Relief to Vi: No TDS Deductible under Income Tax Act on Payments Received by Distributors/Franchisees From Third Parties/Customers, Rules Calcutta HC [Read Order]
It was held that Tax deducted at source ( TDS ) under the Income Tax Act is not deductible on payments received by distributors/franchisees from third parties/customers.
![Relief to Vi: No TDS Deductible under Income Tax Act on Payments Received by Distributors/Franchisees From Third Parties/Customers, Rules Calcutta HC [Read Order]](https://www.taxscan.in/wp-content/uploads/2024/07/Vi-vodafone-idea-tds-tax-deducted-at-source-income-tax-income-tax-act-tds-deductible-under-income-tax-act-calcutta-hc-calcutta-high-court-1-1.jpg "Relief to Vi: No TDS Deductible under Income Tax Act on Payments Received by Distributors/Franchisees From Third Parties/Customers, Rules Calcutta HC [Read Order]")
In a significant case, the Calcutta High Court has held that Tax deducted at source ( TDS ) under the Income Tax Act is not deductible on payments received by distributors/franchisees from third parties/customers. Both the Counsel for the parties jointly stated that the judgment of the Supreme Court covers the controversy dated 28.2.2024 in Bharti Cellular Limited(Now Bharti Airtel...
In a significant case, the Calcutta High Court has held that Tax deducted at source ( TDS ) under the Income Tax Act is not deductible on payments received by distributors/franchisees from third parties/customers.
Both the Counsel for the parties jointly stated that the judgment of the Supreme Court covers the controversy dated 28.2.2024 in Bharti Cellular Limited(Now Bharti Airtel Limited) Vs. Assistant Commissioner of Income Tax Circle-57, Kolkata and Anr.] and in view thereof, both the substantial questions of law deserve to be answered in favour of the assessee and against the revenue.
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. Section 194-H of the Income Tax Act does not apply to the facts and circumstances of this case.”
“The appeals filed by the assessee-cellular mobile service providers, challenging the judgments of the High Courts of Delhi and Calcutta are allowed and these judgments are set aside. The appeals filed by the Revenue challenging the judgments of the High Courts of Rajasthan, Karnataka and Bombay are dismissed. There would be no orders as to cost.”
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.
Read More: Vodafone Idea Limited is not required to Deduct Tax u/s 194H on Prepaid SIM Cards: ITAT
Following the aforesaid judgment in the case of Bharti Cellular Limited (Supra) and also as stated jointly by Counsel for the parties, the substantial questions of law are answered in favour of the assessee and against the revenue. A division bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj dismissed the appeal.
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