Case Law Details
Brief of the Case
Delhi High Court held In the case of Vodafone Essar Mobile Services Limited that as per amendment, the time limit for initiation of proceedings for assessee in default is four years from the end of the financial year in which payment is made or credit is given. It is proposed to make these amendments effective from 1st April, 2010 i.e. there was no time limit mentioned before this amendment. In the case of CIT vs. NHK Japan Broadcasting Corporation (2008) 305 ITR 137 (Del.) the question that arose was whether the Department could seek to initiate proceedings under Sections 201(1) and 201(1A) for a period beyond four years where no time limit mentioned. The court held that ITAT correctly came to the conclusion that the proceedings against the Assessee for treating it as an Assessee in default under Section 201 were not initiated within a reasonable period of time and four year period is reasonable time for initiating action. The court further held that in terms of the decision of the Supreme Court in Bhatinda District Co-op. Milk Producers Union Ltd. [2007] 9 RC 637; 11 SCC 363 action must be initiated by the competent authority under the Income Tax Act, where no limitation is prescribed as in Section 201 within period of four years. Accordingly initiation of proceedings beyond four years even before amendment is not valid.
Facts of the Case
Out of various petitioners, one petitioner is the Tata Teleservices Limited (TTSL) is a company registered under the Companies Act, 1956, engaged in the business of providing telecommunication services across the country. It provides post-paid and pre-paid telecommunication services for which it entered into agreements with various channel partners (distributors). In the pre-paid segment, TTSL sells products such as Recharge Coupon Vouchers (RCVs) and Starter Kits to channel partners. The RCVs are the pre-paid vouchers used for selling validity and talk time to the pre-paid subscribers. The products are sold by TTSL to the channel partners under valid tax invoices. TTSL recovers sales tax and service tax for the said transactions. The channel partner thereafter sells these products to the retailers. It is stated that there is no remuneration/consideration that flow from TTSL to the channel partners for effecting sale of such products. According to TTSL, the transaction between it and the channel partner is on a principal to principal basis.
According to TTSL, in terms of the above arrangement, Section 194H of the Act concerning deduction of TDS towards commission or brokerages does not apply to the above transaction with the channel partners. TTSL filed its TDS return/statement under Section 200 of the Act in each of the relevant Assessment Years. The common question that arises for consideration in these writ petitions concerns the validity of the action initiated by the revenue against the Petitioners under Sections 201(1) and 201(1A) for non-deduction of TDS for periods earlier than four years prior to 31st March, 2011. These petitions in turn involve the interpretation of the proviso to sub-section (3) of Section 201 w.e.f. 01-04-2010 which introduce time limit for initiation of proceedings in case of TDS defaults.
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