The ITO, Ward-1(3)(1), Vadodara V. M/s. Aroma De France, Vadodara

ITA 528/AHD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6040 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.528/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) THE DY.CIT CIRCLE-1(3) VADODARA 390 007 / VS. M/S.AROMA DE FRANCE BLOCK-1441 VILLAGE: DABHASA TAL: PADRA, DIST:VADODARA 391 440 $ ./ ./ PAN/GIR NO. : AALFA 6998C ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : SHRI VILAS V. SHINDE, SR.DR ($'*) / RESPONDENT BY : SHRI MUKUND BAKSHI, AR +,*- / DATE OF HEARING 03/05/2017 ./0*- / DATE OF PRONOUNCEMENT 08 / 05/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSING OFFICER (A O) IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, VADODARA [CIT(A) IN SHORT] DATED 30/11/2015 FOR THE ASSESSMENT YEAR (AY) 2012-13. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE REA D AS UNDER:- ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 2 - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED WHILE GRANTING RELIEF ON ACCOUN T OF NON- DEDUCTION OF TAX ON THE PAYMENT OF SUPPLY OF PRINTE D PACKING MATERIAL WITHOUT APPRECIATING THE FACT THAT THE AO HAS COLLECTED MATERIAL DURING SURVEY AND HAS ESTABLISHED BEYOND D OUBT THAT THE FIXED CONTRACT WITH THE VENDOR IN THIS CASE IS A CO NTRACT FOR WORK AND NOT A CONTRACT FOR SALE AS ENVISIONED U/S.194C. 3. THE AO IS AGGRIEVED BY THE ORDER OF THE CIT(A) I N GRANTING RELIEF ON ACCOUNT OF NON-DEDUCTION OF TAX ON THE PAYMENT T OWARDS SUPPLY OF PRINTED PACKING MATERIAL ON THE PREMISE THAT THE SU PPLY OF PRINTED PACKING MATERIAL IS CONTRACT FOR WORK AND NOT A CONTRACT FOR SALE AS ENVISAGED UNDER S.194C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). 4. BRIEFLY STATED, THE ASSESSEE IS A PARTNERSHIP-F IRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF PERFUME. THE ASSESSEE FILED RETURN OF INCOME FOR THE RELEVANT AY 2012-13 WHICH WAS SUBJE CTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF ASSESSMENT PROCEEDINGS , A SURVEY ACTION ALSO CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 19/0 2/2015 WHEREIN IT WAS INTER ALIA NOTED THAT THE ASSESSEE IS IN POSSESSION OF HUGE S TOCK OF PRINTED MATERIAL. IT WAS NOTICED BY THE REVENUE THAT ASSES SEE HAS FIXED VENDORS TO CARRY OUT PRINTING MATERIAL AS PER EXACTING SPEC IFICATIONS OF THE ASSESSEE. IT WAS THUS, CLAIMED BY THE REVENUE THAT THE TRANSACTION TOWARDS OBTAINING THE PACKING MATERIAL FROM THE SUP PLIERS IS IN THE NATURE ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 3 - OF CONTRACT RATHER THAN IN THE NATURE OF PURCHASE O F MATERIAL. THE AO INTER ALIA RECORDED CERTAIN QUERIES RAISED IN SURVEY CONCERNI NG THE ISSUE IN THE ASSESSMENT ORDER AND ALSO PLACED RELIANCE ON CIRCULAR NO.715 DATED 08/08/1995. HE FINALLY CONCLUDED THAT THE TRANSACTI ONS ON ACCOUNT OF PRINTED PACKING MATERIAL IS COVERED WITHIN THE MEAN ING OF SECTION 194-C OF THE ACT. THE AO THUS FOUND THAT THE EXPENDITUR E INCURRED ON PRINTED PACKING MATERIAL AMOUNTING TO RS.3,15,56,185/- IS L IABLE FOR TDS OBLIGATIONS IN TERMS OF SECTION 194C OF THE ACT WHI CH HAS NOT BEEN COMPLIED WITH. THE AO ACCORDINGLY INVOKED SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE AFORESAID PAYMENT TOWARDS FOR NO N-DEDUCTION OF TDS. 5. IN FIRST APPEAL AGAINST THE ORDER OF AO, THE CI T(A) EXAMINED THE FACTS AND THE LEGAL POSITION IN GREAT LENGTH WITH REFERE NCE TO VARIOUS CASE-LAWS AS PER PARA-10 OF ITS ORDER CONCLUDED THAT IMPUGNED TRANSACTIONS ON ACCOUNT OF SUPPLY OF PRINTED PACKING MATERIAL TO TH E ASSESSEE WAS IN PURSUANCE OF A CONTRACT FOR SALE AND NOT A CONTR ACT FOR WORK AS ALLEGED. CONSEQUENTLY, IT WAS HELD BY THE CIT(A) THAT PROVIS IONS OF SECTION 194C ARE NOT APPLICABLE TO THE SAID SALE TRANSACTIONS. HE ACCORDINGLY HELD THAT THE ACTION OF THE AO IN DISALLOWING THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PRINTED PACKING MATERIAL AMOUNTING TO RS.3,15,56,185/- FOR NON-DEDUCTION OF TAX AT SOURCE UNDER S.194C IS UNSUSTAINABLE IN LAW AND ACCORDINGLY REVERSED THE ACTION OF THE AO. ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 4 - 6. THE REVENUE PREFERRED AN APPEAL AGAINST THE ORDE R OF THE CIT(A) BEFORE THE TRIBUNAL. 7. THE LD.DR FOR THE REVENUE RELIED UPON THE ORDE R OF THE AO. 8. THE LD.AR FOR THE ASSESSEE MR.MUKUND BAKSHI VOCI FEROUSLY SUPPORTED THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE CENTRA L CONTROVERSY IN THE INSTANT CASE INVOLVES AROUND APPLICABLE OR OTHE RWISE OF SECTION 194C OF THE ACT ON EXPENDITURE INCURRED TOWARDS PRINTED PACKING MATERIAL. 8.1. IN THIS CONTEXT, WE NOTE AT THE OUTSET FRO M THE SURVEY STATEMENT EXTRACTED IN ONE ASSESSMENT ORDER WHEREIN ASSESSEE HAD ARGUED THAT IT DOES NOT SUPPLY MATERIAL TO THE SUPPLIER FOR PRODUC TION OF PRINTED PACKING MATERIAL. IT WAS ANSWERED BEFORE THE SURVEY OFFICE R THAT THE MATERIAL WERE PURCHASED BY PLACING THE ORDER. IT WAS FURTHER POI NTED OUT IN THE SURVEY STATEMENT THAT OWING TO HUGE REQUIREMENT OF PACKING MATERIAL, IT IS DIFFICULT TO FIND THE MARKET BY WAY OF DIRECT PURCH ASE. THE ORDERS ARE BEING PLACED FOR SUPPLY AS PER THEIR SPECIFICATIONS . WHILE ADMITTING, THE SUPPLY AS PER THE SPECIFICATIONS OF THE ASSESSEE, IT WAS CONTENDED THAT IT IS A CASE OF SIMPLE PURCHASE OF GOODS WHICH CANNOT BE TREATED AS ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 5 - CONTRACTUAL AGREEMENT OF SUCH NATURE WHERE SECTION 194C OF THE ACT CAN BE APPLIED. 8.2 SECTION 194-C INTER ALIA PROVIDES THE MEANING OF THE EXPRESSION WORK WHICH INTER ALIA INCLUDES MANUFACTURE OR SUP PLY OF A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER . WITH REFERENCE TO THE AFORESAID DEFINITION, WE NOTE THE CONTENTION ADVANCED ON BEHA LF OF THE ASSESSEE THAT SECTION 194-C WOULD APPLY TO A PERSON RESPONSIBLE F OR PAYING ANY SUM TO ANY RECIPIENT FOR CARRYING OUT ANY WORK INCLUDING S UPPLY OF LABOUR FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT WO ULD BE UNDER STATUTORY OBLIGATION TO DEDUCT TDS AT A CERTAIN PER CENTAGE OF THE CONTRACT AS SPECIFIED IN AFORESAID PROVISION. OSTENSIBLY, O BLIGATION UNDER S.194-C TOWARDS EXPENDITURE INCURRED ARISES OUT OF CARRYIN G OUT ANY WORK. AS NOTED, EXPRESSION WORK SPECIFICALLY INCLUDES SUPP LY OF PRODUCT AS PER SPECIFIC REQUIREMENT OF CUSTOMER HOWEVER SUBJECT TO A CAVEAT. THE DEFINITION WORK SEEKS TO INCLUDE ONLY THOSE KINDS OF SUPPLY AS PER SPECIFICATIONS OF A CUSTOMER WHICH ARE MADE BY USIN G MATERIAL PURCHASED FROM SUCH CUSTOMER. IT IS UNDISPUTED FACT IN THE I NSTANT CASE THAT THE SUPPLY OF PRINTED PACKING MATERIAL IS THE RESPONSIB ILITY AND THE SUPPLIER WITHOUT INVOLVING ANY CROSS-SUPPLY OF RAW-MATERIA L FROM THE ASSESSEE. SUCH PHRASEOLOGY EMPLOYED IN THE PROVISION OF THE S TATUE TO INCLUDE SUPPLY AS PER SPECIFICATION BY USING THE MATERIAL SUPPLIED BY THE ASSESSEE ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 6 - GIVES A RESOUNDING IMPRESSION THAT SUPPLY OF PACKIN G MATERIAL ALBEIT AS PER THE REQUIREMENT AND SPECIFICATION OF THE CUSTOM ER BUT WITHOUT SEEKING SUPPLY MATERIAL FROM THE CUSTOMERS STANDS EXCLUDED FROM THE SCOPE OF EXPRESSION WORK AS PROVIDED IN THE AFORESAID PROV ISION. 8.3. WE NOTICE THAT THE AO HAS HARPED ON THE FACT THAT THE ASSESSEE HAS RIGHT OF REJECTION IN CASE THE SPECIFIED WORK OF PR INTED MATERIAL IS NOT DONE AS PER THE SPECIFICATIONS PROVIDED BY THE ASSE SSEE IMPARTS SUCH TRANSACTIONS WITH THE CHARACTER OF CONTRACT OF WOR K. WE DO NOT FIND ANY MERIT IN SUCH PLEA. EVEN ORDINARY PURCHASE WHICH DOES NOT SUIT THE REQUIREMENT OF CUSTOMER CAN BE REJECTED. SUCH SIMP LE AND ORDINARY STIPULATIONS FOR SUPPLY OF PACKING MATERIAL AS PER EXACT SPECIFICATION OF SUCH MAGNITUDE AS INVOLVED IN THE PRESENT CASE ARE ORDINARY FEATURE OF A CONTRACT OF SALE PER SE . SUCH TYPICAL CONDITION WILL NOT IN OUR VIEW ALTE R THE CHARACTER AND COMPLEXION OF CONTRACT OF SUPPL Y OF GOODS TO A CONTRACT OF WORK PER SE . 8.4. WE NOW ADVERT TO CIRCULAR NO.715 DATED 08/08/ 1995 WHEREIN QUESTION AS TO WHETHER SECTION 194C WOULD APPLY IN RESPECT OF SUPPLY OF PRINTED MATERIAL AS PER PRESCRIBED SPECIFICATIONS W AS NOTED IN AFFIRMATIVE BY THE APEX BODY FOR DIRECT TAXES. HOWEVER, IN THE SAME VAIN, WE NOTE THAT EXPRESSION WORK IS NOW SIMILARLY DEFINED IN CLAUSE (IV) OF THE SUBSTITUTED EXPLANATION BY THE AMENDMENT CARRIED OU T BY THE FINANCE ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 7 - (NO.2) ACT, 2009, W.E.F. 01/10/2009 AS DISCUSSED AB OVE. WE OBSERVE THAT THE CIT(A) HAS DEALT THAT THE OBJECTIONS OF THE REV ENUE WITH REGARD TO THE AFORESAID CBDT CIRCULAR IN GREAT LENGTH AND DISTING UISHED THE SITUATION PREVAILING IN THE AFORESAID IMPUGNED ASSESSMENT YEA R 2012-13 WITH REFERENCE TO SEVERAL JUDICIAL PRECEDENTS. WE ALSO NOTE THAT THE COORDINATE BENCH OF TRIBUNAL IN PANJAB CONTRACTORS LTD. VS. IT O (TDS) (2012) 26 TAXMANN.COM 73 (CHD.) AFTER CONSIDERING CIRCULAR NO .715 DATED 08/08/1995 HELD THAT WHERE A PERSON HAD PROVIDED ON LY SPECIFICATION FOR SUPPLY OF PRINTED MATERIAL WITHOUT SUPPLY OF MATERI AL DO NOT FALL WITHIN THE AMBIT OF SECTION 194C. 8.5 WE ALSO SIMULTANEOUSLY NOTE FROM THE INVOICES RAISED BY THE SUPPLIER THAT THE PRINTED PACKING MATERIAL SO SUPPLIED TO TH E ASSESSEE ARE SUBJECTED TO VARIOUS TAXES VIZ. EXCISE DUTY, VAT, AND CST ON THE SALE PRICE. OSTENSIBLY, IT IS THE OWNERSHIP OF THE PRINTED PACK ING MATERIAL WHICH IS PASSED ON TO THE ASSESSEE ON DELIVERY OF THE GOODS BY THE VENDOR BY A SALE CONTRACT. THUS, IN THE TOTALITY OF THE CIRCUMSTA NCES, WE FIND IT MANIFEST THAT THE TRANSACTION ON ACCOUNT OF SUPPLY OF PRINTE D PACKING MATERIAL TO THE ASSESSEE WAS IN PURSUANCE OF A CONTRACT FOR A SALE AND NOT A CONTRACT FOR WORK AS ALLEGED. CONSEQUENTLY, PROVISIONS OF SECTION 194C DO NOT GET TRIGGERED IN THE FACTS OF THE CASE. HENCE, S ECTION 40(A)(IA) HAS NO APPLICATION IN THE GIVEN FACTS. THE DISALLOWANCE M ADE BY THE AO WERE ITA NO.528/AHD/ 2016 DCIT VS. AROMA DE FRANCE ASST.YEAR 2012-13 - 8 - THUS UNWARRANTED. WE FULLY SUBSCRIBE TO THE VIEW T AKEN BY THE CIT(A) ON THE ISSUE AND THUS DECLINE TO INTERFERE THEREWIT H. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 08 / 0 5 /201 7 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 08 / 05 /2017 4..+,.+../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-5, VADODARA 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 4.5.17 (DICTATION-PAD 20- P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 5.5.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.8.5.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8.5.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER