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TMI Blog2002 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ith effect from June 1, 2001. The section reads as under: "194H. Commission or brokerage.--Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the June 1, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent.: Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed two thousand five hundred rupees: Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government pays the stamp vendors 10 per cent. less than the face value of the stamp paper as against hardly 1/2 per cent. to 4 per cent. of discount which the stamp vendor gets at the time of purchasing stamp papers. (v) Perusal of the Gujarat Stamps Supply and Sales Rules, 1987 (hereinafter referred to as "the Rules") indicates that the "stamp vendors" are purchasers of stamp papers under the contract of sale and there is no contract of agency between the Government and the stamp vendors. Reference is made to the decisions of the Supreme Court in Gordon Woodroffe and Co. (Madras) Ltd. v. Sheikh M.A. Majid and Co., AIR 1967 SC 181; Sri Thirumala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer [1968] 21 STC 312; AIR 1968 SC 784; and Bhopal Sugar Industries Ltd. v. Sales Tax Officer [1977] 40 STC 42; [1977] 3 SCC 147. On the other hand, Mr. B.B. Naik, learned standing counsel for the Revenue, has made the following submissions: (i) In the first place, the scheme of the Rules has various features which are not to be found in case of transaction between one principal and another and that the following features indicate that the relationship between the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure for tax deduction at source as in case of State Government employees. Statement showing stamp sold and discount allowed from June 1, 2001, to February 26, 2002, is enclosed herewith." The statement accompanying the aforesaid letter indicates that there are 148 licensed vendors registered with the District Treasury Office, Ahmedabad, and that out of them only 16 stamp vendors had received discount exceeding Rs.60,000 during the relevant period and that there are many who received discount less than Rs.2,500 during the relevant period. Nothing of course turns upon this aspect because the question raised before the court is purely a legal one which is required to be decided in the light of the provisions of section 194H and the provisions of the Rules and the relevant judicial pronouncements in this behalf. In any case, Mr. Sudhir Mehta, learned AGP for respondent No. 4, Senior Treasury Officer, Ahmedabad, has supported the case of the petitioner on the basis of the aforesaid letter dated February 18, 2002. 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 whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, differs essentially from a contract of sale inasmuch as an agent after taking delivery of the property 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. This is yet another dominant factor which distinguishes an agent from a buyer--pure and simple. In Halsbury's Laws of England, volume 1, fourth edition, in para. 807 at page 485, the following observations are made: 'The relation of principal and agent raises by implication a contract on the part of the principal to reimburse the agent in respect of all expenses, and to indeminify him against all liabilities, incurred in the reasonable 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'." At this stage, we may also make a reference to the distinction between "commission" and "discount" as explained in law dictionaries and in judicial pronounc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not necessarily be taken out in advance of payment but may be handed back to the payer after he has paid the stipulated sum. The repayment need not be immediate. It can be made later and in case of persons who have continuous dealings with one another it is nothing unusual to do so." Similarly, in Coromandel. Fertilisers Ltd. v. Union of India [1984] 17 ELT 607, (para. 12) and in Moped India Ltd. v. Assistant Collector of Central Excise [1986] 23 ELT 8 (para. 6), the apex court applied the aforesaid principles while considering the question of arriving at the excisable value of mopeds. The trade discounts given to the dealers by the manufacturer were held to be liable to be deducted from the price charged to the dealers for the purpose of arriving at the excisable value of the goods, but the commissions given to the agents were held to be not deductible from the price for the purpose of arriving at the excisable value of the goods. In the background of the aforesaid principles, we are required to examine the scheme of the Gujarat Stamps Supply and Sales Rules, 1987, under which the stamp vendors are given licence to carry on the business of purchasing and selling stamp pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eductions as follows, namely:-- (a) A deduction of ten paise in the rupee or a fraction of a rupee of the full value of all stamps delivered up in the following circumstances, namely: (i) on resignation by the licensed vendor of his licence; (ii) on revocation of the licence for any fault on the part of or breach of any rules committed by the licensed vendor; (iii) on application by licensed vendor for leave to return any stamps in his possession; (b) A deduction only of the discount, if any, allowed on purchase by the vendor on stamps delivered up in the following circumstances, namely: (i) on the expiration of the licence; (ii) on the recall of the stamps by Government; (iii) on the revocation of the licence for any cause other than a fault on the part of or breach of any rules committed by the licensee; (iv) on the death of the licensed vendor: Provided that application for refund of the value of stamps delivered up under this rule shall be made within a period of one year of the date of the resignation or death of the licensed vendor or the revocation of the licence. 25. A licensed vendor shall be permitted to exchange any stamps which are, in the opinion of the Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the contract of sale, it does prima facie seem attractive but on closer scrutiny it cannot be accepted. The reason is that the licensed vendor after purchasing the stamps on payment of full price less discount is not permitted to go out to sell the stamp papers in the open market in bulk even to another licensed vendor. Hence when the licensed vendor is to cease carrying on his business or to resign his licence or even in any other eventuality if he wants to reduce his stock, the rules envisaging only retail sale of stamp papers to customers had to make provisions for such contingencies. It was in order to make the prohibition against sale except in accordance with the rules efficacious that rule 24 enables the licensed vendor to deliver up any stamps in his possession either on an application for leave to do so or on resigning his licence, but as against the discount between 0.5 per cent. to 4 per cent. obtained by him at the time of purchasing the stamp papers, the Government is to deduct 10 per cent. of the full value of the stamps so delivered up in contingencies like resignation by the licensed vendor or revocation of the licence for any fault on the part of the licensed ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dors. The relevant entry reads as under: SCHEDULE I [See section 5] Goods, the sale or purchase of which is free from all taxes ---------------------------------------------------------------------------------- Conditions and exceptions Sr. Description of goods subject to which exemption & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted, all transactions of sale from a manufacturer to a wholesaler or from a wholesaler to a semi wholesaler or from a semi-wholesaler to a retailer would be covered by section 194H. To fall within the aforesaid Explanation, the payment received or receivable, directly or indirectly, is by a person acting on behalf of another person (i) for services rendered (not being professional services), or (ii) for any services in the course of buying or selling of goods, or (iii) in relation to any transaction relating to any asset, valuable article or thing. The element of agency is to be there in case of all services or transactions contemplated by Explanation (i) to section 194H. If a car dealer purchases cars from the manufacturer by paying price less discount, he would be the purchaser and not the agent of the company, but in the course of selling cars, he may enter into a contract of maintenance during the warranty period, with the customer (purchaser of the car) on behalf of the company. However, such services rendered by the dealer in the course of selling cars does not make the activity of selling cars itself an act of agent of the manufacturer when the dealings between the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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