No withholding tax on discount on prepaid SIM cards, recharge vouchers: Supreme Court | Mumbai News

Mar25,2024



Mumbai: In a recent decision Supreme Court (SC) made it clear that Discount Given at print price of prepaid sim card And recharge coupon vouchers given by telecom operators to distributors will not be operational deduct tax Liabilities under income tax laws.
The Supreme Court's decision, which came in a batch of appeals along with Bharti Cellular's main case, settled the controversy that had seen contradictory judgments from various high courts. The SC used a four-factor test to determine whether an entity qualifies as an agent, including legal power to bind the principal, control over conduct, fiduciary relationship, and ability to render accounts and receive remuneration. Emphasis was placed on factors such as accountability.
EY-India points out in its newsletter that, in this case, the Supreme Court did not find any principal-agent relationship between the distributors and the telecom operators, as the distributors had the freedom to sell, purchase SIM cards and vouchers at a discounted price. was needed. Below the printed price without accounting for telecom operators.
The Supreme Court clarified that telecom operators are not liable to withhold tax as they have not deposited or paid any income by way of commission to the distributors. It also emphasized that the profit earned from resale by distributors cannot be considered as indirect payment by the telecom company.
Furthermore, the Supreme Court held that telecom operators cannot be expected to withhold tax at source due to lack of knowledge of the contracts between distributors and end customers. The Supreme Court recommended that the Central Board of Direct Taxes (CBDT) issue clear and concise instructions or circulars to avoid such disputes in future.



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