TaxTMI 
TaxTMI 
TaxTMI 
2013 (4) TMI 291
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....ations that the petitioner sells general stamp papers, court fee stamps, copy stamps and other stamps either to the public directly or through licensed stamp vendors at a price less than 1% of the value of such stamps which amounts to 'commission' within the meaning of section 194-H of the Act. The petitioner having failed to deduct the tax at source on the said 'commission amount' to which it was obliged under section 194-H of the Act, is assessee in default. The case of the petitioner in brief is that the petitioner is not giving any commission to the stamp vendors. But the sales are made at discount of one per cent on cash purchases of stamp papers etc. by licensed vendors as per provisions of Rule 157 read with Rule 161 of U.P. Stamp Rules, 1942. It has been stated in paragraph-4 of the writ petition that the petitioner, on the instructions of the ITO (TDS)/respondent no.3 collected the tax from 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 resp....
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....onship of principal and agent in between the petitioner and licensed vendor. Considered the respective submissions of the learned counsel for the parties and perused the record. Section 194-H came in the Statute Book by the Finance Act, 2001 w.e.f. 1.6.2001. The section provides for deduction of tax at source in respect of payment of 'commission or brokerage'. For the purposes of this section 'commission or brokerage' has been defined in the Explanation (i) to section 194-H. The said Explanation reads as follows:- (i) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities." The words "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,....
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....d to any of the following persons, namely : (i) lambardars of villages; (ii)bakshis in towns under the provisions of the United Provinces Town Areas Act, 1914 (II of 1914); (iii) pound-keepers; (iv) kurk amins; (v) Postmasters at places other than the headquarters of a district or a tahsil; (vi) village school masters; (vii) the nazir, head copyist or other responsible official attached to a Civil, Criminal or Revenue court at which no salaried vendor has been appointed and where there is no other licensed vendor; (viii) an official on the staff of a Presiding Officer of a court in camp; (ix) patwaris in the districts of Almora, Naini Tal and Garhwal; and (x) any other person deemed by the Collector to be a fit and proper person for the sale of stamps : Approval to appointment required in certain cases.- Provided that in the case of the appointment of postmasters 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 cour....
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....face value of the stamps. If the discount permissible contains a fraction of a rupee, any such fraction, in excess of the nearest lower multiple of five paise shall be ignored : Provided that no discount shall be allowed : (a) on any stamps supplied on any material furnished by the purchaser himself ; (b) unless stamps of an aggregate value of not less than Rs. 5 are purchased at one time ; (c) on the fraction of only one rupee ; and (d) on account of purchase of adhesive revenue stamps. xx xx xx xx xx xx 167. Stamps to be delivered on demand by Collector.-Every licensed vendor shall, at any time, on the demand of the Collector deliver all stamps, or any class of stamps, remaining in his possession together with his registers. A fair reading of these rules do support the petitioner's stand. The stamp vendors are purchasers of the stamps 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 ac....
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....t" is not conclusive. American Law is similar: "the manner in which the parties designate the relationship is not controlling, and if an act done by person on behalf of another is in its essential nature one of agency, the one is the agent of such other notwithstanding he is not so called. Conversely the mere use of the word by agent in the contract cannot have to be held the effect of making one agent, who, in fact is not such." American Jurisprudence, IInd edition Vol. 3 page 431. The foot-note on this page refers to a case in which it was held that the use of the words "agency agreement" and "agent" by the parties in a contract does not necessarily establish a relationship of agency in the legal sense. McCarty v. King County Medical Service Corp. 26 Wash 2d 660, 175 P2d 658. The law in India is the same. It has been held in several 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....
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....urt in the said case held that an agency can be created expressly or by necessary implications. Followings were laid down in paragraphs 26, 27 and 28:- "26. The definition of 'agent' and 'principal' is clear. An agent would be a person employed to do any act for another, or to represent other in dealings with third parties and the person for whom such act is done or who is so represented is called the principal. It may not be obligatory on the part of the Corporation to engage an agent in terms of the provisions of the Act and the rules and regulations framed thereunder, but indisputably an agent can be appointed for other purposes. Once an agent is appointed, his authority may be express or implied in terms of Section 186 of the Contract Act. For creating a contract of agency, in view of Section 185 of the Indian Contract Act, 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....
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....ed upon following observations made in AIR 1967 SC 181, Gordon Woodroffe & Co. v. Sheikh M.A. Majid & Co. : "The essence of sale is the transfer of the title to the goods for price paid or to be paid. The transferee in such case becomes liable to the transferor of the goods as a debtor for the price to be paid and not as agent for the proceeds of the sale. On the other hand, 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 who is therefore liable to account for the proceeds." In AIR 1968 SC 784, M/s. Sri Tirunala Venkateswara Timber and Bamboo Firm Vs. Commercial Tax Officer, Rajahmundry, distinction between a contract of sale and contract of agency was pointed out with reference 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 ....
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....act denotes that no delivery shall take place till entire purchase money is paid, but the incorporation of this term does not per-se postpone the title of the purchaser. In Hoe Kim Seing Versus Maung Ba Chit : AIR 1935 Privy Council, 182, it has been laid down that even it it is intended that the sale consideration shall be paid later on and the goods are specified and ascertained, the property in ascertained goods is transferred to the buyer immediately. In Ahmedabad Stamp Vendors Association vs. Union of India (supra), a similar set of Rules was up for consideration with reference to section 194-H of the Income Tax Act wherein after discussion, the Court has held as follows:- 17. "Applying the aforesaid definitions and the judicial pronouncements to the facts of the present case and in backdrop of the aforesaid rules, 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 f....