TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 514
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....nces of Rs. 1,24,700/- made by the Assessing Officer u/s 40(a)(ia) of the IT Act, 1961 on account of expenses relating to advertisement and publicity which are covered under u/s 194C of the IT Act, 1961 as the payments made by the assessee exceed the statutory limit for deduction of tax. 2. We have heard and considered the arguments advanced by the parties in view of orders of the authorities 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 ....
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....y in respect of contract for supply of any article or thing as per prescribed specifications only. Furthermore, Circular No. 93 dated 26/09/1972 read with clarifications of Circular No. 86 dated 29/05/1972 provided that provisions of section 194C were wide enough to cover not only written contract but also oral contract. It is observed that the CBDT vide Circular No. 715 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 provisi....
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....ials were supplied by the appellant to the manufacturer firms. Therefore, supply of printed tobacco packing material was a sale and could not be considered as a 'works contract' and tax was not required to be deducted u/s 194C. Thus the A.O was not justified in placing reliance on the aforesaid Circulars, which are rather in favour of the appellant. The Hon'ble Supreme 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. Reg....
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....levant facts are that the AO noted that an amount of Rs. 1,24,700/- was debited to the profit and loss account under the head publicity and advertisement expenses. He called for the details of those expenses and gathered from there that out of total expenses incurred under the aforesaid head at Rs. 1,24,700/- an amount of Rs. 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 Rs. 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....
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....4C of the Act and the A.O was not justified in disallowing the impugned sum and thereby making addition of Rs. 1,24,000/-. The same is directed to be deleted. Ground No. 1 is allowed." 11. We find that the first appellate order on the issue is comprehensive and reasoned one. We fully concur with 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 Rs. 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 Rs. 50,000/- made by the A.O out of the cl....