TaxTMI 
TaxTMI 
2025 (1) TMI 1730
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....nsent of the parties we considered it appropriate to dispose by this consolidated order. 3. The grounds of the appeal filed by revenue are as under :- "1. Whether On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in facts and circumstances in deleting the addition of Rs. 1,84,16,722/- made by the assessing officer u/s 40(a)(ia) on account of failure of the assessee to deduct TDS on purchase of packing material as the purchase of specific packing material is covered within the meaning of contract and TDS u/s 194C was required to be deducted by the assessee. 2. Whether On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate the specific finding given by the assessing officer regarding the nature of transaction as The transaction is in the nature of work contract because specific packaging material is being supplied as per the specification given by the assessee and the work is carried out by the third parties at a fixed rate as per the tender passed by RCDF (Rajasthan Cooperative Dairy Federation) which is liable to be treated as work contract for the purpose of deduction as per se....
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....allowance for such default was further asked to submit certain details related to packaging material which has been alleged to be a 'regular purchase' by assessee vide notice u/s.142(1) dated 10/03/2021, in response to which the assessee furnished its response vide letter dated 16/03/2021. 5.2 From the careful perusal of assessee's response, and submissions with the details on record, ld. AO noted that the assessee in its defense for not deducting TDS in relation to the procurement of packaging materials/items has consistently furnished completely untenable justifications. According to the assessee who is a renowned manufacturer of myriads of dairy products like milk, ghee, butter milk, paneer, rasgullas and other sweets etc., it has not deducted TDS on transactions pertaining to procurement of packaging materials/items, because, according to assessee such procurement does not involve any work component rather it is just another mundane over the counter like purchase of goods/items for the assessee, and as such the liability to deduct TDS does not arise. Further the assessee in support of his claim has provided copies of certain sample invoices, a confirmation letter....
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....of particular kind which would have various details printed on them ranging from ingredients to that of firm's name and logo etc., also having specific dimensions, size and nature there can only be two logical possible ways. First, either to have self owned dedicated units and machineries manufacturing and labelling such packaging and storing materials or second, to procure the same from various vendors as per the specific needs and requirements of the firm. The assessee being involved in business of 'manufacturing and supplying' dairy products, rules out the first possibility which invariably leaves out the second one, which in turn, because of the kind of nature of assessee's business and the packaging materials / items / containers needed by the assessee, can only be met out in a certain defined manner which is nothing but, contractual procurement involving a dedicated job to be carried out under certain agreement / arrangement to fulfill the tailor made requirements and needs pertaining to specifications/parameters etc. Thus, ld. AO observed that involvement of work component cannot be ruled out, consequently these kinds of transactions definitely attracts the p....
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....her documents, it is seen that the appeal has been preferred against the order u/s 143(3) rws 144B of the IT Act, 1961 dated 22-04-2021. The said appeal was filed by the assessee company on 02.09.2021 resulting in delay of 130 Days. The appellant has requested to condone the delay. The same is condoned and appeal is admitted. Ground No. 1 "The Ld AO has erred on facts and in law in holding that the assessee has defaulted in non-deduction of TDS u/s 194C on payment made for purchase of packing material and disallowances was made ignoring the facts that some direct purchases were made without contract and for some purchases contract entered by the assessee for supply of goods not for carrying out of any work and such contract does not fall in the definition of WORK as specified in clause (iv) of the explanation to section 194C of the Income Tax Act, 1961. Further sufficient opportunity was also not provided to produce form no 26A though in tough time wherein various offices were closed due to covid-19." At the outset, it is pertinent to note that, in the instant case, the assessee is a cooperative society and engaged, interalia, in the business of manufactu....
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....d "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice, or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income- tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed [thirty] thousand rupees: Provided that where the aggrega....
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....he preceding sub-clauses; and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor, (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE: (iii) "contract" shall include sub-contract; (iv) "work" shall include- (a) advertising; (b) broadcasting and telecasting including for such broadcasting or telecasting; production of programmes (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.]" Thus, from the perusal of the above section, it is clear and evident that the definition of the work has been sp....
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.... Assessing officer in the assessment order. From the perusal of the said order, it is seen that the Assessing officer had vide various notices asked for the details and documents pertaining to the said deduction claimed by the assessee company. However, no response was submitted by the assessee at the time of hearing. "However, at the time of the appeal, assessee has submitted certain documents pertaining to dividend received from RCDF (Rajasthan Co-operative Dairy Federation Limited). Since, the said documents could not be furnished by the assessee before the Assessing Officer and the same is being submitted before the appellate state, being additional evidences as per Rule 46A of the IT Rules, 1962, as the assessee has not submitted or bought on record sufficient circumstances or causes from producing the said evidences before the assessing officer. Furthermore, the assessee has not submitted any other details and documents like bank Statement, balance sheet in order to substantiate the said receipt of the dividend. Considering the submission made and after perusal of the documents submitted and taking into account the entire conspectus of this case, the said grounds of ....
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....d notice u/s 142(1) dt. 10.03.2021 in response to which assessee filed the reply on 16.03.2021 (PB 13) stating that as per section 194C of IT Act, TDS should be deducted wherein work component is there in the contract but for purchasing packing material no work was involved and all the purchases were made as goods, therefore question of tax deduction does not arise. 3. The AO, however held that the kind of business assessee is involved requires not only procurement of ready to use containers/tins/plastic boxes/plastic bags etc. to pack and store the dairy products ready for sale, but also it requires those packaging containers/materials to have on them embossed the logo/mark of the brand name and other relevant necessary details like packaging/manufacturing, expiry date, logo/hallmark/ingredients etc., at the same time such packaging materials should also meet certain specific criterias and specifications with respect to their size, dimensions and also with respect to the kind of material used to manufacture those containers for perishable dairy and other dairy related products. Now such purchases of packing materials cannot be of the nature of everyday over the counter pu....
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....able on sale of products. Merely because the assessee's name/logo is being printed on the packing material, the contract cannot be termed as a works contract. The other details mentioned in the packaging material like date of packaging/manufacturing, expiry date, ingredients, etc. are to comply with the statutory requirements under the relevant laws. These requirements are not specific to the assessee but as per the statutory and industry regulations. Thus, the purchase of packing material by the assessee is on principal-to-principal basis and is not a contract for carrying out of work rather is a contract for sale outside the purview of section 194C of the IT Act, 1961. 2. Reliance in this connection is placed on the following case laws:- ITO Vs. Millan Dairy Foods (P) Ltd.(2005) 24 CCH 616 (Del.) (Trib.) The assessee is a private limited company engaged in the business of milk and milk products. It purchases, as packaging material, poly film, tins and containers from various manufacturers/suppliers. It was under the bona fide belief that the purchase of packaging material was purely a purchase contract and that no deduction of tax at source was to be made on pay....
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....the statutory requirements under the relevant laws. These requirements are not specific to the assessee, being as per the statutory and industry/regulations. Thus, the transactions between the manufacturers and the assessee are transactions of sale and purchase on a principal to principal basis. Hon'ble Supreme Court in Hindustan Shipyard Ltd. vs. State of Andhra Pradesh (2000) 119 STC 3533 (SC) has held that production of goods as per the specifications prescribed by the buyer is not the conclusive determining factor as to the true nature of the transaction. So, the customization of the packing material supplied in accordance with the specifications laid down by the assessee, would not make the transaction into a transaction of contract. Hence assessee is not required to deduct any tax at source. Bangalore District Co-operative Milk Producers Societies Union Ltd. Vs. ITO (2006) 25 CCH 380 (Bang.) (Trib.) The appellant is a registered co-operative society dealing in milk and milk-products. For the relevant assessment years, the appellant had made purchases of packing material from successful bidders on tenders issued by the Karnataka Co-operative Milk Producers' F....
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....s to supply any article or thing fabricated according to the specifications given by 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 sec. 194C. Hence the assessee having procured packing material from various suppliers as per its specification, it was a case of purchase of material and not a payment towards works contract. Accordingly the assessee was not required to deduct tax at source u/s 194C. ITO Vs. Mother Dairy Food Processing Ltd. (2011) 7 ITR 0016 (Delhi) (Trib.) Assessee is not liable for TDS u/s 194C in respect of purchase of printed packing materials from various suppliers which are transactions of purchase and sale of goods and not contract for supply. Such contract is outside the purview of sec. 194C. Hero Moto Corp. Ltd. Vs. ACIT (2013) 91 DTR 1 (Del) (Trib.) Vendors, who are independent legal entities with their own manufacturing establishments, employing huge labour, utilize the raw materials purchased for producing customized finished....
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....tion. Facts& Submission:- 1. During the year assessee has claimed deduction of Rs. 15,91,846/- u/s 80P(2)(d) of the Act. The AO disallowed the same by holding that deduction u/s 80P(2)(d) is available to a cooperative society but assessee is a firm involved in the business of dairy and associated products. 2. The Ld. CIT(A) held that the assessee has submitted the copy of certificate dated 02.09.1972 regarding the formation of co-operative society. Hence, the status of the assessee should be co-operative instead of firms. However, he confirmed the disallowance of deduction of Rs. 15,91,846/- u/s 80P(2)(d) by holding that the AO vide various notices asked for the details and documents pertaining to the said deduction claimed by the assessee company. However, no response was submitted by the assessee at the time of hearing. At the time of the appeal, assessee has submitted certain documents pertaining to dividend received from RCDF. Since the said documents could not be furnished by the assessee before AO and the same is being submitted before the appellate state, being additional evidences as per Rule 46A of the IT Rules, 1962, as the assessee has not subm....
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.... assessee has not submitted the details is against the facts on record. On the contrary ld. CIT(A) also noted that the assessee filed certain documents which were not furnished before the ld. AO and therefore, he confirmed the addition. We not that the assessee was denied the deduction on the count that the assessee was a firm based on the PAN allotted and therefore, the deduction was not denied. The assessee has proved that the assessee is co-operative society and therefore, the deduction based on the evidence merely the PAN is of the firm deduction cannot be denied. 13. We have heard both the parties and perused the materials available on record. Ground no. 1 to 3 raised by the revenue deal with the obligation of the assessee to deduct the TDS on the purchases wherein the product specific details were printed and therefore, that purchases made was considered liable for deducting the TDS as per provision of section 194C of the Act as detailed in the assessment order. When the finding of the Assessing Officer was challenged before the ld. CIT(A) he directed to delete the addition so made on this account by observing as under: Thus, from the perusal of the above section,....
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....hat assessee has not submitted sufficient evidence for claim of said deduction. The bench noted that the assessee vide acknowledgment number 624064761190522 already filed the details of dividend proof, certificate of registration as society. The proof of receipt of the donation as submitted is reproduced herein below : Distribution of Profit as dividend Rs 22109944.94 among the Share Holders (Milk Unions) for the amount/ number of of shares held by the Milk Unions in RCDF as on 31-3-2017 is as under : Name of the Milk Union AMOUNT OF SHARE CAPITAL HELD BY MILK UNION AS ON 31-3-2017 Amt in (Rs) SHAR ES HELD Amount of Dividend in Proportionate to the Shares of the Milk Unions for the year 2016-17 (In Nos) Amt in (Rs) Ajmer 8131000 8131 1876654.36 Alwar 6897000 6897 1591845.58 Banswara 588000 588 135711.00 Barmer 20000 20 4616.00 Bharatpur 1127000 1127 260114.00 Bhilwara 9331000 9331 2153617.00 Bikaner 5521000 5521 1274260.00 Chittoragh 81000 81 18694.00 Churu 1501000 1501 346434.00 Ganganagar 7056000 7056 1628541.00 ....