Section 194H –Where assessee, engaged in business of providing DTH services, sold set top Box (STB) and recharge coupon vouchers to distributors at a discounted rate, discount so offered could not be considered as commission and, hence, not liable for deduction of tax at source under provisions of section 194H.

30.  [2019] 197 TTJ 75 (Mumbai – Trib.) Tata Sky Ltd.
vs. ACIT ITA No.: 6923
to 6926/Mum/2012 A.Y: 2009-10 to
2012-13 Dated: 12^th
October, 2018

Section 194H
–Where assessee, engaged in business of providing DTH services, sold set top
Box (STB) and recharge coupon vouchers to distributors at a discounted rate,
discount so offered could not be considered as commission and, hence, not
liable for deduction of tax at source under provisions of section 194H.

FACTS

The
assessee-company was engaged in business of providing Direct to Home (DTH)
services in the brand name of Tata Sky. The provision of this service required
installation of set top box and dish antenna at the customer’s premises. The
assessee had entered into agreement with distributors for sale/distribution of
settop boxes, prepaid vouchers, recharge vouchers (RCVs) etc. As per the
agreements, STBs and RCVs were sold to distributors at a discounted price. The distributors/dealers
sold these items to customers/subscribers of the assessee-company at a price
not exceeding the MRP mentioned for the product.

The Assessing
Officer held that the assessee was liable to deduct tax at source in respect of
payments made to the distributors as discount for sale of STBs and recharge
coupons as same was ‘commission and brokerage’ and the same was income in the
hands of distributions for service relevant of assessee. He therefore, treated
the assessee to be in default as per the provisions of section 201(1).

Aggrieved by
the assessment order, the assessee preferred an appeal to the CIT(A). The
CIT(A) upheld the order of the Assessing officer.

HELD

The Tribunal
held that the assessee entered into agreement with the distributor for sale of
Set Top Box (STB) and recharge coupon vouchers. As per agreement products are
sold to distributor at discounted price, as agreed. The distributor/dealer
sells these items to customers/subscribers at a price not exceeding MRP on the
product. As per the agreement, payment of each order for the above items was to
be made by distributor either at the time of placing the order or at the time
of delivery. Apart from the above assessee also provided festival/seasonal
discounts to the distributors. For these discounts assessee did not make any
payment rather it issued credit notes and same was subsequently adjusted from
the payment due from the distributor, so in the financial statements the
discount amount was not reflected.

The Tribunal followed the ratio of the Bombay High
Court decisions in the case of CIT vs. Piramal Healthcare Ltd (2015) 230
Taxman 505 and CIT vs. Qatar Airways (2011) 332 ITR 253 wherein it
was held that the assessee should not be visited with the liability to deduct
TDS for non-deduction of tax at source u/s. 194H on the difference between the
discounted price at which it is sold to the distributors and the MRP upto which
they are permitted to sell. The difference between MRP and the price at which
item is sold to the distributor cannot be held to be commission or brokerage.
The distributors are customers of the assessee to whom sales are affected. The
discounts and credit notes credited cannot be considered to be commission
payment u/s. 194H and therefore, the assessee was not liable to deduct the tax at source on the impugned amounts in this case.