TMI Blog1975 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to allow a commission of five per cent on its price list to Herbertsons Private Limited. It was further agreed that where some special lot rates in respect of orders over 500 cwt. from buyers were given, Herbertsons Private Limited would be authorised to allow full five per cent where required and they would be allowed a minimum of three and a half per cent. It was provided in the said letter that Government tenders and supplies handled directly by the respondent would not be covered by the arrangement. Herbertsons Private Limited were, however, authorised to do direct business with the Government in the eventualities stated and, in that case, it was provided that they would get such commission as was settled between the parties. It was agreed that any fluctuations in the prices would be to the account of the respondent and the stocks held by Herbertsons Private Limited and their various depots would be duly allowed to issue debit or credit notes. As far as the question of payment was concerned, the arrangement contained in the letter of Herbertsons Private Limited dated 22nd August, 1959, was confirmed. In that letter dated 22nd August, 1959, it has been provided that Herberts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent to the said distributors and exigible to tax under the said Act. The respondent preferred appeals against this decision to the Assistant Commissioner of Sales Tax, who dismissed the said appeals. The respondent then preferred two second appeals being Second Appeals Nos. 703 and 704 of 1965 to the Sales Tax Tribunal. In these appeals, the Tribunal came to the conclusion that the distributors were only the agents of the respondent and the property in the goods sent to the distributors did not pass to the distributors. It was held that the transactions between the parties being agency transactions were not sales and were not liable to tax under the said Act. This consolidated reference in respect of both the said second appeals has been made at the instance of the Commissioner of Sales Tax. The question, which has been referred for our consideration is as follows: "Whether, on the facts and in the circumstances of the case and on proper interpretation of the agreement between the parties, the Tribunal was justified in law in concluding that the relation between the respondent and the distributors was that of principal and agents and not of vendor and vendees and, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the terms incorporated in the letter. Their Lordships have pointed out that a sale is transfer of property for a price. After referring to the terms of the said letter, their Lordships held that the diverse clauses of the said agreement created a relationship of principals and agent and not of vendors and purchaser. In coming to this conclusion, the Supreme Court has particularly referred to clause (4) of the letter, which provided that the money towards goods would be remitted as sales were effected or some times in advance. The Supreme Court has also pointed out that bidis were expressly referred to in the said letter as "your bidis". It has also been emphasised that the prices were liable to be altered at the instance of the supplier and the person to whom the goods were supplied was to receive a fixed remuneration for his exertion and was liable to remit the price only after the sale was effected. On these considerations it was held that the relationship was of principals and agent and not of vendors and purchaser and that the transactions were not sales liable to tax under the C.P. and Berar Sales Tax Act, 1947. Coming to the agreement in question, we find that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utors. But, in view of the fact that there is a provision for appropriate debit or credit notes being exchanged in case of revision of prices, this seems to be merely a mode of accounting between the parties. In our view, these circumstances clearly indicate that the property in the goods did not pass to the distributors merely on the goods being despatched to or received by them. Hence it could not be said that as soon as the goods were despatched to the distributors or received by them, the same were sold by the respondent to the distributors. Strong reliance was placed by Mr. Kotwal on the decision of a Division Bench of this Court in Daruvala Bros. (P.) Ltd. v. Commissioner of Incometax, Bombay[1971] 80 I.T.R. 213. In that case, the court, on a construction of the agreement between the parties, came to the conclusion that although the assessee had entered into an agreement with Ciba Pharma Ltd., which was, on the face of it, an agreement for distributorship of the products of Ciba Ltd. of Basle (Switzerland) imported into India by Ciba Pharma Limited, on a true construction of the said agreement, it really provided for a scheme for sale of all the pharmaceutical goods of Ciba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement. It may be pointed out that the aforesaid amounts included in the taxable turnover of the respondent by the Sales Tax Officer also included amounts representing the transactions between the respondent and M/s. Sivaram Swamy, Madras, who were appointed by the respondent as the distributors for South India. In connection with M/s. Sivaram Swamy, the Tribunal has proceeded on the footing that the agreement between them and the respondent was, in all material respects, the same as the agreement between the respondent and Herbertsons Private Limited, to which we have already referred earlier. In view of this, what we have observed in connection with the transactions between the respondent and Herbertsons Private Limited would also apply to the transactions between the respondent and Sivaram Swamy. Apart from this, it appears from a letter dated 5th October, 1960, addressed by Sivaram Swamy to the respondent that Sivaram Swamy by the said letter requested confirmation by the respondent for selling the stocks of sodium salicylate held by them at a reduced price and sent a debit note on account of reduction in the price to the respondent. In another letter addressed by Me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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