI STRIBUTORS ARE ACTING AS 55 AGENTS OF THE ASSESSEE COMPANY AND THE MARGIN ENJOY ED BY THE DISTRIBUTORS ARE THE COMMISSION/BROKERAGE ALLOWED BY THE ASSESSEE COMPANY. 60. THE NEXT QUESTION IS WHETHER THE COMMISSION/BRO KERAGE ALLOWED BY THE ASSESSEE COMPANY AT THE STAGE OF RAI SING THE INVOICE IS EQUIVALENT TO PAYING OF COMMISSION/BROKERAGE TO THE DISTRIBUTORS. THE ASSESSEE HAS ALWAYS RAISED A CONTENTION THAT TOO IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS INCLUDING THAT OF M.S.HAMEE D AND OTHERS VS. DIRECTORS OF STATE LOTTERIES AND OTHERS 249 ITR 186 (KER) THAT THE ASSESSEE COMPANY HAD NO OCCASION TO DEDUCT TAX AT S OURCE AS THE ASSESSEE COMPANY WAS NOT MAKING ANY PAYMENT TO THE DISTRIBUTORS OR CREDITING THE ACCOUNT OF THE DISTRIBUTORS FOR ANY S ERVICES RENDERED TO IT. BUT THAT OCCASION WAS REMOVED BY THE ASSESSEE I TSELF BY CONSCIOUS WORDINGS OF THE TERMS OF THE AGREEMENT. THE ASSESSE E COMPANY CAN COLLECT THE NET SALE PROCEEDS ALONG WITH TDS ELEMEN T FROM THE DISTRIBUTORS WHILE DISTRIBUTING THE PRE-PAID PRODU CTS TO THE DISTRIBUTORS,. THE DISTRIBUTORS SHALL FILE THEIR RE TURNS BEFORE THE CONCERNED AUTHORITIES AND DEPENDING UPON THE WORKIN G RESULTS, THEY CAN ADJUST THE TDS COLLECTED BY THE ASSESSEE COMPAN Y AGAINST THEIR TAX LIABILITY OR THE REFUND DUE. THE FACT THAT THE DISTRIBUTORS MAY SOME TIME DELIVER THE PRODUCTS FOR A PRICE LESS THAN THE MRP IS NOT AT ALL AN IMPEDIMENT IN DEDUCTING THE TAX AT SOURCE. THE DIS TRIBUTORS MAY DELIVER THE PRODUCTS AT A LESSER PRICE, BUT EVEN TH EN FOR THE PURPOSE OF SECTION 194H, AS THE ABOVE EXAMPLE, THE MARGIN AVAI LABLE TO THE DISTRIBUTOR IS RS.20/-, WHICH IS TO BE TREATED AS C OMMISSION AND THE ASSESSEE HAS TO CONSIDER THAT AMOUNT FOR THE PURPOS E OF QUANTIFYING THE ELEMENT OF TDS. THE ASSESSEE COMPANY HAS TO COL LEC THE NET PRICE ALONG WITH THE ABOVE STATED TDS ELEMENT. THEREFORE, THE ARGUMENT THAT THERE WAS NO OCCASION AS IN THE CASE OF M.S.HA MEED AND OTHERS VS. DIRECTOR OF STATE LOTTERIES AND OTHERS 249 ITR 186 (KER) HAS NO RELEVANCE HERE. THE SITUATION CONSIDERED BY THE HON BLE HIGH COURT WAS DIFFERENT. IN THAT CASE ONE PARTY IS STATE GOVE RNMENT. WITHOUT EXECUTING AN AUTHORITY IN CONFORMITY WITH THE STATU TORY AND ADMINISTRATIVE RULES, NOBODY CAN BECOME AN AGENT OF THE GOVERNMENT. FURTHER, THE COURT HAS CONSIDERED THE S UBJECT TRANSACTION AS THAT OF PURCHASE AND SALE OF GOODS. BUT, IN THE PRESENT CASE, THERE IS NO FAILURE OF ANY PROCEDURAL PROVISI ONS AS APPREHENDED BY THE ASSESSEE COMPANY. 61. WE HAVE CONSIDERED THE ISSUE RAISED IN THESE AP PEALS IN THE LIGHT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA IN THE CASE 56 OF KERALA STATE STAMP VENDORS ASSOCIATION VS. OFFIC E OF THE ACCOUNTANT GENERAL AND OTHERS 282 ITR 07; M.S.HAM EED AND OTHERS VS. DIRECTOR OF STATE LOTTERIES AND OTHERS 249 ITR 186; GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP V ENDORS ASSOCIATION VS. UNION OF INDIA- 257 ITR 202 AND THE HONBLE BENCH OF INCOME TAX APPELLATE TRIBUNAL, DELHI IN THE CASE OF IDEA CELLULAR LTD. VS. DY. CIT 121 TTJ 352 AND THAT OF THE HONBLE BEN CH OF INCOME TAX APPELLATE TRIBUNAL, HYDERABAD IN THE CASE OF M/S. I DEA CELLULAR LTD. 62. WE HAVE ALSO CONSIDERED ALL OTHER JUDGMENTS REL IED ON BY THE ASSESSEE COMPANY IN SUPPORT OF VARIOUS PROPOSITIONS RELIED ON, WHILE EXPLAINING THE FEATURES OF RELATIONSHIP OF PRINCIPA L TO PRINCIPAL, PRINCIPAL TO AGENT AND MEANING TO BE ASSIGNED TO TH E WORDS BROKERAGE, COMMISSION, DISCOUNT ETC. 63. THE FINDINGS ARRIVED AT IN ALL THESE JUDGMENTS, THOUGH DELIVERED ON ANALOGOUS SITUATION, CANNOT BE IMPLANTED IN THE PRESENT CASE BECAUSE OF THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF M/S. BPL MOBILE CELLULAR LTD. VS. STATE OF KERALA IN WRIT PETITION NO.29202 OF 2005 DATED 13.02.2009 WHICH H AS BEEN PRONOUNCED IN ASSESSEES OWN CASE IN MATTERS RELATI NG TO KERALA VALUE ADDED TAX. 64. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE HOLD THAT THE MARGIN EARNED BY THE DISTRIBUTORS ON SUPPL Y OF SIM CARDS AND OTHER SERVICE PRODUCTS ARE IN THE NATURE OF COMMISS ION AND THEREFORE, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194H. AS THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS AS STATED ABOV E, THE ASSESSEE IS LIABLE TO BE VISITED WITH THE CONSEQUENCES PROVIDED U/S 201(1) AND 201(1A) OF THE I.T.ACT. THE ASSESSEE COMPANY FAILS IN ITS APPEALS FILED BEFORE US. 23.1. IN THE PRESENT CASE, THE ISSUE BEFORE US IS I DENTICAL AS IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. VS. ACIT (SUPRA). WE A RE BOUND TO FOLLOW THE DECISION OF CO-ORDINATE BENCH DECIDED IN THE CASE O F VODAFONE ESSAR CELLULAR LTD. VS. ACIT (SUPRA) WHICH HAS DEALT ALL THE DECISIONS RELIED UPON BY THE ASSESSEE IN THE PRESENT CASE. 57 23.2. AS REGARDS THE ISSUE IN THE PRESENT CASE BEIN G IDENTICAL AS IN THE CASE OF VODAFONE ESSAR CELLULAR LTD. VS. ACIT (SUPRA), A S ALREADY MENTIONED THERE IS NO DISPUTE TO THE NATURE OF TRANSACTIONS E NTERED INTO BETWEEN THE ASSESSEE AND THE DISTRIBUTORS. THE ASSESSEE BY VIRT UE OF THE LICENSE ISSUED BY THE DEPARTMENT OF TELECOMMUNICATIONS, GOVT. OF INDI A, IS ENGAGED IN PROVIDING MOBILE TELEPHONE SERVICES TO THE PUBLIC A T LARGE. THE ASSESSEE HAS OFFERED TWO TYPES OF SERVICES TO THE PUBLIC. THE FI RST OF ITS KIND IS POST-PAID MOBILE SERVICES, WHEREBY THE CUSTOMERS ARE OPENING ACCOUNT WITH THE ASSESSEE COMPANY AND MAKES THE PAYMENT ON MONTHLY B ASIS OR SO AGAINST THE BILLS ISSUED BY THE ASSESSEE COMPANY. IN THAT CASE, THE ASSESSE COMPANY PROVIDES SERVICES TO ITS CUSTOMERS AT THE FIRST INS TANCE AND THEREAFTER ISSUES BILLS AND REALIZES THE PROCEEDS. THE ASSESSE COMPA NY HAS APPOINTED A NUMBER OF DISTRIBUTOR TO MANAGE THE DISTRIBUTION BU SINESS OF POSTPAID MOBILE SERVICES, WHERE THE DISTRIBUTORS ARE SUPPOSED TO ID ENTIFY THE CUSTOMERS ETC. IN THIS SEGMENT OF ACTIVITY CARRIED ON BY THE ASSESSEE COMPANY, IT IS PAYING COMMISSION TO THE DISTRIBUTORS FOR THE SERVICES REN DERED BY THEM AND DEDUCT TAX AT SOURCE, WHENEVER THE SERVICES ARE REMUNERATE D EITHER BY PAYMENT OR BY BOOK ENTRY. THEREFORE, THERE IS NO DISPUTE ABOU T THE APPLICABILITY OF SECTION 194H AS FAR AS POST PAID MOBILE TELEPHONE S ERVICES ARE CONCERNED. 58 23.3. AS REGARDS THE SECOND SEGMENT OF SERVICES REN DERED BY THE ASSESSEE IS THE PREPAID MOBILE SERVICES. THE ASSESSEE IS DELIVE RING THE ACCESS CARDS KNOWN AS SIM CARDS OF FIXED DENOMINATION COUPLED WI TH SPECIFIC AIR TIME DURATION TO THE CUSTOMERS AT LARGE. THE CONSUMERS P AY IN ADVANCE AND USE SIM CARDS BY ACTIVATING THEIR MOBILE CONNECTION PRO VIDED BY THE ASSESSEE COMPANY. IN THIS SEGMENT, THE ASSESSE COMPANY IS AP POINTING STATE-WIDE DISTRIBUTORS FOR IDENTIFYING THE CUSTOMERS AND DIST RIBUTING THE PRE-PAID PRODUCTS TO THE CONSUMERS. 23.4. THE DISTINCTION IN THE POST-PAID AND PRE-PAID SERVICES IS THAT CONSUMERS ARE PAYING IN ADVANCE TO THE DISTRIBUTOR S AS WELL AS THE DISTRIBUTORS ARE PAYING IN ADVANCE TO THE ASSESSEE COMPANY. WHEREAS IN POST- PAID CELLULAR SERVICES, THE CUSTOMERS ARE PAYING A FTER AVAILING THE SERVICES AND THE DISTRIBUTORS ARE ALSO COLLECTING THE AMOUNT AND PAYING OVER TO THE ASSESSEE COMPANY AFTER RENDERING THE SERVICES. THE MAXIMUM RETAIL PRICE (MRP) IS MENTIONED ON EVERY PRODUCT. THE DISTRIBUTO RS/RETAILERS ARE NOT PERMITTED TO SELL THE PRODUCTS TO THE ULTIMATE CON SUMERS BEYOND THE MRP. THE ASSESSEE IS DELIVERING THESE PRODUCTS TO THE DI STRIBUTORS FOR A SPECIFIED MARGIN. THE MARGIN EARNED BY THE DISTRIBUTORS BEING THE DIFFERENCE BETWEEN SALE PRICE AND INVOICE PRICE WHICH IS THE REMUNERAT ION OF THE DISTRIBUTORS. THE PARTIES CAN ENTER INTO SUCH CONTRACT OR AGREEME NT WHERE TERMS AND 59 CONDITIONS DID NOT VIOLATE THE PROVISION OF LAW WH ICH HAS BEEN DONE IN THE PRESENT CASE. NOW THE QUESTION ARISES WHETHER THE A SSESSEE AND ITS DISTRIBUTORS ARE DOING SALE AND PURCHASE OF GOODS O R PROVIDING SERVICES THROUGH VARIOUS AGENTS. THIS QUESTION HAS BEEN ANSW ERED AND AFFIRMED BY THE HONBLE HIGH COURT OF KERALA IN THE CASE OF M/S . BPL MOBILE CELLULAR LTD. VS. STATE OF KERALA AND OTHERS IN WRIT PETITIO N NO.29202 OF 2005, WHERE THE HONBLE HIGH COURT HAS HELD THAT THERE IS NO SA LE OR PURCHASE OF GOODS. THE ASSESSEE IS DOING EXACTLY THE SAME BUSINESS. TH EREFORE, IT IS NOT POSSIBLE TO HOLD THAT THE SIM CARDS AND RE-CHARGE COUPONS DE LIVERED BY THE ASSESSEE COMPANY TO ITS CONSUMERS AND MADE AVAILABLE BY THEM TO THE ULTIMATE CONSIDERS IN THE STATE OF KERALA ARE GOODS. 23.5. THE CO-ORDINATE BENCH OF COCHIN IN THE CASE O F VODAFONE ESSAR CELLULAR LTD. VS. ACIT (SUPRA) HAS DEALT THE DECISI ON IN THE CASE OF KERALA STATE STAMP VENDORS ASSOCIATION VS. OFFICE OF THE ACCOUNTANT GENERAL AND OTHERS REPORTED IN 282 ITR 07 (KER.); M.S,HAMEED A ND OTHERS VS. DIRECTOR OF STATE LOTTERIES AND OTHERS 249 ITR 186 (KER) AND THAT OF AHMEDABAD STAMP VENDORS ASSOCIATIONS VS. UNION OF INDIA 257 ITR 202 (GUJ) AND IN THE CASE OF IDEA CELLULAR LTD 121 TTJ 352 (ITAT, HYDERABAD BENCH) AND HAS DISTINGUISHED THE SAME. 60 23.6. IT HAS BEEN OBSERVED IN THE SAID ORDER OF THE CO-ORDINATE BENCH THAT THE SERVICE CAN ONLY BE RENDERED AND CANNOT BE SOL D AND THE OWNER OF THE SIM CARDS AND RECHARGE COUPONS IS THE ASSESSEE COM PANY. THE ASSESSEE COMPANY IS OPERATING UNDER THE RIGHT OF A LICENSE AGREEMENT ENTERED INTO WITH THE GOVT. OF INDIA AND NO ONE ELSE CAN BE GIV EN THE RIGHT TO OPERATE AS CELLULAR TELEPHONE SERVICE PROVIDERS THE ULTIMATE SERVICE IS PROVIDED BY THE ASSESSEE COMPANY TO EVERY ONE AND EVERY-WHERE. THE SIM CARD IS IN THE NATURE OF A KEY TO THE CONSUMER TO HAVE ACCESS TO T HE TELEPHONE NETWORK ESTABLISHED AND OPERATED BY THE ASSESSEE COMPANY, O N ITS OWN BEHALF. SINCE THE SIM CARD IS ONLY A DEVICE TO HAVE ACCESS TO THE MOBILE PHONE NETWORK, THERE IS NO QUESTION OF PASSING OF ANY OWNERSHIP OR TITLE OF THE GOODS FROM THE ASSESSEE COMPANY TO THE DISTRIBUTOR OR FROM THE DISTRIBUTOR TO THE ULTIMATE CONSUMER. THE DISTRIBUTORS ARE ACTING ONLY AS A LIN K IN THE CHAIN OF SERVICE PROVIDERS AND FOR THIS IT IS NECESSARY FOR THE ASSE SSE TO APPOINT DISTRIBUTORS TO MAKE AVAILABLE THE PRE-PAID PRODUCTS TO THE PUBLIC AS WELL AS TO LOOK AFTER THE DOCUMENTATION AND OTHER STATUTORY MATTERS REGARDING THE MOBILE PHONE CONNECTION. THEREFORE, THE ESSENCE OF SERVICE REND ERED BY THE DISTRIBUTORS IS NOT THE SALE OF ANY PRODUCT OR GOODS. THE DISTRIBUT ORS ARE PROVIDING FACILITIES AND SERVICES TO THE GENERAL PUBLIC FOR THE AVAILABI LITY OF DEVICES LIKE SIM CARDS TO HAVE ACCESS TO THE MOBILE PHONE NETWORK OF THE ASSESSEE COMPANY. 61 THEREFORE, THE DISTRIBUTORS ARE ALWAYS ACTING FOR AND ON BEHALF OF THE ASSESSEE COMPANY AND ONLY FOR THE REASON THAT THE D ISTRIBUTORS ARE MAKING ADVANCE PAYMENT FOR THE DELIVERY OF SIM CARDS AND O THER PRODUCTS AND DISTRIBUTORS ARE RESPONSIBLE FOR THE STOCK AND ACC OUNT OF THOSE CARDS. IT IS ALWAYS POSSIBLE FOR THE TELEPHONE COMPANY ITSELF TO PROVIDE ALL THESE SERVICES DIRECTLY TO THE CONSUMERS AS THE DEPARTMENT OF TELE COMMUNICATION WAS DOING , BUT SUCH A DIRECT SERVICE IS NOT FEASIBLE N OW A DAYS. THEREFORE, THE ASSESSEE HAS MADE OUT A BUSINESS SOLUTION TO APPOIN T DISTRIBUTORS TO TAKE CARE OF THE OPERATIONAL ACTIVITIES OF THE COMPANY FOR P ROVIDING SERVICE. 23.7. THE SIM CARDS STOCKED BY THE DISTRIBUTORS AR E STILL THE PROPERTY OF THE SERVICE PROVIDER I.E. THE ASSESSEE COMPANY. THE PER MISSIVE RIGHT TO USE SIM CARDS TO GET ACCESS THE PHONE NETWORK OF THE ASSESS EE COMPANY IS GIVEN ONLY TO THE ULTIMATE CONSUMER WHO ACTIVATES THE CONNECTI ON BY USING THE SECRETE NUMBER PROVIDED IN THE SIM CARD. THERE IS NO CASE O F ANY PURCHASE AND SALE IN THE MATTER OF PRE-PAID SIM CARDS,/RE-CHARGE COUP ONS. IN FACT, THE LEGAL OBLIGATION IN RESPECT OF PROVIDING PRE-PAID MOBILE SERVICES IS BETWEEN THE ASSESSEE COMPANY AND THE ULTIMATE CONSUMER. IN VIEW OF HUMAN CONDUCT AND BEHAVIOR, THE TRANSACTION BETWEEN THE PARTIES HAS T O BE TAKEN INTO CONSIDERATION WHICH, IN FACT, IS DELIVERING SERVICE RELATING TO MOBILE 62 TELEPHONE SYSTEM, WHICH THE ASSESSEE-COMPANY IS DOI NG. THE ASSESSEE COMPANY IS OPERATING UNDER THE LICENSE ISSUED BY TH E GOVT. OF INDIA. 23.8. WE FIND NO DIFFERENCE BETWEEN POST-PAID AND P RE-PAID SYSTEM EVEN THOUGH POST-PAID AND PRE-PAID ARE TWO DIFFERENT MET HODS EMPLOYED FOR PROVIDING SERVICES AND COLLECTING REVENUE, THE NATU RE AND CONTENT OF THE SERVICE RENDERED UNDER BOTH THE METHODS IS ONE AND THE SAME. AS FAR AS THE ULTIMATE CONSUMER IS CONCERNED, THEY ARE GETTING TH E SERVICE OF MOBILE TELEPHONE, WHETHER HE IS SUBSCRIBING TO THE SCHME O F POST-PAID OR THE SCHEME OF PREPAID. THE ASSESSEE COMPANY IS TREATING THE B ENEFITS ENJOYED BY A DISTRIBUTOR AS COMMISSION AND DEDUCTING TAX AT SOUR CE AND WHERE THE COMPANY ADMITS LIABILITY TO DEDUCT TAX AT SOURCE U /S 194H IN RESPECT OF POST PAID SERVICES RENDERED THROUGH ITS DISTRIBUTORS. IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT THE SERVICES RENDERED BY THE ASSESSEE THROUGH THE DISTRIBUTORS ON PRE-PAID PACKAGE IS DIFFERENT FROM THE POST PAID PACKAGE SO AS TO QUALIFY THE FORMER FOR EXEMPTION FROM OPERATION OF SECTION 194H. THE ONLY DIFFERENCE IS TECHNICAL DIFFERENCE AND THE DIFFEREN CE EXISTS ONLY IN BILLING SYSTEM AND REVENUE COLLECTION ETC. IN BOTH THE CAS ES, ASSESSEE COMPANY IS PROVIDING THE SERVICE DISTRIBUTORS ARE HELPING TO REACH SUCH SERVICES TO THE ULTIMATE CONSUMERS. THERE IS DOCUMENTATION IN BOTH THE SYSTEMS AND THE DISTRIBUTORS RENDER SIMILAR TYPES OF SERVICES TO THE ASSESSEE COMPANY. THE 63 ACCOUNTING IN REVENUE COLLECTION AND RELATED MATTER S ARE DIFFERENT. THE ESSENCE OF POST-PAID AND PRE-PAID SERVICES RENDERE D BY THE ASSESSEE COMPANY IS THE SAME AND THE RELATIONSHIP BETWEEN TH E ASSESSEE AND THE CUSTOMERS IS ALSO THE SAME. THEREFORE, IF POST-PAID SCHEME IS SUBJECT TO SECTION 194H, IT IS QUITE UNLIKELY THAT PRE-PAID SY STEM WOULD BE OUTSIDE THE PURVIEW OF SECTION 194H OF THE ACT. IN THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE MARGIN EARNED BY THE DISTRUBOTRS ON SUPP LY OF SIM CARDS AND OTHER SERVICE PRODUCTS ARE DIRECTLY IN THE NATURE OF CO MMISSION AND THEREFORE, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194H OF THE ACT. THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS AND IS LIABLE UNDER SECTION 201(1)/201(IA) OF THE ACT. 23.9. AS REGARDS THE DECISION OF ITAT, DELHI BENCH AND HYDERABAD BENCH IN THE CASE OF IDEA CELLULAR, RELIED UPON BY THE LD . COUNSEL, THE A.O. HAS DEALT WITH THE SAME IN PARA 2.5 OF HIS ORDER. AGAINST TH E SAID DECISIONS, THE DEPARTMENT HAS MOVED AN APPEAL BEFORE THE HONBLE H IGH COURT OF DELHI, WHERE THE QUESTION OF LAW HAS BEEN ADMITTED. THE HO NBLE HIGH COURT VIDE ORDER DATED 19 TH FEB.,2010 IN ITA NOS. 145 & 784 OF 2009 ANSWERED T HE QUESTION IN FAVOUR OF THE REVENUE. 23.10. IT IS ALSO OBSERVED BY THE A.O. VIDE PARA 2.6 OF HIS ORDER IN THE CASE OF THE PRESENT ASSESSEE ITSELF THAT ITAT, BENCH, KO LKATTA IN ITS ORDER DATED 64 04.04.2006 HAS DECIDED THE ISSUE IN FAVOUR OF THE R EVENUE WHICH FOR THE SAKE OF CLARITY IS REPRODUCED AS UNDER: 2. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED I N THE BUSINESS OF PROVIDING CELLULAR MOBILE TELEPHONE SERVICES IN KOLKATA UNDER THE BRAND NAME AIRTEL. THE ASSESSEE PROVIDES SUCH PRE MISES THROUGH ITS DISTRIBUTORS BY SELLING TO THEM STARTER PACK AN D RECHARGEABLE COUPONS WHICH IS COMMONLY KNOWN AS SIMCARD AND PR E-PAID CARD (AS THERE IS NO DISPUTE REGARDING POST-PAID C ARD MOBILE HOLDERS). THESE SIMCARDS AND RECHARGEABLE COUPON S WERE PURCHASED BY THE DISTRIBUTORS/FRANCHISEES APPOINTED BY THE ASSESSEE AT A FIXED RATE BELOW THE MARKET PRICE ON SUCH SIMCARD AND THE SAME WAS FURTHER SOLD TO THE RETAILERS BY WHOM IT WAS UL TIMATELY SOLD TO THE CUSTOMERS. THE A.O. WHILE PERUSING THE TDS RETURN FILED BY THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD PAID COMMIS SION ON STARTER PACKS AND RECHARGE COUPONS TO 16 PARTIES, HEREIN C ALLED FRANCHISEES AND THOUGH THE ASSESSEE HAD DEDUCTED TDS ON COMMIS SION AND DEPOSITED THE SAME DURING PERIOD FROM APRIL, 2002 T O JULY, 2002, SUCH DEDUCTION OF TAX AT SOURCE WAS DISCONTINUED BY THE ASSESSEE TREATING THE PAYMENT TO SUCH FRANCHISEES NOT AS COMMISSION B UT AS DISCOUNT WHICH WAS OUTSIDE THE AMBIT OF TDS UNDER SECTION 19 4H. 3. OBSERVING THE ABOVE DISCONTINUANCE OF DEDUCTION OF TAX AT SOURCE THE A.O. ISSUED SHOW CAUSE TO THE ASSESSEE A ND AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE ALONG WITH SAMPLE COPY OF THE AGREEMENT ENTERED WITH SUCH FRANCHISEES OBSERVE D THAT THESE FRANCHISEES AND THE ASSESSEE ( I.E. M/S. BHARTI CEL LULAR LIMITED) MAINTAINED A PRINCIPAL AGENT RELATIONSHIP AND THERE FORE, ANY COMMISSION MADE TO SUCH FRANCHISEE WAS LIABLE FOR D EDUCTION OF TAX AT SOURCE U/S 194H. THE A.O. ALSO OBSERVED THAT FROM THE PERUSAL OF VARIOUS PROCESS OF SELLING THESE SIM AND PRE-PAID CARDS TO PERSPECTIVE CUSTOMERS, IT WAS EVIDENT THAT THESE FRANCHISEES WE RE ONLY COLLECTING INFORMATION FOR PASSING ON THE SAME TO THE ASSESSEE AND THEREFORE, THESE FRANCHISEES WERE ONLY AGENTS OF THE ASSESSEE FOR WHICH THEY WERE GETTING FIXED PERCENTAGE ON SUCH SALE FROM THE ASSESSEE. 4. THE A.O. THEREAFTER OBSERVED THAT THE ASSESSEE C OMPANY HAD PAID COMMISSION OF RS.3,08,00,435/- IN BETWEEN 2.8. 2003 TO 31.3.2003 ON SALE OF STARTER PACKS AND RECHARGEABLE COUPONS TO 16 65 FRANCHISEES WHERE SUCH COMMISSION IN THE FINANCIAL YEAR 2003-04 WAS RS.5,66,76,134/-. THE A.O. HAS, THEREFORE, TREATED THE ASSESSEE A DEFAULTER FOR NOT DEDUCTING TDS AND HAS ACCORDINGL Y COMPUTED THE QUANTUM OF SHORT DEDUCTION U/S 201(1) AND INTEREST CHARGEABLE THEREON U/S 201(1A) AT RS.20,09,151/- IN THE FINANCIAL YEAR 2002-03 AND RS.32,60,471 IN FINANCIAL YEAR 2003-04. 5. THE ASSESSEE BEING AGGRIEVED WITH SUCH ORDER OF THE A.O. WENT IN FIRST APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WA S SUBMITTED THAT THE DISCOUNT GIVEN TO DISTRIBUTORS WERE NOT IN THE NATU RE OF COMMISSION AND THAT THERE WAS NO PRINCIPAL-AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND ITS DISTRIBUTOR AS THEY WERE INDEPENDE NT BUSINESS ENTITIES. THE ASSESSEE CLAIMED BEFORE THE LD. CIT(A) THAT IT HAD NEITHER MADE ANY PAYMENTS NOR CREDITED ANY AMOUNT TO THE DISTRIB UTORS, HENCE THE DISCOUNT ALLOWED ON SALE CANNOT BE BROUGHT WITHIN T HE AMBIT OF SECTION 194H. THE ASSESSEE RELIED ON THE JUDGMENT O F GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCI ATION V. UNION OF INDIA {2002} 176 CTR 193 WHEREIN IT WAS HELD THA T DISCOUNT ALLOWED TO LICENSING STAMP VENDORS DO NOT FALL WITH IN THE EXPLANATION COMMISSION AS DEFINED U/S 194H. 6. THE LD. CIT(A) AFTER CONSIDERING THE ABOVE SUBMI SSIONS HAS HELD THAT SINCE THESE FRANCHIESEES ARE MAKING PAYME NT TO THE ASSESSEE COMPANY AFTER REDUCING DISCOUNT BY THE ASSESSEE COM PANY FOR THE SIMCARDS AND SINCE BOTH THE ASSESSEE AND THE FRANCH ISEES HAVE INDEPENDENT BUSINESS ENTITY, IT WOULD BE INCORRECT TO HOLD THAT THE DISCOUNT ALLOWED BY THE ASSESSEE TO THE FRANCHISEES ON THE SALE MADE BY IT AS A COMMISSION. THE LD. CIT(A) ON THE BASIS OF ABOVE OBSERVATION AND ALSO FOLLOWING THE DECISION OF GUJA RAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION HAS VACATED THE ORDER OF THE A.O. AND HAS HELD THAT THE DISCOUNT AL LOWED TO THE FRANCHISEES ARE OUTSIDE THE PURVIEW OF SECTION 194H . 7. THE REVENUE IS AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) AND HAS NOW COME IN APPEAL BY TAKING FOLLOWING GROUNDS OF APPEAL IN BOTH THE YEARS.: (I) THAT THE LD. CIT(A) ACCEPTED ADDITIONAL EVIDENC E FILED BY THE ASSESSEE DURING THE COURSE OF HEARING. NO OPPORTUNITY UNDER RULE 46A OF THE INCOME TAX RULES WAS 66 GIVEN TO THE A.O. BEFORE PASSING THE ORDER UNDER SE CTION 251. (II) THAT THE LD. CIT(A) ERRED IN ALLOWING FULL RE LIEF TO THE DEDUCTOR CONSIDERING THE BENEFIT ALLOWED TO THE AGE NTS AS DISCOUNT ALLOWED TO THEM. THE PERSONS WHO SALES THE STARTER PACKS AND RECHARGEABLE COUPONS NEEDS TO GET THEM APPOINTED BY THE CELLULAR COMPANY THROUGH A SERIES OF FORMALITIES IMPOSED UPON THEM. SOMETIMES THEY ARE N OT ALLOWED TO SELL SUCH COUPONS OF RIVAL CELLULAR COM PANIES. MOREOVER, THE INTERMEDIATE SELLING ORGANIZATIONS AR E GIVEN THE AUTHORITY TO VERIFY THE CREDENTIALS OF TH E END CONSUMERS. IN THE INSTANT CASE, BHARTI CELLULAR LIM ITED HAS DONE SO IN THE CASE OF ITS SELLERS. III) THAT IT IS A PROVEN SITUATION THAT THERE REMAINED P RINCIPAL AGENT RELATIONSHIP BETWEEN THE CELLULAR COMPANY AND THE ORGANIZATIONS SELLING STARTER PACKS ETC. ON WHICH T HEY ENJOY FINANCIAL BENEFITS. IV) THAT THE BENEFIT ALLOWED TO THE AGENTS IN THE NAME OF DISCOUNT MAY BE TREATED AS COMMISSION. V) THAT A COMMISSIONER IS THE RECOMPENSE OR REWARD O F AN AGENT, FACTOR, BROKER OR BAILEE, WHEN THE SAME IS CALCULATED AS A PERCENTAGE ON THE AMOUNT OF HIS TRANSACTION OR ON THE PROFIT TO THE PRINCIPAL-SUNDE RLAND V. DAY 145 N.E. 2D. 39,41 12111. 2D 50. VI) THAT COMMISSION IS COMPENSATION PAID TO ANOTHER FOR SERVICES RENDERED IN THE HANDLING OF ANOTHERS BUSI NESS OR PROPERLY AND BASED PROPORTIONALLY UPON THE AMOUNT O R VALUE THEREOF RUBINSTEIN V. RUBINSTERIN 109 N.Y.S 2D 725, 734 VII) THAT COMMISSION IS A WORD WITHOUT TECHNICAL MEANI NG BUT WHEN USED TO EXPRESS COMPENSATION FOR SERVICES RENDERED, IT USUALLY DENOTES A PERCENTAGE ON THE AM OUNT OF MONEYS PAID OR RECEIVED PURIFY V. GODFRAY. VIII) THAT THE ORDER OF LD. CIT(A) DESERVES TO BE VACATED AND THAT OF THE A.O. RESTORED. IX) THAT THE APPELLANT CRAVES TO ALTER, AMEND, ADD OR MODIFY THE ALL OR ANY OF THE GROUNDS OF APPEAL TAKEN. 8. IN APPEAL BEFORE US THE LD. DEPARTMENTAL REPRES ENTATIVE FOR THE REVENUE HAS RELIED HEAVILY ON THE REASONING GIVEN B Y THE A.O. WHILE 67 TREATING THE ASSESSEE AS A DEFAULTER FOR NOT DEDUCT ING TDS. THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT SINC E TAX WAS BEING DEDUCTED FOR THE EARLIER YEAR AND EVEN FOR A PART O F FINANCIAL YEAR 2002-03 AND THE ASSESSEE SUDDENTLY STOPPED DEDUCTIN G TAX AT SOURCE FROM PAYMENT OF SUCH COMMISSION PAID TO FRANCHISEES , CLAIMING THAT SUCH PAYMENT WAS DISCOUNT IN NATURE WHICH DOES NOT COME UNDER THE AMBIT OF SECTION 194H. THE LD. DEPARTMENTAL REPRESE NTATIVE HAS PLEADED THAT THE CASE LAWS RELIED BY THE LD. CIT(A) IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION AND THE DECISIO N OF DELHI TRIBUNAL RELIED BY THE ASSESSEE IN ITS PAPER BOOK I N THE CASE OF NATIONAL PANASONIC INDIA (P) LTD. V. DY. CIT (2005) 94 TTJ 901 IS NOT IDENTICAL TO THE FACT OF THE PRESENT CASE. IT HAS, THEREFORE, BEEN CONTENDED BY THE LD. DEPARTMENTAL REPRESENTATIVE TH AT SINCE THE ASSESSEE HAS ITSELF CONSIDERED SUCH PAYMENTS AS COM MISSION IN THE NATURE IN EARLIER YEARS AND FROM THE PERUSAL OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE FRANCHISEES/DISTRIBUTORS, IT I S EVIDENT THAT SUCH AGREEMENT WAS MEANT FOR OF PRINCIPAL AND AGENT RELA TION, THE ACTION OF ASSESSEE, NOT DEDUCTING TAX AT SOURCE JUST ON THE B ASIS OF DIFFERENT OPINION AND CHANGING THE NOMENCLATURE OF SUCH COMMI SSION CANNOT BE HELD JUSTIFIED. THE DEPARTMENTAL REPRESENTATIVE HAS , THEREFORE, SUBMITTED THAT THE ORDER OF THE A.O. SHOULD BE REST ORED. 9. IN HIS RIVAL SUBMISSION, THE LD. COUNSEL FOR TH E ASSESSEE HAS RELIED HEAVILY ON THE ORDER OF THE LD. CIT(A) AND H AS SUBMITTED THAT THE ASSESSEE IS HAVING TWO TYPES OF CARDS I.E. POS T-PAID CARDS AND PRE-PAID CARDS AND IN THE CASE OF PRE-PAID CARD TH E DISTRIBUTOR/FRANCHISEE HAS TO PAY THE PRICE OF THE RECHARGE COUPONS, LESS DISCOUNT PROVIDED TO THEM AND THIS IS NOT A CA SE WHERE THE FRANCHISEE COLLECTS THE RECHARGE COUPONS FROM THE ASSESSEE, SELLS THEM TO THE CUSTOMERS AND THEN DEPOSIT THE SALE PROCEEDS TO THE ASSESSEE AFTER DEDUCTING DISCOUNT. IT HAS FURTHER BEEN SUBM ITTED BY THE LD. COUNSEL THAT IN THIS PROCESS THE ASSESSEE COMPENSAT E THE FRANCHISEES FOR PROCURING NEW CONNECTIONS AND SELLING RECHARGIN G COUPONS WITH NECESSARY DISCOUNT AND THE FRANCHISEES, IN TURN ALL OW SOME PORTION OF DISCOUNT TO THE RETAILERS WHO ARE WORKING UNDER TH EM. IT HAS, THEREFORE, BEEN SUBMITTED BY THE LD. COUNSEL THAT T HE ENTIRE PROCESS OF SUCH SALE OF NEW CONNECTIONS AND RECHARGEABLE COUPO NS ARE IN THE NATURE OF PURCHASE AND SALE BETWEEN THE TO INDEPEND ENT ENTITIES WHEREIN THE PURCHASER PAYS LESSER AMOUNT THAN THE LISTED PRICE AND THEREBY AVAILS THE DISCOUNT WHICH IN NO WAY COME UN DER THE PURVIEW 68 OF SECTION 194H AND THEREFORE, THE LD. CIT(A) WAS J USTIFIED IN VACATING THE ORDER OF THE A.O. HE HAS ALSO RELIED O N THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTION: I) AHMEDABAD STAMP VENDORS ASSOCIATIONS CASE II) NATIONAL PANASONIC INDIA (P) LTDS CASE III) BHOPAL SUGAR INDUSTRIES LTD. V. SALES TAX OFF ICER {1977}40 STC 42 (SC). 10. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORD ERS OF THE TAX AUTHORITIES. WE HAVE ALSO CONSIDERED THE PAPER BOOK S FILED BY THE ASSESSEE AND THE CASE LAWS RELIED BY BOTH THE PARTI ES. THE A.O. IN THIS CASE HAS CONSIDERED THE DIFFERENCE BETWEEN THE LIST ED PRICE OF COUPONS AND THE SELL PRICE BY THE ASSESSEE TO ITS FRANCHIS EES AS COMMISSION PAYMENT BY THE ASSESSEE ALONG WITH THE COMMISSION O N NEW CONNECTIONS FOR WHICH THE ASSESSEE IS LIABLE TO DED UCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT. THE ASSESSEE, HOWEVE R, HAS CLAIMED THAT SINCE THE FRANCHISEES WERE MAKING PAYMENT AFT ER DEDUCTING THE DISCOUNT OFFERED TO THEM, THE SAME WILL BE DISCOUNT IN NATURE WHICH IS OUTSIDE THE PURVIEW OF SECTION 194H. THE ASSESSEE H AS FURTHER CONTENDED THAT SINCE THE LIABILITY OF THE FRANCHISE ES TO PAY THE PRICE TO THE ASSESSEE IS NOT DEPENDENT UPON OR CONTINGENT TO THE SALE OF RECHARGE COUPON AND THE BOTH THE ASSESSEE AND THE F RANCHISEES ARE HAVING INDEPENDENT ENTITIES. THERE CANNOT BE ANY RE LATION OF PRINCIPAL AND AGENT BETWEEN THESE TWO PARTIES AND THEREFORE, NO QUESTION ARISES OF TREATING SUCH PAYMENTS AS COMMISSION IN NATURE . 11. WE HAVE ALSO CONSIDERED THE FACT THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS ITSELF DEDUCTED TAX AT SOURCE ON SUCH PAYMENT IN EARLIER YEARS AND EVEN FOR A PART OF THE FINANCIAL YEAR 2002-03 WHICH IS BEFORE US AND THE ASSESSEE FROM AUGUST 2002 ONWARDS HAS TREATED SUCH PAYMENT AS DISCOUNT IN NATURE. SINCE THE ASSES SEE HAS CLAIMED THAT IT WAS OFFERING DISCOUNT TO ITS FRANCHISEE AND THE A.O. IS OF THE OPINION THAT SUCH PAYMENT TO FRANCHISEE IS IN THE N ATURE OF COMMISSION, WE ARE OF THE VIEW THAT THE NATURE OF P AYMENT CAN WELL BE EXAMINED WITH HELP OF AGREEMENT BETWEEN THE ASSESSE E AND THE FRANCHISEE. 69 12. WE FIND FROM THE PERUSAL OF THE AGREEMENT BETW EEN THE ASSESSEE AND THE FRANCHISEES, THAT THE FRANCHISES WERE WORKI NG FOR THE ASSESSEE IN A CAPACITY OF AGENTS. WHILE FORMING SUCH OPINION , WE GET SUPPORT FROM THE FOLLOWING PARAS OF AGREEMENT ENTERED BY TH E ASSESSEE WITH ONE OF THE FRANCHISEE SHRI ASHOK KUMAR SINGH WHICH IS ALSO AVAILABLE AT PAGE 22 ONWARDS IN THE PAPER BOOK. SOME OF THE R ELEVANT PARAS OF AGREEMENT READS AS UNDER: 4.1. THE FRANCHISEE SHALL MAINTAIN A SUITABLE ESTABLISHMENT FOR THE CONDUCT OF ITS BUSINESS AND THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT. THE FRANCHISE E SHALL USE ITS BEST EFFORTS TO ACTIVELY PROVIDE EFFECTIVE WAYS TO BOTH BML AND THE SUBSCRIBERS TO THE SERVICE OF BML 4.8. THE FRANCHISEE SHALL USE ITS BEST EFFORTS A ND ENDEAVOURS TO MARKET AND PROMOTE THE PRE-PAID SERVI CES TO MEET THE GROWING DEMANDS OF THE SUBSCRIBERS. AT NO POINT OF TIME SHALL ANY RIGHT, TITLE OR INTEREST PASS TO THE FRANCHISEE IN RESPECT OF THE PRE- PAID CARDS FOR THE PRE-PAID SERVICES GIVEN TO THE SUBSCRIBERS FOR CONNECTION TO THE SERVICE AND ALL RIGHT, TITLE OWNE RSHIP AND PROPERTY RIGHTS IN THE SUCH CARDS SHALL AT ALL TIMES VEST WI TH BML. 4.9. THE FRANCHISEE SHALL SEEK PRIOR WRITTEN APPR OVAL FROM BML FOR ITS PROMOTIONAL LITERATURE CAMPAIGN (I NCLUDING PROMOTIONAL MATERIAL WHICH BEARS THE TRADEMARKS, LO GOS AND TRADE NAMES OF BML) FOR THE PRE-PAID SERVICES. BML WILL N OT SHARE THE EXPENDITURE INCURRED BY THE FRANCHISEE FOR SUCH ADV ERTISING AND PUBLICITY OF THE SERVICES UNLESS AGREED TO EARLIER IN WRITING. ANY SHARE OF THE EXPENDITURE STATED ABOVE AND THE RATIO FOR T HE SAME SHALL BE DECIDED BY BML FROM TIME TO TIME AT ITS SALE DISCRE TION. 4.14. THE FRANCHISEE SHALL BE RESPONSIBLE FOR COL LECTION OF ALL NECESSARY AGREEMENT/CONTRACT FORMS AND OTHER RE LATED FORMS, AND FOR OBTAINING THE SIGNATURE OF THE CUSTOMERS ON THE SE FORMS. THE FRANCHISE SHALL FORWARD ALL SUCH FORMS, DULY COMPLE TED IN ALL RESPECTS AND SIGNED BY CUSTOMERS, TO BML FOR ITS VE RIFICATION AND RECORDS. 5.1. FROM TIME TO TIME, BML WILL REVIEW WITH THE FRANCHISEE MINIMUM SUBSCRIPTION TARGETS FOR THE PR E-PAID SERVICES, TAKING INTO ACCOUNT THE MARKET DEVELOPMEN T AND MARKET 70 POTENTIAL AND OTHER RELEVANT FACTORS. THE ACHIEVEME NTS OF THESE PRESCRIBED TARGETS BY THE FRANCHISEE IS A MATERIAL OBLIGATION OF THE FRANCHISEE UNDER THIS AGREEMENT. 6.3. BML RESERVES THE RIGHT TO INSPECT AND AUDIT AT ANY TIME THE RELATED QUALITY STANDARDS OBSERVED BY THE FRANC HISEE AND HIS EMPLOYEES AND THE FRANCHISEE WILL ENSURE THAT BOTH HE AND HIS EMPLOYEES FULLY CO-OPERATE WITH SUCH INSPECTION AND AUDIT. BML WILL COMMUNICATE THE RESULT OF SUCH INSPECTION AND AUDIT TO THE FRANCHISEE WHO SHALL TAKE REMEDIAL MEASURES IF SO A DVISED BY BML. 7. OPERATING PROCEDURES. THE FRANCHISEE IN ITS BUSINESS OPERATIONS SHALL E NSURE IMPLEMENTATION THE OPERATING PROCEDURES SPECIFIED B Y BML FROM TIME TO TIME AND OBSERVE SUCH OTHER OPERATING CRIT ERIA AS MAY BE CONTAINED IN ANY MEMORANDUM OR DIRECTIVE ISSUED BY BML TO FRANCHISEE GENERALLY OR SPECIFICALLY TO THE FRANCHI SEE. OPERATING PROCEDURES FOR THE PURPOSE OF THIS CLAUSE SHALL INCLUDE THE OPERATING PROCEDURE TO BE IMPLEMENTED BY THE FRANCH ISEE AS SPECIFIED BY BML TO THE FRANCHISEE IN THE FORM OF M ANUALS, BULLETINS, CIRCULARS OR LETTERS ISSUED, AMENDED AND /OR UPDATED BY BML FROM TIME TO TIME. THE FRANCHISEE SHALL ENSURE THE AVAILABILITY TO SU BSCRIBERS OF THE PRE-PAID SERVICES, A LEVEL OF SERVICE STANDARDS STR ICTLY IN ACCORDANCE WITH BMLS STANDARDS AND SPECIFICATIONS IN TERMS HE RE ABOVE IS A MATERIAL OBLIGATION UNDER THIS AGREEMENT. 13. FROM THE PERUSAL OF ABOVE CLAUSES OF AGREEMENT BETWEEN THE ASSESSEE AND THE FRANCHISES, IT IS EVIDENT THAT THE SE FRANCHISEES ARE COMMISSION AGENTS ACTING ON FIXED MARGINS AND FIXED RESPONSIBILITIES, AS EVIDENT FROM PARA 4.8 OF THE AGREEMENT WHICH IS AGAIN REPRODUCED FOR THE SAKE OF CLARITY: 4.8.THE FRANCHISEE SHALL USE ITS BEST EFFORTS AN D ENDEAVOURS TO MARKET AND PROMOTE THE PRE-PAID SERVI CES TO MEET THE GROWING DEMANDS OF THE SUBSCRIBERS. AT NO POINT OF TIME SHALL ANY RIGHT, TITLE OR INTEREST PASS TO THE FRANCHISEE IN RESPECT OF THE PRE- PAID CARDS FOR THE PRE-PAID SERVICES GIVEN TO THE S UBSCRIBERS FOR CONNECTION TO THE SERVICE AND ALL RIGHT, TITLE OWNE RSHIP AND PROPERTY RIGHTS IN THE SUCH CARDS SHALL AT ALL TIMES VEST W ITH BML. 71 14. ON A PLAIN READING OF ABOVE PARA, IT IS APPARE NT THAT THE RIGHTS WITH THE PRE-PAID CARDS AT ALL TIMES VESTS WITH TH E ASSESSEE COMPANY BEFORE IT IS FINALLY SOLD TO THE CUSTOMER. THE ABOV E AGREEMENT BETWEEN THE ASSESSEE AND THE FRANCHISEES ALSO SUGGEST THAT THEY HAVE A RELATION OF PRINCIPAL AND AGENT BECAUSE IN PRINCIPAL TO PRIN CIPAL RELATIONSHIP THE FRANCHISEES/DISTRIBUTORS ENJOY FULL INDEPENDENC E AND ONCE THE GOODS ARE SOLD THERE CANNOT BE ANY RESTRICTIONS BY THE PRINCIPAL AND THE FRANCHISEES ENJOY ALL FREEDOM TO SELL SUCH GOODS AS PER ITS OWN CONVENIENCE. WE HAVE ALSO CONSIDERED THE FACT THAT IN THE PRESENT CASE ALSO THE FRANCHISEE HAS TO COMPLY WITH ALL THE FORM ALITIES TO BE FIXED BY THE ASSESSEE BEFORE SELLING THE NEW CONNECTIONS OR THE PREPAID CARDS TO THE CUSTOMERS. APART FROM THE FACT THAT IT HAS ALSO TO CHARGE FROM THE CUSTOMERS AT THE RATE PRESCRIBED BY THE AS SESSEE FROM TIME TO TIME AND SERVICE BY ASSESSEE ON SUCH CARDS IS SUBJ ECT TO VARIATION FROM TIME TO TIME. 15. WE HAVE ALSO CONSIDERED THE FACT THAT THE MODU S OPERANDI OF SALE OF SUCH CARD IS ALSO DECIDED BY THE ASSESSEE A PART FROM THE FACT THAT THE ASSESSEE HAS GOT FULL RIGHT TO INSPECT SUC H GOODS WHILE INSPECTION KNOWLEDGE AS MENTIONED IN PARA 6.3 OF T HE AGREEMENT ALONG WITH OTHER CHARACTERISTIC OF THE PREMISES OF THE FRANCHISEE. 16. IT IS, THEREFORE, EVIDENT THAT THE ASSESSEE CA NNOT DO ANYTHING APART FROM THE POWER AND RIGHT DELEGATED TO IT WHIC H FOLLOWS THE LAW OF MAXIM THAT DELEGARTA MEMBERS POSTASLAS NON PROT EST DELEGARI WHICH MEANS THAT AN AGENT CANNOT DELEGATE HIS POWER OR DUTIES TO ANOTHER WITHOUT THE EXPRESSED AUTHORITY OF THE PRIN CIPAL. IN THIS CASE ALSO THE ASSESSEE CAN USE ONLY THOSE POWERS WHICH H AS BEEN DELEGATED TO IT BY THE ASSESSEE, WHICH IS CONFINED TO PROMOTI NG AND MARKETING OF PRE-PAID CARDS SOLD BY THE ASSESSEE THROUGH FRANCHI SEE AND THOUGH THE FRANCHISEE IS MAKING PAYMENT ON BEHALF OF SUCH PRE -PAID CARDS SUPPLIED BY THE ASSESSEE AFTER DEDUCTING COMMISSION , AT THE SAME TIME ALL RIGHTS, TITLE, OWNERSHIP AND PROPERTY RIGHTS IN SUCH CARDS SHALL AT ALL TIME VESTS WITH THE ASSESSEE AS MENTIONED IN PARA 4 .8 OF THE AGREEMENT. 17. WE HAVE ALSO CONSIDERED THE FACT THAT THE FRAN CHISEE WHILE SELLING SUCH CARDS IS BOUND TOE ENSURE IMPLEMENTATI ON OF THE OPERATING PROCEDURES SPECIFIED BY THE ASSESSEE FROM TIME TO T IME AND HAS TO OBSERVE SUCH OTHER OPERATING CRITERIA AS MAY BE CON TAINED IN ANY 72 MEMORANDUM OR DIRECTIVE ISSUED BY THE ASSESSEE TO F RANCHISEE GENERALLY OR SPECIFICALLY. 18. APART FROM ABOVE FACT, WE HAVE ALSO TAKEN INTO CONSIDERATION THE FACT THAT THE FRANCHISEE PRICE AND PAYMENT FOR SERVICES IS BEING DECIDED FROM TIME TO TIME BY THE ASSESSEE ITSELF WH ICH CLEARLY SUGGESTS THAT THESE ARE COMMISSION IN NATURE AND N OT DISCOUNT AS CONTEMPLATED BY THE ASSESSEE AND IS ALSO EVIDENT FR OM CLAUSE NO.8.1 OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE FRANC HISEE WHICH IS BEING REPRODUCED HEREUNDER FOR THE SAKE OF CLARITY: 8.1. THE FRANCHISEES PRICE AND PAYMENT FOR SERV ICES WILL BE SPECIFIED BY BML FROM TIME TO TIME. THE RATES AR E SUBJECT TO VARIATION DURING THE TERM OF THIS AGREEMENT AT TH E SOLE DISCRETION OF BML AND SHALL BE INTIMATE TO THE DISTRIBUTOR FROM T IME TO TIME. THE ASSESSEE HAS RELIED HEAVILY ON PARAS 16.1 AND 16.2 IN SUPPORT OF ITS CLAIM THAT BOTH THE ASSESSEE AND TH E FRANCHISEES ARE INDEPENDENT BUSINESS ENTITY AND IS SOLELY PRINCIPAL TO PRINCIPAL BASIS. THE RELEVANT PARAS READS AS UNDER: 16.1. THE FRANCHISEE UNDERSTANDS THAT IT IS AN INDEPENDENTLY OWNED BUSINESS ENTITY AND THIS AGREEM ENT DOES NOT MAKE THE FRANCHISE, ITS EMPLOYEES ASSOCIATES OR AGE NTS AS EMPLOYEES, AGENTS OR LEGAL REPRESENTATIVES OF BML F OR ANY PURPOSE WHATSOEVER. THE FRANCHISE HAS NO EXPRESS OR IMPLIE D RIGHT OR AUTHORITY TO ASSUME OR TO UNDERTAKE ANY OBLIGATION IN RESPECT OF OR ON BEHALF OF OR IN THE NAME OF BML OR TO UNDERTAKE ANY OBLIGATION IN RESPECT OF OR ON BEHALF OF OR IN THE NAME OF BML OR TO BIND BML IN ANY MANNER. IN CASE, THE FRANCHISEE, ITS EMPLOYEES, ASSOCIATES OR AGENTS HOLD OUT AS EMPLOYEES AGENTS OR LEGAL REPRE SENTATIVES OF BML, THE FRANCHISEE SHALL FORTHWITH UPON DEMAND MAKE GOO D ANY/ALL LOSS, COST, DAMAGES INCLUDING CONSEQUENTIAL LOSS, S UFFERED BY BML ON THIS ACCOUNT. 16.2. IT IS UNDERSTOOD THAT THE RELATIONSHIP BETW EEN THE PARTIES IS SOLELY ON PRINCIPAL-TO PRINCIPAL BASIS. FRANCHIS EE SHALL NOT ACQUIRE, BY VIRTUE OF ANY PROVISION OF THIS AGREEME NT OR OTHERWISE, ANY RIGHT, POWER OR CAPACITY TO ACT AS AN AGENT OR COMM ERCIAL REPRESENTATIVE OF BML FOR ANY PURPOSE WHATSOEVER. N OTHING CONTAINED IN THE CONTRACT SHALL BE DEEMED OR CONSTR UED AS CREATING A 73 JOINT VENTURE RELATIONSHIP OR LEGAL PARTNERSHIP ETC . BETWEEN BML AND THE FRANCHISEE. 19. HOWEVER, WE ARE UNABLE TO ACCEPT THE CONTENTIO N OF THE ASSESSEE ONLY ON THE BASIS OF THE ABOVE TWO CLAUSES JUST BY CHANGING THE NOMENCLATURE OF THE PAYMENT MADE BY THE ASSESSEE TO THE FRANCHISEE. AS FROM THE PERUSAL OF DIFFERENT CLAUSES OF AGREEME NT BETWEEN THE ASSESSEE AND THE FRANCHISEE WHICH HAVE BEEN REPRODU CED ABOVE ELSEWHERE AS IN THIS ORDER, IT IS EVIDENT THAT THE FRANCHISEE IN THIS CASE, ARE SELLING NEW CONNECTIONS AND PRE-PAID CARDS ON B EHALF OF THE ASSESSEE FOR WHICH THEY ARE GETTING FIXED COMMISSIO N AS DECIDED BY THE ASSESSEE AND THE ENTIRE OWNERSHIP RELATING TO SUCH NEW SIMCARD AND PRE-PAID CARDS ALWAYS VEST WITH THE ASSESSEE AS EVIDENT FROM DIFFERENT CLAUSES SUCH AGREEMENT WHICH IS ALSO PLAC ED ON RECORD IN THE FORM OF PAPER BOOK. 20. THE ASSESSEE IN ITS WRITTEN SUBMISSION HAS ALS O CLAIMED THAT IF SUCH TRANSACTIONS ARE SUBJECT TO COMMISSION THEN AL L THE TRANSACTIONS OF SALE FROM MANUFACTURER TO A WHOLESALER AND WHOLE SALER TO A RETAILER WOULD BE COVERED BY SECTION 194H. HOWEVER, SUCH CONTENTION OF THE ASSESSEE HAS TO B E ADJUDICATED KEEPING IN VIEW THE FACT INVOLVED IN THIS CASE AND FOR DRAWING A CONCLUSION THAT WHETHER IT IS A SALE ON DISCOUNT OR SALE WITH A COMPONENT OR COMMISSION INVOLVED, WE HAVE TO SEE WH ETHER THE ASSESSEE IS HAVING PRINCIPAL TO PRINCIPAL RELATIONS HIP WITH ITS FRANCHISEE OR RELATIONSHIP OF PRINCIPAL AND AGENT. WE FIND THAT IN THE CASE OF PRINCIPAL TO PRINCIPAL RELATIONSHIP WITHIN THE RESTRICTION OF MAXIMUM RETAIL PRICE, A PRINCIPAL ENJOY FULL FREEDO M OF FIXING SALE PRICE AND ALSO BECOMES OWNER OF THE GOODS PURCHASE D BY IT FROM ANOTHER BUSINESSMAN. HOWEVER, IN THIS PRESENT CASE FRANCHISEES/DISTRIBUTORS DO NOT HAVE ANY INDEPENDEN CE WHATSOEVER TO DO SO BY REDUCING THEIR MARGINS. 21. APART FROM ABOVE, IN CASE OF SALE ON DISCOUNT, ONCE THE GOODS ARE SOLD THERE CANNOT BE ANY RESTRICTION IMPOSED BY ON PRINCIPAL ON THE OTHER PRINCIPAL IN REGARD TO THE MANNER AND THE ARE A OF SALES OF SUCH GOODS SOLD. THERE CAN ALSO NOT BE ANY RESTRICTION O N THE MANNER IN WHICH THE STOCK PURCHASED BY ONE PRINCIPAL HAS TO B E KEPT BY IT IN CASE OF PURCHASE ON DISCOUNT. WHEREAS IN THE PRESENT CAS E THE ASSESSEE- 74 COMPANY HAS GOT ALL RIGHT TO REGULARLY MONITOR OPER ATION OF FRANCHISEE/MONITOR OR INVESTIGATE THE MANNER IN WH ICH BUSINESS OPERATIONS ARE CARRIED ON BY SUCH FRANCHISEES WHICH IS NOT POSSIBLE IN CASE OF SALE ON DISCOUNT. IN THE PRESENT CASE BEFOR E US THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH DISTRIBUTORS/FRANCHI SEES ALLOWING LATER TO SELL THE PRODUCT WITHIN ITS SPECIFIED GEOGRAPHIC AL AREA AND DIRECTING THE FRANCHISEES THE MANNER IN WHICH SUCH PRODUCT WI LL BE SOLD IN THE MARKET. WE HAVE ALSO NOTICES THE FACT THAT THIS KIN D OF AGREEMENT FALLS UNDER THE AGENCY-FRANCHISEE WHEREIN A MANUFACTURER I.E. FRANCHISER ENTERED INTO AN AGREEMENT WITH A DISTRIBUTOR TO SEL L THE PRODUCT WITHIN ITS SPECIFIED GEOGRAPHICAL AREA. 22. EVEN OTHERWISE THE PROVISION AS CONTAINED IN R ELEVANT SECTION 194H CLEARLY HOLDS THE ASSESSEE RESPONSIBLE FOR DED UCTING TAX AT SOURCE AS SUCH COMMISSION. PROVISION OF SECTION 194 H IS BEING REPRODUCED HEREUNDER FOR THE FACILITY OF REFERENCE: - 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1 ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSIO N (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) O R BROKERAGE, SHALL , AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOU NT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY TH E ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF FIVE PER CENT. PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION IN A CASE WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED TWO THOUSAND FIVE HUNDRE D RUPEES: PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURI NG THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WH ICH SUCH COMMISSION OR BROKERAGE IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION. 75 EXPLANATION- FOR THE PURPOSES OF THIS SECTION- (I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEI VED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACT ING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PR OFESSION SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYI NG OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES; (II) THE EXPRESSION PROFESSIONAL SERVICES MEANS SERVIC ES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL, M EDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROF ESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DE CORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD F OR THE PURPOSES OF SECTION 44AA. (III) THE EXPRESSION SECURITIES SHALL HAVE THE MEANING ASSIGNED TO IT, IN CLAUSE(H) OF SECTION 2 OF THE SECURITIES CONTRAC TS (REGULATION) ACT, 1956 (42 OF 1956). (IV) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHE R CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SU CH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY FROM THE PERUSAL OF EXPLANATION (1) TO SECTION 194H , IT IS WELL APPARENT THAT THE FRANCHISEE APPOINTED BY THE ASSES SEE ARE ONLY BUYING AND SELLING PRE-PAID AND SIMCARDS ON AND BEH ALF OF THE ASSESSEE. IT IS ALSO WORTHWHILE TO NOTE THAT SERVIC E CONDITION ON SUCH PRE-PAID AND SIM CARD PURCHASES BY THE ULTIMAT E CUSTOMERS IS ALWAYS DECIDED BY THE ASSESSEE AND IS SUBJECT TO VARIATION FROM TIME TO TIME AS PER POLICY OF THE ASSESSEE-COMPANY AND THE FRANCHISEE HAS NO ROLE EXCEPT TO PLAY A ROLE OF MID DLEMAN BETWEEN THE ASSESSEE AND THE ULTIMATE CUSTOMERS FOR WHICH H E GETS COMMISSION. 23. IT IS, THEREFORE, EVIDENT FROM THE ABOVE DISCU SSION THAT PRICE DIFFERENCE IN THIS CASE IS CERTAINLY CARRIES NOMENC LATURE OF THE COMMISSION AND NOT AS DISCOUNT AS CLAIMED BY THE AS SESSEE. SINCE APART FROM RIGHT OF OWNERSHIP OF SUCH PRE-PAID CARD S, THE ASSESSEE COMPANY IS STRICTLY REGULATING AS TO THE MANNER OF BUSINESS OPERATION BY THE FRANCHISEES WHILE SELLING SUCH CARDS FROM TI ME TO TIME VIDE INVESTIGATION, CHECKING BY THE AUDITORS APPOINTED B Y THE COMPANY AND 76 INSPECTION OF RECORD. THE ASSESSEE ONLY PAYS COMMIS SION TO THE FRANCHISEE FOR THE SERVICES RENDERED BY THEM AS EVI DENT FROM PARA 8.1 OF THIS AGREEMENT, THEREFORE, IN OUR CONSIDERED OPI NION SUCH PRICE DIFFERENCE IS NOTHING BUT A PAYMENT OF COMMISSION B Y THE ASSESSEE TO ITS FRANCHISEES. 24. COMING TO CASE LAWS RELIED BY THE ASSESSEE, WE FIND THAT THOUGH THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCI ATION BUT THE SAME IS NOT IDENTICAL TO THE FACTS INVOLVED IN THE PRESENT CASE AS THE RESTRICTIONS INVOLVED IN THE STAMP VENDORS ARE PLAC ED BY THE LAW OF LAND AND THEREFORE ARE MANDATORY. WHEREAS IN THE PR ESENT CASE RESTRICTION HAS BEEN IMPOSED BY THE ASSESSEE ITSELF ON THE FRANCHISEES BEFORE BEING SOLD ULTIMATELY TO THE RETAILERS/CUSTO MERS AND THEREFORE, THE ABOVE CASE IS NO HELP TO THE ASSESSEE. 25. COMING TO THE DECISION OF HON'BLE SUPREME COUR T IN THE CASE OF BHOPAL SUGAR INDUSTRIES LTD., WE FIND THAT THIS CAS E IS ALSO OF NO HELP TO THE ASSESSEE AS IN THAT CASE ALSO THE SUBSTANTIA L OWNERSHIP HAS PASSED ON TO THE FRANCHISEE OR PURCHASER WHEREAS IN THE PRESENT CASE IT IS ALWAYS LYING WITH THE ASSESSEE. 26. THE DECISION OF DELHI BENCH IN THE CASE OF NAT IONAL PANASONIC INDIA (P) LTD. IS ALSO NOT IDENTICAL TO THE PRESENT CASE AS IN THAT CASE ALSO THE DEALER AFTER PURCHASING GOODS BECOME ENTIT LE TO SELL IT AT ANY PRICE SUBJECT TO MAXIMUM LIMIT IMPOSED BY THE MANUF ACTURER WHEREAS IN THE PRESENT CASE THE FRANCHISEE IS NOT FREE TO D O SO AND THE ENTIRE BUSINESS OPERATIONS IN REGARD TO SALE OF SUCH NEW C ONNECTIONS AND PRE- PAID CARDS ARE BEING REGULATED/MONITORED BY THE ASS ESSEE AND THEREFORE, THIS CASE ALSO DOES NOT HELP THE ASSESSE E. 27. WE, THEREFORE, FIND THAT THE CASE LAWS RELIED BY THE ASSESSEE ARE DISTINGUISHABLE AND ARE NOT IDENTICAL FACTS INVOLVE D IN THE PRESENT CASE. WHEREAS IN THE RECENT JUDGMENT JAIPUR TRIBUNAL IN T HE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS. ITO [200 5] 98 TTJ (JP.) 1 HAS HELD THAT WHEN THE ASSESSEE HAVING SOLD GOODS TO ITS DISTRIBUTORS TO OPERATION IN SPECIFIED TERRITORIES ONLY AND SALE OF GOODS AT FIXED MARGINS IS UNDER THE SUPERVISION AND CONTROL OF THE ASSESSEE, THE TRANSACTION BETWEEN THE ASSESSEE AND THE DISTRIBUTO RS WERE ON PRINCIPAL AND AGENT BASIS AND NOT ON PRINCIPAL-TO-PRINCIPAL B ASIS AND , THEREFORE, 77 THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE UNDE R SECTION 194H IN RESPECT OF PAYMENT TO DISTRIBUTORS. 28. WE OBSERVE THAT THE FACTS INVOLVED IN THE PRES ENT CASE ARE IDENTIFIED TO THE FACTS OF THE CASE DISPOSED OF BY THE JAIPUR TRIBUNAL IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P.) LTD. AS IN THIS CASE ALSO THE ASSESSEE HAS SOLD PRE-PAID CARDS TO ITS DI STRIBUTORS TO OPERATE IN SPECIFIED TERRITORIES ONLY AND SALE OF GOODS BY FRANCHISEE GIVES THEM FIXED MARGINS DECIDED BY THE ASSESSEE AND THE BUSIN ESS OPERATION OF SUCH FRANCHISEE IS ALWAYS UNDER THE SUPERVISION OF THE ASSESSEE AND THEREFORE SUCH TRANSACTIONS ARE ON PRINCIPAL AND AG ENT BASIS FOR WHICH THE ASSESSEE WAS LIABLE TO TAX AT SOURCE UNDER SECT ION 194H. 29. WE, THEREFORE, CONSIDERING THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN THE LIGHT OF ABOVE DISCUSSING, ARE OF T HE OPINION THAT THE ASSESSEE WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H ON COMMISSION PAYMENT TO ITS FRANCHISEES AND THEREF ORE, THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE ASS ESSEE AS A DEFAULTER AND THEN COMPUTE TDS AND INTEREST THEREON UNDER SEC TION 201(1) AND 201(1A) AND THE LEARNED CIT(A) WAS NOT JUSTIFIED IN VACATING SUCH ORDER OF THE ASSESSING OFFICER. WE, THEREFORE, SET- ASIDE THE ORDER OF THE LEARNED CIT(A) IN THIS REGARD AND RESTORE THE ORDER OF THE ASSESSING OFFICER AND ACCORDINGLY ACCEPT THE GROUNDS RAISED B Y THE REVENUE FOR BOTH THE YEARS. 30. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR BOTH THE YEARS ARE ALLOWED 23.11. THEREFORE, FOLLOWING THE DECISIONS OF CO-OR DINATE BENCHES AND THE DECISION IN THE CASE OF THE ASSESSEE ITSELF BEING T HE RULE OF PRECEDENCE, WE ARE BOUND TO FOLLOW THE DECISION OF THE CO-ORDINATE BENCHES AND DECISION IN THE CASE OF THE ASSESSEE ITSELF. WE FIND NO INFIRMI TY IN THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DECISION OF THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON COMMI SSION BEING THE DIFFERENCE 78 BETWEEN THE MRP AND THE AMOUNT CHARGED FROM THE D ISTRIBUTORS UNDER SECTION 194H OF THE ACT. THE ASSESSEE HAS RIGHTLY B EEN HELD IN DEFAULT UNDER SECTION 201(1)/201(1A) OF THE ACT. 23.12. THE ARGUMENTS MADE BY THE LD. COUNSEL FOR T HE ASSESSEE ARE ALMOST SIMILAR AS MADE BEFORE THE ASSESSING OFFICER AND TH E LD. CIT(A). IN FACT, THE LD. COUNSEL IN ITS WRITTEN SUBMISSIONS, WHICH WERE READ OUT BEFORE US HAS TRIED TO POINT OUT THE ERROR IN THE DECISION OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF BHARTI CELLULAR LIMITED (SUPRA) AND OTH ER DECISIONS OF HONBLE HIGH COURTS RELIED UPON BY THE ASSESSING OFFICER OR THE LD. CIT(A). SINCE THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF VODAFONE ESSAR CELLULAR LTD (SUPRA) DECIDED BY THE CO-ORDINA TE BENCH OF ITAT COCHIN (SUPRA) AND IN ASSESSEES OWN CASE ITSELF BY ITAT, BENCH OF KOLKATTA AND DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF IDEA CELLULAR (SUPRA) AND DECISIONS OF VARIOUS OTHER HIGH COURTS MENTIONED HEREINABOVE. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) , WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 23.13. AS REGARDS THE DECISION IN THE CASE OF HIN DUSTAN COCA COLA BEVERAGES LTD. VS. CIT REPORTED IN 293 ITR 226 AND INSTRUCTION F.NO.275/101/95/-IT(B) DATED 29 TH JANUARY, 1997, THE A.O. HAS RIGHTLY HELD THAT THE ASSESSEE IS LIABLE TO SATISFY THE A.O. BY FURNISHING THE REQUIRED PROOF 79 THAT THE TAXES ON THE AMOUNT RECEIVED FROM THE ASS ESSEE HAS BEEN PAID BY THE DISTRIBUTOR WHICH HE HAS FAILED TO DO VIDE PARA 2. 3. OF HIS ORDER. IN THE FACTS AND CIRCUMSTANCES, THE ORDER OF THE LD. CIT(A) IS C ONFIRMED AND THE APPEAL OF THE ASSESSEE FOR THE IMPUGNED YEAR IS DISMISSED. 24. SINCE THE FACTS IN ALL THE APPEALS AND IN ALL T HE YEARS ARE IDENTICAL EXCEPT THE GROUND OF NON-DEDUCTION OF TDS AND OTHER ROAMING CHARGES DURING THE ASSESSMENT YEAR 2007-08. OUR DECISION H EREINABOVE FOR THE ASSESSMENT YEAR 2006-07 SHALL BE APPLICABLE IN ALL OTHER YEARS AND ACCORDINGLY ALL THE GROUNDS OF ALL THE YEARS MENTI ONED HEREINABOVE I.E. FOR THE ASSESSMENT YEARS 2006-07 TO 2010-2011 ARE DISMI SSED. 25. AS REGARDS THE ISSUE ON ACCOUNT OF ROAMING CHAR GES FOR THE ASSESSMENT YEAR 2007-08 IS INVOLVED, THE ASSESSEE HAS CONTEND ED THAT NO TDS WAS REQUIRED TO BE DEDUCTED U/S 194J OF THE ACT IN VIEW OF THE DECISION IN THE CASE OF SKYCELL COMMUNICATIONS LTD. AND ANOTHER VS . DCIT REPORTED IN 251 ITR 53 (MADRAS). THE NATURE OF TRANSACTION IN R ELATION TO ROAMING FACILITY WAS EXPLAINED AS UNDER: THUS EFFECTIVELY THE SUBSCRIBER IS USING THEIR SE RVICES OF THE OTHER NETWORK WHILE HE IS ROAMING. FOR THE SERVICES USED BY HIM IN THE OTHER NETWORK A BILL IS RAISED WHICH IS TO BE RECOVERED THROUGH THE HOME NETWORK BY NETWORK SERVICE PROVIDER. THE HOME NETWORK THEN RECOVER THIS CHARGE THROUGH THE MONTHLY BILL OF THE SUBSCRIBER. 80 THE AMOUNT DUE TO THE NET WORK VISITED BY THE SUBS CRIBER AND NOT TO AIRTEL. THE SUBSCRIBER OF BHARTI AIRTEL LIMITED U SES THE NET WORK SET UP BY THE VISITING CIRCLE AND INSTEAD OF AMOUNT BE ING RECOVERED FROM THE ROAMING SUBSCRIBER, THE VISITING CIRCLE SENDS THE AMOUNT OF RECOVERED TO THE HOME CIRCLE FOR RECOVERY FROM THE SUBSCRIBER WHO HAD VISITED THE VISITING CIRCLE. THE A.O. RELYING ON A DECISION OF HONBLE SUPREME COURT IN CASE OF M/S. BHART SANCHAR NIGAM LTD. VS. UNION OF INDIA 2 82 ITR 273 ON M/S. KURUKSHETRA DARPAN (P) LTYD. 160 TAXMAN 344 AND ALSO THE CASE OF M/S. ACC LTD. 120 ITR 444 DECIDED BY THE H ONBLE SUPREME COURT HAD HELD THAT ROAMING CHARGES WERE SUBJECT T O DEDUCTION OF TAXES AT SOURCE. 25.1. THE LD. CIT(A), CONFIRMED THE ACTION OF THE A SSESSING OFFICER VIDE PARA 6 TO 6.3 OF HIS ORDER: 26. AFTER HEARING BOTH THE PARTIES, WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT IT CANNOT BE DENIED THAT ROAMING FACIL ITY IS SERVICE PROVIDED TO CUSTOMERS. HE FURTHER STATED THAT IN THE AREAS WHER E THERE IS NO SERVICE OF THE ASSESSEE AND IT TAKES THE SERVICES OF OTHER OPERAT ORS FOR THE SAME UNDER AGREEMENT WITH THEM WHICH ARE UNDERTAKEN BY THE ASS ESSEE ITSELF AND NOT THE CUSTOMERS. CUSTOMERS HAVE NOTHING TO DO WITH OTHER OPERATORS AND ARE CONCERNED WITH ASSESSEE COMPANY WHO BILLS THEM AND REIMBURSES OTHER OPERATORS. IN VIEW OF THIS THE CONTENTION OF THE AS SESSEE THAT OTHER OPERATORS PROVIDE SUCH FACILITY TO CUSTOMERS IS NOT ACCEPTABL E. ROAMING FACILITY IS ONLY A PART OF ENTIRE PACKAGE OF SERVICES WHICH GOES WIT H THE CONNECTION OF A 81 MOBILE PHONE. THE CASE OF M/S. SKY CELL COMMUNICATI ONS LTD. AS RELIED BY THE ASSESSEE IS IN RESPECT OF APPLICATION OF SECTIO N 194J OF I.T. ACT, NOT APPLICABLE IN THIS CASE AS THE A.O. HAS APPLIED TH E PROVISIONS OF SECTION 194C OF I.T. ACT. IT WAS FURTHER STATED THAT THE AG REEMENT BETWEEN ASSESSEE AND OTHER COMMUNICATION OPERATORS TO PROVIDE ROAMIN G FACILITY IS NOTHING BUT A WORK UNDERTAKEN BY THEM FOR ASSESSEE UNDER A CONTRACT OR ARRANGEMENT AGREED UPON BY BOTH THE PARTIES. FURTHER THE RELIAN CE OF A.O. IN THE RATIO OF THE CASE OF M/S. BHARAT SANCHA NIGAM LTD. DECIDED BY THE HONBLE SUPREME COURT 282 ITR 273 IS ALSO VALID. IN THIS CA SE THE HONBLE SUPREME COURT HAS HELD AS UNDER: THE LICENSE CLEARLY MANIFESTS THAT IT IS ONE FOR P ROVIDING TELECOMMUNICATION SERVICE AND NOT FOR SUPPLY OF AN Y GOODS OR TRANSFER OF RIGHT TO USE ANY GOODS. IT IS EXPRESSLY PROHIBI TS TRANSFER OR ASSIGNMENT. THE INTEGRITY OF LICENSE CANNOT BE BRO KEN INTO PIECES NOR CAN THE TELECOMMUNICATION SERVICE RENDERED B THEM BE SO MUTILATED. NOT ONLY THIS POSITION FLOWS FROM THE TERMS OF CON TRACT, THIS ALSO FLOWS FROM SECTION 4 OF THE INDIA TELEGRAPH ACT WHICH PR OVIDES FOR GRANT OF LICENSE ON SUCH CONDITIONS AND IN CONSIDERATION OF SUCH PAYMENTS AS IT THINKS FIT, TO ANY PERSON TO ESTABLISH. MAINTAIN ER WORK AT TELEGRAPH. THE INTEGRITY OF ESTABLISHING, MAINTAI NING AND WORKING IS NOT TO BE MUTILATED. 26. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS, THE ROAMING CHARGES PAID BY THE ASSESSEE TO OTHER OPERATORS ATT RACT TDS PROVISIONS U/S 194C OF THE I.T. ACT. ACCORDINGLY, WE FIND NO INFIR MITY IN THE ORDER OF THE 82 LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. HENCE, THE GROUND OF THE ASSESSEE TAKEN IN THE ASSESSMENT YEAR 2007-08 IS DI SMISSED. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEES IN I TA NOS. 93 TO 97(ASR)/2012 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND APRIL, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22ND APRIL, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. BHARTI AIRTEL LIMITED, CIRCLE OFF ICE, GANDHI NAGAR, JAMMU. 2. THE ITO (TDS), JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.