Sherla v. Ita.603.2017.Doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL NO.603 OF 2017 Pr. Commissioner of Income Tax - 8 … Appellant Vs Reliance Communications Infrastructure Ltd.… Respondent Mr.Suresh Kumar for the Appellant Mr.R.Murlidharan with Mr.B.G. Yewale I/b M/s.Rajesh Shah & Co.for the Respondent CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATED: JULY 22, 2019 P.C.: 1.This appeal is filed by the Revenue challenging the judgment of the Income Tax Appellate Tribunal. The following question ispresented for our consideration: (i)Whether on the facts and circumstances of the caseand in law the ITAT was justified in deleting the disallowance made by the AO of Rs.263,77,08,145/- u/s. 40a(i) of the Act,without appreciating the fact that the discount allowed by theassessee to the distributors in respect of starter packs and recharge coupons for its prepaid services amounted topayment by the assessee of commission or brokerage withinthe meaning of Section 194H of the Act as the distributorsare acting as agents of the assessee? 2.In a separate order passed today in Income Tax AppealNo.702 of 2017 concerning the same assessee, similar questionwas examined and rejected by making following observations: “3.The respondent assessee is a companyregistered under the Companies Act. The issues arisein relation to the Assessment Year 2007-2008. Thefirst question pertains to disallowance under section40a(i) of the Income Tax Act, 1961 (for short, ‘the act’)on the ground that according to the Assessing Officer,the assessee had deducted tax at source in terms ofsection 194H of the Act while making certainpayments. The Tribunal in the impugned judgmentallowed the assessee’s appeal on two grounds. Firstly,that the order under section 201 of the Act was passedholding the assessment to be in default of deduction oftax at source. In appeal, the Commissioner hadallowed the assessee’s appeal against which theRevenue had not carried the issue further. Even onmerits, the Tribunal was of the view that the paymentwas made on principal to principal basis and was not apayment of a principal to the agent. 3.Having heard the learned Counsel for the parties andhaving perused the documents on record, we do not find anyerror in the view of the Tribunal. The Tribunal, as noted,besides holding that the Commissioner’s order setting asidethe order passed u/s 201 was not carried in appeal, had also independently examined the nature of the transaction andcome to the conclusion that when the transaction wasbetween two persons on principal to principal basis,deduction of tax at source as per section 194H of the Act,would not be made since the payment was not forcommission or brokerage. 4.Coming to second and third questions, the sameemanates from the disallowance sought to be made byRevenue under section 14A of the Act. The Tribunal in theimpugned judgement, came to the conclusion that theassessee had not earned any exempt income and there is,therefore, no question of disallowance under section 14Athat would arise. The Tribunal had relied on the decision ofthe Delhi High Court in the case of Cheminvest Ltd. vs.CIT, reported in 378 ITR 33 (Delhi). 5.In view of such facts, we find no error in the view of theTribunal. The decision of the Delhi High Court in the case ofCheminvest (supra) has been followed by this Court onnumerous occasions.” 3.In the result, this appeal is dismissed. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.)