Cellular Mobile Service Providers Not Obliged To Deduct TDS On Income Received By Distributors: Calcutta High Court
Mariya Paliwala
8 July 2024 4:00 AM GMT
The Calcutta High Court has held that the cellular mobile service providers are not obliged to deduct the tax at source (TDS) on income received by distributors/franchisees from customers.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has relied on the decision of Supreme Court in the case of Bharti Cellular Limited Vs. Assistant Commissioner of Income Tax Circle-57, Kolkata and Anr. In Which It Was Held That The Assessees Would Not Be Under A Legal Obligation To Deduct Tax At Source On The Income/Profit Component In The Payments Received By The Distributors/Franchisees From The Third Parties/Customers, Or While Selling/Transferring The Pre-Paid Coupons Or Starter-Kits To The Distributors.
The Petitioner/Assessee, Vodafone Idea Limited Is An Indian Telecommunications Company With Its Headquarters Based In Mumbai And Gandhinagar. It Is An All-India Integrated Gsm Operator Offering Mobile Telephony Services.
The Assessee Had Entered Into Franchise/Distribution Agreements With Several Parties In Relation To Their pre-paid Connections.
The Issue Raised Was Whether The Relationship Between The Appellant And Its Distributors And Course Of Dealings Between Them, The Appellant Was Required To Comply With The Provisions Of Section 194h Of The Income Tax Act, 1961 Relating To Tax Deduction At Source With Reference To The Discount Allowed To The Distributors In Respect Of Pre-Paid Sim Cards And Pre-Paid Vouchers/Recharge Coupons.
Section 194H of the Income Tax Act provides for Tax Deduction at the Source (TDS) on commission or brokerage to a resident individual. any person not being an individual or huf paying any commission or brokerage is liable for TDS under section 194h since commission or brokerage serves as a source of income.
The Court while following the judgement in the case of bharti cellular limited, answered the substantial questions of law in favour of the assessee and against the department.
Counsel For Appellant: Sachit Jolly
Counsel For Respondent: Smita Das De
Case Title: Vodafone Idea Limited Vs Comissioner Of Income Tax
Case No.: ITA/174/2018
