The Tax Publishers2020 TaxPub(DT) 0434 (Mum-Trib)

INCOME TAX ACT, 1961

Section 194H

As per terms of distributor agreement executed between assessee and its distributors, assessee had sold, by way of prepaid vouchers, e-top ups and prepaid SIM cards, the 'right to service' on principal to principal basis to its distributors. The sale was final and assessee was not responsible for any post-deliery defects in the services and it was specifically agreed that 'no request of refund of any money would be entertained by assessee under any circumstances'. The fact that there were certain conditions and stipulations attached to the sale of this right of service by assessee to its distributors did not affect character of sale on principal to principal basis and accordingly, discount allowed to distributors could not be held as commission liable for TDS under section 194H.

Tax deduction at source - Under section 194H - Discount allowed by cellular operaor to distributors on back sale of prepaid cards and recharge coupons -

Assessee company engaged in prouiding Cellular telephone services had appointed distributors for prepaid cellular connection and recharge coupon. AO took the view that discount allowed to distributors on bulk sale of such prepaid cares and recharge coupons was 'commission' paid to them and accordingly, AO disallowed deduction for want of TDS under section 194H.Held: As per terms of distributor agreement executed between assessee and its distributors. Assessee had sold, by way of prepaid vouchers, e-top ups and prepaid SIM cards, the 'right to service' on principal to principal basis to its distributors. The sale was final and assessee was not responsible for any post-deliery defects in the services and it was specifically agreed that 'no request of refund of any money would be entertained by assessee under any circumstances'. The fact that there were certain conditions and stipulations attached to the sale of this right of service by assessee to its distributors did not affect character of sale on principal to principal basis and accordingly, discount allowed to distributors could not be held as commission liable for TDS under section 194H.

Supported by:CIT v. Vegetable Products (1973) 88 ITR 192 (SC) : 1973 TaxPub(DT) 421 (SC).

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