Income Tax Act,1961, Section 194-H – Income Tax – Liability to deduct tax at source – Cellular mobile telephone service providers – Payment of commission or brokerage – Liability to deduct tax at source–Assessees have entered into franchise or distribution agreements with several parties – It is the case of the assessees that they sell the start-up kits and recharge vouchers of the specified value at a discounted price to the franchisee/distributors – The discounts are given on the printed price of the packs – This discount, as per the assessees, is not a ‘commission or brokerage’ under Explanation (i) to Section 194-H of the Act – Revenue submits that the difference between ‘discounted price’ and ‘sale price’ in the hands of the franchisee/distributors being in the nature of ‘commission or brokerage’ is the income of the franchisee/ distributors, the relationship between the assessees and the franchisee/distributor is in the nature of principal and agent, and therefore, the assesses are liable to deduct tax at source under Section 194-H of the Act – Held that 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 – Section 194-H of the Act is not applicable to the facts and circumstances of this case – Accordingly, the appeals filed by the assessee – cellular mobile service providers, challenging the judgments of the High Courts of Delhi and Calcutta allowed and these judgments are set aside – The appeals filed by the Revenue challenging the judgments of High Courts of Rajasthan, Karnataka and Bombay liable to be dismissed. (Para 20 and 42)
SUPREME COURT OF INDIA
2024 STPL(Web) 131 SC
[2024 INSC 148]
Bharti Cellular Limited (Now Bharti Airtel Limited) Vs. Assistant Commissioner Of Income Tax, Circle 57, Kolkata And Another
Civil Appeal No. 7257 of 2011 With Civil Appeal Nos. 2652-2653, 4949-4950 AND 4947-4948 of 2015; 7455 OF 2018; 111 and 2860 of 2021; 8902 of 2022; 7729, 7735, 7736, 7737, 7738, 7739, 7740, 7741, 7742, 7743, 7679, 7680, 7681, 7682, 7744, 7745, 7746, 7747, 7748, 7848, 7849, 7852, 7853, 7854, 7855, 7856, 7857 AND 7859 OF 2023; AND 3514, 3515, 3516 AND 3517 OF 2024-Decide on 28-2-2024
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