Sh. Gurpreet Singh Sethi, Jammu v. Income tax Officer, Jammu

ITA 609/ASR/2013 | 2009-2010
Pronouncement Date: 15-04-2014 | Result: Allowed

Appeal Details

RSA Number 60920914 RSA 2013
Assessee PAN ABPPS5223F
Bench Amritsar
Appeal Number ITA 609/ASR/2013
Duration Of Justice 6 month(s) 11 day(s)
Appellant Sh. Gurpreet Singh Sethi, Jammu
Respondent Income tax Officer, Jammu
Appeal Type Income Tax Appeal
Pronouncement Date 15-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 15-04-2014
Date Of Final Hearing 08-04-2014
Next Hearing Date 08-04-2014
Assessment Year 2009-2010
Appeal Filed On 04-10-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU JUDICIAL MEMBER AND SH. B.P.JAIN ACCOUNTANT MEMBER I.T.A. NOS.608 & 609(ASR)/2013 ASSESSMENT YEAR:2008-09 & 2009-10 PAN :ABPPS5223F SH. GURPREET SINGH SETHI PROP. VS. INCOME TAX OFF ICER M/S. ELECTRONICS 44-A BAHU PLAZA TDS JAMMU. JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. P.N.ARORA ADVOCATE RESPONDENT BY:SH.TARSEM LAL DR DATE OF HEARING: 08/04/2014 DATE OF PRONOUNCEMENT:15/04/2014 ORDER PER BENCH ; THESE TWO APPEALS OF THE ASSESSEE ARISE FROM TWO DIFFERENT ORDERS OF THE CIT(A) JAMMU EACH DATED 05.08.2013 FOR THE AS SESSMENT YEARS 2008- 09 & 2009-10. SINCE THE ISSUES IN THE PRESENT APPE ALS ARE IDENTICAL THESE WERE HEARD TOGETHER AND THEREFORE THESE APPEALS A RE BEING DECIDED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITA NO.608(ASR)/2013 : ITA NOS. 608 & 609(ASR)/2013 2 1. THAT THE LD. CIT(A) JAMMU HAS GROSSLY ERRED BO TH ON FACT AND IN LAW IN CONFIRMING THE ORDERS OF ASSESSING OFFICE R IN TREATING THE ASSESSEE IN DEFAULT UNDER SECTION 201(1) AND 20 1(1A) OF THE INCOME TAX ACT AND RAISING A DEMAND AMOUNTING TO RS.12 22 740/- WITHOUT APPRECIATING THAT THE ASSESS EE HAD FURNISHED DETAILED SUBMISSIONS. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T IN THE INSTANT CASE THE ASSESSEE WAS A TRADER AND TRANSACTIONS WE RE ON PRINCIPAL TO PRINCIPAL BASIS AND NO COMMISSION WAS PAID AND THEREFORE PROVISIONS OF TDS WERE NOT APPLICABLE. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE COMPUTATION MADE BY THE AO WAS NOT CORRECT AND REVI SED COMPUTATION BY THE ASSESSEE HAS NOT BEEN CONSIDERED BY THE LD. CIT(A). 4. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE WHE RE TAX HAS BEEN PAID BY THE PAYEE THEN THERE IS NO LIABILITY FOR T HE PAYER FOR THE SAME. BENEFIT FOR AMOUNTS PAID BY THE PAYEE HAS NOT BEEN ALLOWED IN ALL THE CASES. 5. EXCEPT FOR REJECTING THE EXPLANATION OF THE ASSE SSEE THE ORDERS ARE OF NON-SPEAKING. IT IS THEREFORE PRAYED THAT IT BE HELD THAT BOTH THE INITIATION OF PROCEEDINGS AND THE LEVY OF TAX AND INTEREST U/S 201(1) AND 201(1A) OF THE ACT DESERVE S TO BE VACATED. 6. THE ASSESSEE CRAVES LEAVE TO ADD OR AMEND THE GR OUNDS OF APPEAL. 2. IN ITA NO.609(ASR)/2013 FOR THE A.Y. 2009-10 TH E ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) JAMMU HAS GROSSLY ERRED BO TH ON FACT AND IN LAW IN CONFIRMING THE ORDERS OF ASSESSING OFFICE R IN TREATING THE ASSESSEE IN DEFAULT UNDER SECTION 201(1) AND 20 1(1A) OF THE ITA NOS. 608 & 609(ASR)/2013 3 INCOME TAX ACT AND RAISING A DEMAND AMOUNTING TO RS.10 60 260/- WITHOUT APPRECIATING THAT THE ASSESS EE HAD FURNISHED DETAILED SUBMISSIONS. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T IN THE INSTANT CASE THE ASSESSEE WAS A TRADER AND TRANSACTIONS WE RE ON PRINCIPAL TO PRINCIPAL BASIS AND NO COMMISSION WAS PAID AND THEREFORE PROVISIONS OF TDS WERE NOT APPLICABLE. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE COMPUTATION MADE BY THE AO WAS NOT CORRECT AND REVI SED COMPUTATION BY THE ASSESSEE HAS NOT BEEN CONSIDERED BY THE LD. CIT(A). 4. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE WHE RE TAX HAS BEEN PAID BY THE PAYEE THEN THERE IS NO LIABILITY FOR T HE PAYER FOR THE SAME. BENEFIT FOR AMOUNTS PAID BY THE PAYEE HAS NOT BEEN ALLOWED IN ALL THE CASES. 5. EXCEPT FOR REJECTING THE EXPLANATION OF THE ASSE SSEE THE ORDERS ARE OF NON-SPEAKING. IT IS THEREFORE PRAYED THAT IT BE HELD THAT BOTH THE INITIATION OF PROCEEDINGS AND THE LEVY OF TAX AND INTEREST U/S 201(1) AND 201(1A) OF THE ACT DESERVE S TO BE VACATED. 6. THE ASSESSEE CRAVES LEAVE TO ADD OR AMEND THE GR OUNDS OF APPEAL. 3. FIRST OF ALL WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.608(ASR)/2013 FOR THE A.Y.2008-09. SINCE THE FAC TS BEING IDENTICAL IN BOTH THE APPEALS THE DECISION HEREINBELOW IN THE PRESENT APPEAL IN ITA NO.608(ASR)/2013 SHALL BE IDENTICALLY APPLICATION I N ITA NO.609(ASR)/2013 FOR THE A.Y. 2009-10. ITA NOS. 608 & 609(ASR)/2013 4 4. THE BRIEF FACTS IN THE CASE OF THE ASSESSEE DUR ING THE ASSESSMENT YEAR 2008-09 IN ITA NO.608(ASR)/2013 ARE THAT THE AO CAL LED INFORMATION U/S 133(6) OF THE ACT IN THE CASE AOF M/S. BHARAT SANCH AR NIGAM LTD. (HEREINAFTER CALLED AS COMPANY) AND IT WAS NOTICED THAT THE PERSON RESPONSIBLE WAS APPOINTED FRANCHISES FOR JAMMU & B ARIBRAHMANA AND WAS BEING ALLOWED COMMISSION ON PROVIDING TELECOMMUNICA TION SERVICES OF THE ABOVE COMPANY AND WAS IN RECEIPT OF COMMISSION. ACC ORDINGLY THE PR WAS ASKED TO FURNISH INFORMATION VIDE THIS OFFICE LETT ER NO.2829 DATED 14.09.2011 REGARDING DETAIL OF SUB DEALERS/AGENTS. COPIES OF TRADING & PROFIT & LOSS ACCOUNT TREATMENT OF MARGIN ALLOWED TO THE SUB DEALERS ETC. IN RESPONSE TO THIS THE PR FURNISHED COPIES OF P & L ACCOUNT FOR ALL THE ABOVE FINANCIAL YEARS I.E. 2007-08 TO 2010-11. A P ERUSAL OF THE TRADING PROFIT & LOSS ACCOUNT FOR THE ABOVE FINANCIAL YEAR SHOWS THAT DIRECT & INDIRECT RECEIPTS AND EXPENSES HAVE BEEN ACCOUNTED FOR IN A CONSOLIDATED TRADING PROFIT & LOSS ACCOUNT. IN ORDER TO GIVE CL EAR PICTURE OF THE TRADING ACCOUNT RESULTS ON THE BASIS OF FIGURES OF DIRECT I NCOME AND EXPENSES A TRADING ACCOUNT OF THE PR IS PREPARED AS UNDER: OPENING STOCK 2858460.00 SALES 505574301. 21 PURCHASES 523561906.00 CLOSING STOCK 2186851.90 GROSS LOSS 18659214.11 526420366.00 526420366.00 ITA NOS. 608 & 609(ASR)/2013 5 THE PR HAS CREDITED COMMISSION RECEIVED AT RS.28629 350/- IN THE PROFIT & LOSS ACCOUNT. THUS BY REDUCING THE ABOVE TRADING L OSS OF RS.18659214/- NET MARGIN HAS BEEN SHOWS AT RS.9970137/-. IN ORDER TO FIND OUT THE REASON FOR SHOWING LOSS IN TRADING THE PR VIDE ORDER SHE ET ENTRY DATED 5.12.2011 WAS ASKED TO FILE COPIES OF PURCHASE AND SALE BILLS FOR RS.1.00 LAKH AND ABOVE. ON GOING THROUGH THE COPIES OF BILLS FURNISH ED BY THE PR FOR AMOUNTS RANGING FROM 1000 TO 20000 IT WAS OBSERVED THAT THE PR HAS CREDITED THE SALES NET OF DISCOUNT ALLOWED TO THE SUB FRANCHISE S. 5. THE AO ISSUED SHOW CAUSE NOTICE TO THE PR VIDE LETTER DATED 23/25.01.2012 AND THE SAID LETTER IS REPRODUCED AT PAGES 2 & 3 OF AOS ORDER. THE ASSESSEE PR FILED THE WRITTEN REPLY DAT ED 21.02.2012 WHICH IS REPRODUCED BY THE AO AT PAGES 4 & 5 OF HIS ORDER. THE ARGUMENTS OF THE PR WERE CONSIDERED BY THE AO. AS REQUESTED BY THE PR DETAILS OF RULINGS BEING RELIED WAS PROVIDED AND GIVEN TIME TILL 29.02.2012 TO FURNISH FURTHER REPLY IF ANY. ON THE ABOVE DATE THE COUNSEL FOR THE PR MADE A REQUEST FOR ADJOURNMENT. THE CASE WAS FINALLY ADJOURNED TO 9 TH MARCH 2012. ON THE SAID DATE THE PR ATTENDED AND REQUESTED FOR TIME TO FILE FURTHER REPLY. THE CASE WAS ADJOURNED TO 20.03.2012. ON THE SAID DATE THE P R ATTENDED ALONGWITH S/SH. RAJESH MODI ADVOCATE AND MANDEEP SINGH CA. A FURTHER REPLY WAS FILED BY THE PR ALONGWITH DETAILS OF CASH SALES BY PR AT HIS DIFFERENT ITA NOS. 608 & 609(ASR)/2013 6 BUSINESS REMISES DETAILS OF SALES ON WHICH TDS MAD E DETAILS OF SALE WHERE DISCOUNT ALLOWED WAS BELOW THE PRESCRIBED LIMIT AND COPIES OF ITRS FILED BY THE SUB FRANCHISEES. THE PR HAS SOUGHT RELIEF OF SH ORT DEDUCTION IN RESPECT OF THE DISCOUNT WHICH THE SUB FRANCHISEES HAVE SHOW N IN THEIR RETURN OF INCOME IN VIEW OF CBDTS CIRCULAR AND JUDGMENTS OF HONBLE SUPREME COURT. 6. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASS ESSEE AS MENTIONED IN PARA 3.1 & 3.2 AND THEREAFTER GIVEN THE REASONS FO R NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE IN PARA 4 & 5. THE AO FINALLY REJECTED THE EXPLANATION OF THE ASSESSEE BY HOLDING IN PARA 6 WHICH IS REPRODUCED AS UNDER: 6. IN VIEW OF THE FACTS OF THE CASE AND ABOVE OBSE RVATIONS IT IS HELD THAT THE PR IS ENGAGED IN PROVIDING TELECOMMUN ICATION SERVICES AND ANY MARGIN EARNED IN PROVIDING SUCH SERVICES IS COMMISSION TO WHICH PROVISIONS OF SECTION 194H OF THE INCOME TAX ACT WERE APPLICABLE. IT IS FURTHER HELD THAT THE PR WAS LIA BLE TO DEDUCT THE TAX U/S 194H OF THE INCOME-TAX ACT 1961 ON THE PAYMENT OF COMMISSION ALLOWED TO THE SUB FRANCHISEES WHICH HE HAS FAILED TO DO. ACCORDINGLY THE AMOUNT OF TAX DEDUCTIBLE IS RECOVE RED FROM THE PR U/S 201(1) ALONGWITH INTEREST U/S 201(IA) OF THE IN COME TAX ACT 1961. 7. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AND THE FINDINGS OF THE LD. CIT(A) GIVEN IN PARA 4.2 OF HIS ORDER ARE R EPRODUCED AS UNDER: 4.2. GROUNDS OF APPEAL NO. 2 TO 5 RELATES TO CONTE NTION OF THE APPELLANT THAT THE APPELLANT IS ENGAGED IN THE BUSI NESS OF SALE AND PURCHASE OF SIM CARDS AND TOP UPS AND ACCORDINGLY HE IS NOT LIABLE TO ITA NOS. 608 & 609(ASR)/2013 7 DEDUCT TDS U/S 194H OF THE ACT EVEN THE DISCOUNTS S HOWN BY THE APPELLANT ARE IN THE NATURE OF TRADE DISCOUNTS AND NOT COMMISSION. I HAVE CONSIDERED THE SUBMISSION OF THE ASSSEE AND AS SESSMENT ORDER. IT IS OBSERVED THAT THE APPELLANT IS ENGAGED A FRANSHI SEE OF M/S. BHARAT SANCHAR NIGAM LIMITED AND PROVIDES SIM CARDS AND TO UPS TO SUB FRANCHISEE. THE ISSUE UNDER CONSIDERATION IS WHETHE R THE DISTRIBUTION OF SIM CARDS RECHARGE COUPONS & TOP UPS ETC. AMOUN TS TO SALE OF GOODS OR NOT. IT IS OBSERVED THAT WHAT IS DELIVERED IS THE RIGHT TO USE THE MOBILE PHONE FOR A PARTICULARS PERIOD OF TIME O R RIGHT TO SEND AND RECEIVE THE ELECTRONIC DATA FOR COMMUNICATION UPTO PARTICULAR SIZE OF DATA. THE RECHARGE COUPONS TOP UP CARDS CAN NOT BY ITSELF BE USED FOR ANY PURPOSE. IT ONLY CONTAINS AN ELECTRONIC CODE W HICH WHEN TYPED IN THE MOBILE PHONE WILL ALLOW THE SUBSCRIBER TO USE THE MOBILE SERVICE. THUS WHAT IS DELIVERED IS NOT ANY GOODS FOR USE BU T A SYMBOLIC KEY TO USE THE SERVICES PROVIDED BY THE PARTICULAR MOBILE COMPANY. IT IS ALSO SEEN THAT EVEN THESE SYMBOLIC CARDS FOR RECHARGE AR E NOT REQUIRED AND MANY DISTRIBUTORS USE ELECTRONIC TOP UP OR LAPU-SIM S TO TRANSFER THE RECHARGE AMOUNTS TO SUBSCRIBERS TO ALLOW THEM TO US E THEIR MOBILE SERVICES. THE HONBLE SUPREME COURT IN THE CASE OF BHARAT SANCHAR NIGAM LTD. & ANR. VS. UNION OF INDIA & ORS {2006} 2 01 CTR (SC) 346 HAS CONCLUDED THAT PROVISION OF MOBILE PHONE F ACILITIES BY SERVICE PROVIDER TO THE SUBSCRIBER IS A SERVICE AND NOT A SALE AS THE MASSAGES ARE TRANSMITTED THROUGH ELECTROMAGNETIC WA VES AND NO DELIVERABLE GOODS ARE IN EXISTENCE AND NO LIGHT OF USER OF ANY GOOD INCORPOREAL OR CORPOREAL OTHER THAN THE HANDSET I S GIVEN TO THE SUBSCRIBER AND THEREFORE THE IMPOSITION OF SALES T AX IS NOT VALID. THUS THE APEX COURT HAS VERY CLEARLY HELD THAT THE DISTR IBUTION OF SIM CARDS RECHARGE COUPONS AND TOP UPS COULD NOT BE REGARDED AS SALE. THEREFORE THE PLEA OF THE APPELLANT THAT THE APPEL LANT IS ENGAGED IN THE TRADING BUSINESS AND THE APPELLANT TRADES IN SI M CARDS RECHARGE COUPONS AND TOP UPS ETC. COULD NOT BE ACCEPTED. FU RTHER HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IDEA CELLUL AR LTD. HAS HELD IN RELATION TO COMMISSION OR DISCOUNT TO DISTRIBUTORS OF SIM CARDS/RECHARGE COUPONS WITH REFERENCE TO SECTION 19 4H THAT ASSESSEE A CELLULAR OPERATOR PROVIDES PREPAID CONNECTIONS T O THE SUBSCRIBERS THROUGH DISTRIBUTORS CALLED PREPAID MARKET ASSOCIAT ION APPOINTED BY IT. IT OFFERS DISCOUNT FOR PREPAID CALLING SERVICES TO THE DISTRIBUTORS. LEGAL RELATIONSHIP IS ESTABLISHED BETWEEN THE ASSES SEE AND THE ULTIMATE CONSUMER/SUBSCRIBER WHO IS SOLD THE SIM C AR BY THE AGENTS FURTHER APPOINTED BY THE PMAS WITH THE CONSENT OF T HE ASSESSEE. FACT ITA NOS. 608 & 609(ASR)/2013 8 THAT THE PMA IS SUPPOSED TO MAKE THE PAYMENT IN ADV ANCE AS PER THE AGREEMENT DOES NOT MAKE ANY DIFFERENCE TO THE NATUR E OF TRANSACTION IN VIEW OF THE OTHER TERMS OF THE AGREEMENT. EVEN T HOUGH ADVANCE PAYMENT IS MADE TO THE PMA QUA SIM CARDS ARE TO BE RETURNED TO THE ASSESSEE AND IT IS REQUIRED TO MAKE PAYMENTS AGAINS T THEM. THIS IS AN ANTITHESIS OF SALE. THEREFORE THE DISCOUNT OFFER ED BY THE ASSESSEE TO THE DISTRIBUTORS ON PAYMENTS MADE BY THE LATTER FOR THE SIM CARDS/RECHARGES COUPONS WHICH ARE EVENTUALLY SOLD TO THE SUBSCRIBER AT THE LISTED PRICE IS COMMISSION AND IT IS SUBJECT TO TDS U/S 194H. CONTENTION OF THE ASSESSEE THAT S. 194H IS NOT APPL ICABLE AS THERE IS NO PAYMENT OR CREDIT BY THE ASSESSEE TO THE DISTRIBUTO R CANNOT BE ACCEPTED. THE OBSERVATION OF THE HONBLE DELHI HIGH COURT CLEARLY ESTABLISHES THAT THE DISTRIBUTION OF SIM CARDS REC HARGE COUPONS AND TOP UPS DOES NOT AMOUNT TO SALES AND THE DISCOUNTS OFFERED TO DISTRIBUTORS ARE IN THE NATURE OF COMMISSION. THE A PPELLANT HAS ARGUED THAT THE AGREEMENT BETWEEN THE CELLULAR COM PANY AND FRANCHISEE IS DIFFERENT FROM THE AGREEMENT BETWEEN THE FRANCHISEE AND SUB FRANCHISEE. IT IS OBSERVED THAT THE RECHARGE COUPONS ETC. ARE PROVIDED BY THE CELLULAR COMPANY TO THE FRANCHISEE AND FURTHER BY FRANCHISEE TO THE SUB FRANCHISEE. THEREFORE ONCE IT IS ESTABLISHED THAT THE PROVISION OF SIM CARDS RECHARGE COUPONS ETC. B Y THE CELLULAR COMPANY TO THE FRANCHISEE IS NOT SALE OF GOODS THE N FURTHER DISTRIBUTIONS OF SAME SIM CARDS RECHARGE COUPONS ETC TO SUB FRANCHISEE CAN NOT BE REGARDED AS SALE OF GOODS BY ANY STRETCH OF ARGUMENTS. THIS PLEA OF THE ASSESSEE IS VAGUE AND I S NOT SUSTAINABLE. FURTHER IN A RECENTLY JUDGMENT BY THE HONBLE CALC UTTA HIGH COURT IN THE CASE OF BHARTI CELLULAR LTD. VS. ACIT (2013) 354 ITR 507 (CAL.) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDI NG CELLULAR MOBILE TELEPHONE SERVICES THROUGH ITS FRANCHISEE BY SELLIN G TO THEM STARTER PACK AND RECHARGEABLE COUPONS SIM AND PREPAID CARD S WHICH WERE PURCHASE BY THE FRANCHISEE ENGAGED BY THE ASSESSEE AT A RATE BELOW THE MARKET PRICE ON SUCH SIM CARDS AND SOLD TO RETA ILERS BY WHOM THEY WERE ULTIMATELY SOLD TO CUSTOMERS. IT WAS HELD THAT THERE HAS BEEN INDIRECT PAYMENT BY THE ASSESSEE TO THE FRANCHISEE OF THE COMMISSION AND THE SAME IS ATTRIBUTABLE U/S 194H OF THE ACT AN D ACCORDINGLY THE DEMAND RAISED U/S 201(1) AND 201(1A) IS JUSTIFIED. THEREFORE THESE GROUNDS OF APPEAL ARE DISMISSED. ITA NOS. 608 & 609(ASR)/2013 9 8. THE LD. COUNSEL FOR THE ASSESSEE MR. P.N.AORA ADVOCATE HAS SUBMITTED THE FOLLOWING WRITTEN SUBMISSIONS IN SUPP ORT OF HIS CASE: THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WHEREIN THE L D. CIT (APPEALS) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER ACCORDING TO WHICH THE PROVISIONS OF SECTIONS 201(1) & 201(I A) OF THE INCOME- TAX ACT 1961 ARE APPLICABLE IN THIS CASE ACCORDIN GLY THE APPEAL WAS DECIDED AGAINST THE ASSESSEE AGAINST WHICH THE ASS ESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL IN WHICH IT HAS BEEN CATEGORICALLY POINTED OUT THAT THE PROVISIONS OF TDS ARE NOT AT A LL APPLICABLE ON THE FACTS & CIRCUMSTANCES OF THE CASE AND AS SUCH THE P ROVISIONS OF SECTION 201(1)( & 201(IA) OF THE INCOME-TAX ACT 196 1 CANNOT BE INVOKED. THE WRITTEN SUBMISSIONS WERE SUBMITTED BEF ORE THE WORTHY CIT(A) AND A COPY OF THE SAME IS AVAILABLE AT PAGE NO.1 TO 15 OF THE PAPER-BOOK. AGAIN THE WRITTEN SUBMISSIONS WERE ALSO SUBMITTED BEFORE THE ITO (TDS) AND A PHOTOSTAT COPY OF THE SA ME IS PLACED AT PAGE NO.16 TO 26 OF THE PAPER-BOOK. THE BRIEF FACTS OF THIS CASE ARE AS UNDER:- 1. THAT THE APPELLANT IS A FRANCHISEE OF M/S. BHARA T SANCHAR NIGAM LTD. (BSNL) AND IS IN THE BUSINESS OF PURCHA SING SIM CARDS AND RECHARGE COUPONS FROM BSNL AGAINST PAYMENT AND RESELLS THEM TO SUB-CONTRACTORS/SUB-DISTRIBUTORS/SUB-FRANCHISEE. 2. THE APPLICANT IS A FRANCHISE OF BSNL A STATE O WNED COMPANY AND IS NEITHER A SERVICE PROVIDER NOR A CELLULAR OP ERATOR BUT SIMPLY A TRADER. THE ROLE OF FRANCHISEE IS LIMITED TO FOLLOW ING:- (I) BOOKING OF NEW CONNECTIONS I.E. SIM (SUBSCRIBE R IDENTIFICATION MODULE) CARDS. (II) SALE OF RECHARGE. BOOKING OF NEW CONNECTIONS -- NEW CONNECTIONS (SIM CARDS). CONTRIBUTES TO LESS THAN FIVE PERCENT OF TOTAL BUSI NESS. EXCEPT BOOKING OF NEW CONNECTIONS BY US ALL THE SERVICES SUCH AS - 1. ISSUE OF DUPLICATE SIM CARDS (IN CASE OF LOST) . 2. BLOCKED OR DAMAGED SIM CARDS. 3. EXCESS BILLING. ITA NOS. 608 & 609(ASR)/2013 10 4. OTHER VALUE ADDED SERVICES LIKE GPRS ETC ARE PRO VIDED BY SERVICE PROVIDER I.E. BSNL. 3. OUR ROLE IS LIMITED TO BOOKING OF CONNECTION ON LY. COMMISSION AFTER DEDUCTING TDS IS GIVEN ON NEW CONNECTIONS BY BSNL. SIMILARLY TDS IS DEDUCTED AND DEPOSITED ON COMMISSION DISBURS ED TO SUB- FRANCHISEE ON ACCOUNT OF NEW CONNECTIONS BOOKED BY THEM. 4. RECHARGE - RECHARGE IS A SORT OF CURRENCY TO E NHANCE TALK TIME. SALE OF RECHARGE CONTRIBUTES TO MORE THAN NINETY FI VE PERCENT OF BUSINESS. IT IS SOLD TO DISTRIBUTORS RETAILERS AND SHOP KEEP ERS OF ANY TRADES AND FROM OUR COUNTERS ALSO. AT DIFFERENT RATES DEPENDIN G UPON MARKET. RECHARGE ARE SOLD TO US BY BSNL AGAINST ADVANCE PAYMENT ONLY. IT BECOMES OUR PROPERTY .ALL-RISKS ARE OURS. THEY ARE NOT COMPENSATED /REPLACED IN CASE OF DAMAGED THEFT LOST OR FIRE. IT IS RELEVANT TO POINT OUT THAT THERE IS NO DISPUTE ABOUT THE SIM CARDS/ST ART-UP CONNECTIONS BECAUSE I AM GETTING THE COMMISSION FROM COMPANY AN D THEY DEDUCT TDS THEREON. SIMILARLY WE DEDUCT TDS ON THE PAYMEN T MADE TO SUB- FRANCHISEE ON ACCOUNT OF COMMISSION ON SIM CARDS. T HUS THERE IS NO DISPUTE AS FAR AS THE SIM CARDS ARE CONCERNED. THE ONLY DISPUTE IS WITH REGARD TO RECHARGE COUPONS AND TOP-UPS. 5. THAT THE RECHARGE COUPONS PURCHASED BY THE APPEL LANT BECOMES THE PROPERTY OF THE APPELLANT AND WHETHER T HESE ARE LOST OR DESTROYED OR ARE NOT SOLD THE RESPONSIBILITY FOR TH E SAME RESTS WITH THE APPELLANT AND BSNL DOES SNOT RECOUP THE LOSS TO THE APPELLANT. REFERENCE IS MADE TO CLAUSE 22 OF THE AGREEMENT. (R EFER PAGE NO. 68 OF THE AGREEMENT DATED 22/12/2004) & (REFER PAGE NO 89 OF THE AGREEMENT DATED 08/2008). 6. THE APPELLANT HAS SOLD THE RECHARGE COUPONS TO SUB- DISTRIBUTORS AT A PRICE SO THAT THEY ALSO GET SOME MARGIN OF PROFIT. THIS IS ALSO TO BE BROUGHT ON RECORD THAT SIM CARDS AND RECHARGE COUPONS ONCE SOLD BECOME THE PROPERTY OF THE SAID SUB-DISTR IBUTOR AND ALL LOSS OR PROFIT IS TO HIS ACCOUNT AND ALSO HE IS FREE TO SELL THE SAME AT A PRICE WHICH HE DEEMS FIT THOUGH THE MAXIMUM PRICE HAS BEE N FIXED BY BSNL BUT THE APPELLANT AND THE SUB-DISTRIBUTOR ARE FREE TO SELL AT A PRICE THAT THEY DEEM FIT AND AS PER MARKET CONDITIO NS. ITA NOS. 608 & 609(ASR)/2013 11 7. IN TERMS OF CLAUSE 24.1 OF AGREEMENT WITH BSNL IT IS CLEARLY STIPULATED THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CREATE ANY PARTNERSHIP JOINT VENTURE EMPLOYMENT OR RELAT IONSHIP OF PRINCIPAL & AGENT BETWEEN THE PARTIES. (REFER PAGE NO. 68 OF THE AGREEMENT DATED 22/12/2004) & (REFER PAGE NO 89 OF THE AGREEMENT DATED 08/2008) 8. THE LD. AO TDS ISSUED A NOTICE TO THE APPELLANT AND STATED THAT ANY MARGIN INVOLVED IN PROVIDING TELECOMMUNICATION SERVICES IS COMMISSION. IN HIS ORDER HE HAS REFERRED TO THE DEC ISION IN THE CASES OF BHARTI CELLULAR LTD. BPL MOBILE CELLULAR LTD. IDEA CELLULAR LTD. AND VODAFONE ESSAR CELLULAR LTD.. IN THIS REGARD I T MAY BE SUBMITTED THAT ALL THESE ENTITIES ARE THEMSELVES CELLULAR OPE RATORS AND SERVICE PROVIDERS AND IN TERMS OF THE AGREEMENT BETWEEN THE SE SERVICE PROVIDES AND THE FRANCHISEES THE HONBLE COURTS H ELD THAT THE MARGIN PROVIDED IS IN THE NATURE OF COMMISSION. 9. THE CASES REFERRED TO BY THE LD. AO ARE NOT APP LICABLE TO THE APPELLANT AS HE IS NOT A SERVICE PROVIDER. HE BOOKS NEW CONNECTIONS AND PURCHASE RECHARGE COUPONS FROM THE SERVICE PROV IDER I.E. BSNL AND PROVIDE NO SERVICE TO SUBSCRIBERS. HE SELLS REC HARGES TO THE SUB- DISTRIBUTORS. THE SALE TO SUB-DISTRIBUTORS IS AGAIN ON PRINCIPAL TO PRINCIPAL BASIS AND THERE IS NO RELATIONSHIP OF PRI NCIPAL AND AGENT. 10. THAT THERE ARE NO WRITTEN AGREEMENTS WITH THE S UB-DISTRIBUTORS. 11. THAT SALE BILLS ARE ISSUED TO THE SUB-DISTRIBUT ORS SAMPLE COPIES WHEREOF ARE ENCLOSED. IN THESE BILLS THE APPELLANT HAS GIVEN THE UNITS OF ITEMS SOLD THEIR PRICE AND THEIR TOTAL VALUE. N EITHER ANY COMMISSION HAS BEEN PAID NOR SHOWN IN THE BILL ONL Y TRADE DISCOUNT HAS BEEN DEDUCTED. 12. THAT THE RELATIONSHIP BETWEEN THE APPELLANT AND THE SUB- DISTRIBUTORS IS ON PRINCIPAL TO PRINCIPAL BASIS AND THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENT. 13. AS PER INDIAN CONTRACT ACT AN AGENT IS A PERS ON EMPLOYED TO DO ANY ACT FOR ANOTHER OR TO REPRESENT ANOTHER IN D EALINGS WITH THIRD PERSONS. THE PERSON FROM WHOM SUCH ACT IS DONE IS C ALLED PRINCIPAL. ITA NOS. 608 & 609(ASR)/2013 12 14. A PERSON WHO ACTS ON HIS OWN BEHALF CANNOT BE T ERMED AS AN AGENT. IF THE PRINCIPAL HAS NO CONTROL OVER THE PER SON HE IS NOT AN AGENT. 15. THE SUB-DISTRIBUTORS ARE INDEPENDENT OF THE APP ELLANT AND THE APPELLANT HAS NO CONTROL AS REGARDS SELLING PRACTIC ES OR SALE PRICE OF THE PRODUCT. IN THESE CIRCUMSTANCES IT CANNOT BE S AID THAT THE SUB- DISTRIBUTORS ARE AGENTS OF THE APPELLANT. 16. THE APPELLANT IN ITS BOOKS OF ACCOUNTS HAS SHOW N THE TRANSACTIONS AS PURCHASE AND SALE AND THE BOOKS OF ACCOUNTS ARE DULY AUDITED. THE LD. AO HAS NOT REJECTED THESE BOOKS OF ACCOUNTS AND THE TRADING AND PROFIT & LOSS ACCOUNT FURNISHED. 17. BOTH THE APPELLANT AND THE SUB-DISTRIBUTORS ARE INDEPENDENT BUSINESS ENTITIES AND THE APPELLANT HAS NO CONTROL ON SALE OR PRICING OF THE PRODUCT THEREFORE THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENT. 18. THAT ONCE THE RECHARGE COUPONS ARE SOLD TO SUB DISTRIBUTORS IT BECAME THE PROPERTY OF THE SUB-DISTRIBUTORS. 19. THAT THE DISCOUNT ALLOWED BY THE APPELLANT TO T HE SUB- DISTRIBUTORS IS IN THE NATURE OF TRADE DISCOUNT AND CANNOT BE CATEGORIZED OR TERMS AS COMMISSION. 20. THAT THE APPELLANT SUBMITS THAT THE LD. AO HAS ERRED IN COMING TO THE CONCLUSION THAT THE MARGIN PASSED ON TO THE SUB-DISTRIBUTORS BY THE APPELLANT IS COMMISSION. 21. COMMISSION HAS BEEN DEFINED IN EXPLANATION (I) TO SECTION 194H AND AS PER THE SAID DEFINITION THE SALIENT FEA TURES ARE:- A. PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECT LY B. BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON C. FOR SERVICES RENDERED NOT PROFESSIONAL SERVICES. ITA NOS. 608 & 609(ASR)/2013 13 IN TERMS OF CLAUSE A AND B CONTEMPLATE THAT THE PE RSON RECEIVING THE PAYMENT SHOULD BE FOR AND ON BEHALF O F ANOTHER PERSON. IN THE PRESENT CASE NONE OF THESE CONDITIONS ARE SA TISFIED. THE SUB- DISTRIBUTOR IS NOT RECEIVING THE PAYMENT ON BEHALF OF THE APPELLANT BUT ON HIS OWN ACCOUNT . HE IS NOT ACCOUNTABLE TO THE A PPELLANT. ONCE THE APPELLANT HAS SOLD THE SIM CARDS/RECHARGE COUPONS THE APPELLANT HAS NO CONTROL OR LIABILITY TOWARDS THE SUB-DISTRIB UTORS. IT IS FURTHER RELEVANT TO POINT OUT THAT WE HAVE AL READY FILED THE COPY OF THE BILLS ISSUED BY THE BSNL FROM WHICH IT IS CRYST AL CLEAR THAT THE BSNL HAS ALLOWED DISCOUNT IN SOME CASES AND HAVE AL LOWED COMMISSION. IT IS RELEVANT TO POINT OUT THAT THE AP PELLANTS RELATIONSHIP WITH BSNL IS DIFFERENT FROM THE RELATIONSHIPS OF SU B- FRANCHISEE AND IS ON PRINCIPAL TO PRINCIPAL BECAUSE THE APPELLANT HA S NO CONTROL ON THE SUB-FRANCHISEES WHATSOEVER. THE SUB-FRANCHISEES ARE FREE TO SELL SIM CARDS AND TOP UPS TO ANY CUSTOMER AND THEY ARE ALS O FREE TO CHARGE COMMISSION ON THE SALE OF SIM CARDS. AS REGARDS TOP UPS ONCE IT IS SOLD THE APPELLANT LOSES ITS CONTROL OVER THE SAME. IT WILL BE RELEVANT TO POINT OUT THAT WE ARE SHOWIN G THE DEALING IN RECHARGE AND PURCHASE & SALE THEREOF. COPIES OF TRA DING ACCOUNTS OF VARIOUS SUB-FRANCHISEES WERE FILED BEFORE THE AUTHO RITIES BELOW IN ORDER TO PROVE THAT THE RECHARGE AND TOP UPS HAVE B EEN SHOWN AS PURCHASE & SALE. THE AUTHORITIES BELOW DID NOT APPR ECIATE THAT THE SUB-FRANCHISEES ITSELF ARE SHOWING THE SAME AS PURC HASE & SALE AND THE DEPARTMENT CANNOT TREAT THE SAME IN THE HANDS O F THE APPELLANT AS DIFFERENT WHEN THE APPELLANT HAS DULY BEEN SHOWING THE SAME AS PURCHASE & SALE AND THERE IS NO QUESTION OF DEDUCTI NG TAX AT SOURCE ON THESE WHEREAS THE ASSESSEE HAS PAID THE COMMISS ION. THE ASSESSEE HAS DULY DEDUCTED THE TAX AT SOURCE. THIS VIEW FINDS SUPPORT FROM THE DECISION OF SUPREM E COURT OF INDIA IN THE CASE OF CIT VS. AHMEDABAD STAMP VENDORS ASSO CIATION. IN THIS CASE THE VENDORS WERE ALLOWED 0.50% TO 4% DISCOUNT ON PURCHASE OF STAMPS. HELD BY THE HONBLE SUPREME COURT THAT PROV ISIONS OF SECTION 194H ARE NOT APPLICABLE. ( REFER PAGE NO 113 114 TO 124 OF THE PAPER BOOK) ITA NOS. 608 & 609(ASR)/2013 14 21. THAT THE APPELLANT RELY ON THE FOLLOWING JUDGM ENTS:- 1. CIT VS. AHMEDABAD STAMP VENDORS ASSOCIATION [REFER PAGE NO.113 114 TO 123 OF THE PAPER-BOOK RELEVANT PAGE NO.113 1171121 TO 123] IN THIS CASE STAMP VENDORS WERE ALLOWED TO 0.50% T O 4% DISCOUNT ON PURCHASE OF STAMPS. HELD BY THE HONBLE SUPREME COU RT THAT PROVISIONS OF SEC.194H ARE NOT APPLICABLE. 2. JAGRAN PRAKASHAN LTD VS. DCIT (TDS) 73 DTR (HC) 233 [REFER PAGE NO.164 TO 254 OF THE PAPER-BOOK RELEVANT PAGE NO.1 65 170 177 & 178 212 220 & 252] THE ASSESSEE COMPANY WAS PUBLISHING HINDI DAILY NEW SPAPER AND WAS ALLOWING TRADE DISCOUNT TO ADVERTISING AGENCIES THE PROVISIONS OF SEC.194H WERE INVOKED BY AO AND ON WRIT PETITION H ONBLE HIGH COURT ALLOWED THE PETITION. 3. PAREEK ELECTRICALS VS. ACIT 81 DTR (TRB) 342 [REFER PAGE NO.158 TO 163 OF THE PAPER-BOOK RELEVANT PAGE NO.158 160 & 162] IN THIS CASE THE ASSESSEE WAS IN THE BUSINESS OF T RADING IN SIM CARDS AND RECHARGE COUPONS AS FRANCHISEE OF BSNL. THE AO INVOKED THE PROVISIONS OF SEC.194H WITH REGARD TO MARGIN GIVEN TO RETAILERS/SUB- FRANCHISEES. THE HONBLE ITAT HELD THAT PROVISIONS OF SEC.194H ARE NOT APPLICABLE. 4. DCIT VS. SHRAWAN KUMAR AGGARWAL [REFER PAGE NO.125 TO 149 OF THE PAPER-BOOK RELEVANT PAGE NO.126 127 146 TO 148] IN THIS CASE ALSO THE ASSESSEE WAS TRADING IN SIM CARDS AND RECHARGE COUPONS AND WITH REGARD TO THE SALE TO RET AILERS PROVISIONS OF SEC.194H WERE INVOKED. AFTER DETAILED DISCUSSION THE HONBLE ITAT HELD THAT THE PROVISIONS OF SEC.194H ARE NOT A PPLICABLE. 5. ACIT VS. PEARL BOTTLING (P) LTD. [REFER PAGE NO.150 TO 157 OF THE PAPER-BOOK RELEVANT PAGE NO.150 TO 154 & 156] THE ASSESSEE IN THIS CASE WAS ENGAGED IN MANUFACTUR E AND SALE OF SOFT DRINKS AND HAD APPOINTED DISTRIBUTORS. TO THE DISTR IBUTORS DISCOUNT WAS PAID WHICH WAS CONSIDERED AS COMMISSION AND PRO VISIONS OF ITA NOS. 608 & 609(ASR)/2013 15 SEC.194H INVOKED. HELD THAT THESE ARE DISCOUNTS AND NOT COMMISSION AND PROVISIONS OF SEC.194H NOT APPLICABLE. 6. CIT VS. MOTHER DAIRY INDIA LTD. 206 TAXMAN 157 DEL [REFER PAGE NO.255 OF THE PAPER-BOOK.] THE ASSESSEE WAS IN THE BUSINESS OF TRADING IN MILK AND MILK PRODUCTS AND HAD APPOINTED CONCESSIONAIRES. THEY WERE SELLIN G THE MILK AT THE BOOTHS OWNED BY THE ASSESSEE. THE DIFFERENCE BETWEE N MRP AND PRICE AT WHICH SOLD WAS CONSIDERED AS BUSINESS INCOME AND NOT COMMISSION IN TERMS OF SECTION 194H. 7. AJMER ZILA DUGDH UTPADAK SANGH VS. ITO 126 TTJ 197 (JP) IN THIS CASE SIMILAR HAS BEEN HELD AS IN THE CASE O F MOTHER DAIRY INDIA LTD. 8. FOSTERS INDIA (P) LTD VS. ITO 117 TTJ 346 (PUNE) HELD THAT DISTRIBUTORS INCENTIVE EARLY PAYMENT DIS COUNT DO NOT CONSTITUTE COMMISSION. EVEN IF THERE ARE CONDITIONS WITH REGARD TO SALES STORAGE OR MARKETING DOES NOT MAKE THE MARGI NS TO COMMISSION. 9. IN CIT VS. LIVING MEDIA INDIA LTD . THE HONBLE DELHI HIGH COURT THE ASSESSEE WAS A PUBLISHER AND SELLING SPACE FOR ADVE RTISING IN VARIOUS MAGAZINES DIRECTLY AND THROUGH ADVERTISING AGENCIES . IN CASE OF ADVERTISEMENT THROUGH ADVERTISING AGENCIES THE ASS ESSEE WAS PAYING TRADE DISCOUNT OF 15%. THE REVENUE HELD IT TO BE CO MMISSION AND HENCE TDS DEDUCTIBLE. IT WAS HELD THAT THE TRANSACT ION WAS IN BETWEEN PRINCIPAL AND PROVISIONS OF SECTION 194H NOT APPLIC ABLE. IN THIS CASE SLP OF THE DEPARTMENT STANDS DISMISSED. 10. IN NMDC VS. ACIT 133 TTJ 244 THE ASSESSEE A GOVER NMENT COMPANY SUPPLIED IRON ORE TO ANOTHER GOVERNMENT COMPANY WHI CH WAS APPOINTED AS CENTRALIZING AGENCY BY THE GOVERNMENT THE LATER HAVING EXPORTED THE SAME ORE IN ITS CAPACITY AS PRINCIPAL IT CANNOT BE SAID THAT THE GOODS WERE EXPORTED BY THE OTHER COMPANY O N BEHALF OF THE ASSESSEE AS AGENT AND PROVISIONS OF TDS NOT APPLICA BLE. ITA NOS. 608 & 609(ASR)/2013 16 11. SIMILAR ISSUE WAS CONSIDERED BY THE HONBLE ITAT C UTTACK BENCH IN THE CASE OF PAREEK ELECTRICALS 151 TTJ 226. IN THIS CASE THE ASSESSEE WAS A FRANCHISEE OF BSNL AND WAS SELLING THEIR PROD UCTS I.E. SIM CARDS AND RECHARGE COUPONS AND ALLOWING TRADE DISCO UNT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE THAT IT WAS TRADE DISCOUNT AND CIT(A) CONFIRMED THE ORDERS. ON 2 ND APPEAL THE HONBLE ITAT HELD THAT WE ARE INCLINED TO CONSIDER THE CON TENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE TRADE DISC OUNT MADE AVAILABLE TO THE SUB-FRANCHISEE WAS A COMPENSATION BY FORGOIN G THE PART OF THE COMMISSION ALREADY SUBJECTED TO TAX AT SOURCE BY TH E SERVICE PROVIDER COULD NOT HAVE SUFFERED TAXATION U/S 194H IN SO FAR AS THE PRODUCT NEVER BELONGED TO THE ASSESSEE. IT MAY BE SUBMITTED THAT ON THE ISSUE BEFORE YOUR G OODSELF THE SAME HAS BEEN SETTLED IN FAVOUR OF THE APPELLANT AS ABOV E AND THERE ARE NO CASE LAW AGAINST THE APPELLANT. THEREFORE THE APPE LLANT PRAYS THAT THIS CASE LAW BE RELIED UPON AND RELIEF BE ALLOWED AS PRAYED FOR. 22. IN THE CASE OF JAGRAN PRAKASHAN THE HONBLE CO URT ALSO CONSIDERED THE ALTERNATIVE PLEA THAT IN TERMS OF SE CTION 201 AND 201(!A) IT WAS HELD THAT THE PROVISIONS RELATING T O TAX AND PAYMENT OF INTEREST OPERATE IN TWO DIFFERENT AREAS. IF TAX IS NOT DEDUCTED AT SOURCE THE LIABILITY IS UPON THE ASSESSEE TO PAY DIRECTLY AND THAT OF DEDUCTOR TO PAY INTEREST ONLY. SIMILAR HAS BEEN HELD BY GUJR AT HIGH COURT IN CIT VS. RANOLI INVESTMENT PVT. LTD. 235 ITR 433. AL SO BY FULL BENCH OF UTTRAKHAND IN DIRECTOR OF IT (INTERNAL TAXATION) VS . MAERSK & CO. 334 ITR 79. THE HONBLE HIGH COURT SHIFTED THE BURD EN ON REVENUE. IN PARA 79 THE HONBLE COUT HAS HELD FROM THE ABOV E IT IS CLEAR THAT DEDUCTOR CANNOT BE TREATED AS ASSESSEE IN DEFAULT T ILL IT IS FOUND THAT THE ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECT LY. IN THE PRESENT CASE THE IT AUTHORITIES HAS NOT ADVERTED TO THE EX PLANATION TO S.191 NOR HAD APPLIED THEIR MIND AS TO WHETHER THE ASSESS EE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. THUS TO DECLARE A DEDUCTE R WHO FAILED TO DEDUCT THE TAX AT SOURCE AS AN ASSESSEE IN DEFAULT CONDITION PRECEDENT IS THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DI RECTLY THE FACT THAT THE ASSESSEE HAS FAILED TO PAY TAX DIRECTLY IS THUS FOUNDATIONAL AND JURISDICTIONAL FACT AND ONLY AFTER FINDING THAT ASS ESSEE HAS FAILED TO PAY TAX DIRECTLY DEDUCTER CAN BE DEEMED TO BE ASSE SSEE IN DEFAULT IN RESPECT OF SUCH TAX. ITA NOS. 608 & 609(ASR)/2013 17 23. IN VODAFONE ESSAR LTD. VS. DY CIT 135 TTJ 385 THE ITAT ALLOWED THE ASSESSEES APPEAL HOLDING THAT NO TAX C AN BE RECOVERED FROM THE ASSESSEE AND IT CANNOT BE TREATED AS ASSES SEE IN DEFAULT IF IT IS FOUND THAT THE TAXES HAVE BEEN FULLY PAID BY THE PA YEE ASSESSEE HAVING FURNISHED THE PANS OF 19 PERSONS AND CONFIR MATION OF 8 PARTIES TO WHOM PAYMENTS WERE MADE AO TO VERIFY PAY MENTS OF TAXES WITH THE HELP OF PANS. 24. BEFORE THE AUTHORITIES THE APPELLANT HAS FURNI SHED COPIES OF ACKNOWLEDGEMENTS OF 30 SUB- DEALERS. OUT OF THESE T HE LD. AO ACCEPTED 23 AND WITH REGARD TO OTHERS HE STATED THA T THESE ARE NOT SUPPORTED BY STATEMENT OF INCOMES HENCE CANNOT BE C ONSIDERED. THE APPELLANT SUBMITS THAT THE RETURNS ARE FILED PAPERL ESS AND THEREFORE THESE WERE NOT SUPPORTED BY STATEMENTS. THE LD. AO DID NOT ISSUE ANY NOTICE TO THESE SUB-DEALERS FOR CONFIRMING THE RECE IPT OF AMOUNTS AND PAYING TAX THEREON AS HELD BY HONBLE ALLAHABAD HI GH COURT AND HONBLE MUMBAI BENCH OF ITAT. THE APPELLANT HAS FIL ED FURTHER 7 ACKNOWLEDGEMENTS AND PRAY THAT THESE BE ACCEPTED AS ADDITIONAL EVIDENCE AND CREDIT ALLOWED. 25. THE LD. AO HAS INVOKED THE PROVISIONS OF SECTION 201 AND 201(IA) OF THE ACT. SECTION 201(IA) STATES THAT IN CASE OF DEFAULT IN DEDUCTION THEN THE PERSON RESPONSIBLE SHALL BE DEEM ED TO BE ASSESSEE IN DEFAULT. PROVISION OF SUB-SECTION (IA) STATES TH AT IN DEFAULT THE PERSON RESPONSIBLE SHALL BE LIABLE FOR INTEREST. TH E LAW THEREFORE IS THAT IF THE AMOUNT IS NOT DEDUCTED IT BECOMES THE L IABILITY OF THE PERSON RECEIVING THE INCOME THE PERSON RESPONSIBLE TO DEDU CT IS ONLY LIABLE FOR INTEREST. THIS HAS BEEN SO HELD BY THE FULL BEN CH OF HONBLE UTTRAKHAND HIGH COURT IN DIRECTOR OF INCOME-TAX VS. MAERSK CO. LTD. 334 ITR 79. SIMILAR HAS BEEN HELD BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD. VS. DCI T (TAXATION). IN VIEW OF THE ABOVE LAW THE ONLY LIABILITY IS ON ACCO UNT OF INTEREST AND NOT FOR PRINCIPAL. IN CONTRAST THE LEGAL POSITION WHEN THE GOODS ARE SOLD BY PRINCIPAL TO ITS DISTRIBUTORS CREATING PRINCIPAL AN D PRINCIPAL RELATIONSHIP WOULD BE ENTIRELY DIFFERENT. ON THE SA LE OF GOODS THE OWNERSHIP PASSES BETWEEN THE MANUFACTURER AND THE D ISTRIBUTORS. IT IS THE RESPONSIBILITY OF THE DISTRIBUTOR THEREAFTER TO SELL THOSE GOODS ITA NOS. 608 & 609(ASR)/2013 18 FURTHER TO THE CONSUMERS THE ULTIMATE USERS. THE PR INCIPAL MANUFACTURER DOES NOT COME IN PICTURE AT ALL. OF CO URSE HE MAY BE LIABLE FOR SOME ACTION BY THE CONSUMER BECAUSE OF D EFECTIVE GOODS ETC. WHICH IS THE RESULT OF OTHER ENACTMENTS CONFE RRING CERTAIN RIGHTS ON THE CONSUMER OR COMMON LAW RIGHTS IN HIS FAVOUR AS AGAINST THE MANUFACTURER. IN THE INSTANT CASE ALSO WHEN THE BSNL SOLD ITS PR ODUCTS TO FRANCHISEE I.E. TO THE ABOVE MENTIONED ASSESSEE AND SUBSEQUENTLY WHEN THOSE GOODS WERE SOLD BY THE FRANCHISEE TO ITS SUB FRANCHISEE/RETAILERS THEN IT BECOME THE PROPERTY OF THE SUB FRANCHISEE/RETAILERS AND ANY LOSS OF RECHARGE COUPO NS IN ANY MANNER IS BORNE BY THE OWNER OF SUCH COUPONS AT THAT POINT OF TIME I.E. SAME IS TO BE BORNE BY SUB FRANCHISEE RETAILERS NOT BY THE ABOVE MENTIONED AND ONLY IN SOME EXTREME CASES BSNL REIMBURSES THE SAME WHERE THERE IS A TECHNICAL DEFECT IN THE CASE. . THUS YOUR GOOD-SELF WILL APPRECIATE OUR CONTENTI ON AFTER CONSIDERING THE FACTS ENUMERATED BELOW:- S1S.NO. PARTICULARS. FRANCHISEE SUB-FRANCHISEE/RETAILER 1. WHETHER TELECOM SERVICE PROVIDER NO. FRANCHISEE IS JUST A CHANNEL; OF DISTRIBUTION. NO. SUB- FRANCHISEE/ RETAILER IS JUST A CHANNEL OF DISTRIBUTION. 2. WHETHER ANY SERVICE IS PROVIDED ON SALE OF RECHARGE TO CUSTOMER NO FRANCHISEE BUYS RECHARGE FROM BSNL AND FURTHER SELLS TO CUSTOMERS/ SUB- FRANCHISEE/ RETAILER. RECHARGE IN THE CHAIN OF DISTRIBUTION IS A CASH VALUE PRODUCT AND THE SERVICE IS PROVIDED ONLY BY THE SERVICE PROVIDER I.E. BY THE BSNL NO SUB- FRANCHISEE/RETAILER BUYS RECHARGE FROM FRANCHISEE AND FURTHER SELLS TO CUSTOMERS. RECHARGE IN THE CHAIN OF DISTRIBUTION IS A CASH VALUE PRODUCT AND THE SERVICE IS PROVIDED ONLY BY THE SERVICE PROVIDER. 3. WHETHER STOCK ONCE SOLD IS PROPERTY OF BUYER. YES IF STOCK IS DAMAGED/LOST THE LOSS IS BORNE BY THE BUYER. YES IF STOCK IS DAMAGED/LOST THE LOSS IS BORNE BY THE BUYER. ITA NOS. 608 & 609(ASR)/2013 19 [7] 4. WHETHER RESPONSIBLE TO CUSTOMER FOR DEFAULT/DEFICIENCY IN SERVICE. NO ONLY BSNL IS RESPONSIBLE TO CUSTOMER NO. ONLY BSNL SERVICE PROVIDER IS RESPONSIBLE TO CUSTOMER. 5. WHETHER REQUIREMENT TO HAVE STAFF OFFICE AS PER BSNL DESIGN AND STANDARDS. YES. NO. 6. IN CASE OF CAF [CUSTOMER ACQUISITION FORM] THAT DOES NOT FULFILL GUIDELINES FRANCHISEE HAS TO BEAR THE PENALTY LEVIED BY BSNL/TRAI IN CASE OF ANY ERROR MADE EVEN BY SUB-FRANCHISEE /RETAILER. NO PENALTY LEVIABLE ON SUB-FRANCHISEE/RETAILER AND THE FRANCHISEE IS ONLY LIABLE TO BSNL THE FRANCHISEE CAN NOT LEVY ANY PENALTY ON SUB FRANCHISEE/RETAILER. 7. WHETHER EXCLUSIVE CHANNEL PARTNERS OF BSNL. FRANCHISEE IS EXCLUSIVE IN HIS AREA OF OPERATION NOT EXCLUSIVE MAY DEAL WITH ANY NUMBER OF COMPANIES/PRODUCTS 8. RESPONSIBILITY TOWARDS SELLER FRANCHISEE RESPONSIBLE TO BSNL/ SUB-FRANCHISEE/RETAILER NOT RESPONSIBLE TO FRANCHISEE. 9. WHETHER PRINCIPAL AGENT RELATIONSHIP NO BUT FOR LIMITED PURPOSE DISCOUNT IS TREATED AS COMMISSION AS PER HIGH COURT DECISIONS. NO THE TRANSACTION IS DONE ON PRINCIPAL TO PRINCIPAL BASIS. WITHOUT PREJUDICE TO THE SUBMISSIONS MADE HEREI NABOVE THERE ARE CERTAIN POINTS DETAILED BELOW FOR YOUR KIND CONSIDE RATION:- A. THAT IN MOST OF THE CASES THE SUB-FRANCHISEE/RETA ILER IS EXISTING ASSESSEE OF INCOME-TAX AND FILED THEIR RETURNS OF I NCOME. B. THAT THERE ARE LOT OF CASES WHERE THE DISCOUNT OFFE RED IS LESS THAN RS. 2500.00 DURING THE YEAR. IT MAY BE POINTED OUT THAT THIS IS A CASE OF TAX AUDIT AND THE ACCOUNTS ARE DULY AUDITED BY THE CHARTERED ACCOUNTA NT WHO IS A 3 RD AND INDEPENDENT PERSON AND COPY OF THE AUDIT REPORT IS AVAILABLE AT PAGE NOS. ITA NOS. 608 & 609(ASR)/2013 20 27 TO 44 OF THE PAPER-BOOK .FURTHERMORE IT MAY BE POINTED OUT THAT I AM ENCLOSING HEREWITH COPIES OF THE PURCHASE BILLS AS ARE AVAILABLE ON PAGE NOS. 45 TO 51 OF THE PAPER-BOOK FURTHERMORE WE HAVE ALREADY FILED A COPIES OF THE SALE INVOICES WHICH ARE AVAILABLE FRO M PAGE NOS. 52 TO 57 OF THE PAPER-BOOK WHICH PROVE THAT WE ARE SELLING THE GOODS TO THE SUB- FRANCHISEE FROM PRINCIPAL TO PRINCIPAL BASIS. FURT HERMORE IT MAY BE POINTED OUT THAT THE FRANCHISEE-SHIP AGREEMENTS ARE AVAILA BLE AT PAGE NOS. 58 TO 74 OF THE PAPER-BOOK AND ANOTHER FRANCHISEE SHIP AGRE EMENT WAS EXECUTED ON AUGUST 2008. A COPY OF THE SAME IS AVAILABLE AT PA GE NO. 76 TO 112 OF THE PAPER-BOOK. I WILL REFER THE FOLLOWING CLAUSES WHIC H WILL PROVE THE RELATIONSHIP OF THE ASSESSEE AND THE SUB-FRANCHISEE AND THIS RELATIONSHIP WILL PROVE THAT THE GOODS WERE SOLD TO THEM BY THE ASSES SEE FROM PRINCIPAL TO PRINCIPAL. THE CHART CONTAINING SEVEN RELEVANT CLAU SES IS GIVEN HEREUNDER:- S.NO RELEVANT POINTS RELEVANT PAGE NO AND PARA NO OF AGREEMENT DATED 22/12/2004 RELEVANT PAGE NO AND PARA NO OF AGREEMENT DATED 08/2008 1 PRINCIPAL TO PRINCIPAL PAGE NO 68 CLAUSE 24.1 THE FRANCHISEE ITS EMPLOYEES AGENTS AND REPRESENTATIVES SHALL PROVIDE SERVICE AS AN INDEPENDENT ENTITY ON A EXCLUSIVE BASIS AND NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CREATE ANY PARTNERSHIP JOINT VENTURE EMPLOYMENT OR RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN THE PARTIES HERETO OR BETWEEN BSNL AND THE FRANCHISEE REPRESENTATIVES AND EMPLOYED OR TO PROVIDE SERVICE WITH ANY RIGHT POWER OR AUTHORITY OR TO PROVIDE THE FRANCHISEE PAGE NO 77 CLAUSE 1.8 IN THE INTEREST OF INCREASING THE CUSTOMER BASE THE FRANCHISEE CAN APPOINT SUB FRANCHISEES RETAILER SOLELY FOR THE PURPOSE OF BOOKING NEW BSNL CONNECTIONS AND RETAILERS FOR SELLING PREPAID CARDS. ITA NOS. 608 & 609(ASR)/2013 21 WITH ANY RIGHT POWER OR AUTHORITY WHETHER EXPRESS OR IMPLIED TO CREATE ANY SUCH DUTY OR OBLIGATION. 2 EXCLUSIVE AGREEMENT PAGE NO 60 CLAUSE 2 THE FRANCHISEE UNDERSTANDS AND AGREES THAT THIS MARKETING AND DISTRIBUTION AGREEMENT IS ON EXCLUSIVE BASIS. PAGE NO 78 CLAUSE 2 THE FRANCHISEE UNDERSTANDS AND AGREES THAT THIS MARKETING AND DISTRIBUTION AGREEMENT IS ON EXCLUSIVE BASIS 3 IN CASE OF ANY LOSS LIABILITY IS THAT OF SH. GURPREET SINGH AND NOT OF BSNL PAGE NO 63 CLAUSE 9.7(C & D) THAT THE BSNL SHALL NOT BE LIABLE FOR ANY LOSS PILFERAGE OR DAMAGE TO THE GOODS STORED AND SOLD AT THE PREMISES AND THE MERCHANDISE SHALL BE ENTIRE RESPONSIBILITY OF THE FRANCHISEE UNLESS THE SAME IS OCCASIONED BY WILLFUL NEGLECT OR DEFAULT OF THE BSNL. THAT IT SHALL BE THE RESPONSIBILITY OF THE FRANCHISEE TO EFFECT THE SALES THROUGH PROPER INVOICES DETAILING THE MATERIAL PARTICULARS OF THE BSNL PHONES INCLUDING IMEI NUMBER. PAGE NO 81 CLAUSE 9.7(C) THAT THE BSNL SHALL NOT BE LIABLE FOR ANY LOSS PILFERAGE OR DAMAGE TO THE GOODS STORED AND SOLD AT THE PREMISES AND THE MERCHANDISE SHALL BE ENTIRE RESPONSIBILITY OF THE FRANCHISEE UNLESS THE SAME IS OCCASIONED BY WILLFUL NEGLECT OR DEFAULT OF THE BSNL. THAT IT SHALL BE THE RESPONSIBILITY OF THE FRANCHISEE TO EFFECT THE SALES THROUGH PROPER INVOICES DETAILING THE MATERIAL PARTICULARS OF THE BSNL PHONES INCLUDING IMEI NUMBER. ITA NOS. 608 & 609(ASR)/2013 22 4 NO COMPENSATION TO BE MADE TO THE DISTRIBUTOR ON TERMINATION OF AGREEMENTS PAGE 61 & 62 CLAUSE 8.3 ON TERMINATION OF THE AGREEMENT HOWSOEVER OCCASIONED/CAUSED NO FURTHER COMPENSATION SHALL BECOME DUE TO THE FRANCHISEE UNLESS THE SAME SHALL HAVE ACCRUED PRIOR TO THE DATE OF SUCH TERMINATION AND THE FRANCHISEE EXPRESSLY HAS TO AGREE THAT HE WILL NOT BE ENTITLED TO ANY COMPENSATION AND/OR INDEMNIFICATION WHATSOEVER FROM THE BSNL IN THAT REGARD. PAGE NO.80 CLAUSE 8.3 ON TERMINATION OF THE AGREEMENT HOWSOEVER OCCASIONED/CAUSED NO FURTHER COMPENSATION SHALL BECOME DUE TO THE FRANCHISEE UNLESS THE SAME SHALL HAVE ACCRUED PRIOR TO THE DATE OF SUCH TERMINATION AND THE FRANCHISEE EXPRESSLY HAS TO AGREE THAT HE WILL NOT BE ENTITLED TO ANY COMPENSATION AND/OR INDEMNIFICATION WHATSOEVER FROM THE BSNL IN THAT REGARD. 5 INSURANCE AND ALL LIABILITIES ARE THAT OF MR. GURPREET SINGH AND NOT OF BSNL PAGE NO.68 CLAUSE 22 THE LIABILITY TO INSURE THE STOCKS IN THE OUTLET(S) AND IN THE POSSESSION OF THE FRANCHISEE WILL BE OF THE FRANCHISEE AND THE LIABILITY FOR ANY LOSS OR DAMAGE DUE TO ANY FIRE BURGLARY THEFT ETC WILL BE THAT OF THE FRANCHISEE. PAGE NO.89 CLAUSE 22 THE LIABILITY TO INSURE THE STOCKS IN THE OUTLET(S) AND IN THE POSSESSION OF THE FRANCHISEE WILL BE OF THE FRANCHISEE AND THE LIABILITY FOR ANY LOSS OR DAMAGE DUE TO ANY FIRE BURGLARY THEFT ETC WILL BE THAT OF THE FRANCHISEE. 6. NO ROLE OF BSNL BETWEEN FRANCHISEE TO FRANCHISEE FRANCHISEE TO SUB- PAGE NO.64 CLAUSE 13.3 BSNL WILL NOT BE A PARTY BETWEEN FRANCHISEE TO PAGE NO.84 CLAUSE 13.3 BSNL WILL NOT BE A PARTY BETWEEN ITA NOS. 608 & 609(ASR)/2013 23 FRANCHISEE OR TO RETAILER FRANCHISEE FRANCHISEE TO SUB-FRANCHISEES OR TO RETAILERS OR FRANCHISEES DISPUTE OF ANY NATURE WHATSOEVER IT MAY BE. FRANCHISEE TO FRANCHISEE FRANCHISEE TO SUB- FRANCHISEES OR TO RETAILERS OR FRANCHISEES DISPUTE OF ANY NATURE WHATSOEVER IT MAY BE. 7. FRANCHISEE IS AN INDEPENDENT ENTITY ON EXCLUSIVE BASIS. PAGE NO.68 CLAUSE 24.1 THE FRANCHISEE ITS EMPLOYEES AGENTS AND REPRESENTATIVES SHALL PROVIDE SERVICES AS AN INDEPENDENT ENTITY ON AN EXCLUSIVE BASIS AND NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CREATE ANY PARTNERSHIP JOINT VENTURE EMPLOYMENT OR RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN THE PARTIES HERETO OR BETWEEN BSNL AND THE FRANCHISEE REPRESENTATIVES & EMPLOYEES OR TO PROVIDE SERVICE WITH ANY RIGHT POWER OR AUTHORITY OR TO PROVIDE THE FRANCHISEE WITH ANY RIGHT POWER OR AUTHORITY WHETHER EXPRESS OR IMPLIED TO CREATE ANY SUCH DUTY OR OBLIGATION. PAGE NO.86 CLAUSE 24.1 THE FRANCHISEE ITS EMPLOYEES AGENTS AND REPRESENTATIVES SHALL PROVIDE SERVICES AS AN INDEPENDENT ENTITY ON AN EXCLUSIVE BASIS AND NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CREATE ANY PARTNERSHIP JOINT VENTURE EMPLOYMENT OR RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN THE PARTIES HERETO OR BETWEEN BSNL AND THE FRANCHISEE REPRESENTATIVES & EMPLOYEES OR TO PROVIDE SERVICE WITH ANY RIGHT POWER OR AUTHORITY OR TO PROVIDE THE FRANCHISEE WITH ANY RIGHT POWER OR AUTHORITY WHETHER EXPRESS OR IMPLIED TO CREATE ANY SUCH DUTY ITA NOS. 608 & 609(ASR)/2013 24 OR OBLIGATION. FURTHERMORE IT IS RELEVANT TO POINT OUT THAT THE W ORTHY CIT(A) HAS REJECTED THE APPEAL AND WHILE DECIDING THE APPEAL H E HAS CONCLUDED THE WHOLE DISCUSSION IN PARA 4 ON PAGE NO.9 TO 11 O F THE ORDER OF CIT(A). IT MAY BE FURTHER POINTED OUT THAT THE LD. CIT(A) HAS RELIED ON CERTAIN JUDGMENTS WHICH WERE NOT AT ALL APPLICABLE ON THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. THE CIT(A) WH ILE DECIDING THE CASE HAS NOT APPRECIATED THAT A COPY OF AGREEMENT WAS DULY FILED COPY OF WHICH IS PLACED AT PAGE NO.52 TO 74 OF THE PAPER-BOOK . FURTHERMORE THE CIT(A) HAS NOT APPRECIATED THAT WE ARE NOT SERVICE PROVIDERS AND IT IS VERY MUCH CLEAR FROM THE SAID A GREEMENT THAT WE ARE TRADERS AND DEALING WITH SUB-FRANCHISEE AS PRIN CIPAL TO PRINCIPAL AND NOT AS PRINCIPAL TO AGENT. THE LD. CIT(A) HAS R ELIED ON TWO JUDGMENTS WHICH ARE MENTIONED HEREUNDER:- (I) JUDGMENT OF SUPREME COURT OF INDIA IN THE CASE OF B HARAT SANCHAR NIGAM LTD. & ANR. VS. UNION OF INDIA & ORS. REPORTED IN (2006) 201 CTR 346. A COPY OF THE SAME IS PLACED AT PAGE NO.280 TO 318 OF THE PAPER-BOOK. (II) DECISION OF HIGH COURT OF CALCUTTA IN THE CASE OF B HARTI CELLULOR LTD. VS. CIT & ANR. REPORTED IN (2013) 35 4 ITR 507. A COPY OF THE SAME IS PLACED AT PAGE NO.270 TO 279 OF THE PAPER- BOOK. AS A MATTER OF FACT THE JUDGMENTS CITED BY THE WOR THY CIT(A) ARE NOT AT APPLICABLE TO THE PRESENT CASE FOR THE SIMPLE RE ASON THAT WE ARE NOT SERVICE PROVIDERS BUT A TRADERS AND DEALING AS PRIN CIPAL TO PRINCIPAL. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE CA LCUTTA HIGH COURT HAS HELD AND DECIDED THE CASE ON THE BASIS OF AGREE MENT WHEREAS THE TERMS AND CONDITIONS OF OUR AGREEMENT ARE QUITE DIF FERENT. FURTHERMORE THE ASSESSEE HAS RELIED ON CERTAIN JUD GMENTS WHICH ARE CLEARLY APPLICABLE ON THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE AND ARE IDENTICAL AS THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AND THE PROVISIONS OF SECTION 201(1) AND 201 (1A) ARE NOT AT ALL APPLICABLE IN THE PRESENT CASE. ITA NOS. 608 & 609(ASR)/2013 25 FURTHERMORE IT IS VERY A RELEVANT AND IMPORTANT FA CT THAT THE ASSESSEE STARTED THIS VERY BUSINESS IN CONNECTION W ITH ASSESSMENT YEAR 2007-08 AND A COPY OF THE ASSESSMENT ORDER IS ENCLOSED HEREWITH COPY OF WHICH IS PLACED AT PAGE NO.319 TO 323 OF THE PAPER- BOOK . DURING THIS YEAR I.E. ASSESSMENT YEAR 2007-08 THE SYSTEM OF ACCOUNTANCY MAINTAINED BY THE ASSESSEE WAS FULLY AC CEPTED BY THE DEPARTMENT AND THERE IS NO REASON FOR THE DEPARTMEN T TO TAKE A DIFFERENT VIEW IN CONNECTION WITH ASSESSMENT YEARS 2008-09 & 2009- 10. THE DEPARTMENT HAS TO BE CONSISTENT IN ITS STAN D AND THIS VIEW WAS UPHELD BY THE SUPREME COURT OF INDIA IN THE CASE OF BERGER PAINTS REPORTED IN 266 ITR 99 AND AGAIN THIS VIEW WAS UPHE LD BY SUPREME COURT OF INDIA IN THE CASE OF CIT VS. EXCEL INDUSTR IES AND MAFATLAL INDUSTRIES LTD. REPORTED IN 358 ITR 195. IN VIEW OF THESE CIRCUMSTANCES THERE WAS NO JUSTIF ICATION FOR THE DEPARTMENT TO TAKE A DIFFERENT VIEW DURING THE YEAR UNDER CONSIDERATION AND IT IS THEREFORE VERY RESPECTFUL LY PRAYED THAT THE APPEAL OF THE ASSESSEE MAY KINDLY BE ACCEPTED AS TH ERE WAS NO LIABILITY U/S 201(1) & 201(1A) OF THE IT ACT 1961. 9. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS PER REVENUE THE PR IS ENGAGED IN PROVIDING TE LECOMMUNICATION SERVICES AND IS A SERVICE PROVIDER AND AFTER PROV IDING SUCH SERVICES THE MARGIN SO EARNED IS TERMED AS COMMISSION LIABLE UN DER THE PROVISIONS OF SECTION 194H TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO SUB FRANCHISEE AND SINCE PR ASSESSEE HAS FAILED TO DO SO THE SAM E IS LIABLE U/S 201(1) ALONGWITH INTEREST U/S 201(1A) OF THE ACT. ON PERUS AL OF RECORD AND ITA NOS. 608 & 609(ASR)/2013 26 ARGUMENTS OF BOTH THE AUTHORITIES BELOW WE ARE OF THE VIEW THAT THE ASSESSEE HAS DECLARED HIMSELF AS FRANCHISEE OF M/S. BHARAT SANCHAR NIGAM LIMITED (BSNL) AND IS IN THE BUSINESS OF PURCHASING SIM CAR DS AND RECHARGE COUPONS FROM BSNL AGAINST PAYMENT AND RESELLS THEM TO SUB CONTRACTORS/SUB DISTRIBUTORS/SUB-FRANCHISEE. THE AS SESSEE IS A FRANCHISEE OF BSNL WHO CLAIMS HIMSELF AS A TRADER AND NOT AS SER VICE PROVIDER OR CELLULAR OPERATOR. THE ROLE OF FRANCHISEE IS LIMITED TO BOO KING OF NEW CONNECTIONS I.E. SUBSCRIBER IDENTIFICATION MODULE CARDS AND SAL E OF RECHARGE. BOOKING OF NEW CONNECTIONS I.E. SIM CARDS. CONTRIBUTES TO LESS THAN5% OF TOTAL BUSINESS. ACCORDINGLY IT WAS EXPLAINED THAT THE AS SESSEES ROLE IS LIMITED TO BOOKING OF NEW CONNECTIONS ONLY AND COMMISSION AFTE R DEDUCTING TDS IS GIVEN ON NEW CONNECTIONS BY BSNL AND SIMILARLY TD S IS DEDUCTED AND DEPOSITED ON COMMISSION DISBURSED TO SUB-FRANCHISE E ON ACCOUNT OF NEW CONNECTIONS BOOKED BY THEM.. ON THE OTHER HAND SAL E OF RECHARGE CONTRIBUTES MORE THAN 95% OF BUSINESS AND ONLY DIS PUTE IS WITH REGARD TO RECHARGE OF COUPONS AND TOP-UPS. THE LD. COUNSEL FO R THE ASSESSEE INVITED OUR ATTENTION TO PAGE 68 & 89 OF THE AGREEMENT DATE D 22.12.2004 AND AUGUST 2009 IN WHICH THE RECHARGE COUPONS PURCHASE D BY THE ASSESSEE BECOMES THE PROPERTY OF THE ASSESSEE AND WHEN THE S AME ARE LOST OR DESTROYED OR NOT SOLD THE RESPONSIBILITY RESTS WIT H THE ASSESSEE. THE BSNL ITA NOS. 608 & 609(ASR)/2013 27 DOES NOT RECOUP THE LOSS TO THE ASSESSEE WHICH IS CLEARLY MENTIONED IN CLAUSE 22 OF THE AGREEMENT DATED 22.12.2004. THE ASSESSEE HAS SOLD THE RECHARGE COUPONS TO THE SUB-DISTRIBUTORS SO THAT THEY ALSO E ARN SOME MARGIN OF PROFIT AND SUCH RECHARGE COUPONS ONCE SOLD BECOME THE PRO PERTY OF THE SAID SUB- DISTRIBUTOR AND SUCH SUB-DISTRIBUTOR IS FREE TO SEL L THE SAME AT A PRICE AS HE DEEMS FIT THOUGH THE MAXIMUM PRICE HAS BEEN FIXED B Y THE BSNL WITH REGARD TO THE MARKET CONDITION. THE LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION AT PAGE 68 OF THE AGREEMENT DATED 22 .12.2004 AND AT PAGE 89 OF THE AGREEMENT DATED AUGUST 2008 WHERE IN CLAUSE 24.1 IT IS CLEARLY STATED THAT THERE SHALL NOT BE ANY PARTNERSHIP JOINT VENT URE EMPLOYMENT OR RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN PARTIES . AS REGARDS THE DECISIONS RELIED UPON BY THE AO IN THE CASES OF BHARTI CELLUL AR LTD; BPL MOBILE CELLULAR LTD; IDEAL CELLULAR LTD; AND VODAFONE ESSA R CELLULAR LTD; THE LD. COUNSEL FOR THE ASSESSEE DISTINGUISHED THE SAME BY SUBMITTING THAT ALL THESE ENTITIES ARE THEMSELVES CELLULAR OPERATORS AND SER VICE PROVIDERS AND IN TERMS OF THE AGREEMENT BETWEEN THESE SERVICE PROVID ERS AND FRANCHISEES THE HONBLE COURTS HELD THAT THE MARGIN PROVIDED IS IN THE NATURE OF COMMISSION. THESE CASES ARE NOT APPLICABLE IN THE PRESENT CASE SINCE THE ASSESSEE IS NOT A SERVICE PROVIDER AS HE PURCHASED RECHARGE COUPONS FROM THE SERVICE PROVIDER I.E. BSNL AND NOT PROVIDES AN Y SERVICE TO THE ITA NOS. 608 & 609(ASR)/2013 28 SUBSCRIBERS. THE ASSESSEE SIMPLY SELLS RECHARGES TO THE SUB-DISTRIBUTORS WHICH IS ON PRINCIPAL TO PRINCIPAL BASIS AND THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENT. FURTHER THERE IS NO WRITTEN A GREEMENT WITH THE SUB- DISTRIBUTORS. THE SALE BILLS ARE ISSUED TO THE SUB- DISTRIBUTORS AND COPIES WERE PRODUCED BEFORE THE AUTHORITIES BELOW. THE BOOKS OF ACCOUNT ARE AUDITED AND TRANSACTIONS HAS BEEN SHOWN AS SALE AND PURCHASE. NONE OF THE CONDITIONS REFERRED TO IN SECTION 194H TO EXPLANATION (I) IS FULFILLED. BUT EQUAL MARGIN EARNED/PROFIT EARNED AS COMMISSION I.E. THE SUB-DIS TRIBUTOR IS NOT RECEIVING THE PAYMENT ON BEHALF OF THE ASSESSEE BUT ON HIS OW N AND HE IS NOT ACCOUNTABLE TO THE ASSESSEE. ONCE THE ASSESSEE HAS SOLD THE SIM CARDS OR RECHARGE COUPONS THE ASSESSEE HAS NO CONTROL OR LI ABILITY TOWARDS THE SUB- DISTRIBUTORS. A COPY OF THE BILLS FILED BEFORE THE AUTHORITIES BELOW ISSUED BY THE BSNL SHOW THAT BSNL HAS ALLOWED THE DISCOUNT I N SOME CASES AND ALLOWED COMMISSION IN OTHER CASES. THE RELATIONSHIP WITH BSNL IS DIFFERENT FROM THE RELATIONSHIPS OF SUB-FRANCHISEE AND IS ON PRINCIPAL TO PRINCIPAL BASIS BECAUSE THE ASSESSEE HAS NO CONTROL OVER THE SUB FR ANCHISEES WHATSOEVER. THE SUB FRANCHISEES ARE FROM TO SELL SIM CARDS AND TOP UPS TO ANY CUSTOMER AT ANY PRICE AND ONCE THESE ARE SOLD THE ASSESSEE LOSES ITS CONTROL OVER THE SAME. THE AUTHORITIES BELOW HAVE NOT APPRECIATED TH AT SUB-FRANCHISEES THEMSELVES ARE SHOWING PURCHASE AND SALE WHICH HAS NOT BEEN QUESTIONED OR ITA NOS. 608 & 609(ASR)/2013 29 OBJECTED TO BY THE DEPARTMENT IN THEIR CASES WHETH ER THE ASSESSEE HAS PAID THE COMMISSION THE ASSESSEE HAS DULY DEDUCTED TAX AT SOURCE WHICH IS NOT DISPUTED. THE RELIANCE HAS BEEN PLACED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE CASES MENTIONED HEREINABOVE. ON PERUSAL OF THE SAME AND THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AND ALSO CASES RELIED UPON BY THE AO AND THE LD. CIT(A) HAVING BEEN DISTINGUISHE D AND THE DEPARTMENT HAVING ACCEPTED PURCHASE AND SALE DURING THE PRECED ING YEAR 2007-08 AND LOOKING TO THE DOCTRINE OF CONSISTENCY AND IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. VS. CIT REPORTED IN 266 ITR 99 WE FIND THAT THE ASSESSEE I S A TRADER AND RELATIONSHIP IS THAT OF THE PRINCIPAL TO PRINCIPAL AND THE AUTHORITIES BELOW ARE NOT JUSTIFIED TO HOLD RELATIONSHIP OF PRINCIPAL A ND THAT OF AN AGENT. ACCORDINGLY THE ASSESSEE IS NOT LIABLE FOR THE PR OVISIONS OF SECTION 201(1) & 201(1A) OF THE ACT. THUS THE ORDER OF THE LD. CI T(A) AND THAT OF THE A.O. IS REVERSED AND ALL THE GROUNDS OF THE ASSESSEE AR E ALLOWED. 11. NOW WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO. 609(ASR)/2013 FOR THE ASSESSMENT YEAR 2009-10. THE FACTS IN THE PRES ENT CASE ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE IN ITA NO.608(ASR) /2013 FOR THE ASSESSMENT YEAR 2008-09 AND ACCORDINGLY AS MENTIONED HEREINAB OVE OUR ORDER IN ITA ITA NOS. 608 & 609(ASR)/2013 30 NO. 608(ASR)/2013 IS IDENTICALLY APPLICABLE IN THE PRESENT APPEAL AND ACCORDINGLY ALL THE GROUNDS OF THE ASSESSEE IN ITA NO.609(ASR)/2013 ARE ALLOWED. 12. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE IN ITA NO.608 & 609(ASR)/2013 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH APRIL 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15TH APRIL 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.GURPREET SINGH SETHI JAMMU 2. THE ITO TDS JAMMU 3. THE CIT(A) JAMMU 4. THE CIT JAMMU. 5. THE SR DR ITAT AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR