Case Law Details
ITO Vs Tarun Sales (ITAT Delhi)
Since no dealer or sub-dealer was appointed either by Bharat Sanchar Nigam Ltd. (BSNL) or by the assessee, for the purpose of marketing the products and/or service of the Bharat Sanchar Nigam Ltd., the entire sales were to customers, either directly or through shopkeepers, who rendered services to the customers. Moreover, the entire sales were in cash. No commission was paid by the assessee to the customers. Then, Section 194H of the Act does not cover such discounts as under consideration herein and that being so, obviously the provisions of Section 40(a)(ia) of the Act was wrongly applied. Accounting-wise, the face value of the recharge coupon was debited to the purchase account, whereas the commission given by BSNL was credited to the commission account. At the time of sale, on the other hand, the face value of the recharge coupon was credited to the sales account and the cash receipts was debited to the cash account. The discount offered was debited to the discount account. When purchasing the SIM cards and recharge coupons from BSNL, the assessee had to deposit the money in advance. Undisputed, it is to customers directly and to petty shopkeepers, that the SIM cards and recharge coupons were sold in cash. The customers and shopkeepers were offered discount on the face value of the SIM cards. Apropos the recharge coupons, on the other hand, a small margin was kept by the assessee out of the commission/discount offered by BSNL. Then, activation charges were given by BSNL to the assessee on new connections, and a major portion thereof was given to the customers as discount.
As discussed, it was on the basis of the mistaken presumption of existence of relationship of principal and agent, that the discount offered by the assessee to its customers was considered by the assessing officer as commission. This, however, is not so, to reiterate it was only discounts offered to the customers, on a principal to principal basis, on which, no TDS was either required to be made or was actually made.
Full Text of the ITAT Order is as follows:-
This is an appeal by the department against the order dated 2-12-2013 of learned Commissioner (Appeals), Rohtak.
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HEADING OF CASE LAW ON SECTION 194H IS MISLEADING AND CONTRARY TO THE RATIO DECIDENDI. SECTION 194H IS NOT ATTRACTED ON PRINCIPAL TO PRINCIPAL DEALINGS.