TaxTMI 
TaxTMI 
2024 (4) TMI 267
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....16.08.2021 in W.P.(C) No.35140 of 2021 by the Assistant Commissioner of Income Tax, Circle TDS, Bhubaneswar under Section 197 of the Income Tax Act, 1961 (hereinafter referred to as "the Act" for brevity) to the buyer, Hindustan Unilever Limited. In Certificate No.1AC0821ROW issued on 16.08.2021 the rate of collection of TDS on all sales effected by the Petitioner/ Company was fixed at 1.20% and in Certificate No.1AB08200820IRE issued on 07.08.2020 the rate of collection of TDS on all sales effected by the Petitioner/ Company was fixed at 1.25%. The Petitioner also seeks a direction from this Court to the Assistant Commissioner of Income Tax, Circle TDS, Bhubaneswar to issue a Certificate under Section 197 read with Section 206(C)(9) of the Act to the Hindustan Unilever Limited for NIL Tax Deduction at Source (TDS) on all sales effected by the Petitioner/ Company. The Petitioner has also made a prayer in W.P.(C) No.30312 of 2020 to quash the order dated 28.10.2020 rejecting the application filed by the Petitioner/ Company for issuance of Certificate to reduce the rate of collection during the credit of the sale proceeds to its account. I. FACTUAL MATRIX OF THE CASE: 3. The facts....
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....g to the requirement or specification of a customer by using material purchased from such customer is included within the definition of 'work'. It is further provided that in such a case TDS shall be deducted on the invoice value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. Where the material component has not been separately mentioned in the invoice, TDS shall be deducted on the whole of the invoice value." II. PETITIONER'S SUBMISSIONS: 7. Learned counsel for the Petitioner earnestly made the following submissions in support of his contentions: 8. In view of the Explanatory Notes to the provisions of the Finance (No. 2) Act, 2009, as issued in Circular No. 05/2010 F.No. 142/13/2010-SO (TPL), Government of India, Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) on 03.06.2010, it is hereby clear that the case of the Petitioner Company does not fall within the purview of the definition of 'Work', as the Petitioner Company procured raw materials along with other packing materials at its own cost from different Suppliers with separate invoices raised on its own name. It p....
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.... in pursuance of such arbitrary deduction of tax at source by M/s. Hindustan Unilever Ltd., filed an application under Form 13 (Application by a person for a Certificate Under section 197 and/ or 206 C (9) of the Income Tax Act, 1961, for no deduction/ collection of tax or for the deduction/ collection of tax at a lower rate), before the Opposite Party No. 3, Assessing Officer, Income Tax Department on 03.07.2019, for the issuance of a Certificate to the Opposite Party No. 4, M/s. Hindustan Unilever Ltd., certifying the fact that the Petitioner Company is entitled to 'NIL' deduction of Income Tax (TDS) at the time of payment of Credit to it by the Opposite Party No. 4 as the Petitioner Company had not entered into a 'Works Contract', but only into a 'Contract for Sale' with the Buyer M/s. Hindustan Unilever Ltd. for the manufacture and sale of finished products. 13. On receipt of the aforesaid Application dated 03.07.2019 under Form 13 the Opposite Party No. 3, Assistant Commissioner of Income Tax (ACIT), Circle TDS Bhubaneswar, on 06.08.2019 issued a Certificate Under section 197 of the Income Tax Act, 1961, certifying that a tax deduction of 0.30% is to b....
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....come Tax Act, 1961, at the rate of 0.10% instead of 1.25% by the OP No. 4. 17. Even though the Petitioner Company in the said Letter sought a reply from the Income Tax Authority as to the reason for such sudden enhancement in the percentage of TDS it failed to elicit any response. 18. Challenging the said illegal, unreasonable, malafide and arbitrary action of the Opposite Party Authorities, the Petitioner Company preferred a Writ Application before this Court in W.P.(C) No. 30312/2020, which is pending before this Court. 19. During such period of pendency of the previous Writ Application before this Court, the Opposite Party No. 4 kept collecting TDS at the rate of 1.25% on all Sales effected by the Petitioner Company, on the basis of the Certificate dated 07.08.2020, which clearly stipulated that the said Rate of Collection of Tax @1.25% would remain valid for the period between 07.08.2020 and 31.03.2021. 20. Pursuant to such arbitrary and continued collection of TDS at the rate of 1.25%, the Petitioner Company filed a fresh application before the Opposite Party No. 3, Assessing Officer, Income Tax Department, vide Application dated 30.06.2021 under Form 13 requesting 'NI....
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....he process of such procurement, the Petitioner Manufacturing Company procured one raw material from a Unit of the Buyer Company in an independent commercial transaction with a separate invoice raised in its name on the same, and after the manufacture, processing and packaging as per the stipulations given by the Buyer Company, delivered the possession of such products to the buyer. 26. The supply of outsourced manufactured goods constitutes an outright sale and cannot be treated as Contract of Works within the scope of Section 194C of the Income Tax Act, 1961 and, therefore the present contract being such, it id out of the purview of Section 194C of the Income Tax Act, 1961. 27. The Agreement entered into between the Petitioner and the Opposite Part No. 4 Company amounted to a 'Sale and Purchase Agreement'/ and was clearly out of the purview of a 'Works Contract' for reasons specified above, it is hereby submitted that the Petitioner was never liable to any deduction in the form of TDS and has already been harassed enough in the hands of the Opposite Party Authorities who are wrongfully collecting TDS from all the Sales effected by the Petitioner Company. III. SUBMISSION OF OPPO....
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....HUL does not fall under Section 194C completely lies with the assessee. It is further stated that the assessee is required to provide sufficient documents in support of the transaction that it is not a contract under the meaning of Section 194C of the Act, rather it is a contract for sale and falls under Circular no. 05/2010 issued by the CBDT. g. As per the agreement entered into between the assessee and HUL, whether the materials used in manufacturing the products sold to HUL cannot be assessed and/ or judged from the reading/ analysis of the agreement. The views in respect to purchase of materials can be assessed only from the verification of purchase invoices and books of accounts and confirmation from the HUL. In most of the points including point no. 5.1 (as per the purchase agreement made by the HUL and the Petitioner) it has been expressly noted that the assessee can purchase materials from HUL. In absence of adequate information relating to purchase, it cannot be ascertained whether the entire purchase was made directly from the third party or from HUL. h. Based on the Departmental analysis the rate of deduction has been derived and accordingly approval has been give....
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.... the Opposite Party No. 4 will be required to deduct Tax Deductible at Source during FY 2020-21 at the rate of 1.25% under Section 194-C of the Income-Tax Act, 1961 on its transactions with the Petitioner up to a maximum value of INR 404.73 Crores. e. The Petitioner again furnished a copy of the lower tax deduction certificate No. 1AC0821ROW dated 16.08.2021 issued to it by the Opposite Party No. 1 under Section 197 of the Income Tax Act, 1961 certifying that the Opposite Party No. 4 will be required to deduct tax at source for FY 2021-22 at the rate of 1.20% under Section 194-C of the Income-Tax Act, 1961 on its transactions with the Petitioner for a maximum value of INR 407.43 Crores. f. The Opposite Party No.4 in compliance with the certificates dated 06.08.2019 for the FY 2019-20, 07.08.2020 for the FY 2020-2021, and 16.08.2021 for the FY 2021-2022 has deducted Tax Deductible at Source at the rates prescribed in the certificates issued by the Opposite Party No.1 on all the invoices issued by the Petitioner as against the sales effected under the Purchasing Agreement. The Opposite Party No. 4 submits that a Chartered Accountant has also certified that: (a). the Opposite....
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....#39;. It is further provided that in such a case TDS shall be deducted on the invoice value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. here the material component has not been separately mentioned in the invoice, TDS shall be deducted on the whole of the invoice value." 32. The onus of proving the transactions between the assessee and the HUL that it does not fall under section 194C completely lies with the assessee. He is required to provide sufficient documents in support of the transaction that it is not a contract under the meaning of section 194C of the Act, rather it is a contract for sale and falls under circular no.05/2010 issued by the CBDT. 33. As per the purchase agreement entered into between the assessee and HUL, whether the materials used in manufacturing the products sold to HUL cannot be assessed and/or judged from the reading/ analysis of the agreement. The views in respect to purchase of materials can be only assessed from the verification of purchase invoices and books of accounts and confirmation from the HUL. 34. Moreover, in most of the points including point no. 5.1 (as per the purcha....