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2007 (7) TMI 349 - AT - Income TaxTDS u/s 194C - Works Contract Or Contract to Sale - supply of outsourced manufactured goods - Original Equipment Manufacturers (OEMs) - HELD THAT:- The dominant object underlying the arrangement is manufacture and sale by the OEM. Having carefully perused the agreements before us, we also find that the authorities below have proceeded on the erroneous assumption that goods rejected by the assessee cannot be sold by the OEMs. That is factually incorrect. The OEMs are free to dispose of the goods in whatever manner they deem fit but they are forbidden from affixing assessee's trademark on the same. That restriction is quite justified to protect the legitimate business interests of the assessee. The trademark can only be affixed in the case where the goods are purchased by the assessee, and rightly so, because the trademark belongs to the assessee and is to be used for his business purposes. Ld DR's argument that only off the shelf goods can be considered to be purchases and made to order goods is to be considered as works contract, is devoid of any merits sustainable in law. In view of these discussions, and respectfully following the co-ordinate Benches in the case of ITO vs. Willmar Schwabe India (P) Ltd. [2005 (3) TMI 398 - ITAT DELHI-D], we hold that the supply of outsourced manufactured goods by the OEMs constitutes an outright sale and cannot be treated as a works contract within the scope of s. 194C. The impugned TDS demands raised on the assessee are thus indeed vitiated in law and not warranted by the facts of the case. These demands should, accordingly, be set aside. We order so. In the result, the appeal is allowed.
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