TMI Blog2015 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Revenue. - IT APPEAL NOS.295, 300 & 301 OF 2014 - - - Dated:- 30-3-2015 - VINEET SARAN AND MRS. S. SUJATHA, JJ. K.V. Aravind, Adv. for the Appellant. T. Suryanarayana, Adv. for the Respondent. JUDGMENT Vineet Saran, J. These three appeals arise out of a common order of the Income Tax Appellate Tribunal, 'B' Bench, Bangalore whereby the appeals filed by the Revenue have been dismissed by the Tribunal. These appeals relate to the Assessment Years 2009-10, 2010-11 and 2011-12. 2. The brief facts of the case are that the respondent/assessee is engaged in the business of trading of ophthalmic products. The manufacturing of the products is outsourced by the assessee to other companies, including Piramal Health Care Ltd. (PHL) (previously known as Nicholas Piramal India Ltd.). In the year 1995 the assessee Company had entered into a Contract Manufacturing Agreement with PHL under which PHL had agreed to manufacture and sell to the assessee certain pharmaceutical and contact lens care products on a principal to principal basis. The key features of the agreement have been noted in the order of the Tribunal which have not been disputed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of PHL. Accordingly, the machines were not used during the year in question either by the Assessee or PHL for manufacturing the products. 3. According to the Revenue, for the said three assessment years, payments of ₹ 88,25,70,426/- had been made by the assessee to PHL without deducting tax at source, which according to the Revenue should have been done at 2% under Section 194C of the Income Tax Act (hereinafter referred to as 'the Act' for brevity). The Assessing Officer, after holding that payments had been made for execution of contract work falling under Section 194C, further held that the assessee defaulted in deducting tax at source on the payments made to PHL and thus passed an order for payment of tax under Section 201(1) and for payment of interest under Section 201(1A) of the Act. Consequently, a total amount of tax and interest of ₹ 2,25,70,387/- was levied by the Assessing Officer. The appeals filed by the assessee were allowed by the Commissioner of Income Tax (Appeals). Challenging the said order, the Revenue filed appeals before the Tribunal, which have also been dismissed. Aggrieved by the same, these appeals have been filed raising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion which arises for consideration is that when the assessee had granted PHL (manufacturer) the licence to use the know-how, the product specification, the packaging and labelling specifications, would the same be covered within the meaning of 'contract for work' or would it be a 'contract for sale'. 7. Section 194C of the Act relates to 'payments to contractors' and the explanation to the said Section defines 'work'. The relevant extract of Section 194C is produced below :- 194C- Payments to contractors (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to - (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; under the explanation to Section 194C of the Act. 9. The learned counsel for the appellant has placed reliance on the decision of this Court in the case of CIT v. Nova Nordisk Pharma India Ltd. reported in (2012) 341 ITR 451 to support his contention that in a case where the asseessee company gets the product prepared or manufactured from another company, the same would be termed as a 'contract for work' and thus the provisions of Section 194C of the Act would be attracted. 10. Having gone through the said judgment what we notice is that the assessee therein had got the product manufactured by another company from the materials supplied by its foreign holding company and also by supplying technical know how. As such the foreign company, which supplied the raw material to the manufacturer, had a direct interest in the assessee company in India and even the trade mark of the foreign supplier company was to be borne in the product to be marketed. It was after considering the agreements between the assessee and the manufacturer as well as the other agreements between the foreign holding company and the assessee etc. that this Court had come to the conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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