No penalty for non deduction of TDS on sale of SIM Cards/recharge coupons at discounted rate

Tribunal held that sale of SIM Cards/recharge coupons at discounted rate to distributors is not commission and therefore, not liable to TDS provisions u/s. 194H of the Act. Once, the substratum for levy of penalty has eroded there is no question for sustaining the penalty.

The penalty u/s. 271C has been levied in respect of violation of provisions of section 194H of the Act. Additions were made in the hands of assessee u/ s. 201(1) and 201(1A) of the Act on account of alleged non-deduction of tax at source on the payment of commission to distributors. The quantum addition travelled up to the Tribunal. The Co-ordinate Bench of the Tribunal in ITA Nos. 817, 818, 1577, 1578, 1961, 1962/PUN/2013 for the assessment years 2007-08 to 2012-13 decided on 04-01-2017 has deleted the addition in appeals filed by the assessee.

The appeal of assessee for the assessment year 2007-08 was allowed, as the order passed by Assessing Officer u/s. 201(1) and 201(1A) of the Act was barred by limitation. In respect of other assessment years i.e. assessment years 2008-09 to 2012-13, the Tribunal held that sale of SIM Cards/recharge coupons at discounted rate to distributors is not commission and therefore, not liable to TDS provisions u/s. 194H of the Act. Although the Tribunal has remitted the matter back to the file of Assessing Officer to verify the manner in which the books of account are maintained and whether the sale discount is reflected in the books.

However, in principle the Tribunal has deleted the addition holding that there is no payment of commission, hence, the provisions of section 194H are not attracted. Various Benches of the Tribunal in assessee’s own case have taken consistent view holding that the TDS provisions u/s. 194H are not applicable in respect of sale of SIM Cards/recharge coupons at discounted rates to the distributors.

Once, the substratum for levy of penalty has eroded there is no question for sustaining the penalty. Since, the Co-ordinate Bench of Tribunal has deleted the quantum addition in all the assessment years under appeal, under such circumstances there is no question of levy of Accordingly, the impugned orders are set aside and all the appeals of the assessee are allowed.

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