ITO, Rohtak V. M/s. Veekay Medicos, Rohtak

ITA 968/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6730 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: UMESH CHANDRA DEBEG
• Keywords: Relationship of principal and agent

Judgement Text

I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SH.G.D.AGARWAL, VICE PRESIDENT AND SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-968/DEL /2014 (ASSESSMENT YEAR-2010-11) ITO, WARD-2, ROHTAK. ( APPELLANT) VS VEEKAY MEDICOS, 988-A/4, MAL GODAM ROAD, ROHTAK. PAN-AABFV2592F (RESPONDENT) ASSESSEE BY SH.UMESH CHANDRA DEBEG, SR.DR REVENUE BY SH.MANOJ KUMAR, CA ORDER PER DIVA SINGH, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A SSAILING THE CORRECTNESS OF THE ORDER DATED 05.12.2013 OF CIT(A), ROHTAK PER TAINING TO 2010-11 AY ON FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITIONS MA DE BY THE AO ON ACCOUNT OF DISALLOWANCE OF EXPENSES UNDER HEADS DISCOUNT (R S.76,46,656/-) AND ACTIVATION CHARGES( RS.39,52,845/-) AS THE ASSESSEE IN COURSE OF ASSESSMENT PROCEEDINGS HAD ALSO FAILED TO PROVIDE A NY SUSTAINABLE EVIDENCE IN SUPPORT OF ITS CLAIM THAT HE ACTUALLY H AS PARTED WITH THIS MONEY TO THIS EXTENT TO VARIOUS CUSTOMERS/RETAILERS . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.76,46,656/- AND RS.39,52,845/- (TOTALING RS.1,15,99,501/-) MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DISCOUNT AND ACTIVATION CHARGES U/S 40(A) (IA ) OF THE ACT, AS IT IS CLEAR FROM THE PROFIT AND LOSS ACCOUNT THA T THIS DISCOUNT/ACTIVATION CHARGES HAVE NOT BEEN GIVEN ON SALES BUT HAVE BEEN DISBURSED OUT OF RECEIPTS RECEIVED ON ACCOUNT COMMISSION AND ACTIVAT ION CHARGES, RECEIVED FROM BSNL CLEARLY COVERED UNDER SECTION 194H OF THE IT ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.76,46,656/- AND RS.39,52,845/- (TOTALING RS.1,15,99,501/-) MADE BY THE AO ON ACCOUNT OF DATE OF HEARING 30.08.2016 DATE OF PRONOUNCEMENT 07.11.2016 PAGE 2 OF 7 I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS DISALLOWANCE OF DISCOUNT AND ACTIVATION CHARGES U/S 40(A) (IA ) OF THE ACT, AS IT IS A CASE OF COLLECTION OF MONEY FROM THE CUS TOMERS FOR VARIOUS SERVICES TO BE PROVIDED/ALREADY PROVIDED BY THE TEL ECOM OPERATOR AND THEREFORE, IT IS A CLEAR CUT CASE OF PAYMENT OF COM MISSION TO AN AGENT/ SUBAGENT FOR COLLECTION OF MONEY ON BEHALF OF/FOR T ELECOM OPERATOR AND THEREFORE COVERED UNDER THE PROVISIONS OF SECTION 1 94H OF THE ACT. 4. THAT THE APPELLANT CRAVES FOR PERMISSION TO ADD, DELETE OR AMEND THE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING O F APPEAL. 2. THE LD.AR AT THE OUTSET SUBMITTED THAT THE POINT AT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE ORDER DATED 22.02.2013 PASSED BY THE ITAT IN THE CASE OF ASSESSEE & OTHERS IN ITA NO.3522/DEL /2011 PERTAINING TO 2008-09 AY. COPY OF THE SAID ORDER WAS FILED IN THE COURT. ATTENTION WAS INVITED TO PARA 5 OF THE IMPUGNED ORDER WHERE COGNIZANCE OF THIS FACT HAS BEEN TAKEN NOTE OF AND THE CONCLUSION OF THE CIT(A) IN THE LAST PAGE OF HE R ORDER IT WAS SUBMITTED ALSO MAKES A REFERENCE TO THE VERY SAME FACTS AS CONSIDE RED BY THE ITAT. 3. LD.SR.DR WHO ALREADY HAD BEEN PROVIDED A COPY OF THE SAID ORDER BY THE LD.AR PRIOR TO THE DATE OF HEARING FAIRLY SUBMITTED THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE POINT A T ISSUE IS COVERED. NO CONTRARY DECISION OR ARGUMENT WAS RELIED UPON BY THE LD.SR.D R IN ORDER TO CANVASS A CONTRARY VIEW. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IN T HE YEAR UNDER CONSIDERATION AS IN THE EARLIER YEARS CONTINUED TO BE ENGAGED IN THE BUSINESS OF SIM CARDS AND RECHARGEABLE COUPONS BESIDES BEING ENGAGED IN WHOLE SALE TRADING OF MEDICINES. THE AO ACCEPTED THE RESULTS OF WHOLESALE TRADING IN MEDICINES AFTER ISSUING A SHOW CAUSE NOTICE TO THE ASSESSEE AND CONSIDERING THE RE PLY OF THE ASSESSEE MADE AN ADDITION BY WAY OF A DISALLOWANCE ONLY IN RESPECT O F THE BUSINESS OF THE SIM CARDS AND RECHARGEABLE COUPONS. THE RELIANCE PLACED UPO N THE ORDER OF THE ITAT BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO HOLDING AS UNDE R:- PAGE 3 OF 7 I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS 5. THE REPLIES FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN CONSIDERED. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT HAS BEEN OBSERVED THAT THE ASSESSEE IS NOT ISSUING ANY INVOICE OF CASH MEMO TO THE CUSTOMER/RETAILERS TO W HOM HE HAS SOLD COUPONS AND SIM CARDS PURCHASED FROM BSNL. IN FACT, THE ASSESSEE HAS PRODUCED THE DAILY COLLECTION REPORT OF THE STAFF W HICH IS NOT SUPPORTED BY ANY INVOICES/CASH MEMOS ISSUED TO VARIOUS CUSTOMER/ RETAILERS. ASSESSEE IS AGENT OF BSNL AND CARRYING OUT VARIOUS ACTIVITIE S WHICH INCLUDE SALE OF PREPAID COUPONS/ SIM CARDS ON BEHALF OF BSNL. THE A SSESSEE HAS TAKEN THE ASSISTANCE OF VARIOUS RETAILERS IN PERFORMING T HESE ACTIVITIES. THE ASSESSEE ALSO PART WITH A PART OF CONSUMER/SERVICE CHARGES RECEIVED FROM BSNL TO THE RETAILERS. THE ASSESSEE HAS REFLECTED S UCH PAYMENTS UNDER THE HEAD 'ACTIVATION SCHEME AND DISCOUNT' AMOUNTING TO RS.39,52,845/- AND RS.76,46,656/- IN THE PROFIT AND LOSS ACCOUNT RESPE CTIVELY. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS TIME AND AG AIN ASKED TO FURNISH THE DETAILS OF NAME/ ADDRESSES/PANS OF TH E RETAILS TO WHOM THE ASSESSEE HAS PAID ACTIVATION SCHEME AND DISCOUNT AM OUNTING TO RS.39,52,845/- AND RS.76,46,656/- RESPECTIVELY. BUT ASSESSEE FURNISHED THE DAILY COLLECTION REPORT IN SUPPORT OF ITS CONTENTION. THE DAILY COLLECTION REPORT HAS BEEN PREPARED BY HIS OWN STAF F AND ITS GENUINENESS, AS SUCH, CANNOT BE ASCERTAINED. SINCE THE ASSESSEE HAS FAILED TO GIVE ANY RELIABLE AND SUSTAINABLE EVIDENCE IN SUPPORT OF HIS CONTENTION THAT HE HAS A CTUALLY PARTED WITH THIS MONEY TO THIS EXTENT TO VARIOUS CUSTOMERS/RETAILERS , THE ENTIRE AMOUNT OF RS.39,52,845/- AND RS.76,46,656/-, TOTALING RS.1,15 ,99,501/- SHOWN UNDER THE HEAD 'ACTIVATION SCHEME AND DISCOUNT' RES PECTIVELY IS ADDED TO THE RETURNED INCOME OF THE ASSESSEE ON ACCOUNT OF N ON-PRODUCTION OF ANY RELIABLE ,A)ID SUSTAINABLE EVIDENCE IN SUPPORT OF H IS CONTENTION. 5. THE ISSUE WAS CARRIED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A) AGAIN PLACING RELIANCE UPON THE AFORESAID ORDER OF THE IT AT. CONVINCED WITH THE EXPLANATION OFFERED ON FACTS AND POSITION OF LAW TH EREON THE CIT(A) DELETED THE ADDITION HOLDING AS UNDER:- 6. I HAVE CONSIDERED BOTH THE VIEW OF AO AND THE A PPELLANT SUBMITTED BEFORE ME. AS PER THE SCOPE OF MARKETING AND DISTRI BUTION OF THE ASSESSEE IN THE AGREEMENT WITH BSNL, IT SHALL PROVIDE SERVIC ES TO WALK -IN CUSTOMERS AND ALSO ESTABLISH DIRECT CONTACT THROUGH ITS SALES FORCE, WITH PROSPECTIVE CUSTOMERS AND REGISTER AS MANY NEW BSNL CUSTOMERS AS POSSIBLE SUBJECT TO A MINIMUM NUMBER. NO DEALER/SUB -DEALER HAS BEEN APPOINTED EITHER BY BSNL OR BY THE APPELLANT FOR MA RKETING THE PRODUCTS/SERVICES OF BSNL. THEREFORE, THE ENTIRE SA LES ARE TO THE CUSTOMERS MAY BE DIRECT CUSTOMERS OR SHOP KEEPER WHO IN TURN RENDER THE SERVICES TO THE CUSTOMER'S .FURTHER, THE ENTIRE SALES ARE IN CA SH AS EVIDENT FROM THE DAILY COLLECTION REPORTS (INDICATING THE DISCOUNT O FFERED) FURNISHED BY THE APPELLANT. PAGE 4 OF 7 I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS REGARDING THE DISALLOWANCE MADE BY THE AO ON THE GR OUND OF NON FURNISHING OF EVIDENCE REGARDING THE GENUINENESS OF EXPENSES, IT IS SEEN THAT ALL THE BOOK OF ACCOUNT AND OTHER VOUCHERS AND DAILY COLLECTION REPORTS HAVE BEEN SUBMITTED BEFORE THE AO. IN THE CASE OF N EW SIM CARD, THE LIST OF CUSTOMERS; BEARING THEIR MOBILE NO, NAME, FATHER NA ME ETC ALONG WITH DAILY COLLECTION REPORT WAS SUBMITTED TO THE AO. AN D IN THE CASE OF SCRATCH CARD AND C-TOP UP CARD, THE MOBILE NO. OF THE CUSTO MER ALONG WITH DAILY COLLECTION REPORT HAS BEEN PROVIDED TO THE AO AND A LSO NO NEW PHONE NO CAN BE ISSUED WITHOUT THE ID PROOF OF THE CUSTOMER. THE AO NEITHER POINTED ANY DISCREPANCY/DEFICIENCY NOR CONDUCTED ANY ENQUIR IES, IF HE HAD DOUBT REGARDING THE GENUINENESS OF THE CLAIM. 'THE BOMBAY HIGH COURT IN THE CASE OF R.B.JESSRAM FATEHCHAND (SUGAR DEPARTMENT) VS CIT IN 75 ITR 33 OBSERVED THAT THE ITO HAD SCRUTINISED CLOSELY THE ACCOUNT BOOKS O F THE ASSESSEE AND HAD FOUND NO FAULT WITH THEM EXCEPTING THAT THE ADDRESSES OF THE CUSTOMERS FOR THE CASH SALES OF SUGAR HAD NOT BEEN ENTERED. IT WAS NOT FOUND BY HIM THAT THERE WERE ANY OTHER REASONS FOR NOT ACCEPTING THE SAID CASH SALES, SUCH AS, FOR INSTANCE, THE SALES BEING AT LOWER RATES THAN WHAT WERE PREVAILING IN THE MARKET OR THAT THEY WERE NOT COMPARABLE WITH THE OTHER VERIFIED SALES, WHICH THE ASSESSEE HAD MADE D URING THE MATERIAL TIME. IN THESE CIRCUMSTANCES, THE REASON GIVEN BY T HE ITO FOR REJECTING THE BOOK RESULTS SHOWN BY THE ASSESSEE'S ACCOUNTS OR FO R NOT ACCEPTING THE CASH TRANSACTIONS AS GENUINE COULD NOT BE ACCEPTED AS GOOD AND SUFFICIENT UNLESS THERE WAS AN OBLIGATION ON THE PART OF THE A SSESSEE TO KEEP A RECORD OF THE ADDRESSES OF THE CASH CUSTOMERS. IT COULD NO T, THEREFORE, BE SAID THAT THE FAILURE ON HIS PART TO MAINTAIN THE ADDRESSES W AS A SUSPICIOUS CIRCUMSTANCE GIVING RISE TO A DOUBT ABOUT THE GENUI NENESS OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. SINCE, HAVING REGARD TO THE NATURE OF THE TRANSACTI ONS AND THE MANNER IN WHICH THEY HAD BEEN EFFECTED, THERE WAS N O NECESSITY WHATSOEVER FOR THE ASSESSEE TO HAVE MAINTAINED THE ADDRESSES OF CASH CUSTOMERS, THE FAILURE TO MAINTAIN THE SAME OR TO S UPPLY THEM AS AND WHEN CALLED FOR COULD NOT BE REGARDED AS A CIRCUMST ANCE GIVING RISE TO A SUSPICION WITH REGARD TO THE GENUINENESS OF THE TRA NSACTIONS. THE TRIBUNAL, THEREFORE, WAS NOT RIGHT, IN SETTING ASIDE THE ORDE R OF THE AAC AND RESTORING THAT OF THE ITO. THERE WERE NO CIRCUMSTANCES DISCLO SED IN THE CASE NOR WAS THERE ANY EVIDENCE OR MATERIAL ON RECORD WHICH WOUL D JUSTIFY THE REJECTION OF THE BOOK RESULTS. FURTHER, IT IS SETTLED LAW THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICIOUS AND CONJECTURES. RELIANCE FOR THIS PROPOSITION IS PLACED ON 37 ITR 271(SC) UMA CHARAN SHAW &BROS. CO. V.CIT AND OTHER DECISION 37 ITR 151(SC) OMAR SALAY MOHAMMAD SAIT V CIT 26 ITR 736 (SC) DHIRAJLAL GIRDHARILAL V CIT, BOMBAY, 26 ITR 77 5 (SC) DHAKESHWARI COTTON MILLS LTD. V CIT, 37 ITR 288 (SC) LAL CHAND BHAGAT AMBICA RAM V CIT, 91 ITR 8 (SC) CIT V CALCUTTA DISCOUNT COMPANY LTD.' FURTHER, THIS ISSUE IS COVERED BY THE THIS OFFICE O RDER FOR A.Y. 2008-09. IN VIEW OF THE ABOVE, THE ADDITION IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. REGARDING THE DISALLOWANCE MADE BY THE AO ALSO ON T HE GROUND OF NON DEDUCTION OF TDS U/S 194H AND DISALLOWANCE U/S 40(A )(IA) OF THE I T ACT PAGE 5 OF 7 I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS 1961. THIS ISSUE HAS ALREADY DECIDED BY THE ITAT VI DE ORDER DATED 22-02- 2013, IN ASSESSEE'S OWN CASE IN ASSESSEE'S FAVOUR. IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE AO UNDER ACTIVATION SCHEME AND DISCOUNT AMOUNTING TO RS. 39, 52,845/- AND RS.76,46,656/-TOTALING RS.1,15,99,501/- IS HEREBY D ELETED AND THE GROUNDS OF APPEALS ARE' ALLOWED. 6. THE SAID FINDING IS CHALLENGED BY THE REVENUE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE ABSENCE OF ANY ARGUMENTS ON EITHER CHANGE OF FACTS, CIRCUMSTANCES OR POSITION OF LAW AND HAVING CONSIDERED THE REASON ING AND THE CONCLUSION OF THE ITAT IN PARAS 15 TO 25 OF ITS ORDER WHEREIN IT IS NOTICED THAT THE FACTS AND CIRCUMSTANCES REMAIN THE SAME AND WE ALSO NOTE THAT FACTS AND CIRCUMSTANCES BEING MUTATIS MUTANDIS IS NOT DISPUTED BY THE REVENUE ALSO. IN VIEW OF THE ABOVE FINDING, IN THE ABSENCE OF ANY ARGUMENT WE RESPECTF ULLY FOLLOWING THE ORDER OF THE ITAT DISMISS THE DEPARTMENTAL APPEAL. THE RELEVANT EXTRACT OF THE ORDER OF THE CO- ORDINATE BENCH IS EXTRACTED HEREUNDER:- 15. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE ASSESSEE PAID DISCOUNT OF RS.66,57,565 /- AND ACTIVATION SCHEME OF RS.6,25,600/-. BOTH THESE AMOUNTS, TOTAL AMOUNTING TO RS.77,31,395/- WERE CLAIMED IN THE PROFIT & LOSS AC COUNT. THE STAND OF THE ASSESSEE HAS BEEN THAT DISCOUNT/ACTIVATION CHARGES WERE NOT PAID IN CASH TO ANY RETAILER. RATHER, THEY WERE IN THE NATURE O F TRADE DISCOUNT GIVEN AT THE TIME OF SALE. THE SALES WERE RECORDED AT THE M AXIMUM RETAIL PRICE AND THE DISCOUNT REGARDED AS DISCOUNT WAS THE RETAILER S MARGIN. THERE WAS NO AGREEMENT IN EXISTENCE BETWEEN THE ASSESSEE AND THE CUSTOMERS. THE ASSESSEE, DURING THE YEAR, WAS AN AUTHORIZED FRANCH ISEE OF BHARAT SANCHAR NIGAL LTD. (I.E. BSNL) VIDE AGREEMENT DATED 12.01.2007 (COPY AT PAGES 17-36 OF THE ASSESSEES PAPER BOOK-APB FOR S HORT). UNDER THE AGREEMENT, THE ASSESSEE WAS TO PROVIDE SERVICES TO WALK-IN CUSTOMERS. IT WAS TO DISTRIBUTE ALL TYPES OF AUTHORIZED TELECOM S ERVICES. NO DEALER OR SUB-DEALER WAS APPOINTED. THE DISCOUNT/COMMISSION WAS ALLOWED AS PER THE AGREEMENT. THIS POSITION REMAINS UNDISPUTED. THE RETAILERS SIMPLY BOUGHT SIM CARDS/RECHARGE COUPONS FROM THE ASSESSEE AT A DISCOUNTED PRICE. THESE WERE SOLD IN THE MARKET WITH NO SPECI FIC OBLIGATION TOWARDS THE DISTRIBUTOR. 16. THE ASSESSING OFFICER, HOWEVER, CONCLUDED THAT THE ASSESSEE WAS HAVING THE SAME RELATIONSHIP WITH THE DEALERS/RETAI LERS, AS THE ONE OF BSNL WITH THE DEALERS/RETAILERS; THAT IT WAS A CASE OF COLLECTION OF MONEY PAGE 6 OF 7 I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS FROM THE CUSTOMERS FOR VARIOUS SERVICES TO BE PROVI DED/ALREADY PROVIDED BY BSNL AND, AS SUCH, IT WAS IN THE NATURE OF PAYME NT TO AN AGENT FOR COLLECTION OF MONEY ON BEHALF OF BSNL; THAT THE ASS ESSEE HAD SHOWN THE EXPENSE AS COMMISSION IN ITS PROFIT & LOSS ACCOUN T; THAT THEREFORE, EVEN THOUGH THE PAYMENTS WERE COVERED U/S 194H OF THE IT ACT, NO TDS HAD BEEN DEDUCTED THEREON. IT WAS ON THIS BASIS THAT T HE ASSESSING OFFICER MADE THE DISALLOWANCE. THE LD.CIT(A) DELETED THE S AME. 17. THE QUESTION IS AS TO WHETHER THE LD.CIT(A) COR RECTLY DELETED THE DISALLOWANCE, HOLDING THAT THERE WAS NO PRINCIPAL T O AGENT RELATIONSHIP BETWEEN ASSESSEE AND THE CUSTOMERS. NOW, UNDOUBTED LY, THE COMMISSION IN QUESTION WAS, IN FACT, DISCOUNT. IT WAS ONLY THAT THERE BEING NO HEAD OF DISCOUNT IN ITR-4, THE DEPICTION WAS OF COMMISSION IN COLUMN NO.23 OF THE PROFITS & LOSS ACCOUNT. THUS, HOWEVER, BY ITSELF DOES NOT LEAD TO THE CONCLUSION THAT IT WAS COMMISSION RATHER THAN DISCOUNT. AS PER THE AGREEMENT BETWEEN THE BSNL AND THE ASSES SEE:- THE FRANCHISEE SHALL PROVIDE BSNL SERVICES TO WALK -IN-CUSTOMERS. IT SHALL ALSO ESTABLISH, THROUGH ITS SALE-FORCE, DI RECT CONTACT WITH PROSPECTIVE CUSTOMERS AND REGISTER AS MANY NEW BSNL CUSTOMERS AS POSSIBLE SUBJECT TO A MINIMUM NUMBER FIXED BY BS NL. FRANCHISEE SHALL ALSO DISTRIBUTE ALL TYPES OF AUTHO RIZED TELECOM SERVICES FOR MARKETING TO ITS FRANCHISEES AND CASH CARD (PREPAID) TO ITS RETAILERS. NO DEALER/SUB-DEALER WAS EITHER APPOINTED BY BSNL O N THE ASSESSEE. THE ASSESSEE IS ALLOWED COMMISSION/DISCO UNT AS PER ANNEXURE-B AND SECTION-III OF THE SAID AGREEMENT. 18. SINCE NO DEALER OR SUB-DEALER WAS APPOINTED EIT HER BY BHARAT SANCHAR NIGAM LTD. (BSNL) OR BY THE ASSESSEE, FOR T HE PURPOSE OF MARKETING THE PRODUCTS AND/OR SERVICE OF THE BHARAT SANCHAR NIGAM LTD., THE ENTIRE SALES WERE TO CUSTOMERS, EITHER DIRECTLY OR THROUGH SHOPKEEPERS, WHO RENDERED SERVICES TO THE CUSTOMERS. MOREOVER, THE ENTIRE SALES WERE IN CASH. NO COMMISSION WAS PAID BY THE ASSESSEE TO THE CUSTOMERS. THEN, SECTION 194H OF THE ACT DOES NOT COVER SUCH D ISCOUNTS AS UNDER CONSIDERATION HEREIN AND THAT BEING SO, OBVIOUSLY T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WAS WRONGLY APPLIED. ACCOUNTI NG-WISE, THE FACE VALUE OF THE RECHARGE COUPON WAS DEBITED TO THE PURCHASE ACCOUNT, WHEREAS THE COMMISSION GIVEN BY BSNL WAS CREDITED TO THE COMMIS SION ACCOUNT. AT THE TIME OF SALE, ON THE OTHER HAND, THE FACE VALUE OF THE RECHARGE COUPON WAS CREDITED TO THE SALES ACCOUNT AND THE CASH RECEIPT S WAS DEBITED TO THE CASH ACCOUNT. THE DISCOUNT OFFERED WAS DEBITED TO THE DISCOUNT ACCOUNT. WHEN PURCHASING THE SIM CARDS AND RECHARGE COUPONS FROM BSNL, THE ASSESSEE HAD TO DEPOSIT THE MONEY IN ADVANCE. UNDI SPUTED, IT IS TO CUSTOMERS DIRECTLY AND TO PETTY SHOPKEEPERS, THAT T HE SIM CARDS AND RECHARGE COUPONS WERE SOLD IN CASH. THE CUSTOMERS AND SHOPKEEPERS WERE OFFERED DISCOUNT ON THE FACE VALUE OF THE SIM CARDS. APROPOS THE RECHARGE COUPONS, ON THE OTHER HAND, A SMALL MARGIN WAS KEPT BY THE ASSESSEE OUT OF THE COMMISSION/DISCOUNT OFFERED BY BSNL. THEN, ACTIVATION CHARGES WERE GIVEN BY BSNL TO THE ASSESS EE ON NEW CONNECTIONS, AND A MAJOR PORTION THEREOF WAS GIVEN TO THE CUSTOMERS AS DISCOUNT. 19. AS DISCUSSED, IT WAS ON THE BASIS OF THE MISTAK EN PRESUMPTION OF EXISTENCE OF RELATIONSHIP OF PRINCIPAL AND AGENT, T HAT THE DISCOUNT OFFERED PAGE 7 OF 7 I.T.A .NO.-968/DEL/2014 ITO VS VEEKAY MEDICOS BY THE ASSESSEE TO ITS CUSTOMERS WAS CONSIDERED BY THE ASSESSING OFFICER AS COMMISSION. THIS, HOWEVER, IS NOT SO, TO REITER ATE IT WAS ONLY DISCOUNTS OFFERED TO THE CUSTOMERS, ON A PRINCIPAL TO PRINCIP AL BASIS, ON WHICH, NO TDS WAS EITHER REQUIRED TO BE MADE OR WAS ACTUALLY MADE. 20. IN ITL TOURS & TRAVELS (SUPRA), WHERE THE ASS ESSEE WAS TAKING AIRLINES TICKETS, THE DISCOUNT GIVEN TO INTERMEDIAR IES WAS HELD NOT TO BE COMMISSION, SINCE IT WAS DEAL ON A PRINCIPAL TO PRI NCIPAL BASIS AND THERE WAS NO ELEMENT OF AGENCY INVOLVED. NO TDS WAS HELD TO BE DONE U/S 194H OF THE ACT. 21. IN SURNDRA BUILDTECH (SUPRA), THE ASSESSEE WAS IN THE REAL ESTATE BUSINESS. IT RECEIVED COMMISSION FROM BUILDERS FOR BOOKING FLATS. PORTION OF SUCH COMMISSION WAS PAID TO BUYERS OF FLATS. IT WA S HELD THAT THIS WAS LIKE GIVING A DISCOUNT TO BUYERS AND WAS NOT COMMIS SION AND SO SECTION 194H OF THE ACT DID NOT APPLY. 22. IN AHMEDABAD STAMP VENDORS ASSOCIATION (SUPRA ) IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT THAT WHERE LICENSED STAMP VENDORS TAKE DELIVERY OF STAMP PAPERS ON PAYMENT OF FULL PRICE L ESS DISCOUNT AND THEY SELL SUCH STAMP PAPERS TO RETAIL CUSTOMERS, NEITHER OF THE TWO ACTIVITIES, I.E, BUYING FROM THE GOVERNMENT AND SELLING TO THE CUSTO MERS, CAN BE TERMED AS SERVICE IN COURSE OF BUYING AND SELLING OF GOODS ; AND THAT SO THE DISCOUNT MADE AVAILABLE TO THE LICENSE STAMP VENDOR S WAS OUTSIDE THE EXPRESSION COMMISSION OR BROKERAGE U/S 194H OF TH E IT ACT AND AS SUCH, NO TDS IS REQUIRED TO BE MADE FROM THE DISCOUNT. 23. THE SLP FILED BY THE DEPARTMENT WAS DISMISSED B Y THE HONBLE SUPREME COURT VIDE ORDER DATED 06.09.2012 (COPY AT PAGE 48 OF THE CASE LAWS PAPER BOOK FILED BY THE ASSESSEE), HOLDING THA T THE DISCOUNT GIVEN TO THE STAMP VENDORS WAS FOR PURCHASING THE STAMPS IN BULK QUANTITY AND THE DISCOUNT WAS IN THE NATURE OF CASH DISCOUNT, DUE TO WHICH THE TRANSACTION WAS A SALE AND CONSEQUENTLY, SECTION 194H OF THE IT ACT HAD NO APPLICATION. 24. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. 25. IN VIEW OF THE ABOVE, FINDING NO MERIT THEREIN, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT IS REJECTED. 8. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 07 TH NOVEMBER, 2016. SD/- SD/- (G.D.AGARWAL) (DIVA SINGH) VICE PRESIDENT JUDICIAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSIS TANT REGISTRAR ITAT NEW DELHI