Case Law Details
Addition on account of discount extended to prepaid distributors
Third proviso to section 194H will get attracted only when the nature of payment is “commission or brokerage”. Parties before us agree that majorly the distribution of products by BSNL and MTNL takes place through Public Call Office franchisees since this was an infrastructure existing with them even before mobile telephone services became popular. Moreover, as upheld by Hon’ble Punjab & Haryana High Court in case of appellant itself (supra) that “…….. the above extracts from the Board circular would show that the amendment in the Section 194 H was brought about because, as admitted by the CBDT itself, very few of the recipients had a tax liability.”
The issue can also be considered from different prospective. As stated by us above, Hyderabad Bench of ITAT in case of appellant for the year under consideration has already held that there is no default on part of the appellant for not having deducted tax on discounts given for its prepaid products. This in our considered opinion operates res judicata for examining whether there is any default committed u/s 40(a)(ia). We find that co-ordinate bench of Delhi ITAT in case of Bharti Hexacom (supra) has held that in such a scenario disallowance cannot be sustained by invoking provisions of section 40(a)(ia).
We therefore hold that appellant had a reasonable / bonafide cause for not deducting TDS on payment of discounts to the distributors / franchises of its repaid products. This is accordingly not a fit case for making disallowance of an expense by invoking penal provisions of section 40(a)(ia).
Addition on account of IUC charges paid to foreign / non-resident telecom operators
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