Income Tax Appellate Tribunal - Delhi
Idea Cellular Ltd., Noida vs Ito (Tds), Rohtak on 1 May, 2018
1 ITA Nos. 852/Del/2015 & ors.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'C' NEW DELHI
BEFORE SHRI G. D. AGRAWAL, PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A .No. 852/DEL/2015 (A.Y 2010-11)
DCIT Vs Idea Cellular Ltd.
TDS Circle A-68, Sector-64,
Gurgaon Noida AAACB2100P
(APPELLANT) (RESPONDENT)
I.T.A .No. 941/DEL/2015 (A.Y 2010-11)
AND
I.T.A .No. 2382/DEL/2015 (A.Y 2011-12)
Idea Cellular Ltd. Vs ITO(TDS)
A-68, Sector-64, Rohtak
Noida AAACB2100P
(APPELLANT) (RESPONDENT)
Appellant/Respondent Sh. Sanjit Singh, CIT DR
by
Respondent/Appellant Sh. Ronak Doshi FCA & Mr.
by Anil Mittal,
Date of Hearing 15.03.2018
Date of Pronouncement .05.2018
ORDER
PER SUCHITRA KAMBLE, JM
These appeals are filed by the Revenue and the assessee against the orders dated 09/12/2014 & 3/2/1015 passed by CIT(A)-Rohtak for Assessment Year 2010-11 & 2011-12.
2. The assessee is a cellular service provider. The assessee made payments of commission to its distributors on the sale of pre-paid SIM cards, recharge 2 ITA Nos. 852/Del/2015 & ors. coupons etc. during the year under consideration but no TDS was deducted on the said commission payment as per the provisions of Section 194H of the Income Tax Act, 1961 as per the Assessing Officer. Therefore, the assessee was asked vide letter dated 12.03.2012, to furnish information regarding total amount of commission allowed to its distributors on sale of such pre paid products along with details of TDS made. In the said letter, the assessee was specifically asked to explain the reason thereof if no TDS is deducted as explained above. The assessee filed reply dated 22.03.2012. By following various judicial decision, the Assessing Officer held that the discount allowed by the deductor assessee on transfer of talk-time or sale of these items to the distributors is treated as commission on which the deductor assessee was liable to deduct tax at source u/s 194H of the Income Tax Act, 1961 which the assessee failed to do so. Therefore, the Assessing Officer held that the assessee is deemed to be an assessee in default u/s 201(1) for an amount of Rs.1,97,05,130/- and consequential interest thereon amounting to Rs.47,29,231/- u/s 201(1A) of the Act for assessee's failure to tax deduct at source on the commission payment of Rs.19,70,51,298/- under the provisions of Section 194H of the Act. Further the assessee vide letter dated 12.03.2012 also asked to furnish complete details of payments of Roaming charges made during the Financial Year 2009-10 along with details of TDS made on such Roaming charges. In the said letter the assessee was specifically asked to explain the reason for non deduction of tax on the said roaming charges. The assessee furnished its reply vide letter dated 22.03.2012. The Assessing Officer held that the payment of roaming charges made to other telecom operators for professional services of its technical experts to make the call processing successful by monitoring the physical equipments installed for this purpose is covered under the definition of "fees for technical services" which is defined in Explanation 2 to clause (vii) of sub-section (1) of Section 9 of the Act. Therefore, the deductor assessee was liable to deduct tax at sources u/s 194J of the Act on payment made/ credited in respect of roaming charges to other telecom operators for the technical services provided by them to the subscribers of the deductor assessee, which it failed to do so. Therefore, the assessee failed to deduct tax at source u/s 3 ITA Nos. 852/Del/2015 & ors. 194J of the Act on the amount of roaming charges paid/credited amounting to Rs.2,37,37,341/- for the year under consideration and assessee is deemed to be an assessee in default u/s 201(1) for an amount of Rs.2,37,37,341/- & consequential interest thereon of Rs.5,69,696/- u/s 201(1A) of the Act.
3. Being aggrieved by the said order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
4. In respect of Revenue's appeal the Ld. DR submitted that the CIT(A) erred in relying upon the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. and holding that the payee had included the receipts from assessee in its return of income, and the assessee company could not be treated as assessee in default in view of the provisions of section 191 of the Act. The CIT(A) has not appreciated the observations made by the Assessing Officer in treating the assessee as assessee in default, since the provision to section 201 of the Act has been incorporated prospectively w.e.f. 01.07.2012. The Ld. DR further submitted that the CIT(A) was not correct in directing the Assessing Officer to delete the liability of the assessee created u/s 201(1) of the Act, in respect of such distributors/channel partners, who would certify that they have filed their return of income for the concerned assessment year and their total income declared therein was including the business income from the purchase and sale of prepaid products for the assessee company. By doing so the CIT(A) has indirectly set aside the order of the Assessing Officer.
5. With respect to appeal of the assessee, in ground No. II and III regarding deduction of tax at source on discount/commission on sale of prepaid cards the Ld. DR relied upon the decision of the Hon'ble Delhi High Court in assessee's own case. On Ground No. IV of assessee's appeal on non deduction of tax at source on payment of roaming charges he supported the order of the CIT(A). With respect to Ground No. V he submitted that interest for non deduction of tax at source u/s 201(1A) is automatic and mandatory. The Ld. DR relied upon order of the CIT(A).
4 ITA Nos. 852/Del/2015 & ors.6. The Ld. AR for Revenue's appeal in A.Y. 2010-11, relied upon the order of the CIT(A). The Ld. AR further submitted that the issue contested herein was decided against the assessee by the Hon'ble Delhi High Court in case of the assessee's own case in CIT vs. Idea Cellular Ltd. for A.Ys 2003-04 and 2004-05 reported in (2010) 189 Taxmann 118. But, the Ld. AR submitted in case of Bharati Airtel Limited vs. DCIT (2014) (372 ITR 33), Hon'ble Karnataka High Court and in assessee's own case (87 taxmann.com 295) Hon'ble Rajasthan High Court decided this issue in favour of the assessee. Thus, the Ld. AR submitted that Hon'ble Karnataka High Court considered the decision of the Hon'ble Delhi High Court delivered in assessee's own case. The Ld. AR submitted that the order u/s 201 of the Act was passed by ITO TDS, Rohtak and thus, the Punjab and Haryana High Court has necessary jurisdiction. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in case of CIT vs. Vegetable Products Ltd. 88 ITR 192 wherein it is held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. Thus the Ld. AR submitted that in absence of any decision of the Jurisdictional Punjab and Haryana High Court on this issue and in view of conflicting decisions of other High Courts, following the ratio of the Hon'ble Apex Court, the view favourable to assessee be upheld. On issue of roaming charges, he relied on the decision of the Hon'ble Supreme Court in case of Bharti Cellular and the decision of the co-ordinate bench.
7. We have heard both the parties and perused all the records. The first issue on which assessee was held by the Revenue as 'assessee-in-default' is for discount/commission on sale of prepaid sim cards. The issue contested herein was decided against the assessee by the Hon'ble Delhi High Court in case of the assessee's own case in CIT vs. Idea Cellular Ltd. for A.Ys 2003-04 and 2004-05. But, in case of Bharati Airtel Limited vs. DCIT (2014) (372 ITR 33), Hon'ble Karnataka High Court and in assessee's own case (87 taxmann.com 295) Hon'ble Rajasthan High Court decided this issue in favour of the assessee. As per Ld. AR, the order u/s 201 of the Act was passed by ITO TDS, Rohtak and thus, the 5 ITA Nos. 852/Del/2015 & ors. Hon'ble Punjab and Haryana High Court which has necessary jurisdiction. After looking into the address of the assessee, the assessee's address is at Noida, Uttar Pradesh. Thus, in both these circumstances the jurisdictional High Court will not be the Hon'ble Delhi High Court. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in case of CIT vs. Vegetable Products Ltd. 88 ITR 192 wherein it is held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. In absence of any decision of the Hon'ble Punjab and Haryana High Court as well as the Hon'ble Allahabad High Court on this issue and in view of conflicting decisions of other High Courts, following the ratio of the Hon'ble Apex Court, the view favourable to assessee is upheld. Hence assessee cannot be deemed to be an 'assessee-in-default' on discount/commission of sale of prepaid sim cards. Therefore, Ground No. 2 of the assessee's appeal is allowed.
8. Now we come to the assessee's appeal. The Ld. AR submitted that the Ground No. I for A.Y. 2010-11 in assessee's appeal is not pressed. Therefore, the same is dismissed. As relates to Ground No. II and III for A.Y. 2010-11 and Ground No. I & II of A.Y. 2011-12, the Ld. AR submitted that the same is covered in favour of the assessee by the Hon'ble Karnataka High Court decision in Bharati Airtel and Hon'ble Rajasthan High Court decision in assessee's own case. Therefore, we are of the view that the same will be applicable in assesse's case herein on the reasons mentioned while deciding the appeal of the Revenue. Ground No. II & III of the assessee's appeal for A.Y. 2010-11 and Ground No. I and II for A.Y. 2011-12 are allowed.
9. As relates to Ground No. IV of A.Y. 2010-11 and Ground No. III for A.Y. 2011-12 on TDS on roaming charges, the Ld. AR submitted that in absence of any human intervention during the actual roaming process, payment would not be Fees for Technical services. Thus, payment made to other telecom operators should not be regarded as payment towards fees for technical service. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in case of CIT vs. Bharati 6 ITA Nos. 852/Del/2015 & ors. Cellular 193 taxman 97. The Ld. AR also relied upon the decision of the Delhi Tribunal in case of Bharati Airtel Ltd. Vs. ITO (TDS) (2016) 67 taxmann.com 223. The Ld. AR further submitted that any payment for the use of standard facility does not amount to fees for technical services. The Ld. AR relied upon the decision of the Hon'ble Apex Court in case of CIT vs. Kotak Securities Ltd. 67 taxmann.com 356 wherein it is held that facility provided with 'no customization to user' / 'customer needs' is not technical services u/s 194J or u/s 9(1)(vii). Only payments for services which are specialized, exclusive and customized to user/consumer qualify as "fees for technical services" in terms of Explanation 2 to Section 9(1)(vii) so as to attract TDS u/s 194J. The Ld. AR also relied upon the decision of the Hon'ble Apex Court in case of CIT (TDS) vs. Delhi Transco Ltd. 380 ITR 398 wherein it has confirmed the Hon'ble Delhi High Court decision that payment towards "wheeling charges" was not taxable as Fees for Technical Services u/s 194J of the Act. It was held that payment was towards transportation of electricity and nothing more and thus, the process was automatic through network/equipment without any human intervention. The Ld. AR also relied upon the decision of the Apex Court in case of DIT vs. A.P. Moller Maersk AS 78 taxmann.com 287. Thus, the Ld. AR submitted that no tax is deductible u/s 194J of the Act for payment of roaming charges to other telecom operators and hence, the assessee cannot be held as an 'assessee-in-default' u/s 201(1) of the Act.
10. The Ld. DR submitted that the assessee is in default u/s 201(1) of the Act and relied upon the Order u/s 201(1) and 201(1A) of the Act.
11. We have heard both the parties and perused all the records. It is pertinent to note that in absence of any human intervention during the actual roaming process, payment would not be Fees for Technical services as per the decisions of the various High Court and the Apex Court in case of CIT vs. Bharati Cellular. Thus, payment made to other telecom operators should not be regarded as payment towards fees for technical service. Thus, Ground No. IV of A.Y. 2010-11 7 ITA Nos. 852/Del/2015 & ors. and Ground No. III for A.Y. 2011-12 are allowed.
12. As regards to Ground No. V for A.Y. 2010-11 and Ground No IV for A.Y. 2011-12 interest levied u/s 201(1A) of the Act, the same is consequential. Therefore, Ground No. V for A.Y. 2010-11 and Ground No IV for A.Y. 2011-12 are not necessary to adjudicated at this stage.
13. As appeal of the revenue are on issue of certain deduction of CIT(A) about applicability of decision of the Hon'ble Supreme Court. However, when we have already held that assessee was not required to deduct tax at source on discount and roaming charges, the appeal of the revenue becomes infructuous in absence of any TDS liability and hence appeal of the revenue is dismissed.
14. In result, ITA No. 941/DEL/2015 for A.Y. 2010-11 and ITA No. 2382/DEL/2015 for A.Y. 2011-12 filed by assessee are allowed. ITA No. 852/DEL/2015 for A.Y. 2010-11 filed by the Revenue is dismissed.
Order pronounced in the Open Court on 1st May, 2018.
Sd/- Sd/-
(G. D. AGRAWAL) (SUCHITRA KAMBLE)
PRESIDENT JUDICIAL MEMBER
Dated: 01/05/2018
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
8 ITA Nos. 852/Del/2015 & ors.
ITAT NEW DELHI
Date
1. Draft dictated on 15/03/2018 PS
2. Draft placed before author 19/03/2018 PS
3. Draft proposed & placed before .2018 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
Sr.PS/PS 1.05.2018
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
1.05.2018
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.