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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 3874/Mum/2019 (A.Y: 2015-16) DCIT, 8(3)(1) Vs. M/s Tata Teleservices Room No. 615, 6th Floor (Mah.) Ltd., Aayakar Bhavan, D-26, TTC Industrial MK Road, Mumbai Estate, MIDC 400020. Sanpada, Navi Mumbai – 4000703 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACH1458C Appellant .. Respondent Appellant by : Mr.Vinay Sinha.DR Respondent by : Mr.Hiten Chande.AR Date of Hearing 04.04.2022 Date of Pronouncement 18.04.2022 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The revenue has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-14, Mumbai passed u/s 143(3) and 250 of the Act, 1961. The assessee has raised the following grounds of appeal:
"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 59,30,89,904/- under section 40(a)(ia) of Income Tax
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Act, 1961 and holding that the assessee was not required to deduct tax at source u/s 194H 'in respect of payment of the discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation claim of the assessee amounting to Rs. 99.50 crores u/s 32 of the IT Actin respect of amount paid to DOT for purchase of 3G spectrum. 3. The Ld. CIT(A)'s order is contrary in law and on facts and deserves to - be set aside. 4. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary. 5. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the AO restored. 2. The brief facts of the case are that the Hon’ble Tribunal vide its order dated 01.04.2021 has dismissed the revenue appeal and upheld the order of the CIT(A). Subsequently, the assessee has filed the miscellaneous application seeking rectification of mistake apparent in the order, were the Hon’ble Tribunal has not adjudicated the ground of appeal No.1 on the applicability of provisions of Sec. 194H of the Act on payments of discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers. Whereas, the Honble Tribunal in MA No.213/Mum/2021 dated 07.02.2021 has recalled
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the order for limited purposes for adjudicating the issue on applicability of provisions of Sec 194 H of the Act.
At the time of hearing, the Ld.AR submitted that the ground of appeal no.1 is in respect of applicability of provisions of sec194 H of the Act. Whereas, the Hon’ble Tribunal in assesses own case for A.Y 2012-13 has decided in favour of the assessee and referred to the order of the Hon’ble ITAT in the paper book. Further the Ld. AR submitted that the Jurisdictional Hon’ble High Court has up held the decision of the Tribunal on similar issue and supported the submissions with paper book and judicial decisions. Contra, the Ld.DR supported the order of the Assessing officer.
We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.AR that the Assessing officer has made disallowance of payments for non deduction of TDS u/sec194H of the Act applying the provisions of Sec. 40(a)(ia) of the Act. Whereas the CIT(A) has
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deleted the disallowance and observed at page 36 Para 4.1 to 4.2 of the order,which is read as under:
4.1 First ground of appeal filed by the appellant is general in nature and no separate adjudication is required in respect of the same. 4.2 So far as the second ground of appeal challenging the disallowance of Rs. 59,30,89,904/- made by the AO under section 40(a)(ia) of the IT Act is concerned, it is seen from the assessment order that the AO held that the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers was in the nature of commission and provisions of section 194H were applicable to this discount. Since the appellant had not deducted any tax at source, the AO disallowed the amount of Rs. 59,30,89,904/- relying on following decisions: - 1 The judgement of Honourable Delhi High Court in the case of CIT XVII Vs Idea Cellular Ltd [2010] 189 Taxman 118 (Delhi)/[2010] 325 ITR 148 (Delhi)/[2010] 230 CTR 43 (Delhi) 2 The judgement of Honourable Kerala High Court in the case of Vodafone Essar Cellular Ltd Vs ACIT [20101 194 Taxman 518 (Kerala)/E20111 332 ITR 255 (Kerala)/[2010] 235 CTR 393 (Kerala) 3 The decision of Honurable ITAT Chennai in the case of ITO, TDS Vs Vodafone Essar Cellular Ltd [2011] 12 taxmann.com 45 (Chennai)/[2011] 46 SOT 211 (Chennai)(URO)/[2011] 141 TJ 461 (Chennai) 4 The decision of Honourable ITAT Cochin in the case of Vodafone Essar Cellular Ltd Vs ACIT, TDS Kochi (2009) 32 SOT 280 and 5 The decision of Honourable ITAT Cochin in the case of
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Vodafone Essar Cellular Ltd Vs ACIT, TDS Kochi (2011) 43 SOT 257 Thus, three high courts and many tribunals are against the appellant on this issue. However, it is seen that the judgment of the Hon'ble Karnataka High Court in Bharti Airtel Ltd. & Ors v/s DCIT, in ITAs no.637 & 644 of 2013, dated 14th August 2014, [2014] 52 taxmann.com 31 (Karnataka)/[2015] 228 Taxman 219 (Karnataka) (MAG.) / [2015] 372 ITR 33 (Karnataka)/[2015] 274 CTR 213 (Karnataka), wherein the assessee was also a party, in ITA no. 158 of 2013, is in favour of the appellant. Relying on this decision, the 'D' Bench of the jurisdictional Tribunal has, in the case of the appellant, in ITA Nos 2043, 2044 & 2045/Mum/2014 for A.Y. 2009-10 to 2011-12, in context of proceedings u/s 201 of the I.T. Act for non deduction of TDS on discount, vide order dated 27/05/2016 held as under: - 7. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon by the learned Authorised Representative and the learned Departmental Representative. As could be seen, the Assessing Officer has treated the assessee as assessee in default alleging non–deduction of tax at source under section 194H, on the reasoning that it has paid commission to the distributors for selling the pre–paid sim card / starter kit and recharge vouchers. However, on a perusal of the facts on records, it is noticed that though the assessee has fixed an MRP on the starter kits / pre–paid sim card and recharge vouchers but that is 12 M/s. Tata Teleservices (Maharashtra) Limited only for the purpose of allowing margin to the distributors. The assessee does not sell the starter kit pre– paid sim card to the distributor at the MRP but at a lesser price. The distributor is permitted to sell the starter kit /
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pre–paid sim card to the retailer / consumers after retaining his margin but under no circumstances, the distributor can charge over and above the MRP. For example, if the MRP of the starter kit is ` 100, the assessee sells it to the distributor at ` 80 and the distributor can sell it to the retailer or customer for a price ranging from ` 80 to ` 100. However, as far as the assessee is concerned, it raises the invoice for ` 80 only to the distributer and also the same amount is reflected in the books of account towards the sale price. The assessee never credits the amount of ` 100 towards the sale price and allows discount of ` 20 in its books of account. Thus, as far as the assessee is concerned, sale price of the starter kit / sim card is ` 80. Furthermore, as per the terms and conditions, once the sim card / starter kits are sold to the distributor, the sale is complete and under no circumstances, they can be returned back to the assessee. From the aforesaid facts, it is clearly evident that as far as sale of starter kit / sim card is concerned, it is purely a purchase / sale transaction on principal–to–principal basis and there is no relationship of agency. That being the case, the provisions of section 194H are not applicable. The Hon'ble Karnataka High Court after examining in detail the 13 M/s. Tata Teleservices (Maharashtra) Limited aforesaid factors have decided the issue in favour of the assessee by reversing the order of the Tribunal. In view of the changed scenario, after the order of the Hon'ble Karnataka High Court as referred to above, the decision of the learned Commissioner (Appeals) cannot be sustained. In fact, ITAT, Jaipur Bench, in case of M/s. Tata Teleservices Ltd. v/s ITO, ITA no.309/Jp./2012 and others, dated 13th March 2015, following the decision of Hon’ble Karnataka High Court (supra), held that provisions of section 194H is not attracted on the discount given on sale of pre–paid starter kit and accordingly, following the decisions referred to
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above, we set aside the impugned order of the learned Commissioner (Appeals) and quash the demand raised by the Assessing Officer under sections 201(1) and 201(1A). The issue has also been decided in the favour of the appellant by ITAT Mumbai, in the appeal of the appellant against the assessment order for A.Y. 2006-2007 to 2008- 09, in ITA No.5031 to 5033/Mum/2016, vide order dated 27.04.2018 relying on the decision of of Hon'ble Karnataka High Court in the case of Bharti Airtel Ltd v DCIT [2015] 372 ITR 33 in which the appellant's group company Tata Tele Services Ltd was also a party. Respectfully following the above decisions in the case of the appellant, which are in favour of the appellant, it is held that the appellant was not required to deduct tax at source under section 194H of the IT Act in respect of the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers. Therefore, disallowance of Rs. 59,30,89,904/- made by the AO under section 40(a)(ia) of the IT Act is directed to be deleted. Since the primary ground of appeal raised by the appellant has been decided in favour of the appellant, alternative ground of appeal raised by the appellant has become in- fructuous. Accordingly, the same is not decided. 5. Whereas the Revenue has filed the appeal challenging the action of the CIT(A) in ground of appeal no.1.The Ld.AR emphasized that in the assessee’s own case for the A.Y 2012-13 and 2013-14, the Hon’ble Tribunal in ITA No. 1059 & 1060/Mum/2019 has observed at page 20 to 23 Para 7 & 8, which is read as under:
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Vide ground No 2 the revenue has challenged the action of the Ld. CIT(A) in holding that the assessee was not required to deduct tax at source u/s 194 in respect of payment of the discounts allowed to its prepaid distributors on sale of starter kits and prepaid recharge vouchers and further directing the AO to delete the disallowance made under section 194H of the Act. As pointed out by the Ld. counsel, this issue is also covered by the decision of the coordinate Bench in assessee’s own case for the assessment years 2009-10 to, 2011-12. The Ld. CIT(A) decided this issue in favour of the assessee holding as under:- 4.3 So far as the third ground of appeal challenging the disallowance of Rs. 57, 24 ,22, 930 /- made by the AO under section 40(a)(ia| of the IT Act is concerned, it is seen from the assessment order that the AO held that the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers was in the nature of commission and provisions of section 194H were applicable to this discount. Since the appellant had not deducted any tax at source, the AO disallowed the amount of Rs. 57, 24,22, 93Q/- relying on following decisions: - 1 The judgment of Honourable Delhi High Court in the case of CIT XVII Vs Idea Cellular Ltd [2010] 189 Taxman 118 (Dclhi)/[2010] 325 ITR 148 (Delhi/[2010] 230 CTR 43 (Delhi) 2 The judgment of Honourable Kerala. High Court in the case of Vodafonc Essar Cellular Ltd. Vs ACIT [2010] 194 Taxman 518 (Kerala)/ {2011] 332 JTR 255{Kerala)/(2QlQl 235 CTR 393 3 The decision of Honurable ITAT Chennai in the case of 1TO, TDS Vs Vodafone Essar Cellular Ltd [2011] 12 taxmann.com 45 (Chennai)/[2011] 46 SOT 211 (Chennai) (URO)/[2011] 141 TTJ 461 (Chennai) 4 The decision of Honourable ITAT Chennai in the case of Vodafonc Essar Cellular Ltd Vs ACIT, TDS Kochi (2009) 32 SOT 280 and 5 The decision of Honourable ITAT Cochin in the case of Vodafone Essar
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Cellular Ltd Vs ACIT, TDS Kochi [2011)43 SOT 257 Thus, three high courts and many tribunals are against the appellant on this issue. However, it is seen that the judgment of the Hon'ble Karnataka High Court in Bharti Airtel Ltd. & Ors v/s DClT, in ITAs no.637 & 644 of 2013, dated 14th August 2014, [2O14] 52 taxmann.com 31 |Karnataka)/[20l5] 228 Taxman 219 (Karnataka)(MAG.)/ [2015] 372 ITR 33 (Karnataka)/[2015] 274 CTR 213(Karnataka), wherein the assesses was also a party, in ITA no,158 of 2013, is in favour of the appellant. Relying on this decision, the 'D' Bench of the jurisdictional Tribunal has, in the case of the appellant, in ITA Nos 2043, 2044 & 2045/Mum/2014 for A.Y. 2009-10 to 2011-12, vide order dated 27/05/2016 held &s under: - "We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon by the learned Authorised Representative and the learned Departmental Representative. As could be seen, the Assessing Officer has treated the assesses as assessee in default alleging non-deduction of tax at source under section 194H, on the reasoning that it has paid commission to the distributor for selling the pre-paid sim card /starter kit and recharge vouchers However, on a perusal of the facts on records, it is noticed that though the assessee has fixed an MRP on the starter kits / pre-paid sim card and recharge vouchers but that is only for the purpose of allowing margin to the distributors, The assessee does not sell the starter kit pre-paid sim card to the distributors at the MRP but at a lesser price. The distributor is permitted to sell the starter kit / pre-paid sim card to the retailer/ consumers after retaining his margin but under no circumstances. the distributor can charge over and above the MRP. For example, if the MRF of the starter kit is Rs.100/-, the assessee sells it to the distributor at Rs. 80/- and the distributor can sell it to the retailer or
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customer for a price ranging from Rs. 80 to 100/- However, as far as the assessee is concerned, it raises the invoice for Rs. 80/- only to the distributer and also the same amount is reflected in the books of account towards the sale price. The assessee never credits the amount of Rs.100/- towards the sale price and allows discount of Rs. 20/- in its books of account. Thus, as far as the assebsee is concerned, sale price of the starter kit /sim card is Rs.80/-Furthermore, as per the terms and conditions, once the sim card / starter kits are sold to the distributor, the sale is complete and under no circumstances, they can he returned back to the asscssee. From the aforesaid facts, it is clearly evident that as far as sale of starter kit / sim card is concerned, it is purely a purchase / sale transaction on principal-toprincipal basis and there is no relationship of agency. That being the case, the provisions of section 194H are not applicable. The Hon'ble Karnataka High Court after examining in detail the aforesaid factors have decided the issue in favour of the assessee by reversing the order of the Tribunal. In view of the changed scenario, after the order of the Hon'ble Karnataka High Court as referred to above, the decision of the learned Commissioner (Appeals) cannot be sustained. In fact, ITAT, Jaipur Bench, in case of M/s. Tata Teleservices Ltd. v/s 1TO, ITA no-309/JP./2O12 and others, dated 13th. March 3015, following the decision of Hon'ble Karnataka High Court (supra), held that provisions of section 194H is not attracted on the discount given on sale of pre-paid starter kit and accordingly, following the decisions referred in above, we set aside the impugned Order of the learned Commissioner [Appeals) and quash the demand raised by the Assessing Officer under sections 201(1) and 201(1A) Respectfully following the above decisions in the case of the appellant, which are in favour of the appellant, it is held that the appellant was not required to deduct tax at
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source under section 194H of the IT Act in respect of the discounts allowed to prepaid distributors on sale of starter kits and prepaid recharge vouchers. Therefore, disallowance of RS. 57,24,22,93Q/- made by the AO under section 40(a)(ia) of the IT Act is directed to be deleted. 8. As pointed out by the Ld. counsel, the coordinate Bench of the Tribunal has decided the identical issue in assessee’s own case discussed above and since the revenue has not pointed out any material change in the facts of the present case, we find no reason to interfere with the findings of the Ld. CIT(A). Hence, respectfully following the decision of the coordinate Bench rendered in assessee’s case discussed above, dismiss this ground of appeal of the revenue and direct the AO to delete the addition made on account of disallowance u/s 40(a)(ia) of the Act.
We find Jurisdictional Hon’ble High Court of Bombay in the case of CIT (Tds) Vs. Idea cellular in ITA No.354 of 2019 dated 13.01.2020 on the similar issue has upheld the order of the Hon’ble Tribunal.
We have considered the facts, submissions, ratio of the judicial decisions and the assessee’s own case are of the opinion that the disputed issue is allowed in favour of the assessee . Accordingly, we find that the CIT(A) has dealt on the facts, provisions and judicial decisions and directed the Assessing officer to delete the addition. Further, The Ld.DR could not controvert
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the findings of the CIT(A) with new cogent material or information to take a different view. Accordingly, we do not find any infirmity in the order of the CIT(A) on this disputed issue and uphold the same and dismiss the ground of appeal raised by the revenue.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 18.04.2022.
Sd/- Sd/- (AMARJIT SINGH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 18.04.2022
KRK, PS Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A) 3. Concerned CIT 4. DR, ITAT, Mumbai 5. Guard file. 6. आदेशानुसार/ BY ORDER, //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai