By TIOL News Service

NEW DELHI, MAY 10, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether if two reasonable constructions of a taxing provision are possible, construction that favours the assessee is to be necessarily adopted. YES IS THE ANSWER.

Facts of the case:

The assessee is a cellular service provider. During the relevant year, the assessee had made payments of commission to its distributors on the sale of pre-paid SIM cards, recharge coupons etc, but without deducting TDS. Accordingly, the assessee was specifically asked to explain the reason as to why no TDS was deducted. After considering the reply of assessee, the AO held that the discount allowed by assessee on transfer of talk-time or sale of these items to the distributors, was commission on which the assessee was liable to deduct tax at source u/s 194H, which the assessee failed to do so. Therefore, the AO held that assessee was deemed to be an assessee in default u/s 201(1) for an amount of Rs.1,97,05,130/- and consequential interest thereon amounting to Rs.47,29,231/- u/s 201(1A).

Further, the AO held that the payment of roaming charges made to other telecom operators for professional services of its technical experts to make the call processing successful by monitoring the physical equipments installed for this purpose, was covered under the definition of "fees for technical services". Since the assessee failed to deduct tax at source u/s 194J on the amount of roaming charges amounting to Rs.2,37,37,341/-, the assessee was deemed to be in default u/s 201(1) for an amount of Rs.2,37,37,341/- & consequential interest thereon of Rs.5,69,696/- u/s 201(1A).

Tribunal held that,

++ the first issue on which assessee was held by the Revenue as 'assessee-in-default' is for discount/commission on sale of prepaid sim cards. The issue contested here was decided against the assessee by Delhi High Court in assessee's own case in CIT vs. Idea Cellular Ltd. for A.Ys 2003-04 and 2004-05. But, in case of Bharati Airtel Limited vs. DCIT - 2014-TIOL-2113-HC-KAR-IT, Karnataka High Court and Rajasthan High Court decided this issue in favour of assessee. After looking into the address of assessee, the jurisdictional High Court will not be the Delhi High Court. The AR relied upon the decision of Supreme Court in case of CIT vs. Vegetable Products Ltd - 2002-TIOL-574-SC-IT-LB wherein it is held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. In absence of any decision of Punjab and Haryana High Court as well as Allahabad High Court on this issue and in view of conflicting decisions of other High Courts, following the ratio of Apex Court, the view favourable to assessee is upheld.

(See 2018-TIOL-681-ITAT-DEL)