TMI Blog2013 (4) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... T) where it was a case of publisher of newspaper engaged in the business of printing and publishing newspapers 'Dainik Jagran' and 'Eye Next' from different places across the country. It was giving trade discount to the advertisers who used to bring advertisements for the newspapers. The newspaper publisher used to charge less advertisement charges from a category of persons who are the members of Indian Newspapers Society. The Income Tax Department treated the newspaper Dainik Jagran as assessee in default as it failed to deduct the tax at source on the differential amount which according to the department was commission paid to such advertisers. This Court on the consideration of various judgements of the Apex Court has held that such type of discount is trade discount and it is not commission. By applying the ratio of the aforesaid decision and keeping in mind that the nature of transaction discount under Rule 161 is not payment of commission directly or indirectly but it is a discount. Therefore the impugned order has been passed without taking into consideration the relevant facts and is illegal. Also in similar set of facts CIT (A)-II, Kanpur has held that the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the licensed vendors pertaining to the financial years 2001-2002, 2002-2003 and 2003-2004 and deposited the same with the respondent department. The petitioner further states that similar issue was up for consideration before the Commissioner, Income Tax (Appeals) - II, Kanpur with respect to the Chief Treasury Officer, Kanpur and it was held that the Chief Treasury Officer is not required to deduct the tax at source on the sale of stamp papers etc. to licensed vendors as per the U.P. Stamp Rules, 1942. Therefore, the impugned order is illegal and void. The stand of the respondent department in the counter affidavit is that the impugned order dated 17.2.2004 has been passed after careful consideration and the petitioner has been rightly held as assessee in default for not deducting the tax as per provisions of section 194-H. In para 7 of the counter affidavit in reply to the plea that under the circumstances the CIT(A) has held that section 194-H is not attracted on the sale of stamp paper etc. by the petitioner, it is stated, is wholly irrelevant. Heard Sri S.P. Kesarwani, Additional Chief Standing Counsel on behalf of the petitioner and Shri Shambhu Chopra, learned standi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds "by a person acting on behalf of another person" the element of agency must be present in all such services or transactions in order to fall within the expression commission and brokerage under this Act. To find out as to whether the relation of licensed stamp vendors vis a vis the petitioner, is of principal and agent or it is sale of stamp paper etc. on principal to principal basis, it is necessary to have a look to the relevant statutory provision i.e. the U.P. Stamp Rule, 1942 which governs relationship of the petitioner with stamp vendor. The Court was taken through the various provisions of the Rules i.e. Rules 150, 151, 155, 157, 161, 167. Heading of Chapter IV of the said Rules is "Sale of Stamps". Its Rules 150, 151, 155, 157, 161, 167 read as follows:- 150. Only authorized persons to sell stamps : Exceptions.-No person, who is not duly authorized in the manner hereinafter provided, shall be entitled to sell stamps of any description other than then naye paise revenue stamps. This prohibition shall not apply :- (i) to a legal practitioner or a banker, who buys a stock of stamps for use in his own business, and affixes them, when occasion requires, to the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... masters and school masters the previous approval of the "Postmaster-General" and the "Chairman of the Education Committee of the District Board" respectively shall be obtained. 1[151-A Period of licence and fee.-(1) Licence for vend of stamps shall be granted for a financial year. (2) A licence granted during the course of a financial year shall terminate on March 31, next following. (3) The Collector may on a written application of the licensed vendor to that effect, moved within a period of one month prior to the date on which the licence expires, renew the licence for the succeeding financial year : Provided that if the application for renewal of licence is moved and the renewal is not granted till the expiry of the period of licence, the licence granted shall remain valid till the same is renewed or renewal is refused. (4) A licence fee of one hundred rupees for every financial year for which the licence is granted or renewed shall be paid to the Government through the Collector concerned. Provided that if a new licence is applied for during a financial year the licence fee for the remainder period of that financial year shall be calculated at the rate of twenty-fiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps etc. from the treasury on payment of ready money in cash. They sell stamps etc. to the public not on behalf of the State Government but in their own account. Section 182 of the Indian Contract Act, 1872 defines 'agent and principal' in the following manner:- "182."Agent" and "principal" defined.-An "agent" is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the "principal". The rule as to agency is expressed in maxim "qui facit per alium, facit per se". It is founded on a contract, express or implied, by which one of the parties confides to the other, the management of some business to be transacted in his name or on his account and by which the other assumes to do the business and renders an account of it. A Division Bench of this Court had occasion to consider Section 182 of the Indian Contract Act in the case of Loon Karan Sohan Lal vs. Firm John and Co. and others reported in A.I.R. 1967 Alld. 308. Following was laid down in paragraphs 5 and 6:- "6. ..... The court must examine the true nature of the agreement and the subsequent dealings between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l decisions that the fact that the parties have called their relationship an agency is not conclusive, if the incidence of this relationship, as disclosed by evidence does not justify a finding of agency, and that the court must examine the true nature of the relationship and the functions and responsibilities of the alleged agent: Banaras Bank v. Ram Prasad, AIR 1930 All 573, Phool Chand v. Agarwal B. M. Co., AIR 1938 Lah 814; Suryaprakasaraya v. Matheson's Coffee Works, (1913) 14 Mad L. T. 249. What is the real nature of the relationship created between the plaintiff and the Government of Assam under the so-called agreement of agency Ex. C-1. Before analysing this agreement, it is necessary to state the essential characteristic of an agency in law. Section 182 of the Contract Act defines an agent as "a person employed to do any act for another or to represent another in dealings with third person." The section defines a principal as "the person for whom such act is done or who is so represented." According to this definition, an agent never acts on his own behalf but always on behalf of another. He either represents his principal in any transaction or dealing with a third person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even passing of the consideration is not necessary. The consideration, however, so far as the employers are concerned as evidenced by the Scheme, was to project their better image before the employees. It is well-settled that for the purpose of determining the legal nature of the relationship between the alleged principal and agent, the use of or omission of the word "agent" is not conclusive. If the employee had reason to believe that his employer was acting on behalf of the Corporation, a contract of agency may be inferred. In A.I.R. 1977 SC 1275, The Bhopal Sugar Industries Ltd. v. Sales Tax Officer, Bhopal, the Supreme Court has held as follows: "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 'sell- er' 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 buyer is not conclusive, unless the context shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to Sales of Goods Act. 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. In the light of the propositions of law as delineated above, if we examine the issue in the light of the facts of the present case, relationship of petitioner with licensed vendor is not that of agency. It is not a contract of employment, as contract between principal and agent is primarily contract of employment to bring a legal relation with a third party or contract to such business as may be governed between them and the third party. The U.P. Stamp Rules, 1942 leaves no room for doubt that the title to the stamp papers etc. is passed on immediately to the licensed dealer on payment of ready-money. There is nothing in the said rule to indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, it is clear that although the Government has imposed a number of restrictions on the licensed stamp vendors regarding the manner of carrying on the business, the stamp vendors are required to purchase the stamp papers on payment of price less the discount on the principal to principal basis and there is no contract of agency at any point of time." Respectfully following the aforesaid decision we are also of the view that in the State of U.P. in the light of the Rules, 1942, the sale of stamp papers by the petitioner to the licensed vendor is a sale on principal to principal basis and there does not exist a relationship of agency in between them. The central theme of the impugned order dated 16.12.2003 is that as the stamp papers etc. have been sold at a discounted price, it is nothing but payment of commission to stamp vendors by the petitioner. The impugned order proceeds on the ignorance of the scheme of U.P. Stamp Rules as also the difference in between the commission and discount. Similar kind of controversy was up for consideration before this Court in the case of Jagran Prakashan Limited (supra). It was a case of publisher of newspaper engaged in the business of print ..... X X X X Extracts X X X X X X X X Extracts X X X X
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