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2016 (1) TMI 753 - ITAT KOLKATA

2016 (1) TMI 753 - ITAT KOLKATA - TMI - TDS u/s 194C - disallowance of job work charges without deduction of TDS - CIT(A) deleted the addition - Held that:- See case of BDA Ltd. vs. ITO (TDS) (2004 (3) TMI 11 - BOMBAY High Court ), wherein it is held that supply of printed materials constitutes sale under the sale of Goods Act; and section 194C of the Act is not applicable. In that case it was held that supply of printed packaging labels merely because the printing was done as per requirement/sp .....

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ng Officer erred in law in making disallowance despite the facts that the said amount is paid for purchases and section 194C of the Act is not applicable. Accordingly, no disallowance by invoking the provisions of section 40(a)(ia) of the Act can be made. - Decided in favour of assessee.

Disallowance of set off of unabsorbed depreciation loss against current year’s income - CIT(A) allowed the claim - Held that:- In view of the ratio laid down in the case of General Motors India Pvt. L .....

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sh, AM For the Appellant : Shri Shital C Das, JCIT, Sr. DR For the Respondent : Shri Manoj Kataruka, Adv ORDER Per Mahavir Singh This appeal by revenue is arising out of order of CIT(A)-VIII, Kolkata in Appeal No. 305/CIT(A)-VIII/Kol/11-12 dated 07.12.2012. Assessment was framed by ITO, Wd-7(2), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for AY 2009-10 vide its order dated 30.12.2011. 2. The first issue in this appeal of revenue is against th .....

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during the course of assessment proceedings, the AO noted that the assessee company had made the following payments on account of the job work for procuring printed materials as per the specification of the assessee company from various parties: Sl. No. Ledger Head Amount 1. Carton Larger 164189.50 2. Carton Bullet 4214639.53 3. Carton KFS 61278.00 4. Crown Bullet 1895343.00 5. Crown KFL 56454.00 6. Crown KFS 96035.00 7. Foil Bullet 1709170.80 8. Foil KFS 68040.00 9. Foil KPL 41925.37 10. Foil .....

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rocuring printed materials from various parties and the suppliers had done the job work of printing on the materials submitted by them as per specifications of the assessee. The materials obtained from the above parties, according to AO, were printed labels, foils and cartons used for labeling and packing bottles of beer manufactured by the assessee. The AO further observed from the bills submitted by the assessee it is quite clear, that the above parties have supplied the printed materials to t .....

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appeal before CIT(A), who allowed the claim of the assesse by observing as under:- "5.2.5 I have carefully considered the facts of the case, the material placed on record and the submissions and arguments advanced on behalf of the appellant. From a careful reading of the provisions of section 194C and the circulars issued by the CBDT from time to time, it is clear that the term 'work' does not cover the following: (a) Contracts for sale of goods. (b) Where contractor undertakes to .....

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rendering professional service by lawyers, physicians surgeons, engineers, accountants, architects, consultants, etc. can also not be regard as "contract for carrying out any work" and accordingly no deduction of income -tax shall be made under this section. It will covered under section 194J. Where there was an agreement for supply of corrugated boxes with labels printed on them, it was held that predominant object underlying the contract was one for sale of goods and not of work cont .....

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nd following Bombay High Court's decision in the case of BDS Ltd. dated 08.03.2004, it held that the transaction is contract of sale not liable to TDS under Section 194C. It held that .the printing on the material is incidental to supply of material i.e. sale of material. The Bombay High Court in the case of BDA Ltd. cited supra held that where an independent establishment was engaged in the business of supplying printed packaging material to various units and was not a captive unit of the a .....

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lary costs like the labels, ink, papers, screen-printing, screens, etc. were being supplied by the assessee to M. In the facts of this case, the supply of printed labels by M to the assessee was a "contract of sale" and it could not be termed a ''works contract" Hence the provisions of section 194C were not applicable. 5.2.7 While delivering the judgment the Hon.ble Bombay High Court had considered the observations of the Supreme Court in State of Tamilnadu v. Annandam Vis .....

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Bench Kolkata in ITA No. 2132/KOL/2005 for A.Yr. 2004-05 in the case of Khadim Shoe Pvt. Ltd. Kolkata vs. ACIT Circle 58 (TDS), Kolkata vide order dated 12.05.2006 also held that in the case of outsourcing of finished goods, there is no liability to deduct tax at source under section 194C as outsourcing of manufacturing activity does not amount to 'work contract' and hence no tax deductible under section 194C. 5.2.8 In the light of the discussion and the legal proposition as discussed a .....

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eted." 4. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee before AO argued that the supply of printed materials was a sale and could not be considered as work contract and tax was not required to be deducted u/s.194C of the Act, since the ancillary materials were not supplied by the assessee. It was also contended that Clause (iv)(e) of explanation with section 194C of the Act as introduced by Finance (No.2) Act, 2009, has plac .....

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uction of tax at source. We are of the view that it was only when the contract is for printing of materials and not for purchasing of material that the circular may be applicable. It is a fact that the assessee made outright purchases of goods for ₹ 1,10,42,997/- from various suppliers on which sales tax stands paid and as such, the transaction is one of the sale and not work and does not fall under the scope and ambit of section 194C of the Act. Details of expenses of ₹ 11042997 are .....

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sale bills the vendor has charged VAT and as such the transaction amounts to contract of sale and section 194C of the Act is not applicable. Even in view of Circular no. 681 dated 08.03.1994, section 194C of the Act does not apply "where contractor undertakes to supply and article or thing fabricated according to specification given by the payer and the property in such article or thing passes to such payer only after such article or thing is delivered". 5. In section 194C of the Act .....

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not applicable. In that case it was held that supply of printed packaging labels merely because the printing was done as per requirement/specifications of the assessee, it could not be said that any work was carried out on behalf of the assessee. We find that similar issue was dealt by various courts, wherein it has been held that supply of any article or thing fabricated according to the specification of the purchaser and the property in such article passes to the person only after the same is .....

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of revenue s appeal is dismissed. 6. The next issue in this appeal of revenue is against the order of CIT(A) deleting the disallowance by allowing set off of unabsorbed depreciation loss against current year s income. For this, revenue has raised following ground no.2: "2. For that in the facts and in the circumstances of the case the Ld. CIT(A) is not correct by allowing set off of unabsorbed depreciation loss against the current years income." 7. Brief facts relating to the case are .....

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d depreciation for assessment year 2003-04 of ₹ 18,76,759/- were allowed to be carried forward and the same is allowed to be set-off with the income of the assessment year 2009-10. Further, no unabsorbed depreciation is allowed to be carried forward. Aggrieved, assessee preferred appeal before CIT(A), who allowed the claim of the assessee by observing as under:- "I have considered the facts of the case and the submission behalf of the appellant. I have also gone through the decision r .....

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) in a different manner, on 72 deals with losses other than losses due to depreciation. There is no time limit prescribed under section 32(2) of the Act. From the provisions of the Act and the ratio laid down in the cases cited, supra, the following steps are to be kept in mind while dealing with unabsorbed depreciation: Step one Depreciation allowance of the previous year is first deductible from the income chargeable under the head "profits and gains of business or profession". Step .....

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ime limit is fixed for the purpose of carrying forward of unabsorbed depreciation; it can be carried forward for indefinite period, if necessary. 2. In the subsequent year(s), unabsorbed depreciation can be set off against any income whether chargeable under the head "Profits and gains of business or profession" or under any other head (except Income under the head "Salaries"). In the matter of set off, the following order of priority is followed in the subsequent year(s): . .....

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oregoing discussion, the claim of the assessee company, in my opinion, the disallowance of the claim of set off of unabsorbed depreciation loss against the current income is not justified. The Assessing Officer is hereby directed to allow the same on the basis of the steps given above in accordance with law while giving effect to this order." Aggrieved, revenue came in second appeal before Tribunal. 8. We have heard rival submissions and gone through facts and circumstances of the case. We .....

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d on the ground that unabsorbed depreciation loss could be carried forward further for 8 years only. Accordingly, in the assessment year 2008-09 the assessed total income of ₹ 37850399/- (inclusive of addition of ₹ 22401596/-) u/s. 40(a)(ia) was fully adjusted with the unabsorbed depreciation of assessment year 2001-2002 to assessment year 2002-03 without adjusting unabsorbed depreciation for assessment year 1998-99 and 1999-2000. It is found that in the assessment order for the asse .....

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Y. 1999-2000 on the ground that unabsorbed depreciation loss for these two years are only allowed to be carried forward to 8 subsequent years. In view of these facts, we are of the view that prior to the Finance Act No.2 of 1996 unabsorbed depreciation could be carried forward indefinitely. The Finance Act No.2 of 1996 restricted the period of carry forward & set-off of unabsorbed depreciation to 8 years from AY I997-98. The Circular 762 dated 18.2.1998 clarified that brought forward unabsor .....

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can be carried forward for set off indefinitely. In Circular No.14 of 2001, the CBDT clarified the removal of the 8 year time period was "with a view to enable the industry to conserve sufficient funds to replace plant and machinery". The effect of the amendment is that the unabsorbed depreciation available to an assessee on 1.4.2002 (AY 2002-03) has to be dealt with in accordance with the s. 32(2) as amended by the Finance Act, 2001 and not by s. 32(2) as it stood prior to the said a .....

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