JUDGMENT judgment of court was delivered by N. Kumar J.-As common questions of law are involved in all these appeals, they are taken up together for consideration and disposed of by this common order. Brief facts In I. T. A. No. 158 of 2013, assessee is M/s. Tata Teleservices Ltd. It is engaged in business of providing telecommunication services across country. They provide telecommunication services, sell service products such as starter kits and recharge coupon vouchers. Recharge coupon vouchers (RCVs) are pre-paid vouchers used for selling talk time to pre-paid subscribers. Starter kits are new connections containing "removable user identity module" for providing telecommunication connection. assessee has entered into agreement with its channel partners. second respondent conducted survey under section 133A of Income-tax Act, 1961 (for short hereinafter referred to as "the Act"), on February 29, 2008. After hearing explanation of assessee, second respondent opined that channel partners are commission agents of assessee acting on fixed margins and fixed responsibilities, difference between MRP and selling price constitutes commission payment. Therefore, assessee failed to deduct tax at source under section 194H of Act. Accordingly, order came to be passed on November 24, 2008, under section 201(1) of Act treating assessee as assessee in default. Interest was also levied under section 201(1A) of Act. In I. T. A. Nos. 637-644 of 2013 assessee is M/s. Bharti Airtel Ltd. assessee is public limited company engaged in business of telecom operations. survey was conducted by respondent in business premises of assessee to verify compliance of TDS provisions by assessee for assessment years 2005-06 to 2008-09 on February 27, 2008. Here also after considering terms and conditions stipulated in agreement entered into between assessee and distributors, assessing authority was of view that there is principal and agent relationship between two parties and, therefore, discount/commission made to such parties was liable for deduction of tax at source under section 194H of Act. In I. T. A. Nos. 256-263 of 2012, assessee is M/s. Vodafone Essar South Ltd. It is in business of cellular services. In course of its business, assessee appoints distributors to purchase starter packs (SIM cards), refill packs (refill/re-charge slips, refill/recharge cards, e-topup, etc.,), etc., in bulk and then, sells them to sub-dealers or retailers. There was survey conducted by authorities to find out compliance of TDS. After going through agreement entered into between assessee and its dealers, assessing authority was of view that said agreement establishes principal and agent relationship between two parties and, therefore, any discount/commission made to such parties was liable for deduction of tax at source under section 194H of Act. said orders were challenged by assessees by way of appeal before Commissioner of Income-tax (Appeals). appeals came to be dismissed. Aggrieved by said order, they preferred second appeal to Tribunal which also came to be dismissed. Aggrieved by said order, assessees are before this court. We have heard learned counsel appearing for parties. Rival contentions Sri S. S. Naganand, learned senior counsel appearing for M/s. Tata Teleservices Ltd., contended that transaction between assessee and channel partners is on basis of principal to principal basis. terms of agreement show that on sale of sim cards, channel partner becomes absolute owner of sim cards and assessee has not retained any title over property. In invoices raised, it is categorically mentioned what is MRP of such sim cards, what is trade discount to which channel partner is entitled to. It is after giving deductions to said discount, amount due from channel partner as purchase price of sim cards is mentioned. On payment of such amount, sim card is sold, sales tax is paid on that consideration. Therefore, in case of pre-paid services it is case of out and out sale. No relationship of principal and agent exists. assessee has not paid any amount to channel partner and, therefore, section 194H of Act is not attracted. reliance of judgment of Kerala High Court as well as Delhi High Court has no application to facts of this case. Sri Chythanya, learned counsel appearing for Bharti Airtel Ltd., submitted that terms of agreement between parties had not created any relationship of principal and agent. On contrary, it makes it clear that there is relationship between principal and principal. What is sold by assessee to distributor is right to receive services. In invoice raised, MRP and amount of discount are mentioned. MRP minus discount is sale price. In accounts, there is no reference to this discount portion at all. Under terms of agreement, there is no liability on part of assessee to make any payment to distributor. On date of sale, no income has accrued to distributor. It is only if and when distributor sells sim cards/pre- paid/e-coupon/etopups either to sub-distributor or to retailer, he may earn income, which is chargeable to tax. Therefore, there is no liability cast on assessee under section 194H of Income-tax Act to deduct tax at source on future income to be earned by distributor and, therefore, all three authorities were in error in holding it otherwise. Sri N. Venkataraman, learned senior counsel appearing for Vodafone, submitted that in order to find out application of section 194H of Income-tax Act, whether ingredients of aforesaid section exist or not is to be looked into and not relationship as explained in Explanation. Admittedly, telephone is service. Sim cards/pre-paid/e-coupon/e-topups though are not goods, they confer right to receive services. service provider, in order to market his products, has to necessarily depend on supply agent. right to receive service can be sold. distributor after purchase of sim cards/pre- paid/e-coupon/e-topups, is entitled to sell same at maximum price prescribed by assessee. difference between purchase price and sale price is his income. In books of assessee, there is no reference to said discount at all. three judgments on which reliance is placed by lower authorities in denying relief proceeds on assumption that service cannot be sold. Article XXVIII General Agreement on Trade in Services is part of GAT. It defines supply of service which includes production, distribution, marketing, sale and delivery of service. It recognises selling and marketing of services and, therefore, once service is sold to distributor, then services and, therefore, once service is sold to distributor, then relationship of principal and agent is not necessary. It would be relationship of principal to principal and in that view of matter, as facts of case do not fall within scope of section 194H, there is no liability on part of assessee to deduct tax from income, which has not arisen. Per contra, Sri Indra Kumar, learned senior counsel appearing for Revenue, sought to support impugned orders. He pointed out from judgment of Kerala High Court where judgment of Tribunal has been extracted, which shows that when sim cards/pre-paid/e-coupon/ e-topups is given to distributor, assessee-company was crediting sales account with Rs. 100. assessee was debiting cash amount with Rs. 80 though by paying cash to distributor. assessee was paying commission amount of Rs. 20. This is commission enjoyed by distributor. In said case, it was held that there existed relationship of principal and agent. That is Rs. 20 represented commission. Therefore, he submitted that, in instant case, assessee being same, contention of assessee that there is no relationship of principal and agent is factually incorrect and, therefore, he submits that authorities were justified in passing impugned order. Consequently, he contended that terms and contents of agreement between parties clearly demonstrate that neither these channel partners nor distributors had any freedom in matter of selling products, which is supplied to them by assessees. There was complete control, which will clearly establish that it is not in relationship of principal and principal but it is relationship of principal and agent. When three fact finding authorities have recorded question of fact, no case for interference is made out. He also submitted that as is clear from invoice raised, though price of sim cards/pre-paid/e-coupon/e-topups is Rs. 100, it is sold for Rs. 80, Rs. 20 being discount given to distributor, which is in nature of commission paid by assessee to distributor and, therefore, section 194H is attracted as rightly held by three authorities and, therefore, he submits that no case for interference is made out. Sri Venkataraman, learned senior counsel pointed out that assessment year in Kerala High Court's case was 2007-08. However, having regard to accounting practice followed by assessee, they have mentioned contents of invoice and produced their books of account also. But nowhere it is shown that Rs. 20 is paid by assessee to distributor. However, subsequently, after understanding law for subsequent years, there is no mention of trade discount paid to distributor in their accounts. It is treated as out and out sale between principal and principal and what is credited to account of distributor is only sale price and, therefore, said judgment has no application to present case. Substantial questions of law In light of aforesaid facts and rival contentions, substantial questions of law, which arise for our consideration in all these three appeals are as under: "(1) Whether word'income' which is defined under section 2(24) of Income-tax Act, 1961, can be given wider meaning by Department so as to include within its scope also a'trade discount' for bulk sales such as discount allowed by assessee to its distributors (channel partners) on bulk purchases made by them of starter-kits (SUKs), recharge vouchers (RCVs) and pre-paid cards? (2) Whether section 194H of Income-tax Act is attracted to sale of RCVs, pre-paid cards and starter kits and trade discount allowed by appellant to its distributors would amount to payment of'commission' requiring deduction of tax at source?" Telecommunication apex court in case of Bharat Sanchar Nigam Ltd. v. Union of India reported in [2006] 282 ITR 273 (SC) was called upon to decide question as to what is nature of transaction by which mobile phone connections are enjoyed. Whether it is sale or is it service or is it both? Answering said question at paragraph 82 of said judgment, it was held that telephone service is nothing but service. There is no sales element apart from obvious one related to hand set, if any. Dealing with question whether sim card was "goods" within definition of word in Sales Tax Act it was held that what sim card represents is ultimately question of fact. In determining issue, assessing authorities will have to keep in mind following principles (page 309): "If sim card is not sold by assessee to subscribers but is merely part of services rendered by service providers, then sim card cannot be charged separately to sales tax. It would depend ultimately upon intention of parties. If parties intended that sim card would be separate object of sale, it would be open to sales tax authorities to levy sales tax thereon." As there was no sufficient material on basis of which they could reach decision, matter was remitted back to respective High Court to record finding of fact and then decide case on merits. dispute before Supreme Court was whether sales tax is payable on value of sim cards to State Government or service tax is payable to Central Government. After remand, before Kerala High Court, State Government gave up its claim for sales tax. Therefore, only question, which arose for consideration before Kerala High Court was whether value of sim cards form part of taxable service. After examining functioning of sim card, Kerala High Court held that sim card is computer chip having its own sim number on which telephone number can be activated. sim card is device through which customer gets connection from mobile tower. Unless it is activated, service provider cannot give service connection to customer. Signals are transmitted and conveyed through towers and through sim card communication signals reach customer's mobile instrument. In other words, it is integral part required to provide mobile service to customer. customer cannot get service without sim card and it is essential part of service. sim card has no intrinsic value or purpose other than use in mobile phone for receiving mobile telephone service from service provider. Therefore, they accepted stand of BSNL that it is not goods sold or intended to be sold to customer but supplied as part of service. Consequently, they held value of sim card supplied by BSNL forms part of taxable service on which service tax is payable. said order was challenged before apex court by assessee. apex court in case of Idea Mobile Communication Ltd. v. CCE and Customs reported in [2011] 10 GSTR 12 (SC); [2011] 43 VST 1 (SC) held that position in law is, therefore, clear that amount received by cellular telephone company from its subscribers towards sim cards will form part of taxable value for levy of service tax, for sim cards are never sold as goods independent of services provided. They are considered as part and parcel of services provided and dominant purpose of transaction is to provide services and not to sell materials, i.e., sim card which on its own but without service would hardly have any value at all. Thus, it was established from records and facts of case that value of sim cards formed part of activation charges as no activation was possible without proper functioning of sim card and value of taxable service was calculated on gross total amount received by operator from subscribers. Therefore, judgment of Kerala High Court was upheld. It is in this background we have to understand telecommunication services provided to customers by assessee. It is in two models. (1) Pre-paid: Under pre-paid model, subscriber is required to take mobile telephone connection, through distributor, from telecom operator. Under this model, subscriber pays for talk time in advance (paid through distributor) and its balance depletes as and when he uses it. When pre- paid amount is used fully, subscriber is required to get his'service/talk time' recharged, for which he buys recharge voucher for chosen amount/validity. He pays for talk time purchased in advance. This is called pre-paid model. (2) Post-paid: In post-paid model, subscriber signs up agreement with telecom operator seeking telephone connection. He uses connection and is subsequently billed for usage on monthly basis (per his billing cycle). subscriber here makes payment to telecom company post- usage of telecom services, hence model is called post-paid service. In pre-paid model customer would first re-recharge his connection with required amount and then use it for voice or non-voice requirements. As and when balance available is exhausted after using up, then customer has to recharge again for denomination for which re-charge vouchers are made available by telecom operator. In post-paid model, customer would be permitted to use services and billed subsequently as per billing cycle. In this situation, customer need not recharge. Statutory provisions In these cases we are concerned with only pre-paid products. In all these three sets of cases, invoice is raised which apart from other particulars, contain unit price, discount offered, net value of unit after such discount and sales tax paid on that net value and maximum retail price of unit for which dealer could sell said units. dealer/distributor pays to assessee net value of unit. question for consideration is whether assessee is liable to deduct tax at source on discount amount shown in said invoice. claim of Revenue is under section 194H of Act, which falls in Chapter XVII of Act. Chapter XVII of Act deals with collection and recovery of tax. Section 190(1) of Income-tax Act reads as under: "190. Deduction at source and advance payment.-(1) Notwithstanding that regular assessment in respect of any income is to be made in later assessment year, tax on such income shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of section 192, as case may be, in accordance with provisions of this Chapter. (2) Nothing in this section shall prejudice charge of tax on such income under provisions of sub-section (1) of section 4." Section 190 of Act, provides for deduction at source and advance payment. Section 190(2) of Income-tax Act makes it very clear that TDS provisions are subservient and subordinate to charging provisions of section 4 of Income-tax Act. Section 194H reads as under: "194H. Commission or brokerage.-Any person, not being individual or Hindu undivided family, who is responsible for paying, on or after 1st day of June, 2001, to resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at time of credit of such income to account of payee or at time of payment of such income in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at rate of ten per cent.: Provided that no deduction shall be made under this section in case where amount of such income or, as case may be, aggregate of amounts of such income credited or paid or likely to be credited or paid during financial year to account of, or to, payee, does not exceed five thousand rupees: Provided further that individual or Hindu undivided family, whose total sales, gross receipts or turnover from business or profession carried on by him exceed monetary limits specified under clause (a) or clause (b) of section 44AB during financial year immediately preceding financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section: Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees. Explanation.-For purposes of this section,- (i)'commission or brokerage' includes any payment received or receivable, directly or indirectly, by person acting on behalf of another person for services rendered (not being professional services) or for any services in course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (ii) expression'professional services' means services rendered by person in course of carrying on legal, medical, engineering or architectural profession or profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by Board for purposes of section 44AA; (iii) expression'securities' shall have meaning assigned to it in clause (h) of section 2 of Securities Contracts (Regulation) Act, 1956 (42 of 1956); (iv) where any income is credited to any account, whether called 'Suspense account' or by any other name, in books of account of person liable to pay such income, such crediting shall be deemed to be credit of such income to account of payee and provisions of this section shall apply accordingly." Section 4 of Act provides for basis of charge. Section 4(1) of Act reads as under: "4. Charge of income-tax.-(1) Where any Central Act enacts that income- tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to provisions (including provisions for levy of additional income- tax) of, this Act in respect of total income of previous year of every person: Provided that where by virtue of any provision of this Act incometax is to be charged in respect of income of period other than previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), incometax shall be deducted at source or paid in advance, where it is so deductible or payable under any provisions of this Act." Judgments Section 194H of Act, has been subject matter of interpretation by various High Courts across country. We have two streams of judgments delivered in favour of and against revenue. judgments in favour of assessee are as under: High Court of Bombay in case of CIT v. Qatar Airways [2011] 332 ITR 253 (Bom) dealing with section 194H of Act held as under (page 254): "Be that as it may, for section 194H to be attracted, income being paid out by assessee must be in nature of commission or brokerage. Counsel for Revenue contended that it was not case of Revenue that this difference between principal price of tickets and minimum fixed commercial price amounted to payment of brokerage. We find, however, that in order to deduct tax at source income being paid out must necessarily be ascertainable in hands of assessee. In facts of present case, it is seen that airlines would have no information about exact rate at which tickets were ultimately sold by their agents since agents had been given discretion to sell tickets at any rate between fixed minimum commercial price and published price and it would be impracticable and unreasonable to expect assessee to get feed back from their numerous agents in respect of each ticket sold. Further, if airlines have discretion to sell tickets at price lower than published price then permission granted to agent to sell it at lower price, according to us, can neither amount to commission nor brokerage at hands of agent. We hasten to add any amount which agent may earn over and above fixed minimum commercial price would naturally be income in hands of agent and will be taxable as such in his hands. In this view of matter, according to us, there is no error in impugned order and question of law as framed does not arise." High Court of Gujarat in case of Ahmedabad Stamp Vendors Association v. Union of India [2002] 257 ITR 202 (Guj); 124 Taxman 628 (Guj) held as under (page 215): "It is also not possible to accept contention of Mr. Naik for Revenue that definition of'commission or brokerage' as contained in Explanation to section 194H is so wide that it would include any payment receivable, directly or indirectly, for services in course of buying or selling of'goods' and that, therefore, discount availed of by stamp vendors constitutes commission or brokerage within meaning of section 194H. If this contention were to be accepted, all transactions of sale from manufacturer to wholesaler or from wholesaler to semi wholesaler or from semiwholesaler to retailer would be covered by section 194H. To fall within aforesaid Explanation, payment received or receivable, directly or indirectly, is by person acting on behalf of received or receivable, directly or indirectly, is by person acting on behalf of another person (i) for services rendered (not being professional services), or (ii) for any services in course of buying or selling of goods, or (iii) in relation to any transaction relating to any asset, valuable article or thing. element of agency is to be there in case of all services or transactions contemplated by Explanation (i) to section 194H. If car dealer purchases cars from manufacturer by paying price less discount, he would be purchaser and not agent of company, but in course of selling cars, he may enter into contract of maintenance during warranty period, with customer (purchaser of car) on behalf of company. However, such services rendered by dealer in course of selling cars does not make activity of selling cars itself act of agent of manufacturer when dealings between company and dealer in matter of sale of cars are on'principal to principal' basis. This is just illustration to clarify that service in course of buying or selling of goods has to be something more than act of buying or selling of goods. When licensed stamp vendors took delivery of stamp papers on payment of full price less discount and they sell such stamp papers to retail customers, neither of two activities (buying from Government and selling to customers) can be termed as service in course of buying or selling of goods. In view of above discussion, we uphold contention urged on behalf of petitioner's association that discount made available to licensed stamp vendors under provisions of Gujarat Stamps Supply and Sales Rules, 1987, does not fall within expression'commission' or'brokerage' under section 194H." This judgment was challenged by Revenue before apex court. apex court dismissed appeal holding that they are satisfied that 0.50 per cent. to 4 per cent. discount given to stamp vendors is for purchasing stamps in bulk quantity and said amount is in nature of cash discount and, therefore, such transaction is sale and, consequently, section 194H of Act has no application. said judgment is reported in CIT v. Ahmedabad Stamp Vendors Association [2012] 348 ITR 378 (SC). High Court of Delhi in case of CIT v. Mother Dairy India Ltd. [2013] 358 ITR 218 (Delhi) dealing with question, whether difference between MRP and price which concessionaire paid to assessee was his income from business and it could not be categorised as commission within meaning of section 194H held as under (page 225): "The principal question that falls for consideration is whether agreements between assessee and concessionaires gave rise to relationship of principal to principal or relationship of principal to agent. On fair reading of all clauses of agreement as have been referred to in orders of Tribunal as well as those of income-tax authorities, we are unable to say that view taken by Tribunal is erroneous. It is well-settled proposition that if property in goods is transferred and gets vested in concessionaire at time of delivery then he is thereafter liable for same and would be dealing with them in his own right as principal and not as agent of Dairy. clauses of agreements show that there is actual sale, and not mere delivery of milk and other products to concessionaire. concessionaire purchases milk from Dairy. Dairy raises bill on concessionaire and amount is paid for. Dairy merely fixed MRP at which concessionaire can sell milk. Under agreement, concessionaire cannot return milk under any circumstance, which is another clear indication that relationship was that of principal to principal. Even if milk gets spoiled for any reason after delivery is taken, that is to account of concessionaire and Dairy is not responsible for same. These clauses have all been noticed by Tribunal. fact that booth and equipment installed therein were owned by Dairy is of no relevance in deciding nature of relationship between assessee and concessionaire. Further, fact that Dairy can inspect booths and check records maintained by concessionaire is also not decisive. As rightly pointed out by Tribunal Dairy having given space, machinery and equipment to concessionaire would naturally like to incorporate clauses in agreement to ensure that its property is properly maintained by concessionaire, particularly because milk and other products are consumed in large quantities by general public and any defect in storage facilities which remains unattended can cause serious health hazards. These are only terms included in agreement to ensure that system operates safely and smoothly. From mere existence of these clauses it cannot be said that relationship between assessee and concessionaire is that of principal and agent. That question must be decided, as has been rightly decided by Tribunal, on basis of fact as to when and at what point of time property in goods passed to concessionaire. In cases before us, concessionaire becomes owner of milk and products on taking delivery of same from Dairy. He thus purchased milk and products from Dairy and sold them at MRP. difference between MRP and price which he pays to Dairy is his income from business. It cannot be categorized as commission. loss and gain is of concessionaire. Dairy may have fixed MRP and price at which they sell products to concessionaire but products are sold and ownership vests and is transferred to concessionaires. sale is subject to conditions, and stipulations. This by itself does not show and establish principal and agent relationship. supervision and control required in case of agency is missing. It is irrelevant that concessionaires were operating from booths owned by Dairy and were also using equipment and furniture provided by Dairy. That fact is not determinative of relationship between Dairy and concessionaires with regard to sale of milk and other products. They were licensees of premises and were permitted use of equipment and furniture for purpose of selling milk and other products. But so far as milk and other products are concerned, these items became their property moment they took delivery of them. They were selling milk and other products in their own right as owners. These are two separate legal relationships. income-tax authorities were not justified or correct in law in mixing up two distinct relationships or telescoping one into other to hold that because concessionaires were selling milk and other products from booths owned by Diary and were using equipment and furniture in course of sale of milk and other products, they were carrying on business only as agents of Diary. judgments in favour of Revenue are as under: Revenue relied on judgment of Delhi High Court in case of CIT v. Singapore Airlines Ltd. [2009] 319 ITR 29 (Delhi); [2009] 224 CTR (Delhi) 168, where it was held as under (page 55): "The submission of some of learned counsel for assesseeairlines that monies retained in form of supplementary commission are really in nature of discount rather than commission is not tenable. fact that this is payment which travel agent receives from passenger by virtue of sale of traffic documents/air tickets of which assessee is proprietor at point till transaction is made would clearly establish that it is commission as against discount. word'discount' is normally used to describe deduction from full amount or value of something, especially price (see Black's Law Dictionary, VIIth edition, page 477) whereas commission is defined in Explanation (i) to section 194H as any payment received or receivable, directly or indirectly by agent for services rendered acting on behalf of assessee-airlines. In view of fact that payment retained by travel agent is inextricably linked to sale of traffic document/air ticket, it cannot but lead to conclusion that payment retained which is supplementary commission, is commission within meaning of section 194H of Act. This is especially so, as indicated above, at no point in time travel agent obtains proprietary rights to traffic documents/air tickets. There is no value or price paid by him on which travel agent gets deduction. price or value is received by assessee-airlines through medium of travel agent from passenger which is also one of facets of services offered by travel agent. price or value of traffic document received by travel agent for and on behalf of assessee-airlines, is held in trust. Thus, money retained by travel agent is commission (supplementary commission) within meaning of section 194H of Act. Therefore, for assessee- airlines to contend, as discussed hereinabove, that in so far as first leg of transaction is concerned whereby they pay standard commission to travel agent on which assessee-airlines deduct tax at source, relationship between assessee-airlines and travel agent is that of principal and agent, whereas money or monies which travel agent retains over and above net fare is not commission since relationship transforms from one which commences as principal and agent relationship and ends up into that of principal to principal relationship is completely untenable as there are no two transactions in point of fact. transaction is singular transaction which is executed between travel agent while acting on behalf of principal airline in selling traffic documents/air tickets to third party which is passenger and thereby creating legal relationship between principal, that is, assessee-airlines and third party, which is passenger. For any enforcement of rights emanating therefrom principal would have right to sue passenger and similarly passenger would have right to sue principal, that is, assessee-airlines." In aforesaid judgment, relationship of principal and agent was not in dispute. Airline paid standard commission to travel agent on which assessee-Airline deducted tax at source. dispute was only in respect of money or monies which travel agent retains over and above net fare, question was whether it was commission. Delhi High Court held that, under agreement only one relationship exists and transaction is singular transaction which is executed between travel agent while acting on principal-Airline in selling traffic document/air ticket to third party who is passenger and, therefore, second leg of transaction cannot be different from first leg of transaction. Reliance is placed on judgment of Delhi High Court in case of CIT v. Idea Cellular Ltd. [2010] 325 ITR 148 (Delhi) while dealing with commission/brokerage to distributor on sim cards/recharge coupons under section 194H of Act, it was held as under (page 166): "It is obvious that service can only be rendered and cannot be sold. owner of sim cards and recharge coupons is assessee-company, M/s. Vodafone Essar Cellular Ltd. This is because assessee-company is operating under right of licence agreement entered into with Government of India. Nobody else can be given right to operate as cellular telephone service providers. ultimate service is provided by assessee-company to everyone and everywhere. sim card is in nature of key to consumer to have access to telephone network established and operated by assessee- company on its own behalf. Since sim card is only device to have access company on its own behalf. Since sim card is only device to have access to mobile phone network, there is no question of passing of any ownership or title of goods from assessee-company to distributor or from distributor to ultimate consumer. distributors are acting only as link in chain of service providers. assessee-company is providing mobile phone service. It is ultimate owner of service system. service is meant for public at large. In between providing of that service, it is necessary for company to appoint distributors to make available pre-paid products to public as well as to look after documentation and other statutory matters regarding mobile phone connection. So, what is essence of service provided by distributors? essence of service rendered by distributors is not sale of any product or goods. distributors are providing facilities and services to general public for availability of devices like sim cards to have access to mobile phone network of assessee-company. Therefore, it is beyond doubt that all distributors are always acting for and on behalf of assesseecompany. Only for reason that distributors are making advance payment for delivery of sim cards and other products and distributors are responsible for stock and account of those cards, it is not possible to hold that distributors are not acting for assessee-company but distributors are acting on their own behalf. Such proposition is inconceivable in facts of present case. It is always possible for telephone company itself to provide all these services directly to consumers as Department of Telecom was doing; but such direct service is not feasible now-adays. Therefore, assessee has made out business solution to appoint distributors to take care of operational activities of company for providing service. distributor is one of important links in that chain of service." Reliance is also placed on judgment of High Court of Kerala in case of Vodafone Essar Cellular Ltd. v. Asst. CIT (TDS) [2011] 332 ITR 255 (Ker), where Cochin Bench held that service can only be rendered and cannot be sold. judgment at paragraphs 4 to 6, reads as under (page 263): "The main question to be considered is whether section 194H is applicable for the'discount' given by assessee to distributors in course of selling sim cards and recharge coupons under prepaid scheme against advance payment received from distributors. We have to necessarily examine this contention with reference to statutory provisions namely, section 194H... What is clear from Explanation (i) of definition clause is that commission or brokerage includes any payment received or receivable directly or indirectly by person acting on behalf of another person for services rendered. We have already taken note of our finding in BPL Cellular's case (supra) above referred that customer can have access to mobile phone service only by inserting sim card in his hand set (mobile phone) and on assessee activating it. Besides getting connection to mobile network, sim card has no value or use for subscriber. In other words, sim card is what links mobile subscriber to assessee's network. Therefore, supply of sim card, whether it is treated as sale by assessee or not, is only for purpose of rendering continued services by assessee to subscriber of mobile phone. Besides purpose of retaining mobile phone connection with service provider, subscriber has no use or value for sim card purchased by him from assessee's distributor. position is same so far as recharge coupons or e topups are concerned which are only air time charges collected from subscribers in advance. We have to necessarily hold that our findings based on observations of Supreme Court in BSNL's case (supra) in context of sales tax in case of BPL Cellular Ltd. (supra) squarely apply to assessee which is nothing but successor company which has taken over business of BPL Cellular Ltd. in Kerala. So much so, there is no sale of any goods involved as claimed by assessee and entire charges collected by assessee at time of delivery of sim cards or recharge coupons is only for rendering services to ultimate subscribers and distributor is only middleman arranging customers or subscribers for assessee. terms of distribution agreement clearly indicate that it is for distributor to enroll subscribers with proper identification and documentation which responsibility is entrusted by assessee on distributors under agreement. It is pertinent to note that besides discount given at time of supply of sim cards and recharge coupons, assessee is not paying any amount to distributors for services rendered by them like getting subscribers identified, doing documentation work and enrolling them as mobile subscribers to service provider, namely, assessee. Even though assessee has contended that relationship between assessee and distributors is principal to principal basis, we are unable to accept this contention because role of distributors as explained above is that of middleman between service provider namely, assessee, and consumers. essence of contract of agency is agent's authority to commit principal. In this case distributors actually canvass business for assessee and only through distributors and retailers appointed by them assessee gets subscribers for mobile service. assessee renders services to subscribers based on contracts entered into between distributors and subscribers. We have already noticed that distributor is only rendering services to assessee and distributor commits assessee to subscribers to whom assessee is accountable under service contract which is subscriber connection arranged by distributor for assessee. terminology used by assessee for payment to distributors, in our view, is immaterial and in substance discount given at time of sale of sim cards or recharge coupons by assessee to distributors is payment received or receivable by distributor for services to be rendered to assessee and so much so, it falls within definition of commission or brokerage under Explanation (i) of section 194H of Act. test to be applied to find out whether Explanation (i) of section 194H is applicable or not is to see whether assessee has made any payment and if so, whether it is for services rendered by payee to assessee. In this case there can be no dispute that discount is nothing but margin given by assessee to distributor at time of delivery of sim cards or recharge coupons against advance payment made by distributor. distributor undoubtedly charges over and above what is paid to assessee and only limitation is that distributor cannot charge anything more than MRP shown in product namely, sim card or recharge coupon. distributor directly or indirectly gets customers for assessee and sim cards are only used for giving connection to customers procured by distributor for assessee. assessee is accountable to subscribers for failure to render prompt services pursuant to connections given by distributor for assessee. Therefore, distributor acts on behalf of assessee for procuring and retaining customers and, therefore, discount given is nothing but commission within meaning of Explanation (i) on which tax is deductible under section 194H of Act. contention of assessee that discount is not paid by assessee to distributor but is reduced from price and so much so, deduction under section 194H is not possible also does not apply because it was duty of assessee to deduct tax at source at time of passing on discount benefit to distributors and assessee could have given discount net of tax amount or given full discount and recovered tax amount thereon from distributors to remit same in terms of section 194H of Act." Following said judgment, Calcutta High Court in case of Bharti Cellular Ltd. v. Asst. CIT [2013] 354 ITR 507 (Cal), has taken same view. Delhi High Court also has affirmed said view. It is in background of this legal position we have to consider substantial question of law framed in this case. However, before that it is useful to take note of first principles governing levying of tax which equally applies to telecommunication service also. First principles apex court in case of A. V. Fernandez v. State of Kerala reported in [1957] 8 STC 561 (SC); [1957] SCR 837 observed thus: "If there is liability to tax, imposed under terms of taxing statute, then follow provisions in regard to assessment of such liability. If there is no liability to tax there cannot be any assessment either." apex court in case of Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); AIR 1967 SC 1616 observed thus: "If person is not liable for payment of tax at all, at any time, collection of tax from him, with possible contingency of refund at later stage, will not make original levy valid because, if particular sales or purchases are exempt from taxation altogether, they can never be taken into account, at any stage, for purpose of calculating or arriving at taxable turnover and for levying tax." apex court in case of GE India Technology Centre P. Ltd. v. CIT [2010] 327 ITR 456 (SC) in paragraph 9 has held as under (page 462): "... obligation to deduct TAS arises only when there is sum chargeable under obligation to deduct TAS arises only when there is sum chargeable under Act. Section 195(2) is not merely provision to provide information to Income-tax Officer (TDS). It is provision requiring tax to be deducted at source to be paid to Revenue by payer who makes payment to non-resident. Therefore, section 195 has to be read in conformity with charging provisions, i.e., section 4, 5 and 9.... While interpreting provisions of Income-tax Act one cannot read charging sections of that Act de hors machinery sections. Act is to be read as integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery." apex court in case of CIT v. Eli Lilly and Co. (India) P. Ltd. [2009] 312 ITR 225 (SC) has held as under (page 463 of 327 ITR): "... provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and charging provisions of income-tax form one single integral, inseparable code and, therefore, provisions relating to TDS applies only to those sums which are 'chargeable to tax' under Income-tax Act... section 192 imposes statutory obligation on payer to deduct TAS when he pays any income chargeable under head'Salaries'. Similarly, section 195 imposes statutory obligation on any person responsible for paying to non- resident any sum'chargeable under provisions of Act', which expression, as stated above, do not find place in other sections of Chapter XVII.... provisions relating to TDS applies only to those sums which are chargeable to tax under Income-tax Act..." apex court in case of Deputy CST v. Advani Oerlikon P. Ltd. [1980] 45 STC 32 (SC); [1980] AIR 1980 SC 609 explaining meaning of discount held as under (page 34 of 45 STC): "...cash discount cannot be confused with trade discount. two concepts are wholly distinct and separate. Cash discount is allowed when purchaser makes payment promptly or within period of credit allowed. It is discount granted in consideration of expeditious payment. trade discount is deduction from catalogue price of goods allowed by wholesalers to retailers engaged in trade. allowance enables retailer to sell goods at catalogue price and yet make reasonable margin of profit after taking into account his business expense. outward invoice sent by wholesale dealer to retailer shows catalogue price and against that deduction of trade discount is shown. net amount is sale price, and it is that net amount which is entered in books of respective parties as amount reliable." Further it was held that (page 35 of 45 STC): "Nor is there any question here of two successive agreements between parties, one providing for sale of goods at catalogue price and other providing for allowance by way of trade discount. Having regard to nature of trade discount, there is only one sale price between dealer and retailer, and that is price payable by retailer calculated as difference between catalogue price and trade discount. There is only one contract between parties, contract being that goods will be sold by dealer to retailer at aforesaid sale price." apex court in case of Bhopal Sugar Industries Ltd. v. STO [1977] 40 STC 42 (SC); [1977] 6 CTR (SC) 284 answering question whether contract between assessee and Caltex India was one of agency or sale held as under (pages 47, 48 of 40 STC): "5. This question, therefore, will have to be determined having regard to terms and recitals of agreement, intention of parties as may be spelt out from terms of documents and surrounding circumstances and having regard to course of dealings between parties... ... while interpreting terms of agreement, court has to look to substance rather than form of it. mere fact that word'agent' or'agency' is used or words'buyer' and'seller' are used to describe status of parties concerned is not sufficient to lead to irresistible inference that parties did in fact intend that said status would be conferred. Thus mere formal description of person as agent or buyer is not conclusive, unless context shows that parties clearly intended to treat buyer as buyer and not as agent..." Constitution Bench of apex court in case of Padmasundara Rao (Decd.) v. State of Tamil Nadu [2002] 255 ITR 147 (SC); [2002] 3 SCC 533 dealing with question how court should understand decision of court as precedents held as under (page 153 of 255 ITR): "Courts should not place reliance on decisions without discussing as to how factual situation fits in with fact situation of decision on which reliance is placed. There is always peril in treating words of speech or judgment as though they are words in legislative enactment, and it is to be remembered that judicial utterances are made in setting of facts of particular case, said Lord Morris in Herrington v. British Railways Board [1972] 2 WLR 537 HL). Circumstantial flexibility, one additional or different fact may make world of difference between conclusions in two cases." apex court in Union of India v. Chajju Ram (Decd.) by Lrs. [2003] 5 SCC 568 on same question held as under: "23. It is now well-settled that decision is authority for what it decides and not what can logically be deduced therefrom. It is equally well-settled that little difference in facts or additional facts may lead to different conclusion." provisions for deduction of TAS (tax at source) which are in Chapter XVII dealing with collection of taxes and charging provisions of income- tax form one single integral, inseparable code. Therefore, provisions relating to TDS apply only to those sums which are "chargeable to tax" under Income-tax Act. While interpreting provisions of Income-tax Act one cannot read charging sections of that Act de hors machinery sections. Act is to be read as integrated code. In order to deduct tax at source amount being paid out must necessarily be ascertainable as income chargeable to tax in hands of payee. TDS is vicarious liability and it pre-supposes existence of primary liability. Therefore, TDS provisions have to be read in conformity with charging provisions, i.e., section 4, 5 and 9. Section 194H deals with deduction of TAS in respect of any income by way of commission or brokerage. following three conditions are to be fulfilled for attracting said provision. They are: (1) assessee should be responsible for paying income by way of commission or brokerage to distributor. (2) There should be payment either by cash or by issue of cheque or draft or any other mode or credit of such income to distributor in accounts of assessee. (3) Tax is to be deducted at time of payment or credit thereof, whichever is earlier. word "income" has been defined under section 2(24) of Act. Income includes profits and gains. commission is defined in Explanation (i) to section 194H as any payment received or receivable, directly or indirectly by agent for services rendered acting on behalf of principal. element of agency is to be there in case of all services or transactions contemplated by Explanation (i) to section 194H. mere fact that word "agent" or "agency" is used or words "buyer" and "seller" are used to describe status of parties concerned is not sufficient to lead to irresistible inference that parties did in fact intend that said status would be conferred. While interpreting terms of agreement, court has to look to substance rather than form of it. Thus mere formal description of person as agent or buyer is not conclusive, unless context shows that parties clearly intended to treat buyer as buyer and not as agent. It is well- settled proposition that if property in goods is transferred and gets vested in concessionaire at time of delivery then he is thereafter liable for same and would be dealing with them in his own right as principal and not as agent. For section 194H to be attracted, income being paid out by assessee must be in nature of commission or brokerage. element of agency is to be there in case of all services or transactions contemplated by Explanation (i) to section 194H. word "discount" is normally used to describe deduction from full amount or value of something, especially price whereas commission is defined in Explanation (i) to section 194H as any payment received or receivable, directly or indirectly by agent for services rendered acting on behalf of principal. word "discount" is normally used to describe deduction from full amount or value of something, especially price. Cash discount cannot be confused with trade discount. two concepts are wholly distinct and separate. Cash discount is allowed when purchaser makes payment promptly or within period of credit allowed. It is discount granted in consideration of expeditious payment. trade discount is deduction from catalogue price of goods allowed by wholesalers to retailers engaged in trade. allowance enables retailer to sell goods at catalogue price and yet make reasonable margin of profit after taking into account his business expense. principal question that falls for consideration in all these appeals is whether agreements between assessee and distributors gave rise to relationship of principal to principal or relationship of principal to agent. However, question arising in case has to be determined having regard to terms and recitals of agreement, intention of parties as may be spelt out from terms of document and surrounding circumstances and having regard to course of dealings between parties and statutory provisions and interpretation placed by courts in judgments on point. Agreements distribution agreement between Bharti Mobile Ltd. and its distributors, discloses that for promotion of marketing and distribution of products/services of assessee and also other related services/products, assessee has desired to avail of services of distributor for marketing and distribution of cellular phone connections and other related products. distributor has to provide services mentioned in agreement at paragraphs 1, 2, 3 and 4. Further, agreement stipulates that distributors have to represent to customers that distributor's agreement with customers/its dealers is on principal-to-principal basis and assessee is in no way concerned or liable to customer/dealers of distributor. Further, it provides that distributor shall not make any promise, representation or to give any warranty or guarantee with respect to services and products, who are not authorised by assessee. Clause 9 of agreement makes it abundantly clear that distributor shall purchase material from assessee and sell same to customer. This will include handsets, sim cards/recharge cards and any other products. sales tax liability on products sold by distributor from its premises shall solely vest with distributor. That insurance liability for entire stock-in-trade in premises at address under reference will be of distributor and liability for any loss or damage due to any fire, burglary, theft, etc., will be of distributor. Clause 23 sets out relationship. It provides that distributor understands that it is independently owned business entity and this agreement does not make distributor, its employees, associates or agents as employees, agents or legal representative of assessee for any purpose whatsoever. distributor has no express or implied right or authority to assume or to undertake any obligation in respect of or on behalf of or in name of assessee or to bind assessee in any manner. In case, distributor, its employees, associates or agents hold out as employees, agents or legal representatives of company, distributor shall forthwith upon demand make good any/all loss, cost, damage including consequential loss, suffered by assessee on this account. In agreement between Tata Teleservices Ltd., distributor is described as channel partner. "channel partner" shall mean person whose name is appearing in agreement appointed by TTSL for marketing and/or distributing products and services of TTSL. "Consideration" is defined under agreement. It shall mean trade discounts, commissions and other monetary compensation that channel partner is entitled to receive for distributing products and services, which will keep changing periodically due to various factors including changing nature of market and same will be informed by TTSL to channel partner from time to time. Clause 2.4 provides that channel partner acknowledges that it is acting for limited and exclusive purpose of agreement which does not constitute channel partner as servant or employee or partner of joint venture or affiliate or group company of TTSL. channel partner shall have no authority to bind TTSL in any respect whatsoever and shall not hold itself out as owned by or associated with TTSL, other than as independent channel partner on principal to principal basis, authorised and permitted to market products and services under agreement. None of employees of channel partner shall be construed or deemed to be employees of TTSL at any time channel partner shall indemnify and keep indemnified TTSL, its directors and officers against any claim, demand, loss or whatsoever in this connection. Clause 8.5 of agreement stipulates that channel partner be liable to pay all taxes such as sales tax, service tax applicable and payable in respect of subject matter of this agreement and any statutory increase in respect thereof. Clause 8.9 provides that channel partner shall procure products from TTSL or such person/s authorised by TTSL. channel partner shall ensure that there is no sale of spurious and unauthorised products from channel partner outlet(s) and/or retails outlets under control of channel partner. Clause 10.1 provides that in consideration of channel partner duly performing duties and obligations as contemplated in agreement, channel partner shall be entitled to consideration as set forth in schedule being attached to agreement. Clause 10.4 provides that channel partner shall be solely liable for any state and local taxes including sales tax, in relation to this agreement. TTSL shall have no liability or obligation for any state or local income-tax liability of channel partner or any person assigned/ appointed by channel partner. Clause 15.2 provides that TTSL shall have no obligation to take back any products sold to channel partner. Clause 21.1 stipulates that channel partner shall alone be responsible for all loss and damage arising out of or relating to operation of channel arrangement or arising out of acts of commissions or omissions of channel partner or any of its dealers, operators, agents, servants or personnel in connection with rendering of services by channel partner. In case of Vodafone Essar South Ltd., clause 17.2 of agreement stipulates that relationship of parties is that of seller and buyer and it is hereby expressly agreed and clarified that this agreement between VESL and hereby expressly agreed and clarified that this agreement between VESL and distributor is on principal to principal basis and neither party is, nor shall be deemed to be, agent/partner of other. Nothing in this agreement shall be construed to render distributor, partner or agent of VESL. However, appointment of such retailers outlets will be governed on principal to principal basis between such retailers/outlets and distributor. From aforesaid clauses, it is clear that there is no relationship of principal and agency. On contrary, it is expressly stated that relationship is that of principal to principal. Secondly distributor/channel partner has to pay consideration for product supplied and it is treated as sale consideration. There is clause, which specifically states that after such sale of products, distributor/channel partner cannot return goods to assessee for whatever reason. It is channel partner and distributor who have to insure products and godowns at their cost. They are even prevented from making any representation to retailers unless authorised by assessee. What is given by assessee to its distributor/channel partner is trade discount. It is not commission. In Qatar Airways case (supra) it was held that, when airlines sell air tickets it would have no information about exact rate at which tickets would ultimately be sold by their agents since agents had been given discretion to sell tickets at any rate between fixed minimum commercial price and published price. question of deducting any tax at source would not arise. In Ahmedabad Stamp Vendors' Association's case (supra) also, it was held that, when licensed stamp vendors took delivery of stamp papers on payment of full price less discount and they sell such stamp papers to retail customers, neither of two activities can be termed as service in course of buying or selling of goods. Discount given to stamp vendors is for purchasing stamps in bulk quantity and said amount is in nature of cash discount and, therefore, such transaction is sale. Therefore, discount made available to licensed stamp vendors does not fall within expression "commission" or "brokerage" under section 194H of Act. In Mother Dairy India Ltd.'s case (supra) referred to supra, it was held that concessionaire purchases milk from Dairy which raises bill on concessionaire and amount he has paid for. dairy merely fixed MRP at which concessionaire can sell milk. Under agreement, concessionaire cannot return milk under any circumstance, which is another clear indication that relationship was that of principal to principal. Even if milk gets spoiled for any reason after delivery is taken, that is to account of concessionaire and dairy is not responsible for same. concessionaire becomes owner of milk and products on taking delivery of same from Dairy. He thus purchased milk and products from Dairy and sold them at MRP. difference between MRP and price which he pays to Dairy is his income from business. It cannot be categorised as commission. loss and gain is of concessionaire. Dairy may have fixed MRP and price at which they sell products to concessionaire but products are sold and ownership vests and is transferred to concessionaires. sale is subject to conditions and stipulations. This by itself does not show and establish principal and agent relationship. supervision and control required in case of agency is missing. Therefore, it was held that there is no relationship of principal and agent and consideration paid to concessionaire is not commission. In Singapore Airlines Ltd.'s case (supra), relationship of principal and agent was not in dispute. At no point in time travel agent obtains proprietary rights to traffic documents/air tickets. There is no value or price paid by him on which travel agent gets deduction. price or value is received by assessee-airline through medium of travel agent from passenger which is also one of facets of services offered by travel agent. price or value of traffic document received by travel agent for and on behalf of assessee-airline is held in trust. Thus, money retained by travel agent is commission. airline paid standard commission to travel agent on which assessee-airline deduct tax at source. dispute was only in respect of money or monies which travel agent retains over and above net fare. In that context, Delhi High Court held that, under agreement only one relationship exists and transaction is singular transaction which is executed between travel agent while acting on behalf of principal airline in selling traffic documents/air tickets to third party who is passenger and, therefore, second leg of transaction cannot be different from first leg of transaction. In Idea Cellular Ltd.'s case (supra), Delhi High Court proceeded on footing that assessee is providing mobile phone service. It is ultimate owner of service system. service is meant for public at large. They had appointed distributors to make available pre-paid products to public and look after documentation and other statutory requirements regarding mobile phone connection and, therefore, essence of service rendered by distributor is not sale of any product or goods and, therefore, it was held that all distributors are always acting for and on behalf of assessee-company. Similar is view expressed by Kerala High Court in Vodafone Essar Cellular Ltd.'s case (supra), where it was held that, distributor is only rendering services to assessee and distributor commits assessee to subscribers to whom assessee is accountable under service contract which is subscriber connection arranged by distributor for assessee. In that context, it was held that discount is nothing but margin given by assessee to distributor at time of delivery of sim cards or recharge coupons against advance payment made by distributor. In both aforesaid cases, court proceeded on basis that service cannot be sold. It has to be rendered. But they did not go into question whether right to service can be sold. telephone service is nothing but service. Sim cards have no intrinsic sale value. It is supplied to customers for providing mobile services to them. sim card is in nature of key to consumer to have access to telephone network established and operated by assessee-company on its own behalf. Since sim card is only device to have access to mobile phone network, there is no question of passing of any ownership or title of goods from assessee-company to distributor or from distributor to ultimate consumer. Therefore, sim card, on its own but without service would hardly have any value. customer, who wants to have its service initially, has to purchase sim card. When he pays for sim card, he gets mobile service activated. Service can only be rendered and cannot be sold. However, right to service can be sold. What is sold by service provider to distributor is right to service. Once distributor pays for service, and service provider, delivers sim card or recharge coupons, distributor acquires right to demand service. Once such right is acquired distributor may use it by himself. He may also sell right to sub-distributors who in turn may sell it to retailers. It is well-settled proposition that if property in goods is transferred and gets vested in distributor at time of delivery then he is thereafter liable for same and would be dealing with them in his own right as principal and not as agent. seller may have fixed MRP and price at which they sell products to distributors but products are sold and ownership vests and is transferred to distributors. However, whoever ultimately sells said right to customers is not entitled to charge more than MRP. income of these middlemen would be difference in sale price and MRP, which they have to share as per agreement between them. said income accrues to them only when they sell this right to service and not when they purchase this right to service. assessee is not concerned with quantum and time of accrual of income to distributors by reselling pre-paid cards to sub-distributors/retailers. As at time of sale of pre-paid card by assessee to distributor, income has not accrued or arisen to distributor, there is no primary liability to tax on distributor. In absence of primary liability on distributor at such point of time, there is no liability on assessee to deduct tax at source. difference between sale price to retailer and price which distributor pays to assessee is his income from business. It cannot be categorised as commission. sale is subject to conditions and stipulations. This by itself does not show and establish principal and agent relationship. following illustration makes point clear: On delivery of prepaid card, assessee raises invoices and updates accounts. In first instance, sale is accounted for Rs. 100, which is first account and Rs. 80 is second account and third account is Rs. 20. It shows that sales is for Rs. 100, commission is given at Rs. 20 to distributors and net value is Rs. 80. assessee's sale is accounted at gross value of Rs. 100 and, thereafter, commission paid at Rs. 20 is accounted. Therefore, in those circumstances of case, essence of contract of assessee and distributor is that of service and, therefore, section 194H of Act is attracted. However, in first instance, if assessee accounted for only Rs. 80 and on payment of Rs. 80, he hands over pre-paid card prescribing MRP as Rs. 100, then at time of sale, assessee is not making any payment. Consequently, distributor is not earning any income. This discount of Rs. 20 if not reflected anywhere in books of account, in such circumstances, section 194H of Act is not attracted. In appeals before us, assessees sell pre-paid cards/vouchers to distributors. At time of assessee selling these pre-paid cards for consideration to distributor, distributor does not earn any income. In fact, rather than earning income, distributors incur expenditure for purchase of pre-paid cards. Only after resale of those pre-paid cards, distributors would derive income. At time of assessee selling these pre-paid cards, he is not in possession of any income belonging to distributor. Therefore, question of any income accruing or arising to distributor at point of time of sale of pre-paid card by assessee to distributor does not arise. condition precedent for attracting section 194H of Act is that there should be income payable by assessee to distributor. In other words, income accrued or belonging to distributor should be in hands of assessees. Then out of that income, assessee has to deduct income-tax thereon at rate of 10 per cent. and then pay remaining portion of income to distributor. In this context, it is pertinent to mention that assessee sells sim cards to distributor and allows discount of Rs. 20, that Rs. 20 does not represent income at hands of distributor because distributor in turn may sell SIM cards to sub-distributor who in turn may sell sim cards to retailer and it is retailer who sells it to customer. profit earned by distributor, sub-distributor and retailer would be dependant on agreement between them and all of them have to share Rs. 20 which is agreement between them and all of them have to share Rs. 20 which is allowed as discount by assessee to distributor. There is no relationship between assessee and sub-distributor as well as retailer. However, under terms of agreement, several obligations flow in so far as services to be rendered by assessee to customer is concerned and, therefore, it cannot be said that there exists relationship of principal and agent. In facts of case, we are satisfied that, it is sale of right to service. relationship between assessee and distributor is that of principal to principal and, therefore, when assessee sells sim cards to distributor, he is not paying any commission; by such sale no income accrues in hands of distributor and he is not under any obligation to pay any tax as no income is generated in his hands. deduction of income-tax at source being vicarious responsibility, when there is no primary responsibility, assessee has no obligation to deduct TDS. Once it is held that right to service can be sold then relationship between assessee and distributor would be that of principal and principal and not principal and agent. terms of agreement set out supra in unmistakable terms demonstrate that relationship between assessee and distributor is not that of principal and agent but it is that of principal to principal. It was contended by Revenue that, in event of assessee deducting amount and paying into Department, ultimately if dealer is not liable to tax it is always open to him to seek for refund of tax and, therefore, it cannot be said that section 194H is not attracted to case on hand. As stated earlier, on proper construction of section 194H and keeping in mind object with which Chapter XVII is introduced, person paying should be in possession of income which is chargeable to tax under Act and which belongs to payee. statutory obligation is cast on payer to deduct tax at source and remit same to Department. If payee is not in possession of net income which is chargeable to tax, question of payer deducting any tax does not arise. As held by apex court in Bhawani Cotton Mills Ltd.'s case, if person is not liable for payment of tax at all, at any time, collection of tax from him, with possible contingency of refund at later stage will not make original levy valid. In case of Vodafone it is necessary to look into accounts before granting any relief to them as set out above. They have accounted entire price of pre-paid card at Rs. 100 in their books of account and showing discount of Rs. 20 to dealer. Only if they are showing Rs. 80 as sale price and not reflecting in their accounts credit of Rs. 20 to distributor, then there is no liability to deduct tax under section 194H of Act. This exercise has to be done by assessing authority before granting any relief. same exercise can be done even in respect of other assessees also. In light of aforesaid discussions, we are of view that order passed by authorities holding that section 194H of Act is attracted to facts of case is unsustainable. Therefore, substantial question of law is answered in favour of assessee and against Revenue. Hence, we pass following order: Order 1. Appeals are allowed. 2. impugned orders passed by authorities are hereby set aside. 3. matter is remitted back to assessing authority only to find out how books are maintained and how sale price and sale discount is treated and whether sale discount is reflected in their books. If accounts are not reflected as set out above, in paragraph 60, section 194H of Act is not attracted. Ordered accordingly. *** Bharti Airtel Ltd. v. Deputy Commissioner of Income-tax