I buy stamp papers from the government at a discount and resell them. Is that discount commission under 194H?
No. The sale of stamp papers by the State to a licensed vendor is a sale on a principal-to-principal basis, and the 0.50% to 4% margin is a cash discount for bulk purchase, not commission or brokerage attracting deduction under s.194H.
Decided by the Supreme Court (Supreme Court of India — S.H. Kapadia, CJI and Madan B. Lokur, J.) on 2012-09-06, reported as [2012] 348 ITR 378 (SC); [2012] 210 Taxman 269 (SC); [2012] 254 CTR 111 (SC); [2012] 25 taxmann.com 201 (SC); Civil Appeal No. 10270 of 2003; affirming Ahmedabad Stamp Vendors Association v. Union of India [2002] 257 ITR 202 / 124 Taxman 628 (Guj.). It bears on section 194H of the Income Tax Act 1961, in TDS Defaults matters.
This is the base authority for the discount-versus-commission line: once the buyer takes title and does not hold the goods for or on behalf of the seller, a margin built into the price of a completed sale is outside s.194H. It is worth citing well beyond stamp vendors, and the same principal-to-principal reasoning was applied by the Supreme Court in Bharti Cellular Ltd v ACIT in February 2024 on telecom distributor discounts.
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Licensed stamp vendors purchased judicial and non-judicial stamp papers from the State Government at a discount ranging from 0.50% to 4% of the face value and resold them to the public. The Revenue treated the vendors as agents of the State Government and the discount as commission or brokerage attracting deduction of tax at source under s.194H. The Association challenged this by writ petition.
The Department's appeal was dismissed with no order as to costs. The discount of 0.50 to 4 per cent given to licensed stamp vendors is for purchasing stamps in bulk quantity and is in the nature of a cash discount, and the Court concurred with the High Court that the transaction is a sale; s.194H accordingly has no application.
The order is very short. The Court recorded its satisfaction that the 0.50 to 4 per cent discount is given for purchasing stamps in bulk quantity and is a cash discount, and on that footing concurred with the High Court that the transaction is a sale, with the consequence that s.194H does not apply. The Court did not set out reasoning of its own beyond this; the analysis of agency and of the width of Explanation (i) to s.194H that is usually associated with this authority is in the Gujarat High Court judgment with which the Supreme Court concurred.
In the circumstances, we concur with the impugned judgement that the impugned transaction is a sale. Consequently, section 194H of the Income-tax Act, 1961, has no application.
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Handle my notice → Ask a CA on WhatsAppNo. The sale of stamp papers by the State to a licensed vendor is a sale on a principal-to-principal basis, and the 0.50% to 4% margin is a cash discount for bulk purchase, not commission or brokerage attracting deduction under s.194H. This was decided by the Supreme Court (Supreme Court of India — S.H. Kapadia, CJI and Madan B. Lokur, J.) and bears on section 194H of the Income Tax Act 1961. It is reported as [2012] 348 ITR 378 (SC); [2012] 210 Taxman 269 (SC); [2012] 254 CTR 111 (SC); [2012] 25 taxmann.com 201 (SC); Civil Appeal No. 10270 of 2003; affirming Ahmedabad Stamp Vendors Association v. Union of India [2002] 257 ITR 202 / 124 Taxman 628 (Guj.). This is the base authority for the discount-versus-commission line: once the buyer takes title and does not hold the goods for or on behalf of the seller, a margin built into the price of a completed sale is outside s.194H. It is worth citing well beyond stamp vendors, and the same principal-to-principal reasoning was applied by the Supreme Court in Bharti Cellular Ltd v ACIT in February 2024 on telecom distributor discounts. If it applies to you, the first step is this: Establish where title passes: show that the goods are bought outright and are not held for or on behalf of the payer.
Licensed stamp vendors purchased judicial and non-judicial stamp papers from the State Government at a discount ranging from 0.50% to 4% of the face value and resold them to the public. The Revenue treated the vendors as agents of the State Government and the discount as commission or brokerage attracting deduction of tax at source under s.194H. The Association challenged this by writ petition. The matter was decided on 2012-09-06 by the Supreme Court (Supreme Court of India — S.H. Kapadia, CJI and Madan B. Lokur, J.). On those facts the Supreme Court held as follows. The Department's appeal was dismissed with no order as to costs. The discount of 0.50 to 4 per cent given to licensed stamp vendors is for purchasing stamps in bulk quantity and is in the nature of a cash discount, and the Court concurred with the High Court that the transaction is a sale; s.194H accordingly has no application.
The order is very short. The Court recorded its satisfaction that the 0.50 to 4 per cent discount is given for purchasing stamps in bulk quantity and is a cash discount, and on that footing concurred with the High Court that the transaction is a sale, with the consequence that s.194H does not apply. The Court did not set out reasoning of its own beyond this; the analysis of agency and of the width of Explanation (i) to s.194H that is usually associated with this authority is in the Gujarat High Court judgment with which the Supreme Court concurred. In the words reproduced by the source cited on this page: "In the circumstances, we concur with the impugned judgement that the impugned transaction is a sale. Consequently, section 194H of the Income-tax Act, 1961, has no application."
It was decided by the Supreme Court on 2012-09-06 and is reported as [2012] 348 ITR 378 (SC); [2012] 210 Taxman 269 (SC); [2012] 254 CTR 111 (SC); [2012] 25 taxmann.com 201 (SC); Civil Appeal No. 10270 of 2003; affirming Ahmedabad Stamp Vendors Association v. Union of India [2002] 257 ITR 202 / 124 Taxman 628 (Guj.). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 194H, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Department's appeal was dismissed with no order as to costs. The discount of 0.50 to 4 per cent given to licensed stamp vendors is for purchasing stamps in bulk quantity and is in the nature of a cash discount, and the Court concurred with the High Court that the transaction is a sale; s.194H accordingly has no application. It arises in TDS Defaults matters, on section 194H of the Income Tax Act 1961, and was decided by Supreme Court of India — S.H. Kapadia, CJI and Madan B. Lokur, J.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show that the margin is fixed as a percentage of price and is not remuneration for any service rendered on the seller's behalf. If the department frames the arrangement as agency, ask it in writing to identify the acts done 'on behalf of' the principal, since s.194H is engaged only on that footing.
Still good law. Applied by the Bombay High Court in CIT (TDS)-2 v. Nish Developers (P.) Ltd. [2025] 177 taxmann.com 472 (Bombay), Income Tax Appeal No. 2289 of 2018, decided 6 August 2025, for the proposition that an element of agency must be present before a payment can be styled commission or brokerage under s.194H; the Revenue's appeal was dismissed. The Supreme Court in Bharti Cellular Ltd. v. Asstt. CIT [2024] 462 ITR 247 (SC) also refers to this decision, but its case review does not record it as followed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The citation needed care and is now settled: 257 ITR 202 is the Gujarat High Court decision, Ahmedabad Stamp Vendors Association v. Union of India; the Supreme Court decision is CIT v. Ahmedabad Stamp Vendors Association, Civil Appeal No. 10270 of 2003, decided 6 September 2012 and reported at 348 ITR 378. Cite the right one for the right proposition. The Supreme Court's order runs to four sentences and does no more than concur with the High Court; the developed reasoning that courts quote under this name — that the Explanation to s.194H cannot be read so widely as to catch every sale from manufacturer to wholesaler, and the car dealer illustration — comes from the High Court judgment, not from the Supreme Court's order. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Department's appeal was dismissed with no order as to costs. The discount of 0.50 to 4 per cent given to licensed stamp vendors is for purchasing stamps in bulk quantity and is in the nature of a cash discount, and the Court concurred with the High Court that the transaction is a sale; s.194H accordingly has no application.
TaxSphere, “CIT v Ahmedabad Stamp Vendors Association”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-ahmedabad-stamp-vendors-194h-discount/ (validity last checked 2026-08-19)
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