M/s. Agarwal Zarda Factory (P) Ltd., Saharanpur V. ACIT, Saharanpur

CO 302/DEL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9373 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM SAMUJH
• Assessee Lawyers: Y KAKKAR
• Section: 194C; 6

Judgement Text

ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESIDEN T AND SHRI I. C. SUDHIR, JUDICIAL MEMBER I.T.A .NO. 3430/DEL/2011 ASSESSMENT YEAR:- (2008-09) ACIT CIRCLE SAHARANPUR (APPELLANT) VS AGARWAL ZARDA FACTORY (P) LTD. 4/654, BOMANJI ROAD SAHARANPUR AABCA1961C (RESPONDENT) C.O. NO. 302/DEL/2011 ASSESSMENT YEAR:- (2008-09) AGARWAL ZARDA FACTORY (P) LTD. 4/654, BOMANJI ROAD SAHARANPUR AABCA1961C (APPELLANT) VS ACIT CIRCLE SAHARANPUR (RESPONDENT) APPELLANT BY MS. Y. KAKKAR, DR RESPONDENT BY SH. RAM SAMUJH, CA ORDER PER I. C. SUDHIR, JM ITA NO. 3430/DEL/2011 THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS:- ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCES OF RS.92 ,73,027/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE I.T ACT, 196 1 ON ACCOUNT OF PACKING MATERIAL AS THE ASSESSEE HAD PROCURED PRINTED MATER IAL FROM THE FIRMS AFTER PROVIDING ITS SPECIFICATIONS OF BRAND, LOGO N AME, COMPANY ADDRESS AND MRP ETC. WHILE THE CIT(A) HAS HIMSELF ACCEPTED THE FACT THAT IT WAS IN THE NATURE OF CONTRACT WHICH INCLUDES JOB WORK A S WELL AS COST OF MATERIAL USED THEREIN. THEREFORE, PROVISIONS OF SE CTION 194C OF THE IT ACT, 1961 ARE ATTRACTED IN THIS CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCES OF RS.1,24,700/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE IT ACT, 1961 ON ACCOUN T OF EXPENSES RELATING TO ADVERTISEMENT AND PUBLICITY WHICH ARE COVERED UN DER U/S 194C OF THE IT ACT, 1961 AS THE PAYMENTS MADE BY THE ASSESSEE E XCEED THE STATUTORY LIMIT FOR DEDUCTION OF TAX. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL A VAILABLE ON RECORD AND THE DECISIONS RELIED UPON. GROUND NO. 1 3. THE RELEVANT FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS GATHERED BY THE AO THAT THE ASSESSEE HAD PROCUR ED PRINTED MATERIAL FROM THE FIRMS AS PER SPECIFICATION PROVIDED BY THE ASSE SSEE. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SALE OF TOBACCO CHEWI NG ETC. THE AO NOTICED THAT IN THE TOBACCO PACKING IT WAS STATUTORY TO PUT THE WARNING AND OTHER SLOGANS AS SPECIFIED BY THE GOVERNMENT OF INDIA. T HE ASSESSEE HAD ALSO OBTAINED THE PACKING MATERIAL INCLUSIVE OF HIS SPEC IFICATION OF BRAND ETC APART FROM OTHER LIKE LOGO, NAME OF THE COMPANY, ADDRESS AND MRP. ETC. ON THE BASIS OF THESE FACTS THE AO INFERRED THAT THE PROVI SIONS OF SECTION 194C OF THE ACT ARE ATTRACTED AND THE ASSESSEE WAS RELIABLE TO DEDUCT TDS ON SUCH PURCHASES ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 3 AND TO DEPOSIT THE TAX IN GOVERNMENT ACCOUNT. THE AO REQUIRED THE ASSESSEE TO FURNISH DETAILS AND ALSO TO EXPLAIN THE REASONS AS WELL IF TDS HAD NOT BEEN MADE ON THE PAYMENT ON THE SAID AMOUNT. THE ASSESSEE EX PLAINED THAT THE PACKING MATERIAL WAS PURCHASED AND THERE WAS NO LIABILITY O F TDS ON THE PURCHASE OF PACKING MATERIAL, HENCE IMPUGNED SUM WAS NOT COVERE D U/S 194C OF THE ACT. THE AO DID NOT AGREE WITH THIS EXPLANATION OF THE A SSESSEE AND REFERRING CBDT CIRCULARS NO. 715 & 13/2006, HE CAME TO THE CONCLUS ION THAT PROVISIONS OF SECTION 194C WOULD APPLY IN RESPECT OF SUPPLY OF AR TICLE OR THING AS PER PRESCRIBED SPECIFICATIONS OF THE ASSESSEE AS WELL A S MANDATORY SPECIFICATIONS OF THE GOVERNMENT PRESCRIBED FOR TOBACCO. THE AO ACCO RDINGLY MADE ADDITION OF RS.92,73,027/- BEING DISALLOWANCE OF EXPENSES DEBIT ED IN THE MANUFACTURING ACCOUNT UNDER THE HEAD TOBACCO PACKING. THE LD. CIT(A) HAS HOWEVER DELETED THE ADDITION EXCEPTING THE EXPLANATION OF T HE ASSESSEE. AGAINST THIS ACTION OF THE LD. CIT(A) THE REVENUE IS IN APPEAL. 4. IN SUPPORT OF THE GROUND, THE LD. DR HAS BASICA LLY PLACED RELIANCE ON THE ASSESSMENT ORDER. THE LD. AR ON THE OTHER HAND REF ERRED THE DECISION OF FIRST APPELLATE AUTHORITY AND THE DECISIONS RELIED UPON B EFORE HIM WITH THIS SUBMISSION THAT THE ISSUE RAISED IS FULLY COVERED B Y SEVERAL DECISIONS FOLLOWED BY THE LD. CIT(A). 5. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW WE FIND THAT THE LD. CIT(A) AFTER DISCUSSING THE ISSUE IN DETAIL HAS COME TO THE FOLLOWING CONCLUSION:- THE FACTS OF THE CASE AS WELL AS SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE IMPUGNED SUM WAS INCURRED IN PROCURING PACKING MATERIAL FOR THE COMP ANYS PRODUCTS. THE A.O HAS TREATED SUCH TRANSACTIONS ENTERED BETWEEN T HE SELLER AND THE ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 4 COMPANY NOT AS SALES AND PURCHASES BUT AS UNDER CON TRACT ON WHICH TAX, ACCORDING TO THE A.O., WAS DEDUCTIBLE AT SOURCE AS PER PROVISIONS OF SECTION 194C OF THE ACT. THE A.O HAS DRAWN ADVERSE INFERENCE ON THE BASIS OF CBDT CIRCULAR NO. 715 WHEREIN IT WAS CLEAR LY MENTIONED THT IF ANY PERSON RECEIVES SUPPLY OF PRINTED MATERIAL AS P ER PRESCRIBED SPECIFICATION HE WAS LIABLE TO DEDUCT TAX ON SUCH P AYMENTS AND DEPOSIT THE SME IN GOVERNMENT ACCOUNT. FURTHER CIRCULAR NO . 13/2006 DATED 13/12/2006 MENTIONED THAT PROVISIONS OF SECTION 194 C WOULD APPLY IN RESPECT OF CONTRACT FOR SUPPLY OF ANY ARTICLE OR TH ING AS PER PRESCRIBED SPECIFICATIONS ONLY. FURTHERMORE, CIRCULAR NO. 93 DATED 26/09/1972 READ WITH CLARIFICATIONS OF CIRCULAR NO. 86 DATED 2 9/05/1972 PROVIDED THAT PROVISIONS OF SECTION 194C WERE WIDE ENOUGH TO COVER NOT ONLY WRITTEN CONTRACT BUT ALSO ORAL CONTRACT. IT IS OBS ERVED THAT THE CBDT VIDE CIRCULAR NO. 715 DATED 08/08/1995 HAS CLARIFIED VID E QUESTION NO. 101 TO THE EFFECT THAT SECTION 194C WOULD APPLY IN RESP ECT OF SUPPLY OF PRINTED MATERIAL AS PER PRESCRIBED SPECIFICATIONS. ON THE OTHER HAND, THE BOARD VIDE CIRCULAR NO. 681 DATED 08/03/1994 HAD CLARIFIE D THAT THE PROVISIONS OF SECTION 194C OF THE ACT WOULD APPLY IN RESPECT O F A CONTRACT FOR SUPPLY OF ANY ARTICLE OR THING AS PER PRESCRIBED SPECIFICA TIONS ONLY IF IT IS A CONTRACT FOR WORK AND NOT A CONTRACT FOR SALE. THE NECESSITY FOR CLARIFICATION AROSE DUE TO CONTRADICTION IN REPLY T O QUESTION NO. 15 IN CIRCULAR NO. 715 DATED 08/08/1995 AND CIRCULAR NO. 681 DATED 08/03/1994. ACCORDINGLY THE BOARD HAS FINALLY CLAR IFIED THIS AMBIGUITY VIDE CIRCULAR NO. 13 DATED 13/12/2006 AFTER CONSIDE RING CIRCULAR NO. 715 & 681 AS UNDER:- IT IS THEREFORE CLARIFIED THAT THE PROVISIONS OF SECTION 194C WOULD APPLY IN RESPECT OF A CONTRACT FOR SUPPLY OF ANY ARTICLE OR THING AS PER PRESCRIBED SPECIFICATIONS ONLY IF IT IS A CONTRACT FOR WORK AN D NOT A CONTRACT FOR SALE AS PER THE PRINCIPLES OF THIS REGARD LAID DOWN IN PARA 7(VI) OF CIRCULAR NO. 681 DATED 08/03/1994.. [EMPHASIS SUPPLIED] AS PER THE APPELLANT THE A.O HAS WRONGLY INTERPRETE D BOARDS CIRCULARS NO. 13/2006 DATED 13/12/2006 WHICH CLEARLY SPEAKS T O THE EFFECT THAT THE PROVISIONS OF SECTION 194C WOULD APPLY IN RESPECT O F A CONTRACT FOR SUPPLY OF ANY ARTICLE OR THING AS PER PRESCRIBED SP ECIFICATION ONLY IF IT IS A CONTRACT FOR WORK AND NOT A CONTRACT FOR SALE. AS PER THE APPELLANT, THE SELLER SUPPLIED THE MATERIAL AFTER PRINTING THE COM PANYS LOGO, NAME, STATUTORY WARNING AS REQUIRED BY GOVERNMENTS ORDER AND OTHER RELEVANT INFORMATION AS REQUIRED BY THE APPELLANT. THE MANU FACTURER ON HIS OWN ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 5 PURCHASED MATERIAL AND MANUFACTURED PRODUCTS WHICH HE SOLD TO THE APPELLANT. IT IS POSSIBLE THAT SUCH PRODUCTS MIGHT BE CUSTOMER SPECIFIC AS PER THE REQUIREMENTS OF THE CUSTOMERS, IT WAS STILL A CASE OF SALE AND NOT CARRYING OUT ANY WORK. EVEN IN CASE OF THE CUSTOME RS SPECIFIC SALE, THE FACT THAT THE GOODS MANUFACTURED WERE ACCORDING TO THE REQUIREMENT OF THE CUSTOMERS DOES NOT MEANT THAT ANY WORK HAS BEEN CARRIED OUT ON BEHALF OF THE CONTRACTEE. THUS, THE CUSTOMIZATION OF THE PACKING MATERIAL SUPPLIED IN ACCORDANCE WITH THE SPECIFICATION LAID DOWN BY THE APPELLANT, SHOULD NOT MAKE THE TRANSACTION INTO A TRANSACTION OF CONTRACT. AS PER THE APPELLANT THE TRANSACTIONS WERE PURE AND SIMPLE TRANSACTIONS OF SALE AND PURCHASE AND HENCE, NO TAX WAS REQUIRED TO BE D EDUCTED AS SOURCE. IT IS OBSERVED THAT IN THE PRESENT CASE THE MANUFAC TURER FIRMS ARE INDEPENDENT ESTABLISHMENT ENGAGED IN BUSINESS OF MA NUFACTURING OF TOBACCO PACKING MATERIALS AND THE APPELLANT HAD ISS UED THE PURCHASE ORDERS IN FAVOUR OF THE MANUFACTURERS FOR SUPPLY OF PRINTED TOBACCO PACKING MATERIAL. THE MANUFACTURERS WERE MANUFACTU RING THE PRINTED MATERIAL AT THEIR PREMISES AND THEY WERE NOT CAPTIV E UNITS OF THE APPELLANT. THE MANUFACTURERS PRINTED TOBACCO PACKI NG MATERIAL AS APPELLANTS SPECIFICATION. MERELY BECAUSE THE PRIN TING WAS DONE AS PER THE REQUIREMENT/SPECIFICATIONS OF THE APPELLANT, IT CANNOT BE SAID THAT ANY WORK WAS CARRIED OUT ON BEHALF OF THE APPELLANT. F URTHER, THERE IS NOTHING ON RECORD TO SHOW THAT ANCILLARY MATERIALS WERE SUPPLIED BY THE APPELLANT TO THE MANUFACTURER FIRMS. THEREFORE, SU PPLY OF PRINTED TOBACCO PACKING MATERIAL WAS A SALE AND COULD NOT B E CONSIDERED AS A WORKS CONTRACT AND TAX WAS NOT REQUIRED TO BE DED UCTED U/S 194C. THUS THE A.O WAS NOT JUSTIFIED IN PLACING RELIANCE ON TH E AFORESAID CIRCULARS, WHICH ARE RATHER IN FAVOUR OF THE APPELLANT. THE HONBLE SUPREME COURT IN THE CASE OF STATE OF HIMACHAL PRADESH VS. ASSOCIATED HOTELS OF INDIA LTD. & ORS, SALES TAX CASES VOLUME XXIX PAGES 494 HAS OBSERVED THAT A CONTRAC T OF SALE IS ONE WHOSE MAIN OBJECT IS THE TRANSFER OF PROPERTY IN, A ND THE DELIVERY OF THE POSSESSION OF A CHATTEL AS A CHATTEL TO THE BUYER. WHERE THE PRINCIPLE 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. FURTHER, THE APPELLANT HAS PAID VAT ON THESE PURCHASES. THE HONBLE SUPREME COURT (SUPRA) HAS HELD THAT SALES TAX IS ONLY APPLI CABLE WHEN IT IS NOT A WORK CONTRACT BUT A CONTRACT TO SALE. AS SUCH, THE TRANSACTIONS ARE COVERED UNDER A CONTRACT TO SALE AND NOT OF A WORK CONTRACT AND THE ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 6 PROVISIONS OF SECTION 194C OF THE ACT ARE NOT APPLI CABLE ON SUCH TRANSACTIONS. REGARDING APPLICABILITY OF PROVISIONS OF SECTION 1 94C OF THE ACT THE APPELLANT HAS CITED NUMBER OF HONBLE COURTS RU LINGS IN SUPPORT OF ITS CONTENTION THAT PROVISIONS OF SECTION 194C ARE NOT APPLICABLE, AS UNDER:- (I) CIT V. DABOUR INDIA LTD. 198 CTR 375 (DELHI) (II) BDA VS. I.T.O (2006) 281 ITR 99 (BOM) (III) DCIT VS. SEAGRAM MANUFACTURING (P) LTD. (2008) 19 S OT 139 (DELHI) (IV) WHIRPOOL OF INDIA LTD. VS. JCIT (2007) 16 SOT 435 ( DELHI) (V) DCIT VS. REBOK INDIA COMPANY 92006) 100 TTJ 976 (DELHI) (VI) POWER GRID CORPORATION OF INDIA VS. CIT 92007) 13 S OT 347 (HYD) (VII) BANGLORE DISTRICT COOPERATIVE MILL PRODUCTORS SOCIE TY UNION LTD. VS. I.T.O (2007) 11 SOT 539 IN ALL THE DECISIONS CITED ABOVE, THE BASIC REQUIRE MENT OF APPLICABILITY OF SECTION 194C IS THAT THE TRANSACTION SHOULD COME UN DER WORK CONTRACT AND NOT AS A CONTRACT TO SALE. AS IT IS EVIDENT TH AT THE APPELLANTS CASE IS COVERED AS CONTRACT TO SALE, THE PROVISIONS OF SECT ION 194C ARE NOT APPLICABLE AT ALL. THEREFORE, THERE WAS NO REQUIRE MENT OF DEDUCTION OF TAX AT SOURCE AND FOR THAT MATTER THE PROVISIONS OF SECTION 40 A (IA) OF THE ACT ARE NOT APPLICABLE AT ALL. IN VIEW OF THE ABOV E DISCUSSION THE ADDITION MADE BY THE A.O AT RS.92,76,026/- IS HELD AS UNTENA BLE. THE SAME IS (92,76,026/-) DIRECTED TO BE DELETED. GROUND NO. 2 IS ALLOWED. 6. WE FIND THAT DECISION OF THE FIRST APPELLATE AUT HORITY ON THE ISSUE IS FULLY COVERED BY THE DECISIONS RELIED UPON BY HIM, WHEREI N IT HAS BEEN HELD THAT THE BASIC REQUIREMENT OF APPLICABILITY OF SECTION 194C IS THAT THE TRANSACTION ARE COME UNDER WORK CONTRACT AND NOT AS A CONTRACT TO SALE AND SINCE IN THE CASE OF ASSESSEE IT IS EVIDENT THAT IT WAS COVERED AS C ONTRACT TO SALE, THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE. IN THE PRESENT C ASE BEFORE US THE UNDISPUTED FACTS ARE THAT THE MANUFACTURER ON HIS OWNER HAS PU RCHASED MATERIAL AND MANUFACTURED THE PRODUCTS AS PER SPECIFICATION OF T HE ASSESSEE, WHICH IT SOLD, TO THE ASSESSEE. WE THUS FULLY CONCUR WITH THE FINDIN G OF THE LD. CIT(A) THAT THERE ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 7 WAS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE IN THE PRESENT CASE AND THUS THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE. IN RESULT, THE LD. CIT(A) HAS RIGHTLY HELD THE ADDITION OF RS.92,76,02 6/- MADE BY THE AO AS UNTENABLE. THIS ACTION OF THE LD. CIT(A) IS THUS U PHELD. GROUND NO. 1 IS ACCORDINGLY REJECTED. GROUND NO.2 7. THE RELEVANT FACTS ARE THAT THE AO NOTED THAT AN AMOUNT OF RS.1,24,700/- WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER TH E HEAD PUBLICITY AND ADVERTISEMENT EXPENSES. HE CALLED FOR THE DETAILS OF THOSE EXPENSES AND GATHERED FROM THERE THAT OUT OF TOTAL EXPENSES INCURRED UNDE R THE AFORESAID HEAD AT RS.1,24,700/- AN AMOUNT OF RS.1,24,700/- WAS PAID T O M/S MICRON INDIA. HE AGAIN ASKED THE ASSESSEE TO FURNISH THE DETAILS OF TAX DEDUCTED AND DEPOSITED IN THE GOVERNMENT ACCOUNT AS STIPULATED U/S 194C OF TH E ACT. SINCE THE ASSESSEE FAILED TO FURNISH REQUISITE DETAILS THE AO CONCLUDE D THE ASSESSEE HAD FAILED TO DEDUCT TDS ON THE SAID AMOUNT AND ACCORDINGLY DISAL LOWED THE AMOUNT OF RS.1,24,700/- U/S 40(A)(IA) OF THE ACT. THE LD. CI T(A) HAS, HOWEVER, ACCEPTED THE EXPLANATION OF THE ASSESSEE AND HAS DELETED THE ADDITION. THIS ACTION OF THE LD. CIT(A) HAS BEEN QUESTIONED BY THE REVENUE. 8. IN SUPPORT OF THE GROUND, THE LD. DR HAS BASICAL LY PLACED RELIANCE ON THE ASSESSMENT ORDER. 9. THE LD. AR ON THE OTHER HAND TRIED TO JUSTIFY TH E FIRST APPELLATE ORDER ON THE ISSUE. 10. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT THE LD. CIT(A) AFTER DISCUSSING THE ISSUE IN DETAIL HAS PASSED FOLLOWING ORDER:- ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 8 THE FACTS OF THE CASE AS WELL AS SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE A.O HAD DISALLOWED THE AMOUNT OF RS.1,24,700/- U/S 40(A)(IA) OF THE ACT IN ABSENCE OF DEDUCTION OF T.D.S ON PAYMENTS MADE TO M/S MICRON INDIA IN CO NTRAVENTION OF PROVISIONS OF SECTION 194C OF THE ACT. ON THE OTHE R HAND IT HAS BEEN CONTENDED BY THE APPELLANT THAT PROVISIONS OF SECTI ON 194C WERE NOT APPLICABLE IN ITS CASE IN AS MUCH AS IT HAD PURCHAS ED THE BAGS AFTER PRINTING THE SAME AND THE ARTICLE OR THING SO FABRI CATED PASSES FROM THE SELLER TO THE APPELLANT ONLY AFTER SUCH ARTICLE OR THINGS ARE DELIVERED TO THE APPELLANT AND IS COVERED UNDER THE CONTRACT OF SALE AND THUS OUTSIDE THE PURVIEW OF SECTION 194C OF THE ACT. IT HAS BEE N CONTENDED THAT AT NO POINT OF TIME THE APPELLANT COMPANY HAD ANY POSSESS ION OVER IT, TILL IT IS SOLD TO THE APPELLANT. NO MATERIAL WAS SUPPLIED TO THE SELLER AND THE ENTIRE MATERIAL WAS PURCHASED ON HIS OWN BY THE SEL LER. THE TRANSACTION, IN THIS VIEW, CONSTITUTES A SALE WITHIN THE RULES G IVING RISE TO SUCH A WARRANTY. THE SUPPLY HAS BEEN MADE BY M/S MICRON I NDIA OF PRINTED PACKING LABELS AS PER REQUIREMENT/SPECIFICATIONS OF THE APPELLANT. MERELY BECAUSE THE PRINTING WAS DONE AS PER THE REQUIREMEN T/SPECIFICATIONS OF THE APPELLANT, IT CANNOT BE SAID THAT ANY WORK WAS CARRIED OUT ON BEHALF OF THE APPELLANT. THE PRINTING WORK WAS CARRIED OU T IN THE PREMISES OF THE AFORESAID COMPANY AN INDEPENDENT ESTABLISHMENT ENGAGED IN THE BUSINESS OF SUPPLYING PRINTED PACKAGING MATERIAL TO VARIOUS ESTABLISHMENTS, AND THE SUPPLY WAS LIMITED TO THE Q UANTITY SPECIFIED IN THE ORDER. FURTHER, THERE IS NO MATERIAL TO SHOW THAT ANCILLARY MATERIALS LIKE LABELS, INK, PAPERS, SCREEN-PRINTING, SCREENS ETC. WERE SUPPLIED BY APPELLANT TO THE AFORESAID COMPANY. FURTHER, THE A PPELLANT HAS ALSO PAID VAT ON THESE SALES AND HAS FURNISHED COPIES OF BILL S IN SUPPORT OF ITS CONTENTION. THEREFORE, SUPPLY OF PRINTED LABELS WA S A SALE AND COULD NOT BE CONSIDERED AS A WORKS CONTRACT AND THUS TAX WA S NOT REQUIRED TO BE DEDUCTED U/S 194C. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE FINDINGS GIVEN IN GROUND NO. 2, IT IS HELD THAT THE PAYMENT MADE T O M/S MICRON INDIA LIMITED AT RS.1,24,700/- WAS IN THE NATURE OF CONT RACT FOR SALE AND AS SUCH T.D.S. WAS NOT REQUIRED TO BE DEDUCTED AS PER PROVISIONS OF SECTION 194C OF THE ACT AND THE A.O WAS NOT JUSTIFIED IN DI SALLOWING THE IMPUGNED SUM AND THEREBY MAKING ADDITION OF RS.1,24 ,000/-. THE SAME IS DIRECTED TO BE DELETED. GROUND NO. 1 IS ALLOWED . ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 9 11. WE FIND THAT THE FIRST APPELLATE ORDER ON THE I SSUE IS COMPREHENSIVE AND REASONED ONE. WE FULLY CONCUR WITH THAT WHEN THERE IS NO MATERIAL TO SHOW THAT ANCILLARY MATERIALS LIKE LABELS, INK, PAPERS, SCREE N PRINTING, SCREENS ETC WERE SUPPLIED BY THE ASSESSEE TO M/S MICRON INDIA FOR MA NUFACTURING THE PRODUCTS MANUFACTURED BY M/S MICRON INDIA AS PER SPECIFICATI ON OF THE ASSESSEE, WHICH WAS SAID TO THE ASSESSEE. HENCE, IT WAS NOT A WORK CONTRACT BUT CONTRACT FOR SALE. THUS THE LD. CIT(A) HAS RIGHTLY CONCLUDED THAT SUPP LY OF PRINTED LABELS WAS A SALE AND COULD NOT CONSIDERED AS A WORK CONTRACT AN D THUS TAX WAS NOT REQUIRED TO BE DEDUCTED U/S 194C OF THE ACT. HE HAS ACCORDI NLGY DELETED THE ADDITION OF RS.1,24,700/-. THE SAME IS UPHELD. THE GROUND NO. 2 IS ACCORDINGLY REJECTED. 12. CONSEQUENTLY, APPEAL IS DISMISSED. C.O 302/DEL/201 1. THE ASSESSEE HAD OBJECTED FIRST APPELLATE ORDER ON THE SOLE BASIS THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF R S. 50,000/- MADE BY THE A.O OUT OF THE CLAIMED EXPENSES. 2. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY ITEM OF EXPENSES OF UNWASHED, INVARIABLE AND INADMI SSIBLE NATURE. HENCE, THE LD. CIT(A) NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.50,000/- OUT OF THE CLAIMED EXPENSES MADE BY THE A.O 3. THE LD. DR ON THE OTHER HAND TRIED TO JUSTIFY T HE ACTION OF THE AUTHORITIES BELOW IN THIS REGARD. 4. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW ON THE ISSUE, WE FIND THAT THE AO HAS MADE ADDITION OF RS.50,000/- B Y MAKING DISALLOWANCE OUT ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 10 OF THE CLAIMED EXPENSES ON THE BASIS THAT THE ASSES SEE COULD NOT PREJUDICE SOME OF THE VOUCHERS AND ALSO FROM THE PERUSAL OF OTHER VOUCHERS, IT WAS FOUND THAT THESE ARE PETTY AND CASH PAYMENTS FOR WHICH PROPER VERIFICATION IS NOT POSSIBLE. THUS, UNDISPUTEDLY NO SPECIFIC DEFECT HAS BEEN POIN TED OUT BY THE AO WHILE MAKING THE DISALLOWANCE ON THE BASIS OF SOME VOUCH ERS WHICH LED HIM TO MAKE ESTIMATION OF THE DISALLOWANCE IN THIS REGARD AT RS .50,000/-. IT HAS NOT BEEN SPECIFIED THT WORK NATURE OF PAYMENT OF THOSE CLAIM ED EXPENSES FOR WHICH VOUCHERS WERE NOT PRODUCED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFI ED HIM SUSTAINING THE ADDITION MADE ON AD-HOC BASIC WITHOUT PROPER JUSTIFICATION. WE THUS, WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD DIRECT THE AO TO DELETE THE ADDITION OF RS.50,000/- IN QUESTION. THE OBJECTION IS THUS ALLOWED. 5. IN RESULT, APPEAL CROSS- OBJECTION IS ALLOWED. 6. IN RESULT, APPEAL PREFERRED BY THE REVENUE IS DI SMISSED AND CROSS- OBJECTION FILED BY THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31ST M ARCH 2014. SD/- SD/- (G.D.AGRAWAL) (I. C. SUDHIR) VICE PRESIDENT JUDICIAL MEMBER DATED: 31/03/2014 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT ITA NO. 5 979/DEL/12 & C.O 1 2/DEL/13 11 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI