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2005 (9) TMI 530 - ITAT DELHINon-deduction of tax at source u/s 194C - Purchase of goods with the assessee specification that is "Contract for sale of goods or work contract" - HELD THAT:- In ITO v. Dr. Willmar Schwabe (P.) Ltd.[2005 (3) TMI 398 - ITAT DELHI-D], the Delhi Bench of the Tribunal has held, inter alia, under similar circumstances, that even though the packing material was manufactured by the suppliers as per the specifications given by the assessee-company and even some printing was also done as per the assessee’s requirement, the required raw material for the purpose of manufacturing the said packing material was purchased by the concerned suppliers on their own; that these manufacturers had even paid sales tax and excise duty on the material supplied to the assessee-company, wherever applicable; that thus, the ownership in the said material was entirely with the concerned manufacturers till its supply to the assessee-company and the contract between the assessee-company and these manufacturers was for supply of material and not for carrying out any particular work as envisaged in section 194C; that it was a clear case of sale of goods by the suppliers to the assessee-company, which was evident from the fact that sales tax as well as excise duty was paid by the concerned suppliers on the packing material supplied to the assessee-company, wherever applicable; that the CBDT itself in clause 7(b) of its circular No. 681 dated 8-3-1994 (which circular has been invoked by the present assessee also), has clarified that where the contractor undertakes to supply any article or thing fabricated, according to the specifications, the property in such article or thing passes to the purchaser only after such article or thing is delivered and the contract itself being for sale of such article or thing, would be outside the purview of section 194C. Thus, following the aforesaid case laws, we hold that section 194C is not applicable to the transaction entered into by the assessee. That being so, the assessee was not liable to deduct TDS. Moreover, it has not been denied that the taxes have since been paid. This amount, as per the learned counsel, is refundable. In these facts, section 201(1) of the Act is not attracted. Evidently, no tax can be collected twice over. All the parties have paid up, according to the learned counsel for the assessee. If it is so, to that extent, the amount is to be refunded. Credit of TDS was not allowed to these parties. The full amount was collected. All in all, this matter of refund is not before us. It has to be sorted out in appropriate proceedings. On merits too, the very fact that the above discussed decisions have been given on the issue, evinces that the matter has been of a debatable nature. In that event, obviously, no penalty was leviable. We hold accordingly. The grievance of the assessee is, hence, justified and is accepted. In the result, both the appeals of the assessee are allowed.
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