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2009 (2) TMI 246 - AT - Income TaxTDS u/s 194H - Penalty levied u/s 271C - failure to deduct the tax at source on discount allowed by the assessee - assessee supplied Pre-paid SIM Card and recharge vouchers to pre-paid distributors at a discounted price - Contract of agency - relationship between principal and agent - Before the ld CIT(A) it was contended by the assessee that there was no principal and agent relationship between the assessee and the distributor and the discount allowed to such distributors was not commission paid attracting deduction of tax at source u/s. 194H. According to the assessee, it is not the product sold which determines the relationship between the supplier and the distributor but the terms of contract between the two. CIT(A) held that there was no principal agent relationship between the assessee and the distributors nor there was any payment at all by the principal to the distributor either directly or constructively i.e., in an implied manner - further held that since there was no payment at all either in monetary terms or in terms of goods and/or services, the provisions of s. 194H are not attracted - further held that simply because the agreement shows the difference between the market price and the price at which the distributor buys the cards as commission or the treatment given in accounts, it would not partake the character of commission for the purpose of taxation - CIT(A) while observing that viewed from any angle, it cannot be said that the assessee was a defaulter, attracting the provisions of s. 201(1) and the provisions of s. 201 (1A). HELD THAT:- The Hon'ble Supreme Court in the case of Bhopal Sugar Industries Ltd. vs. STO [1977 (4) TMI 151 - SUPREME COURT] explained the contract of agency to mean;- "A contract of agency, however, differs essentially from contract of sale in as much as an agent after taking delivery of the property of the principal does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Furthermore, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal." In Gordon Woodroffe & Co. vs. Sheikh M.A. Majid & Co.[1966 (3) TMI 79 - SUPREME COURT] it has been observed that it is well established that even an agent can become a purchaser when an agent pays the price to the principal on his own responsibility. Applying the ratio of the decisions in the light of provisions of s. 194H, and keeping in view that the decisions relied on by the ld DR in Asstt. CIT vs. Bharti Cellular Ltd.[2006 (4) TMI 50 - ITAT, KOLKATA] and in the case of Hindustan Coca Cola Beverages (P) Ltd. vs. ITO [2005 (7) TMI 306 - ITAT JAIPUR], have been distinguished by the Tribunal in Foster's India (P) Ltd [2008 (4) TMI 397 - ITAT PUNE-A]., on the ground that the normative effect of the judgments of Hon'ble Supreme Court is far greater than that of the judgments of the Co-ordinate Benches, we are of the view that for application of the provisions of s. 194H there should be in existence the relationship of principal and agent in order to bring the discount in the ambit of commission or brokerage. The expression 'commission or brokerage' as contained in cl. (i) of Explanation to s. 194H, it is not so wide that it would include any payment receivable, directly or indirectly for services in the course of buying or selling of goods, hence discount allowed on transactions resulting in outright purchases cannot be treated as brokerage or commission. In our view, the transactions between the assessee and the distributors are on principal to principal basis and not on principal and agent basis and hence, it cannot be said that the assessee was defaulter attracting the provisions of s. 201(1) and s. 201 (1A) and accordingly the order passed by CIT(A) does not call for any interference. The grounds taken by the Revenue are therefore rejected.
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