Case Law Details
Vodafone Idea Ltd. Vs ITO (ITAT Delhi)
At the outset, we find merit in the contention of the Ld. Counsel of the Assessee that in the absence of any adverse judgment by the Hon’ble Jurisdictional High Court, i.e., the Hon’ble High Court of Punjab & Haryana, there being divergence of judicial opinion on the subject matter, a view in favour of the Assessee has to be taken. It has already been brought to our attention that a Coordinate Bench of this Tribunal in the case of Idea Cellular itself in ITA No. 852/Delhi/2015 vide order dated 01.05.2018, has decided the issue in favour of the Assessee noting that in the absence of any judgment of the Jurisdictional High Court, i.e., the Hon’ble High Court of Punjab & Haryana, a view in favour of the Assessee have to be taken. The relevant portion of the Coordinate Bench’s Judgment is reproduced as under:
“We have heard both the parties and perused all the records. The first issue on which assessee was held by the Revenue as ‘assessee-in-default’ is for discount/commission on sale of prepaid sim cards. The issue contested herein was decided against the assessee by the Hon’ble Delhi High Court in case of the assessee’s own case in CIT vs. Idea Cellular Ltd. for A.Ys 2003-04 and 200405. But, in case of Bharati Airtel Limited vs. DCIT (2014) (372 ITR 33), Hon’ble Karnataka High Court and in assessee’s own case (87 taxmann.com 295) Hon’ble Rajasthan High Court decided this issue in favour of the assessee. As per Ld. AR, the order u/s 201 of the Act was passed by ITO TDS, Rohtak and thus, the Hon’ble Punjab and Haryana High Court which has necessary jurisdiction. After looking into the address of the assessee, the assessee’s address is at Noida, Uttar Pradesh. Thus, in both these circumstances the jurisdictional High Court will not be the Hon’ble Delhi High Court. The Ld. AR relied upon the decision of the Hon’ble Supreme Court in case of CIT vs. Vegetable Products Ltd. 88 ITR 192 wherein it is held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. In absence of any decision of the Hon’ble Punjab and Haryana High Court as well as the Hon’ble Allahabad High Court on this issue and in view of conflicting decisions of other High Courts, following the ratio of the Hon’ble Apex Court, the view favourable to assessee is upheld. Hence assessee cannot be deemed to be an ‘assessee-in-default’ on discount/commission of sale of prepaid sim cards. Therefore, Ground No. 2 of the assessee’s appeal is allowed.”
While coming to the above conclusion Coordinate Bench has noted that the issue was decided in favour of the Assessee by Karnataka High Court and since the orders under Section 201 of the Income Tax Act were passed by the ITO TDS Rohtak the Hon’ble Punjab & Haryana High Court had the necessary jurisdiction. In paras 7 & 8 of their order the Coordinate Bench while relying on the Judgment of the Hon’ble Supreme Court in the case of CIT Vs. Vegetable Products Limited (88 ITR 192) decided the issue in favour of the Assessee. We find that the above decision was rendered in the case of Idea Cellular Limited itself for the Haryana Circle in-spite of the contrary decision of the Delhi High Court in the case of that Assessee. It is a settled position in law that where two contrary decisions of the High Courts are available, the view taken in favour of the Assessee is to be adopted and applied. Based on the above and on this short ground itself the appeal of the Assessee is capable of being allowed.
Even otherwise, on merits we find that the commercial arrangement between the Assessee and its distributors had undergone a change with effect from 01.01.2007 and under the new commercial arrangement the relationship between the Assessee and the distributor’s is clearly based on principal to principal basis and hence, the earlier judgments would not apply. Having carefully considered the written submissions of the Ld. DR dated 28.3.2019, 16.7.2019 and 24.9.2019 and the rejoinder made by the Ld. Counsel of the Assessee, we find that the commercial arrangements between the Assessee and distributors had significantly changed w.e.f. 2007. The new arrangements between the Assessee and the distributors were in fact in the nature of principal to principal given that all risk in the services tickets, once having sold to the distributors, passed to the distributors. Under the new arrangement, Vodafone Essar Digilink Limited, Haryana circle, transferred its prepaid talk time to the distributors at a discount and the distributors in turn distributed the same to the retailers, the retailers thereafter transfer the same to the ultimate subscribers. At each level of the distribution, the party distributing the prepaid talk time retains a margin for its risk and efforts, while Vodafone Essar Digilink Limited, Haryana circle assumed the responsibility for the provision of services to the subscribers. Accordingly, post January 2007, the assessee also accounted for revenues on the basis of consideration received from the distributors, i.e., the price on which the prepaid talk time was transferred to the distributor. From the terms of condition mentioned in the new agreement the gist of which has been dealt with in para 20 herein fore it is quite evident that the relationship is no longer agent – principal relationship. The comparison and the differences between earlier agreements have been highlighted above which clearly shows the changes and how it has transformed to principal to principal relationship.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
