1 3366, 3367, 3368/Del/2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `E' NEW DELHI
BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A. No. 3366/DEL/2015 (A.Y. 2003-04)
I.T.A. No. 3367/DEL/2015 (A.Y. 2004-05)
I.T.A. No. 3368/DEL/2015 (A.Y. 2005-06)
Vodafone Idea Limited Vs ACIT
(Formerly known as Idea TDS Range-50, New Delhi
Cellular Limited) 4th Floor, Laxmi Nagar Distt.
A-19, Mohan Co-operative
Centre, New Delhi-110092
Industrial Estate, Mathura
Road,
New Delhi - 110044
AAACB2100P
(APPELLANT) (RESPONDENT)
Appellant by Sh. Ronak Doshi, CA
Respondent by Ms. Rinku Singh, Sr. DR
Date of Hearing 03.07.2019
Date of Pronouncement 10.07.2019
ORDER
PER SUCHITRA KAMBLE, JM
These three appeals are filed by the assessee against the
orders dated 20.03.2015 passed by CIT(A)-41, New Delhi for
assessment years 2003-04, 2004-05 and 2005-06.
2. Grounds of appeals are as under:-
ITA No. 3366/Del/2015 (A.Y. 2003-04)
Ground no. 1 : Passing of order barred by limitation u/s 275
of the Act
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1. On the facts and in circumstances of the case and in law, the
Ld. Commissioner of Income-tax (Appeals)-41, New Delhi ("CIT(A)")
erred in not annulling the penalty order passed u/s 271C of the
Income Tax Act, 1961 ("the Act") by the Additional Commissioner
of Income, Range 50, New Delhi ("the TDS Officer") which was
barred by limitation u/s 275 of the Act.
2. The Appellant prays that, the penalty order, being time barred
be annulled/set aside as being ab-initio void and bad in law.
WITHOUT PREJUDICE TO GROUND I
GROUND NO. II :
1. On the facts and in the circumstances of the case and in law,
the CIT(A) erred in upholding the action of the TDS Officer in
levying penalty amounting to Rs. 10,73,990/- u/s 271C of the Act
on the alleged ground that the Appellant has failed to deduct tax
at source u/s 194H of the Act.
2. He failed to appreciate and ought to have held :
a) the Appellant had acted under an honest and bona fide belief
that tax was not deductible u/s 194H of the Act on "discount"
(alleged by the department as "commission") given to distributors;
b) Appellant's stand was also approved by the Hon'ble Tribunal
before the Hon'ble High Court reversed those decisions and
therefore there was a "reasonable cause".
c) There was a "reasonable cause" for non-deduction of TDS and
in view of section 273B of the Act, no penalty can be levied.
d) Without Prejudice, if the mechanism to deduct TDS fails in
absence of `payment' or `credit', there is a `reasonable cause' for
non-deduction of TDS u/s 194H of the Act.
3. The Appellant prays that the penalty amounting to 10,73,990/-
levied u/s 271C of the Act be deleted.
GROUND NO. III
The Appellant craves leave to add, to alter and / or amend,
withdraw all or any of the foregoing grounds of appeal."
ITA No. 3367/Del./2015 (A.Y. 2004-05)
GROUND NO. I: Passing of order barred by limitation u/s
275 of the Act
1. On the facts and in circumstances of the case and in law,
the Learned Commissioner of Income-tax (Appeals) - 41, New
Delhi ("CIT(A)") erred in not annulling the penalty order passed
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u/s 271C of the Income Tax Act, 1961 ("the Act") by the
Additional Commissioner of Income, Range 50, New Delhi ("the
TDS Officer") which was barred by limitation u/s 275 of the Act.
2. The Appellant prays that, the penalty order, being time barred
be annulled/set aside as being ab-initio void and bad in law.
WITHOUT PREJUDICE TO GROUND I
GROUND NO. II:
1. On the facts and in the circumstances of the case and in law,
the CIT(A) erred in upholding the action of the TDS Officer in
levying penalty amounting to Rs. 30,76,179/- u/s. 271C of the
Act on the alleged ground that the Appellant has failed to deduct
tax at source u/s. 194H of the Act.
2. He failed to appreciate and ought to have held:
a) the Appellant had acted under an honest and bona fide belief
that tax was not deductible u/s. 194H of the Act on "discount"
(alleged by the department as "commission") given to distributors;
b) Appellant's stand was also approved by the Hon'ble Tribunal
before the Hon'ble High Court reversed those decisions and
therefore there was a "reasonable cause".
c) There was a "reasonable cause" for non-deduction of TDS and
in view of section 273B of the Act, no penalty can be levied.
d) Without Prejudice, if the mechanism to deduct TDS fails in
absence of `payment' or `credit', there is a `reasonable cause' for
non-deduction of TDS u/s 194H of the Act.
3. The Appellant prays that the penalty amounting to
30,76,179/- levied u/s. 271C of the Act be deleted.
GROUND NO. III:
The Appellant craves leave to add, to alter and / or amend,
withdraw all or any of the foregoing grounds of appeal.
ITA no. 3368/Del./2015 (A.Y. 2005-06)
Ground No. 1 :
1. On the facts and in the circumstances of the case and in law, the
Ld. Commissioner of Income-tax (Appeals)-41, New Delhi ("CIT(A)")
erred in upholding the action of the Additional Commissioner of
Income, Range 50, New Delhi ("the TDS Officer") in levying penalty
amounting to Rs. 62,00,145/- u/s 271C of the Income Tax Act,
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1961 ("the Act") on the alleged ground that the Appellant has
failed to deduct tax at source u/s. 194H of the Act.
2. He failed to appreciate and ought to have held :
a) the Appellant had acted under an honest and bona fide belief that
tax was not deductible u/s. 194H of the Act on "discount" (alleged
by the department as "commission") given to distributors;
b) Appellant's stand was also approved by the Hon'ble Tribunal
before the Hon'ble High Court reversed those decisions and
therefore there was a "reasonable cause".
c) There was a "reasonable cause" for non-deduction of TDS and in
view of section 273B of the Act, no penalty can be levied.
d) Without Prejudice, if the mechanism to deduct TDS fails in
absence of `payment' or `credit', there is a `reasonable cause' for
non-deduction of TDS u/s 194H of the Act.
3. The Appellant prays that the penalty amounting to 62,00,145/-
levied u/s 271C of the Act be deleted.
GROUND No. II :
The appellant craves leave to add, to alter and / or amend,
withdraw all or any of the foregoing grounds of appeal."
3. During the hearing the Ld. AR submitted that as regards
ground no. 1 and 2 for assessment year 2003-04 and 2004-05 the
same are not pressed. Therefore, ground no. 1 and 2 for assessment
years 2003-04 and 2004-05 are dismissed.
4. We are taking up assessment year 2003-04 as the facts are
identical in all the three assessment years.
5. The brief facts are that the assessee is engaged in the
business of providing cellular mobile telephone services to its
subscribers. In the course of its business, it appoints various
Distributors the assessee is admittedly paying service tax on the
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telecommunications services provided to the ultimate subscribers.
The assessee supplied prepaid cards i.e. Subscriber Identification
Module and Recharge Vouchers ("SIM/RV") to its Distributors at a
discounted price. The Distributors are free to resupply them to the
retailers at any price subject to the maximum retail price. It is the
distributor who pays the discounted price to the assessee and there
is no payment of any kind made by the assessee to the distributor
for the above transaction. The distributors are required to pay the
assessee company, the discounted price of the products purchased
by them in the advance irrespective of the fact that whether such
products purchased are in tern sold or are remained unsold. The
deductor company, M/s Idea Cellular Ltd. started his commercial
operation in November, 2002. A Survey was conducted u/s 133(A)
of the IT Act, 1961 on the premises of the company at Delhi on
24.03.2003. Statement of General Manager Finance and Account
was recorded on oath. The Assessing Officer vide order dated
13.02.2004 held that the transaction between Idea Cellular Ltd. and
its prepaid distributor is that Principal and Agent at all times and
prepaid distributor is merely selling the prepaid SIM Card /
Recharge Coupons on behalf of the Idea Cellular Ltd. The Assessing
Officer held that as a logical conclusion, various discounts, bonus
offer to the prepaid distributor false bill within the definition of
commission and liable to deduction u/s 194H accordingly company
was held liable to pay through deduction/ non-deduction u/s
201(1) and interest u/s 201(1A) of the Income Tax Act, 1961. Order
u/s 201(1) / 201(1A) was passed for assessment year 2003-04 on
13.02.2004 and the matter was referred to additional CIT for
initiation of penalty proceedings u/s 271C of the Act. The assessee
filed appeal before the CIT(A) and CIT(A) vide order dated
31.03.2005 uphold the order of the Assessing Officer. Accordingly
the assessee filed appeal to the Tribunal which was allowed in
favour of assessee vide order dated 28th March, 2008. Against this
order the revenue filed appeal in the Hon'ble High Court, New Delhi
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and the Hon'ble High Court vide order dated 19.02.2010 decided
the issues in favour of the revenue and against the assessee.
Accordingly necessary appeal effect was given the order of the
Hon'ble High Court for both financial years and the notice for
penalty u/s 271C was accordingly revised on 20.01.2011. The
Assessing Officer passed penalty order at a section 271C read with
section 274(1) of the Act.
6. Being aggrieved by the penalty order the assessee filed appeal
before the CIT(A) which was dismissed by the CIT(A).
7. The Ld. AR submitted that it is a settled position in law that
penalty u/s 271C of the Act cannot be imposed if there is a
reasonable cause for any failure on the part of the assessee as
referred to various provisions of the Act. Section 273B of the Act
clearly states that no penalty shall be imposed on the person or
assessee, as the case may be, for any failure referred to in the said
provisions. If he proves that there was reasonable cause for the said
failure. The Hon'ble Jurisdiction of Delhi High Court in case of
Woodward Governors India Private Ltd. Vs. CIT (253 ITR 745). The
Assessee appointed prepaid distributors. An agreement is executed
between them. The Distributor is communicated discounted price of
various products like SIM / Recharge Vouchers. The Distributor
communicates its purchase order to the Assessee and pays the
discounted price upfront in advance to the Assessee. The Assessee
post receipt of the money, deliver the products to the Distributor
who thereafter resells to Retailers/etc. Thus, for example, MRP of a
product is Rs.100 and Discounted Price is Rs.80. The Distributor
pays Rs.80 in advance. Thereafter, there is no financial transaction
between Assessee Distributor. The Distributor is not accountable to
Assessee as to at what price it sold to Retailer. Thus, it is not the
case that he first sells to Retailer, recovers price and then retains
his commission and only remits the net sum. The Assessee is
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unaware of what price he resells, when he resells etc. The
Assessee's reasonable cause for non-deduction of tax at source
U/S. I94H was based on the following:
· Relationship between Assessee and Distributor was on
Principal to Principal and hence in absence of Principal and
Agent relationship, section 194H would not apply; This view was
affirmed by the Tribunal and then reversed by the Hon'ble High
Court; While the Hon'ble Delhi High Court decided against by
stating that services cannot be bought and sold, the Karnataka
High Court states that right to avail telecom services and be
bought and sold.
· Without prejudice, in absence of payment or credit by the
Appellant of Rs.20/- and Appellant not being person responsible
to pay any income to Distributor, again section 194H does not
apply as mechanism to deduct TDS fails. Reliance is placed on:
i.M. S. Hameed Vs. Director of State Lotteries (249 ITR 186)
(Ker.) as subsequently affirmed by the Divisional Bench and the
Hon'ble Supreme Court;
ii.CIT Vs. Qatar Airways (332 ITR 253) (Bom.);
iii. Piramal Healthcare Ltd. Vs. ACIT (21 taxmann.com 225)
(Trib-Mumbai) as subsequently affirmed by the Hon'ble Bombay
High Court in CIT vs. Piramal Healthcare Ltd (ITA Nos. 1427,
1428, 1545. 1622 of 2012 and 15 of 2013);
iv. SRL Ranbaxy Ltd. Vs. ACIT (2011) (50 SOT 173) (TDel)
· Lastly, the Department stand is that the Appellant should
have collected say Rs.82 (Rs.80 discounted price and Rs.2. being
10% TDS on Rs.20 i.e MRP Rs.100 Less Discounted Price).
Appellant humbly submits that this argument would import TCS
provisions u/s.206C into I94H
8. The Ld. AR further relied upon the decision of Delhi Tribunal in
the case of ITO vs. G. B. Morrison Travels (P.) Limited (99 TTJ
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117). In that case, penalty was imposed on the assessee (carrying
on the business as travel agents for various airlines) under section
271C of the Act for not deducting tax under section 194H on
discount given by it to its sub-agents. Further, the Ld. AR relied
upon the decision of Hon'ble Allahabad High Court in the case of
CIT (TDS) Vs GM Telecom, BSNL (ITA No. 39 of 2014) where on
similar facts the High Court held in favour of the Assessee
confirming the Tribunal's action of deletion of levy of penalty u/s
271C of the Act on the ground that the reasonable cause within the
meaning of section 273B of the Act had been shown by the assessee
by relying on the decision of Delhi ITAT in case of Idea Cellular
Ltd vs. DC1T (121 TTJ 352). Thus, the Lucknow Tribunal and
thereafter the Hon'ble Allahabad High Court has deleted penalty
u/s 271C of the Act by relying on the Delhi Tribunal's decision in
the assessee's case, despite department's reference to the decision
of Calcutta High Court (which has in turn considered Delhi High
Court decision). Since, the transactions under consideration relate
to FY 2002-03, 2003-04 and 2005-06 for which initially ITAT
decided in favour and where the High Court decided against in
February 2010, no penalty is leviable u/s. 271C. The Ld. AR
submits that the fact that as of date, there are High Courts and
Tribunal taking contrary view- and fact that SLP has been
admitted, itself shows that assessee has a reasonable cause for non
deduction of tax at source on the discount allowed to the Prepaid
Distributor. The Ld. AR further prayed that penalty levied u/s 271C
of the Act deserves to be deleted.
9. The Ld. DR relied upon the penalty order and the order of the
CIT(A).
10. We have heard both the parties and perused all the relevant
material available on record. The issue on which the penalty u/s
271C is imposed is debatable as different courts have taken diverse
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views. Therefore, the fact remains that the assessee has reasonable
cause for non deduction of tax at source on the discount allowed to
the prepaid distributor as there are decisions of the Hon'ble High
Courts and Tribunal taking diverse views. Thus, it is contesting
issue and the assessee has reasonable cause not to deduct the tax
at source. Therefore, the action of non deduction of tax in the
present case will not attract the penalty u/s 271C. Since this issue
is decided in case of assessee's own case for earlier assessment
years the same will be followed.
11. In result, appeals of the assessee are allowed.
Order pronounced in the Open Court on 10th JULY, 2019.
Sd/- Sd/-
(N. K. BILLAIYA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 10/07/2019
BR
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
10 ITA No. 3366, 3367, 3368/Del/2015
Date of dictation 03.07.2019
Date on which the typed draft is placed before the 03.07.2019
dictating Member
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Other Member
Date on which the approved draft comes to the Sr.
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Date on which the fair order is placed before the
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