Case Law Details
ACIT Vs Bharti Haxacom Ltd (ITAT Delhi)
ITAT Delhi held that provisions of section 194H of the Income Tax Act are not applicable on sells of pre-paid SIM at discounted price to the distributors. Further, as no TDS deductible, disallowance u/s 40(a)(ia) cannot be sustained.
Facts- The assessee company is engaged in the business of Cellular phone and landline services and its associated value added services in the telecom circle of Rajasthan and North East pursuant to the licence granted by Department of A sum of Rs.394,76,33,759/- was debited in the P&L account towards payment of licence fee and spectrum charges. According to AO, this amount should be amortized over the remaining period of licence in case of each circle u/s 35ABB of the Act instead of allowing it as revenue expenditure.
Another issue is that the assessee sells the pre-paid SIM Card with available talk time worth Rs. 100/- at a discounted price of Rs 70 to the distributors. This discount charges of Rs 30 (100-70) is the subject matter of dispute before us. The case of the assessee is that its relationship with the distributors is that of Principal to Principal. Accordingly, no tax would be deductible on the said discount charges. The case of the Revenue is that relationship between the assessee and its distributors would be that of Principal and the Agent. Accordingly, difference between the maximum retail price and discounted price i.e., Rs.30/- in the aforesaid example (100-70), in the opinion of the Department, amounts to commission warranting deduction of tax at source in terms of section 194H of the Act. Since, no tax was deducted on the said transaction, the Ld. AO provided to treat the discount charges on prepaid SIM Card as not allowable in terms of section 40(a)(ia) of the Act.
Conclusion- Held that CIT(A) has allowed the payment of licence fee and spectrum charges as revenue expenditure by following the decision of Hon’ble Jurisdictional High Court in assessee’s own case. We find that since the relief has been granted by the Ld. CIT(A) by following the decision of Hon’ble Jurisdicitonal High Court in assessee’s own case on the impugned issue, we do not find any infirmity in the order of the Ld. CIT(A).
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