Vodafone Idea Ltd. (As successor to Spice Communications Limited Vs DCIT (ITAT Mumbai)
Sale of prepaid sim cards / recharge vouchers by the assessee to distributors cannot be treated as commission / discount to attract the provisions of section 194H of the Act and hence there cannot be any obligation on the part of the assessee to deduct tax at source thereon and consequentially there cannot be any disallowance u/s 40(a)(ia) of the Act.
Hon ’ble Rajasthan High Court had the occasion to examine the issue as to whether TDS is applicable w/s 1941 of the Act on roaming charges paid for facilities provided by service provider, as this interconnection is managed/controlled/monitored by human intervention. In their order dt. 11.07.2017, while disposing off a bunch of appeals involving various mobile service providers including the appellant, M/s Tata Teleservices Ltd, Ms Bharti Hexacom Ltd. and M/s Vodafone Digilink Ltd the Hon’ble High Court dismissed the Departmental appeals on this issue. The facts and the issues involved in the present appeal are identical to the issues considered by Hon’ble High Courts of Karnataka and Rajasthan as has been discussed above. Accordingly, respectfully following the decisions of Hon’ble Karnataka High Court in the case of CIT, TDS. Bangalore vs Vodafone South Ltd, Hon’ble Rajasthan High court in the case of case of Hindustan Coca Cola Beverages Pvt. Ltd and others as well as in the decision of Hon’ble Jaipur Tribunal & Hon’ble Banglore tribunal in appellant’s own case (supra) it is held that payments made for interconnection are not fees for rendering any technical services as envisaged in section 1941 of the Act. Therefore, no tax is deductible at source u/s 1941 of the Act on payment of roaming charges to the OTOs and the appellant therefore can’t be treated as on assessee in default.
For installation/setting up/repairing/servicing/maintenance/capacity augmentation etc. human intervention is required, however after this process is complete, the interconnection between the operators is automatic and at that stage, no human intervention is required. These conclusions have been arrived after considering the Reports of the technical experts, their cross-examination etc. We note that Interconnecting User Charges (IUC) which signifies charges for connecting two entities. The Co- ordinate Benches have relied upon the order in the case of i-Gate Computer Systems Ltd where decision of the Apex Court in the case of M/s Bharti Cellulars Ltd. has been considered and also on the decision of Data Link transfer wherein considering similar facts, it has been held that it does not require any human intervention and charges received or paid on account of this is not fees for technical services as envisaged in section 194J read with section 9(1) (vii) read with Explanation-2 of the Act. We find that in the absence of any change in facts or law, the payments made for interconnection are not fees for rendering any technical services as envisaged in section 194J of the Act. Therefore, no tax is deductible at source u/s 1943 of the Act on payment of roaming charges to the OTOS and the assessee therefore cannot be treated as an assessee in default. Apart from the various decisions of High Courts and ITAT orders cited, the issue stands concluded in favour of the assessee by the consistent orders of ITAT Bangalore and Jaipur Benches in own case. In the absence of any distinction on facts, circumstances or position of law, the departmental appeals are dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal in ITA No. 3425/Mum/2014 for A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-4, Mumbai in appeal No.CIT(A)-4/IT-84/DCIT- (2)/2011-12 dated 12/03/2014 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2011 by the ld. Dy. Commissioner of Income Tax-3(2), Mumbai (hereinafter referred to as ld. AO).
2. The ground No.II raised by the assessee is challenging the disallowance of discount amounting to Rs.31,68,50,210/- given to prepaid distributors u/s.40(a)(ia) of the Act for non- eduction of tax at source u/s.194H of the Act. The ground No.I raised by the assessee is with regard to non-adjudication of additional evidences filed before the ld. CIT(A) is interconnected with ground No.II. Hence, they are taken up together for disposal.
3. We have heard rival submissions and perused the materials available on record. We find that assessee is in the business of providing cellular services in the telecom circles of Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Kerala, Uttar Pradesh(W), Haryana, Delhi, Uttar Pradesh (E), Himachal Pradesh and Rajasthan. The assessee had filed its return of income on 26/09/2009 declaring total income of Rs.‟Nil‟ after setting of brought forward unabsorbed depreciation of Rs.33,06,29,157/-. The assessee filed its revised return of income on 01/04/2010 declaring total income at Rs.Nil after set off of brought forward unabsorbed depreciation of Rs.229,74,10,373/- on 30/03/2011. The assessee filed second revised return of income declaring total income at Rs.Nil after setting off of brought forward unabsorbed depreciation of Rs.234,59,26,810/-. During the course of assessment proceedings, the assessee was asked to submit details of commission and discount given to dealers and tax deducted on the same. On perusal of the details furnished by the assessee, the ld. AO observed that assessee had deducted tax at source for the commission payments made but had not deducted tax for the discount allowed to the distributors. Accordingly, the assessee was asked to make its submissions as to why tax was not deducted on the discount allowed to the distributors. The ld. AO ignoring the submissions made by the assessee merely followed the decision of Hon‟ble Delhi High Court in the case of assessee company reported in 325 ITR 148 (Del) wherein it was held that the relationship between assessee and the Distributors was that of Principal to Agent and accordingly the discount given to the dealers / distributors would be in the nature of commission on which tax is deductible u/s 194H of the Act which has not been done by the assessee and consequently the same would be liable for disallowance u/s 40(a)(ia) of the Act.
3.1 The assessee made elaborate submissions before the ld. CIT(A) enclosing the distributors agreement entered into by the assessee with the distributors for a territory in Karnataka Circle and made detailed submissions with respect to each and every clause thereon in the agreement. These were considered as additional evidences of the ld. CIT(A) and a remand report were called for from the ld. AO. The ld. AO submitted his first remand report on 18/06/2013 objecting to the admission of additional evidences on the ground that assessee failed to furnish these evidences during the course of assessment proceedings despite providing sufficient opportunities; secondly, this issue is a recurring issue and disallowance has been made in the earlier assessment year also ; accordingly, in view of the decision of the Hon‟ble Delhi High Court in assessee‟s own case in the case of Idea Cellular Ltd. reported in 325 ITR 148 (Del) and hence the discount given to the dealers / distributors by the assessee would result in violation of provisions of Section 194H of the Act and consequently disallowance u/s.40a(ia) of the Act has to be made. The assessee furnished its rejoinder to the remand report on 18/07/2013. Subsequently, the ld. AO submitted his second remand report dated 05/08/2013. In the rejoinder, the assessee had raised that the issue would in any case would be covered by the decision of the Hon‟ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. reported in 293 ITR 226 (SC). The ld.AO in the second remand report submitted that the said Hon‟ble Supreme Court decision was not cited by the assessee before the assessment proceedings and hence, the same should not be considered by the ld. CIT(A). The assessee filed its rejoinder to the second remand report on 10/09/2013. Further, the ld. AO submitted his final remand report on 17/10/2013. In all the remand reports, the ld. AO objected to the admission of additional evidences by the ld. CIT(A). Accordingly, the ld. CIT(A) rejected the additional evidences furnished by the assessee without admitting the same by stating that the assessee‟s case does not fall under any of the clauses mentioned in Rule 46A of the Income Tax Rules.
3.2 It is not in dispute that during the year under consideration, the assessee paid discount on prepaid products to 213 distributors in Punjab circle totalling to Rs.11,76,80,658/- and 491 distributors in Karnataka Circle amounting to Rs.19,91,69,552/-. The total discount paid was Rs.31,68,50,210/-. The assessee furnished the names of the distributors, address of the distributors, PAN of the distributors and the discount paid thereon in respect of parties where details are available with it. The assessee pleaded that the relationship between assessee company and the distributor is on principal to principal basis and therefore, the discount given to prepaid distributors would not be subjected to deduction of tax at source (TDS). It was also pointed out by the assessee, on without prejudice basis, that the assessee receives the entire sale price from the distributors in advance and that no payment is made to the distributors or credit given in favour of the distributor and accordingly, the entire provisions of Chapter XVIIB of the Act warranting deduction of tax at source fails. The assessee stated that for deducting tax in terms of Section 194H of the Act –
(a) Income should be in the nature of commission or brokerage
(b) Payment should be received by a person acting on behalf of other, in the course of rendering services to third parties.
(c) Such income should be paid or credited by the payer in favour of payee.
(d) The payer should be a person responsible for paying such income to payee.
(e) The amount of commission should be actually ascertainable.
(f) The time of credit or payment should also be known.
3.3. Accordingly, it was submitted that to effectuate TDS, an amount that would be paid should be clearly determinable, the time when tax should be deducted at source should have crystallised, and the payer should be responsible for earning of such income by the distributor. Since, all these parameters fail, the assessee company is not obligated to deduct tax at source on the discount given to distributors for prepaid cards.
3.4 We find that assessee in the course of its business appoints prepaid distributors (i.e. distributors). The assessee supplies prepaid sim cards and recharge vouchers to its distributors at a discounted price. The assessee supplies prepaid sim cards containing the talk time worth at a higher figure than the discounted price to the distributors. The distributors supply them to the retailers and retailers sell the same to the ultimate customer / user. The distributors make payment of the discounted price in advance to the assessee and there is no payment of any kind made by the assessee to its distributors. The distributors would sell to the retailers after adding its margin and the retailers would sell to the customer after adding his margin. The ultimate price to the customer / user is subjected to the Maximum Retail Price (MRP) fixed by the assessee. It is pertinent to note that the distributor does not earn any income just by obtaining the prepaid sim cards and recharge vouchers from the assessee. The distributor earns income only if the said sim cards and recharge vouchers were sold further. Hence, there is no fixed amount of commission that could be determined from the agreement entered into by the assessee with the distributors. Once the amount of commission income that could be determined in the hands of the distributor is not permissible, there cannot be any obligation of deduction of tax at source that could be casted on the assessee.
3.5. From the perusal of the distributors agreement, we find that the distributor is allowed to distribute to its retailers at any price between the consideration paid to the assessee and the MRP fixed by the assessee. The distributor possesses complete freedom of pricing. Hence, the first tranche of the transaction is selling of prepaid sim cards and recharge vouchers containing the talk time for a higher value by the assessee to the distributors, on which the distributor does not earn any income at all. As stated supra, the distributors earn income only when the said sim cards and recharge vouchers were sold at a price higher than its purchase price (i.e. the price paid by the distributor to the assessee herein). Hence, it is highly impossible to determine the amount of income that would accrue to the distributor on which tax ought to have been deducted by the assessee u/s.194H of the Act. Hence, the entire TDS computation mechanism fails in this case. In this regard, we find that the ld. AR rightly placed reliance on the decision of Hon‟ble Karnataka High Court in the case of Bharti Airtel Ltd vs DCIT reported in 372 ITR 33 (Kar) wherein it was held as under:-
62. In the appeals before us, the assessees sell prepaid cards/vouchers to the distributors. At the time of the assessee selling these pre-paid cards for a consideration to the distributor, the distributor does not earn any income. In fact, rather than earning income, distributors incur expenditure for the purchase of prepaid cards. Only after the resale of hose prepaid cards, distributors would derive income. At the time of the assessee selling these pre-paid cards, he is not in possession of any income belonging to the distributor. Therefore, the question of any income accruing or arising to the distributor at the point of time of sale of prepaid card by the assessee to the distributor does not arise. The condition precedent for attracting Section 194H of the Act is that there should be an income payable by the assessee to the distributor. In other words the income accrued or belonging to the distributor should be in the hands of the assessees. Then out of that income, the assessee has to deduct income tax thereon at the rate of 10% and then pay the remaining portion of the income to the distributor. In this context it is pertinent to mention that the assessee sells SIM cards to the distributor and allows a discount of Rs.20/-, that Rs.20/- does not represent the income at the hands of the distributor because the distributor in turn may sell the SIM cards to a subdistributor who in turn may sell the SIM cards to the retailer and it is the retailer who sells it to the customer. The profit earned by the distributor, sub-distributor and the retailer would be dependant on the agreement between them and all of them have to share Rs.20/- which is allowed as discount by the assessee to the distributor. There is no relationship between the assessee and the sub-distributor as well as the retailer. However, under the terms of the agreement, several obligations flow in so far as the services to be rendered by the assessee to the customer is concerned and, therefore, it cannot be said that there exists a relationship of principal and agent. In the facts of the case, we are satisfied that, it is a sale of right to service. The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands. The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS. Once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent. The terms of the agreement the assessee and the distributor is not that of principal and agent but it is that of principal to principal.
3.6. First of all, the assessee herein does not make any payment of commission or discount to the distributor in the instant case. What assessee does is – it sells prepaid sim cards and recharge vouchers at a discounted price than the MRP to the distributors. This amounts to sale of right to service (i.e. talk time upto MRP). Assuming the MRP of the sim cards and recharge vouchers is Rs.100/-, the assessee sells the same to its distributors at a discounted price of Rs.70/-. Later the distributor in turn sells the same product to retailers at Rs.90/- and thereafter, the retailer sells the same product to the ultimate customer /user at Rs.100/-. In this case, the distributors margin would be Rs.20/- (i.e. Rs.90-Rs.70) and retailers margin would be Rs.10 (Rs.100-Rs.90). From the above example, it could be seen that there are different amounts of margins earned by the distributor and retailer at every point in time. As stated supra, the margins arise to the distributor or the retailer only when the product is ultimately sold by them to the respective parties, i.e. the distributor earns the margin when he sells the sim cards to the retailers and retailer earns margin when he sells to the ultimate customer / user. In this scenario, how the assessee could be expected to determine the margins that could be derived by the distributor or the retailer and deduct tax at source. Admittedly, the agreement is entered by the assessee only with the distributors. It is very likely that the distributor may not be able to sell the prepaid sim cards and recharge vouchers. In this scenario, there cannot be any income that would accrue to the distributors and hence there would be no question of deduction of tax at source by the assessee company. The assessee has got absolutely no control over the appointment of retailers. Hence, the entire computation mechanism of deduction of tax at source in terms of Section 194H of the Act grossly fails as the income component thereon is not determinable when the assessee sells the sim cards to the distributors. Accordingly, the arguments advanced by the ld. DR before us vehemently that the TDS is to be done by the assessee at the difference in price of MRP and its sale price is rejected. We hold that the argument of the Revenue only results in impossibility of performance in the hands of the assessee. The famous legal maxim “LEX NON COGUT AD IMPOSSIBLIA” , meaning thereby – „law cannot compel a person to perform an act which he could not possibly perform‟ , would certainly come to the rescue of the assessee herein. As stated supra, the assessee only collects the discounted price of goods from its distributors and does not make any payment thereon. This aspect is squarely covered by the decision of Hon‟ble Jurisdictional High Court in the case of CIT(TDS) vs Super Religare Laboratories Ltd reported in 284 Taxman 657 (Bom) wherein the head notes are reproduced hereunder:-
Section 194H of the Income-tax Act, 1961 – Deduction of tax at source – Commissions, brokerages etc. (Collection centres, discount allowed to) – Assessee-company was engaged in providing laboratory and testing services to customers through its own and through third party collection centres – It allowed certain discount to these collection centres – Assessing Officer held that such discount allowed by assessee to collection centres was in nature of commission and assessee was obligated under section 194H to deduct tax at source on same – It was noted that provision of section 194H to deduct tax was applicable only to a person who was responsible for paying, at time of credit to account of payee or at time of payment – Whether, since assessee did not perform any act of paying but was only receiving payments from these collection centres, there was no obligation on assessee-company to deduct tax at source under section 194H on discount so allowed – Held, yes [In favour of assessee]
3.7. Similarly in yet another decision of Hon‟ble Jurisdictional High Court in the case of CIT vs Qatar Airways reported in 332 ITR 253 (Bom), the same decision was rendered. The facts of that case and decision rendered thereon are reproduced herein for the sake of convenience :-
1. The question of law as raised in this appeal is as under:
“Whether on the facts and in the circumstances of the case and in law, the difference in amount between commercial price and published price is special commission in the nature of commission or brokerage within the meaning of Explanation (i) to section 194H of the Income-tax Act 1961 ?”
2. It is not in dispute that the airlines have a discretion to reduce the published price to their tickets. In the present case, the airlines had an agreement with their agents to sell their tickets at a minimum fixed commercial price which was lower than the published price but was of a variable nature and could be increased by the agent, at his discretion, to the extent up to the published price. It is not in dispute that under rules of IATA, the commission payable to the agent was 9 per cent. of the published price. It is an admitted position that the TDS has been deducted while payment of this commission of 9 per cent. It is the contention of the Revenue that the difference between the published price and the minimum fixed commercial price amounts to an additional special commission and therefore, TDS is deductible on this amount under section 194H of the Income-tax Act.
3. On a perusal of the order of the Income-tax Appellate Tribunal, we find that it proceeded on the basis of its earlier decision in the case of Korean Air v. Dy. CIT in which, in similar circumstances, it was held that TDS was not deductible. He finds that though an appeal was preferred against the aforesaid decision the same has been rejected by this court for non-removal of the office objections under rule 986. Be that as it may, for section 194H to be attracted, the income being paid out by the assessee must be in the nature of commission or brokerage. Counsel for the Revenue contended that it was not the case of the Revenue that this difference between the principal price of the tickets and the minimum fixed commercial price amounted to payment of brokerage. We find however, that in order to deduct tax at source the income being paid out must necessarily be ascertainable in the hands of the assessee. In the facts of the present case, it is seen that the airlines would have no information about the exact rate at which the tickets were ultimately sold by their agents since the agents had been given discretion to sell the tickets at any rate between the fixed minimum commercial price and the published price and it would be impracticable and unreasonable to expect the assessee to get a feed back from their numerous agents in respect of each ticket sold. Further, if the airlines have discretion to sell the tickets at the price lower than the published price then the permission granted to the agent to sell it at a lower price, according to us, can neither amount to commission nor brokerage at the hands of the agent. We hasten to add any amount which the agent may earn over and above the fixed minimum commercial price would naturally be income in the hands of the agent and will be taxable as such in his hands. In this view of the matter, according to us, there is no error in the impugned order and the question of law as framed does not arise. The appeal is therefore, dismissed in limini.
3.8. We find that the ld. CIT(A) observed that the issue in dispute is squarely covered by the decision taken by his predecessor in the assessee‟s own case for A.Y.2008-09 vide Appeal No.CIT(A)-4/IT- 239/ITO-3(2)(4)/2011-12 dated 10/01/2014 and reproduced the order passed by his predecessor in its entirety and finally in para 5.3.1.2 of his order observed as under:-
” 5.3.1.2 Having carefully and dispassionately considered the facts and circumstances of the present appeal and those of earlier A.Y. 2008-09, it is noticed that facts and circumstances are identical in both years and therefore ground of appeal no. I of the present appeal is squarely covered by my decision on ground of appeal no. I in the same case of M/s. Idea Cellular Ltd., A.Y. 2008-09, Appeal No. CIT(A)-4/IT-239/ITO.3(2)(4) /2011-12 dated 10.01.2014 vide paragraph no. 6 as extracted above. Therefore, ground of appeal no. I of the present appeal is not allowed. For the same reasons, as discussed above, without prejudice ground to the ground of appeal no. I is also not allowed‖.
3.9. From the above final observation of the ld. CIT(A) it could be seen that the ld. CIT(A) had dismissed the plea of the assessee on the ground that similar disallowance was made in A.Y.2008-09 and since the facts and circumstances of A.Y.2009-10 are identical with A.Y.2008-09, the decision taken in A.Y.2008-09 shall be squarely applicable for the year under consideration also. It is pertinent to note that this appellate order i.e. appeal for A.Y.2008-09 had already been agitated by the assessee before this Tribunal and this Tribunal in ITA No.2285/Mum/2014 dated 12/10/2022 for A.Y.2008-09 had elaborately deleted the very same disallowance u/s 40(a)(ia) of the Act and decided the issue in favour of the assessee. It is not in dispute that the agreements entered into by the assessee with its distributors were subject matter of verification and examination by the ld. AO for A.Y.2008-09. This is evident from the detailed analysis made by this tribunal in A.Y. 2008-09 in the order referred supra. In view of the finding given by the ld. CIT(A) that facts and circumstances of A.Y.2008-09 are identical with A.Y.2009-10, it could be safely presumed that the agreements entered into during the year for fresh telecom circles are same as that was entered for other telecom circles in A.Y.2008-09. In other words, terms and conditions of the distributors agreement always remain the same for all telecom circles.
3.10. Before us, the ld. DR vehemently argued that the agreement entered by erstwhile assessee Spice Communications Ltd. with its distributors need not be the same with the agreements entered by Idea Cellular Ltd with its distributor. The assessee has not furnished the agreements before the ld. AO during the course of assessment proceedings. Hence, neither the ld. AO nor the ld. CIT(A) had gone into the clauses in the agreement. Accordingly, in terms of Section 255(6) of the Act, this Tribunal has to go through the entire clauses of the agreement by causing such enquiry either on its own or by asking a remand report in order to ensure whether relationship between the assessee and its distributors is principal to principal or principal to agent. The ld. DR placed reliance on the decision of the Hon‟ble Jurisdictional High Court in the case of Thyrocare Technologies Ltd. vs. ITO in ITA No.53 & 54 of 2016 together with Writ Petition No.730 & 847 of 2016 dated 11/09/2017 wherein he referred to para 19 & 20 of the said order which reads as under:-
”19. We do not see how it is possible for us to uphold the order of the Tribunal and when it purports to decide two appeals of the Revenue by this single paragraph conclusion. There is absolutely no discussion of the law and why the Co-ordinate Bench decision rendered at Delhi is either distinguishable on facts or inapplicable. There is no discussion, much less any finding and conclusion that the order of the first appellate authority is perverse or is contrary to law. There are no infirmities, much less serious errors of fact and law noted by the Tribunal in the order of the Commissioner, which the Tribunal is obliged to and which order is therefore interfered with by the Tribunal. Why the Tribunal feels it is its duty and obligation to interfere with the order of the first appellate authority, therefore, should be indicated with clarity. We have also not seen a reference to any communication or to any document which would indicate that the six queries raised by the Tribunal on the assessee have not been answered, much less satisfactorily. The Tribunal should have, independent of the statements, referred to such of the materials on record which would disclose that the assessee has entered into such arrangements so as to avoid the obligation to deduct the tax at source. If the arrangements are sham, bogus or dubious, then such a finding should have been rendered. Therefore, we are most unhappy with the manner in which the Tribunal has decided these appeals. We have no alternative but to set aside such order and when the last fact finding authority misdirects itself totally in law. It fails to perform its duty. It has also not rendered a complete decision. Once the Tribunal was obliged in law to examine the matter and reappraise and reappreciate all the factual materials, then it should have performed that duty satisfactorily and in terms of the powers conferred by law. Once this duty is not performed, we can safely come to the conclusion that the Tribunal’s order is vitiated by not only total non-application of mind but also misdirection in law. We accordingly conclude and proceed to set aside the impugned order. We direct the Tribunal to hear the appeals afresh on the merits and in accordance with law after giving complete opportunity to both sides to place their versions and arguments. The Tribunal shall frame proper points for its determination and consideration and render specific findings on each of them. The Tribunal should carry out this exercise uninfluenced by any observations or conclusions in the impugned order which we have quashed and set aside. We clarify that beyond emphasizing what is the real controversy and which question goes to the root of the matter, we have not expressed any opinion on the rival contentions. All of them are open for being raised before the Tribunal. Once the two appeals succeed and the Tribunal’s order is set aside, nothing survives in the writ petitions and the same are disposed of.‖
3.11. Per contra, the ld. AR vehemently objected to the arguments advanced by the ld. DR by stating the following:-
a) The agreements entered by the assessee with distributors were never even called for by the ld. AO during the course of original assessment proceedings in as much as the ld. AO had completely closed his eyes in view of the decision of the Hon‟ble Delhi High Court which was decided in favour of the Revenue and accordingly, directly proceeded to make disallowance u/s.40a(ia) of the Act.
b) These agreements together with the explanation for each clause were duly furnished by the assessee before the ld. CIT(A) on its own in the form of additional evidences. These additional evidences were forwarded to the ld. AO for remand report by the ld. CIT(A). The ld. AO objected to the admission of those additional evidences in his remand report which was accepted by the ld. CIT(A). Though the additional evidences in the form of agreements were placed on record by the assessee before the ld. CIT(A) as well as before the
c) AO in the remand proceedings, the lower authorities in their wisdom, chose not to examine those agreements. Having done so, the ld. DR before this Tribunal cannot request for adjudication of the very same agreements by this Tribunal either on its own or by seeking a remand report from the ld. AO. This request of the ld. DR if accepted, would only tantamount to improving the case of the Revenue, which the ld. DR does not have power to seek before the Tribunal. It is very well settled that the ld. DR before the Tribunal is entitled only to defend the case of the ld. AO and cannot improve the case of the Revenue.
c) Moreover why should the remand report be called for from the ld. AO to examine the distributors agreement when the very same agreement was directed to be not even admitted as additional evidence by the ld. AO in the remand proceedings.
d) With regard to reliance placed on the decision of the Hon‟ble Jurisdictional High Court in the case of Thyrocare Technologies Ltd by the ld. DR, the ld. AR stated that in the facts of that case, the Tribunal did not look into the order of the CIT(A) and Delhi Tribunal which was relied by CIT(A). This fact is clearly mentioned in para 7 of the order of the Hon‟ble Bombay High Court by holding that the Tribunal has reproduced the entire assessment order which is set aside by the first appellate authority but has not made any reference to the order of the first appellate authority and view taken by CIT(A). That view of the first appellate authority is based on the decision of the Tribunal Bench at Delhi. No attempt was made by the Tribunal to distinguish the Delhi Tribunal‟s decision. In these facts and circumstances, the Hon‟ble Bombay High Court had given the aforesaid direction in para 19 of its order which is reproduced hereinabove. Hence, the reliance placed on this decision would not advance the case of the Revenue.
e) On the categorical finding given by the ld. CIT(A) that the facts and circumstances of the A.Y.2008-09 are identical with A.Y.2009-10 i.e. the year under consideration and consequently the ld. CIT(A) upholding the disallowance made u/s.40a(ia) of the Act, this Tribunal had reversed the order of the ld. CIT(A) in A.Y.2008-09. Now, the ld. DR on knowing that the said order of the ld. CIT(A) for A.Y.2008-09 has been reversed by this Tribunal, is trying to make out a fresh case with a request for examination of each and every clause in the distributors agreement so as to establish principal to agent relationship between assessee and its distributors. It is pertinent to note that against categorical finding of the ld. CIT(A), the Revenue had not preferred any appeal. Without disturbing that finding, the ld. DR is not entitled to make any fresh arguments before this tribunal.
3.12. The ld. DR stated that the reason for the Revenue not filing appeal against the direction of the ld. CIT(A) that facts and circumstances of A.Y.2008-09 are identical with A.Y.2009-10 was that there was no tax effect involved on that as the issue was decided in Reveue‟s favour. In this regard, the ld. DR placed reliance on the CBDT Circular No.3/2018 dated 11/07/2018 wherein it was stated that the Revenue would be entitled to file appeal or cross objections before the Tribunal only if there is tax effect on the disputed issue. The ld. DR also placed reliance on the decision of the Hon‟ble Gujarat High Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. vs. Commissioner of Income Tax reported in 282 ITR 321 wherein he placed reliance on para 17 & 18 of the said order which is reproduced as under:-
“17. In case a party having succeeded before Commissioner (Appeals) opts not to file cross objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or the part thereof which was against the respondent. The Tribunal has, in the present case, unfortunately drawn such an inference which is not supported by the plain language employed by the provision.
18. If the inference drawn by the Tribunal is accepted as a correct proposition, it would render rule 27 of the Tribunal Rules redundant and nugatory. It is not possible to interpret the provision in such manner. Any interpretation placed on a provision has to be in harmony with the other provisions under the Act or the connected Rules and an interpretation which makes other connected provisions otiose has to be avoided. Rule 27 of the Tribunal Rules is clear and unambiguous. The right granted to the respondent by the said Rule cannot be taken away by the Tribunal by referring to provisions of section 253(4) of the Act. The Tribunal was, therefore, in error in holding that the finding recorded by the Commissioner (Appeals) remained unchallenged since the assessee had not filed cross objections.‖
3.13. The ld. DR also placed reliance on yet another decision of the Hon‟ble Gujarat High Court in the case of PCIT vs. Chartered Logistics Ltd. reported in 250 Taxman 385. The ld. DR argued that since the issue was decided in favour of the Revenue by the ld. CIT(A) there was no scope for the Revenue to file any appeal before this Tribunal against that finding in view of the Circular referred to above.
3.14. With regard to the aforesaid arguments, the ld. AR submitted as under:-
