ACIT, CHENNAI V. M/s Apex Laboratories Ltd., CHENNAI

ITA 438/CHNY/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1197 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: V S MANOJ
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A. NO. 438/MDS/2009 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI-600 101. VS. M/S. APEX LABORATORIES LTD. , 76, C.P.RAMASAMY ROAD, ALWARPET, CHENNAI-600 018. PAN AAACA 5174 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B.RENGARAJAN, JR. STANDING COUNSEL RESPONDENT BY : SHRI V.S.MANOJ O R D E R PER DR. O.K.NARAYANAN, VICE PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2005-06. THE APPEAL IS DIRECTED AGAINST THE ITA 438/09 :- 2 -: ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), LARGE TAXPAYER UNIT AT CHENNAI DATED 27.11.2008. THE APP EAL ARISES OUT OF THE ASSESSMENT COMPLETED UNDER SEC.143(3). 2. THE ASSESSEE-COMPANY HAD CLAIMED AN AMOUNT OF ` 86,89,916/- BY WAY OF DEDUCTION AS EXPENSES ON PRI NTING OF BROCHURES AND VISUAL AID MATERIALS. THE ASSESSING OFFICER OBSERVED THAT THE BROCHURES AND VISUAL AID MATERIAL S ARE PRINTED ON A CUSTOM-MADE BASIS EXCLUSIVELY FOR THE ASSESSEE WHICH CANNOT BE SOLD TO ANY OTHERS AND IN THAT CIRCUMSTAN CES, THE TRANSACTIONS WOULD AMOUNT TO A CONTRACT COVERED BY SEC.194C OF THE ACT BY WHICH THE ASSESSEE WAS BOUND TO DEDUCT T AX AT SOURCE WHILE MAKING THE PAYMENTS. AS NO TAX HAS BEEN DEDU CTED AT SOURCE, THE ASSESSING AUTHORITY INVOKED THE PROVISI ONS OF SEC.40(A)(IA) OF THE ACT AND DISALLOWED THE AMOUNT OF ` 86,89,916/-. IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE BY HOLDING THAT THERE IS NO CONTRACT INVOLVED OF ANY SERVICE I N MAKING PAYMENTS TOWARDS PURCHASE OF PRINTED MATERIALS. HE DELETED THE DISALLOWANCE/ADDITION MADE BY THE ASSESSING AUTHORI TY. ITA 438/09 :- 3 -: 3. THE REVENUE IS AGGRIEVED AND THEREFORE, THIS APPEAL BEFORE US. 4. THE GROUNDS RAISED BY THE REVENUE READ AS BELOW : 2.1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE EXPENDITURE INCURRED ON PRINTING CHARGES CANNOT BE SUBJECTED TO TDS. THE PAYMENT MADE BY THE ASSESSEE DOES NOT COME UNDER THE PURVIEW OF SECTION 194C OF THE IT ACT. 2.2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO NOTE THAT WHEN PRINTING IS DONE AS PER SPECIFICATIONS OF A CUSTOMER, IT WOULD AMOUN T TO A CONTRACT COVERED BY THE PROVISIONS OF SECTION 194C OF THE IT ACT. 2.3 HAVING REGARD TO BOARDS IN NO. 715 DATED 8.8.1995 (QUESTION NO.15), THE LEARNED CIT (A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 2.4 HAVING REGARD TO THE FOLLOWING DECISIONS, THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT PRINTING MADE AS PER SPECIFIC REQUIREMENTS OF A CUSTOMER IS ONLY A WORKS CONTRACT WHICH WOULD BE CLEARLY HIT BY THE PROVISIONS OF SECTION 194C ITA 438/09 :- 4 -: I. STATE OF TAMIL NADU VS. ANANDAN VISWANATHAN (1989) 73 STC 1(SC) II. SARVODAYA PRINTING PRESS VS STATE OF MAHARASHTRA (1994) 93 STC 387 (BOM) III STATE OF TAMIL NADU VS AMBICA PRESS (1992) 86 STC 407 (MAD) 5. WE HEARD SHRI K.E.B.RENGARAJAN, THE LEARNED STANDIN G COUNSEL APPEARING FOR THE REVENUE AND SHRI V.S. MAN OJ, THE LEARNED COUNSEL APPEARING FOR THE RESPONDENT-ASSESS EE. THE RELEVANT PORTION OF THE CONCLUSION ARRIVED AT BY TH E COMMISSIONER OF INCOME-TAX (APPEALS) IN PAGE 6 OF HIS ORDER IS E XTRACTED BELOW : I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO SEEN THE XEROX COPIES OF THE BILLS. IT IS SEEN THAT THE MAIN PURPOSE OF THE APPELLANT TO BUY PACKING MATERIAL IS TO OBTAIN GOODS FOR THE PURPOSE OF PACKING OF ITS FINISHED PRODUCTS. THE FACTUM OF SUCH PACKING MATERIAL CARRYING SOME PRINTED WORK CAN ONLY BE REGARDED AS THE WORK EXECUTED BY THE SUPPLIER INCIDENTAL TO THE SALE TO THE ASSESSEE. AS HELD BY THE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF CIT ITA 438/09 :- 5 -: VS. DEPUTY CHIEF ACCOUNTS OFFICER, MARKFED (SUPRA), THIS FACT OF SOME PRINTING BEING DONE AS A PART OF SUPPLY IS OF NO CONSEQUENCE TO THE CONTRACT BEING ESSENTIAL OF A SALE OF CHATTEL. I F IND THE JUDICIAL PRONOUNCEMENTS REFERRED TO ABOVE BY THE AR ALSO SUPPORTS THE CASE OF THE APPELLANT. FOLLOWING THE SAME I ALLOW THE APPEAL OF THE APPELLANT AND DIRECT THE AO TO DELETE THE DISALLOWANCE. 6. FROM THE ABOVE, IT IS CLEAR THAT THE PRINTING WAS D ONE ON THE PACKING MATERIALS SUPPLIED TO THE ASSESSEE. AS RIG HTLY POINTED OUT BY THE COMMISSIONER OF INCOME-TAX (APPEALS) PRINTIN G MADE ON THE PACKING MATERIALS ARE JUST INCIDENTAL IN THE SA LES OF PACKING MATERIALS TO THE ASSESSEE. FURTHER, IT HAS BEEN ST ATED BEFORE US THAT THE BILLING IS DONE ON A COMPOSITE VALUE FOR T HE PACKING MATERIALS WITHOUT DIFFERENTIATING ANY AMOUNT FOR TH E PRINTING DONE. ALSO IT IS STATED THAT THE ASSESSEE HAS SUFFERED VA T (VALUE ADDED TAX) THROUGH THE PURCHASE INVOICES WHILE BUYING PRI NTED PACKING MATERIALS. THEREFORE, IT IS NOT POSSIBLE TO AGREE WITH THE ARGUMENT OF THE REVENUE THAT THERE IS ANY ELEMENT OF CONTRAC TUAL PAYMENT ITA 438/09 :- 6 -: IN PURCHASING THE PRINTED PACKING MATERIALS BY THE ASSESSEE. WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 7. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON THURSDAY, THE 20 TH OF JANUARY, 2011. SD/- SD/- (HARI OM MARATHA) JUDICIAL MEMBER (DR. O.K.NARAYANAN) VICE-PRESIDENT CHENNAI, DATED : 20 TH JANUARY, 2011 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR