Home › Tax Laws › Hindustan Coca Cola Beverages (P) Ltd. v. CIT (2018)402 ITR 539 /303 CTR 13 (Raj) (HC).

Hindustan Coca Cola Beverages (P) Ltd. v. CIT (2018)402 ITR 539 /303 CTR 13 (Raj) (HC).

S. 194H : Deduction at source –Commission or discount to distributors – Arrangement between assessee company and the distributor that of principal to principal basis- Amount receivable from distributor was adjusted / reduced and no commission was paid as such – Regarding MRP – restrictions on distributor (price fixed and expenses to be managed by distributor)- not to decide the relationship of principal and agent – Provisions of S.. 194H were not applicable and proceedings under S.. 201 or S.. 201(1A) are misconceived.[ S.201, 201(IA)]

Held  by the High Court that:

  • Under the provisions of Section 194H, TDS is deducted on any commission paid and in the present case, it was only an arrangement between the assessee company and distributor by which the amount to be received was reduced and no amount was paid as commission.
  • Considering the provisions of Section 182 of Contract Act, a distributor cannot be considered to be an agent more particularly when the arrangement is on principal to principal basis and the responsibility is on the basis of agreement entered into between the parties.

Pricing policy agreed between the parties is that a price is fixed by assessee-company (MRP) and all other expenses like commission to retailers, etc has to be managed by distributor.  Such restrictive pricing arrangement cannot be considered to be the basis for reaching a conclusion that the relationship between parties is that of principal and agent.