Wp/2460/2015 Of M/S. Vodafone South Ltd v. By The

HON'BLE SRI JUSTICE G.CHANDRAIAH& HON’BLE SRI JUSTICE CHALLA KODANDA RAMW.P. Nos. 2456, 2460, 2464, 2469 and 2472 of 2015 DATE: 25.08.2015 Between: M/s. Vodafone South Limited .. petitioner And 1. The Deputy Commissioner, TDS Circle-2(1) 2. The Deputy Commissioner, Circle-15(2) 3. The Commissioner of Income Tax (Appeals) 4. The Addl. Commissioner of Income Tax (TDS)..RespondentsRespondents COMMON ORDER:- (per Hon’ble Sri Justice G. Chandraiah) Inasmuch as these five writ petitions are inter-related and filed by the same assessee questioning theOrder dated 22.01.2015 passed by the 1[st] respondent, allthese matters are taken up together for disposal by thisCommon Order. By virtue of the order, dated 14.11.2014 passed bythe 2[nd] respondent, the petitioner-company, which is anassessee, was declared to be an assessee in defaultunder Section 220 of the Income-Tax Act, 1961 (forbrevity “the Act”) and a total demand of tax ofRs.17,42,97,709/- was made for the assessment yearsfrom 2010-2011 to 2014-2015. The demand was madewith the allegation that the assessee failed to make TDSunder Section 194(H) of the Act on thebrokerage/commission paid to its dealers. The case ofthe assessee is that no commission / brokerage has beenpaid to its dealers and the transaction of the petitioner withthe agents/dealers is one of selling the services at adiscount and the discount amount cannot be treated ascommission or brokerage, and hence, the question of making any TDS itself would not arise. However, thepetitioner admits that for the assessment years 2007-2008, 2008-2009 and 2009-2010 against the orders of theTribunal holding that Section 194(H) of the Act can bemade applicable, they preferred appeals before this Court,and this Court, by orders dated 31.07.2013, dismissed theappeals and the petitioner carried the matter in appeal tothe Apex Court. The issue whether the discounts madeby the petitioner to its dealers could be treated asbrokerage / commission is pending before the SupremeCourt in Special Appeals filed by the petitioner and othersand the matters are listed for disposal on 10.09.2015 forhearing. Further, in similar circumstances, the KarnatakaHigh Court in M/s.Bharati Airtel Limited v. DeputyCommissioner (I.T.A.Nos. 637 – 644 of 2013 and batch)had delivered an elaborate judgment dated 14.08.2014holding that the discounts given by the petitioner andother similar operators are not commissions, and henceSection 194(H) of the Act has no application and theDepartment’s appeal against the view taken by theKarnataka High Court is also pending before the ApexCourt for consideration. In that view of the matter, theassessee prays that the impugned order dated22.01.2015 treating the assessee as an assessee indefault is unsustainable and the application dated19.12.2014 filed by the assessee seeking grant of stay ofcollection of demanded tax ought to have been allowed by the 1[st] respondent. Questioning the refusal order dated22.01.2015, the present writ petitions are filed. by the 1[st] respondent. Questioning the refusal order dated22.01.2015, the present writ petitions are filed. Sri Krishna Koundinya, learned senior counsel for thepetitioner, while placing reliance on the judgment of theKarnataka High Court submits that the main issue itself ison board before the Supreme Court, and in fact, thematter is set for hearing on 10.09.2015 as a first case. Considering the fact that there are conflicting judgments ofCalcultta, Kerala and Delhi High Courts holding in favourof the Revenue and the judgment of Karnataka High Courtwhich was held in favour of the assessee, the issue isfluid and has not attained finality. In the circumstances,when these matters came up for admission on09.02.2015, this Court adjourned them to 18.03.2015taking into consideration the fact that the matters arebeing heard by the Supreme Court. Later, the cases wereadjourned sine die with liberty to mention after disposal ofsimilar appeals. Without considering these aspects, the 1[st] respondent, on 20.08.2015, threatened to takecoercive action for recovery of the disputed tax. Hence,he prays for grant of stay of the demanded tax. On the other hand, Sri B. Narasimha Sarma, learnedsenior Standing Counsel for Income-tax, has submittedthat this Court, at the admission stage, did not consider itnecessary to grant stay, and even at this state, this Courtshould not grant the relief sought for. He further submits that as a matter of fact, this Court, in assessee’s owncases in I.T.T.A.Nos.291, 313 and 314 of 2013 for theassessment year 2007-2008, dismissed the appealsaffirming the finding of the Tribunal holding that theamounts paid in the name of discounts, arecommissions/brokerage, as such, there is a default on thepart of the assessee in not making TDS. Inasmuch as thepetitioner has already approached the Apex Court inappeal and the issue whether the amounts paid by thepetitioner as already held to be in the nature ofcommissions/brokerage for the subsequent years as wellis under consideration, and there being no differentiatingcircumstances, the action of the authorities in not grantingstay is justified and the impugned order is unassailable. The learned counsel further submits that whatever may bethe view taken by the High Court of Karnataka, the factremains that the jurisdictional High Court judgment is infavour of the Revenue. In that view of the matter, thelearned Standing Counsel prays to dismiss the writpetitions. We have considered the rival submissions andperused the material placed on record. A careful reading of the judgments in I.T.T.A.No. 291of 2013 and other appeals reveals that this Court did notdiscuss facts of the case, but merely affirmed the order ofthe Tribunal by following the judgment of Delhi High Court reported in C.I.T. v. Idea Cellular Ltd.[[1]], judgment ofKerala High Court in Vodafone Essar Cellular Ltd. v. ACIT[[2]]and the judgment of Calcutta in Bharti Cellular v.ACIT[[3]]. The judgment of this Court in I.T.T.A.No. 291 of2013 is dated 17.07.2013. Later, the Karnataka HighCourt, by its judgment dated 14.01.2014, elaboratelyconsidered the issue and after analyzing the events indetail, came to a conclusion that Section 194(H) is notattracted to the transactions of the petitioner and similarlysituated assessees. It is an admitted fact that the matteris on board before the Supreme Court and listed forhearing on 10.09.2015. Even though this Court hadaffirmed the order of the Tribunal holding that there is noquestion of law which is required to be considered, thefact remains that the appeals are pending before theSupreme Court against the judgments delivered by thisCourt in I.T.T.A.Nos.291, 313 and 314 of 2013. It is alsobrought to the notice of this Court that the Supreme Courtitself, by its orders dated 24.01.2011 in S.L.P.Nos.36446-36453 of 2010 and dated 23.08.2011 in S.L.P.No.22317of 2011, directed that no coercive steps for recovery shallbe taken. In other words, the issue is highly debatableand the matter is set for hearing. Considering all these aspects and in the interest ofjustice, we are of the opinion that the 1[st] respondent-Deputy Commissioner ought to have exercised discretion as enjoined on him under Section 220(6) of the Act andgranted stay. Inasmuch as the matter is ripe for hearingbefore the Supreme Court on 10.09.2015, this Court,instead of setting aside the impugned order andremanding the matter back for fresh consideration, deemsit appropriate to dispose of the writ petitions with thefollowing direction: “The 1[st] respondent – Deputy Commissioner of Income-tax,TDS Circle, is directed not to take any coercive steps forrecovery of the total disputed tax demand of Rs.17,42,97,709/-for the assessment years from 2010-2011 to 2014-2015 subjectto the condition that the petitioner deposits 40% of thedemanded amount. Out of 40%, the petitioner shall pay 20%within a period of two weeks from the date of receipt of a copy ofthis order and remaining 20% shall be paid within a period offour weeks thereafter.” With the above direction, these writ petitions aredisposed of. No order as to costs. As a sequel to disposal of the writ petitions,Miscellaneous Petitions, if any pending, shall standdisposed of as infructuous. _________________ G. CHANDRAIAH, J 25.08.2015 bcj ______________________ CHALLA KODANDA RAM,J [1]325 ITR 148 DEL [2]332 ITR 255 Kerala332 ITR 255 Kerala [3]244 CTR 185 Cal.244 CTR 185 Cal.