TMI Blog2014 (12) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities below, material available on record and the decisions relied upon. GROUND NO. 1 3. The relevant facts are that during the course of assessment proceedings, it was gathered by the AO that the assessee had procured printed material from the firms as per specification provided by the assessee. The assessee is in the business of manufacturing and sale of tobacco chewing etc. The AO noticed that in the Tobacco packing it was statutory to put the warning and other slogans as specified by the Government of India. The assessee had also obtained the packing material inclusive of his specification of brand etc apart from other like logo, name of the company, address and MRP. Etc. On the basis of these facts the AO inferred that the provisions of Section 194C of the Act are attracted and the assessee was reliable to deduct TDS on such purchases and to deposit the tax in government account. The AO required the assessee to furnish details and also to explain the reasons as well if TDS had not been made on the payment on the said amount. The assessee explained that the packing material was purchased and there was no liability of TDS on the purchase of packing material, hence impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 08/08/1995 has clarified vide Question No. 101 to the effect that Section 194C would apply in respect of supply of printed material as per prescribed specifications. On the other hand, the Board vide Circular No. 681 dated 08/03/1994 had clarified that the provisions of Section 194C of the Act would apply in respect of a contract for supply of any article or thing as per prescribed specifications only if it is a contract for work and not a contract for sale. The necessity for clarification arose due to contradiction in reply to question no. 15 in Circular No. 715 dated 08/08/1995 and Circular No. 681 dated 08/03/1994. Accordingly the Board has finally clarified this ambiguity vide Circular No. 13 dated 13/12/2006 after considering Circular No. 715 681 as under:- It is therefore clarified that the provisions of Section 194C would apply in respect of a contract for supply of any article or thing as per prescribed specifications only if it is a contract for work and not a contract for sale as per the principles of this regard laid down in para 7(vi) of Circular No. 681 dated 08/03/1994.. [Emphasis supplied] As per the appellant the A.O has wrongly interpreted Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of State of Himachal Pradesh Vs. Associated Hotels of India Ltd. ors, sales tax cases volume XXIX pages 494 has observed that a contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of a chattel as a chattel to the buyer. Where the principle object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour . Further, the appellant has paid VAT on these purchases. The Hon ble Supreme Court (supra) has held that sales tax is only applicable when it is not a work contract but a contract to sale. As such, the transactions are covered under a contract to sale and not of a work contract and the provisions of Section 194C of the Act are not applicable on such transactions. Regarding applicability of provisions of Section 194C of the Act the appellant has cited number of Hon ble Courts rulings in support of its contention that provisions of Section 194C are not applicable, as under:- (i) CIT V. Dabour India Ltd. 198 CTR 375 (Delhi) (ii) BDA Vs. I.T.O (2006) 281 ITR 99 (Bom) (iii) DCIT Vs. Seagram Manufacturing (p) Ltd. (2008) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,24,700/- was paid to M/s Micron India. He again asked the assessee to furnish the details of tax deducted and deposited in the government account as stipulated u/s 194C of the Act. Since the assessee failed to furnish requisite details the AO concluded the assessee had failed to deduct TDS on the said amount and accordingly disallowed the amount of ₹ 1,24,700/- u/s 40(a)(ia) of the Act. The Ld. CIT(A) has, however, accepted the explanation of the assessee and has deleted the addition. This action of the Ld. CIT(A) has been questioned by the revenue. 8. In support of the ground, the ld. DR has basically placed reliance on the assessment order. 9. The Ld. AR on the other hand tried to justify the first appellate order on the issue. 10. Having gone through the orders of the authorities below, we find that the Ld. CIT(A) after discussing the issue in detail has passed following order:- The facts of the case as well as submissions made by the appellant have been carefully considered. It is observed that the A.O had disallowed the amount of ₹ 1,24,700/- u/s 40(a)(ia) of the Act in absence of deduction of T.D.S on payments made to M/s Micron India in contrave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h that when there is no material to show that ancillary materials like labels, ink, papers, screen printing, screens etc were supplied by the assessee to M/s Micron India for manufacturing the products manufactured by M/s Micron India as per specification of the assessee, which was said to the assessee. Hence, it was not a work contract but contract for sale. Thus the Ld. 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. He has accordinlgy deleted the addition of ₹ 1,24,700/-. The same is upheld. The Ground No. 2 is accordingly rejected. 12. Consequently, appeal is dismissed. C.O 302/Del/201 1. The assessee had objected first appellate order on the sole basis that the Ld. CIT(A) has erred in upholding the addition of ₹ 50,000/- made by the A.O out of the claimed expenses. 2. The Ld. AR submitted that the Assessing Officer has not pointed out any item of expenses of unwashed, invariable and inadmissible nature. Hence, the Ld. CIT(A) not justified in upholding the addition of ₹ 50,000/- out of the claimed expenses made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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