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Income Tax Appellate Tribunal, “D”, BENCH MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA
Revenue by Shri. S.C.Tiwari - CIT, DR Assessee by Shri. Niraj Sheth & Snehal Bamne, AR’s Date of Hearing 02/12/2019 Date of Pronouncement 02/12/2019 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):
These two appeals filed by the assessee are directed against separate, but identical orders of the Commissioner of Income Tax (Appeals)-4, Mumbai, both dated 30/08/2018 and for the Assessment Years (AY) 2014-15 & 2015-16. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed-off by this consolidated order.
The assessee has, more or less raised common grounds of appeal for both Assessment Year’s. Therefore, for the sake of brevity, grounds of appeal rasied for AY 2014-15 are reproduced as under:-
1. The Commissioner of Income-tax (Appeals) [hereinafter referred to as "the CIT(A)" erred in upholding the action of the Assessing Officer [hereinafter referred to as "the AO1'] in disallowing expenditure in the nature of discount amounting to Rs. 65,12,63,900/- under section 40(a)(ia) of the Income-tax Act, 1961 [hereinafter referred to as "the Act"l for non-deduction of tax under section 194H of the Act, The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law; 2. The AO / CIT(A) failed to appreciate that the expenditure of Rs. 65,1263,900/-was in the nature of discount given to distributors, working on a principal to principal basis, for early/advance payment and not in the nature of commission for provision of any service and therefore did not warrant tax deduction under section 194H of the Act; 3 Assuming without admitting the arrangement with the distributor is in the nature of commission, the AO / ClT(A) failed to appreciate that the distributors had the liberty to sell the electronic re-charge balance on price, terms & conditions decided by the distributor and therefore it was not possible to compute the amount in the nature of commission liable to withholding tax under section 194H of the Act in which case the provisions of section 194H would fail and therefore could not be applied; 4. The AO / CIT(A) erred in drawing an analogy with expenditure of Rs. 2008,27,735/-, suo-moto disallowed by the assessee for non-deduction of tax without appreciating that the said sum related to commission given to distributors for distribution of equipments, liable to withholding tax and therefore the nature of such expenditure was completely different from the expenditure in the nature of discount of Rs. 65,12,63,9007- which did not warrant any tax deduction at source; 5. The CIT(A) erred in upholding the action of the AO on the grounds of judicial consistency without appreciating that the earlier order of CIT(A) on a similar issue had been set aside by the Hon'ble Income-tax Appellate Tribunal to the file of the AO for fresh adjudication; 6. The Ld. CIT(A) failed to consider the order of Hon'ble ITAT, Mumbai in the case of Videocon d2h Limited (now merged with Dish TV India Ltd.), wherein on similar issues, the Hon'ble ITAT held in the favor of Appellant. 7. The above grounds I sub-grounds are without prejudice to each other 3. The brief facts of the case are that the assessee is engaged in the business of Direct to Home (DTH) operator, Satellite Telephone services etc. During the course of assessment proceedings, the Ld. AO noticed that the assesse has paid commission charges of Rs 65,12,63,900/-, but failed to deduct TDS as applicable under respective provisions of the Act, and hence, called upon the assesee to explain as to why commission payment shall not be disallowed u/s 40(a)(ia) of the I.T.Act, 1961, for failure to TDS u/s 194H of the I.T.Act, 1961. In response, the assessee submitted that as per the system adopted, the distributor pays lump- sum amount in advance, which is credited to his card or EPRS and assessee gets this amount as subscription charges. It was further submitted that to incentivize the payment in advance, the assesse gives cash discount to the distributors. Therefore, cash discounts shown under the head commission for sales and related services to the distributor do not come under the purview of commission and brokerage as defined u/s 194H of the I.T.Act, 1961, consequently, no requirement to deduct tax at sources. The Ld. AO did not convinced with the arguments of the assessee and proceed to disallow the payments u/s 40(a)(ia) of the Act, for failure to deduct tax at sources on such payment in terms of section 194H of the I.T.Act, 1961. The assesee carried the matter in appeal before the first appellate authority, but could not succeed. The Ld. CIT(A), for the detailed reasons recorded in his appellate order, dated 30/08/2018 dismissed appeal filed by the assessee, wherein he has affirmed the findings of the Ld. AO by following his predecessor appellate order for AY 2012-13. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us.
The Ld. AR for the assessee, at the time of hearing submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai ‘D’ bench for AY 2011-12 and 2012-13, where under an identical set off facts, the issue has been set aside to the file of the Ld. AO for reconsideration of the issue, in light of various avertments made by the assessee. He, further submitted that for the year under consideration, the Ld.CIT(A) has followed the order for the AY 2012-13 and hence, the appeals may be set aside to the file of the Ld. AO and to decide the issue by following findings of the Tribunal for AY 2012-13.
The Ld. DR, on the other hand strongly supporting order of the Ld.CIT(A) submitted that in earlier years, the issue was set aside to the file of the AO because, there are divergence views expressed by the different high court on the issue of applicability of TDS u/s 194H, in respect of commission paid to distributor for distributing various products of the assessee. He, further submitted that although, the issue is now settled by the decision of Hon’ble Supreme Court, but consistent with earlier year, this year also, the issue may be set aside to the file of the AO to decide the issue in accordance with the findings of the Tribunal for earlier years.
We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We find that the co-ordinate bench of ITAT, Mumbai had considered an identical issue for AY 2010-11 in vide order dated 08/06/2018 and after considering the submissions of the assessee and evidences placed on record, set aside the issue to the file of the Ld. AO with the following observations:-
We have considered rival submissions and perused materials on record. As could be seen, identical issue arose in assessee’s own case for assessment years 2011–12 and 2012–13. The Tribunal after considering the submissions made by the assessee and the evidences produced passed an order in 3062/MUM./2017, dated 10.10.2017 restoring the issue to the Assessing Officer with the following observations:–
8. We have gone through the copy of the agreement entered into by the assessee with the distributor available on pages 138 to 148 as well as the sample subscription application form available on pages 149 to 150 of the paper book. On the basis of the document and the issue involved we are of the view that examination of these documents as a whole along with the terms and conditions of the agreement entered into between the assessee and the distributor in respect of talk time card is essential to determine the true nature of the transaction whether the transaction entered into between the assessee and the distributor relates to discount or commission. The TDS provisions are applicable under section 194H in case it is held that the nature of the transaction entered into between the assessee and the distributor is that of commission but in case if it is decided that the nature of transaction is not commission but discount given on sales it cannot be regarded to be commission which is hit by the provisions of Section 194H of the Income Tax Act. We, therefore, in the interest of justice and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall re-decide this issue afresh in accordance with law after going though the agreement which the assessee has entered into with the distributor as well as the sample subscription application form, whether the amount represents the expenditure incurred by the assessee towards commission or whether the 6 ITA 3061, 3062, 3691&3602/Mum/2017 M/s. Dish TV India Ltd.
Facts being identical, respectfully following the aforesaid decision of the Co–ordinate Bench, we restore the issue to the file of the Assessing Officer for fresh adjudication keeping in view the directions of the Tribunal in assessment year 2011–12 and 2012–13. This ground is allowed for statistical purposes.”
In this view of the matter and consistent with view taken by the co-ordinate bench for earlier years, we restored the issue to the file of the Ld.AO for fresh adjudication keeping in view, the directions of the Tribunal for AY 2011-12 and 2012-13.
In the result, appeals filed by the assessee for both AY 2014- 15 and 2015-16 are allowed for statistical purpose.
Order pronounced in the open court on this day: 02/12/2019