9911796707
TMI Blog2015 (5) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee; (f) he shall maintain the branch image of HTEL and shall not do anything which may tarnish or spoil or reduce the value of the assessee; (g) he shall keep the assessee informed as regards feed back received from the customers and shall also keep the assessee informed as regards the purchases and inventory; (h) he shall pay the service tax to the assessee as may be assessed and levied from time to time;(i) he shall not enter into any agreement with any third party which may be considered to be in competition of the business of the assessee; (j) he shall comply with all instructions and directions of the assessee; and (k) he shall not transfer or assign or sub-licence any of its rights and obligations. In consideration of the service to be rendered by him, he shall get a commission at the rates as per the policy to be adopted by the assessee from time to time. The terms and conditions noticed above leave no manner of doubt that the relationship between Poddar Communications and the assessee appearing from the agreement relied upon by Mr. Khaitan is that of an agent and principal. Poddar Communications appears to have been employed to act on behalf of the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyers:- (b) Ensure that all payments to HTEL due under this Agreement are tendered in a timely manner; (f) Unless otherwise agreed in writing, be solely responsible for all costs and expenses for all operating expenses incurred in connection therewith; (i)Make payment to HTEL for any amounts due under this Agreement by way of Account Payee cheque or Banker s Draft or in such other manner as HTEL may agree; (k)Pay the Service tax to HTEL as may be assessed and levied from time to time; (17) NO CREATION OF THIRD PARTY OBLIGATIONS The Service Provider shall not assume or create any obligations on HTEL s behalf without any prior written permission or incur any liability on behalf of HTEL or in any way pledge or purport to pledge HTEL s credit or accept any contract binding upon HTEL without HTEL s prior written consent. He also drew our attention to the sample invoice appearing at Page-75 and the price list at Page-77 which contain the cost of the retailer, the cost of the distributor and the maximum retail price with specific reference to the percentage of discount enjoyed by the distributor and the retailer. He also drew our attention to a judgement of the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. That takes us to the second question, namely, whether the Division Bench was right in taking the view that the commission of ₹ 110, 145 and 165 per moped in respect of different varieties of mopeds sold to the dealers could not be said to be trade discount. Mr. Nariman, learned counsel appearing on behalf of the appellants, contended that this commission allowed to the dealers was clearly trade discount and was, therefore, liable to be deducted in determining the excisable value of the mopeds by reasons of sub-section (b)(ii) of Section 4 of the Act. Now, it is true that this amount allowed to the dealers has been referred to in the agreement as commission but the label given by the parties cannot be determinative because it is for the court to decide whether the amount is trade discount or not, whatever be the name given to it. If we look at the terms of the agreement, it is clear that the agreement was between the appellants and the dealers on principal to principal basis. The clauses of the agreement which we have set out above clearly show beyond doubt that under the agreement, the mopeds were sold by the appellants to the dealers and the dealers did not act as agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement between them. The said income acrues to them only when they sell this right to service and not when they purchase this right to service. The assessee is not concerned with quantum and time of accrual of income to the distributors by reselling the pre-paid cards to the sub-distributors/retailers. As at the time of sale of pre-paid card by the assessee to the distributor, income has not accrued or arisen to the distributor, there is no primary liability to tax on the distributor. In the absence of primary liability on the distributor at such point of time, there is no liability on the assessee to deduct tax at source. The difference between the sale price to retailer and the price which the distributor pays to the assessee is his income from business. It cannot be categorised as commission. The sale is subject to conditions and stipulations. This by itself does not show and establish the principal and agent relationship. He also drew our attention to the paragraph 62 of the judgment which reads as follows:- 62) In the appeals before us, the assessees sell pre-paid cards/vouchers to the distributors. At the time of the assessee selling these pre-paid c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS. Once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent. The terms of the agreement set out supra in unmistakable terms demonstrates that the relationship between the assessee and the distributor is not that of principal and agent but it is that of principal to principal. . Mr. Khaitan, however, added that there are judgments wherein a contrary view has been taken. Such judgments include a judgment of this Court. Mr. Bhowmik, learned advocate, appearing for the Revenue drew our attention to those judgments, wherein a contrary view was taken. They are the judgments in the case of C.I.T. Vs. Idea Cellular Ltd. reported in (2010) 325 ITR 148(Delhi), wherein the following view was taken:- that the legal relationship was established between the assessee and the ultimate consumer/subscriber, who was sold the SIM card by the agents further appointed by the PMAs with the consent of the assessee. It was creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called whether discount or commission, fell within the definition of commission as defined under Explanation (i) to section 194H. Since permission given to agents was to withhold 15 per cent out of advertisement charges collected by them from the customers, and payable to Doordarshan, it was nothing but a payment made to agents in advance by Doordarshan before remittance of net advertising charges to them by the agents. Irrespective of the pattern of account maintained by Doordarshan, what happened when the agent paid 85 per cent of the advertisement charges collected from the customers was that the agent simultaneously got paid commission of 15 per cent which he was free to appropriate as his income. Tax deducted at source on the commission charges of 15 per cent had to be paid by Doordarshan to the Income-tax Department with reference to the date on which 85 per cent of the advertisement charges were received from the agent. Another judgment, on the point, of the Kerala High Court itself is in the case of Vodafone ESSAR Cellular Ltd. Vs. Assistant Commissioner of Income- Tax(TDS)(Kerala) reported in (2011) 332 ITR 255, wherein the following view was taken:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee; (f) he shall maintain the branch image of HTEL and shall not do anything which may tarnish or spoil or reduce the value of the assessee; (g) he shall keep the assessee informed as regards feed back received from the customers and shall also keep the assessee informed as regards the purchases and inventory; (h) he shall pay the service tax to the assessee as may be assessed and levied from time to time; (i) he shall not enter into any agreement with any third party which may be considered to be in competition of the business of the assessee; (j) he shall comply with all instructions and directions of the assessee; and (k) he shall not transfer or assign or sub-licence any of its rights and obligations. In consideration of the service to be rendered by him, he shall get a commission at the rates as per the policy to be adopted by the assessee from time to time. The terms and conditions noticed above leave no manner of doubt that the relationship between Poddar Communications and the assessee appearing from the agreement relied upon by Mr. Khaitan is that of an agent and principal. Poddar Communications appears to have been employed to act on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the dealings and transactions were pursuant to the contract indicated above it is difficult to hold that the dealing were between principal to principal. Therefore, the judgment in the case of Moped India does not render any assistance to the appellant before us. Lastly, the judgment cited in the case of Bharti Airtel (Supra) is of no assistance because we have not been able to persuade ourselves that the dealings and transactions between the assessee and service provider were on the principal to principal basis. The Karnataka High Court held in favour of the assessee only on that basis. Such a full-fledged hearing could have been avoided because the point in substance is already covered by an earlier judgment of this Court in the case of Bharat Cellular Limited vs. Assistant Commissioner of Income-Tax Anr. (supra). But considering the strenuous effort of learned Advocates on either side we thought it proper to devote time to examine the issue. For the aforesaid reason, the first question formulated has to be answered in the affirmative and in favour of the revenue. In so far as the second question is concerned, we hold that the appellant was a person responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
