Distributorship agreement treated as sale, not agency, where price, risk, and title passed to the distributor.

A distributorship agreement was construed as a contract of sale rather than a mere agency where the distributor was bound to pay a fixed price, bore commercial risk, and was required to account in a manner consistent with purchase and resale. Contractual controls over territory, supply terms, and resale price did not by themselves negate a sale. On the true construction of the agreement and the course of dealings, title passed to the distributor before onward supply to consumers, so the transactions constituted sales and could not be treated as non-taxable agency dealings.

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Issues: Whether the assessee acted only as an agent under the distributorship agreement, or whether the arrangement created a sale from the company to the distributor with a further sale by the distributor to consumers.

Analysis: The agreement fixed a price payable by the distributor to the company, required the distributor to make payment irrespective of collections from consumers, and provided for supply direct to the distributor with the distributor bearing the risk and incidental charges in the relevant cases. The arrangement also reserved to the company control over territory, supply terms, and price, while the distributor was obliged to account to the company in a manner consistent with purchase and resale rather than mere agency. Mere restrictions on resale, territorial limits, and the requirement to sell at stipulated prices did not by themselves convert a sale into agency. On the true construction of the agreement and the course of dealings, title passed to the distributor before onward supply to consumers.

Conclusion: The assessee was not acting merely as an agent; the transactions amounted to sales from the company to the distributor, and the assessment could not be set aside on the footing that no taxable sale had occurred.

Ratio Decidendi: A distributorship agreement is a contract of sale, not agency, where the distributor is bound to pay a fixed price for the goods, bears the commercial risk, and onward sales to consumers are made after title has passed, even if resale is subject to contractual restrictions.

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