No withholding tax on low cost on pay as you go SIM playing cards, recharge vouchers: Supreme Courtroom | Mumbai Information – Instances of India

MUMBAI: In a latest ruling, the Supreme Courtroom (SC) clarified that reductions given on the print worth of pay as you go SIM playing cards and recharge coupon vouchers by telecom operators to distributors is not going to set off withholding tax obligations underneath the income-tax legal guidelines.
The SC’s determination, which got here in a batch of appeals with Bharti Mobile because the lead case, settled an issue that had seen conflicting judgments from varied excessive courts.The SC laid out a four-factor check to find out if an entity qualifies as an agent. , emphasizing elements corresponding to authorized energy to bind the principal, management over conduct, fiduciary relationship, and accountability to render accounts and obtain remuneration.
EY-India in its publication explains that, on this case, the SC discovered no principal-agent relationship between the distributors and the telecom operators, as distributors have been required to buy the SIM playing cards and vouchers at a reduced worth, with the liberty to promote Beneath the printed worth with out rendering accounts to the telecom operators.
The SC clarified that telecom operators weren’t liable to withhold tax as they didn’t credit score or pay any earnings to distributors as fee. It additionally emphasised that the revenue earned by distributors from resale can’t be thought-about as oblique fee by the telecom firm.
Moreover, the SC famous that the telecom operators, not being aware about contracts between distributors and finish prospects, can’t be anticipated to withhold tax at supply. The SC beneficial that the Central Board of Direct Taxes (CBDT) subject clear and potential directions or circulars to keep away from such disputes sooner or later.