INCOME TAX ACT, 1961

Section 194H

Tax deduction at source - Under section 194H - Discount extended to pre-paid distributors by assessee telecom operator -

Assessee telecom operator claimed deduction of discount extended to pre-paid distributors by assessee. AO held the same in the nature of commission and accordingly, disallowed deduction for want of TDS under section 194H.Held: Arrangement between assessee and prepaid distributors for distributor of right to prepaid service was on a 'principal to principal' basis. Under this arrangement, at each level of distribution chain, party distributing right to prepaid service retained a margin for its efforts and risks assumed, while telecom operator, being service provider assumed responsibility for provision of services to subscriber. The distributors were free to distribute right to prepaid service to retailers/eligible subscribers once they had acquired the same from assessee on payment of consideration. Hence, discount extended to prepaid distributors was in the nature of margin for such distribution of right to prepaid services and such discount did not qualify as commission with the meaning of section 194H.

Followed:Bharti Cellular Ltdx. v. Assistant CIT & Anr. (2013) 354 ITR 507 (Cal) : 2012 TaxPub(DT) 392 (Cal-HC), Bharti Airtel Ltd. v. DCIT, (2014) 372 ITR 33 (Karn-HC) : 2014 TaxPub(DT) 4369(Karn-HC), Vodafone Cellular Limited v. Dy. CIT ITA No. 817/Pun/2013 : 2017 TaxPub(DT) 715 (Pune-Trib), CIT v. Idea Cellular Limited (2010) 325 ITR 148 (Del-HC) : 2010 TaxPub(DT) 1556 (Del-HC), CIT (TDS), Jaipur v. Idea Cellular Ltd. ITA No. 205 of 2005 and i>Tata Teleservices Ltd. v. ITO (2015) 42 ITR (Trib) 121 (JP) : 2015 TaxPub(DT) 1451 (JP-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10 to 2012-13

INCOME TAX ACT, 1961

Sectoipm 194J

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