The ACIT, TDS Circle, Ahmedabad V. Fascel Limited, Ahmedabad

ITA 406/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0328 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-08-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 04-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI BHAVNESH BHAVNESH BHAVNESH BHAVNESH SAINI SAINI SAINI SAINI, , , , JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING :12-8-2010 DRAFTED ON:12-8-201 0 ITA NO. 406,407 & 408 /AHD/ ASSESSMENT YEARS:2002-03, 2003-04 & 2004-05 ASSISTANT COMMISSIONER OF INCOME TAX TDS CIRCLE, 2 ND FLOOR, AMRUT JAYANTI BHAVAN, OFF. ASHRAM ROAD, AHMEDABAD. VS. FASCEL LIMITED 601, SAKAR-II, ELLISBRIDGE, AHMEABAD. PAN/GIR NO. : AAACF 1190P (A PPELLANT ) .. ( RESPONDENT ) APPELL ANT BY : SHRI R.K.DHANESTA D.R. RESPONDENT BY: SHRI DHINAL SHAH C.A. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-X, AHMEDABAD ALL DATED 22-11-2007. 2. THE COMMON GROUND OF APPEAL TAKEN BY THE REVENUE IN ALL THESE APPEALS IS THAT THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN DELETING TAX OF `.2,22,384/- AND INTEREST OF `.1,83,559/-UNDER SECTION 201(1) AND 201(1A) OF THE ACT RESPECTIVELY IN ASSESSMENT YEAR 2002-03, IN DELETIN G THE TAX OF `.46,308/- AND INTEREST OF `.1,31,782/- UNDER SECTI ON 201(1) AND 201(1A) OF THE ACT RESPECTIVELY IN THE ASSESSMENT Y EAR 2003-04 - 2 - AND INTEREST OF `.2,41,636/- UNDER SECTION 201(1A) OF THE ACT IN ASSESSMENT YEAR 2004-05. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE PURCHASED SIM CARD FROM VARIOUS PERSONS WHO MANUFAC TURED THE SAME AS PER THE SPECIFICATIONS OF THE ASSESSEE AND THE SIM CARD CONTAINED LOGO OF THE ASSESSEE. THE LEARNED ASSESS ING OFFICER WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE DEDUCT ED TDS UNDER SECTION 194C OF THE ACT ON THE PAYMENT IN RESPECT O F SUCH SIM CARDS AS THE TRANSACTION AMOUNTED TO CONTRACT OF WO RK. THEREFORE, THE LEARNED ASSESSING OFFICER TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT IN RESPECT OF THE TDS AMOUNT OF `.2,22,384/ - AND INTEREST OF `.1,83,559/-UNDER SECTION 201(1) AND 201(1A) OF THE ACT RESPECTIVELY IN ASSESSMENT YEAR 2002-03, TDS AMOUNT OF `.46,308/- AND INTEREST OF `.1,31,782/- UNDER SECTI ON 201(1) AND 201(1A) OF THE ACT RESPECTIVELY IN THE ASSESSMENT Y EAR 2003-04 AND INTEREST OF `.2,41,636/- UNDER SECTION 201(1A) OF THE ACT IN ASSESSMENT YEAR 2004-05. 4. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE TRANSACTION WAS A TRANSACTI ON FOR PURCHASE OF SIM CARD AND THEREFORE, PROVISIONS OF SECTION 19 4C WAS NOT APPLICABLE. HE ACCORDINGLY DELETED THE DEMAND RAIS ED AGAINST THE ASSESSEE UNDER SECTION 201(1) AND 201(1A) OF THE AC T. 5. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E REITERATED THE OBSERVATIONS MADE BY THE LEARNED ASS ESSING OFFICER IN THE IMPUGNED ORDERS. 6. ON THE OTHER HAND THE LEARNED AUTHORISED REPRESE NTATIVE OF THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) AND ALSO SUBMITTED THAT THE DE CISION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FINDS SUPPORT FROM - 3 - THE RECENT DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GLENMARK PHARMACEUTICALS LTD.(2010) 324 ITR 199 (BOM.). HE IN SUPPORT OF HIS CASE, ALSO DREW OUR ATTENTION TO THE AMENDMENT MADE IN EXPLANATION III TO SECTION 194C B Y THE FINANCE ACT OF 2009 WHICH INSERTED CLAUSE (E) AS FOLLOWS :- MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OF SPECIFICATION OF A CUSTOMER BY USING MATERIAL, PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER. THE REASON WHY CLAUSE (E) HAS BEEN INCORPORATED IN THE EXPLANATION HAS BEEN EXPLAINED IN THE MEMORANDU M EXPLAINING THE PROVISIONS OF THE FINANCE BILL OF 20 09. THE MEMORANDUM CONTAINS THE FOLLOWING STATEMENT:- C. CLARIFICATION REGARDING WORK UNDER SECTION 194 C. THERE IS ONGOING LITIGATION AS TO WHETHER TDS IS DE DUCTIBLE UNDER SECTION194C ON OUTSOURCING CONTRACTS AND WHET HER OUTSOURCING CONSTITUTES WORK OR NOT. ON THIS ISSUE , IT IS PROPOSED TO PROVIDE THAT WORK SHALL NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY ISSUI NG RAW MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH A CUSTOMER AS SUCH A CONTRACT IS A CONTRACT FOR SALE . THIS WILL HOWEVER NOT APPLY TO A CONTRACT WHICH DOES NOT ENTA IL MANUFACTURE OR SUPPLY OF ARTICLE OR THING (.E.G., A CONSTRUCTION CONTRACT). IT IS ALSO PROPOSED TO INCL UDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, WITHIN THE DEFINITION OF WORK. 7. WE FIND THAT IN THE INSTANT CASE, IT IS NOT IN D ISPUTE THAT THE SUPPLIERS OF SIM CARDS MANUFACTURED THE SIM CARD BY THEIR OWN MATERIAL. IT IS NOT THE CASE WHERE THE ASSESSEE SU PPLIED THE MATERIAL TO THE MANUFACTURER OF SIM CARD WHO MANUFA CTURED SIM CARD ON BEHALF OF THE ASSESSEE. IN THE INSTANT CASE , THE MANUFACTURER OF SIM CARD MANUFACTURED SIM CARD AS P ER THE SPECIFICATION AND AGREEMENT WITH THE ASSESSEE AND A FTER MANUFACTURING SUPPLIED THE SIM CARD TO THE ASSESSEE . THUS, IT IS A SIMPLE CASE OF SALE CONTRACT. MERELY BECAUSE THE G OODS ARE - 4 - MANUFACTURED AS PER THE SPECIFICATION OF THE BUYER BY THE MANUFACTURER WILL NOT CONVERT THE TRANSACTION OF SA LE INTO A CONTRACT FOR WORK. IN THE INSTANT CASE, IT IS NOT THE CASE OF THE REVENUE THAT THE SUPPLIERS OF THE SIM CARD WERE CAPTIVE UNIT OF THE ASSESSEE OR THE MANUFACTURING OF SIM CARD WAS DONE IN THE ASSES SEES PREMISES. CONSIDERING THE ABOVE FACTS, IN OUR CONS IDERED OPINION MERELY BECAUSE THERE WAS SOME SECRECY CLAUSE BETWEE N THE ASSESSEE AND ITS SUPPLIER OF MATERIAL WILL NOT MAKE A CONTRACT FOR SALE AS CONTRACT FOR WORK. THUS, WE DO NOT FIND AN Y ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) WHICH IS ALSO FULLY SUPPORTED BY THE RECENT DECISION OF T HE HON'BLE BOMBAY HIGH COURT CIT VS. GLENMARK PHARMACEUTICALS LTD.(2010) 324 ITR 199 (BOM.). THUS, THE GROUND OF APPEAL OF T HE REVENUE IS DISMISSED. 8. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13 TH DAY OF AUGUST, 2010. SD/- SD/- (BHAVNESH SAINI) (N. S. SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; ON THIS 13 TH DAY OF AUGUST, 2010 PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-X, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// - 5 - (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 12-8-2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 12-8-2010 ------ ------------- 3. DRAFT PROPOSED & PLACED 12-8-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 13-8-2010 ----------- -------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 13-8-2010 ---------- ---------- 6. KEPT FOR PRONOUNCEMENT ON 13-8-2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 13-8-2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- ---- -----------------