By TIOL News Service

PUNE, JAN 31, 2017: THE issue is - Whether sale of SIM cards/recharge coupons at discounted rate to distributors, is to be treated as 'commission' liable to TDS u/s 194H. NO is the verdict.

Facts of the case:

The assessee is a company engaged in the business of providing Telecom Services all over India. During the course of survey, it was noticed that the assessee company was not deducting TDS u/s. 194H in respect of discount allowed to pre-paid Distributors. Accordingly, a show cause notice was issued to the assessee company on 21-12-2009, calling for details regarding trade discount passed on to prepaid distributors and the assessee was asked to explain its position.Assessing Officer held that supply and delivery of SIM cards did not constitute sale & purchase but provision of services. Assessing Officer rejecting the claim of the assessee that the discount allowed to the distributors by the assessee company is on account of principal to principal relationship and not that of principal to agent held that the discount allowed by the assessee constituted commission and therefore the assessee was liable to deduct tax at source on such payment u/s.194H. Accordingly, demand was raised for A.Y. 2007-08 & 2008-09.

On appeal, the ITAT held that,

++ it is seen that Karnataka High Court in the case of BhartiAirtel Ltd. held that sale of SIM cards/recharge coupons at discounted rate to distributors is not commission and therefore not liable to TDS u/s.194H. However, the High Court while holding so has remitted the matter back to the assessing authority only to find out how the books are maintained and how the sale price and the sale discount is treated and whether the sale discount is reflected in their books. If the accounts are not reflected as set out in para 60 of the order, section 194H is not attracted. Therefore, matter restored to the file of the Assessing Officer for necessary verification. Thus, following the same, the sale of SIM cards/recharge coupons at discounted rate to distributors is not commission and therefore not liable to TDS u/s.194H.

(See 2017-TIOL-78-ITAT-PUNE)