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"14. In order to ascertain whether the PMAs were acting as agents of the assessee or were outright purchasers of goods supplied by the assessee, it is necessary to discuss the distinction between the contract of sale or contract of agency. The essence of contract to sale is the transfer of title to the goods for price paid or to be paid. The transferee in such case becomes liable to the transferor of goods as a debtor for the price to be paid and not an agent for the proceeds of the sale. On the other hand, the essence of agency to sell is the delivery of goods to a person, who is to sell them, not as his own property but as the property of the principal who continues to be the owner of goods and who is therefore liable to account for the proceeds. The true legal relationship between the assessee and the PMAs has to be inferred from the nature of contract, its terms and conditions and the nature of respective obligations undertaken by the parties. Clause 3 of the agreement specifically provides that the relationship created by the agreement is that of independent contracting parties and is not, and shall not deem to be any relationship inter-alia employer/employee; principal and agent. Clause 6(b) provides that full legal equitable title and interest in all and any of the prepaid simcard/recharge coupons delivered to PMAs shall remain in ICL and shall not pass to PMAs. However, in case the prepaid SIMCards/recharge coupons with PMAs become unusable, substandard or are destroyed due to natural calamities or occurrences or circumstances beyond the reasonable control of either party or due to negligence of PMA in storage, the assessee shall replace the prepaid simcards/recharge coupons subject to payment of processing fees for such replaced cards. On cursory look on this condition of agreement it appears that ownership on prepaid simcard/recharge coupons remains with the assessee. However, as per the conditions prescribed the PMA shall pay the processing fees for such replaced cards. If the relationship between the assessee and PMA was that of principal and agent, there was no need for recovery of processing fee for replacement of cards destroyed or become unusable. In case of a contract of agency the agents acts on behalf of the principle and no question arises for seeking the compensation from the agent in case of loss of property due to natural calamity or occurrence or circumstances beyond the reasonable control of the agent. The agent is required to protect the interest of his principal as a man of ordinary prudence. Another contention of Revenue that Clause 8 of the agreement debars the PMA to enter into agreement with other parties for similar telephony services and therefore he is not to act independently. In our view the restrictions prescribed in Clause 8 deals with the competitors of the assessee. Such terms and conditions are generally found in commercial agreements. Clause 9 provides for appointment of retailer by PMA. Further Clause 10 deals with the price at which PMA shall acquire the prepaid SIM cards/recharge vouchers. The retailers can sell the recharge vouchers to end user at any price not exceeding the maximum retail price. The assessee will receive the fixed amount including service charges. In case of a agent the price collected by him is remitted to the principal after deduction of his commission and expenses relating to sale of the goods. The assessee is not making any reimbursement of the expenditure incurred by the PMA and his retailers. This also suggests that the agreement between the assessee and PMA is that of seller and purchaser. Agreement also provides certain conditions relating to protection of intellectual property rights of the assessee. The other conditions stipulated in the agreement including termination clause do not throw any light so as to suggest that the agreement between the assessee and PMA is that of principal and agent. In the case of Gordon Goodroffe & Co. Madras Ltd. v. Shaik MA Mazid and Co. held that even an agent can become a purchaser when agent pays the price to principal on his own responsibility. In the case before the goods are sold to the PMA who in turn transfer goods to retailer to be sold to the end users. The retailers are appointed by the PMA though with the approval of the assessee but they are working under the instructions of PMAs. Termination of the retailers is co-terminus with the termination of the agreement with PMA. In our considered view the legal relationship between the assessee and PMA is that of seller and purchaser. We do not find any condition in the agreement from which it can be inferred that PMA stands in a fiduciary position in relation to the assessee. It is admitted by the revenue that the agreement in substance is the agreements entered into between the assessee and the PMA is in the nature of contract to sale and not contract of the agency. Therefore, the discount allowed by the assessee to PMA will not fall in the definition of commission of brokerage."
c) The distributor is not free to sell the similar products offered by the competitors company without the written consent of the assessee.
d) PMA is allowed to appoint the retailers only after the written approval from the assessee.
e) The maximum price of SIM Card/recharge coupon is also decided by ICL.
f) It is the responsibility of the PMA to obtain all relevant information concerning a subscriber and to forward the same to ICL and unless that is done, no activation of SIM card can be done.

(Clause 6(a) of the PMA Agreement.

(iii) There is a specification of the price t which goods are transferred by the respondent to its distributors. (Clause 10 of the PMA Agreement)

(iv) The distributor has freedom to sell at his own price. (Clause 10 of the PMA Agreement)

(v) The distributor is not liable to account to the respondent for the price at which he effects the sale to the retailer/subscriber. (Clause 10 of the PMA Agreement)

25. No doubt, as per Clause 6(a) of the Agreement, PMA is supposed to make the payment in advance. That would not make any difference to the nature of transaction in view of Clause 25(d) of the Agreement, which stipulates as under:

"25(d) Upon the termination or expiration of this Agreement for any reason, PMA shall discontinue the marketing/distributing/offering for sale, IDEA CHITCHAT PREPAID SERVICES, and shall forthwith return to ICL the entire stock of PREPAID SIM CARDS/RECHARGE COUPONS remaining with him and/or his Authorized Retailer. ICL shall pay to PMA for such PREPAID SIM CARDS/RECHARGE COUPONS received by it from THE DISTRIBUTOR."