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Facts
The assessee, Vodafone Idea Limited, faced a TDS demand under sections 201(1) and 201(1A) concerning cash discounts on pre-paid/postpaid sales, treated as commission under section 194H, and payments for IUC/Roaming charges under section 194J for AY 2011-12. The Assessing Officer and CIT(A) held the assessee liable, leading to this appeal.
Held
The Tribunal, relying on the Supreme Court's judgment in Bharti Cellular Limited and the Delhi High Court's ruling in Vodafone Idea Limited, held that the assessee is not obligated to deduct tax at source on the income component from sales of prepaid coupons or starter-kits by distributors. Consequently, Section 194H is not applicable to these transactions, and the prior orders were set aside.
Key Issues
Applicability of TDS provisions under sections 194H and 194J to cash discounts on telecom sales and IUC/Roaming charges, and whether the assessee can be treated as an assessee in default under sections 201(1)/201(1A).
Sections Cited
133A, 194H, 194J, 201(1), 201(1A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
Assessee by: Ms. Ananya Kapoor, Advocate Department by: Shri Vivek Vardhan, Sr. DR Date of Hearing: 15.04.2024 Date of 30.04.2024 pronouncement: O R D E R PER VIMAL KUMAR, JM
The appeal is against order dated 08.11.2019 of the Learned Commissioner of Income Tax (Appeals), New Delhi upholding order dated 21.03.2014 of the Assessing Officer, ACIT, Circle- 50(1), New Delhi (in short “the AO”) under section 201(1)/201(1A) of Income Tax-Act, 1961 (hereinafter referred to as “the Act”) for F.Y. 2011-12/2012-13.
Brief facts of case are that assessee is engaged in business of providing cellular mobile telephone services in the state of New Delhi (Delhi Circle). A survey under section 133A of the Income Tax Act was carried out on 17.01.2011 to verify as to whether idea Cellular Ltd. does discharge the TDS liability on account of payments covered under various TDS related provisions of the Act, especially considering the decision of the Hon’ble Jurisdictional High Court in its own case, on the issue of treating the cash discounts on pre-paid and postpaid sales as commission covered under section 194H and also the treatment on account of payment towards IUC/Roaming charges covered under section 194J of the Act. The statement of Shri Anil Mittal was subsequently recorded on oath. As a matter of TDS compliance verification under section 201(1)/201(1A) of Income Tax Act, 1961 for AY 2011-12 a notice dated 11.4.2013 and a fresh notice dated 13.12.2013 were issued to the Idea Cellular Ltd. In response to these notices, Shri Anil Mittal, DGM Finance of the assessee appeared and filed the details called for from time to time. The case was discussed with him.
The computation of the assessee company for liability under the provisions of TDS compliance u/s 201(1)/201(1A) is computed as under- S. No. Particulars Default u/s 201(1) Interest u/s Total on non-payment. 201(1A) of Delay in Non Payment of TDS F.Y. 2011-12 1. Tax Liability u/s 1,59,58,112/- 59,27,035/- 2,18,85,147/- 194H 2. Tax Liability u/s NIL 1,05,305/- 1,05,305/- 194J Total 1,59,58,112/- 60,32,340/- 2,19,90,452/- Less NIL NIL NIL Prepaid(Verified from the system) Balance Tax 1,59,58,112/- 60,32,340/- 2,19,90,452/- liability
Being aggrieved appellant assessee preferred appeal before Learned Commissioner of Income Tax (Appeals) which was dismissed vide order dated 8.11.2019.
In the present appeal Learned AR submitted that Learned Commissioner of Income Tax (Appeals) erred in upholding order of ACIT (TDS) treating appellant as an assessee in default under section 201r.w.s 194H of the Act despite of the fact that the TDS Officer failed to give a finding that the recipient had not paid taxes or discharged its liability. Learned CIT(A) erred in upholding order of TDS Officer that the relationship between the appellant and its distributors is that of Principal and Agent. 3 Learned CIT(A) erred in upholding order of TDS treating appellant as assessee in default under section 201 of the Act. Learned CIT(A) erred in upholding TDS officer levying interest under section 201(1A) on the ground that appellant has not deducted tax under section 194H. Hon’ble Supreme Court of India in the case of Bharti Cellular Limited vs ACIT has held as under:-
“42. In view of the aforesaid discussion, we hold that the assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H of the Act is not applicable to the facts and circumstances of this case.”
Hon’ble High Court of Delhi in the case of Vodafone Idea Limited vs ACIT decided in appeal No.446/2019 is in above terms.
Learned DR submitted that order of Commissioner of Income Tax is legal.
From examination of record in light of aforesaid pleadings and submissions in view of above it is crystal clear that Learned CIT(A) vide order dated 8.11.2019 upheld order of Learned AO imposing of tax liability under section 201 r.w. s 194H&J. As per ratio of judgment in Bharti Cellular Ltd.’s case (supra), it is well settled that assessee would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H of the Act is not applicable to the facts and circumstances of this case. In view of the above material facts and circumstances and well settled principle of law impugned orders dated 8.11.2019 and 21.03.2014 are unsustainable and liable to be set aside.
No other points were argued.
Hence the appeal is allowed. Both the impugned orders dated 8.11.2019 and 21.03.2014 are set aside.