<p>New Delhi: In a significant judgment, the Supreme Court on Wednesday declared that telecom companies are not liable to deduct tax at source on income or profit in the payments received for selling pre-paid SIM cards from their distributors at a rate below the market price. </p><p>A bench of Justices Sanjiv Khanna and S V N Bhatti allowed appeal filed by Bharti Airtel Limited and others and set aside judgements by Delhi and Calcutta high courts.</p><p>The judgment came as big relief to telecom companies like Bharti Airtel Ltd and Vodafone Idea Ltd.</p>.I-T dept collects over Rs 1,260 crore in TDS from online gaming, crypto trade.<p>In its judgment, the bench said, "We hold that the assessees (telecom companies) would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors."</p><p>Dealing with a batch of 40 appeals by telecom companies and the income-tax department, the bench said that Section 194H of the Income Tax Act, 1961, was not applicable to the facts and circumstances of this case. </p><p>"The obligation to deduct tax at source in terms of Section 194 H of the Act arises when the legal relationship of principal-agent is established," the bench said.</p><p>Under Section 194H of the Act, tax is imposed on the earnings generated through commission or brokerage. </p><p>The court dealt with the issue of whether telecom companies should deduct tax at source on the discounts offered to distributors for the sale of SIM cards and recharge vouchers. </p><p>The Income Tax department, for its part, had said that the relationship between the telecom firms and distributors was like a principal to an agent. </p><p>The tax department said that the lower price at which the distributors get the SIM card starter-pack is to be treated as commission for the purpose of taxation. </p><p>However, telecom companies said that they are not paying a commission or brokerage to the distributors, and the distributors are not their agents. The lower price offered should be treated as a discount and not a commission for the purpose of the income-tax Act, they said.</p><p>The court, while deciding the issue, also dismissed the appeals by the revenue department challenging the judgements of Rajasthan, Karnataka and Bombay.</p>
<p>New Delhi: In a significant judgment, the Supreme Court on Wednesday declared that telecom companies are not liable to deduct tax at source on income or profit in the payments received for selling pre-paid SIM cards from their distributors at a rate below the market price. </p><p>A bench of Justices Sanjiv Khanna and S V N Bhatti allowed appeal filed by Bharti Airtel Limited and others and set aside judgements by Delhi and Calcutta high courts.</p><p>The judgment came as big relief to telecom companies like Bharti Airtel Ltd and Vodafone Idea Ltd.</p>.I-T dept collects over Rs 1,260 crore in TDS from online gaming, crypto trade.<p>In its judgment, the bench said, "We hold that the assessees (telecom companies) would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors."</p><p>Dealing with a batch of 40 appeals by telecom companies and the income-tax department, the bench said that Section 194H of the Income Tax Act, 1961, was not applicable to the facts and circumstances of this case. </p><p>"The obligation to deduct tax at source in terms of Section 194 H of the Act arises when the legal relationship of principal-agent is established," the bench said.</p><p>Under Section 194H of the Act, tax is imposed on the earnings generated through commission or brokerage. </p><p>The court dealt with the issue of whether telecom companies should deduct tax at source on the discounts offered to distributors for the sale of SIM cards and recharge vouchers. </p><p>The Income Tax department, for its part, had said that the relationship between the telecom firms and distributors was like a principal to an agent. </p><p>The tax department said that the lower price at which the distributors get the SIM card starter-pack is to be treated as commission for the purpose of taxation. </p><p>However, telecom companies said that they are not paying a commission or brokerage to the distributors, and the distributors are not their agents. The lower price offered should be treated as a discount and not a commission for the purpose of the income-tax Act, they said.</p><p>The court, while deciding the issue, also dismissed the appeals by the revenue department challenging the judgements of Rajasthan, Karnataka and Bombay.</p>
