Tribunal: Logo-branded footwear purchases not subject to TDS under Income Tax Act

The Tribunal ruled in favor of the appellant, holding that the purchases of footwear with the specified logo "Khadim" were transactions of purchase and sale of goods, not subject to TDS under Section 194C of the Income Tax Act. The Tribunal emphasized that affixing the logo did not alter the nature of the transactions, following judicial precedents that similar transactions were not considered works contracts. The appellant's appeal was allowed, absolving them from liability to deduct tax on these purchases.

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Issues Involved:
Interpretation of Section 194C of the Income Tax Act regarding liability to deduct TDS on purchase of goods with a specified logo.

Detailed Analysis:

Issue 1: Liability under Section 194C for purchase of goods with specified logo

The appeal was filed against the order of CIT(A) regarding the applicability of Section 194C of the Income Tax Act on the purchase of footwear with a specified logo "Khadim" amounting to Rs. 7.90 crores. The Assessing Officer (A.O.) treated the purchase as a work contract and held the assessee liable for TDS non-deduction under Section 194C. The CIT(A) found that only the purchases without the logo of the assessee were exempt from TDS, while purchases with the logo were subject to TDS. The appellant contested this decision, arguing that the nature of the transactions for both types of purchases was the same, and affixing the logo did not change the character of the transaction. The appellant cited relevant case laws to support this argument.

Issue 2: Judicial Precedents and Interpretation

The Tribunal considered judicial precedents, including the case of Dabur India Ltd., where the High Court ruled that a contract for the supply of goods with printed labels was primarily for the sale of goods and not a works contract under Section 194C. Similarly, in the case of Wadilal Dairy International Ltd., it was held that purchases of packing material as per the assessee's specification were not covered under Section 194C. The ITAT also referred to the Reebok India Company case, where it was established that outsourcing of manufacturing activity did not constitute a works contract under Section 194C. Based on these precedents, the Tribunal concluded that the purchases of footwear with the logo "Khadim" were transactions of purchase and sale of goods, not falling under the purview of Section 194C.

Conclusion:

The Tribunal, in line with the decisions of the Hon'ble Delhi High Court and the ITAT benches, ruled that the assessee was not liable to deduct tax on the purchase of footwear with the logo "Khadim." The Tribunal allowed the assessee's appeal, emphasizing that the transactions were for the sale of goods and did not constitute a works contract under Section 194C of the Income Tax Act.

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