Per Shri B.K. Mitra, J.M. - This appeal by the Revenue is directed against the order of the CIT(A), Cuttack dated 31-10-1994 for the assessment year 1992-93.

2. Learned DR vehemently opposed the order passed by the CIT(A) and submitted that section 194H came into operation from 1-10-1992 and accordingly tax should have been deducted from the payments of commission by the assessee for payments upto 31-3-1992 and for payments for April and May, 1992. It was brought to our notice that the assessee had not effected any such TDS and therefore total tax liability under section 194H was asked to be paid. He further submitted that section 204 clearly indicates the meaning of ‘Person responsible for paying’ and there is no ambiguity. In view of the same section 194H is clearly applicable in this case. Learned AR of the assessee, on the other hand, entirely relied on the order of the CIT(A) and his candid argument were hovering around the said order.

3. The assessee publishes, inter alia, a newspaper in the name and style of ‘The SAMAJ’ which was bequeathed by its founder Pt. Gopanbandhu Dash. The assessee has sold newspapers at a discounted price to its sales agents and also received payment from advertising agencies after deduction of their charges. The Assessing Officer has objected to such transactions on the ground that there had been no deduction of TDS under section 194H, which was on the statute from 1-10-1991 to 30-6-1992. The Assessing Officer further treated the assessee as an assessee in default for the alleged failure in deduction of tax at source and held them liable for payment of tax of Rs. 10,29,064. The assessee for the purpose of sale of his newspapers has engaged several persons who are described as sales agents in accordance with the custom of the trade. The said agents are required to furnish a security deposit at an agreed rate which is refunded when the arrangement between the assessee and agents comes to an end. The said Agents purchased the newspaper from the assessee and sell them through hawkers/vendors. Liability in respect of the unsold newspapers also lies with the agents and this is clearly brought in the agreement with the agents. Since the newspaper has to be sold at the printed price to the readers, the agents are given a discount of 25% more of the sale price which is termed as commission. It is not out of place to mention here that out of the margin of 25% as aforesaid the agent is free to pay whatever amount he thinks expedient to the hawkers/vendors. Thus it is seen that the commission paid to the circulation agents by way of deduction from the gross amount in the relevant periodic bills were in the nature of trade discount.

4. It has been brought to our notice by the learned AR that although the agent settles his accounts of newspapers lifted during a month between 10th and 20th of the next month, he has to make payment for the entire quantity of newspaper lifted irrespective of the papers actually sold. This is in our view abundantly disproves the Assessing Officer’s contention that the sale proceeds are collected by the Agents through the hawkers from the customers and then passed on to the publisher. The arrangement so made between the assessee and the agents would in our view be governed by the provisions of Sales of Goods Act and not by the laws of Agency.

5. An agent has been defined in section 182 of the Indian Contract Act as a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the ‘principal’. However, the Hon’ble Courts have repeatedly held that the true nature of a contract of agency has to be gathered from its terms and conditions; the terminology used is not decisive of the legal relationship of the parties. Hon’ble Bombay High Court in the case of Superintendent of Stamps v. Breul & Co. [1944] 46 Bom. L.R. 686 has held that a person referred to as agent is not an