HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant Commissioner of Income Tax, Circle 57, Kolkata and Another
Civil Appeal No. 7257 of 2011 / Civil Appeal Nos. 2652-2653, 4949-4950 and 4947-4948 of 2015 / Civil Appeal No. 7455 of 2018 / Civil Appeal Nos. 111 and 2860 of 2021 / Civil Appeal No. 8902 of 2022 / Civil Appeal Nos. 7729, 7735, 7736, 7737, 7738, 7739, 7740, 7741, 7742, 7743, 7679, 7680, 7681, 7682, 7744, 7745, 7746, 7747, 7748, 7848, 7849, 7852, 7853, 7854, 7855, 7856, 7857 and 7859 of 2023 / Civil Appeal Nos. 3514, 3515, 3516 and 3517 of 2024
[2024] 2 S.C.R. 1001 : 2024 INSC 148 ·
194H · 204(iii)
Sources & disclosures includedDownload original judgment / order
Two-judge bench · Sanjiv Khanna, J. · S.V.N. Bhatti, J.
01 · Facts of the case
The common judgment concerns appeals by cellular mobile telephone service providers and the Revenue arising from conflicting High Court decisions on section 194H. Its subject is the prepaid business model, not post-paid operations. Distributors/franchisees paid the providers an agreed discounted price in advance for starter kits, recharge vouchers and similar products, irrespective of whether they had resold them. They could sell below the printed price and determined their own trading margin. The Revenue treated the difference between the distributors' actual resale proceeds and their acquisition price as commission earned as agents. The assessees disputed both agency and any payment or credit of commission by them. The Court examined Bharti's agreement and the admitted financial model; it noted that the Vodafone/Idea agreements differed somewhat but did not reproduce them. Contractual controls covered branding, targets, premises, retailer appointments and customer documentation, while distributors bore their business, staffing, insurance and stock-loss responsibilities.
Source: official court judgment current download / paragraphs 1 (opening unnumbered paragraph) / PDF pages 1, 2 / judgment; official court judgment current download / paragraphs 18-21 / PDF pages 17, 18, 19 / judgment; official court judgment current download / paragraphs 22-28 / PDF pages 26, 27, 28, 29, 30 / judgment
02 · Discussion by the Hon’ble Court
The Court read section 194H with Explanation (i), section 204(iii) and section 182 of the Contract Act. For the agency case advanced by the Revenue, the legal substance of the relationship was decisive, not a label such as franchisee, distributor or principal-to-principal. The relevant indicia included power to alter the principal's legal relationship with third parties, the character of the principal's control, fiduciary duties and an obligation to account for business conducted on the principal's account. A person working on its own account to maximise resale profit can remain an independent contractor despite contractual restrictions. The Court also recognised that one contract may contain different legal relationships.
On these facts, the distributors' contractual duties did not establish a fiduciary business conducted for the telecom providers. Retention of title to SIM cards and customer-document requirements reflected telecom licence obligations; they did not by themselves establish agency. The distributors earned their margin upon their own resale, and the providers neither paid nor credited that income. The actual margin was not necessarily the difference between the printed price and the distributor's discounted acquisition price. The providers were not privy to the resale transactions. The word 'indirectly' in Explanation (i) captures indirect satisfaction of a payer's obligation; it does not create a payment obligation where the main provision is inapplicable.
Singapore Airlines was distinguished because agency was undisputed there and its billing-and-settlement mechanism supplied information about supplementary commission payable in that agency relationship. The Revenue could not impose an additional requirement that these telecom providers periodically obtain distributors' resale data and change the statutory deduction timetable through a concession in court. The Court's general discussion of doubtful penalisation was not its basis for relieving these assessees: footnote 29 expressly says that doctrine did not apply here, noting that they had previously deducted tax before discontinuing on legal advice. Footnote 3 also reserves the unargued question whether the main section could reach commission or brokerage in the absence of agency; footnote 4 disclaims any general exemption for indirect book credits.
Source: official court judgment current download / paragraphs 3-9 / PDF pages 3, 4, 5, 6, 7, 8, 9, 10 / judgment; official court judgment current download / paragraphs 11-17 / PDF pages 10, 11, 12, 13, 14, 15, 16, 17 / judgment; official court judgment current download / paragraphs 28-34 / PDF pages 30, 31, 32, 33, 34, 35, 36, 37 / judgment; official court judgment current download / paragraphs 35-41 / PDF pages 37, 38, 39, 40, 41, 42, 43 / judgment
03 · Judicial decision
Section 194H did not apply to the prepaid distribution arrangements before the Court. The cellular providers were not obliged to deduct tax on the distributors' profit component in receipts from retailers/customers, or when selling/transferring prepaid coupons or starter kits to them. The assessees succeeded on this common issue and the Revenue's appeals failed. The jurisdiction-specific operative wording varies between the currently served official SCI PDF and the collected SCR rendition; the outcome records that discrepancy rather than treating the two texts as identical.
Source: official court judgment current download / paragraphs 29-31 / PDF pages 30, 31, 32 / judgment; official court judgment current download / paragraphs 34, 37-42 / PDF pages 36, 37, 39, 40, 41, 42, 43, 44 / judgment
04 · Outcome / in whose favour
In whose favour: Assessees / cellular mobile telephone service providers
Assessee appeal(s) allowed; Revenue appeals dismissed; no order as to costs; pending applications disposed of
Common section 194H issue decided in favour of the assessees; no merits remand or monetary quantification ordered
Confined to the prepaid arrangements and facts examined. No automatic exemption for every franchise, distributor, discount, post-paid arrangement, indirect payment or indirect book credit. The recipients' own liability to tax remains unaffected. The wider unargued question recorded in footnote 3 remains open.
Source: official court judgment current download / paragraphs 42 / PDF pages 43, 44 / judgment; reported collected source / paragraphs 42 / PDF pages 38 / judgment
05 · AKHB REVIEW POINT
For a legacy-year section 194H dispute, test each payment stream against the actual contract and business practice. Preserve advance-payment records, resale-pricing freedom, allocation of stock and credit risk, authority to bind the provider and any duty to account for customer receipts. A principal-to-principal clause or the word discount is not conclusive. Conversely, regulatory controls and retained title to SIM cards do not alone establish agency. Distinguish an independent resale margin from a separately payable marketing fee or genuine agency commission; the judgment does not decide every such payment. Check the governing statutory version and later treatment separately before relying on this decision. No correspondence to, or automatic carryover under, the Income-tax Act, 2025 is asserted.
Source: official court judgment current download / paragraphs 8-9, 14, 17 / PDF pages 7, 8, 9, 10, 13, 16, 17 / judgment; official court judgment current download / paragraphs 28-31 / PDF pages 30, 31, 32 / judgment; official court judgment current download / paragraphs 34-35, 39-42 / PDF pages 36, 37, 38, 41, 42, 43, 44 / judgment
Provision-specific scope
- act
- Income-tax Act, 1961
- section
- 194H, including Explanation (i)
- role
- Operative TDS issue: whether the prepaid distribution margin was commission or brokerage and whether the provider was the person responsible for paying it
- act
- Income-tax Act, 1961
- section
- 204(iii)
- role
- Interpreted definition of person responsible for paying; paras 3-4 and 34
- act
- Income-tax Act, 1961
- section
- 119
- role
- Contextual statutory power for a permissible CBDT circular; para 38, not an independent claim for relief
- act
- Income-tax Act, 1961
- section
- 194D
- role
- Insurance-commission exclusion appearing in the quotation of section 194H; not decided
- act
- Indian Contract Act, 1872
- section
- 182
- role
- Definition and legal indicia of agency used to determine the relationship
- act
- Indian Telegraph Act, 1885
- section
- 4
- role
- Telecom licence and regulatory context; not a tax holding
Source & verification
Download original judgment / order · Open cited source rendition
Identified source rendition: 44 PDF pages; SHA-256 ed819001aab77993534c71d159ead642b45b94f648696dc00df7578eff41ab86. Original bytes preserved. Preferred official-domain text for merits and primary pinpoints, with para-42 variance expressly disclosed. The signature/re-creation date is not represented as the decision date or proof of a particular correction order.
- Group-specific disposition warning: operative para-42 jurisdiction wording differs between two verified renditions. Current official PDF p. 44 says Calcutta; Rajasthan/Karnataka/Bombay/Orissa. Collected SCR PDF p. 38 says Delhi/Calcutta; Rajasthan/Karnataka/Bombay. A correction order has not been verified.
- Full judicial text was read, including footnotes. The editorial headnote statement about doubtful penalisation is qualified by judicial footnote 29, which expressly excludes its application on these facts.
- Footnote 3 leaves open the unargued reach of the main section absent agency; footnote 4 prevents reading the decision as an exemption for indirect credits.
- Paragraph 18 expressly limits the dispute to prepaid operations. The reference to post-paid documentation in para 29 does not enlarge the holding to post-paid operations.
- Paragraph 21 footnote 23 records somewhat different Vodafone/Idea agreements. No assumption that all telecom agreements are word-for-word identical is made.
- Paragraphs 31 and 36 distinguish actual resale profit from a printed-price discount. The note does not describe every printed-price discount as the subject of an assessed commission payment.
- Paragraph 1 is unnumbered in both renditions. References to para 1 mean the opening judicial paragraph, not editorial material.
- Bench is verified from the judgment signature names and SCR title page; later case-status listing panels are not used to substitute a different coram.
- No assessment year, individual connected-appeal origin, quantified refund or later-treatment status is invented.
- Both citations are printed on SCR PDF p. 1. The currently served official SCI PDF is a different, 44-page rendition whose para 42 differs from the 38-page SCR source; the difference is expressly retained below.
- No assessment year for the lead appeal or connected batch is specified in the common judicial text. No year has been inferred from the litigation dates, other cases or headnotes.
- The common-judgment list is verified on official PDF p. 1 and SCR PDF p. 7. Paragraph 42 groups dispositions by appellant category and originating High Court; it does not match each connected appeal number to its High Court or party. No such individual mapping has been inferred.
- Only the accurately established common prepaid-distribution section 194H merits outcome is cleared by this review. Jurisdiction/connected-appeal-specific disposition claims remain unresolved because the two verified source renditions differ. Display the source-variance warning alongside the note.
- Sections 163 and 285 and references to the Foreign Exchange Management Act appear only inside the quoted section 204 footnote. They are not independent issues or holdings and are not promoted to operative tax-section tags.
Statutory scope
Income-tax Act, 1961 provisions as reproduced and analysed in this judgment; no comprehensive current statutory-version audit
The judgment's quoted rates, thresholds, provisos and legislative language are historical source material and are not presented as current compliance guidance. No Income-tax Act, 2025 mapping has been attempted.
Later treatment
Source checked 2026-10-04. Subsequent appeals, review proceedings, stays, reversals and later judicial treatment have not been comprehensively checked. This note is not a citator status certificate.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Identified source links
- official court judgment current download — PDF 44 pages
Preferred official-domain text for merits and primary pinpoints, with para-42 variance expressly disclosed. The signature/re-creation date is not represented as the decision date or proof of a particular correction order.
SHA-256: ed819001aab77993534c71d159ead642b45b94f648696dc00df7578eff41ab86
- reported collected source — PDF p. 1 / SCR p. 1001 — PDF 38 pages
Collected eSCR mirror. Judicial text occupies PDF pp. 8-38 / SCR pp. 1008-1038; para 42 differs from current SCI file. Editorial headnotes and result box are excluded as authority.
SHA-256: 0bbbbd7036bd6f378b2d870e316577feb01a9d5a163088c9a565668083ebca8a
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