Distributorship agreement treated as agency where goods were sold for the principal and no transfer of property to distributor occurred.

A distributorship agreement was treated as agency, not a sale, because the firm sold chemicals on the company's behalf at prices fixed by the company, remitted sale proceeds, earned commission, and maintained accounts showing stock was debited only on actual sale. Clauses on payment, custody, and collection responsibility did not by themselves transfer property in the goods to the distributor. The accounting practice between the parties reinforced that the firm acted for the principal and not as purchaser. No taxable sale from the company to the firm arose under the Kerala General Sales Tax Act.

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Issues: Whether the distributorship agreement created a relationship of agency or effected a transfer of property in the chemicals from the company to the firm so as to constitute a sale under the Kerala General Sales Tax Act.

Analysis: The agreement, read as a whole, showed that the firm was appointed as distributor to sell the chemicals on the company's behalf, at prices fixed by the company, with monthly statements, remittance of sale proceeds, and commission on goods sold. The running account was to be maintained by the company, and the goods were to be debited only when sold. The clauses relied upon by the revenue, including payment terms, responsibility for realisation, and custody of goods, did not establish a transfer of property to the firm. The implementation of the agreement in the parties' accounts also reflected sales made on behalf of the company and remittance of sales tax by the firm.

Conclusion: The agreement did not transfer property in the chemicals from the company to the firm and was an agreement of agency, not a sale.

Ratio Decidendi: Where a distributorship arrangement, read with the parties' accounting practice, shows sale on behalf of the principal and payment of commission rather than transfer of property to the distributor, the relationship is one of agency and no taxable sale from principal to distributor arises.

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