The Calcutta Bench of Income Tax Appellate Tribunal (ITAT) held that Vodafone Idea Limited the assessee shall not be treated as an assessee in default under Section 201(1) of the Income Tax Act, 1961 Act as the assessee is not required to deduct tax under Section 194J of the Act. Once, the assessee is treated as the assessee, not in default under Section 201(1), the interest under Section 201(1A) is not required to be charged.

The assessee company, Vodafone Idea Limited is in the business of providing telecommunication services in various parts of India. A survey under section 133A of the Act was conducted in the premises of the assessee and it was found that the assessee has violated the provisions of TDS in non-deducting TDS in respect of payments.

The AO was of the opinion that TDS has to be deducted in respect of prepaid SIM cards and commission is paid for services rendered by the network of distributors and the terminology of discount as claimed by the distributors is nothing but the commission payment services rendered by the distributors, therefore, provisions of Section 194H are applicable and, therefore, calculated TDS at 10% under the provisions of Section 194H of the Act.

As the assessee has not deducted TDS, therefore, the assessee is held as the assessee in default in respect of non-deduction of TDS under Section 194H and 194J of the Act on payment of commission and fees for professional or technical services and passed an order under Section 201(1) & 201(1A) of the Act.

The action of the AO was confirmed by the CIT(A). The matter was traveled up to the Tribunal and on considering the submissions of both sides, the matter was remitted back to the file of the AO for verification of evidence filed by the assessee and passed a fresh order.

The tribunal consisting of a Judicial Member, Chandra Mohan Garg, and an Accountant Member, Laxmi Prasad Sahu in the light of the various precedents held that the assessee is not required to deduct tax under Section 194J of the Act and consequently, the assessee shall not be treated as an assessee in default under Section 201(1) of the Act. Once, the assessee is treated as the assessee, not in default under Section 201(1), the interest under Section 201(1A) is not required to be charged. Accordingly, it allowed the grounds of appeal raised by the assessee.

“We have given thoughtful consideration to the aforesaid observations of the Tribunal and found ourselves to be in agreement with the same, therein respectfully following the same. As such, we are of the considered view that the period during which the lockout was in force shall stand excluded for the purpose of working out the time limit for pronouncement of orders, as envisaged in Rule 34(5) of the Appellate Tribunal Rules, 1963,” the tribunal said.