No TDS on Sale of Recharge Vouchers and Pre-Paid Vouchers to Distributors: ITAT grants relief to Vodafone [Read Order]

In a ruling granting TDS relief to the telecom giants, Vodafone, the Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that TDS provisions under section 194H of the Income Tax Act, 1961 is not applicable on the sale of recharge vouchers and pre-paid vouchers to the sole distributors.

During the relevant assessment proceedings, the Assessing Officer found that the assessee has not deducted the TDS on discounts allowed for prepaid SIM Cards/ Talktime as distributor margin.

On appeal, the Commissioner of Income Tax (Appeals) held that the sale of recharge vouchers and prepaid vouchers and prepaid cards to the sole distributors does not establish Principal-Agent relationship liable to TDS under section 194H of the Act and also held that no tax at source was deductible provided the assessee satisfied the conditions relating to the treatment of discount in the books of accounts.

Referring to its past orders, the Tribunal accepted the plea of the company and held that “against the order passed under section 201(1)/ 201(1A) of the Act for non-deduction of TDS under section 194H of the Act, by furnishing copies of the order of the Tribunal in assessee’s own case for the assessment years 2011-12 & 2010-11 in I.T.A. Nos. 1414 & 1415/Mds/2014 dated 21.09.2017, the assessee has submitted before the L’d. CIT(A) that the said order may be followed to decide the issue in favor of the assessee. By extracting the relevant portion of the order and following the same, the L’d. CIT(A) held that the provisions of section 194H of the Act are not attracted in the case of the assessee and no tax at source was deductible provided the assessee satisfied the conditions relating to the treatment of discount in the books of accounts.”

Dismissing the appeal filed by the Revenue, the Tribunal said that “TheL’d DR could not controvert the above findings of the Tribunal by filing an order of higher Court having modified or reversed. Thus, we are of the considered opinion that the L’d. CIT(A) has rightly followed the decision of the Tribunal in assessee’s own case. Thus, we find no infirmity in the order passed by the L’d. CIT(A).”