Holding

Section 194-H does not apply because the franchisees/distributors are independent contractors, not agents, and the assessees are not the persons responsible for paying the commission.

Summary

The case concerned whether cellular mobile service providers (the assessees) were required to deduct tax at source under section 194-H of the Income Tax Act, 1961 on the margin earned by franchisees/distributors from selling prepaid kits at a price higher than the discounted price paid to the assessees. The Revenue argued that the margin constituted commission or brokerage payable to an agent, invoking a principal‑agent relationship, while the assessees contended that the franchisees/distributors were independent contractors and the margin was their own profit, not a commission. The Supreme Court examined the legal definition of an agent under section 182 of the Contract Act, 1872 and the requirements of section 194-H, emphasizing that a principal‑agent relationship must exist and the payer must be the person responsible for paying the income. It held that the franchisees/distributors acted as independent contractors, not agents, and the assessees neither paid nor credited any commission to them, so section 194-H was inapplicable. Consequently, the Court set aside the High Court decisions that imposed the tax deduction liability and allowed the assessees' appeals, dismissing the Revenue's appeals.

Issues considered

The existence of a principal‑agent relationship between the cellular service providers and the franchisees/distributors under the franchise/distributorship agreements.
Whether the margin earned by franchisees/distributors qualifies as 'commission or brokerage' within the meaning of section 194-H, Income Tax Act, 1961.
Whether section 194-H imposes a duty on the assessees to deduct tax at source on payments made indirectly to the franchisees/distributors.

Legislation cited

Subjects

Liability to deduct tax at sourceCellular mobile telephone service providersAgentPrincipalFranchise/distributorship agreementCommissionBrokeragePowerAuthorityFiduciary character of the relationshipServantsIndependent contractorIndependent agentLaw relating to agencyDoctrine of presumption against doubtful penalisation

Judgment

[2024] 2 S.C.R. 1001 : 2024 INSC 148

Bharti Cellular Limited (Now Bharti Airtel Limited)
v.
Assistant Commissioner of Income Tax, Circle 57, Kolkata
and Another
(Civil Appeal No. 7257 of 2011)
28 February 2024
[Sanjiv Khanna* and S.V.N. Bhatti, JJ.]
Issue for Consideration
The liability to deduct tax at source u/s.194-H, Income Tax Act,
1961 on the amount which, as per the Revenue, is a commission
payable to an agent by the assessees-cellular mobile telephone
service providers under the franchise/distributorship agreement
between the assessees and the franchisees/distributors.

Headnotes
Income Tax Act, 1961 – s.194-H – When not attracted –
Assessees entered into franchise or distribution agreements
and sold start-up kits, recharge vouchers at a discounted
price to the franchisee/distributors – As per Revenue, the
difference between ‘discounted price’ and ‘sale price’ in the
hands of the franchisee/distributors being in the nature of
‘commission or brokerage’ was the income of the franchisee/
distributors, the relationship between the assessees and the
franchisee/distributor was in the nature of principal and agent,
and thus, the assesses were liable to deduct tax at source
u/s.194-H – As per the assessees, neither the discount was
a ‘commission or brokerage’ u/Explanation (i) to s.194-H nor
were the franchisees/distributors their agents:
Held: Whether in law the relationship between the parties is that
of principal-agent is answered by applying s.182, Contract Act,
1872 – The obligation to deduct tax at source in terms of s.194-H
arises when the legal relationship of principal-agent is established
– Contractual obligations of the distributors/franchisees, do not
reflect a fiduciary character of the relationship, or the business
being done on the principal’s account – Franchisees/distributors
earn their income when they sell the prepaid products to the
retailer or the end-user/customer – Their profit consists of the
difference between the sale price received by them from the

* Author
1002 [2024] 2 S.C.R.

Digital Supreme Court Reports

retailer/end-user/customer and the discounted price at which
they ‘acquired’ the product – Though the discounted price is
fixed or negotiated between the assessee and the franchisee/
distributor, the sale price received by the franchisee/distributor
is within their sole discretion – Assessee has no say in this
matter – Assessee does not at any stage either pay or credit
the account of the franchisee/distributor with the income by way
of commission or brokerage on which tax at source u/s.194-H is
to be deducted – Expression “direct or indirect” used in s.194-H
Explanation (i) is no doubt meant to ensure that “the person
responsible for paying” does not dodge the obligation to deduct
tax at source, even when the payment is indirectly made by the
principal-payer to the agent-payee however, deduction of tax at
source in terms of s.194-H is not to be extended and widened in
ambit to apply to true/genuine business transactions, where the
assessee is not the person responsible for paying or crediting
income– Assessees neither pay nor credit any income to the
person with whom he has contracted and are not privy to the
transactions between distributors/franchisees and third parties–
It is impossible for the assessees to deduct tax at source and
comply with s.194-H, on the difference between the total/sum
consideration received by the distributors/ franchisees from third
parties and the amount paid by the distributors/franchisees to
them – Payee receives payment when the third party makes the
payment – This payment is not the payment received or payable
by the assessee as the principal – The distributor/franchisee is
not the trustee who is to account for this payment to the assessee
as the principal – Assessees not under legal obligation to deduct
tax at source on the income/profit component in the payments
received by the distributors/franchisees from the third parties/
customers, or while selling/transferring the pre-paid coupons
or starter-kits to the distributors – s.194-H not applicable to
the facts and circumstances of this case – Judgments of High
Courts of Delhi and Calcutta set aside. [Paras 6, 29, 31, 34,
36, 37 and 42]
Contract Act, 1872 – s.182 – ‘agent’ and ‘principal’ – Whether
a legal relationship of a principal and agent exists, factors
to be taken into consideration:
Held: (a) The essential characteristic of an agent is the legal
power vested with the agent to alter his principal’s legal
[2024] 2 S.C.R. 1003

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

relationship with a third party and the principal’s co-relative
liability to have his relations altered – (b) As the agent acts
on behalf of the principal, one of the prime elements of the
relationship is the exercise of a degree of control by the principal
over the conduct of the activities of the agent – This degree of
control is less than the control exercised by the master on the
servant, and is different from the rights and obligations in case
of principal to principal and independent contractor relationship
– (c) The task entrusted by the principal to the agent should
result in a fiduciary relationship – The fiduciary relationship is
the manifestation of consent by one person to another to act
on his or her behalf and subject to his or her control, and the
reciprocal consent by the other to do so – (d) As the business
done by the agent is on the principal’s account, the agent is liable
to render accounts thereof to the principal – An agent is entitled
to remuneration from the principal for the work he performs for
the principal – Other relevant aspects/considerations, discussed.
[Paras 8, 9]
Income Tax Act, 1961 – Explanation (i) to s.194-H:
Held: The words “direct” or “indirect” in Explanation (i) to s.194-H
are with reference to the act of payment – The legislative intent
to include “indirect” payment ensures that the net cast by the
section is plugged and not avoided or escaped, albeit it does not
dilute the requirement that the payment must be on behalf “the
person responsible for paying”– This means that the payment/
credit in the account should arise from the obligation of “the person
responsible for paying” – The payee should be the person who
has the right to receive the payment from “the person responsible
for paying” – Further, explanation (i) to s.194-H, by using the
word “indirectly”, does not regulate or curtail the manner in which
the assessee can conduct business and enter into commercial
relationships – Neither does the word “indirectly” create an
obligation where the main provision does not apply – The tax
legislation recognises diverse relationships and modes in which
commerce and trade are conducted, albeit obligation to tax at
source arises only if the conditions as mentioned in s.194-H
are met and not otherwise – This principle does not negate the
compliance required by law – Latter portion of the Explanation
(i) to s.194-H is a requirement and a pre-condition – It should
not be read as diminishing or derogating the requirement of
1004 [2024] 2 S.C.R.

Digital Supreme Court Reports

the principal and agent relationship between the payer and the
recipient/payee. [Paras 4, 5 and 34]
Income Tax Act, 1961 – Issue as regards the liability to
deduct tax at source u/s.194-H on the amount which, as per
the Revenue, is a commission payable to an agent by the
assessees under the franchise/distributorship agreement
between the assessees and the franchisees/distributors –
Plea of the Revenue relying upon the decision of this Court
in Singapore Airlines Ltd. and Another v. Commissioner of
Income Tax [2022] 9 SCR 1 that assessees would be liable
to deduct tax at source even if they are not making payment
or crediting the income to the account of the franchisee/
distributor:
Held: Rejected – When the obligation, and the time and manner
in which the tax is mandated by law to be deducted at source, is
fixed by the statute, the same cannot be shifted/altered/modified
or postponed on a concession in the court by the Revenue –
The concession may be granted, when permissible, by way of a
circular issued in accordance with s.119 – Decision in Singapore
Airlines Limited can not be read in the manner as suggested by
the Revenue. [Para 38]
Franchise agreement and distributorship agreement –
Distinction – Legal position of a distributor different from
agent – Distributor, an independent contractor:
Held: Legal position of a distributor, it is to be generally regarded
as different from that of an agent – The distributor buys goods
on his account and sells them in his territory – In such cases,
distributor is an independent contractor – Unlike an agent, he
does not act as a communicator or creator of a relationship
between the principal and a third party – Franchise agreements
are normally considered as sui generis, though they have
been in existence for some time – They provide a mechanism
whereby goods and services may be distributed – In franchise
agreements, the supplier or the manufacture, i.e. a franchisor,
appoints an independent enterprise as a franchisee through
whom the franchisor supplies certain goods or services – There
is a close relationship between a franchisor and a franchisee
because a franchisee’s operations are closely regulated, and this
possibly is a distinction between a franchise agreement and a
[2024] 2 S.C.R. 1005

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

distributorship agreement – Franchise agreements are extremely
detailed and complex – Notwithstanding the strict restrictions
placed on the franchisees, the relationship may in a given case
be that of an independent contractor – Facts of each case and
the authority given by ‘principal’ to the franchisees matter and
are determinative – Further, an independent contractor is free
from control on the part of his employer, and is only subject to
the terms of his contract – But an agent is not completely free
from control, and the relationship to the extent of tasks entrusted
by the principal to the agent are fiduciary – As contract with an
independent agent depends upon the terms of the contract,
sometimes an independent contractor looks like an agent from
the point of view of the control exercisable over him, but on an
overview of the entire relationship the tests specified in clauses
(a) to (d) in paragraph 8 may not be satisfied – The distinction
is that independent contractors work for themselves, even when
they are employed for the purpose of creating contractual relations
with the third persons – An independent contractor is not required
to render accounts of the business, as it belongs to him and not
his employer. [Paras 39, 40]
Law relating to agency – Exclusion of servants and
independent contractors:
Held: ‘Agent’ denotes a relationship that is very different from that
existing between a master and his servant, or between a principal
and principal, or between an employer and his independent
contractor – Although servants and independent contractors are
parties to relationships in which one person acts for another, and
thereby possesses the capacity to involve them in liability, yet
the nature of the relationship and the kind of acts in question
are sufficiently different to justify the exclusion of servants and
independent contractors from the law relating to agency – Term
‘agent’ should be restricted to one who has the power of affecting
the legal position of his principal by the making of contracts, or
the disposition of the principal’s property; viz. an independent
contractor who may, incidentally, also affect the legal position of
his principal in other ways – This can be ascertained by referring
to and examining the indicia mentioned in clauses (a) to (d) in
paragraph 8 of this judgment – It is in the restricted sense in
which the term agent is used in Explanation (i) to s.194-H of the
Income Tax Act, 1961. [Para 41]
1006 [2024] 2 S.C.R.

Digital Supreme Court Reports

Doctrine/Principles – Doctrine of presumption against
doubtful penalisation:
Held: The deduction of tax provisions should be programmatically
and realistically construed – In case of a legal or factual doubt in a
given case, the assessee can rely on the doctrine of presumption
against doubtful penalisation – Whether or not the said doctrine
should be applied will depend on facts and circumstances of the
case, including the past practice followed by the assessee and
accepted by the department – When there is apparent divergence
of opinion, to avoid litigation and pitfalls associated, it may be
advisable for the Central Board of Direct Taxes to clarify doubts
by issuing appropriate instruction/circular after ascertaining view
of the assesses and stakeholders. [Para 35]
Words and expressions – ‘power’; ‘authority’.

Case Law Cited
Singapore Airlines Ltd. and Another v. Commissioner
of Income Tax, [2022] 9 SCR 1 : (2023) 1 SCC 497 –
dsitinguished.
Bhopal Sugar Industries Limited v. Sales Tax Officer,
Bhopal, [1977] 3 SCR 578 : (1977) 3 SCC 147;
Commissioner of Income Tax, Ahmedabad and Others v.
Ahmedabad Stamp Vendors Association, (2014) 16 SCC
114; Ahmedabad Stamp Vendors Association v. Union of
India, (2002) 257 ITR 202 (Guj.); Director, Prasar Bharati
v. Commissioner of Income Tax, Thiruvananthapuram,
[2018] 3 SCR 287 : (2018) 7 SCC 800; Securities
and Exchange Board of India v. Sunil Krishna Khaitan
and Others, [2022] 18 SCR 987 : (2023) 2 SCC 643
– referred to.
Commissioner of Income Tax v. Singapore Airlines Ltd.,
(2009) 319 ITR 29 – referred to.
Labreche v. Harasymiw, (1992) 89 DLR (4th) 95 at
107 – referred to.

Books and Periodicals Cited
F.E. Dowrick, The Relationship of Principal and Agent,
17 MLR 24, 37 (1954); Restatement (Third) Of Agency
(American Law Institute Publishers 2007); Warren A.
[2024] 2 S.C.R. 1007

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

Seavey, The Rationale of Agency, 29 YALE L.J. 859,
866 (1920); G.H.L. Fridman, The Law of Agency 33
(Butterworths, 7 ed. 1996) – referred to.

List of Acts
Income Tax Act, 1961; Contract Act, 1872; Indian Telegraph Act,
1885.

List of Keywords
Liability to deduct tax at source; Cellular mobile telephone service
providers; Agent; Principal; Franchise/distributorship agreement;
Commission; Brokerage; Power; Authority; Fiduciary character of
the relationship; Servants; Independent contractor; Independent
agent; Law relating to agency; Doctrine of presumption against
doubtful penalisation.

Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No.7257 of 2011
With
Civil Appeal Nos. 2652-2653, 4949-4950, 4947-4948 of 2015, 7455
of 2018, 111, 2860 of 2021, 8902 of 2022, 7729, 7735, 7736, 7737,
7738, 7739, 7740, 7741, 7742, 7743, 7679, 7680, 7681, 7682, 7744,
7745, 7746, 7747, 7748, 7848, 7849, 7852, 7853, 7854, 7855, 7856,
7857, 7859 of 2023, 3514, 3515, 3516 And 3517 of 2024
From the Judgment and Order dated 19.05.2011 of the High Court at
Calcutta in ITA No.222 of 2006
Appearances for Parties
Balbir Singh, N. Venkatraman, A.S.Gs., Arvind P. Datar, Ajay Vohra,
Arijit Prasad, Kavin Gulati, Sr. Advs., Kumar Visalaksh, Udit Jain,
Archit Gupta, Arihant Tater, Ajitesh Dayal Singh, Praveen Kumar,
Harish Pandey, Raj Bahadur Yadav, Digvijay Dam, V.C. Bharathi,
Santosh Kumar, Rupesh Kumar, Prahlad Singh, Alka Agarwal, Ms.
Ankita Anilkumar Singh, Deepak Kumar, Indrajit Prasad, Shyam
Gopal, Aditya Rathore, Naman Tandon, Samarvir Singh, Prasenjeet
Mohapatra, Sachit Jolly, Ms. Anuradha Dutt, Ms. Disha Jham, Ms.
Soumya Singh, Ms. B. Vijayalakshmi Menon, Abhishek Vikas, Mahesh
Agarwal, Rishi Agrawala, Ms. Sayree Basu Mullick, Ms. Madhvi
Agarwal, M.S. Ananth, Ms. Sayree Basu Mullik, Abhinabh Garg, E.C.
Agrawala, Advs. for the appearing parties.
1008 [2024] 2 S.C.R.

Digital Supreme Court Reports

Judgment / Order of the Supreme Court

Judgment
Sanjiv Khanna, J.
This common judgment decides the aforestated appeals preferred
by the Revenue and the assessees, who are cellular mobile
telephone service providers. The issue relates to the liability
to deduct tax at source under Section 194-H of the Income
Tax Act, 19611 on the amount which, as per the Revenue, is a
commission payable to an agent by the assessees under the
franchise/ distributorship agreement between the assessees and
the franchisees/distributors. As per the assessees, neither are they
paying a commission or brokerage to the franchisees/distributors,
nor are the franchisees/distributors their agents. The High Courts
of Delhi and Calcutta have held that the assessees were liable
to deduct tax at source under Section 194-H of the Act, whereas
the High Courts of Rajasthan, Karnataka and Bombay have held
that Section 194-H of the Act is not attracted to the circumstances
under consideration.
2. To avoid prolixity and repetition, we are not referring to the facts
and arguments in the beginning, and will preface our judgment by
reproducing Section 194-H of the Act and explaining its contours.
The relevant portion of Section 194-H reads as under:
“194-H. Commission or brokerage.— Any person, not
being an individual or a Hindu undivided family, who is
responsible for paying, on or after the 1st day of June,
2001, to a resident, any income by way of commission (not
being insurance commission referred to in Section 194-D)
or brokerage, shall, at the time of credit of such income
to the account of the payee or at the time of payment of
such income in cash or by the issue of a cheque or draft
or by any other mode, whichever is earlier, deduct income
tax thereon at the rate of five per cent:
Provided that no deduction shall be made under this
section in a case where the amount of such income or,

1 “The Act”, for short.
[2024] 2 S.C.R. 1009

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

as the case may be, the aggregate of the amounts of
such income credited or paid or likely to be credited or
paid during the financial year to the account of, or to, the
payee, does not exceed fifteen thousand rupees:
Provided further that an individual or a Hindu undivided
family, whose total sales, gross receipts or turnover from
the business or profession carried on by him exceed one
crore rupees in case of business or fifty lakh rupees in
case of profession during the financial year immediately
preceding the 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.

xx xx xx”
3. Section 194-H of the Act imposes the obligation to deduct tax at
source, states that any person responsible for paying at the time of
credit or at the time of payment, whichever is earlier, to a resident any
income by way of commission or brokerage, shall deduct income tax
at the prescribed rate The expression “any person (...) responsible for
paying” is a term of art, defined vide Section 2042 of the Act. As per

2 204. Meaning of “person responsible for paying”.—For the purposes of the foregoing provisions of
this chapter and Section 285, the expression “person responsible for paying” means—
(i) in the case of payments of income chargeable under the head “Salaries” other than payments by
the Central Government or the Government of a State, the employer himself or, if the employer is
a company, the company itself, including the principal officer thereof;
(ii) in the case of payments of income chargeable under the head “Interest on securities” other than
payments made by or on behalf of the Central Government or the Government of a State, the local
authority, corporation or company, including the principal officer thereof;
(ii-a) in the case of any sum payable to a non-resident Indian, being any sum representing consider-
ation for the transfer by him of any foreign exchange asset, which is not a short-term capital asset,
the authorised person responsible for remitting such sum to the non-resident Indian or for crediting
such sum of his Non-resident (External) Account maintained in accordance with the Foreign Ex-
change Management Act, 1999 (42 of 1999)], and any rules made thereunder;
(ii-b) in the case of furnishing of information relating to payment to a non-resident, not being a company,
or to a foreign company, of any sum, whether or not chargeable under the provisions of this Act,
the payer himself, or, if the payer is a company, the company itself including the principal officer
thereof;
(iii) in the case of credit or, as the case may be, payment of any other sum chargeable under the provi-
sions of this Act, the payer himself, or, if the payer is a company, the company itself including the
principal officer thereof.
1010 [2024] 2 S.C.R.

Digital Supreme Court Reports

the clause (iii) of Section 204, in the case of credit or in the case of
payment in cases not covered by clauses (i), (ii), (ii)(a), (ii)(b), “the
person responsible for paying” is the payer himself, or if the payer
is a company, the company itself and the principal officer thereof.
4. Explanation (i) to Section 194-H3 of the Act defines the expressions
‘commission’ or ‘brokerage’, as:
“Explanation. — For the purposes of this section, —
(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;”
Payment is received when it is actually received or
paid. The payment is receivable when the amount
is actually credited in the books of the payer to the
account of the payee, though the actual payment
may take place in future. The payment received or

(iv) in the case of credit, or as the case may be, payment of any sum chargeable under the provisions
of this Act made by or on behalf of the Central Government or the Government of a State, the draw-
ing and disbursing officer or any other person, by whatever name called, responsible for crediting,
or as the case may be, paying such sum.
(v) in the case of a person not resident in India, the person himself or any person authorised by such
person or the agent of such person in India including any person treated as an agent under Sec-
tion 163.]
Explanation. —For the purposes of this section, —
(a) “non-resident Indian” and “foreign exchange asset” shall have the meanings assigned to them in
Chapter XII-A;
(b) “authorised person” shall have the meaning assigned to it in clause (c) of Section 2 of the Foreign
Exchange Management Act, 1999 (42 of 1999).
3 Sub-section 1 to Section 194-H of the Act can be interpreted as requiring deduction of tax at source on
commission and brokerage, even when the principal and agent relationship does not exist between the
parties. Explanation (i) to Section 194-H of the Act can be read as expanding and widening the scope of
the provision of sub-section (1) to include in the ambit of brokerage and commission, payments made
by the principal to the agent, when covered under the four corners of the said explanation. We would
not like to pronounce on this aspect as it has not been argued by the Revenue, and it appears that the
requirement of relationship of principal and agent has been read into the main section. Further, applying
common or commercial parlance meaning to the terms ‘brokerage’ or ‘commission’, given the wide di-
vergence in which it is understood, would lead to confusion and has pitfalls. Deduction of Tax provisions
should be pragmatically and realistically construed, and not as enmeshes or by adopting catch-as-catch-
can approach. When doubts exist, the Central Board of Direct Taxes may examine this question and may
issue appropriate instructions/circular after ascertaining the views of assessees and other stakeholders.
The decision should be clear, and we trust and hope that an obligation, if imposed, will be prospective.
(See paragraph 34 of the judgment.)
[2024] 2 S.C.R. 1011

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

receivable should be to a person acting on behalf of
another person. The words “another person” refers to
“the person responsible for paying”. The words “direct”
or “indirect” in Explanation (i) to Section 194-H of the
Act are with reference to the act of payment. Without
doubt, the legislative intent to include “indirect” payment
ensures that the net cast by the section is plugged
and not avoided or escaped, albeit it does not dilute
the requirement that the payment must be on behalf
“the person responsible for paying”. This means that
the payment/credit in the account should arise from
the obligation of “the person responsible for paying”.
The payee should be the person who has the right to
receive the payment from “the person responsible for
paying”. When this condition is satisfied, it does not
matter if the payment is made “indirectly”.4
5. The services rendered by the agent to the principal, according to the
latter portion of Explanation (i) to Section 194-H of the Act, should
not be in the nature of professional services. Further, Explanation
(i) to Section 194-H of the Act restricts application of Section 194-
H of the Act to the services rendered by the agent to the principal
in the course of buying and selling of goods, or in relation to any
transaction relating to any asset, valuable article, or thing, not being
securities. The latter portion of the Explanation (i) to Section 194-
H of the Act is a requirement and a pre-condition. It should not be
read as diminishing or derogating the requirement of the principal
and agent relationship between the payer and the recipient/payee.
6. It is settled by a series of judgments of this Court that the expression
‘acting on behalf of another person’ postulates the existence of a
legal relationship of principal and agent, between the payer and the
recipient/payee.5 The law of agency is technical. Whether in law the
relationship between the parties is that of principal-agent is answered

4 We are unable to visualize ‘indirect’ credit in the books of the payer to the account of the payee. Credit
entry is required even in cases of set-off. Nevertheless, this judgment should not be read as laying down
that ‘indirect’ credit in the books shall not require deduction of tax under Section 194-H of the Act.
5 Singapore Airlines Ltd. and Another v. Commissioner of Income Tax, [2022] 9 S.C.R. 1 : (2023) 1 SCC
497, ¶¶ 23-29.
1012 [2024] 2 S.C.R.

Digital Supreme Court Reports

by applying Section 182 of the Contract Act, 18726. Therefore, the
obligation to deduct tax at source in terms of Section 194-H of the Act
arises when the legal relationship of principal-agent is established. It is
necessary to clarify this position, as in day to day life, the expression
‘agency’ is used to include a vast number of relationships, which are
strictly, not relationships between a principal and agent.
7. Section 182 of the Contract Act, defines the words ‘agent’ and
‘principal’ and reads as under:
“182. “Agent” and “principal” defined.— An “agent” is 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”.”
Agency in terms of Section 182 exists when the principal employs
another person, who is not his employee, to act or represent
him in dealings with a third person. An agent renders services
to the principal. The agent does what has been entrusted to him
by the principal to do. It is the principal he represents before
third parties, and not himself. As the transaction by the agent
is on behalf of the principal whom the agent represents, the
contract is between the principal and the third party. Accordingly
the agent, except in some circumstances, is not liable to the
third party.
8. Agency is therefore a triangular relationship between the principal,
agent and the third party. In order to understand this relationship,
one has to examine the inter se relationship between the principal
and the third party and the agent and the third party. When we
examine whether a legal relationship of a principal and agent exists,
the following factors/aspects should be taken into consideration:
(a) The essential characteristic of an agent is the legal power
vested with the agent to alter his principal’s legal relationship
with a third party and the principal’s co-relative liability to have
his relations altered.7

6 “Contract Act”, for short.
7 F.E. Dowrick, The Relationship of Principal and Agent, 17 MLR 24, 37 (1954).
[2024] 2 S.C.R. 1013

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

(b) As the agent acts on behalf of the principal, one of the prime
elements of the relationship is the exercise of a degree of control
by the principal over the conduct of the activities of the agent. This
degree of control is less than the control exercised by the master on
the servant, and is different from the rights and obligations in case
of principal to principal and independent contractor relationship.
(c) The task entrusted by the principal to the agent should result
in a fiduciary relationship. The fiduciary relationship is the
manifestation of consent by one person to another to act on
his or her behalf and subject to his or her control, and the
reciprocal consent by the other to do so.8
(d) As the business done by the agent is on the principal’s account,
the agent is liable to render accounts thereof to the principal.
An agent is entitled to remuneration from the principal for the
work he performs for the principal.
9. At this stage, three other relevant aspects/considerations should
be noted. First is the difference between ‘power’ and ‘authority’.
The two terms though connected, are not synonymous. Authority
refers to a factual position, that is, the terms of contract between
the two parties. The power of the agent however, is not, strictly
speaking, conferred by the contract or by the principal but by the
law of agency. When a person gives authority to another person to
do the acts which bring the law of agency into play, then, the law
vests power with the agent to affect the principal’s legal relationship
with the third parties. The extent and existence of the power with
the agent is determined by public policy. The authority, as observed
above, refers to the factual situation. The second consideration is
that the primary task of an agent is to enter into contracts on behalf
of his principal, or to dispose of his principal’s property. The factors
mentioned in clauses (b) to (d) in paragraph 8 above flow, and are
indicia of this primary task. Clauses (b) to (d) of paragraph 8 are
useful as tests or standards to examine the true nature or character
of the relationship. Lastly, the substance of the relationship between
the parties, notwithstanding the nomenclature given by the parties
to the relationship, is of primary importance. The true nature of the
relationship is examined by reference to the functions, responsibility

8 Restatement (Third) of Agency (American Law Institute Publishers 2007).
1014 [2024] 2 S.C.R.

Digital Supreme Court Reports

and obligations of the so-called agent to the principal and to the
third parties.
10. An agent is distinct from a servant, in that an agent is subject to
less control than a servant, and has complete, or almost complete
discretion as to how to perform an undertaking. As Seavey said, ‘‘a
servant (...) is an agent under more complete control than is a non-
servant’’.9 The difference is “in the degree of control rather than in
the acts performed. The servant sells primarily his services measured
by time; the agent his ability to produce results.”10 This distinction
can be criticised, for servants may have very wide discretion, and
may not really be subject to control at all in practice, while agents
may have their power to act circumscribed by detailed instructions.11
11. This Court in Bhopal Sugar Industries Limited v. Sales Tax Officer,
Bhopal12, has expounded the difference between principal-agent and
principal-principal relationship, in the following words:-
“5. … the essence of the matter is that in a contract of sale,
title to the property passes on to the buyer on delivery of the
goods for a price paid or promised. Once this happens the
buyer becomes the owner of the property and the seller has no
vestige of title left in the property. The concept of a sale has,
however, undergone a revolutionary change, having regard
to the complexities of the modern times and the expanding
needs of the society, which has made a departure from the
doctrine of laissez faire by including a transaction within the
fold of a sale even though the seller may by virtue of an
agreement impose a number of restrictions on the buyer, e.g.
fixation of price, submission of accounts, selling in a particular
area or territory and so on. These restrictions per se would
not convert a contract of sale into one of agency, because
in spite of these restrictions the transaction would still be a
sale and subject to all the incidents of a sale. A contract of
agency, however, differs essentially from a contract of sale
inasmuch as an agent after taking delivery of the property

9 Warren A. Seavey, The Rationale of Agency, 29 YALE L.J. 859, 866 (1920).
10 Ibid.
11 G.H.L. Fridman, The Law of Agency 33 (Butterworths, 7 ed. 1996).
12 [1977] 3 SCR 578 : (1977) 3 SCC 147.
[2024] 2 S.C.R. 1015

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

does not sell it as his own property but sells the same as
the property of the principal and under his instructions and
directions. Furthermore, since the agent is not the owner of
the goods, if any loss is suffered by the agent he is to be
indemnified by the principal. This is yet another dominant
factor which distinguishes an agent from a buyer—pure and
simple. In Halsbury’s Laws of England, Vol. 1, 4th Edn., in
para 807 at p. 485, the following observations are made:
“807. Rights of agent. —The relation of principal
and agent raises by implication a contract on
the part of the principal to reimburse the agent
in respect of all expenses, and to indemnify him
against all liabilities, incurred in the reasonable
performance of the agency, provided that such
implication is not excluded by the express terms
of the contract between them, and provided
that such expenses and liabilities are in fact
occasioned by his employment.”
12. The aforesaid judgment in the context of distinction between a
contract of sale and contract of agency observes that the agent
is authorised to sell or buy on behalf of the principal, whereas the
essence of contract of sale is the transfer of title of goods for the
price paid or promised to be paid. In case of an agency to sell, the
agent who sells them to the third parties, sells them not as his own
property, but as a property of the principal, who continues to be the
owner of the goods till the sale. The transferee is the debtor and
liable to account for the price to be paid to the principal, and not to
the agent for the proceeds of the sale. An agent is entitled to his
fee or commission from the principal.
13. This distinction and test was referred to by this Court in Commissioner
of Income Tax, Ahmedabad and Others v. Ahmedabad Stamp
Vendors Association13, which is a case relating to Section 194-H
of the Act. This Court had approved the decision of the High Court
in Ahmedabad Stamp Vendors Association v. Union of India14.
We may also refer to two more decisions of this Court. In the case

13 (2014) 16 SCC 114.
14 (2002) 257 ITR 202 (Guj.).
1016 [2024] 2 S.C.R.

Digital Supreme Court Reports

of Director, Prasar Bharati v. Commissioner of Income Tax,
Thiruvananthapuram15, this Court has observed that the explanation
appended to Section 194-H of the Act defining the expression
‘commission or brokerage’ is an inclusive definition giving wide
meaning to the expression ‘commission’. The second decision is
in the case of Singapore Airlines Limited v. Commissioner of
Income Tax, Delhi16, which we shall refer to subsequently in some
detail as to its exact purport and ratio. However, at this stage, we
would like to examine in some detail commercial relationships in
the nature of an independent contractor, that are legally, principal
to principal dealings.
14. The passage from Bhopal Sugar Industries Limited (supra)
highlights the principles and the complexities involved in determining
the correct nature of the legal relationship between a principal and
an agent. Law permits individuals to enter into complex contracts
incorporating multiple rights and obligations. The relationships
between contacting parties have become multi-dimensional, which
may not strictly fall within an employer-employee, principal-agent or
principal-principal relationship. A singular contract may create different
legal relationships and obligations. Independent contractors on
occasion act for themselves, and at other times may be creating legal
relations between their employers and third persons. For example,
a solicitor may start by giving advice (independent contractor), and
then as a consequence make a contract for his employer with another
person (agent).
15. In Labreche v. Harasymiw17, Valin J. delineated the question of
what an agency involves, stating that: (i) it refers to the power of the
agent to affect the principal’s position. However, this is not the sole
test, though it still remains one of the main criteria in determining
whether someone is an agent. There are several features in the
definition of an agent18. There can be several situations where one
person represents or acts for another, but this does not create the
relationship of principal and agent. It is only when the representation

15 [2018] 3 SCR 287 : (2018) 7 SCC 800.
16 [2022] 9 SCR 1 : (2023) 1 SCC 497.
17 (1992) 89 DLR (4th) 95 at 107.
18 See ¶8 of the judgment.
[2024] 2 S.C.R. 1017

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

or action on another’s behalf affects the latter’s legal position, that
is to say his rights against, or his liability towards, other people, that
the law of agency applies; (ii) the second feature is the importance
of the way in which law regards the relationship which is created.
The effect of the law is that it regulates the way in which parties
conduct themselves. The conduct of the parties is considered in
terms of law, regardless of the language or nomenclature used by the
parties. The true factual position must be investigated to determine
whether a relationship of agency has come into existence between
a set of parties or individuals.
16. The significant observation in the aforesaid judgment is that all kinds
of interactions with third parties or interested parties, resulting from
the introduction of the third parties with one who wishes a particular
undertaking to be performed, may not be a result of an agency. For
instance, a retail dealer or supplier of goods, obtains goods from
a wholesale supplier or a manufacturer for subsequent resale to
retail customers or suppliers who, in turn, deals with retail dealers
or shopkeepers. Such ‘middlemen’ are sometimes referred to as
‘agents’, when in fact they are franchisees of the manufacturer or
supplier, or are distributors of the manufactures’ goods, perhaps
with a ‘sole agency’ or special dealership for his goods. Such
‘agents’ can be real buyers, acting as principals on their own behalf.
Consequently, they are not liable to the manufacturer or supplier in
the way an agent might be for failure of duty, nor do their contracts
with other parties – whether it be suppliers, retail dealers or individual
customers – hold the party who sold to them, liable, for any breach
including misrepresentation or sale of defective goods. The seller’s
contractual or tortious liability is different from the manufacturer’s
liability on account of warranty/guarantee, statutory liability or even
obligation to a third party who purchases the goods or avails services
from/through the independent contractor. An agent renders service
to the principal, who he/she represents, and therefore the principal,
and not the agent, is liable to the third parties. Further, the money
received by an independent contractor from his customers will belong
to the independent contractor and not to the party who sold to him.
The money will be a part of such independent contractor’s property
in the event of his bankruptcy or liquidation. This may be the case
even if the contract of sale is one of ‘sale or return’. It is important
to avoid confusion, by applying the legal tests, that may arise where
1018 [2024] 2 S.C.R.

Digital Supreme Court Reports

the functions of the ‘buyer’ – described as an ‘agent’ – is really as
that of a ‘middleman’, and the necessary elements for creation of
principal and an agent relationship are absent. Two level commercial
transaction can result in an tripartite arrangement/agreement with
respective rights and obligations, without any of the two parties
having principal-agent relationship.
17. Clause (d) in paragraph 8 observes that the agent is liable to render
accounts to the principal as the business done by the agent is on
principal’s account. The agent is entitled to remuneration from the
principal for the work he performs. To decide whether a contracting
party acts for himself as an independent contractor, we may examine
whether in the course of work, he intends to make profits for himself,
or is entitled to receive prearranged remuneration. If the party is
concerned about acting for himself and making the maximum profits
possible, he is usually regarded as a buyer, or an independent
contractor and not as an agent of the principal. This would be true
even when certain terms and conditions have been fixed relating
to the manner in which the seller conducts his business. We shall
subsequently further elucidate on the characteristics of an independent
contractor, and differentiate them from the principal-agent relationship.
18. We now turn to the facts of the present case. The assessees, as
noticed above, are cellular mobile telephone service providers in
different circles as per the licence granted to them under Section
4 of the Indian Telegraph Act, 1885 19 by the Department of
Telecommunications20, Government of India. To carry on business,
the assessees have to comply with the licence conditions and
the rules and regulations of the DoT and the Telecom Regulatory
Authority of India.21 Cellular mobile telephone service providers
have wide latitude to select the business model they wish to adopt
in their dealings with third parties, subject to statutory compliances
being made by the operators. As per the business model adopted by
the telecom companies, the users can avail post-paid and prepaid
connections. In the present case, we are only concerned with the
business operations under the prepaid model.

19 The ‘1885 Act’, for short.
20 ‘DoT’, for short.
21 ‘TRAI’, for short.
[2024] 2 S.C.R. 1019

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

19. Under the prepaid business model, the end-users or customers
are required to pay for services in advance, which can be done
by purchasing recharge vouchers or top-up cards from the
retailers. For a new prepaid connection, the customers or end-
users purchase a kit, called a start-up pack, which contains a
Subscriber Identification Mobile card22, commonly known as SIM
card, and a coupon of the specified value as advance payment
to avail the telecom services.
20. The assessees have entered into franchise or distribution agreements
with several parties, the terms and conditions of which we would
refer to subsequently. It is the case of the assessees that they sell
the start-up kits and recharge vouchers of the specified value at a
discounted price to the franchisee/distributors. The discounts are
given on the printed price of the packs. This discount, as per the
assessees, is not a ‘commission or brokerage’ under Explanation
(i) to Section 194-H of the Act. The Revenue, on the other hand,
submits that the difference between ‘discounted price’ and ‘sale
price’ in the hands of the franchisee/distributors being in the nature
of ‘commission or brokerage’ is the income of the franchisee/
distributors, the relationship between the assessees and the
franchisee/distributor is in the nature of principal and agent, and
therefore, the assesses are liable to deduct tax at source under
Section 194-H of the Act.
21. In order to decide the dispute in question, we would like to refer to
some of the relevant clauses of the franchisee/distributor agreement
between Bharti Airtel Limited and the franchisee/distributors, which
read as under23:
Bharti Airtel Limited
“WHEREAS THE FRANCHISEE has approached BML
and have expressed their keen desire to be one of the
FRANCHISEE’s to undertake the job of promoting and
marketing of Pre Paid and also other related services
all under the brand name of “MAGIC” to the potential

22 ‘SIM card’, for short.
23 Agreements in the case of assessees Vodafone Idea Limited (formerly known as Vodafone Mobile Ser-
vices Limited) and Idea Cellular Limited (now known as Vodafone Idea Limited) are somewhat different.
To avoid repetition or prolixity, we are not reproducing the said clauses.
1020 [2024] 2 S.C.R.

Digital Supreme Court Reports

subscribers, under the terms of this Agreement. The
FRANCHISEE has also represented that they have
infrastructure, manpower and experience in the above
area and they possess the financial to perform the above
functions and such other functions as may be assigned
to them by BML from time to time.

xx xx xx
A. It is expressly understood that the Agreement does
not confer any exclusive right to the FRANCHISEE to
market the Services nor does the Agreement gives any
territorial right to the FRANCHISEE. The BML expressly
reserves its right to enter into similar arrangements with
other party(ies) to market and promote the Services
and to market the Services directly to the customers if
considered appropriate in terms of business exigency and
market requirements.

xx xx xx
2.1 Subject to the terms and conditions of this Agreement,
BML hereby appoints Central Supply Corporation, as its
FRANCHISEE to promote and market the Pre Paid Services
of BML and more particularly in terms of the policies of
BML as shall be informed by BML from time to time and
the FRANCHISEE hereby accepts the appointment as the
FRANCHISEE of BML.

xx xx xx
2.3 The parties recognize that it is commercially prudent
and desirable for the FRANCHISEE in the performance of
the obligations under this Agreement to appointment (sic)
Retailers/outlets for the retail promotion and marketing of
Pre Paid services. In such an event the FRANCHISEE
shall obtain the prior approval of BML for appointment(s)
of Retailers/outlets, and also to the terms and conditions
of such appointment.
2.4 The FRANCHISEE acknowledges that the business of
cellular mobile services is extremely competitive and exists
[2024] 2 S.C.R. 1021

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

in an ever expanding market. The FRANCHISEE agrees
and acknowledges that during the term of this Agreement it
shall not undertake the activities under this Agreement for
any other provider of Cellular Mobile Telephone Services
or any similar competitive business.

xx xx xx
3.1 The FRANCHISEE warrants and represents that:
(a) It has all necessary statutory, regulatory and municipal
permissions, approvals and permits for the running and
operation of its establishment and for the conduct of its
business, more particularly for the business as provided
for in this Agreement.
(b) It is in compliance of all laws, regulars and rules in the
conduct of its business and the running of its business
establishment.
3.2 The FRANCHISEE shall indemnify and keep indemnified
BML from and against all and any costs, expenses and
charges imposed on BML as a result of any action by a
statutory, regulatory or municipal authority arising out of
non-compliance by the FRANCHISEE of laws, rules or
regulations in the running, operation and conduct of its
business and business establishment, more particularly
with respect to the conduct of its business provided for
in this Agreement.

xx xx xx
4.1 The FRANCHISEE shall maintain a suitable
establishment for the conduct of its business and the
performance of its obligations under this Agreement. The
FRANCHISEE shall use its best efforts to actively provide
effective ways to market and promote the Pre Paid Services
and shall always act in the interest of both BML and the
subscribers to the Services of BML.
4.2 As covenanted for in clause 2.4, the FRANCHISEE shall
not involve himself in any manner either directly or indirectly in
any business or activity which is competitive with the business
1022 [2024] 2 S.C.R.

Digital Supreme Court Reports

of activities of BML. The FRANCHISEE acknowledges that
the adherence to this provision is a material obligation of
the FRANCHISEE under this Agreement.

xx xx xx
4.4 The FRANCHISEE shall, in the conduct of its business
and performing its obligations under this Agreement, conform
and adhere to the policies of BML communicated to the
FRANCHISEE from time to time. The FRANCHISEE shall
not charge the customers of BML for the services anything
more than the rates specified by the BML from time to time.
4.5 The FRANCHISEE shall employ adequate employees
for performing its obligations under this Agreement and in
the promoting and marketing of the Pre Paid Services. All
contractual and statutory payments, including wages and
salaries to the employees of the FRANCHISEE, shall be
the sole liability and responsibility of the FRANCHISEE.
4.6 The FRANCHISEE in respect of its business
establishment shall, if so desired by BML, in order to
effectively project the Franchisee, make alterations,
modifications in and install such furniture, fixture and
air conditioning equipment, fax, computer, with internet
connection as required necessary and mutually agreed
upon and the cost of such alterations, renovation shall be
borne exclusively by the FRANCHISEE.
4.7 The FRANCHISEE agrees and undertakes to maintain
proper and sufficient quantities of the prepaid start up packs
and recharge coupons in respect of the Pre Paid service
in order to meet the market requirements at all times and
in accordance with the guidelines and instructions issued
by BML from time to time.
4.8 The FRANCHISEE shall use its best efforts and
endeavours to market and promote the Pre Paid Services
to meet the growing demands of the Subscribers. At no
point of time shall any right, title or interest pass to the
FRANCHISEE in respect of the Pre-Paid Cards for the
Pre Paid Services given to the subscribers for connection
[2024] 2 S.C.R. 1023

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

to the Service and all right, title, ownership and property
rights in such cards shall at all times vest with BML.
4.9 The FRANCHISEE shall seek prior written approval
from BML for its promotional literature campaign (including
promotional material which bears the Trademarks, logos
and trade names of BML) for the Pre Paid Services. BML
will not share the expenditure incurred by the FRANCHISEE
for such advertising and publicity of the Services unless
agreed to earlier in writing. Any share of the expenditure
stated above and the ratio for the same shall be decided
by BML from time to time at its sole discretion.
4.10 The FRANCHISEE shall be solely liable and
responsible, at its business premises, for the safety and
storage of all pre paid start up kits, recharge cards and other
material in respect of the Pre Paid Services. BML shall not
be liable for any loss, pilferage or damage to the items as
stated here above and the FRANCHISEE shall indemnify
BML from all loss caused to BML arising out of any loss,
pilferage or damage to the items as stated here above.

xx xx xx
4.12 The liability to insure and keep insured the items as
stated in Clause 4.10 at the business establishment of
the FRANCHISEE shall be of the FRANCHISEE and the
liability for any loss or damage due to any fire, burglary,
theft, etc. will be that of the FRANCHISEE.

xx xx xx
4.14 The FRANCHISEE shall be responsible for collection
of all necessary agreement/contract forms and other related
forms, and for obtaining the signature of the customer on
these forms. The FRANCHISEE shall forward all such
forms, duly completed in all respects and signed by
customers to BML for its verification and records.

xx xx xx
5.1 From time to time, BML will review with the FRANCHISEE
minimum subscription, targets for the Pre Paid Services,
1024 [2024] 2 S.C.R.

Digital Supreme Court Reports

taking into account the market development and market
potential and other relevant factors. The achievements of
these prescribed targets by the FRANCHISEE is a material
obligation of the FRANCHISEE under this Agreement.

xx xx xx
6.2 The FRANCISEE shall employ a fully trained service
staff whose training has been completed in accordance
with the standards set out by BML.

xx xx xx
8.1 The FRANCHISEE’s price and payment for services
will be specified by BML from time to time. The rates are
subject to variation during the terms of this Agreement at
the sole discretion of BML and shall be intimated to the
Distributor from time to time.

xx xx xx
8.3 All other tax liabilities arising in connection with or out of
the agreement transactions pertaining to the FRANCHISEE
shall be the responsibility of the FRANCHISEE.

xx xx xx
10.1 The FRANCHISEE accepts for all purposes that all
trademarks, logos, trade names or identifying marks and
slogans used by BML in respect of the Service and the
Pre Paid Services, whether registered or not, constitute the
exclusive property of BML or their affiliated companies as
the case may be, and cannot be used by the FRNCHISEE
except in connection with the promotion and marketing of
the Services of BML and that too with the express written
consent of BML. The FRANCHISEE shall not contest, at
any time, the right of the BML or its affiliated companies
to any such Trademark or trade name used or claimed by
BML or such affiliated companies in respect of the Service
or Pre Paid Services.

xx xx xx
[2024] 2 S.C.R. 1025

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

11.2 During the term of this Agreement, the FRANCHISEE
is authorised to use BML’s trademarks, logos and trade
names only in connection with the FRANCHISEE’s use of
such trademarks, logos and trade names as set out in this
Agreement. The FRANCHISEE’s use of such trademarks,
logos and trade names shall be in accordance with the
guidelines issued by BML. Nothing herein shall give the
FRANCHISEE any right, title or interest in such trademarks,
logos or trade names, in the event of termination of this
Agreement, however caused, the FRANCHISEE’S right to
use such Trademarks, logos or trade names shall cease
forthwith. The FRANCHISEE agrees not to attach any
additional trademarks, logos or trade designation to the
Trademarks of BML.
11.3 For as long as this Agreement continues in force but
not thereafter, the FRANCHISEE may identify itself as
an authorised FRANCHISEE of BML, but shall not use
the Trademarks, logos and trade names of BML as part
of its proprietorship name/corporate/partnership name or
otherwise indicate to the public that it is an affiliate of BML.

xx xx xx
11.5 BML shall allow the FRANCHISEE to use its logo
to be displayed on the sign board to be placed at the
FRANCHISEE’s outlet(s) and on the each memos and/or
official business documents issued by the FRANCHISEE
towards the services effected from the outlet(s). However,
the intellectual property rights associated with Trademarks,
logos and trade names are and shall remain the sole
property of BML.

xx xx xx
14.1 BML shall not be liable to the FRANCHISEE or any
other party by virtue of the termination of this Agreement
for any reason whatsoever, including but not limited to any
claim for loss of profits or compensation or prospective
profits or on account of any expenditure, investments,
leases, capital improvements or any other commitments
1026 [2024] 2 S.C.R.

Digital Supreme Court Reports

made by the FRANCHISEE in connection with the business
made in reliance upon or by virtue of FRANCHISEE’s
appointment under this Agreement. It is expressly agreed
that no compensation whatsoever shall be payable by
BML to the FRANCHISEE upon the termination of this
Agreement.
14.2 Upon receipt of any notice of termination of this
Agreement the FRANCHISEE shall conduct all its operations
until the effective date of termination mentioned in such
notice in the manner which is consistent with the obligation
of the FRANCHISEE hereunder and the FRANCHISEE
shall not prejudice the reputation or goodwill of BML and
the interests of the subscribers in any manner whatsoever.
14.3 Upon termination of this Agreement for any reason,
the FRANCHISEE shall cease to represent himself as the
authorised FRANCHISEE of BML and shall not act in a
manner, which is likely to cause confusion or to deceive
the public. The FRANCHISEE shall promptly remove all
Trademarks, signs, words, trademarks (sic), logos and any
other representations connected with BML. In the event
the FRANCHISEE fails to comply with the above, BML
shall have the right to enter upon the FRANCHISEE’s
premises and remove, without liability, all Trademarks,
signs, logos, trademarks (sic), materials written documents
and any other representations connected with BML and
the FRANCHISEE shall reimburse to BML all costs and
expenses incurred thereof.
14.4 In the event of termination of this Agreement,
FRANCHISEE shall return to BML by the effective date
of termination all advertising and promotional materials,
marketing aids and other documents and materials
received and all Confidential Information received under
this Agreement.
14.5 Both parties agree that goodwill created with respect
to Service and Pre Paid Services is the exclusive property
of BML. Any expenditure for promotion, advertising and
other efforts by FRANCHISEE is made with the knowledge
that this Agreement may be terminated pursuant to
[2024] 2 S.C.R. 1027

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

Article 13 hereof. Under no circumstance shall BML be
obliged to pay to the FRANCHISEE upon termination of
this Agreement any termination pay or compensation for
subscriber acquisition, special indemnification, or any other
termination compensation.

xx xx xx
16.1 The FRANCHISEE understands that it is an
independently owned business entity and this Agreement
does not make the FRANCHISEE, its employees, associates
or agents as employees, agents or legal representatives of
BML for any purpose whatsoever. The FRANCHISEE has
no express or implied right or authority to assume or to
undertake any obligation in respect of or on behalf of or in
the name of BML, or to bind BML in any manner. In case,
the FRANCHISEE, its employees, associates or agents
hold out as employees, agents, or legal representatives of
BML, the FRANCHISEE shall forthwith upon demand make
good any/all loss, cost, damages, including consequential
loss, suffered by BML on this account.
16.2 It is understood that the relationship between the parties
is solely on principal-to-principal. FRANCHISEE shall not
acquire, by virtue of any provision of this Agreement or
otherwise, any right, power or capacity to act as an agent
or commercial representative of BML for any purpose
whatsoever. Nothing contained in the contract shall be
deemed or construed as creating a joint venture relationship
or legal partnership etc. between BML and the FRANCHISEE.
16.3 The FRANCHISEE shall not obtain/offer the pre
paid cards and/or recharge coupons for the Pre Paid
Service from any other source other than BML unless
such permission is granted in writing by BML in order to
meet the specific needs of the market and subscribers as
determined by BML.

xx xx Xx”
22. As per the agreement, the franchisee/distributor is appointed for
marketing of prepaid services and for appointing the retailer or
1028 [2024] 2 S.C.R.

Digital Supreme Court Reports

outlets for sale promotion. It is pertinent to note that the retailers
or outlets for sale promotion are appointed by the franchisee/
distributor and not the assessee. The franchisees/distributors have
agreed not to undertake activities mentioned in the agreement
for any other competitive cellular mobile telephone service
provider in the business. The franchisees/distributors have to
comply with statutory, regulatory and municipal permissions
while conducting the business. The franchisees/distributors
have agreed to indemnify and keep indemnified the assessee
against any and all costs, expenses and charges imposed on
the assessee because of any action by a statutory, regulatory
or municipal authority due to non-compliance by the franchisee/
distributor. The franchisee/ distributor has to maintain a suitable
establishment for the conduct of business and performance
of obligations. While doing so, the franchisee/distributor shall
conform and adhere to the policies communicated to it from
time to time by the assessee. The franchisee/distributor shall
employ adequate employees for performing its obligations, and
all contractual and statutory payments, including wages, are to
be paid by the franchisee/distributor. The assessee can, if it so
desires, call upon the franchisee/distributor to make alterations,
modifications in furniture, air conditioning equipment etc., as
required and necessary and mutually agreed. Costs of such
alternations and distributions are to be borne by the franchisee/
distributor.
23. The franchisee/distributor has to maintain proper and sufficient
quantities of prepaid start-up packs and recharge coupons to
meet the market requirements. The franchisee/distributor shall
follow the guidelines and directions issued by the assessee from
time to time. At no point of time, the right, title, or interest in the
prepaid cards shall pass on to the franchisee/distributor. All rights,
title ownership and property rights in the cards shall rest with the
assessee. The franchisee/distributor shall be solely responsible
and liable for safety and storage of prepaid start-up kits, recharge
cards and other material. The assessee will not be liable for any
loss, pilferage or damage to the pre-paid coupons/starter-kits. The
franchisee/ distributor is to indemnify the assessee for any loss
caused on this account. The franchisee/distributor is to insure the
prepaid start-up kits/ recharge coupons. The liability for any loss
[2024] 2 S.C.R. 1029

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

or damage due to fire, burglary, theft etc. is that of the franchisee/
distributor.
24. On termination of the agreement, the franchisee/distributor shall
continue its operation till the effective date of termination mentioned
in the notice. Upon termination, the franchisee/distributor is required
to return all advertising and promotional material, etc. to the assessee
by the effective date of termination. Further, the assessee is not
liable to the franchisee/distributor or any other party for any loss of
profits or compensation or prospective profits or on account of any
expenditure, etc. in the event of termination.
25. The assessee is to review the minimum subscriptions/targets for
prepaid services taking into account market development and potential
and other relevant factors. The franchisee/distributor is to employ a
fully trained service staff, who have undergone training in accordance
to the standards set out by the assessee. The franchisee/distributor
will be responsible to collect all necessary agreement/contract forms
and other related forms, after obtaining signatures of the customers
on the said forms. These forms, duly completed in all respects and
signed by the customers, will be forwarded to the assessee for its
verification and record.
26. The franchisee’s/distributor’s price and payment for services will
be specified by the assessee from time to time. The rates can be
varied during the terms of the agreement at the discretion of the
assessee and such variation is to be intimated to the franchisee/
distributor. All tax liabilities in connection with, or arising out of, the
transactions pertaining to the agreement shall be the responsibility
of the franchisee/distributor.
27. The trademarks, logos, trade names or identifying marks and
slogans used by the assessee, whether registered or not, are
exclusive property of the assessee or the affiliated companies.
The use of such marks, logos etc. will be in accordance with the
guidelines issued by the assessee. As long as the agreement is in
force, but not thereafter, the franchisee/distributor shall identify itself
as an authorised franchisee, but shall not use trademarks, logos,
tradenames, as part of its proprietorship name/corporate/ partnership
name or otherwise. The franchisee/distributor is entitled to use its
logo on the side door at its outlets and on its memos and official
business documents towards the services effected from the outlet.
1030 [2024] 2 S.C.R.

Digital Supreme Court Reports

28. On the question of actual business financial model adopted and
followed, it is an admitted position that the franchisees/distributors
were required to pay in advance the price of the welcome kit
containing the SIM card, recharge vouchers, top-up cards, e-tops,
etc. The abovementioned price was a discounted one. Such discounts
were given on the price printed on the pack of the prepaid service
products. The franchisee/distributor paid the discounted price
regardless of, and even before, the prepaid products being sold and
transferred to the retailers or the actual consumer. The franchisee/
distributor was free to sell the prepaid products at any price below
the price printed on the pack. The franchisee/distributor determined
his profits/income.
29. The Revenue has highlighted that the prepaid SIM cards were not the
property of franchisee/distribution and no right, title or interest was
transferred to them. These were always to remain the property of the
assessee. This is correct, but it is equally true that this is a mandate
and requirement of the licence issued to the assessee by the DoT.
In actual practice, the right to use the SIM card and its possession
is handed over and given to the end-user, that is, the customer who
installs the SIM card in his phone to avail the telecommunication
services. Similarly, the franchisees/distributors are to ensure that the
post-paid customers/end-users fill up the form as prescribed along
with the documents which are given and submitted to the assessee.
These are mandates prescribed by the licence issued by the DoT
to the assessees. The contractual obligations of the distributors/
franchisees, do not reflect a fiduciary character of the relationship,
or the business being done on the principal’s account.
30. The franchisees/distributors earn their income when they sell the
prepaid products to the retailer or the end-user/customer. Their
profit consists of the difference between the sale price received by
them from the retailer/end-user/customer and the discounted price
at which they have ‘acquired’ the product. Though the discounted
price is fixed or negotiated between the assessee and the franchisee/
distributor, the sale price received by the franchisee/ distributor is
within the sole discretion of the franchisee/distributor. The assessee
has no say in this matter.
31. It is not the case of the Revenue that the tax at source under Section
194-H of the Act is to be deducted on the difference between the
[2024] 2 S.C.R. 1031

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

printed price and the discounted price. This cannot be the case as
the Revenue cannot insist that the franchisee/distributor must sell
the products at the printed price and not at a figure or price below
the printed price. The obligation to deduct tax at source is fixed
by the statute itself, that is, on the date of actual payment by any
mode, or at the time when income is credited to the account of the
franchisee/distributor, whichever is earlier. In the context of the present
case, the income of the franchisee/distributor, being the difference
between the sale price received by the franchisee/distributor and the
discounted price, is paid or credited to the account of the franchisee/
distributor when he sells the prepaid product to the retailer/end-
user/customer. The sale price and accordingly the income of the
franchisee/distributor is determined by the franchisee/distributor and
the third parties. Accordingly, the assessee does not, at any stage,
either pay or credit the account of the franchisee/distributor with the
income by way of commission or brokerage on which tax at source
under Section 194-H of the Act is to be deducted.
32. Faced with the above situation, the Revenue has relied upon the
use of the expression “payment received or receivable directly or
indirectly by a person acting on behalf of the other person”, that is, ‘the
principal’. It is argued that even if the franchisee/distributor receives
payment in the form of income from the retailer/end-user/customer,
it would require deduction of tax at source as payment received or
receivable, directly or indirectly, is to be subjected to deduction of
tax. In support of the argument, reliance is placed upon decision in
the case of Singapore Airlines Limited (supra).
33. The decision in Singapore Airlines Limited (supra) is required to
be understood in the context of the contract in the said case, which
was in terms of the rules/agreement set up by the International
Airport Transport Association 24. IATA would fix a ceiling price,
and the price an airline could charge from its customers with a
discretion to the airlines to sell their tickets at a net fare lower
than the base fare but not higher. The air carriers were required
to furnish a fare list to the Director General of Civil Aviation. The
arrangement between the airlines and travel agents was covered

24 ‘IATA’, for short.
1032 [2024] 2 S.C.R.

Digital Supreme Court Reports

by the Passenger Sales Agency Agreement25, which would set
out the conditions under which the travel agent carried out sale of
tickets along with other ancillary services. The travel agents were
entitled to 7% commission on sale of the tickets for its services
as the standard commission based on the price bar set by the
IATA. The airlines were deducting tax at source under Section
194-H of the Act on the 7% commission. In addition to the 7%
commission, the travel agents were also entitled to additional/
supplementary commission on the tickets sold by them. The
additional/supplementary commission and the amount at which
the tickets were sold were computed by the travel agents and
transmitted to the billing and settlement plan (BSP). The BSP,
functioning under the aegis of the IATA, managed, inter alia,
logistics vis-à-vis payments, and acted as a forum for agents and
airlines to examine details pertaining to the sale of the flight tickets.
33.1 This Court examined the operation of the BSP where the
financial data regarding sale of tickets was stored. The BSP
agglomerated the data from multiple transactions. Thereupon,
this data was transmitted either bimonthly or twice a month to
the airlines. It is on the basis of this data that the airlines/air
carriers were required to pay the additional commission to the
travel agents. These are the striking distinguishing features in
Singapore Airlines Limited (supra) case.
33.2 Having considered the aforesaid mechanism and the nature
of relationship between a principal and an agent26, this Court
found considerable merit in the argument of the Revenue
that the airlines/ air carriers utilised the BSP to discern the
amount earned as additional/supplementary commission and
accordingly arrive at the income earned by the agent to deduct
tax at source, in accordance with the provisions of Section 194-
H of the Act. If the aforesaid mechanism is understood, then
it is not difficult to appreciate and understand the conclusion
arrived at by this Court in the said case.

25 ‘PSA’, for short.
26 As stated above the airlines were deducting tax at source under Section 194-H on the 7% commission
(standard commission). The dispute only related to whether the airlines were liable to deduct tax at
source on the additional commission (supplementary commission).
[2024] 2 S.C.R. 1033

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

33.3 Thus, the question whether there was relationship of principal
and agent was not in dispute, but nevertheless the assessees
in the said case disputed liability to deduct tax at source on the
additional/supplementary commission. However, the judgment
does refer to the difference between the legal relationship of
master and servant, principal and agent, and between principal
and principal. In this context, reference is made to the statement
of law in Halsbury’s Law of England27, which reads:
“The difference between the relations of master and
servant and of principal and agent may be said to be this:
a principal has the right to direct what work the agent has
to do: but a master has the further right to direct how the
work is to be done.”

xx xx xx
“An agent is to be distinguished on the one hand from a
servant, and on the other from an independent contractor.
A servant acts under the direct control and supervision
of his master, and is bound to conform to all reasonable
orders given him in the course of his work; an independent
contractor, on the other hand, is entirely independent of
any control or interference and merely undertakes to
produce a specified result, employing his own means to
produce that result. An agent, though bound to exercise
his authority in accordance with all lawful instructions
which may be given to him from time to time by his
principal, is not subject in its exercise to the direct control
or supervision of the principal. An agent, as such is not
a servant, but a servant is generally for some purposes
his master’s implied agent, the extent of the agency
depending upon the duties or position of the servant.”
34. We have already expounded on the main provision of Section 194-
H of the Act, which fixes the liability to deduct tax at source on the
‘person responsible to pay’ – an expression which is a term of art
– as defined in Section 204 of the Act and the liability to deduct tax
at source arises when the income is credited or paid by the person

27 Vol. 22, p. 113, ¶ 192 and Vol. 1, at p. 193, Article 345.
1034 [2024] 2 S.C.R.

Digital Supreme Court Reports

responsible for paying.28 The expression “direct or indirect” used
in Explanation (i) to Section 194-H of the Act is no doubt meant
to ensure that “the person responsible for paying” does not dodge
the obligation to deduct tax at source, even when the payment is
indirectly made by the principal-payer to the agent-payee. However,
deduction of tax at source in terms of Section 194-H of the Act is
not to be extended and widened in ambit to apply to true/genuine
business transactions, where the assessee is not the person
responsible for paying or crediting income. In the present case, the
assessees neither pay nor credit any income to the person with
whom he has contracted. Explanation (i) to Section 194-H of the
Act, by using the word “indirectly”, does not regulate or curtail the
manner in which the assessee can conduct business and enter
into commercial relationships. Neither does the word “indirectly”
create an obligation where the main provision does not apply. The
tax legislation recognises diverse relationships and modes in which
commerce and trade are conducted, albeit obligation to tax at source
arises only if the conditions as mentioned in Section 194-H of the
Act are met and not otherwise. This principle does not negate the
compliance required by law.
35. Deduction of tax at source is a substantial source of the direct tax
revenue. The ease of collection and recovery is obvious. Deduction
and deposit of tax at source checks evasion and non-payment of
tax. It expands the tax base. However, the assessee as a deductor
is not paying tax on his/her income, and collects and pays tax
otherwise payable by the third party. Liability of the third party to pay
tax when not deducted remains unaffected. Failure to deduct tax at
source has serious and quasi-penal consequences for an assessee.
The deduction of tax provisions should be programmatically and
realistically construed, and not as enmeshes or by adopting catch-
as-catch-can approach. In case of a legal or factual doubt in a given
case, the assessee can rely on the doctrine of presumption against
doubtful penalisation.29 Whether or not the said doctrine should

28 See ¶ 5 of the judgment.
29 See Securities and Exchange Board of India v. Sunil Krishna Khaitan and Others, [2022] 18 SCR 987 :
(2023) 2 SCC 643. However, in the present case doctrine of presumption against doubtful penalisation
is not applicable. The assessees were earlier deducting tax at source under Section 194-H of the Act,
though the amount on which tax was being deducted is unclear. On legal opinion they stopped deducting
tax at source.
[2024] 2 S.C.R. 1035

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

be applied30, will depend on facts and circumstances of the case,
including the past practice followed by the assessee and accepted
by the department. When there is apparent divergence of opinion,
to avoid litigation and pitfalls associated, it may be advisable for the
Central Board of Direct Taxes to clarify doubts by issuing appropriate
instruction/circular after ascertaining view of the assesses and
stakeholders.31 In addition to enhancing revenue and ensuring tax
compliance, an equally important aim/objective of the Revenue is
to reduce litigation. The instructions/circular, if and when issued,
should be clear, and when justified – require the obligation to be
made prospective.
36. Notably, the Delhi High Court in Commissioner of Income Tax v.
Singapore Airlines Ltd.32 had held that tax under Section 194-H
of the Act is not required to be deducted on the discounted tickets
sold by the airlines/air carriers through travel agents. Revenue did
not challenge the decision of the Delhi High Court to this extent and
therefore, this dictum attained finality. As noted, it is not the case
of the Revenue that tax is to be deducted when payment is made
by the distributors/franchisees to the mobile service providers. It is
also not the case of the revenue that tax is to be deducted under
Section 194-H of the Act on the difference between the maximum
retail price income of the distributors/ franchisees and the price paid
by the distributors/franchisees to the assessees. The assessees
are not privy to the transactions between distributors/franchisees
and third parties. It is, therefore, impossible for the assessees to
deduct tax at source and comply with Section 194-H of the Act, on
the difference between the total/sum consideration received by the
istributors/ franchisees from third parties and the amount paid by
the distributors/ franchisees to them.
37. The argument of the Revenue that assessees should periodically
ask for this information/data and thereupon deduct tax at source
should be rejected as far-fetched, imposing unfair obligation and
inconveniencing the assesses, beyond the statutory mandate. Further,
it will be willy-nilly impossible to deduct, as well as make payment

30 This would include the question of prospective or retrospective application.
31 We do acknowledge that the Central Board of Direct Taxes has on several occasions quelled doubts and
issued instructions/circulars.
32 (2009) 319 ITR 29.
1036 [2024] 2 S.C.R.

Digital Supreme Court Reports

of the tax deducted, within the timelines prescribed by law, as these
begin when the amount is credited in the account of the payee by
the payer or when payment is received by the payee, whichever is
earlier. The payee receives payment when the third party makes the
payment. This payment is not the payment received or payable by
the assessee as the principal. The distributor/franchisee is not the
trustee who is to account for this payment to the assessee as the
principal. The payment received is the gross income or profit earned
by the distributor/franchisee. It is the income earned by distributor/
franchisee as a result of its efforts and work, and not a remuneration
paid by the assessee as a cellular mobile telephone service provider.
38. We must, therefore, reject the argument of the Revenue relying upon
the decision of this Court in Singapore Airlines Limited (supra)
that assessees would be liable to deduct tax at source even if the
assessees are not making payment or crediting the income to the
account of the franchisee/distributor. When the obligation, and the
time and manner in which the tax is mandated by law to be deducted
at source, is fixed by the statute, the same cannot be shifted/altered/
modified or postponed on a concession in the court by the Revenue.
The concession may be granted, when permissible, by way of a
circular issued in accordance with Section 119 of the Act. We do not
think that the decision in Singapore Airlines Limited (supra) can
be read in the manner as suggested by the Revenue.
39. Coming back to the legal position of a distributor, it is to be generally
regarded as different form that of an agent. The distributor buys
goods on his account and sells them in his territory. The profit
made is the margin of difference between the purchase price and
the sale price. The reason is, that the distributor in such cases is
an independent contractor. Unlike an agent, he does not act as a
communicator or creator of a relationship between the principal and
a third party. The distributor has rights of distribution and is akin
to a franchisee. Franchise agreements are normally considered
as sui generis, though they have been in existence for some time.
Franchise agreements provide a mechanism whereby goods and
services may be distributed. In franchise agreements, the supplier
or the manufacture, i.e. a franchisor, appoints an independent
enterprise as a franchisee through whom the franchisor supplies
certain goods or services. There is a close relationship between
a franchisor and a franchisee because a franchisee’s operations
[2024] 2 S.C.R. 1037

Bharti Cellular Limited (Now Bharti Airtel Limited) v. Assistant
Commissioner of Income Tax, Circle 57, Kolkata and Another

are closely regulated, and this possibly is a distinction between a
franchise agreement and a distributorship agreement. Franchise
agreements are extremely detailed and complex. They may
relate to distribution franchises, service franchises and production
franchises. Notwithstanding the strict restrictions placed on the
franchisees – which may require the franchisee to sell only the
franchised goods, operate in a specific location, maintain premises
which are required to comply with certain requirements, and even
sell according to specified prices – the relationship may in a given
case be that of an independent contractor. Facts of each case and
the authority given by ‘principal’ to the franchisees matter and are
determinative.
40. An independent contractor is free from control on the part of his
employer, and is only subject to the terms of his contract. But an
agent is not completely free from control, and the relationship to the
extent of tasks entrusted by the principal to the agent are fiduciary.
As contract with an independent agent depends upon the terms of
the contract, sometimes an independent contractor looks like an
agent from the point of view of the control exercisable over him,
but on an overview of the entire relationship the tests specified in
clauses (a) to (d) in paragraph 8 may not be satisfied. The distinction
is that independent contractors work for themselves, even when
they are employed for the purpose of creating contractual relations
with the third persons. An independent contractor is not required
to render accounts of the business, as it belongs to him and not
his employer.
41. Thus, the term ‘agent’ denotes a relationship that is very different
from that existing between a master and his servant, or between a
principal and principal, or between an employer and his independent
contractor. Although servants and independent contractors are parties
to relationships in which one person acts for another, and thereby
possesses the capacity to involve them in liability, yet the nature of the
relationship and the kind of acts in question are sufficiently different
to justify the exclusion of servants and independent contractors from
the law relating to agency. In other words, the term ‘agent’ should be
restricted to one who has the power of affecting the legal position
of his principal by the making of contracts, or the disposition of
the principal’s property; viz. an independent contractor who may,
incidentally, also affect the legal position of his principal in other ways.
1038 [2024] 2 S.C.R.

Digital Supreme Court Reports

This can be ascertained by referring to and examining the indicia
mentioned in clauses (a) to (d) in paragraph 8 of this judgment. It is
in the restricted sense in which the term agent is used in Explanation
(i) to Section 194-H of the Act.
42. In view of the aforesaid discussion, we hold that the assessees
would not be under a legal obligation to deduct tax at source on
the income/profit component in the payments received by the
distributors/franchisees from the third parties/customers, or while
selling/transferring the pre-paid coupons or starter-kits to the
distributors. Section 194-H of the Act is not applicable to the facts
and circumstances of this case. Accordingly, the appeals filed by
the assessee – cellular mobile service providers, challenging the
judgments of the High Courts of Delhi and Calcutta are allowed and
these judgments are set aside. The appeals filed by the Revenue
challenging the judgments of High Courts of Rajasthan, Karnataka
and Bombay are dismissed. There would be no orders as to cost.
Pending applications, if any, shall stand disposed of.

Headnotes prepared by: Divya Pandey Result of the case:
Appeals filed by the assessees
are allowed and that of the
Revenue are dismissed.