Hon'ble Judges/Coram:
Sanjiv Khanna and S.V. Bhatti

JUDGMENT

Sanjiv Khanna, J.

1. This common judgment decides the aforestated appeals preferred by the Revenue and the Assessees, who are cellular mobile telephone service providers. The issue relates to the liability to deduct tax at source Under Section 194-H of the Income Tax Act, 1961¹ on the amount which, as per the Revenue, is a commission payable to an agent by the Assessees under the franchise/ distributorship agreement between the Assessees and the franchisees/distributors. As per the Assessees, neither are they paying a commission or brokerage to the franchisees/distributors, nor are the franchisees/distributors their agents. The High Courts of Delhi and Calcutta have held that the Assessees were liable to deduct tax at source Under Section 194-H of the Act, whereas the High Courts of Rajasthan, Karnataka and Bombay have held that Section 194-H of the Act is not attracted to the circumstances under consideration.

2. To avoid prolixity and repetition, we are not referring to the facts and arguments in the beginning, and will preface our judgment by reproducing Section 194-H of the Act and explaining its contours. The relevant portion of Section 194-H reads as under:

194-H. Commission or brokerage.- Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in Section 194-D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rate of five per cent:

Provided that no deduction shall be made under this Section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed fifteen thousand rupees:

Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year i........