TMI Blog2000 (11) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... days. But in reply, learned counsel for the assessee put the facts straight and argued that there was no such delay and this confusion has arisen because of some typographical error crept in the particulars mentioned in Form No. 36. It is seen that the order of the learned CIT(A) was dated 23rd Oct., 1998, whereas the present appeal as per the nothing made on Form No. 36 was filed on 24th Dec., 1998. Therefore, there was no delay in filing the appeals, as was made out on the basis of nothing of the Registry. 4. Before the issue is dealt by us, it is necessary for us to record the facts of the present case as are borne out from the assessment order, order of the learned CIT(A) and the facts as stated before us. Assessee-Andhra Pradesh State Road Transport Corporation, is a corporation established under the state enactment. The assessee is in the business of providing transport services to the public in the state and for that purpose, it owns fleet of buses. It purchases chassis and after the purchase of chassis hands over the same to the fabricators for constructing the body building upon the chassis. 5. During the course of inspection, it came to the notice of the IT Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemently argued by learned counsel for the assessee before the learned CIT(A) that section 194C was not applicable to the facts of its case and the order passed under section 201 was liable to be quashed. But learned CIT(A) was not convinced with the arguments of learned counsel for the assessee and on the basis of the extracts of the bus body building contract, which was placed before him by the appellant, he held the assessee as assessee-in-default and confirmed the order passed by the Assessing Officer under section 201. 7. Before us, learned counsel for the assessee submitted that section 194C does not cover those transactions, which involve sale of goods and in the case before us, what was done by the assessee by entering into contracts with bus body builder was to purchase bus bodies constructed and fitted on the chassis supplied. He further argued that the dominant objective and intention of the parties have to be seen, which are embedded in an agreement. According to him, the dominant objective and intention of the appellant was to purchase bus bodies and, therefore, the transactions entered into were the transactions of purchase and sale simplicitor. He drew our att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) on the ground that in that decision, what was got made from the fabricators was an identifiable object i.e., ferry whereas in the instant case, no identifiable object having separate existence and entity was purchased. What has been got made in the instant case, was the bus body fabricated on the chassis already supplied. Learned senior departmental Representative further argued that the fabricators did not have the property rights in the chassis fitted with bodies which also shows that it was not the sale but was fabrication work got done. He relied upon the decision of the Hon ble Supreme Court in the case of State of Gujarat v. Kailash Engg. Co. 19 STC 13, State of Gujarat v. Variety Body Builders 38 STC 176 and Sentinel Rolling Shutters Engg. Co. (P.) Ltd. v. CST 42 STC 409. He further relied upon the decision of the Hon ble Madras High Court in the case of Kumdum Publications (P.) Ltd. v. CIT [1991] 188 ITR 84 (Mad.). Therefore, he vehemently pleaded that there was no infirmity in the orders passed by the authorities below and, therefore, their orders were prayed to be upheld. 9. In reply, learned counsel for the assessee submitted that the decisions relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clauses (a) to (j) of that sub-section can get carried out through a contractor under a contract. In that decision, the Hon ble Supreme Court made it clear in very many words that the meaning of the word work cannot be construed to be confined to the expression works contracts alone. Therefore, the meaning assigned to the expression work will have to be seen beyond the meaning of the expression works contracts. This position as enunciated by the apex court was also duly taken note of and clarified by the CBDT in its Circular 666, dated 8th Oct., 1993 [published at [1993] 114 CTR (St.) 62] in para 5.3. But one thing which is certain and on which there could be no dispute from either of the parties is that, if a transaction can be termed as a contract for sale, that transaction can at least not be treated as work . This position was admitted by the CBDT also, in the context of section 194C itself it its Circular No. 86, dated 29th May, 1972, reported at 84 ITR 99 (St.). 12. Therefore, we will have to examine as to whether the contract entered into by the appellant-corporation with the fabricators, a company of which was supplied to learned CIT(A) and quoted by him in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and for supply of materials used in the execution of the work for a price; (b) it may be a contract for work in which the use of materials is accessory or incidental to the execution of work; or (c) it may be a contract for supply of goods where some work is required to be done as incidental to the sale; Where a contract is of the first type, it is a composite contract consisting essentially of two contracts, one for the sale of goods and the other for work and labour. The second type of work is clearly a contract for work and labour not involving sale of goods. While the third type is contract for sale where the goods are sold as chattels and some work is undoubtedly done, but it is done merely as incidental to the sale. Similarly, observations of the Hon ble Supreme Court in the case of Hindustan Shipyard Ltd. v. State of Andhra Pradesh 110 STC 533 are also guideposts in this regard, relevant portion of which is extracted below: Transfer of property in goods for a price is the linchpin of the definition of sale . Whether a particular contract is one for sale of goods or for work and labour depends upon the main object of the parties found out from an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the other aspect of the transaction and afford some guidance in determining the question. Basically and primarily whether a particular contract is a contract for sale of goods or for work and labour, depends upon the main object of the parties, gathered from the terms of the contract, the circumstances of the transactions and the customs of the trade. There can be no gain saying that there is no standard formula by which a contract of sale can be distinguished from a contract for work and labour. There may be many common characteristics in both the contract, some neutral in a particular contract and yet certain clinching terms in a given case may fortify the conclusion one way or the other. All that will depend upon the facts and circumstances of each case. This question to be answered, is not an easy and has perplexed the jurists all over. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of the property in and the delivery of the possession of a chattel as a chattel to the buyer. Where the dominant object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bodies in fact. Merely because specifications are provided by the appellant-corporation to suit the bus bodies according to appellant s requirements, does not alter the basic crux and character of the contract, which in the instant case is nothing but the contract of sale and purchase. The materials involved in the construction of the bus bodies were to be procured by the fabricators and thereafter bus bodies were to be constructed and to be fitted on the chassis supplied by the appellant-corporation. At no point of time, appellant had any property or ownership in the material used in bus body building or in the bus body itself unless these were delivered to the appellant and approved by the appellant for final use. Property in the bus bodies was to pass on acceptance of bus bodies by the appellant. Purchase of any item which is constructed as per agreed specifications would involve labour and skill but these two elements by themselves alone are not enough to turn the transaction of sale into transaction of work . Object and end result of the entire process through which that transaction passes shall be looked into. In the case before us, we are of the considered view in the bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the chassis. In other words, if the parties intended that there should be delivery of bus bodies as units, or as bus bodies though fitted to the chassis, that will be a case where the property passed only at the time of delivery. Such a transaction will be a sale of goods. That precisely is the position in this case. We agree with the Tribunal that the turnover in respect of these transactions was rightly charged to sales-tax. 16. Similar issue was dealt with by Hon ble Supreme Court in the case of Patnaik Co. v. State of Orissa [1965] 2 SCR 782 : 16 STC 364, in which Hon ble Supreme Court held that the bus body constructed by the fabricator was sale and was not works contract . Circumstances considered and relied upon in above cases for holding that the transaction amounted to a sale and not to works contract , we find, do exist in the case before us also as is clear from the salient features of the contract mentioned earlier and from the discussion and findings in the preceding paragraphs. Therefore, the contract entered into by the appellant-corporation with its fabrications in the instant case, was the contract of sale upon which the provisions of section 194C were no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract of bus body building implying thereby that in view of Hon ble Supreme Court, a contract of bus body fitted into the chassis with all the materials supplied by the contractor and all the skill and labour contributed by the contractor constitutes a contract of sale. Because Hon ble Supreme Court in the case of Variety Body Builder s case (supra) held that contract for construction of coaches on the under frame supplied by Railways was a contract of works and labour. Facts of the case of Sentinel Rolling Shutters Engineering Co. (P) Ltd. v. CST (supra) are also materially different and therefore, ratio of that decision cannot be applied to the case before us. Similar is the position in regard to the cases of Hindustan Aeronautics Ltd. v. State of Karnataka 55 STC 314 (SC) and Kumudam Publications (P.) Ltd. (supra). 20. Therefore, we quash the orders passed by the authorities below and hold that appellant-corporation was not liable to deduct tax at source under section 194C. Therefore, there was no question of the appellant-corporation being treated as assessee in default and fastening the liability of tax and interest levied by learned AO and therefore, we delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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