Income Tax Appellate Tribunal - Pune
Idea Cellular Ltd.,, Pune vs Assessee on 15 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
SA Nos.119 to 122/PN/2014
(Arising out of ITA Nos.1867 to 1870/PN/2014)
(Assessment Years : 2007-08 to 2010-11)
Idea Cellular Limited,
11/1, Sharda Centre,
Erandwane, Pune - 411 004.
PAN : AAACB2100P .... Appellant
Vs.
Addl. Commissioner of Income Tax (TDS),
Pune. .... Respondent
Assessee by : Mr. J. D. Mistri
Department by : Mr. A. K. Modi
Date of hearing : 14-01-2015
Date of pronouncement : 15-01-2015
ORDER
PER G. S. PANNU, AM
The captioned Stay Applications by the assessee seek stay on the recovery of the outstanding demands relating to penalty u/s 271C of the Act imposed by the income-tax authorities on account of the failure of the assessee to deduct requisite tax at source u/s 194H of the Income Tax Act, 1961 (in short "the Act") for assessment years 2007-08 to 2010-11. The details of the amount of outstanding demands for captioned four assessment years are as under :-
Assessment Year Penalty Demand u/s 271C 2007-08 50,49,551/- 2008-09 80,78,569/- 2009-10 6,35,25,863/- 2010-11 6,43,36,230/-
2. At the time of hearing, the Ld. Representative for the assessee contended that assessee is in the business of providing telecom services across India and the income-tax authorities held that assessee was liable to deduct TDS on discounts allowed to the pre-paid SIM card distributors in 2 SA Nos.113 & 114/PN/2014 terms of section 194H of the Act. Initially, the Assessing Officer held the assessee-in-default u/s 201(1)/201(1A) of the Act for not deducting tax at source on discount allowed to pre-paid distributors as according to him it was in the nature of commission falling within the purview of section 194H of the Act. It was pointed out that appeals of the assessee relating to the orders passed by the Assessing Officer u/s 201(1)/201(1A) of the Act were still pending for adjudication before the Tribunal and the stand of the assessee was that the impugned discount allowed to pre-paid distributors could not be considered as commission in terms of section 194H of the Act. It was also pointed out that having regard to certain judicial precedents even if the impugned discount allowed to the pre-paid distributors was to be considered as commission yet it did not fall for consideration in terms of section 194H of the Act. Prima-facie, it was sought to be made out that the assessee has a good case to succeed on its plea that it has not defaulted in any manner with respect to the application of section 194H of the Act qua the impugned amounts, and thus the impugned penalties levied u/s 271C of the Act would not survive.
3. Further, it was pointed out that that in a recent judgement, the Hon'ble Karnataka High Court in ITA Nos.637-644 of 2013 & others dated 14.08.2014 in the case of M/s Bharti Airtel Limited & others vs. DCIT has held that section 194H of the Act is not attracted to the transactions in question. The Ld. Representative pointed out that prior to the said judgement there are certain decisions of other High Courts which were against the assessee, namely, CIT vs. Idea Cellular Ltd., 325 ITR 148 (Delhi). It was pointed out that the Hon'ble Karnataka High Court held in favour of the assessee's stand after considering the earlier contrary judgements of the Hon'ble Delhi High Court. It was therefore contended that so far as the present proceedings are concerned, which relating to the levy of penalty u/s 271C of the Act, it could not be considered that the act of the assessee of not deducting the tax at source was 3 SA Nos.113 & 114/PN/2014 bereft of any reasonable cause. In support of the said proposition the following chart has been furnished :-
Financial Assessment Date of Order Date of Order Decision prevailing during that Date of Year Year passed u/s passed u/s period Order of the 201(1)/201(1A) 271C of the said of the Act Act decisions 2006-07 2007-08 24-Mar-11 21-Jan-14 Korean Air vs. Dy.CIT (Mum) (ITA 28-Dec-04 No.1979/Mum/2003) 2007-08 2008-09 24-Mar-11 21-Jan-14 2008-09 2009-10 19-Mar-12 21-Jan-14 DCIT vs. Idea Cellular Ltd. (123 ITD 28-Mar-08
620) (Trib.-Del) Foster's India (P.) Ltd. vs. ITO (29 28-Apr-08 SOT 32) (Trib.-Pune) ACIT vs. Idea Cellular Ltd. (125 ITD 26-Feb-09
222) Trib.-Hyd) CIT vs. Qatar Airways (332 ITR 253) 26-Mar-09 (Bom HC) 2009-10 2010-11 26-Mar-12 21-Jan-14 CIT vs. Idea Cellular Ltd. (325 ITR 19-Feb-10
148) (Delhi HC) Piramal Healthcare Ltd. vs. ACIT (21 9-May-12 taxmann.com 225) (Trib.-Mumbai) CIT vs. Piramal Healthcare Ltd. 16-Jan-13 (Bom HC) (ITA Nos.1427, 1428, 1545, 1622 of 2012 and 15 of 2013 Decision of Karnataka High Court 14-Aug-14 (ITA Nos.637-644, 256-263, 158-163 of 2013) wherein it was held in favour of the telecom companies like Bharti Airtel Ltd., Vodafone Essar South Ltd., and Tata Teleservices Ltd. in a bunch of appeals filed by them against the revenue to demonstrate that at the relevant point of time when assessee was to deduct the tax at source, the judicial pronouncements prevailing were in favour of the proposition that no tax was deductible in terms of section 194H of the Act qua the impugned payments. Therefore, it is sought to be pointed out that under these circumstances, assessee had a good prima-facie case to demonstrate that if at all there was a failure to deduct the tax at source u/s 194H of the Act, such failure was for a reasonable cause and therefore no penalty u/s 271C of the Act is leviable. Coming to the quantum of outstanding demand, the Ld. Representative pointed out that the CIT(A) in para 19 of his order has directed the Assessing Officer to allow appropriate relief to the assessee by applying the judgement of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd. vs. CIT, (2007) 293 ITR 226 (SC). As per the Ld. Representative, the CIT(A) has held that assessee could not be treated as an assessee-in-default where the TDS Officer is satisfied that the recipient of 4 SA Nos.113 & 114/PN/2014 income has paid the requisite taxes. To the aforesaid extent, no penalty u/s 271C of the Act could be levied. The Ld. Representative pointed out that the Assessing Officer has not given appeal effect to the aforesaid direction of the CIT(A). In the course of the hearing, a Tabulation has been furnished which is purported to be the working of the demand which would remain payable once the appeal effect is granted qua the aforesaid direction of the CIT(A). The Tabulation shows that the following position of outstanding demand would emerge :-
Financial Year Assessment Year Penalty Demand Appeal Relief** u/s 271C 2006-07 2007-08 50,49,551 35,50,159 2007-08 2008-09 80,78,569 80,78,569 2008-09 2009-10 6,35,25,863 1,96,12,212 2009-10 2010-11 6,43,36,230 2,65,12,384 Total 14,09,90,213 5,77,53,324
4. In sum and substance, the Ld. Representative for the assessee pointed out that assessee has a good prima-facie case to succeed with respect to the appeals pending with the Tribunal on the issue of levy of penalty u/s 271C of the Act and therefore the outstanding demands be stayed and the appeals of the assessee be heard on an out-of-turn basis.
5. On the other hand, the Ld. CIT-DR has not disputed the factual matrix brought out by the Ld. Representative for the assessee but it was contended that the efficacy of the penalty levied u/s 271C of the Act, which stands confirmed by the CIT(A), can be tested only after it is crystallized as to whether or not assessee was required to deduct the tax at source u/s 194H of the Act. The appeals relating to the quantum proceedings against the orders passed u/s 201(1)/201(1A) of the Act are in the course of hearing before the Tribunal and according to the Ld. CIT-DR, the merits of the issue shall only be appraised therein.
5 SA Nos.113 & 114/PN/2014
6. We have carefully considered the rival submissions. No doubt, in so far as the merit or other of the levy of penalty u/s 271C of the Act is concerned, the same shall be a subject-matter of consideration when the corresponding appeals of the assessee shall be heard by the Tribunal. So however, in so far as it is necessary to appraise the prima-facie nature of assessee's case and the balance of convenience necessary to dispose of the captioned Stay Applications is concerned, the same have been noted by us. Considering the entirety of circumstances and the factual and legal matrix brought out by the Ld. Representative for the assessee, we deem it fit and proper to direct the Assessing Officer not to take any coercive measures to recover the outstanding demands.
7. Meanwhile, the corresponding appeals of the assessee pending with the Tribunal shall be posted for hearing on an out-of-turn basis before the regular Bench on 02nd March, 2015, as announced in the open Court at the time of hearing. Since the aforesaid date of hearing was announced in the open Court in the presence of both the parties, the requirement of issuance of a formal notice of hearing is hereby dispensed with. The above order restraining the Assessing Officer from taking coercive measures shall operate for a period of six months from today or till the date of order of the Tribunal in assessee's appeals, whichever is earlier.
8. Accordingly, the captioned Stay Applications are disposed-off.
Order pronounced in the open Court on 15 th January, 2015.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 15 th January, 2015.
Sujeet
6 SA Nos.113 & 114/PN/2014
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-V, Pune;
4) The CIT-V, Pune;
5) The DR "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune