Held that while the prepaid SIM cards were not the property of the franchisees or distributors and no right, title or interest was transferred to them, this was a mandate and requirement of the licence issued to the assessees by the Department of Telecommunications. In actual practice, the right to use the SIM card and its possession was handed over and given to the end-user, who installed the SIM card in his phone to avail of the telecommunications services. Similarly, the franchisees or distributors had to ensure that post-paid customers or end-users filled up the form as prescribed with the documents to be submitted to the assessees. These were mandates prescribed by the licence issued by the Department of Telecommunications to the assessees. The contractual obligations of the franchisees or distributors, did not reflect a fiduciary character of the relationship, or the business being done on the principal’s account. Held that the profits of the franchisees or distributors consisted of the difference between the sale price received by them from the retailer, end-user or customer and the discounted price at which they had “acquired” the product. Though the discounted price was fixed or negotiated between the assessees and the franchisees or distributors, the sale price received by the franchisees or distributors was within the sole discretion of the franchisees or distributors. The assessees had no say in this matter. The obligation to deduct tax at source was fixed by the statute itself, that is, on the date of actual payment by any mode, or at the time when income was credited to the account of the franchisees or distributors, whichever was earlier. The income of the franchisees or distributors, being the difference between the sale price received by the franchisees or distributors and the discounted price, was paid or credited to the account of the franchisees or distributors when they sold the prepaid product to the retailer, end-user or customer. The sale price and accordingly the income of the franchisees or distributors was determined by the franchisees or distributors and the third parties. Accordingly, the assessee did not, at any stage, either pay to, or credit the account of the franchisees or distributors with, income by way of commission or brokerage on which tax at source under section 194H of the Act was to be deducted. Held that the assessees neither paid nor credited any income to the person with whom they had contracted. The assessees were not privy to the transactions between the franchisees or distributors and third parties. It was, therefore, impossible for the assessees to deduct tax at source and comply with section 194H of the Act, on the difference between the total consideration received by the distributors or franchisees from third parties and the amount paid by the distributors or franchisees to them. The Department’s contention that even if the franchisees or distributors received payment in the form of income from the retailer or end-user or customer, and the assessees were not making payment or crediting income to the account of the franchisees or distributors, the assessees would be liable to deduct tax at source as payment received or receivable, directly or indirectly, was to be subjected to deduction of tax, was not tenable.Held  that the argument of the Department that the assessees should periodically ask for this information and thereupon deduct tax at source was far-fetched, imposing an unfair obligation and inconveniencing the assessees, beyond the statutory mandate. Further, it would be well-nigh impossible to deduct, as well as make payment of the tax deducted, within the time limits prescribed by law, as these began when the amount was credited in the account of the payee by the payer or when payment was received by the payee, whichever was earlier. The payee received payment when the third party made the payment. This payment was not the payment received or payable by the assessee as the principal. The distributor or franchisee was not the trustee who was to account for this payment to the assessee as the principal. The payment received was the gross income or profit earned by the distributor or franchisee. It was the income earned by the distributor or franchisee as a result of its efforts and work, and not a remuneration paid by the assessee as a cellular mobile telephone service provider. Held  that, therefore, the assessees were not under a legal obligation to deduct tax at source on the income or profit component in the payments received by the franchisees or distributors from the third parties or customers, or while selling or transferring the prepaid coupons or starter-kits to the distributors. Section 194H of the Act was not applicable to the facts and circumstances of this case.(AY.2003-04 to 2008-09)