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2015 (4) TMI 1264 - HC - Income TaxProvision for Expenses - TDS u/s 194C/J - Disallowance u/s 40(a)(i) - short / non deduction of tax - HELD THAT:- Appeal deserves to be admitted on the following substantial question of law : “(A) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal is justified in accepting the assessee's contention that the amount covered by 'Provision for Expenses' were not credited to the account of any of the payee but was credited to 'Provision for Expenses' and therefore TDS provisions were not applicable without appreciating the provisions of sub-section (2) of section 194C, Explanation (iv) to section 194H and Explanation (ii) to section 194I ? (B) Whether on the facts and in the circumstances of the case and in law, in the context of 'Provisions for expenses', the Hon'ble Tribunal has erred in deleting the short / non deduction of tax by holding that in view of disallowances u/s 40(a)(i) / 40(a)(ia), no demand can be raised u/s 201(1) r.w.s. 194C / 194J of the Act?” TDS u/s 194C - Purchase of traded goods, purchase of packing material and clinical trials - stand of the Revenue was that these are all works contract and there is a requirement of deduction of tax at source u/s 194C - HELD THAT:- The Pharma company provides the formulation and specifications. The third party then manufactures the product or goods and affixes thereon the trademark of the assessee. The raw materials for manufacturing these products are procured not by the assessee or supplied by the assessee but independently by the third party. The property in the goods does not pass on to the assessee till delivery. This is termed as an agreement on principal to principal basis. That is why this is termed as a contract of sale. We do not see how this situation and in the case of Glenmark [2010 (3) TMI 289 - BOMBAY HIGH COURT] is inapplicable to the present assessee. Merely because the patent is not in any way dealt with and or rights therein are retained by the assessee does not make any difference. The formulations and specifications are provided for manufacture of the goods and which are eventually sold to the assessee. In these circumstances, we do not see that the transactions partake the character of works contract in any manner. Therefore, the issue or question is covered by Commissioner of Income Tax vs. Glenmark. Transaction was of sale and the assessee was not required to deduct tax at source on payments. (BDA Ltd. vs. Income Tax Officer (TDS) [2004 (3) TMI 11 - BOMBAY HIGH COURT] - Appeal cannot be entertained on Questions (C) and (D)
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