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2014 (12) TMI 514 - AT - Income TaxDisallowance of amount spent on packing materials u/s 40(a)(ia) – Applicability of TDS under section 194C – Works contract or contract to sale - Held that:- CIT(A) rightly held that the manufacturers were manufacturing the printed material at their premises and they were not captive units of the appellant - Merely because the printing was done as per the requirement/specifications of the assessee, it cannot be said that any work was carried out on behalf of the assessee - there is nothing on record to show that ancillary materials were supplied by the assessee to the manufacturer firms - supply of printed tobacco packing material was a sale and could not be considered as a ‘works contract’ and tax was not required to be deducted u/s 194C - the basic requirement of applicability of section 194C is that the transaction should come under ‘work contract’ and not as a contract to sale – assessee’s case is covered as contract to sale, the provisions of section 194C are not applicable at all - Therefore, there was no requirement of deduction of tax at source and for that matter the provisions of Section 40 a (ia) of the Act are not applicable at all - the manufacturer on his owner has purchased material and manufactured the products as per specification of the assessee, which it sold, to the assessee - the CIT(A) has rightly held the addition made by the AO as untenable – Decided against revenue. Expenses relating to advertisement and publicity – Applicability of section 194C – Payments made exceeded the statutory limit for deduction of tax – Held that:- CIT(A) rightly was of the view that no material was supplied to the seller and the entire material was purchased on his own by the seller - the transaction constitutes a sale within the rules giving rise to such a warranty - The supply has been made by M/s Micron India of printed packing labels as per requirement/specifications of the assessee - there is no material to show that ancillary materials like labels, ink, papers, screen-printing, screens etc. were supplied by appellant to the aforesaid company - assessee has also paid VAT on the sales and has furnished copies of bills in support of its contention - supply of printed labels was a sale and could not be considered as a ‘works contract’ and thus tax was not required to be deducted u/s 194C - it was not a work contract but contract for sale - Thus the CIT(A) has rightly concluded that supply of printed labels was a sale and could not considered as a work contract and thus tax was not required to be deducted u/s 194C of the Act – Decided against revenue. Addition of ₹ 50,00 upheld out of claimed expenses – Held that:- The AO has made addition of ₹ 50,000/- by making disallowance out of the claimed expenses on the basis that the assessee could not prejudice some of the vouchers and also from the perusal of other vouchers, it was found that these are petty and cash payments for which proper verification is not possible - CIT(A) was not justified him sustaining the addition made on ad-hoc basic without proper justification – thus, the order of the CIT(A) is to be set aside and the AO is directed to delete the addition – Decided in favour of assessee.
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