Bharti Airtel Limited Vs DCIT (ITAT Delhi)
No Principal–Agent Relationship in Telecom Distribution: ITAT Follows Supreme Court, Quashes 194H Demand- Section 194H Not Applicable to Prepaid SIM/Recharge Discounts—Bharti Airtel Gets Full Relief
Assessee challenged NFAC’s order sustaining TDS liability u/s 194H on discount allowed to distributors on sale of prepaid products. Appeal was filed belatedly, but Tribunal condoned the delay after noting that the impugned order dated 25.11.2022 was never served on Assessee’s registered email & Assessee genuinely believed that the appeal was still pending before CIT(A). On merits, Assessee submitted that the issue stands conclusively settled by Supreme Court in its own case for AY 2011-12 (160 taxmann.com 12), holding that there is no principal–agent relationship in telecom distributor arrangements & therefore Section 194H is inapplicable to margins earned by distributors. Revenue objected but could not cite any contrary precedent.
Tribunal examined the detailed extracts from the Supreme Court judgment reproduced in the order, wherein the Apex Court distinguished agents from independent contractors, held that distributors act on principal-to-principal basis, & clarified that 194H cannot be expanded to cover genuine business margins nor can TDS be demanded where the Assessee neither pays nor credits any income to the distributor. Applying the binding ratio, Tribunal held that Section 194H does not apply to telecom prepaid discounts. Accordingly, the TDS demand sustained by CIT(A) was deleted & the appeal was allowed.
