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TMI Blog2012 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements and the transactions, work entrusted to TPL was only a work contract and not contract for sale of goods and consequently provisions of section 194C of the Act were applicable? 2. The appeal had been admitted on 10.9.2007 to examine these two questions. 3. The respondent had been put on notice and is represented by counsel M/s.Harish and Co., but unfortunately at the time of hearing of the appeal we had the benefit of hearing only Shri. Thirumalesh, learned Standing Counsel appearing for the appellant-Income Tax Department. 4. The assessee is an Indian Company and assessment year is 1997-98. The assessee company markets pharmaceutical products and one of its products had been got prepared from M/s.Torrent Pharmaceuticals Limited, a product which perhaps was being used as insulin in medically presentable form, raw material for the manufacture of this product was being supplied to M/s Torrent Pharmaceuticals Ltd. by a foreign company by name NOVA Nordisk, Denmark. 5. It also transpires that the assessee company was a subsidiary of M/s NOVA Nordisk Singapore but had no direct contract or relationship with the Indian manufacturer, but under another agreement between the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f resolving the dispute particularly, the question arising in the context of the provisions of Section 194C of the Act because of which proviso the respondent-Company is treated as an assessee, an assessee so deemed because of the default committed in not deducting the commensurate amount in respect of the payments mae by the assessee company in favour of the Indian Manufacturing company which was as per the provision at 2% of the total amounts paid by the assessee company to the supplying company. 11. This amount was worked out to be at a sum of Rs.5,10,49,267/- by the assessing officer applying the formula of multiplying payments made by the assessing company to the supplier company using the multiplier 19/119 as being the value of conversion charges which alone was taken to be a payment by the assessing company towards the manufacturing cost or conversion charges paid by the assessee to the manufacturing company though the actual payments include the price of the raw materials, but that amount having been paid by the supplier directly to the foreign raw material supplier company, that was not included in the value of payments by the assessee company for the purpose of computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar the assessee being not the supplier of the raw material was not under any obligation to deduct any tax at source u/s/194C of the Act and therefore, dismissed the appeal in terms of the order dated 22.3.2005. 15. It is aggrieved by this order of the Tribunal, the present appeal by the Revenue posing the questions as indicated above for our consideration. 16. Appearing on behalf of the Revenue, Shri Thirumalesh, learned Standing counsel has drawn our attention to the orders, the relevant clauses in the agreement particularly, Articles 3 and 4 of the agreement between the assessee company and the supplier company which reads as under :- ARTICLE 3: PURCHASE AND SALE OF INSULIN FORMULATIONS 3.1. During the terms, the supplier shall supply to the buyer and the buyer shall purchase from the Supplier, Formulations meeting the applicable requirements contained, and as more particularly specified in Appendix 2 on the following basis. a) The supplier shall supply and the buyer shall purchase. Formulations manufactured from the Insulin Crystals strictly in accordance with the Know how licensed to the suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz. the assessee company, its supplier the manufacturing company and the foreign raw material supplier company and that the terms of agreement between the raw material supplying company virtually, dictating terms to the raw material receiving Indian manufacturing company to supply the entire product, manufactured by the utilisation of the raw materials and applying the technical know-how as supplied by the assessee company, this was not a case of the supplier or the manufacturer having produced an independent product out of its own ability or on its own but being guided, regulated and restricted in the marketing of the product only in favour of the assessee company and more so, the price fixation mechanism as stipulated under the agreement taking care of the value with reference to the quantity and quality of the product produced with the supplied raw material, the situation is not one governed by the Board circular and the Appellate Commissioner and the Tribunal ignoring the facts and circumstances of the case as had been discussed by the Income Tax Officer, have simply set aside the order passed by the Assessing Authority on the premise of the board circular. The situation does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by it also labelling the product with the brand name of the assessee and supplying the entire product only to the assessee company and not to anyone else and it is throughout to be held as a specific contract for manufacturing of a particular product notwithstanding the fact that the supplier had paid the price for the raw-material directly to the foreign company which supplied the raw material to the manufacturer, but had interest in the assessee company in India while bearing the trade mark of the foreign supplier, but having a definite communication and in such a situation one has to really look into the real nature of the transaction that emerges on the conjoint reading of the three agreements and the assessing officer in fact having undertaken this exercise and having arrived at the conclusion that the assessee company is one who fits into the definition and situation contemplated u/s.194C of the which on an examination is found is a proper reasoned approach and in consonance with the statutory provision. We answer the questions posed for our examination in the negative and in favour of the revenue. 22. We are also of the view that the situation contemplated u/s.194C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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