TaxTMI 
TaxTMI 
2015 (6) TMI 8
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....ase 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 by the parties and hence, for convenience, are being reproduced below :- "The assessee grants to PHL a licens....
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....moulds [hereinafter referred to as 'machines'] for a consideration of Rest. 2.86 cores on behalf of, and upon receiving instructions from the Assessee. * These machines were installed in the manufacturing facility of PHL and the machines were used by PHL for manufacturing the products during the FY 1997-98 and 1998-99 [relevant to AY 1998-99 and AY 1999-2000]. * Thereafter, the Assessee decided to import the products which were manufactured by those machines, hence the machines are not actually used in the subsequent financial years. * During the FY 1998-99 [relevant to AY 1999-2000], the Assessee charged off an amount of Rs. 20,625,000 in its profit and loss account as additional depreciation towards obsolescence of machin....
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....f the Act is not attracted without taking into consideration that the technical know-how for manufacture of the products was provided by the assessee to M/s. Nicolas Piramal India Ltd., and M/s. Nicolas was only a manufacturing agent and recorded a perverse finding? 2. Whether on the facts and in the circumstances of the present case the appellate authorities failed to take into consideration that the transaction between the assessee and M/s. Nicolas Piramal India Ltd., is not a sale transaction but it's a contract manufacturing attracting provisions of section 194C of the Act?" 4. We have heard Sri. K.V. Aravind, learned counsel appearing for the appellant as well as Sri. T. Suryanarayana, learned counsel appearing for the assess....
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....ow, 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....
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....upplied by the assessee to the manufacturer and hence it would be a 'contract for work' and not merely a 'contract for sale' as the main 'material' was the 'know how' which was supplied by the assessee. What is relevant is that the aforesaid explanation provides for using of material purchased from the customer. Although 'know how' is not a 'material', but even if 'know how' is taken as a 'material' supplied by the assessee, there has to be a finding to the effect that the said 'know how' (material) was purchased by the manufacturer from the assessee. In the present case, there is a specific admission made by the appellant in the grounds raised by it before the Tribunal....
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.... 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 assessee therein would be one which fits into the definition and the situation contemplated under Section 194C of the Act. 11. The facts of the aforesaid case are thus different from the one in hand. Even otherwise, the aforesaid case relates to the Assessment Year 1997-98, when the said explanation in Section 194C was not there. Section 194C was substituted by Finance Act No.2 of 2009 with effect from 1.10.2009. Prior to the said amendment the explanation, as referred to above, was not there in Section 194C. As such also, the said judgment in the case of NovaNord....