Tata Sky Limited Vs ACIT (ITAT Mumbai)
Conclusion: TDS under section 194H was not required to be deducted on discount allowed to distributors on sale of Set Top Box and hardware, recharge coupons vouchers because transaction between assessee company and distributor was on principal-to-principal basis and all the risk, loss, damages were transferred to distributor on delivery and it was a sale but not service to come within the ambit of definition of commission as defined under section 194H.
Held: Assessee had given discount on the sale of Set-top Boxes and Recharge Coupon Vouchers, which was referred to as a primary discount. As a part of its sale promotion, assessee also provided additional discounts like a festival discount, quantity discount, etc. to the distributors to encourage them to purchase and in turn sell higher quantities of products. The additional/secondary discounts were recognized by assessee as sale promotion expense or distribution channel support expenses. AO during assessment of TDS had passed the order under sections 201 and 201(1A) wherein the primary discount and secondary discount were held to be subject to provisions of section 194H. It was held that this issue was squarely covered by Tribunal’s decision in assessee’s own case, wherein Tribunal had categorically observed that assessee was not required to deduct TDS on the amounts of discount on sale of Set-top box and hardware, discount on sale of recharge coupon and vouchers, bonus or credit provided by assessee to subscribers, sales promotion expenses and distribution channel support expenses. Further, the transaction between the company and distributor was on principal to principal basis and all the risk, loss, damages were transferred to distributor on delivery. Further, distributors were free to sale at any price below maximum retail price. Assessee had filed the sample copy of invoices for sale of Set Top Box (STB) and other recharge coupons to prove that it was a sale but not services to come within the ambit of the definition of commission as defined under section 194H. Therefore, assessee was not required to deduct TDS on discount allowed on sale of Set Top Box and hardware, recharge coupons vouchers and disallowance of bonus or credit provided to subscribers including sales promotion expenses.
FULL TEXT OF THE ITAT JUDGEMENT
These cross appeals, by the assessee and by revenue, are arising out of the orders of Commissioner of Income Tax (Appeals)-13, Mumbai [in short CIT(A)], in appeal Nos. CIT(A)-13/Rg.7(3)/AP-269/11-12 and 127/12-13 dated 03.03.2014. The Assessments were framed by the Asst. Commissioner of Income Tax & Dy. Commissioner of Income Tax, Circle-7(3), Mumbai (in short ‘ACIT/DCIT/ AO) for the AY 2009-10 and 201011 vide different orders dated 31.12.2011 and 06.02.2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The first common issue in these two appeals of assessee for AYs 2009-10 and 2010-11 in ITA Nos. 3214 & 3215/Mum/2014 is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of discount and various other expenses like discount on sale of set-top box and hardware, discount on sale of recharge coupon vouchers, disallowance of bonus or credit provided by the assessee to subscribers, disallowance of sale promotion expenses and disallowance of channel support expenses for non-deduction of TDS by invoking the provision of section 40(a)(ia) of the Act.
3. The facts and circumstances of both the years are identical as admitted by Ld. Senior Counsel for the assessee as well by Ld. CIT-DR. Hence, we will take the facts from AY 2009-10 and decide the issues raised by the assessee in this year. For this, assessee has raised the following grounds in AY 2009-10: –
“1. On the facts and in the circumstances of the case and in law, the Hon’ble Commissioner of Income-tax (Appeals) – 13. Mumbai [C1T(A)] erred in upholding the disallowance of discount on sale of Set-top box & hardware aggregating to Rs. 23.50,51.772 (Rs. 1338,81.648 and Rs. 10,11,70,124 respectively) under Section 40(a)(ia) of the Act.
2. On the facts and in the circumstances of the case and in law, the Hon’ble 01(A) erred in upholding the disallowance of discount on sale of recharge coupon vouchers of Rs. 38,80,6 I .901 under Section 40(a)(ia) of the Act.
3. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance of bonus or credit provided by the Appellant to subscribers of Rs. 1,54,24,104 under Section 40(a)(ia) of the Act.
4. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance of sales promotion expenses of Rs. 1,30,37,124 under Section 40(a)(ia) of the Act.
5. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance of distribution channel support expenses of Rs. 10,81,11,728 under Section 40(a)(ia) of the Act.”
4. Briefly stated facts are that the assessee has given discount on the sale of Set-top Boxes and Recharge Coupon Vouchers, which is referred to as a primary discount. As a part of its sale promotion the assessee also provides additional discounts like a festival discount, quantity discount, etc. to the distributors to encourage them to purchase and in turn sell higher quantities of products. This additional discount is referred to as a secondary discount. The secondary discounts are recognized by the Assessee as Sale promotion expense or distribution channel support expenses. The AO during assessment of TDS had passed the order under sections 201 and 201(1A) of the Act for AY 2009-10 & AY 2010- 11, wherein the primary discount and secondary discount were held to be subject to provisions of section 194H of the Act. However, the Mumbai Tribunal has held that the primary discount and secondary discount provided by the assessee is not in the nature of commission and not subject to TDS under section 194H of the Act. In this regard, the Ld. Counsel for the assessee SH JD Mistry stated that the Tribunal has relied on the decisions of the Hon’ble Bombay High Court in the case of Piramal Healthcare Ltd (230 Taxman 505), Qatar Airways Ltd (332 ITR 253) and Intervet India (P.) Ltd (49 taxmann.com 14/3M ITR 238). Ld. Counsel filed a chart before us in regard to the issues decided by the Tribunal, which reads as under: –
Summary chart for AY 2009-10
