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August 29, 2022

No TDS on the discount on the sale of prepaid sim cards to distributors

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

No TDS on the discount on the sale of prepaid sim cards to distributors

Facts and Issue of the Case

The facts of the Case are that assessee is a franchise of Bharat Sachar Nigam Ltd. The assessee sold SIM-Card on behalf of BSNL. Copy of agreement is annexed herewith Nature of transaction is the discount on sale of Sim-card to the parties on behalf of BSNL. The ld. AO had treated this discount as Commission. On violation of section 194H read with section 40(a)(ia) of the Act, ld. AO added back amount of Rs.8,60,955 as taxable income with the total income of the assessee. In other issue the interest was added back at Rs.51861/- for the reason that assessee declared the interest income at 5,56,386/- against the interest income of 6,08,068/- earned in the year under consideration as per Form No. 26AS of Income Tax Rules, 1962. The interest amount was added back with the total income of the assessee. Aggrieved assessee filed an appeal before the CIT(A). The ld. CIT(A) upheld the order of the ld. AO. Being aggrieved assessee filed an appeal before us.

The ld. counsel had filed a Paper Book which is which is kept in the record. The BSNL sold goods by allowing discount @5.5% on total amount, also TDS was deducted @10% from the party. The same sim-cards were sold by the assessee to the parties and copy of sale bills are annexed. The assessee sold the goods @4% deduction. The ld. Counsel of the assessee prayed for deletion of the addition of Rs.8,60,955/-.

Observation by the Court

The court had heard rival submissions and documents available in the record. The BSNL sold the goods at discount of 5.5% and deduction of TDS at 10@. The sim-card was sold to the party @4% discount. The same amount was already deducted TDS by the BSNL. So, no need to deduction of TDS 2nd time on the same amount. The doubled taxation in same amount is nullity. The assessee relied on the order of Coordinate Bench in the case of Bharat Sanchar Nigam Limited Vs. Income Tax Officer (TDS) in ITA. In this result the assessee had not violated the provisions of section 194H of the Act, so addition amounting to Rs.8,60,955/- is deleted. Relating to interest amount of Rs.51,682/- for mismatch in the declared interest in books of assessee and the interest as per 26AS, the assessee was not able to explain the difference before the Bench. So, the addition made amount to Rs.51,682/- on account of undisclosed interest is sustained. In the result, ground of assessee related addition of interest amount to Rs.51,682/- is dismissed.


The appeal of the assessee is partly allowed by the court.


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