TaxTMI 
TaxTMI 
2011 (7) TMI 400
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....n the circumstances of the case Ld.CIT(A) erred in observing that the A.O. should not repeat such mistake in future without going through the detailed findings recorded by the A.O. in order u/s 201(1)/201(1A) holding that the assessee deductor was liable for deduction of TDS on the payments made for purchase of printing plastic pouches from the parties. 4. On the facts and in the circumstances of the case Ld.CIT(A) erred in not considering the Board Circular no.715 dt. 18.8.95 wherein it has been clarified that TDS u/s 194C is applicable on the payments for purchase of packing/printed materials." 3. The short issue which falls for our consideration in the departmental appeal is whether payment received for printing on the pouches the name, logo, contents, weight etc. as per assessee's specifications would amount to 'contract of sale' and thus outside the ambit of S.194C or would this actively be considered as a 'contract of work' for which tax deduction at source was necessary. A perusal of the record shows that the assessee company is a manufacturer of tobacco khaini and was incorporated in 1999-2000. The assessee was subjected to a survey u/s 133A of the Income Ta....
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.... assessee company and could not have been used for any other concern. This clearly indicates that assessee company's payments for the purchase of packaging material were covered u/s 194-C. As far as the assesee's reliance upon the decision of the Hon'ble Bombay High Court, in the case of BDA Ltd. is concerned, it is stated with due deference that the department has not accepted the same and a Special Leave Petition filed before the Hon'ble Supreme Court which is pending adjudication. In view of the above the assessee is held to be a defaulter in terms of the provision of section 194-C for not deducting TDS on its payments towards the purchase of packaging/printed material as per its own specifications. Penalty proceedings u/s 271-C are being referred separately to the ACIT, Range 50, New Delhi for the above said default. With these remarks the total tax liability of the assessee company is worked out as under. F.Y. 2005-06 TDS Amount Interest u/s 201(1A) Rs. 196540/- Rs. 30929/- F.Y. 2006-07 TDS Amount Interest u/s 201(1A) Rs. 223783/- Rs. 10136/- Total : Less: Paid Rs. 461388/- Rs. 461389/- Balance Tax Liability Nil Nil 5. Aggrieved by this the a....
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.... assessee's company purchased printed packaging material as per its specifications from the independent parties. Before the purchase of the goods the property in the goods did not belong to the assessee. Only after delivery the right to use comes into operation and the property passes to the assessee. It was contended that the manufacturers/suppliers were independent entities manufacturing the articles. Accordingly it was a clear contract for sale and not a contract for work on which it was stated no TDS is deductible. 10. Considering these submissions the CIT(A) held that there is no need for TDS on payments for purchase of raw materials/packing materials Sale of Goods Act is applicable. The A.O. was directed to refund the TDS amount with interest as per law. 11. Aggrieved by this the Revenue is in appeal before the Tribunal. 12. Ld.D.R. relying upon the order of the ITO submitted that these pouches were printed specifically at the behest of the assessee mentioning therein the contents, weight and price etc. as per assesee's specifications. As such this was a case of contract for work. Merely because the sale of these pouches was subjected to sales tax etc.....
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....deals with payment to contractors reads as under. Hence we are concerned with Explanation (iv) to the said Section. Payment to Contractors: 194C. (1) Any person responsible for paying any sum to any resident (hereafter 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 by 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 the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family of such sum as income-tax on income comprised therein. (2) x x x x x (3) x x x x x (4) x x x x x (5) x x x x x (6) x x x x x (7) x x x x x Explanation:- For the purpose of this section,- (i) xxxxxxxxx ....
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....e a delicate and confidential type of work and the price paid for supplying such printed question papers or printed material entails primarily the confidence and secondly the skill and to a very small extent the material. In the facts where corrugated boxes were made at the specification of the assessee the necessary display etc. their Lordships were of the view that it is nobody's case that the printing of the labels on the corrugated boxes require any special skill or involve any confidence or secrecy. 17. It may not be out of place here to refer to the order of the Coordinate Bench in the case of ITO vs. Dr.Willmar Schwabe India P.Ltd. 95 TTJ (Del) 53 : wherein the Coordinate Bench was seized of the facts where the assessee who was a private limited company engaged in the business of manufacture and distribution of homeopathic and herbal medicines required bottles, caps, labels and other packing materials for packing of the medicines which were purchased from various suppliers as per assesee's own specifications. The suppliers were found to be paying excise duty and also sales tax. The Tribunal concluded that the ownership in the said material was entirely with the conce....