Vodafone Essar South Ltd. V. The Deputy Commissioner of Income Tax, Hyderabad

ITTA/291/2013

AI Insights

The case involves M/s. Vodafone Essar South Ltd., the appellant, contesting the classification of discounts offered to its distributors as commission under Section 194H of the Income Tax Act, 1961. The Tribunal and the High Court examined whether the relationship between the appellant and its distributors constituted a 'Principal to Principal' or 'Principal-Agent' relationship and whether the discounts should be treated as commission. The Tribunal's decision, which was based on similar precedents and the nature of the transactions, was upheld by the High Court, leading to the dismissal of the appeal.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 808077 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 17-07-2013
• Assessment Year: misc
• Other Referred Cases: C.I.T. vs. Idea Cellular Ltd., Vodafone Essar Cellular Ltd. vs. ACIT, Bharti Cellular vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Commission; Discount; Principal-Agent Relationship; Recharge coupons; Sim cards; Tax deduction at source
• Section: 194H

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A.No.291 of 2013 DATED: 17.7.2013 Between: M/s. Vodafone Essar South Ltd., Hyderabad. … Appellant And The Deputy Commissioner of Income Tax, Hyderabad. …. Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A.No.291 OF 2013 Judgment: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred against the judgment and order of the learned Tribunal dated 31.1.2013 in relation to the assessment year 2007-08 and is sought to be admitted on the following suggested questions of law: a) Whether on the facts and circumstances of the case, the Hon’ble Tribunal was right in upholding the orders of the authorities below in treating the discount offered by the appellant to its distributors as commission paid by the appellant ? b) Whether on the facts and circumstances of the case, the Hon’ble Tribunal was right in confirming the orders of the lower authorities holding that the relationship between appellant and its distributors was not that of a ‘Principal to Principal’, but only a Principal-Agent relationship ? c) Whether the Tribunal was right in confirming the orders of the lower authorities that the discount offered by the appellant on sale of Prepaid SIM cards and Recharge coupons etc., would be a commission envisaged under Section 194H of the Income Tax Act, 1961 ? d) Merely because the appellant is a service provider, does it necessarily mean that the relationship with its distributor would always be on ‘Principal to Agent’ basis ? Can it be said that only in case of goods, there can either be Principal to Agent or Principal to Principal arrangement ? e) Whether the fact that the pre-paid distributor was required to undertake activities such as performing subscriber identification, doing documentation work and enrolling them as mobile subscribers would make the pre-paid distributor an agent of the Petitioner ? f) Whether the fact that no such services referred to above were rendered in relation to recharge coupons would not imply that the relationship between the Petitioner and the pre-paid distributor is a Principal-Principal relationship as regards distribution of recharge coupons ? g) Whether the Tribunal was right in holding that the tax deduction provisions can be applied to such unascertained or indeterminable amounts keeping in view the un-workability of computation provisions in such cases ? h) Whether the Tribunal was right in holding that Section 194H will apply to such cases where a person neither makes any payment nor credits any sum to the account of another person ? After reading the suggested questions of law, we are of the view that almost all the suggested questions relate to question of fact, not law. In any view of the matter, upon hearing the learned counsel for the appellant and after going through the impugned judgment and order of the learned Tribunal, the only point that arises for consideration is whether allowing discount to the dealers on SIM Cards and re-charge coupons will attract the provision for tax deducted at source under the Act or not. The learned Tribunal has followed the following decisions of various High Courts, namely, C.I.T. vs. Idea Cellular Ltd., reported in 325 ITR 148 DEL; Vodafone Essar Cellular Ltd., vs. ACIT reported in 332 ITR 255 Kerala and Bharti Cellular vs. ACIT reported in 244 CTR 185 Cal. It is recorded that the facts of the case in all those reported judgments are identical to the facts of the present case. The learned Tribunal recorded that the A.R. did not bring in any arguments to distinguish the above cases in so far as similarity of facts and method of accounting are concerned. The learned Tribunal following the decisions of the other High Courts referred to above, dismissed the appeal and held that the provision of Section 194H is applicable in respect of amounts paid to the agents in connection with sale of SIM cards and other services is adaptable. Hence, we do not find any illegality or infirmity in the impugned judgment and order of the Tribunal. The appeal is accordingly dismissed. ___________________ K.J. SENGUPTA, CJ _________________ G. ROHINI, J 17.07.2013 pnb "