2012 (8) TMI 981

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....to one Smt. B. Poorna. Since no tax was deducted at source in accordance with the provisions of section 194I, the AO disallowed the expenditure u/s 40(a)(ia) of the Act. 3. Further, in the course of assessment proceedings, the assessee was asked to file the details of the sundry creditors. The AO noticed that an amount of Rs. 15,47,378/- was outstanding to one M/s Surya Graphics, Hyderabad, against the total bill amount of Rs. 25,47,378/-. It was stated that M/s Surya Graphics had done the printing work of text book solutions and audio visual solutions for the assessee company. The AR of the assessee submitted a letter from M/s Surya Graphics confirming the outstanding balance of Rs. 15,47,378/- along with a copy of the tax invoice issue....

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....rected the AO to verify as to how much of the total rent payments of Rs. 145,200/- had remained 'payable' as on 31/03/2007 and restrict the disallowance u/s 40(a)(ia) to that extent only. 5. As regards the disallowance of Rs. 25,47,378/- on account of payment to M/s Surya Graphics, the learned AR of the assessee before the CIT(A) submitted that during the year the assessee had got printed some of its educational material and audio visual solution CDs through M/s Surya Graphics. It was submitted that M/s Surya Graphics had supplied the books and other material by raising invoices, which included sales tax @ 4% on such sales/supplies made, which duly indicated that the transaction is purely a purchase transaction by the assessee an....

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....actured the articles in its own establishment and finally after bringing the goods in a saleable form the same were sold to the appellant by raising invoices, wherein sales tax was also charged and thereby the property in the articles as a whole passed on to the appellant. Under the circumstances, it is to be held that the appellant's transaction with M/s Surya Graphics were in the nature of purchase transaction, which at best can be considered as a contract for sale and not a contract for work so as to attract the provisions of section 194C. In view of the above discussion, therefore, the addition of Rs. 25,47,578 is also deleted." 6. Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds ....