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TMI Blog2011 (1) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... ter referred to as "distributor") as C & F agent-cum-distributor for the purpose of distribution and sale of its products vide an agreement dated December 23, 2002. 3. A survey was conducted under section 133A of the Act and the Assessing Officer passed an order holding that the payment made by the assessee to the distributor constituted commission under section 194H of the Act. The Assessing Officer held that the assessee defaulted in not deducting the tax at source on the amount of commission paid to the distributor and consequently, determined the total tax liability of Rs. 40,06,679 under section 201(1) and 201(1A) of the Act. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) (hereinafter referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion would be selling goods not on his own account but on behalf of another, commonly known as the principal. In order to attract the provision of section 194H, commission must have been received by a person who is acting on behalf of another. In other words, he must be acting as an agent to another person. The Commissioner of Income-tax (Appeals) had also noticed that the assessee as well as the distributor are showing their respective sale invoices and are assessed to sales tax, which was evidenced by the respecive sales bills and sales tax orders. With these observations, and in the light of each and every clause of the agreement, the Commissioner of Income-tax (Appeals) held that the arrangement between the assessee and the distributor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distributors. It is the responsibility of the distributor thereafter to sell those goods further to the consumers-the ultimate users. The principal/manufacturer does not come in picture at all. Of course, he may be liable for some action by the consumer because of defective goods, etc., which is the result of other enactments conferring certain rights on the consumer or common law rights in his favour as against the manufacturer." 7. The facts of CIT v. Idea Cellular Ltd. [2010] 325 ITR 148 (Delhi) are entirely distinguishable from the facts of the present case. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 per cent. advance payment or may be some times on credit at the discretion of the assessee. Both the assessee and the distributor have been collecting and paying their sales tax separately. Both the parties have clearly understood and accepted the agreement between them. That being the arrangement between the assessee and the distributor, it could not be said that the relation between them was that of principal-agent. On the other hand it was clearly stipulated to be an agreement between them on principal-to-principal basis. Both the Commissioner of Income- (Appeals) and also the Income-tax Appellate Tribunal rightly held that the payments being made by the assessee to the distributor were incentives and discounts and not commissions. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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