AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 63
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....A) has erred in deleting the disallowance of sales promotion of Rs. 88,85,919/- & selling expenses of Rs. 4,19,23,214/- though the assessee failed to produce any details such as address, PAN etc., of the payee. 3. Whether Ld. CIT(A) is correct in deleting the disallowance of sales promotion of Rs. 88,85,919/- & selling expenses of Rs. 4,19,23,214/- without appreciating the fact that on the both the expenses, tax was liable to be deducted at source which the assessee failed to do while making such payment under provisions of section 40(a)(ia)? Mr. Niraaj Kumar, Ld. CIT-DR appearing on behalf of Revenue and Sri Somnath Banerjee, Ld. Advocate appearing on behalf of assessee. 2. First issue raised by Revenue in this appeal is that Ld. CIT(A) has erred in deleting the disallowance of expenses for an amount of Rs. 4,04,12,991/- towards packing material expenses in the form of job charges paid without deduction of Tax under section 194C of the Act. 3 Briefly stated facts are that assessee is a Limited Company and is into the business of manufacturer of coconut oil, spices, mustered oil and grocery items. The assessee-company does its business through a network of distributorship thr....
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....igh court, CIT Vs. Dabur India Ltd. reported in 283 ITR 197(Delhi) the Hon'ble Delhi High court etc. Aggrieved, Revenue preferred appeal before the Tribunal. 4. We have heard rival contentions and perused the materials available on record. Before us Ld. DR supported the order of AO and cited the case lawState of Maharashtra v. Sarvodya Printing Press Fine Art (1999) 9 SCC 65 wherein it was held that supply of printed material was a works contract. Whereas Ld. AR submitted that the circular No. 681 dated 08.03.1994 in the contest of Sec. 194C of the Act, wherein in terms of clause(b) of sub-clause (6) of clause (7) it is mentioned that where, however, the contractor undertakes to supply any article or thing fabricated according to specification given by the Government or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this Section. 5. After careful consideration and examination of the submissions made by both the parties. The Ld. AR of the assessee has submitted two paper books running into pages f....
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....-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 as "work contract". Hence, the provisions of section 194C were not applicable." The Similar view was taken by the Hon.ble Delhi High Court in the case of Dabur India Limited (supra) and head note reads as under:- "Deduction of Tax At Source - Deduction from payment to contractor - Sale or Works Contract - Agreement for supply of corrugated boxes with labels printed on them - agreement for sale - Section 194C Not Applicable - Income Tax Act, 1961." In the case of Tuareg Marketing Pvt. Ltd. Vs ACIT reported in 122 TTJ 343 (Delhi) it was held by the Hon'ble ITAT has held as under:- "In the case of Tuareg marketing Pvt. Ltd. Vs. ACIT reported in 122 TTJ 343 (Delhi) it was held by the Hon'ble ITAT, Delhi that where the manufacturing activity was carried out at the risk of contract manufacturer or supplier, the manufacturer purchased required raw material on his own and purchases the goods as per specifications of the assessee buyer, the ownership of the goods passes from the manufact....
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....the expenses 2) violation of section 40(a)(ia) viz a viz section 194C of the Act, Consequently stating that Ld. CIT(A) has erred in deleting the disallowance made by the AO. In this case AO has found that assessee has debited a sum of Rs. 4,19,23,214/- as selling expenses and Rs. 88,85,919/- of sale promotion expenses under head 'selling and distribution of Rs. 24,38,51,825/- as per Schedule-17 forming part of the profit and loss account for the year ended 31stMarch, 2008. Firstly we take up the matter of the genuineness of the expenses claimed by the assessee. The AO calls upon assessee to explain the said transaction. Before AO Ld. AR stated that these expenses are kinds of incentive to promote sale by the distributors. In this connection the assessee has merely provided names along with amount of incentive given to various parties. The assessee could not provide any base for the payment incentive. On what basis these selling expenses are paid to the distributors and what is target fixed for achieving sales. Hence the AO has disallowed the expenses for not getting the satisfactory reply from the assessee and recorded the following reasons for the disallowance:- 1) Genuineness ....
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....ee. The AO has also cited various case laws in support of his claim. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Before Ld. CIT(A) Ld. AR of the assessee demonstrated that all the requisite details such two paper book, company circular for the working of incentives, distributors-name-address-VAT etc., as desired by the AO time to time were submitted. In relation to incentives to the distributors, there was no financial transaction between the parties but only credit notes were provided to such distributors who achieved the target which they can redeem against future purchases. There was no transaction between the parties of principal and agent but all the transaction were of principal to principal basis. The distributor makes full payment upfront for the value of invoice raised for the sale of appellant products. The appellant does not take back the unsold stock of its product. On the basis of aforesaid discussions the CIT(A) has directed the AO to delete the addition made by him. Aggrieved, Revenue is in appeal before us. 8. We have the heard the rival parties and perused the materials available on record. The Ld DR has submitted that the distributors to whom the t....