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TMI Blog2003 (2) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... tus claimed by the petitioner in respect of its transactions with M/s. Malayalam Plantations Ltd. In the tax revision cases in respect of the assessment under the C.S.T. Act, in addition, there is another point regarding the claim for deduction of the sales return and trade discount. 3.. According to the petitioner the entire transactions in question both under the K.G.S.T. assessment and under the C.S.T. assessment are agency transactions effected by the petitioner on behalf of M/s. Malayalam Plantations Ltd., for whom the petitioner was acting as the managing agent under an agreement dated May 13, 1948 executed between them w.e.f. April 1, 1948. The assessing authority did not accept the said contention and had treated the entire transaction between the petitioner and M/s. Malayalam Plantations Ltd., as one of sale and the respective turnovers were assessed either under the K.G.S.T. Act, 1963 or under the C.S.T. Act, 1956 as the case may be. The petitioner took up the matter in appeal before the Additional Deputy Commissioner (Appeals), Agricultural Income-tax and Sales Tax, Ernakulam. The claim made by the petitioner was allowed by the first appellate authority in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had erroneously come to the conclusion that those documents also would show that the transactions between the petitioner and M/s. Malayalam Plantations Ltd., are independent sale transactions. The counsel further submitted the Tribunal, with reference to clause 16 of the agreement, had erroneously taken the view that the managing agency agreement contemplated both agency transactions and independent sales between the petitioner and M/s. Malayalam Plantations and that the transactions in question fell under latter category. This view was taken by the Tribunal, according to the counsel, relying on the first limb of clause 16 of the agreement in respect of transactions covered by the said limb: The counsel also submitted that the Tribunal had not considered the issue in question under the second and third limb of clause 16 of the agreement. The point for decision is whether there is a sale in the first category of transactions mentioned in clause 16 where the petitioner purchases the goods for the company and supplies the goods to the company. The Tribunal in paragraph 11 of the appellate order held that reading the caption given to clause 16 along with the latter two limbs of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement. He submitted that though the agreement is one styled as a commission agreement in fact the intention of the parties was that the transactions in question should have the incidents of a sale. Government pleader also sought reliance on the explanation to the definition of "sale" under section 2(xxi) of the Act. The Government Pleader also pointed out that there is no stipulation in the agreement that the goods ordered to be purchased by the petitioner should be delivered within any time frame. According to the Government Pleader the transactions between the petitioner and M/s. Malayalam Plantations Ltd., which are the subject-matter of these tax revision cases are nothing but outright sale by the petitioner in favour of M/s. Malayalam Plantations Ltd. The Government pleader relied on clause 16 of the agreement in that regard. 6.. We have considered the rival submissions. We have also perused the orders of the authorities including the Tribunal. As already stated, these revisions relate to various assessment years both under the K.G.S.T. Act and under the Central Sales Tax Act. Of course, since the petitioner had placed some of the purchase orders for M/s. Malayal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch remuneration be repaid all godown rent, freights, insurances, duties, harbour and wharfage dues, commissions, brokerages and charges incurred in the ordinary course of business and all travelling and out-of-pocket expenses which may be incurred by them or their employees in the performance of the company's business. Clause 16 is more relevant and crucial for the purpose of these cases, which reads as follows: "The agents shall procure for the company the benefit of all discounts, rebates and allowances obtainable on goods purchased for the company, but they shall be entitled to receive and retain in respect of such purchases all commissions payable to them as the duly appointed agents of the suppliers or manufacturers if the agents have previously given notice to the company that they hold such agency appointments. Provided always that, where it is customary to purchase the goods locally or owing to urgency or to any other reason the agents deem it in the interests of the company to do so, the agents may act as principals in the sale of goods to the company at prices not greater than the current prices of the goods at the place of sale in which cases no buying commission shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefits by way of discount, rebate and allowances obtained on goods purchased for the benefit of the company. The proviso to clause 16 states that where it is customary to purchase the goods locally or owing to urgency or to any other reason the agents deem it in the interests of the company to do so, the agents may act as principals in the sale of goods to the company at prices not greater than the current prices of the goods at the place of sale. In such cases, the petitioner will not be entitled to any buying commission. Clause 16 further provides that if at any time the company or its estate managers shall be able to make purchases direct upon terms more advantageous than can be obtained through the agents as buying agents or from them as principals, the company may do so but no such purchases shall be made without the opportunity first being given to the agents to do the business. The first proviso to clause 16 deals with a situation of purchasing goods locally or owing to urgency or to any other reason. In such a case it is provided that they may act as principals in the sale of goods to the company at prices not greater than the prices of the goods at the place of sale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of transactions mentioned in this clause are direct sales and discounts and commissions have no application to those transactions. It is in the first category of transaction discounts, rebates and Commissions are mentioned. So the side caption relates to the first category of transactions only. It can be noted that the parties to the agreement themselves have described the transactions as purchases by the Company. The intention of the parties to the agreement as evident from the caption given to this clause, therefore, was to treat the transaction as purchase and sale and not as agency transactions. Reading this portion along with the other two types of transactions mentioned in clause 16 and the clause 2(b) appointing the appellant as buying agent for the goods purchased by the Company will also lead only to the conclusion that the transaction mentioned in the first category of transactions is only a contract for purchase and sale and not a contract of agency." From the above it would appear that the Tribunal had given emphasis to the side caption given to clause 16, viz., discounts and commissions on purchases by company. When clause 2(b) which appoints the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... layalam Plantations Ltd., are independent transactions. 10.. According to us, the approach made by the Tribunal in deciding the issue does not appear to be correct. Clause 2(b) in the agreement clearly provides that the petitioner is appointed as agent of M/s. Malayalam Plantations Ltd., inter alia, for the purpose of purchase of goods and things by the company. Ordinarily, when the principal, viz., M/s. Malayalam Plantations Ltd., places an order the petitioner is obliged to purchase the goods ordered by the principal in the name of the principal. In the instant case, the petitioner has purchased the goods in its own name. The appointment of the petitioner as buying agent, as already noted, is subject to clause 16. We have already noted that clause 16 comprised of the main part and two provisos. Under the main part of clause 16, the agent is obliged to get for the company the benefit of all discounts, rebates and allowances obtainable on goods purchased for the company which prima facie would indicate that the petitioner should disclose to the seller that the goods are being purchased for the principal, viz., M/s. Malayalam Plantations Ltd. There is no case that the purchases we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r remuneration which in turn is geared to the C.I.F. price is also relevant. In these circumstances, we are of the view that the orders of the assessing authority as well as the two appellate authorities on this question cannot be sustained. We are also of the view that the assessing authority must be directed to consider this question in the light of the agreement and correspondence between the petitioner, the supplier and M/s. Malayalam Plantations which we have already adverted to. 11.. In this context it is also relevant to refer to the provisions of Explanation 5 of Section 2(xxi) of the Act. The said Explanation reads as follows: "Explanation 5.-Notwithstanding anything to the contrary contained in this Act or any other law for the time being in force, two independent sales or purchases shall, for the purposes of this Act, be deemed to have taken place,- (a) when the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser; or (b) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal, if the agent is found in either of the cases aforesaid; (i) to have sold the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng authority to consider the claim of agency status in respect of the transactions between the petitioner and M/s. Malayalam Plantations Ltd., in the light of the agreement (annexure I) particularly clauses 2(b), 13 and 16 thereof and the correspondents, purchase bills, debit notes, etc., and also with reference to Explanation 5 of section 2(xxi) of the Act. Petitioner is free to rely on the decisions referred to in this judgment in support of its case. 12.. One other contention also arises in this case, i.e., with regard to the claim for deduction of the turnover of sales return or trade discount. These questions arise only in four cases that too in respect of the assessment under the Central Sales Tax Act for the years 1967-68, 1970-71, 1971-72 and 1974-75. Admittedly the petitioner did not claim deduction of the turnover of the sales return/ trade discount before the assessing authority. However, the petitioner had made the said claim for the first time before the appellate authorities. They declined to consider the said claim on the ground that the petitioner had not made the claim initially before the assessing authority for the assessment years concerned. The contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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