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II. Direct Taxes Case Laws:
1. DCIT Vs. M/s Tata Tele Services, I.T.A. No.3857/Mum/2016, Date of Pronouncement: 08.06.2018, ITAT - Mumbai
Issue
Whether the discount given by the assessee on sale of prepaid
starter kits/sim cards to the distributors would be liable for deduction
of tax at source u/s 194H of the Act?
Held: No
Brief facts
The assessee company which is a telecom operator had e-filed its
return of income for A.Y 2011-12 declaring a loss, which was processed
as such under Sec.143 (1) of the Act. The case of the assessee was there
after taken up for scrutiny assessment. During the course of assessment
proceedings, the AO observed that the assessee had extended discounts
to its prepaid distributors for selling of its prepaid recharge vouchers
and starter kits, but no TDS was deducted on the said discounts. The AO
being of the view that as the discount on sale of SIM/RCV were in the
nature of commission, hence the assessee was liable to deduct tax at
source on the same under Sec.194H of the Act.
The
assessee contended that as its relation with the distributors was on a
principal-to-principal basis, thus the discount given to the
distributors constituted the latter’s margin and could not be held to be
commission or brokerage liable for deduction of tax at source u/s
194H.The A.O disallowed the amount u/s 40(a)(ia). Aggrieved, the
assessee carried the matter in appeal before the CIT(A). The CIT(A)
after deliberating on the contentions advanced by the assessee in the
backdrop of the facts of the case observed, that his predecessor while
disposing off the appeals in the case of the assessee for the
immediately preceding years i.e. A.Y 2009-10 and A.Y 2010-11 had deleted
similar disallowances made by the A.O u/s 40(a)(ia) by relying on the
judgment of the High Court of Karnataka in the case of Bharti Airtel
Ltd.Vs. DCIT[2015] 372 ITR 33. The CIT(A), therefore, deleted the
addition/disallowance made by the A.O. The revenue being aggrieved with
the order of the CIT(A) had carried the matter in appeal before ITAT.
Held
The Hon’ble ITAT by placing reliance on judgement of Hon’ble High
Court of Karnataka in Bharti Airtel Ltd. Vs. DCIT [2015] 372 ITR 33 had
concluded that the assessee remained under no obligation to deduct tax
at source on the said discounts,thus it could not be held as being in
default under Sec. 201(1) and 201(1A)of the Act. The sale of starter
kits/sim cards is purely a purchase/sale transaction on
principal-to-principal basis and there is no relationship of agency,
hence no obligation was cast upon the assessee to have deducted tax at
source under Sec. 194H in respect of the discounts given to the
distributors on the sale of the same. Thus,in the absence of any
obligation castupon the assessee to have deducted tax at source in
respect of the discounts given to the distributors on the sale of the
prepaid starter kits/sim cards, no disallowance under Sec.40(a)(ia) was
called for in the hands of the assessee. Thus, there is no infirmity
with the order of the CIT(A), uphold the same.The appeal filed by the
revenue is dismissed.
Case referred:
1. Bharti Airtel Ltd. Vs. DCIT[2015] 372 ITR 33 (Karnataka)
(Please click here for judgment)
2. ITO (Exemptions) Vs. M/s Syndicate Rural Development Trust,
I.T.A. No. 1342/Bang/2018, Date of Pronouncement: 15.06.2018, ITAT -
Bangalore
Issue
Whether the learned CIT(A) is right in allowing exemptions u/s 11(1)(d) which was not claimed in the return of income?
Held: - Yes
Brief facts
The appellant is a trust registered under section 12AA and filed its
return of income declaring a Nil income. During the year, appellant
received Rs.50.00 lakh from National Institute of Rural Development,
Government of India, as a part of grant of Rs.100 lakh for creating
infrastructure for setting up of RSETI (Rural Self Employment Training
Institute). The AO has made an addition of Rs.50.00 lakh to the return
of income on the ground that the appellant did not claim the same as
corpus fund under section 11(1)(d) of the Act. The AO also added the
interest on the building fund which was reflected as receipt in receipts
and payments account, but not included in the income and expenditure
account. The assessee preferred an appeal before the CIT(A) and filed
relevant evidence to demonstrate that the first instalment was given for
creating infrastructure for setting up of RSETI at Gautam Buddh Nagar,
Uttar Pradesh. He has also scanned the letter and the approval issued in
this regard in its order and having examined the claim under section
11(1)(d) of the Act, the CIT(A) has deleted the additions relying upon
the judgment of the jurisdictional High Court. Aggrieved, the Revenue
preferred an appeal before the Tribunal.
Held
The Hon’ble ITAT held that the submissions of the appellant and
assessment order were carefully considered. It is undisputed that the
appellant in the return made an error in not claiming the grant and the
interest on it as corpus fund u/s.11(1)(d) or specific fund. But the
intention of the appellant is reflected in its actions. The appellant
received Rs.50 lakhs as grant from NIRD, Ministry of Rural Development
for building fund as mentioned in the sanction letter and treated it as a
separate fund in its books.The CIT(A) has adjudicated the issue in the
light of evidence filed before it and the judgments of the
jurisdictional High Court and no specific defect is found in the order
and there is no infirmity in the order of the CIT(A). Therefore, the
appeal was held against the revenue and in favour of assessee.
(Please click here for judgment)
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