VODAFONE ESSAR MOBILE SERVICES LIMITED (NOW KNOWN AS VODAFONE MOBILE SERVICES LIMITED) Vs. UNION OF INDIA AND ORS.

JUDGEMENT

(1.) The common question that arises for consideration in these writ petitions concerns the validity of the action initiated by the Respondent Income Tax Department ('Department') against the Petitioners under Ss. 201(1) and 201(1A) of the Income Tax Act, 1961 ('the Act') for non -deduction of tax at source ('TDS') for periods earlier than four years prior to 31st March, 2011. These petitions in turn involve the interpretation of the proviso to sub -section (3) of Sec. 201 of the Act, which was inserted with effect from 1st April, 2010.

(2.) Although the facts of these cases are more or less similar, the facts pertaining to Tata Teleservices Limited ('TTSL'), the Petitioner in WP (C) No. 8642/2011, are first discussed. TTSL is a company registered under the Companies Act, 1956, engaged in the business of providing telecommunication services across the country. TTSL has a central office in New Delhi. It provides post -paid and pre -paid telecommunication services for which it entered into agreements with various channel partners (distributors). In the pre -paid segment, TTSL sells products such as Recharge Coupon Vouchers (RCVs) and Starter Kits to channel partners. The RCVs are the pre -paid vouchers used for selling validity and talk time to the pre -paid subscribers. The Starter Kits are the new connections containing Removable User Identity Module (RUIM) cards for providing telecommunication connection.

(3.) The products are sold by TTSL to the channel partners under valid tax invoices. TTSL recovers sales tax and service tax for the said transactions. The channel partner thereafter sells these products to the retailers. It is stated that there is no remuneration/consideration that flow from TTSL to the channel partners for effecting sale of such products. TTSL proceeded on the basis that in terms of the above arrangement that the retailers cannot charge to the consumer an amount exceeding the Maximum Retail Price ('MRP'). The difference between MRP charged from consumers and price charged to channel partners by TTSL is nothing but the maximum amount of business income available for channel partners and retailers taken together. Further, the amount that is realised by channel partners or retailers separately is not known to TTSL at any point of time.