TaxTMI 
TaxTMI 
TaxTMI 
2000 (11) TMI 1226
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....at appeals are delayed by 108 days. But in reply, learned counsel for the assessee put the facts straight and argued that there was no such delay and this confusion has arisen because of some typographical error crept in the particulars mentioned in Form No. 36. It is seen that the order of the learned CIT(A) was dated 23rd Oct., 1998, whereas the present appeal as per the nothing made on Form No. 36 was filed on 24th Dec., 1998. Therefore, there was no delay in filing the appeals, as was made out on the basis of nothing of the Registry. 4. Before the issue is dealt by us, it is necessary for us to record the facts of the present case as are borne out from the assessment order, order of the learned CIT(A) and the facts as stated before us. Assessee-Andhra Pradesh State Road Transport Corporation, is a corporation established under the state enactment. The assessee is in the business of providing transport services to the public in the state and for that purpose, it owns fleet of buses. It purchases chassis and after the purchase of chassis hands over the same to the fabricators for constructing the body building upon the chassis. 5. During the course of inspection, it came to the....
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....o contracts with bus body builder was to purchase bus bodies constructed and fitted on the chassis supplied. He further argued that the dominant objective and intention of the parties have to be seen, which are embedded in an agreement. According to him, the dominant objective and intention of the appellant was to purchase bus bodies and, therefore, the transactions entered into were the transactions of purchase and sale simplicitor. He drew our attention to p. 4 of the learned CIT(A)'s order where the caption has been mentioned. He argued that merely because certain specifications were given to the seller as to the number of seats, quality of seats and other material, the transaction does not lose its basic character, which was purchase and sale in the instant case. Learned counsel for the assessee argued that learned CIT(A) was not justified in distinguishing the case of PS & Co. 56 STC 282 cited before him, as it covers the case of the assessee and moreover, this case was approved by the Hon'ble Supreme Court, in the case reported in 119 STC 533. He further submitted that the case Sentinel Rolling Shutters, relied upon by learned CIT(A) was not applicable to his case, as analogy....
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....uilders 38 STC 176 and Sentinel Rolling Shutters & Engg. Co. (P.) Ltd. v. CST 42 STC 409. He further relied upon the decision of the Hon'ble Madras High Court in the case of Kumdum Publications (P.) Ltd. v. CIT [1991] 188 ITR 84 (Mad.). Therefore, he vehemently pleaded that there was no infirmity in the orders passed by the authorities below and, therefore, their orders were prayed to be upheld. 9. In reply, learned counsel for the assessee submitted that the decisions relied upon by learned Senior Departmental Representative in the case of Kailash Engineering Company (supra) and other cases were considered by Hon'ble Supreme Court and distinguished by the apex Court in the subsequent decision rendered by it in the case of Hindustan Shipyard Ltd. v. State of Andhra Pradesh 119 STC 33. Therefore, the decisions relied upon by learned Senior Departmental Representative were not relevant to the case at hand. In respect of the point of time when the property in the bus bodies passed, it was submitted by him that during the construction period of the bus bodies on the chassis, the property remained vested with the fabricators only and has not transferred before the time of sale. He furt....
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....shed at [1993] 114 CTR (St.) 62] in para 5.3. But one thing which is certain and on which there could be no dispute from either of the parties is that, if a transaction can be termed as a contract for sale, that transaction can at least not be treated as "work". This position was admitted by the CBDT also, in the context of section 194C itself it its Circular No. 86, dated 29th May, 1972, reported at 84 ITR 99 (St.). 12. Therefore, we will have to examine as to whether the contract entered into by the appellant-corporation with the fabricators, a company of which was supplied to learned CIT(A) and quoted by him in his impugned order is essentially a contract for a sale or is a contract for work. If it is former, it can safely be concluded that the provisions of section 194C would not be attracted to the appellant-corporation and in case it falls within the latter category, appellant-corporation would well be within the clutches of the provisions of section 194C. 13. Admittedly, it is not an easy task to distinguish between the contracts of sale and the contracts of work because the distinction between the two types of contracts is very thin and the Courts have faced tre....
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....ds. While the third type is contract for sale where the goods are sold as chattels and some work is undoubtedly done, but it is done merely as incidental to the sale. Similarly, observations of the Hon'ble Supreme Court in the case of Hindustan Shipyard Ltd. v. State of Andhra Pradesh 110 STC 533 are also guideposts in this regard, relevant portion of which is extracted below: "Transfer of property in goods for a price is the linchpin of the definition of "sale". Whether a particular contract is one for sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of the contract, the circumstances of the transaction and custom of the trade. It is the substance of the contract document(s), and not merely the form, which has to be looked into. The Court may form an opinion that the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale. If the primary object of the contract is the carrying out of work by bestowal of labour and services and materials are incidental....
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....al in a particular contract and yet certain clinching terms in a given case may fortify the conclusion one way or the other. All that will depend upon the facts and circumstances of each case. This question to be answered, is not an easy and has perplexed the jurists all over. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of the property in and the delivery of the possession of a chattel as a chattel to the buyer. Where the dominant 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. The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale, neither the ownership of materials is conclusive although such factors may be relevant and be taken into consideration in ascertaining and determining whether the contract in question is in pith and substance a contract for work and labour or one for the sale of chattel. These principles have enunciated and culled out from Halsbury Laws of England, 3rd Edn., Vol. 34, 6-7. 15. In the case before us, after careful co....
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....in bus body building or in the bus body itself unless these were delivered to the appellant and approved by the appellant for final use. Property in the bus bodies was to pass on acceptance of bus bodies by the appellant. Purchase of any item which is constructed as per agreed specifications would involve labour and skill but these two elements by themselves alone are not enough to turn the transaction of sale into transaction of "work". Object and end result of the entire process through which that transaction passes shall be looked into. In the case before us, we are of the considered view in the backdrop of the object and end-result of the contract, that it was a contract of sale ultimately and finally. In fact, the issue which is involved in the present case came to be considered by Hon'ble Madras High Court in the case of City Motor Services (P.) Ltd. v. State of Madras, wherein interestingly the assessee sought to claim that the bus body building activity was a "works contract", on which sales-tax was not leviable. Therefore, Hon'ble High Court of the State of Madras considered the issue whether the work of the building body constituted the contract of sal....
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....TC 364, in which Hon'ble Supreme Court held that the bus body constructed by the fabricator was sale and was not "works contract". Circumstances considered and relied upon in above cases for holding that the transaction amounted to a sale and not to "works contract", we find, do exist in the case before us also as is clear from the salient features of the contract mentioned earlier and from the discussion and findings in the preceding paragraphs. Therefore, the contract entered into by the appellant-corporation with its fabrications in the instant case, was the contract of sale upon which the provisions of section 194C were not applicable. 17. Our attention was drawn by learned Senior Departmental Representative to the words "work" appearing in the impugned contract. But mere use of the words "work" alone cannot determine the true character of a transaction covered by that contract. On the basis of covenants of the said contract and by reading the contract as a whole if conclusion emerges that it was contract of sale, use of words "works" here and there do not matter. Substance of the contract has to be seen and not the form or cer....