- (1.) The subject matter of challenge in the appeal is a judgement and order dated 5th May, 2006 passed by the learned Income Tax Appellate Tribunal allowing an appeal preferred by the revenue pertaining to the assessment year 2004-05. The assessee has come up in appeal. The following questions were formulated at the time when the appeal was formally admitted:-- "1. Whether the Tribunal was justified in law in holding that the discount allowed by the appellant to the distributors in respect of starter packs and recharge coupons for its prepaid service amounted to payment by the appellant of commission or brokerage within the meaning of section 194H of the Income Tax Act, 1961 and its purported findings in that behalf are arbitrary, unreasonable and perverse? 2. Whether and in any event and having regard to the fact that in respect of sale of starter packs and recharge coupons for prepaid service, the appellant did not make any payment to or credit the accounts of the distributors, the appellant was not a person "responsible for paying" within the meaning of section 194H and could not be proceeded against under section 201 and the Tribunal was justified in law in rejecting the said contention of the appellant?"
(2.) Mr. Khaitan, learned Senior Advocate appearing for the appellant restricted his submissions to the question as to whether there was, in fact, a relationship of principal and agent between the assessee and his buyers or that the goods were sold on principal to principal basis.
(3.) Mr. Khaitan added that once this question is resolved, the questions formulated at the time of admission of the appeal have to be consequently answered. In support of his submission, Mr. Khaitan drew our attention to the obligation undertaken by the buyer under various clauses of the agreement entered into between the assessee and its buyers:-- "(b) Ensure that all payments to HTEL due under this Agreement are tendered in a timely manner; (f) Unless otherwise agreed in writing, be solely responsible for all costs and expenses for all operating expenses incurred in connection therewith; (i) Make payment to HTEL for any amounts due under this Agreement by way of Account Payee cheque or Banker's Draft or in such other manner as HTEL may agree; (k) Pay the Service tax to HTEL as may be assessed and levied from time to time; (17) NO CREATION OF THIRD PARTY OBLIGATIONS The Service Provider shall not assume or create any obligations on HTEL's behalf without any prior written permission or incur any liability on behalf of HTEL or in any way pledge or purport to pledge HTEL's credit or accept any contract binding upon HTEL without HTEL's prior written consent.";