Income Tax Appellate Tribunal

The Assistant Commissioner of Income Tax, Chennai. Vs. M/s. Vodafone South Ltd.

MANU/IX/0102/2020

18.05.2020

Direct Taxation

TDS provisions under Section 194H of IT Act is not applicable on sale of recharge vouchers and pre-paid vouchers to sole distributors

Present cross appeals filed by the Revenue as well as the assessee are directed against the common order of the learned Commissioner of Income Tax (Appeals). The Assessee has challenged the order of CIT(A) in confirming the order of the Assessing Officer passed under Section 201(1) /201(1A) of the Income Tax Act, 1961 on the ground that, the order passed by the TDS Officer is bad in law and void-ab-initio, since such order has been passed beyond the limitation period specified under Section 201(3) of the Act.

Before the learned CIT(A), it was a submission of the assessee that, the assessee was covered by the provisions of Section 201(3) of the Act and hence, the order under section 201(1) of the Act cannot be passed beyond the limitation period. Clause (i) to section 201(3) of the Act specifies that, no order shall be made under sub-section (1) of section 203 of the Act deeming a period to be an assessee in default for failure to deduct the whole or any part of the tax from a resident in India, at any time after the expiry of two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed. Here, the assessee has not deducted TDS under Section 194H of the Act and thus, the question of filing of quarterly statement as required under Section 200 of the Act by the assessee does not arise. Therefore, the assessee is not covered by the provisions of Section 201(3)(i) of the Act. Accordingly, CIT(A) has validly confirmed the order passed under Section 201(1)/201(1A) of the Act. Thus, the ground raised by the assessee stands dismissed for both the assessment years.

The ground raised in the appeal of the Revenue is that, CIT(A) has erred in holding that the sale of recharge vouchers and prepaid vouchers and prepaid cards to the sole distributors does not establish Principal-Agent relationship liable to TDS under Section 194H of the Act and also held that no tax at source was deductible provided the assessee satisfied the conditions relating to treatment of discount in the books of accounts.

The assessee company is a mobile/cellular service provider. While completing the assessments for the assessment years 2008-09 and 2009-10, the Assessing Officer found that, the assessee has not deducted the TDS on discounts allowed for prepaid SIM Cards/ Talktime as distributor margin. After considering the clarifications of the assessee, the Assessing Officer passed the orders under Section 201(1)/ 201(1A) of the Act for the assessment years by determining TDS under Section 194H of the Act. On appeal, by following the decision of the Tribunal in assessee’s own case, CIT(A) held that, the provisions of Section 194H of the Act are not attracted in the case of the assessee and no tax at source was deductible provided that the assessee satisfies the conditions laid down by the ITAT relating to the treatment given by the assessee in their books of accounts. Aggrieved, the Revenue is in appeal before the Tribunal for both the assessment years.

By extracting the relevant portion of the order of the Tribunal in assessee’s own case and following the same, CIT(A) held that the provisions of Section 194H of the Act are not attracted in the case of the assessee and no tax at source was deductible provided the assessee satisfied the conditions relating to treatment of discount in the books of accounts. Thus, the CIT(A) has rightly followed the decision of the Tribunal in assessee’s own case. Thus, there is no infirmity in the order passed by the CIT(A). Accordingly, the grounds raised by the Revenue are dismissed. In the result, both the appeals filed by the assessee as well as the Revenue are dismissed.

Tags : Levy TDS provisions Applicability

Share :