IDEA CELLULAR LIMITED,INDORE vs. DEPUTY COMMISSIONER OF INCOME TAX TDS , INDORE

The assessee company is engaged in the business of providing telecom services including the mobile services through prepaid and post- paid connections, recharge vouchers of prepaid connections. In order to provide these services to the subscribers the assessee is having network of distributors/dealers appointed by the assessee through written agreements. The Ld. AO noted that the assessee is allowing certain amounts to the distributors/dealers in respect of prepaid products which is in fact in the nature of commission or brokerage as per explanation (1) to section 194H of the Act. The AO accordingly, issued show cause notice to the assessee to explain as to why the assessee should not treat as assessee in default u/s 201(1) and 201(1A) of the Act due to the default of the assessee in deducting tax at source in respect of the said commission paid/allowed to the distributors/dealers. The assessee contested the said show cause notice issued by the AO and explained that the transactions of allowing the discount by the assessee to the dealers/distributors is between principal to principal and not between principal to agent. The AO did not accept this explanation and contention of the assessee and by following the judgments of Hon’ble Delhi High Court in case of CIT vs. Idea Page 2 of 8

Before the tribunal the assessee has relied upon the various decisions of the different benches of the Tribunal in favour of the assessee whereas the department has relied upon the decision of Coordinate Bench of this Tribunal as well as the decisions of Hon’ble Delhi High Court, Hon’ble Kerala High Court and Kolkata High Court. The Ld. Sr. counsel of the assessee has reiterated his contention as raised before the Ld. CIT(A) and submitted that the nature of transaction between the assessee and distributors/dealers is not a commission but the assessee is allowing only discount to the distributors/dealers. He has filed specimen copy of the agreement between the assessee and distributors and submitted that from the terms and conditions of this agreement it cannot be inferred that the relationship between assessee and dealer is that of principal and agent but the relationship is principal to principal and therefore, amount Page 3 of 8

The Ld. Counsel for the assessee has also filed ledger copy of the distributors in the books of the assessee and submitted that the transaction is recorded in the books of account of the assessee as discount allowed and not as commission paid to the distributors. He has submitted that though in case of M/s Idea Cellular Ltd. Vs. ITO the coordinate Bench of this Tribunal has decided this issue against the assessee however at that point of time when the said order was passed in the year 2014 only Delhi High Court judgment was available as a precedence whereas subsequently, there are three High Courts judgments in favour of the assessee/telecom service providers were passed wherein the issue has been decided in favour of the assessee by holding that the payment allowed by the assessee to the distributors/dealers is not in the nature of commission and therefore, the provision of section 194H are not applicable. He has also relied upon the decisions of this Tribunal in case of Vodafone Digilink Ltd. in ITANo.67/JP/2015, in case of Idea Cellular

On the other hand, ld. DR has relied upon the decision of the Coordinate Bench of this tribunal in case of Idea Cellular Ltd. vs. ITO (supra) as well as decision of Hon’ble Delhi High Court in case of CIT vs. Idea Cellular Ltd. reported 189 taxmann.com 118, decision of Hon’ble Kerala High Court in case of Vodafone Essar Cellular vs. ACIT reported 194 taxman 518 and decision of Hon’ble Kolkata High Court Bharati Cellular Ltd. Vs. ACIT reported 12 taxmann.com 30.

He has also relied upon the order of the authorities below and submitted that the ld. CIT(A) has passed impugned order by following order of this Tribunal in case of Idea Cellular Ltd. vs. ITO dated 11.12.2014.

We have considered the rival submission as well as relevant material on record. The solitary issue raised in these appeal is common and identical to the issue involved in case of Bharti Airtel Ltd. vs. ITO(TDS) in ITANo.513/Ind/2014 for A.Y.2010-11 wherein vide even dated order we have considered and decided this issue as under:

The Ld. Sr. counsel of the assessee has filed before us the specimen copy of the agreement entered into between the assessee and the distributors/dealers as well as ledger copy of the distributors in the books of the assessee. These relevant documents have not been examined and considered by the AO while passing order u/s 201(1)/201(1A). Further the Ld. CIT(A) has also not given a finding of fact regarding nature of transaction but has simply followed the decision of this Tribunal in pursuant to the judgment of Hon’ble Delhi High Court only precedent at that point of time therefore, Ld. CIT(A) has not considered the contrary view taken by other High Courts while the passing the impugned order. In fact the terms and conditions of the agreement between the assessee and distributors/dealers as well as treatment of the transactions in the books of the assessee are essential consideration for determining the nature of transaction have not been taken into account either by the AO or by the Ld. CIT(A). Hence in the facts and circumstances of the case as discussed above and in the interest of justice, we are of the considered view that matter requires a proper verification/ examined and fresh adjudication at the level of the AO after considering terms and conditions of the agreement between assessee and distributors/dealers as well as the treatment of these transactions in the books of the assessee. Accordingly the impugned order is set aside and the matter is remanded to the record of the AO for fresh adjudication after proper verification and examination of the agreement between the assessee and distributors/dealers as well as Page 7 of 8

In the result, These appeals of assessee are allowed for statistical purposes.