Punjab Tractors Limited, Mohali V. ITO, (TDS-II), Chandigarh

ITA 940/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63905 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: A K JINDAL
• Keywords: Question of law
• Section: 194C; 201(1); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R. SOOD, AM AND MS. SUSHMA CHOWLA, JM ITAS NO. 940, 941, 942 & 943/CHD/2010 A.YS: 2006-07 , 2007-08, 2008-09 & 2009-10 PUNJAB TRACTORS LTD., V ITO (TDS-II) (SINCE MERGED WITH MAHINDRA CHANDIGARH & MAHINDRA LTD.) MOHALI AAACP 8578 K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI A.K. JINDAL RESPONDENT BY: SHRI N.K. SAINI DATE OF HEARING: 27.08.2012 DATE OF PRONOUNCEMENT: 31.08.2012 ORDER PER BENCH IN THESE APPEALS A COMMON IMPUGNED ORDER HAS BEEN PASSED BY THE LD. CIT(A), CHANDIGARH FOR A.YS 2006-07 TO 2009-10. IN FACT THE ORDER PASSED IS 201(1) R.W.S 201(1A) OF THE ACT IS ALSO COMMON ORDE R. THE ASSESSEE HAS RAISED THE COMMON GROUNDS WHICH READ AS UNDER:- 1 THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT CONTRACT FOR PURCHASE OF PRINTED MATERIAL IS A CONTRACT FOR WORK AND LABOUR AND NOT A CONTRACT FOR SALE. 2. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT TAX IS LIABLE TO BE DEDUCTED U/S 194C OF THE A CT FOR PURCHASE OF PRINTED MATERIAL. 3. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CHARGING INTEREST U/S 201(1A) OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT A SURVEY WAS CA RRIED OUT AT THE PREMISES OF THE ASSESSEE. DURING SURVEY IT WAS NOTICED THAT TAX WAS NOT BEING DEDUCTED ON PRINTING AND STATIONERY FOR SUPPLY OF PRINTED MA TERIAL AS PER PRESCRIBED SPECIFICATION OF THE ASSESSEE. THE PAYMENTS WERE M ADE TO M/S FAIR DEAL PRINTING PRESS AS PER FOLLOWING DETAILS: FINANCIAL YEAR AMOUNT (RS.) 2005-06 64,19,998/- 2006-07 19,79,176/- 2007-08 60,88,633/- 2008-09 76,71,686/- TOTAL RS. 2,21,59,493/- 2 THE ASSESSEE WAS GIVEN A SHOW CAUSE NOTICE AS TO WH Y THE PAYMENTS MADE TO M/S FAIR DEAL PRINTING PRESS MAY NOT BE BROUGHT U/S 194C OF THE ACT. IN RESPONSE IT WAS STATED THAT THE PAYMENTS MADE IN RE SPECT OF THE TRANSACTIONS TO M/S FAIR DEAL PRINTING PRESS WERE ON ACCOUNT OF CON TRACT FOR SALE FOR PRINTED MATERIAL. IT WAS FURTHER SUBMITTED THAT WHEREVER A PPLICABLE THE SALES TAX/VAT HAS ALSO BEEN CHARGED BY M/S FAIR DEAL PRINTING PRE SS. SINCE IT WAS A CONTRACT FOR SALE, THEREFORE, IN VIEW OF CIRCULAR NO. 681 DA TED 8.3.1994 THE TDS PROVISIONS WERE NOT APPLICABLE. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS:- (I) CIT V. DY. CAO, MARKFED, 304 ITR 17 (PH) (II) CIT V. DABUR INDIA LTD. 283 ITR 197 (DELHI) (III) BDA LTD. V. ITO, 281 ITR 99 (BOM) FURTHER RELIANCE WAS PLACED ON SOME DECISIONS OF TH E TRIBUNAL. IT WAS ALSO SUBMITTED THAT SINCE M/S FAIR DEAL PRINTING PRESS H AS ALREADY TAKEN INTO ACCOUNT THE PAYMENTS MADE BY THE ASSESSEE IN VARIOU S YEARS. THEREFORE, NO TDS WAS REQUIRED TO BE DEDUCTED. 3. AFTER CONSIDERING THE ABOVE SUBMISSIONS THE ASSE SSING OFFICER OBSERVED THAT NO EVIDENCE WAS FILED TO SHOW THAT M/S FAIR DE AL PRINTING PRESS HAS ALREADY ACCOUNTED FOR THE RECEIPT AND PAID TAX ACCO RDINGLY . HE FURTHER OBSERVED THAT CIRCULAR NO. 681 CANNOT BE HELD TO BE APPLICABLE PARTICULARLY IN VIEW OF THE LATTER CIRCULAR NO. 715 OF THE BOARD WH EREIN IN REPLY TO SPECIAL QUESTION NO. 15 IT WAS CLARIFIED THAT SUPPLY OF PRI NTED ARTICLE AS PER SPECIFICATIONS BY THE BUYER WOULD AMOUNT TO WORKS C ONTRACT AND PROVISIONS OF SECTION 194C WOULD BE ATTRACTED IN SUCH A CASE. HE OBSERVED THAT VARIOUS DECISIONS QUOTED BY THE ASSESSEE HAD MAINLY RELIED ON CIRCULAR NO. 681 AND CIRCULAR NO. 715 WAS NOT CONSIDERED. ACCORDINGLY THE ASSESSEE WAS HELD TO BE LIABLE FOR DEDUCTION OF TAX U/S 194C. FURTHER THE A SSESSEE WAS HELD TO BE IN DEFAULT U/S 201 AS WELL AS FOR INTEREST U/S 201(1A) OF THE ACT. 4. BEFORE THE LD. CIT(A) THE SUBMISSIONS MADE BEFOR E THE ASSESSING OFFICER WERE REITERATED. IT WAS FURTHER EMPHASIZED THAT TH E ASSESSEE WAS PROCURING 3 PRINTED MATERIAL CONSISTING OF ANNUAL REPORT AND BA LANCE SHEETS AND OTHER MATERIAL FROM M/S FAIR DEAL PRINTING PRESS. THE AS SESSEE WAS NOT SUPPLYING ANY PAPER, INK AND LABOUR ETC. THEREFORE, SUCH PRO CUREMENT SHOULD BE TREATED AS SALE PARTICULARLY WHEN M/S FAIR DEAL PRINTING PR ESS HAS CHARGED SALES TAX/VAT AS APPLICABLE. 5. THE LD. CIT(A) AFTER EXAMINATION OF THE SUBMISSI ONS DID NOT FIND MUCH FORCE IN THE SAME. SHE OBSERVED THAT THERE WAS NO FIXED PRINCIPLE TO DEFINE THE SALE FOR CONTRACT AND CONTRACT FOR WORK AND LABOUR. SHE REFERRED TO DECISION OF HON'BLE SUPREME COURT IN CASE OF ASSOCIATED CEMENT COMPANY LTD. V CIT, 120 ITR 444 WHEREIN IT WAS OBSERVED THAT THERE IS NOTHING IN SUB-SEC 1 OF SECTION 194C WHIC H COULD MAKE US HOLD THAT THE CONTRACT TO CARRY OUT A WORK OR THE CONTRA CT TO SUPPLY LABOUR TO CARRY OUT A WORK SHOULD BE CONFINED TO WORKS CONTRA CT. SHE ALSO OBSERVED THAT HON'BLE COURT HELD THAT ANY WORK MEANS ANY WORK AND NOT A WORKS CONTRACT. SHE ALSO REFERRED TO CIRCU LAR NO. 681 WHEREIN IT IS PROVIDED THAT SECTION 194C SHALL APPLY TO ALL TYPE OF CONTRACT FOR CARRYING OUT ANY WORK INCLUDING TRANSPORT CONTRACT, SERVICE CONT RACT AND ADVERTISEMENT CONTRACTS, BROADCASTING CONTRACTS, LABOUR CONTRACTS , MATERIAL CONTRACTS AND WORK CONTRACTS. SHE OBSERVED THAT THIS CIRCULAR HAS REL IED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF STATE OF HIMACHAL PRADESH V. ASSOCIATED HOSTELS OF INDIA LTD. (1972) 29 STC 474 WHEREIN IT WAS OBSERVE D AS UNDER:- WHERE THE PRINCIPLE OBJECTIVE OF THE WORK UNDERTAK EN BY THE PAYEE OF THE PRICE IS NOT THE TRANSFER OF A CHATTEL QUA CHATTEL, CONTRACT IS A WORK AND LABOUR. THE TEST IS WHETHER OR NOT THE WORK AND LA BOUR BE STORED AND IN ANYTHING THAT CAN PROPERLY BECOME THE SUBJECT OF SA LE, NEITHER THE OWNERSHIP OF MATERIAL, NOR THE VALUE OF SKILLS AND LABOUR AS COMPARED WITH THE VALUE OF THE MATERIAL IS CONCLUSIVE ALTHOU GH SUCH MATTER MAY BE TAKEN INTO CONSIDERATION IN DETERMINING IN THE CIRC UMSTANCES OF A PARTICULAR CASE, WHETHER THE CONTRACT IS IN SUBSTAN CE, ONE OF WORK AND LABOUR OR ONE FOR THE SALE OF A CHATTEL. A BUILDIN G CONTRACT OR A CONTRACT UNDER WHICH A MOVABLE IS FIXED TO ANOTHER CHATTEL O R THE OTHER HAND WHERE THE INTENTION PLAINLY IS NOT TO SELL THE ARTI CLES, BUT TO IMPROVE THE LAND OR THE CHATTEL AND THE CONSIDERATION IS NOT FO R THE TRANSFER OF A CHATTEL BUT FOR THE LABOUR AND THE WORK DONE AND TH E MATERIAL FURNISHED, THE CONTRACT WILL BE ONE FOR WORK AND LABOUR. SHE FURTHER REFERRED TO CIRCULAR NO. 13 OF 2006 DAR TED 13.12.2006 WHICH CLARIFIES THAT WHERE THE PROPERTY IN THE ARTICLE OR THING SO FABRICATED PASSES FROM THE FABRICATED CONTRACTOR TO THE ASSESSEE ONLY AFTER SU CH ARTICLE OR THING IS DELIVERED 4 TO THE ASSESSEE SUCH CONTRACT WOULD BE A CONTRACT F OR S ALE AND SO OUTSIDE THE PROVISIONS OF SECTION 194C. AFTER THIS OBSERVATION SHE WAS OF THE OPINION THAT ON THE BASIS OF VARIOUS DECISIONS AND THE CIRCULAR S FOLLOWING PRINCIPLE EMERGED:- 1. IF THE THING TO BE DELIVERED HAS ANY INDIVIDUAL EXISTENCE BEFORE THE DELIVERY AS THE SOLE PROPERTY OF THE PARTY WHO IS T O DELIVER IT THEN IT IS A SALE. 2. IF MAJOR COMPONENT OF THE PRODUCT IS THE MATERIA L CONSUMED IN PRODUCING THE CHATTEL TO BE DELIVERED AND SKILL AND LABOUR ARE EMPLOYED FOR CONVERTING THE MAIN COMPONENTS INTO EN D PRODUCTS THE SKILL AND LABOUR ARE ONLY INCIDENTALLY USED, TH E DELIVERY OF THE END PRODUCT BY THE SELLER TO THE BUYER WOULD CONSTI TUTE A SALE ON THE OTHER HAND IF THE MAIN OBJECT OF THE CONTRACT I S TO AVAIL THE SKILL AND LABOUR OF THE SELLER THOUGH SOME MATERIAL OF CO MPONENTS MAY BE INCIDENTALLY USED DURING THE PROCESS OF END PROD UCT BEING BROUGHT INTO EXISTENCE BY THE INVESTMENT OF THE SKI LL AND LAB OUR OF THE SUPPLIER, THE TRANSACTION WOULD BE A CONTRACT FOR WORK AND LABOUR. 3. IF A CONSIDERATION IS FOR THE TRANSFER OF THE CH ATTEL THEN IT IS A SALE BUT IF THE CONSIDERATION IS FOR THE LABOUR AND WORK DONE AND THE MATERIAL FURNISHED THE CONTRACT WILL BE ONE OF WORK AND LABOUR. 4. BEFORE A PERSON CAN BE CALLED A CONTRACTOR WITHI N THE MEANING OF A SECTION 194C, HIS STATUS MUST HAVE NEXUS IN ITS CHA RACTERISTICS AS CARRYING OUT WORK FOR ANOTHER PERSON AS A CONTRACT IN THE ORDINARY SENSE HAD NOT MERELY CARRYING ON ACTIVITIES OF HIS OWN BUSINESS OR PROFESSION IN THE ORDINARY COURSE. 5. IF THE PROPERTY IN GOODS PASSES FROM THE CONTRAC TOR TO THE ASSESSEE ONLY AFTER SUCH ARTICLE OR THING IS DELIVE RED TO THE ASSESSEE SUCH CONTRACTOR WOULD BE A CONTRACT FOR SA LE. 6. IF THE PROPERTY IN GOODS WOULD PASS ON THE PRINC IPLE OF ACCRETION INSTEAD OF DELIVERY THEN IT WOULD BE A WORKS CONTRA CT. 7. WHERE THE FINISHED PRODUCT SUPPLIED TO A PARTICU LAR CUSTOMER IS NOT A COMMERCIAL COMMODITY IN THE SENSE THAT IT CANNOT BE SOLD IN THE MARKET TO ANY OTHER PERSON, THE TRANSACTION IS ONLY A WORKS CONTRACT. 8. IN A CONTRACT OF SALE, THE MAIN OBJECTIVES, THE TRANSFER OF PROPERTY AND DELIVERY OF POSSESSION OF THE PROPERTY AND WHER EAS THE MAIN OBJECT IN A CONTRACT FOR WORK IS NOT THE TRANSFER O F THE PROPERTY BUT IT IS ONE FOR WORK AND LABOUR. ON THE BASIS OF ABOVE PRINCIPLES THE LD. CIT(A) HE LD THAT THOUGH THE ASSESSEE HAS NOT SUPPLIED ANY PAPER TO THE PRESS ON WHICH TH E ANNUAL REPORTS WERE TO BE PRINTED BUT M/S FAIR DEAL PRINTING PRESS RENDERED S ERVICES FOR PRINTING AS PER SPECIFICATIONS OF THE ASSESSEE. HENCE THIS WAS A C ASE OF WORKS CONTRACT AND 5 THE PROVISIONS OF SECTION 194C WERE APPLICABLE. HO WEVER, SHE ALLOWED THE RELIEF TO THE ASSESSEE IN RESPECT OF ALLOWABILITY U/S 201(1) IN THE LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN CASE OF HINDUS TAN COCA COLA BEVERAGES PVT LTD. (2007) 163 TAXMAN 355 (S.C) AND HELD THAT THE ASSESSEE IS LIABLE FOR PAYMENT OF INTEREST AS PER PARA 26 WHICH IS AS UNDE R:- AFTER CAREFUL CONSIDERATION THIS JUDGMENT, I AM OF THE VIEW THAT THE CASE OF THE ASSESSEE IS COVERED BY THIS JUDGMENT. THE A SSESSING OFFICER IS THEREFORE, DIRECTED TO ASCERTAIN THE DUE DATES OF P AYMENT OF TAXES BY THE DEDUCTEE M/S M/S FAIR DEAL PRINTING PRESS AND CHARG E INTEREST U/S 201(1A) ACCORDINGLY AND IN ACCORDANCE WITH THE JUD GMENT IN HINDUSTAN COCA COLA BEVERAGES PVT LTD. (SUPRA) THE RELEVANT P ARA OF WHICH IS EXTRACTED BELOW: BE THAT AS IT MAY, CIRCULAR NO. 275/201/95-IT(B) D ATED JANUARY 29, 1997, ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IN OUR CONSIDERED OP INION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES NO DEMAND VISU ALIZED U/S 201(1) OF THE INCOME-TAX ACT, 1961 SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTE E-ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST U/S 201( 1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE-ASSESSEE OR THE LIABILITY FOR PENALTY U/S 271C OF THE INCOME-TAX ACT. 6. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REITE RATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE ALSO REFERRE D TO VARIOUS CIRCULARS AND DECISIONS RELIED BEFORE THE LOWER AUTHORITIES. HE ALSO REFERRED TO PAPER BOOK WHEREIN DETAILS REGARDING PAYMENT MADE TO M/S FAIR DEAL PRINTING PRESS ALONG WITH SOME SAMPLE COPIES OF THE BILLS HAVE BEEN FURN ISHED. HE EMPHASIZED THAT WHEREVER APPLICABLE M/S FAIR DEAL PRINTING PRESS HA S CHARGED SALES TAX/VAT WHICH CLEARLY SHOWS THAT IT WAS A CASE OF SALE AND NOT A WORK OF CONTRACT. 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY IN THE LIGHT OF MATERIAL ON RECORD AND THE DECISIONS CITED BY THE PARTIES. PER USAL OF THE CIRCULAR NO. 681 DATED 6.3.1984 ISSUED BY THE CBDT SHOWS THAT THE BO ARD HAS ISSUED EARLIER CIRCULARS AND WAS OF THE OPINION THAT SUCH CIRCULAR S NEED RECONSIDERATION IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN CAS E OF ASSOCIATED CEMENT COMPANY LTD. V. CIT, 201 ITR 435 ULTIMATELY FOLLOWI NG GUIDELINES WERE ISSUED VIDE PARA 7 OF THIS CIRCULAR. 7. THE CONCLUSION FLOWING FROM THE AFORESAID JUDGM ENTS OF THE HON'BLE SUPREME COURT AND THE PATNA HIGH COURT IS T HAT THE PROVISIONS 6 OF SECTION 194C WOULD APPLY TO ALL TYPES OF CONTRAC TS INCLUDING TRANSPORT CONTRACTS, LABOUR CONTRACTS, SERVICE CONTRACTS, ETC . IN THE LIGHT OF THESE JUDGMENTS, THE BOARD HAVE DECIDED TO WITHDRAW THEIR ABOVE MENTIONED CIRCULAR NOS. 86 AND 93 AND PARA 11 OF CIRCULAR NO. 108 AND ISSUE THE FOLLOWING GUIDELINES IN REGARD TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 194C. (I) THE PROVISIONS OF SECTION 194C SHALL APPLY TO A LL TYPES OF CONTRACTS FOR CARRYING OUT ANY WORK INCLUDING TRANSPORT CONTR ACTS, SERVICE CONTRACTS, ADVERTISEMENT CONTRACTS, BROADCASTING CONTRACTS, TE LECASTING CONTRACTS, MATERIALS CONTRACTS AND WORKS CONTRACTS. (II) NO DEDUCTION AT SOURCE U/S 194C SHALL BE REQUI RED TO BE MADE IF THE CONSIDERATION FOR THE CONTRACT DOES NOT EXCEED THE PRESCRIBED AMOUNT WHICH AT PRESENT IS RS. 10,000 (TEN THOUSAND ONLY). (III) THE PROVISIONS OF SECTION 194C WOULD NOT APPL Y IN RELATION TO PAYMENTS MADE FOR HIRING OR RENTING OF EQUIPMENTS E TC. (IV) THE PROVISIONS OF SECTION 194C WOULD NOT APPLY IN RELATING TO PAYMENTS MADE TO BANKS FOR DISCOUNTING BILLS, COLLE CTING/RECEIVING PAYMENTS THROUGH CHEQUES/DRAFTS, OPENING AND NEGOTI ATING LETTERS OF CREDITS AND TRANSACTIONS IN NEGOTIABLE INSTRUMENTS. (V) SERVICE CONTRACTS WOULD BE COVERED BY THE PROVI SIONS OF THIS SECTION SINCE SERVICE MEANS DOING ANY WORK AS EXPL AINED ABOVE. (VI) THE PROVISIONS OF THIS SECTION WILL NOT COVER CONTRACTS FOR SALE OF GOODS. (A)______________ (B) WHERE HOWEVER, THE CONTRACT UNDERTAKES TO SUPPL Y ANY ARTICLE OR THING FABRICATED ACCORDING TO THE SPECIFICATIONS GIVEN BY GOVERNMENT OR ANY OTHER SPECIFIED PERSON AND THE PR OPERTY IN SUCH ARTICLE OR THING PASSES TO THE GOVERNMENT OR SUCH P ERSON ONLY AFTER SUCH ARTICLE OR THING IS DELIVERED, THE CONTRACT WI LL BE A CONTRACT F OR SALE AND AS SUCH OUTSIDE THE PURVIEW OF THIS SECTIO N. (C)______________ (VII) THE PROVISIONS OF THIS SECTION WOULD APPLY IN RELATION TO PAYMENTS MADE TO PERSONS WHO ARRANGE ADVERTISEMENT, BROADCAS TING, TELECASTING ETC. (VIII) THE PROVISIONS ARE WIDE ENOUGH TO COVER NOT ONLY WRITTEN CONTRACTS BUT ALSO ORAL CONTRACTS. (IX)_________________ (X)_________________ (XI)________________ (XII)_________________ (XIII)_________________ 7 THUS FROM ABOVE IT IS CLEAR THAT AFTER CONSIDERING VARIOUS PROVISIONS IT WAS OPINED THAT PROVISIONS OF SECTION 194C ARE NOT APPL ICABLE IN THE CASE OF SALE OF GOODS. IT WAS FURTHER CLARIFIED THROUGH CLAUSE 7(B ) THAT WHERE ARTICLE OR THING WAS FABRICATED IN ACCORDANCE WITH THE SPECIFICATION GIVEN BY THE GOVERNMENT OR OTHER SPECIFIED PERSONS THEN IF PROPERTY IN SUCH AR TICLE OR THING IS DELIVERED THEN CONTRACT WILL BE A CONTRACT FOR SALE AND AS SUCH OU TSIDE THE PURVIEW OF THIS SECTION. IN OTHER WORDS, IF THE PARTY GET SOMETHIN G FABRICATED ACCORDING TO ITS SPECIFICATION, HOWEVER, PROPERTY PASSES TO SUCH PAR TY ONLY AFTER SUCH FABRICATED ARTICLE IS DELIVERED THEN IT WOULD BE THE CONTRACT FOR SALE. NOW IN CASE OF PRINTING CONTRACTS WHAT HAPPENS IS THAT FOR EXAMPLE GETTING A BALANCE SHEET OR ANNUAL REPORT PRINTED FROM A PRINTING PRESS THE PAR TY MAY SUPPLY DESIGNS, CONTENTS I.E. VARIOUS FIGURES AND DATA BUT IF SUCH PARTY DOES NOT GIVE ITS OWN PAPER OR INK FOR SUPPLY OF SUCH ANNUAL REPORT AND A FTER PRINTING ANNUAL REPORTS ARE SUPPLIED TO SUCH PARTY, THE PROPERTY WOULD OBVI OUSLY PASS AFTER THE SUPPLY OF SUCH ANNUAL REPORTS. THUS IN SUCH CASES IT WILL BE CONTRACT OF SALE. THIS IS SO BECAUSE IF LET US SAY ANNUAL REPORT IS WRONGLY P RINTED BECAUSE OF ERRORS IN THE FIGURES OR DESIGN THEN THE CUSTOMER WILL NOT AC CEPT THE DELIVERY AND THE WHOLE MATERIAL WOULD GO WASTE AND LOSS MUST OCCUR T O SUCH PRINTING PRESS. THEREFORE, THE DECISION WAS QUITE CLEAR IN CASE OF PROPERTY PASSES ONLY AFTER DELIVERY OF SUCH ARTICLE WOULD BE TREATED AS CONTRA CT OF SALE. FURTHER THIS POSITION GOT CONFUSED AND COMPLICATED BECAUSE OF RE PLY TO Q NO. 15 IN CIRCULAR NO. 715 DATED 8.8.1985. RELEVANT QUESTION AND ANSW ER IS AS UNDER:- QUESTION 15: WHETHER SECTION 194C WOULD APPLY IN R ESPECT OF SUPPLY OF PRINTED MATERIAL AS PER PRESCRIBED SPECIF ICATIONS? ANSWER: YES. THUS ABOVE MAKES IT CLEAR THAT A CASE OF PRINTING M ATERIAL PROVISIONS OF SECTION 194C WOULD BE ATTRACTED. HOWEVER, THIS POSITION HA S AGAIN BEEN DISCUSSED BY THE BOARD AND AFTER DELIBERATION AND ISSUE CIRCULAR NO. 13/06 DATED 13.12.2006 WAS ISSUED WHICH READS AS UNDER: 1. REPRESENTATIONS HAVE BEEN RECEIVED IN THE BOARD SEEKING CLARIFICATION ON THE APPLICABILITY OF SECTION 194C ON SUCH TRANSACTIONS, WHERE THE ASSESSEE HAS OUTSOURCED CERTAIN WORK RELA TING TO FABRICATION 8 OR MANUFACTURING OF ARTICLE OR THING IN ACCORDANCE WITH THE SPECIFICATIONS GIVEN BY THE ASSESSEE. CIRCULAR NO. 681 DATED 8.3. 1994 OF THE BOARD CLARIFIES IN PARA 7(VI) THAT THE PROVISIONS OF SECT ION 194C WOULD NOT APPLY TO CONTRACTS FOR SALE OF GOODS AND FURTHER CLARIFIE S THAT WHERE THE PROPERTY IN THE ARTICLE OR THING SO FABRICATED PASSES FROM T HE FABRICATOR-CONTRACTOR TO THE ASSESSEE ONLY AFTER SUCH ARTICLE OR THING IS DELIVERED TO THE ASSESSEE, SUCH CONTRACT WOULD BE A CONTRACT FOR SAL E AND SO OUTSIDE THE PURVIEW OF SECTION 194C. HOWEVER, IN REPLY TO QUES TION NO. 15 IN CIRCULAR NO. 715, DATED 8.8.1995 ON THE SUBJECT OF APPLICABILITY OF SECTION 194C, IN RESPECT OF CONTRACT FOR SUPPLY PRINTED MA TERIAL AS PER PRESCRIBED SPECIFICATIONS, IT HAS BEEN SAID THAT SUCH CONTRACT S WOULD ALSO BE COVERED U/S 194C. IT HAS BEEN REPRESENTED THAT THE VIEWS EXPRESSED IN THESE TWO CIRCULARS, TO THE EXTENT AS POINTED OUT A BOVE, ARE IN CONTRADICTION TO EACH OTHER. 2. THE MATTER HAS BEEN EXAMINED BY THE BOARD AND IT IS CONSIDERED THAT EXCLUSIVE RELIANCE ON QUESTION/ANSWER NO. 15 O F CIRCULAR NO. 715, WITHOUT TAKING INTO ACCOUNT THE PRINCIPLES LAID DOW N IN CIRCULAR NO. 681 IS NOT JUSTIFIED. BEFORE TAKING A DECISION ON THE APP LICABILITY OF TDS U/S 194C, ON A CONTRACT, IT WOULD HAVE TO BE EXAMINED W HETHER THE CONTRACT IN QUESTION IS A CONTRACT FOR WORK OR A CONTRACT FOR SALE AND TDS SHALL BE APPLICABLE ONLY WHERE IT IS A CONTRACT FOR WORK . 3. 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 I S A CONTRACT FOR WORK AND NOT A CONTRACT FOR SALE AS PER THE PRINCIP LES IN THIS REGARD LAID DOWN IN PARA 7(VI) OF CIRCULAR NO. 681 DATED 8 ..3.1994. FROM THE HIGHLIGHTED PORTION IN THE ABOVE CIRCULAR IT BECOMES CLEAR THAT QUESTION AND ANSWER NO. 15 OF CIRCULAR NO. 715 CANN OT BE BLINDLY APPLIED TO PRINTING CONTRACTS WITHOUT TAKING INTO THE PRINCIPL ES LAID DOWN IN CIRCULAR NO. 681. WHAT IT MEANS? THIS WOULD ONLY MEAN THAT IT WOULD DEPEND ON THE NATURE OF THE CONTRACT ENTERED BY A PERSON WITH A PRINTER IN CASE OF SUCH CONTRACT SHOWS THAT THE FIRST PERSON HAS NOT ONLY GIVEN SPEC IFICATIONS BUT HAS ALSO GIVEN ITS OWN PAPER OR INK AND THE PRINTER IS ONLY PRINT ING SUCH MATERIAL ON SUCH PAPER THEN PERHAPS THIS WOULD CONSTITUTE A WORKS CONTRACT AND PROVISIONS OF SECTION 194C WOULD BE ATTRACTED. HOWEVER, IF A PERSON HAS ONLY GIVEN A SPECIFICATION AFTER WHICH THE PRINTER PRODUCES SUCH PRINTED MATER IAL ON THE BASIS OF SUCH SPECIFICATIONS AND DELIVERED THE SAME TO THE FIRST PERSON THEN THAT WOULD BE A CASE OF CONTRACT FOR SALE. THIS POSITION IS FURTHE R SUPPORTED IN THE CASES WHERE THE PRINTER HAS CHARGED SALES TAX/VAT IN THE INVOIC ES RAISED AGAINST THIS PERSON. THEREFORE, THE FINDINGS OF THE LD. CIT(A) ARE NOT CORRECT WHEREIN SHE HAS OBSERVED THAT IN CASE OF PRINTING CONTRACT PROVISIO NS OF SECTION 194C WOULD ALWAYS BE ATTRACTED. THE APPLICABILITY OF SECTION WOULD DEPEND ON THE NATURE OF CONTRACT AND THE PREDOMINANT PURPOSE OF PRINTING AS OBSERVED BY THE LD. CIT(A) AND THIS POSITION HAS BEEN DISCUSSED AS DISCUSSED A BOVE HAS BEEN CONSIDERED BY THE CBDT ITSELF. WE FURTHER FIND THAT HON'BLE P UNJAB & HARYANA HIGH COURT HAS APPROVED THIS POSITION IN CASE OF CIT V. DY. CA O, MARKFED (SUPRA). PARA 5 OF THE JUDGMENT READS AS UNDER:- 9 WE HAVE CONSIDERED THE SUBMISSIONS MADE BY LD. COU NSEL OF THE REVENUE. THERE IS NO DISPUTE THAT THE MAIN PURPOSE OF THE AS SESSEE TO BUY PACKING MATERIAL IS TO OBTAIN GOODS FOR THE PURPOSE OF PACK ING OF ITS FINISHED PRODUCTS. THE FACTURM OF SUCH PACKING MATERIAL CARRYING SOME PRINTED WORK CAN ONLY BE REGARDED AS THE WORK EXECUTED BY THE SUPPLIER INCID ENTAL TO THE SALE TO THE ASSESSEE. THE FACT OF SOME PRINTING BEING DONE AS A PART OF SUPPLY IS OF NO CONSEQUENCE TO THE CONTRACT BEING ESSENTIALLY OF A SALE OF CHATTEL. THE PREDOMINANT OBJECT UNDERLYING THE CONTRACTS WERE SA LE/PURCHASE OF GOODS AND ONLY THE INTENTION OF THE RESPONDENT WAS TO BUY PAC KING MATERIAL. ADMITTEDLY, THE RAW MATERIAL FOR THE MANUFACTURING OF SUCH PACK ING MATERIAL WAS NOT SUPPLIED BY THE RESPONDENT. THUS, IT WAS A CASE OF SALE AND NOT A CONTRACT FOR CARRYING OUT ANY WORK. IN THE CASE OF CIT V. DABUR INDIA LTD. (2006) 283 ITR 197, THE HON'BLE DELHI HIGH COURT HELD THAT PRINTI NG LABELS ON CORRUGATED BOXES DID NOT REQUIRE ANY SPECIAL SKILL OR INVOLVE ANY CO NFIDENCE OR SECRECY AND THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PREDOMIN ANT OBJECT UNDERLYING THE CONTRACT WAS ONE FOR SALE OF GOODS WHICH TOOK THE C ONTRACT OUT OF THE PURVIEW OF SECTION 194C OF THE INCOME-TAX ACT, 1961. IN BDA L TD. V ITO (TDS) (2006) 281 ITR 99 (BOM) THE COURT HELD THAT IF A MANUFACTURER PURCHASES MATERIAL ON HIS OWN AND MANUFACTURES A PRODUCT AS PER THE REQUIREME NT OF A SPECIFIC CUSTOMER, IT IS A CASE OF SALE AND NOT A CONTRACT FOR CARRYIN G OUT ANY WORK. THE FACT THAT THE GOODS MANUFACTURED WERE , ACCORDING TO THE REQU IREMENT OF THE CUSTOMER, DOES NOT MEAN OR IMPLY THAT ANY WORK WAS CARRIED OU T ON BEHALF OF THAT CUSTOMER. WE ARE IN RESPECTFUL AGREEMENT OF THE ABOVECITED JU DGMENTS AND HOLD THAT THE PURCHASE OF PARTICULAR PRINTED PACKING MATERIAL BY THE RESPONDENT WAS A CONTRACT FOR SALE AND OUTSIDE THE PURVIEW OF SECTIO N 194C OF THE ACT. NO SUBSTANTIAL QUESTION OF LAW AS PROPOSED ARISES FOR DETERMINATION OF THE COURT. THUS, WE FIND NO INFIRMITY IN THE ORDER OF THE TRIB UNAL, THE APPEAL IS WITHOUT ANY MERIT AND THE SAME IS DISMISSED. IN CASE BEFORE US ALSO WE HAVE EXAMINED THE SAMPLE INVOICES AND IN MANY CASES M/S FAIR DEAL PRINTING PRESS HAS CHARGED EVEN VAT/CST. THE REVENUE HAS AT NO POINT ALLEGED OR PROVED THAT THE ASSESSEE HAD SUPPLIED PAPER OR INK TO THE PRINTER. THEREFORE, IT IS SIMPLE CASE OF CONT RACT FOR SALE/PURCHASE AS THE ASSESSEE HAS PURCHASED PRINTED MATERIAL THOUGH MADE ACCORDING TO THE SPECIFICATION OF THE ASSESSEE. THEREFORE, IN OUR HUMBLE OPINION THE PROVISIONS OF SECTION 194C ARE NOT ATTRACTED IN THIS CASE AND THE ASSESSEE IS NOT LIABLE TO DEDUCTION OF TAX U/S 194C. ACCORDINGLY WE SET ASI DE THE ORDER OF THE LD. CIT(A) AND HOLD THAT THE ASSESSEE IS NOT IN DEFAULT U/S 20 1(1) AND FURTHER NOT LIABLE TO PAY INTEREST U/S 201(IA) OF THE ACT. 9 IN THE RESULT, ALL THE APPEALS FILED BY THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED ON 31.8. 2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 .8.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 10 11