Relief to Vodafone Idea: No TDS Liability on Discount to Distributors of Prepaid Sim Cards and Recharge Vouchers, rules ITAT [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no Tax Deducted at Source (TDS) liability arises from discount on prepaid sim cards and recharge vouchers, granting a major relief to Vodafone Idea Ltd.(formerly Idea Cellular Ltd.)

The Tribunal comprising Vikas Awasthy and M Balaganesh, on hearing the cross appeals between the Assessee and respondent, relied on the nature of relation between the assessee and distributors of the prepaid sim cards and recharge vouchers to ascertain the liability of Vodafone India Ltd to deduct TDS on discounts given in this regard.

It was observed by the bench that the matter had already been settled in favour of the assessee, by the Rajasthan High Court. The High Court relied on the nature of relationship between the assessee and distributors, which was followed in this matter by the Tribunal.

On behalf of the revenue, it was contended by counsel J D Mistry that the assessee had erred in accounting the discounted price of sales as its revenue when sim cards were sold to distributors.  On perusal of the decision referred to by the revenue in this regard, it was observed that, the decision was rendered in the context of determination of Annual Gross Revenue for the purpose of fixing the licence fee payable to Government by the telecom service providers, which was held to be inapplicable in this present matter.

In favour of the assessee, the lack of material on record against Vodafone India was highlighted by the Tribunal3 to hold that,  “the relationship between assessee and distributor is only that of Principal to Principal and not that of Principal to Agent and accordingly there is no obligation for the assessee to deduct tax at source in terms of section 194H of the Income Tax Act, 1961”, and reliefs were granted accordingly.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates