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TMI Blog2017 (7) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... wrongly been invoked, and therefore, the first issue is answered in favour of assessee and against the Department. Tribunal justification in ignoring the statutory books of accounts, the auditors report and the certificate issued by the auditors and merely relying on the internal Management Information System records in coming to the conclusion on the nature of the dealings with the distributors - Held that:- Management Information System was not a part of their books of accounts nor could have been relied upon by the Income Tax Authorities. The basis on which the proceedings were initiated, in our considered opinion, the Statutory Audit Report is final conclusion over the authorities under the Income Tax Act, therefore, the second issue is required to be answered in favour of the assessee. - D.B. Income Tax Appeal No. 205-206/2005, 10/2007, 55/2007, 6 & 7/2008, 540/2009, 1 to 4/2014, 124 to 126/2015, 131-132/2015, 168-171/2015, 195/2015, 8/2016, 45/2016, 48-49/2016, 96 to 108/2016, 199-200/2016, 204/2016, 209-210/2016, 217/2016 - - - Dated:- 11-7-2017 - K. S. Jhaveri And Inderjeet Singh, JJ. For the Appellant(s) : Ajay Vohra, Abhishek Sharma, Gaurav Jain, P. K. Verma, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Tribunal was right and justified in holding that assessee was liable to withhold tax at source under S.194H of the Income Tax Act, 1961 amounting to ₹ 42,43,729/- (including interest) in respect of sales to its distributors, which are on a principal to principal basis and wherein property in the goods is transferred to the distributors? (ii) Whether the Tribunal was justified in ignoring the statutory books of accounts, the auditors report and the certificate issued by the auditors and merely relying on the internal Management Information System records in coming to the conclusion on the nature of the dealings with the distributors? (iii) Whether on the facts and in the circumstances of the case the Tribunal erred in law in holding that interest under Ss.201 (1A) and 220 (2) of the Income Tax Act, 1961 should be levied on the appellant when the taxes due had already been paid by the distributor(s)/ when a valid stay of recovery has been obtained? 3.3 D.B. Income Tax Appeal NO.10/2007 admitted on 07.02.2007. (a) Whether in the facts and circumstances of the case the learned Tribunal was justified in holding the appellant as an assessee in default under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case the Tribunal erred in law in not holding that the notice proposing penalty is time barred and consequently the order levying penalty under Section 271 C of the Act was voidab-initio? (ii). WHETHER on the facts and in the circumstances of the case the Tribunal erred in law in upholding the levy of penalty under Section 271 C for the alleged failure of the appellant to deduct tax at source under Section 194H of the Act in respect of sale of products to its distributors? 3.7 D.B. Income Tax Appeal NO.540/2009 admitted on 11.03.2011. (i). WHETHER on the facts and circumstances of the case the Tribunal erred in law in not holding that the notice proposing penalty is time barred and consequently the order levying penalty under Section 271 C of the Act was voidab-initio? (ii). WHETHER on the facts and in the circumstances of the case the Tribunal erred in law in upholding the levy of penalty under Section 271 C for the alleged failure of the appellant to deduct tax at source under Section 194H of the Act in respect of sale of products to its distributors? 3.8 D.B. Income Tax Appeal NO.1/2014 admitted on 27.01.2014. 1. whether on the facts in circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal erred in Law in not independently directing the AO to carry out such verification delete the demand u/s. 201(1) of the Act in relation to income on which tax had been paid by the prepaid distributors? 3.10 D.B. Income Tax Appeal NO.3/2014 admitted on 27.01.2014. 1. whether on the facts in circumstances of the case, the Tribunal erred in Taw in upholding the order of the CIT (A) treating the appellant as an assessee in default u/s 201(1), for alleged failure to deduct TDS u/s. 194H of the Act in respect of discount. Allowed on pre-paid SIM cards and Talk time sold to pre-paid distributors by the appellant? 2. whether against a deductor who fails to deduct the tax at source, the liability of payment of tax can also be fastened under section 201 apart from Liability of interest and penalty? 3. Whether, according to section 191 read with section 201, a deductor, who fails to deduct tax at source can be deemed to be an assessee in default without adverting to the issue and recording a finding that the assessee who is liable to pay tax directly had not paid tax? 4. Whether on the facts and circumstances of the case, the Tribunal was correct in holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention? 3.14 D.B. Income Tax Appeal NO.126/2015 admitted on 18.10.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention? 3.15 D.B. Income Tax Appeal NO.131/2015 admitted on 18.10.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention? 3.20 D.B. Income Tax Appeal NO.171/2015 admitted on 18.10.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention? 3.21 D.B. Income Tax Appeal NO.195/2015 admitted on 18.10.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/monitored by human intervention? 3.26 D.B. Income Tax Appeal NO.96/2016 admitted on 18.10.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention? 3.27 D.B. Income Tax Appeal NO.97/2016 admitted on 18.10.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provider as this interconnection is managed/controlled monitored by human intervention. 4. Whether in the facts and circumstances of the case, TDS u/s. 194J is applicable on roaming charges paid for facilities provided by service providers. 5. Whether in the facts and circumstances of the case, the Tribunal has erred in deleting the interest u/s. 201(1A) on the tax demand raised under section 201(1) of the Act. 3.31 D.B. Income Tax Appeal NO.101/2016 admitted on 20.04.2017. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194H of the IT Act, as the relation between assessee and distributor is that of principal to agent. 2. Whether in the facts and circumstances of the case, the Tribunal has erred in law in deleting the demand u/s. 201(1) for non deduction of TDS u/s 194H on commission payment to various distributors. 3. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r facilities provided by service providers. 5. Whether in the facts and circumstances of the case, the Tribunal has erred in deleting the interest u/s. 201(1A) on the tax demand raised under section 201(1) of the Act. 3.34 D.B. Income Tax Appeal NO.104/2016 admitted on 20.04.2017. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194H of the IT Act, as the relation between assessee and distributor is that of principal to agent. 2. Whether in the facts and circumstances of the case, the Tribunal has erred in law in deleting the demand u/s. 201(1) for non deduction of TDS u/s 194H on commission payment to various distributors. 3. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provider as this interconnection is managed/controlled monitored by human intervention. 4. Whether in the facts and circumstances of the case, TDS u/s. 194J is applicable on roaming charges paid for facilities provided by service providers. 5. Whether in the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal NO.108/2016 admitted on 26.07.2016. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194-H of IT Act, as the relation between assessee and distributor is that of Principal to Agent? 2. Whether in the facts and circumstances of the case, the TDS is applicable u/s. 194J of the IT Act on roaming charges paid for facility provided by service provider, as this interconnection is managed/ controlled/ monitored by human intervention? 3.39 D.B. Income Tax Appeal NO.199/2016 admitted on 08.11.2016. 1. Whether in the facts and circumstances of the case, Tribunal was justified in holding that the provisions of section 194J are not applicable on roaming charges paid for facilities provided by the Service Providers. 2. Whether in the facts and circumstances of the case, the Tribunal was justified in law in holding the payment of roaming charges to other telecom operator is not subject to TDS u/s 194J of the Act as fees for technical services, and accordingly holding that assessee is not in default u/s 201 read with section 194J of the Act. 3.40 D.B. Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Tribunal has erred in law in deleting the demand u/s 201 (1) for non deduction of TDS u/s 194H on commission payment to various dsitributors. 3. Whether in the facts and circumstances of the case, TDS u/s 194J is applicable on roaming charges paid for facilities provided by service providers. 3.44 D.B. Income Tax Appeal NO.217/2016 admitted on 20.04.2017. 1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the provisions of section 194J are not applicable on roaming charges paid for facilities provided by the Service Providers. 2. Whether in the facts and circumstances of the case, the Tribunal was justified in law in holding the payment of roaming charges to other telecom operator is not subject to TDS u/s. 194J of the Act as fees for technical services, and accordingly holding that assessee is not in default u/s. 201 read with section 194J of the Act. 3. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the provisions of section 194H are not applicable in the case of respondent assessee despite of the fact that the different between the MRP and dealers pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isk of the goods which has been delivered is of the buyer. 6.2 The transfer is also taken within the custody of the Distributor because he has to keep his own godown at his own risk. The title of the property is also vested with the person who has purchased the goods from the assessee. 6.3 The basis on which the proceedings are initiated under Section 133A are on the basis of Management Information System process data which has been raised and the 10% which is claimed to be commission is never paid by the company. It has also been shown on record that the sales tax deferment or 20% rebate which has been given to the assessee company is claimed by the assessee and that has been shown in the invoices which are issued by the assessee. There is no agreement of agency nor even ingredients which are defined under Section 182 of the Contract Act. 7. The provisions of Section 194H, Section 194J of the Income Tax Act read as under: 194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of (a) fees for professional services, or (b) fees for technical services, [or][ (c) royalty, or (d) any sum referred to in clause (va) ofsection 28,] shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to [ten] per cent of such sum as income-tax on income comprised therein : Provided that no deduction shall be made under this section- (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed- (I) twenty thousand rupees, in the case of fees for professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the different decisions of the Supreme Court has held as under: (Page 208) Since the principal controversy in the present petition is whether the stamp vendors are agents of the State Government who are being paid commission or brokerage or whether the sale of stamp papers by the Government to the licensed vendors is on principal to principal basis involving the contract of sale, a brief reference is required to be made to the principles laid down by the Supreme Court in the case of Bhopal Sugar Industries Ltd, v. Sales Tax Officer [1977]3SCR578 , wherein the apex court reviewed all the relevant previous decisions on the subject. (B at Page 209) In the aforesaid decision, the apex court reiterated the principles laid down by it in the earlier decisions as under (see page 48 of 40 STC) : As a matter of law there is a distinction between a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal and make over either the sale proceeds or the goods to the principal. The essence of a contract of sale is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State Legislature for giving exemption from sales tax in respect of sale of stamp papers by the licensed vendors was the fact that the sale of stamp papers by the licensed vendors to the customers would have been otherwise exigible to sales tax. The question of levy of sales tax would arise only because the licensed vendors themselves sell the stamp papers on their own and not as agents of the State Government. Had they been treated as agents of the State Government, the question of levy of sales tax on sale of stamp papers by them would not arise. 8.0.2 And the conclusion which was reached by the Gujarat High Court reads as under: (B at page 216) In view of the above discussion, we uphold the contention urged on behalf of the petitioner's association that the discount made available to the licensed stamp vendors under the provisions of the Gujarat Stamps Supply and Sales Rules, 1987, does not fall within the expression commission or brokerage under Section 194H of the Income Tax Act, 1961. The impugned communication dated March 14, 2002, from the Income Tax Officer, TDS 4, Ahmedabad, to the Senior Treasury Officer, Ahmedabad, is, therefore, quashed and set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) The retailer can sell only during shop hours. (e) Upon termination or cancellation of agreement, the remaining stock can only be disposed of according to direction of Director. 5. The retailer must maintain appropriate stock registers and sale register and issue cash memo to each customer, noting the name and address of the customer. 6. The retailer must offer inspectionto authorised staff to inspect his stock and books of account. 7. If the retailer contravenes any provision of the agreement the Director may without assigning reason suspend supply of wheat to him and cancel his appointment. 8. The Director may at his uncontrolled discretion and without assigning any reason, terminate the agreement upon giving one month's notice, it may similarly be terminated by the retailer. 9. After cancellation or termination of the agreement, any stock of wheat left can only be dealt with or disposed of according to the direction issued in this behalf of the Director and not otherwise. In favour of the view that it is an agreement for sale: 1. The wheat is obtained by depositing a price of ₹ 14 per maund and sold to consumers at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed can be held guilty of criminal breach of trust? As laid down in Section 385, Cochin Penal Code (corresponding to Section 405, I.P.C.) to constitute an offence of criminal breach of trust it is essential that the prosecution must prove first of all that the accused was entrusted with some property or with any dominion or power over it. It has to be established further that in respect of the property so entrusted there was dishonest misappropriation or dishonest conversion or dishonest use or disposal in violation of a direction of law or legal contract, by the accused himself or by some one else which he willingly suffered to do. It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. In the case before us, it is not disputed that If the sum of ₹ 23,100 was paid by P.W. 1 to the appellant by way of illegal gratification to induce the latter to make an allotment of cloth in his favour, there can be no quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dies vested in the Railway even during the process of construction. No such terms exist in the present case. 12. He submitted that in view of these provisions, it is very clear that the transaction which has taken place between the company/assessee and the Department is required to be looked into prospectively. The judgment of Bhopal Sugar Industries (supra) which has also referred the judgment of Sri Tirumala Venkateswara Timber and Bamboo Firm Vs. Commercial Tax Officer, AIR 1968 SC 784 has also been referred by the learned counsel for the appellant which is required to be accepted. 3. In our opinion the real object of the Explanation is to prevent the misuse by the assessee of the relationship of principal and agent for the purpose of evading tax. The first situation contemplated by the legislature is that covered by clause 2(i) of Explanation III where the agent has sold the goods at one rate and passed on the sale proceeds to its principal at another rate. The second situation is where the agent has purchased the goods at one rate and has passed them on to the principal at another rate. The third situation is where the agent has not accounted to his principal for the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a sale for the purpose of assessment to sales-tax. 4. It was contended on behalf of the appellant that in any event items No. 2 to 11 of the notice related to goods which the appellant had sent for sale to the commission agents and as the latter had already paid the sales-tax the appellant was not liable to be assessed to tax again on the same transaction as there was only one sale. As a matter of law there is a distinction between a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal and make over either the sale proceeds or the goods to the principal. The essence of a contract of sale is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will therefore be liable to account for the sale proceeds. The true relationship of the parties in each case has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the transaction is not thereby changed; and because they have said that Lippert was to be entitled to whatever surplus or balance shall remain on the resale of portions of the property, if any were resold, 'as commission and recompense for the said guarantee,' this expression does not convert him from a purchaser into an agent. 5. It is manifest that the question as towhether the transactions in the present case are sales or contracts of agency is a mixed question of fact and law and must be investigated with reference to the material which the appellant might be able to place before the appropriate authority. The question is not one which can properly be determined in an application for a writ under Art. 226 of the Constitution. 6. It was also submitted on behalf of the appellant that the third Explanation to s. 2(1)(n) of the Act violated the guarantee under Art. 14 of the Constitution since the classification contemplated, i.e., sales through commission agents who account fully for all collection made and sales through commission agents who do not account for collections, was not made on any intelligible differentia and had no rational relationship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s between the parties. In all the sales tax statutes as also the definition of sale in the Act in this case, the definition given in the Sale of Goods Act has been bodily lifted from that Act and inserted in the tax statutes. In the instant case under the Madhya Pradesh Sales of Motor Spirit Taxation Act, 1957, sale is defined thus: 'Sale' with all its grammatical variations and cognate expressions means transfer of motor spirit for cash or deferred payment or for other valuable consideration and includes transfer of motor spirit by a society or club or any association to its members, but does not include a mortgage, hypothecation, charge or pledge ; Explanation I.-Consumption of motor spirit by a dealer himself or on his behalf shall be deemed to be a 'sale'; Explanation II.-A sale of motor spirit deemed to be a sale inside the State within the meaning of Sub-section (2) of Section 4 of the Central Sales Tax Act, 1956 (74 of 1956), shall also be deemed to be sale inside the State for the purposes of this clause. Thus it would appear that in order to satisfy the conditions of sale under the definition of the Act, the following conditions mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onable performance of the agency, provided that such implication is not excluded by the express terms of the contract between them, and provided that such expenses and liabilities are in fact occasioned by his employment. We have mentioned this fact, particularly because under the agreement between the Caltex Company and the appellant the loss sustained by the buyer has to be borne by it after delivery of the goods and the seller is, not responsible for the same. Such a special arrangement between the parties is a factor which taken along with other circumstances points towards the agreement being one of sale. 6. It is well-settled that while interpreting the terms of the agreement, the Court has to look to the substance rather than the form of it. The mere fact that the word agent or agency is used or the words buyer and seller are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that the said status would be conferred. Thus the mere formal description of a person as an agent or a buyer is not conclusive, unless the context shows that the parties clearly intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that the appellant had been loaned properties belonging to the company like petrol pumps and their accessories, etc., and it was in respect of these properties which had been given to the dealer for working the petrol pumps that the statements of account were called for from the appellant. This appears to be the modus operandi adopted by the seller-company in respect of all its distributors. There is no stipulation in the agreement which requires or enjoins on the appellant to submit accounts of the Hispeedol or petrol which he may have sold to various customers, after having taken delivery of the same from the company. In these circumstances, therefore, this argument of the learned Counsel for the respondent must be overruled. 22. Another circumstance relied upon by the respondent was the fact that the appellant was under the terms of the agreement to sell the goods at a price fixed and not higher or lower than that. We have already indicated that when a company enters into a distribution agreement it always fixes a particular price in order to protect its goodwill and in order to control the market. Such fixation of the price by itself would not be a restriction which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeded on the footing that the transactions in question were effected pursuant to the said agreement, the primary task to which we must address ourselves is to examine whether under the agreement the assessee firm was an agent of the said company, or whether the assessee firm was really a purchaser of the goods which were booked by it. In this connections, it must be noticed that under Sub-Clause (a) of Clause 2 provides that the distributor has the right of the sale of the product within the stipulated area. Bulk supplies were effected in wagon-load or lorry-load by the said company direct to the consumer, but only provided that the distributor arranged the payment as per the agreement and also took the responsibility to bear entirely the resultant effects and risk from said direct despatches. It is true that the price at which the goods were to be sold to the customers was fixed by the company but that itself does not necessarily lead to the conclusion that the assessee acted merely as an agent of the said company. In fact, it is well settled that the mere fact that the manufacturer fixes the sale price, by itself, cannot lead to the conclusion that the distributor is merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument and the surrounding circumstances and having regard to the course of dealings between the parties. While interpreting the terms of the agreement, the Court has to look to the substance rather than the form of it. The mere fact that the word 'agent' or 'agency' is used or the words 'buyer' and seller' are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that the said status would be conferred. We are in complete agreement with the principles laid down in this decision. We may point out that although we have referred to the assessee being described in the agreement as distributor and not as agent and to the fact that what they got was described as rebate and not commission , we have not treated these circumstances as in any manner decisive. In our view, however, these descriptions considered in the light of the general tenor of the agreement and the circumstances surrounding the transactions between the parties show that the assesses was not agent, but really a purchaser from the company in respect of the goods in question. 9. We may mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f advance tax than what was payable by it. As the amount of tax payable by the contractor had already been paid by it and that too in excess of the amount which was payable by way of advance tax, in our opinion, the Tribunal was absolutely right in holding that the tax paid by the contractor in its own case, by way of advance tax and self-assessment tax, should be deducted from the gross tax that the assessee should have deducted under Section 194C of the Act while computing interest chargeable under Section 201(1A) of the Act. If the Revenue is permitted to levy interest under the provisions of 201(1A) of the Act, even in a case where the person liable to pay the tax has paid the tax on the date due for the payment of the tax, the Revenue would derive undue benefit or advantage by getting interest on the amount of tax which had already been paid on the due date. Such a position, in our opinion, cannot be permitted. 13. In view of the aforesaid reasons, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference is thus answered accordingly and is disposed of with no order as to costs. 16. In the alternative he contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Appellate Tribunal has attained its finality since the appeal filed against the same by the appellant was dismissed by the High Court on 21.5.2004; the point based on Ground No. 7 was not taken up in the appeal preferred by the appellant in the High Court. The High Court further held that the Income-tax Appellate Tribunal's order dated 12.7.2002 got itself merged into the order passed by it on 21.5.2004 dismissing the appeal of the appellant herein. The High Court came to the conclusion that the Tribunal could not have reopened the matter for any further hearing. 9. We have already noticed that the order passed by the Tribunal to reopen the matter for further hearing as regards ground No. 7 has attained its finality. In the circumstances, the High Court could not have interfered with the final order passed by the Income-tax Appellate Tribunal. 10. Be that as it may, the circular No.275/201/95- IT(B) dated 29.1.1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares no demand visualized under Section 201(1) of the Income- tax Act should be enforced after the tax deductor has satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is one more reason for not imposing penalty under Section 271C because by not claiming deduction under Section 40(a)(iii), in some cases, higher corporate tax has been paid to the extent of ₹ 906.52 lacs (see Civil Appeal No. 1778/06 entitled CIT v. The Bank of Tokyo Mitsubishi Ltd.). In some of the cases, it is undisputed that each of the expatriate employees have paid directly the taxes due on the foreign salary by way of advance tax/self-assessment tax. The tax-deductorassessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the 104 cases penalty was leviable under Section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to deduct tax at source. 19. He also relied upon the decision in the case of CIT Vs. Jai Drinks (P) Ltd., (2011) 336 ITR 383 (Delhi) wherein it has been held as under: 8. A perusal of the agreement shows that the Assessee had permitted the distributor to sell its products in a specified area. The distributor was to exclusively deal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... founded either expressly or by implication. Even if there is no agreement between the principal and agent, the relationship can exist. To find out the real relationship between the petitioner and the advertising agency, the Rules of INS and the agreement entered between the advertising agencies and the INS has to be carefully looked into. The petitioner has brought on record as Annexure RA- 2, copy of the Rules governing accreditation (INS Press Handbook 2010-11). The aforesaid rules delineate the clear picture of relationship between the newspaper agencies and advertising agencies. It is useful to refer to certain rules of INS which clearly negate the relationship of principal and agent between the newspaper agency and the advertising agency. Under the heading Rules and Regulations Governing Accreditation of Advertising Agencies , Rule 10 clearly indicates that there is no control of newspapers agency on the advertising agency whereas in a relationship of principal and agent principal retains full control over the activities of agent. Rule 10(1), 10(b) and 10(c) are quoted below:- 10(a). It is free from control or interference of any business or person who owns or controls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to any transaction relating to any asset, valuable article or thing, not being securities. Accordingly, the assessee was called upon to explain why orders cannot be passed under Section 201(1)/201(1A) treating the assessee in default and charging interest for the period of the default in not deducting the taxes. 3. ------ 4. ------ 5. The Assessing Officer considered the submissions of the assessee. He noted that the booths were constructed by the assessee on its own and they were allotted to the concessionaires at its discretion. The milk and other products were sold from these booths by concessionaires during fixed hours of the day. An agreement was entered into between the assessee and the concessionaires. Clause 43 of the agreement provided that the assessee will sell milk and other products to the concessionaires at the sale price fixed by the Dairy from time to time. The concessionaires cannot sell the milk to consumers for any other sale price and if he is found to be indulging in this, the agreement was liable to be terminated. As per Clause 13, the concessionaire did not have any right, title or interest over the booth or the machinery, equipment, fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot responsible for the same. These clauses have all been noticed by the Tribunal. The fact that the booth and the equipment installed therein were owned by the Dairy is of no relevance in deciding the nature of relationship between the assessee and the concessionaire. Further, the fact that the Dairy can inspect the booths and check the records maintained by the concessionaire is also not decisive. As rightly pointed out by the tribunal the Dairy having given space, machinery and equipment to the concessionaire would naturally like to incorporate clauses in the agreement to ensure that its property is properly maintained by the concessionaire, particularly because milk and the other products are consumed in large quantities by the general public and any defect in the storage facilities which remains unattended can cause serious health hazards. These are only terms included in the agreement to ensure that the system operates safely and smoothly. From the mere existence of these clauses it cannot be said that the relationship between the assessee and the concessionaire is that of a principal and an agent. That question must be decided, as has been rightly decided by the Tribunal, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back by the DMS from the concessionaires. The ownership of the milk and other products did not pass from DMS to the concessionaires inasmuch as there was no sale of the milk or milk products to them. Further the unsold milk was to be taken back by the DMS from the concessionaires. The agreement also provided that the daily cash collection of the concessionaires was to be handed over to DMS. On these facts, it was held by the Tribunal that the concessionaires only rendered a service to DMS for selling milk to the customers and, therefore, the relationship between DMS and the concessionaires was that of a principal and an agent. This attracted the provisions of Section 194H. This is apart from the fact, as noticed earlier, that the DMS redrafted the agreements and filed them before the CIT(A) and the Tribunal and such redrafted agreements were found to be different from the agreements found during the survey under Section 133A. This Court, on the above facts held that Section 194H was attracted. As already pointed out, the terms of the agreement entered into between the present assessees and their concessionaires are different in crucial aspects. Therefore, the judgment of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amp Vendors Association Vs. Office of the Accountant General (supra) is required to be accepted. 24. Mr. Kasliwal while appearing for another assessee in his appeals, over and above the submissions made by Mr. Vohra, the counsel for the appellants, has taken us to the agreement entered into between the parties from the record of Tax Appeal No.1/2014 which reads as under: DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT is made at Jaipur on this 1st day of January, 2007. BETWEEN Aircel Digilink India Ltd., a company incorporated under the Companies Act, 1956, and having its registered office at C48. okhla Industrial Area, Phase-II, NewDelhi-110020, and one of its office at 5th Floor, Gaurav Towers, Malviya Nagar, Jaipur, Rajasthan ( ADIL ) which expression shall, unless it be repugnant or contrary to the contest or meaning thereof be deemed to mean and include its successors and assigns of the FIRST PART; AND The Distributor whose full name and address is set out in full in the Schedule I to this agreement ( the Distributor ) which expression shall, unless it be repugnant or contrary to the context or meaning thereof, be deemed to mean and include its successors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Refill Slip means ADIL's product in case of physical form, a preprinted paper slip containing a secret code presently a 16 digit code known as PIN) and a serial number assigned thereto, which is used to Reflll Recharge the Prepaid card. SIM Cards mean cards used for accessing or availing of the prepaid cellular mobile telephony service. Stock means stock of the Service Tickets (including the SIM cards, the Refill Slips). (a) Words (including the words defined herein) denoting the singular number only shall include the plural and vice versa wherever the context so requires. (b) Unless the context otherwise requires, references to a clause or Schedule is to a Clause of or Schedule of this Agreement. (c) The term Agreement referred to herein includes all Schedules/Annexure appended to hereto (including any amendment, modification or alteration of any provision hereof from time to time in accordance with the provisions hereof. 2. APPOINTMENT ADIL hereby appoints the Distributor, and the Distributor hereby agrees to operate as distributor in accordance with the terms and conditions contained herein. The acknowledge that such appointment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r enhanced versions of Service Tickets. (e) Provide its expertise end to guide and assist the Distributor in the various activities pertaining to the Service Tickets using the latest techniques and skills available to ADIL; (f) provide assistance (on request from the Distributor) to its staff on service knowledge and updates; (g) provide and maintain an up-to-date list of the Service Tickets and/or suppliers from which the Distributor may purchase Stock and/or accessories; 6. TRAINING 6.1 ADIL shall provide training in the use, installation and rendering of after-sale Services in respect of the Service Tickets to the Distributor and its personnel, wherever required. 6.2 Any additional training required by the Distributor shall be provided by ADIL in accordance with is standard scale of charges in force from time to time. 6.3 The Distributor shall offer training in the use of the Service Tickets to all its customers on commercially reasonable terms. 7. CONSIDERATION 7.1 In consideration of the Distributo rfulfilling its obligations contemplated under this agreement, ADIL shall sell to the Distributor, the Service Tickets at rate ( Distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Distributor hereby agrees to grant an irrevocable license to ADIL and its designated employees to enter the premises and remove all ADIL signage if Distributor has not done so itself to the satisfaction of ADIL, within 7 days of termination of the Agreement. 10.2 The Distributor shall not be entitled to any compensation or indemnity (whether for loss of distribution rights, goodwill or otherwise) as a result of the termination of this Agreement in accordance with its terms. 10.3 obligations of the parties relating to confidentiality and indemnity as contained in this Agreement shall survive the expiration or terminiation of the Agreement 11. CONFIDENTIALITY The Distributor hereby undertakes that it and each of its affiliates and employees or representatives thereof shall not, at any point of time divulge or communicate in any manner whatsoever, to any third party or any of its customers or use for its own purpose any information about the business and affairs of ADIL or any of its clients which may come to the knowledge of the Distributor pursuant to this Agreement. For the purposes of this clause, confidential information includes (without limitation) subscriber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. 16. NOTICES 16.1 All notices, requests or other communication made or required to be given under this Agreement shall be in writing and shall be delivered personally or by prepaid registered AD mail or certified letter to the respective address of the parties mentioned in this Agreement. 16.2 or such address as may notify the other party in writing and shall be deemed to be served: (A) if it is personally delivered/by courie rat the time of delivery, or acknowledgement taken, or (B) if it is delivered by prepaid registere AD, mail three days after posting thereof 17. No CREATION OF THIRD PARTYOBLIGATIONS 17.1 Notwithstanding anything contrary contained herein, the Distributor shall not, without ADIL prior specific approval/consent in writing, assume or create any obligations on ADIL's behalf or incur any liability on behalf of ADIL or in any way pledge or purport to pledge ADILs credit or accept any contract binding upon ADIL. 17.2 The relationship of the parties is that of seller and buyer and it is hereby expressly agreed and clarified that this Agreement between ADIL and the Distributor is on principal to principal basis and neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction of competent courts of Jaipur. IN WITNESS WHEREOF the parties have set and subscribed their respective hand on the day and year first herein above written. 25. After taking into consideration the agreement, he has mainly contended with regard of the power of CIT(A) where the Tribunal has held that the CIT(A) cannot reverse the finding of Assessing Officer. He has relied on the decision of Supreme Court in the case of Union of India Others Vs. Umosh Dhaimode(1997) 10 SCC 223 and the decision of this Court in Commissioner of Income Tax, Udaipur Vs. Hindustan Zinc Ltd.- (2012) 209 Taxman 519 (Raj.) wherein it has been held as under: Head Note: Appeal CIT(A) Where AO s order found contrary to Tribunal's directions, whether in CIT(AS) cannot the order and remand back the same to AO-The assessee's assessment in this case was earlier completed by the AO on 20-1-1983 at nil income. The appeal against this order was decided by the CIT(A) on 8-3-1994. The Assessee s appeal against this order was decided by the Tribunal. In its order, the Tribunal restored essentially two issues to the file of AO for consideration afresh namely, the issue regarding disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment but was an order of assessment passed after remand by the ITAT. The directions in remand order having not been complied with, the course as adopted by the CIT(A) cannot be said to be de hors the powers available to him under the statute. Therefore, it was held that even if the appeal had been filed after amendment to section 251(1)(a), the order as passed by the CIT(A) directing the AO to decide the matter in accordance with the directions of the Tribunal could not be said to be unauthorised. 26. In the case of Commissioner of Income Tax vs. NIIT Ltd. (2009) 318 ITR 289 (Delhi). It has been observed as under: 6. In the facts of the present case, we find that the order of the Tribunal is correct and must be upheld. The relations between the parties in the present case are not of a lessor and lessee as has been sought to be contended by the Revenue. A reference to the Clauses of the agreement which has been placed on record shows that a limited license is granted by the assessee company to Sh. Ashok Arora and Sh. Ashish Bhatia (i.e. the licencee) for use by the licensee of the trademark and trade name of the assessee company for the education centre. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranchisee as per the Clauses of the agreement. The details of provisions regarding conduct of the business were stipulated in the franchisee. The dominant intention of the parties of the agreement was to conduct the business not mere letting out of the building, furniture and fixture. The amount to be shared with the Franchisee was variable and it was not fixed. There was no minimum guarantee amount which the assessee was to make. The composite arrangement in the essence of the agreement for conducting the business. The essence of agreement is to conduct the business of running education centre jointly. Mere certain rights of the assessee to protect the business interest stipulated in the agreement would not change the essence of the agreement. The share of the Revenue with the Franchisee is on account of composite services provided by the Franchisee. In view of these facts, we hold that the broad objective of the agreement between the assessee and the Franchisee was to share the revenue and certainly it was not hire the premises provided by the assessee. Therefore, the assessee is not liable to deduct the taxes under Section 194-I of the act in respect of the amount shared by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy services . The word technical is preceded by the word managerial and succeeded by the word consultancy . Since the expression technical services is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on The Interpretation of Statutes (Twelfth Edition) in the following words: Where two or more words which are susceptible of analogous meaning are coupled together, noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. This would mean that the word technical would take colour from the words managerial and consultancy , between which it is sandwiched. The word managerial has been defined in the Shorter Oxford English Dictionary, Fifth Edition as: of pertaining to, or characteristic of a manager, esp. a professional manager of or within an organization ,business, establishment, etc. The word manager has been defined, inter alia, as: a person whose office it is to manage an organization, business establishment, or public i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hines or robots. 28. In the case of CIT vs. Career Launcher India Ltd. (2013) 358 ITR 179 (Delhi), it has been observed as under: 35. Let us examine the real nature of the agreement between the assessee and the franchisees and consider the question whether the agreement or contract is for carrying out any work by the franchisee, so as to attract the provisions of section 194C relating to tax deduction at source and consequently the disallowance under Section 40(a)(ia) of the Act. On a careful consideration of the issue, it seems to us that it would not be possible to view the agreement as a contract for carrying out any work by the franchisee. The terms of contract which we have referred to show that the arrangement consists of mutual obligations and rights. It is not a simple case of an agreement under which a person is engaged to carry out any work for the other. The essence of the contract appears to us to be one under which the trade name or reputation or knowhow belonging to the assessee in the business of running learning centres, where students are coached for writing competitive examinations, is permitted to be made use of by the franchisees in different places for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is shared. Parties do not work for each other. Therefore, the mere fact that the definition of the word work is an extended or inclusive definition does not automatically justify the conclusion of the income tax authorities that the activities carried on by the licencees of the assessee in running learning centres amount to the carrying out of any work for the assessee in pursuance of the contract. 29. He has also relied upon the decision in the case of M/S Gujarat State Fertilizers chemicals Ltd. Anr. vs. Commissioner of Central Excise Civil Appeal No. 4066-4067/2015 decided on. 22.11.2016, wherein the Supreme Court has held as under: 15. ----- Once these facts are accepted, we find that handling portion and maintenance including incineration facilities is in the nature of joint venture between two of them and the parties have simply agreed to share the expenditure. The payment which is made by GACL to GSFC is the share of GACL which is payable to GSFC. By no stretch of imagination, it can be treated as common 'service' provided by GSFC to GACL for which it is charging GACL. 16. We are, thus, of the opinion that the second ingredient has not been es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguishable and separately identifiable and hence, it can be termed as technical services . 31. He has contended that all the questions which are posed for our consideration are required to be answered in favour of the assessee. Contentions raised Judgments relied upon by Mr. N.M. Ranka appearing on behalf of assessee Tata tele Services Ltd. 32.1. Mr. Ranka, counsel for another assessee, over and above the contentions raised and the decisions which are sought to be relied upon by the counsel for the assessee has taken us to agreement entered into between the parties and the definitions which are covered under the agreement and following decisions. (i) Ahmedabad Stamp Vendors Association Vs. Union of India, 257 ITR 202 (Guj.) (ii) CIT Vs. Mother Dairy India Ltd., (2013) 358 ITR 218 (Delhi) (iii) Bharti Airtel Ltd. Vs. DCIT (2015) 372 ITR 33 (Karnataka) Contentions raised Judgments relied upon by Mr. Sanjay Jhanwar appearing on behalf of assessee M/s Bharti Hexacom Ltd. 33. Mr. Sanjay Jhanwar, appearing for another assessee has sought to rely upon, three Supreme Court judgments over and above decisions given by the other counsels which are as under: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent view. But the view taken by the Calcutta and Mysore High Courts cannot be said to be untenable view. Hence, particularly in view of the fact that we are interpreting, not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected. Further as seen earlier, the consequences of accepting the interpretation placed by the Revenue may lead to harsh results. (ii) Commissioner of Income Tax Vs. J.K. Hosiery Factory-(1986) 159 ITR 0085 wherein it is held as under: 13. A case converse to the instant case was before the Division Bench of the Bombay High Court in the case of CIT Vs. Estate Finance Ltd. (1978) 111 ITR 119 (Bom), where the Division Bench observed that when enacting the provision regarding cary forward and set off of unabsorbed depreciation under s.32(2) of the IT Act, 1961, the legislature could have imposed a condition that unabsorbed depreciation could be set off against the profits of a subsequent year only if the business in relation to which depreciation was allowed continued to exist in such year. The absence of such a restriction had to be construed in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Jhanwar contended that the issue is concluded in view of the following decisions : 1. Commissioner of Income Tax Vs. BhartiCellular Ltd. (2011) 330 ITR 239 (SC), 2. Union of India Vs. Satish Panalal Shah(2001) 249 ITR 221 (SC), 3. Commissioner of Income Tax Vs. JaipurVidyut Vitran Nigam Ltd. D.B. ITA No. 579/2009, High Court of Judicature for Rajasthan, Jaipur 4. Commissioner of Income Tax Vs BhartiCellular Ltd (2009) 319 ITR 139 (Del.), 5. Skycell Communications Ltd. and Anr. VsDeputy Commissioner of Income Tax and Ors. (2001) 251 ItR 53 (MAD.), 6. M.S. Jewellery Vs. Assistant Commissioner (ASSESSMENT) Agricultural Income Tax and Sales Tax and Anr. (1994) 208 ITR 531 (KER.), 7. CIT vs. Maharashtra State ElectricityDistribution Co. Ltd., (2015) 119 DTR (BOM) 278, 8. Commissioner of Income Tax-II and Ors.Vs Delhi Transport Ltd. Manu/ DE/ 2199/2015. 5. We have heard learned counsel for theparties. 6. In view of the fact that issue is concludedby decision of Bombay High Court and Delhi High Court and SLP against the same has been dismissed. In that view of the matter the issues are required to be answered in favour of the assessee aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following reasons (A) In assessee's own accounts margin of Distributor has been included in gross revenue realization by debiting Distributor commission account and crediting Gross revenue account If the transactions were strictly on principat-to-principal basis, there was no reason to give any effect to the distributor margin in its own books of accounts under any circumstances (B) Assessee has heavily relied upon the sales invoice made by the company and the distributors and corresponding accounting entries to claim that their transactions with the Distributor are principal to principal. However assessee himself has rightly argued that the entries in books of account are not conclusive in determining the real nature of transaction The real nature of transaction is governed by the actual understanding between the two parties and the manner in which the transaction is completed in the reality. In the case of assessee and his distributors, the distributors do not have any substantial independence in carrying out their own transactions which an independent principal always enjoy. The distributor is just acting as an arm of the assessee company in carrying out its business for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. This practice also destroys the sanctity of sale price mentioned on the sales invoice prepared by the company for its transactions with the Distributor. (e) Loss on account of expiry of sold goods borne by assessee company; If the stock available with the distributor cannot be sold before expiry date, the loss accruing this account is also borne by the company after the claim is submitted by the distributor and is by the company. In response to question No. 10 of Shri and question No.8 of Shri Rajesh Kumar (statement dated 15.1.2003) above fact was confirmed. (f) Control of sales executives over the operations of distributors; Sales executives of the assessee company, regularly monitor the operations of distributors, which is neither possible needed in relationship The non of operation by distributors is see to it that area system is strictly adhered to, at the time of sale FIFO maintained etc. Importantly, sales executives send weekly report of stock with distributors to the company. In distant places, Ratangarh, Auditors of company also audit the records and stock of the distributor on monthly basis (question No.7 and 13 of Shri Purushottam) In fact, a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by distributor would have been independent sales by independent principal, then how the assessee company would claim depreciation on these vehicles, because for making a claim of depreciation in respect of an asset, not only the asset should be owned by the assessee but it should be used by assessee for its own business Thus, it is very clear that in the considered view of assessee company and its management, the distribution of goods by the distributors is an extension of their own business. 26. At the outset on the President demand of the bench, to the Ld. AR to produce the copy of agreement/contract entered into by the assessee and its distributors so that nature of transaction is determined in view of provisions of Indian contract Act and Sale of Goods Act. To the surprise of the bench, it has been categorically denied by the Ld. AR that no such agreement/contract between the assessee and its distributors have been executed and it is argued by Ld. AR that it is the mutual understanding between the two which governs the nature of the transaction and accordingly sale bills and Sales Tax Return filed are the only documents which can be considered as a result of mutual underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly monitors the operations of distributors, which is neither possible nor needed in principal to principal relationship. They see to it that area of operation by distributors is strictly adhered to, at the time of sale FIFO system is maintained etc. Importantly, sales executives send weekly report of stock with distributors to the company. In distant places like Ratangarh, Auditors of company also audit the records and stock of the distributor on monthly basis. (viii) Once the goods are sold to the distributor, how the goods are sold further by him should be solely his discretion in principal to principal relationship. However, they have no right to appoint any sub distributor. At the same time, company can appoint any sub-distributor and direct distributor to supply goods to such sub distributors. (ix) A large number of claims, which would never be available in principal-to-principal relationship are made by the distributors and paid by assessee company. Some of such claims are as follows (a) Diesel and petrol claim to meet part o fthe distribution expenses. (b) Vehicle repair to meet part of the distribution expenses. (c) Salary to salesmen claim to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------- Date Particulars Vch Typ Debit Credit Brought Forward 1,27, 93,030.00 26-4-2002 Gross Revenue-Customer J Journal BEING GROSS REVENUE BOOK- ED 114182 C/S FOR THE MONTH OF APRIL 02 FOR SALES MADE FROM UDAIPUR DEPOT AS PER THE ENCLOSED DETAILS 11,61,441.00 24-5-2002 Gross Revenue-Customer J Journal Gross Revenue for the period 27-04-2002 to 24-05-02 (VKIA+KALADERA) 97,35,943.00 Gross Revenue-Customer J Journal being GR booked for 1446-37 cases has been sold during the m.o. may 2002 as per enclosed reconciliation 14,86,999.00 Gross Revenue-Customer J Journal Being reversal entry passed of JV no.763 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit. Whether the distributor have their own warehouses or godowns and sells them as an owner has also not been brought on record. Without bringing on record any material, a said statement that closing stock belongs to distributor, is of no value. Since it is evident from papers found in survey, the distributor is entitled for commission only and hence his right to collect the money from retailer can not be to retain the same but send the same to the assessee. There is an old section 194-H which is in peri Materia with the present section 194-H. The old section came in statute book w.e.f. 1.10.91 and remained effective upto 31.5.92. In pursuance of which there is a Board circular No.619 dated 4.12.1991, which has also been mentioned by the CIT(A) in his order and the relevant para of the circular reads as under:- 6. A question may raise whether there would be deduction of tax at source under section 194-H where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration. It may be clarified that since the retention of commission by the consignee/agent amounts to constructive payment of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the concessionaires is a principal to agent transaction and not a principal to principal transaction. 12. The Tribunal has found, as a matter of fact, that the milk booths are owned by the assessed; the assessed has a right to enter the milk booth and take charge thereof any time without assigning any reason or without any intimation to the concessionaires; unsold milk is taken back by the assessed from the concessionaires; cash collection is daily handed over to the assessed by the concessionaires; the concessionaires only render a service to the assessed for selling milk to the customers; and finally ownership of the goods does not pass from the assessed to the concessionaires inasmuch as there is no sale of the milk or milk products to the concessionaires. No material has been brought on record to controvert these findings of fact. 13. We also do not find any perversity in the findings of fact that have been arrived at by the Tribunal on the basis of the agreement entered into between the assessed and the concessionaires and the terms of their appointment. 14. That being the position, we are of the opinion that no substantial question of law arises. 15. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter of mutual consent between the parties. Even in the case of an agency, there can be a clause by which an agent is authorized to sell the goods for a price less than the MRP. Even in a case of principal to-principal, there may be a clause that the distributor cannot sell a product for a price less than the MRP unless a consent is given by the manufacturer. The matter of pricing in both the cases, i.e., principal-to-principal and principal to agents can be a matter of mutual consent between the parties and even a matter of negotiation after the execution of the agreement. There are no hard and fast rules of any legal proposition as far as these matters are concerned. 51. It is obvious that a service can only berendered and cannot be sold. The owner of the SIM Cards and recharge coupons is the assessee-company, M/s. Vodafone Essar Cellular Ltd. This is because the assessee company is operating under the right of a licence agreement entered into with the Government of India. Nobody else can be given the right to operate as Cellular telephone service providers. The ultimate service is provided by the assessee company to everyone and everywhere. The SIM card is in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etwork of the assessee-company is given only to the ultimate consumer who activates the connection by using the secrete number provided in the SIM Card. It is only for the ultimate consumer or the assessee-company who has the authority to uncover the secret number and bring the card into activation. This unique situation negates the argument of the assessee-company that once delivery of the SIM Card is taken, it is the absolute property of the distributors. No, this is a mis-conception. 56. In the case of post-paid scheme, the assessee-company is treating the benefits enjoyed by a distributor as commission and deducting tax at source. Where the assessee-company itself admits that it is liable to deduct tax at source under Section 194H in respect of post-paid services rendered through its distributors, it is the duty of the assessee to prove that the services rendered by the assessee through the distributors on pre-paid package is different from the post-paid package so as to qualify the former for exemption from operation of Section 194H. 57. It is beyond any dispute that the essence of service rendered to the pre-paid and post-paid consumers are one and the same. There i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Therefore, the argument that there was no occasion as in the case of M.S. Hameed (supra) has no relevance here. The situation considered by the Hon'ble High Court was different. In that case one party is State Government. Without executing an authority in conformity with the statutory and administrative Rules, no-body can become an Agent of the Government. Further, the Court has considered the subject transaction as that of purchase and sale of goods. But, in the present case, there is no failure of any procedural provisions as apprehended by the assessee-company. 65. We have come to the above conclusion specifically on the following grounds: (1) In the judgment of the Hon'ble High court of Kerala in the case of BPL Mobile Cellular Ltd. (supra) it has been held that in the supply and delivery of SIM Cards and other recharge coupons, there is no sale and purchase of goods, but only of providing services; (2) The Hon'ble Kerala High court in the case of Kerala Stamp Vendors Association(supra) have treated the subject transactions as transaction of purchase and sale of goods; (3) The assessee-company as a service provider is always the owner of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the decision of the Gujarat High Court in Ahmedabad Stamp Vendors Association v. Union of India (2002) 176 CTR (Guj) 193 : (2002) 257 ITR 202 (Guj) and a decision of learned Single Judge of this Court in M.S. Hameed and Ors. v. Director of State Lotteries and Ors. (2001) 165 CTR (Ker) 481 : (2001) 249 ITR 186 (Ker) and contended that commission payable cannot be subjected to deduction, we are unable to accept this argument because the case decided by the Gujarat High Court pertains to sale of stamp by the Government to stamp vendors at a discount and the case decided by this Court pertains to sale of lottery tickets to the agents at a discounted price. In both the cases, the purchasers, namely, stamp vendors and lottery agents purchased stamps and lottery tickets respectively at a discounted price and they run the business at their risk. They will get the discount retained by the Government only if stamp paper or lottery ticket is sold and destruction of the stamp paper or lottery ticket before sale in their hands will be a complete loss to them. Therefore the transactions of purchase at discounted price and sale at face value were rightly treated as not agency transactions by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the Assessee liable for recovery of tax at source under Section 194H which is only because we have clearly found that the discount paid to the distributors is for service rendered by them and the same amounts to commission within the meaning of that term contained under Expln. (i) to Section 194H of the Act. The impugned orders issued under Sections 201(1) and 201(1A) of the Act are only consequential orders passed on account of default committed by the Assessee under Section 194H and, therefore, those orders were rightly upheld by the Tribunal. We, therefore, dismiss all the appeals filed by the Assessee. 40. He has relied upon a decision of Calcutta High Court in the case of Bharti Cellular Ltd. (now Bharti Airtel Ltd.) Vs. Assistant Commissioner of Income Tax anr.- (2013) 354 ITR 507 (Cal) wherein it has been held as under: 26. We conclude thus that there has been indirect payment by the assessee to the franchisee of the commission and the same is attractable under section 194H. The decision of the Gujarat High Court in case of Ahmedabad Stamp Vendors Association (supra) is of no assistance in this case as on analysis of fact and interpreting the various pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances and having regard to the course of dealings between the parties and the statutory provisions and the interpretation placed by Courts in the judgments on the point. 51. From the aforesaid clauses, it is clear that there is no relationship of principal and agency. On the contrary, it is expressly stated that the relationship is that of principal to principal. Secondly the Distributor/Channel Partner has to pay consideration for the Product supplied and it is treated as sale consideration. There is a Clause, which specifically states that after such sale of Products, the Distributor/Channel Partner cannot return the goods to the assessee for whatever reason. It is the Channel Partner and the Distributor who have to insure the products and the godowns at their cost. They are even prevented from making any representation to the retailers unless authorized by the assessee. What is given by the assessee to its Distributor/Channel Partner is a trade discount. It is not commission. 58. In both the aforesaid cases, the Court proceeded on the basis that service cannot be sold. It has to be rendered. But, they did not go into the question whether right to service can be sold. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands. The deduction of income 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 demonstrate that the relationship between the assessee and the distributor is not that of principal and agent but it is that of principal to principal. 63. It was contended by the revenue that, in the event of the assessee deducting the amount and paying into the department, ultimately if the dealer is not liable to tax it is always open to him to seek for refund of the tax and, therefore, it cannot be said that Section 194H is not attracted to the case on hand. As stated earlier, on a proper construction of Section 194H and keeping in mind the object with which Chapter XVII is introduced, the person paying should be in possession of an income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time to time. 13. 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 purpose of feeding the retailers and through them to sell the services to the consumers. 14. The judgments cited by Mr. Khaitan donot really provide any assistance to him in deciding the matter in one way or the other. In the case of Daruvala Bros. (P) Ltd. (Supra), the question for consideration was whether the compensation received by the assessee was a revenue receipt or a capital receipt. The contention was that the compensation had been received by the assessee because the agency was surrendered for some of the territories. In lieu of such surrender, the compensation was paid by the principal. It is in that context, the question was considered and it was held that the sum paid to the assessee did not partake the character of compensation at all. We do not find any applicability of this judgment to the issue before us. 43. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation System which has been sought to be relied upon for alleging that expenditure has been claimed could not have been relied upon by the Tribunal or the authorities under the Income Tax Act. (i) The findings which are given by the Tribunal regarding Distributor being Agent in view of the discussion made here-inabove, the arrangement which has been made between the Company and the Distributor is on Principal to Principal basis and the responsibility is on the basis of agreement entered into between the parties. (ii) Regarding MRP, the findings which are arrived at is a price which has been fixed by the assessee company and other expenses, namely; commission given to the retailer and everything is to be managed by the Distributor. In that view of the matter, the restrictions which are put forward will not decide the relation-ship of Principal and Agent. (iii) The Distributor has all rights to reduce his margin. He can increase the margin of retailer and will reduce the margin from 10% to anything between 1% to 10%. There is no restriction by the assessee to give commission amount to the retailer. (iv) Regarding area of operation, it is the business policy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first issue is answered in favour of assessee and against the Department. 49. The second issue which has been raised for our consideration, as discussed hereinabove, the Management Information System was not a part of their books of accounts nor could have been relied upon by the Income Tax Authorities. The basis on which the proceedings were initiated, in our considered opinion, the Statutory Audit Report is final conclusion over the authorities under the Income Tax Act, therefore, the second issue is required to be answered in favour of the assessee. 50. Regarding third issue whether 201A or 201(1A), in view of the decisions of different High Courts, the argument canvassed by counsel for the appellant pre-supposes deduction out of the payment. In our conclusion in issue No.1, the amount was not required to be deducted since they have not made any payment. In that view of the matter any proceedings under Section 201 or 201(1A) are misconceived. In that view of the matter, this issue is also answered in favour of assessee. 51. Contention regarding provisions of Section 271 of the Act,in view of our answer in favour of assessee, this issue is also required to be answere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of above, all the issues in each appeal are answered in tabular form as follows: Sr. No. Appeal No. Ques.1 Ques.2 Ques.3 Ques.4 Ques.5 1. 205/2005 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 2. 206/2005 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 3. 10/2007 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 4. 55/2007 In favour of assessee and against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee Against the department and In favour of assessee -- -- -- 13. 125/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 14. 126/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 15. 131/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 16. 132/2015 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 17. 168/2015 Against the department and In favour of assessee Against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -- 28. 98/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 29. 99/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 30. 100/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee 31. 101/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against the department and In favour of assessee Against the department and In favour of assessee -- -- -- 40. 200/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee -- -- 41. 204/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee -- -- 42. 209/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee -- -- 43. 210/2016 Against the department and In favour of assessee Against the department and In favour of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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