Distributorship as purchase, not agency, means sales are includible in taxable turnover under the sales tax law.

An exclusive distributorship arrangement was examined to determine whether the distributor acted as the manufacturer's agent or as a purchaser for purposes of taxable turnover under the Kerala General Sales Tax Act, 1963. The decisive features were that the distributor arranged payment, goods were supplied against immediate or deferred payment, the rebate was described as rebate rather than commission, transit risk was borne by the distributor when payment and delivery were not simultaneous, and title documents were endorsed to the distributor on payment or through bank collection. On these terms, the commercial substance was a purchase-and-resale model, not agency, and the transactions were includible in the distributor's taxable turnover.

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Issues: Whether, under the distributorship agreement, the assessee acted as an agent of the manufacturer or as a purchaser of the goods, and whether the transactions were includible in the assessee's taxable turnover under the Kerala General Sales Tax Act, 1963.

Analysis: The agreement conferred an exclusive distributorship, but the decisive features were that the distributor had to arrange payment, the goods were supplied against immediate or deferred payment as provided in the agreement, the rebate was described as such and not as commission, and insurance of the transit risk was placed on the distributor where payment and delivery were not simultaneous. The documents of title were endorsed in favour of the distributor and handed over on payment or sent through the bank for collection. On these terms and the surrounding circumstances, the commercial substance was that the distributor purchased the goods and thereafter sold them to customers. The statutory alternative based on deemed independent sales did not arise for decision once the relationship was found not to be one of agency.

Conclusion: The assessee was not merely an agent; it was a purchaser in respect of the transactions in question, and the turnover was rightly includible in its taxable turnover.

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