TDS
This query is : Resolved
19 March 2011
Whether income tax is to be deducted from DISCOUNT given to distributor's on sale of prepaid SIM Cards. If so, which section attracts.
19 March 2011
Yes, under sec 194 H
19 March 2011
In my view TDS deduction is not required as it is not Commission.
TELECOM giant Vodafone has told the Delhi high court that the discount offered by it to the prepaid distributors is not commission and hence the company is not liable to deduct tax at source on the sale of talk time by the company. It has challenged revenue department’s demand of about Rs 5 crore alleging non-deduction of tax at source for April 2009-Feb 2010 on the assumption that the discounts extended by the company constituted commission making it liable to pay tax under section 194 H of the Income-Tax Act.
The department had raised a demand of Rs 4,39,85,731 under section 201 of the act for the concerned period and Rs 25, 51,163 under section 201 (1A) for the same period relying on a decision of the Delhi high court. Vodafone in its petition filed through legal firm KJ John &Company said: “The Delhi high court in a recent decision in the case of Idea Cellular has held that a prepaid distributor constitutes an agent of the telecom operator and the discount allowed by the prepaid distributor would amount to commission subject to the deduction of tax at source under section 194 H of the Income-Tax Act. The petitioner (Vodafone) submits that the judgment of the high court is based on earlier decisions and the Cochin bench of the Income-Tax Appellate Tribunal in the case of Vodafone Essar Cellular which does not take into account the various aspects of the matter and is based on an incorrect understanding of the prepaidtelecom business model”.
It said that the company, with effect from January 2007, entered into arrangements with its distributors for sale of prepaid talk time in Delhi and NCR on a principal to principal basis. Under this arrangement, the company sells prepaid talk time todistributors which in turn sells it to retails. They thereafter sells it to the ultimate subscribers. The sale of such talk time by the company to thedistributors is at discount, a part of which is in turn passed by the distributors to the retailers/subscribers. Once delivery is taken by the distributors , they are free to use talk time purchased by them in any way i.e., either for their own consumption or for trading by further selling the talk time to the retailers/subscribers.
Source: https://taxguru.in/income-tax/no-tds-on-discount-on-sale-of-sim-card-by-telecom-companies-to-prepaid-distributors.html
TELECOM giant Vodafone has told the Delhi high court that the discount offered by it to the prepaid distributors is not commission and hence the company is not liable to deduct tax at source on the sale of talk time by the company. It has challenged revenue department’s demand of about Rs 5 crore alleging non-deduction of tax at source for April 2009-Feb 2010 on the assumption that the discounts extended by the company constituted commission making it liable to pay tax under section 194 H of the Income-Tax Act.
The department had raised a demand of Rs 4,39,85,731 under section 201 of the act for the concerned period and Rs 25, 51,163 under section 201 (1A) for the same period relying on a decision of the Delhi high court. Vodafone in its petition filed through legal firm KJ John &Company said: “The Delhi high court in a recent decision in the case of Idea Cellular has held that a prepaid distributor constitutes an agent of the telecom operator and the discount allowed by the prepaid distributor would amount to commission subject to the deduction of tax at source under section 194 H of the Income-Tax Act. The petitioner (Vodafone) submits that the judgment of the high court is based on earlier decisions and the Cochin bench of the Income-Tax Appellate Tribunal in the case of Vodafone Essar Cellular which does not take into account the various aspects of the matter and is based on an incorrect understanding of the prepaidtelecom business model”.
It said that the company, with effect from January 2007, entered into arrangements with its distributors for sale of prepaid talk time in Delhi and NCR on a principal to principal basis. Under this arrangement, the company sells prepaid talk time todistributors which in turn sells it to retails. They thereafter sells it to the ultimate subscribers. The sale of such talk time by the company to thedistributors is at discount, a part of which is in turn passed by the distributors to the retailers/subscribers. Once delivery is taken by the distributors , they are free to use talk time purchased by them in any way i.e., either for their own consumption or for trading by further selling the talk time to the retailers/subscribers.
Source: https://taxguru.in/income-tax/no-tds-on-discount-on-sale-of-sim-card-by-telecom-companies-to-prepaid-distributors.html
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