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2024 (5) TMI 229 - GUJARAT HIGH COURTTDS u/s 194H - assessee is a cellular mobile service providers - discount offered by assessee to its distributors on the payment made by the distributors towards pre-paid sim-cards/recharge coupons - - whether appellant assessee and its distributors enjoy legal relationship of principal and agent and not of principal to principal basis? - HELD THAT:- As decided in [2024 (3) TMI 41 - SUPREME COURT] the term ‘agent’ denotes a relationship that is very different from that existing between a master and his servant, or between a principal and principal, or between an employer and his independent contractor. Although servants and independent contractors are parties to relationships in which one person acts for another, and thereby possesses the capacity to involve them in liability, yet the nature of the relationship and the kind of acts in question are sufficiently different to justify the exclusion of servants and independent contractors from the law relating to agency. The term ‘agent’ should be restricted to one who has the power of affecting the legal position of his principal by the making of contracts, or the disposition of the principal’s property; viz. an independent contractor who may, incidentally, also affect the legal position of his principal in other ways. This can be ascertained by referring to and examining the indicia mentioned in clauses (a) to (d) in paragraph 8 of this judgment. It is in the restricted sense in which the term agent is used in Explanation (i) to Section 194-H of the Act. We hold that the assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H is not applicable to the facts and circumstances of this case. Decided in favour of assessee.
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