Income Tax Appellate Tribunal - Kolkata
Five Stein India Projects Pvt. Ltd., ... vs Department Of Income Tax on 2 June, 2012
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IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri Pramod Kumar (Accountant Member),
and Shri Mahavir Singh (Judicial Member)
I.T.A. No .: 34 9/ Kol. / 2011
Assessme nt year : 20 07-08
Deputy Commi ssione r of Income Tax,
Circl e-8, Kol kata..............................................................Appella nt
-Vs.-
M/ s. Five S tein India Proj ects Pvt. Ltd.,
8/1, Middl eton Row,
Kolka ta-700 071...........................................Responden t
[PAN : AADCS 7768 M]
Appearances by:
A.K. Mahapatra, for the appellant
Anup Sinha, for the respondent
Date of co ncluding t he hea ri ng : Mar ch 2 6, 2012
Date of prono unci ng the o rde r : Ma rch , 20 12
O R D E R
Per Pramod Kumar:
1. This is an appeal filed by the Assessing Officer and is directed against the order dated 18 t h November, 2010, in the matter of assessment u/s. 143(3) of the Income Tax Act, 1961 for the assessment year 2007-08, on the following grounds :-
(1) That the ld. CIT(A) has erred on facts and circumstances of the case and in law by holding that supply of articles as per the spe cification of the cus tomer would not attract TDS under section 194C and that the I . T. A . N o . : 3 4 9 / K o l . / 2 0 11 A s s e s s m e nt y e a r : 2 0 0 7- 0 8 Page 2 of 5 present case is one of sale per se and not a contra ct of work.
(2) That the ld. CIT(A) has erred on facts and circumstances of the case and in law by not considering that the work assigned by the assessee to its ve ndor is not a 'contract for sale' and instead the work is in nature of 'contract for work'.
(3) That the ld. CIT(A) has erred on facts and circumstances of the case and in law by overlooking the fact that the case of assessee does not fall under any of the exclusions given in 194C(3) of the Act.
2. Briefly stated, the relevant material facts are like this. The assessee is engaged in the business of industrial fu rnace installation. During the course of assessment proceedings, the Assessing Officer noticed that, out of total purchases of Rs.13,86,04,165/-, the assessee has made purchases of Rs.11,70,28,899/- in respect of "manufactu red goods by the vendors as per assessee's technical specifications and drawings". The Assessing Officer noted that the assessee has a full fledged design office and each order for fabrications of various parts of furnace is as per tailor made specifications and as per exact quantitative and qualitative description of various materials that a manufacturer would require for manufacturing the final product as per design given by the assessee. It was also noted that the orders are placed with the vendor after floating enquiries and after techno commercial evaluations received in response to such enquiries. On these facts, the Assessing Officer was of the view that supplies made by the vendors to the assessee were covered by the scope of 'works contract' for the purpose of section 194C, and, accordingly, the assessee ou ght to have deducted tax at source u/s. 194C in respect of these I . T. A . N o . : 3 4 9 / K o l . / 2 0 11 A s s e s s m e nt y e a r : 2 0 0 7- 0 8 Page 3 of 5 payments. The Assessing Officer was further of the view that assessee's lapse of non-deduction of tax at source is also to be visited with disallowance u/s. 40(a)(ia). Accordingly, the Assessing Officer disallowed Rs.11,70,28,899/- in the computation of total income of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A). It was contended before the CIT(A) that amendment in definition of 'work' by Finance Act, 2009 which provides that manufacturing or supplying a p roduct according to the requirements or specifications of a customer by using material purchased from a person, other than such customer, would not fall within the ambit of 'work' for the purpose of section 194C. It was submitted that this amendment is only clarificatory in nature. It was also pointed out that Hon'ble Bombay High Court in the case of CIT -vs.- Glenmark Pharmaceuticals Ltd. (231 CTR 105) has held the amendment to be clarificatory in nature. The judicial precedents in the cases of Khadim Shoe P. Ltd. -vs.- ACIT (ITA No. 2132/Kol./2005), CIT -vs.- Rebook India C o. (306 ITR 124) and Whirlpool of India Ltd. -vs.- JCIT (109 TTJ
994) were also cited in support of the contention that the provisions of section 194C do not come into play in cases where goods are supplied as per buyer's specifications. A reference was made to CBDT Circular No. 681 dated 08.03.1994 and also to CBDT Circular No. 13/2006 dated 13.12.2006. It was in this backdrop that the CIT(A) was of the considered view that merely because the goods purchased were as per specifications of the appellant, the character of purchases would not change and the provisions of section 194C will not be attracted. Learned CIT(A) also noted that decisions of a coordinate bench in the case of Khadims (supra) squarely covers the issue in favour of the assessee and these being no contrary judicial p recedent by a coordinate I . T. A . N o . : 3 4 9 / K o l . / 2 0 11 A s s e s s m e nt y e a r : 2 0 0 7- 0 8 Page 4 of 5 or higher forum, it is pending on the CIT(A). Accordingly, the impugned disallowance was deleted. The Assessing Officer is aggrieved and is in appeal before us.
3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.
4. We find that the issue is squarely covered, in favou r of the assessee, by a coordinate bench, decisions in Khadim's case (supra) and by Hon'ble Bombay High Court, judgment in the case of CIT -vs.- Glenmark Pharmaceuticals Ltd. (324 ITR 199). As held by Hon'ble Bombay High Court in Glenmark's case (supra), the amendment in section 194C which lays down that purchase of goods made as per the specifications of buyer will not attract the provisions of section 194C is only clarificatory in nature and will hold field for the earlier years as well. There is no contrary decision by Hon'ble jurisdictional High Court, or, for that purpose by any other High Cou rt. The esteemed views of Hon'ble Bombay High Cou rt, therefore, bind us as well. That apart, as held by various coordinate benches, in the cases of Whirlp ool (supra), Khadim (supra) and others, purchase of goods as per given specifications do not attract the tax deduction requirements u/s. 194C. In this view of the matter, in our considered opinion, the assessee did not have any obligation to deduct tax at source from payments in respect of purchases as per assessee's own designs and specification. Accordingly, as held by the CIT(A), the very foundation of impu gned disallowance u/s. 40(a)(ia) ceases to be sustainable in law. We I . T. A . N o . : 3 4 9 / K o l . / 2 0 11 A s s e s s m e nt y e a r : 2 0 0 7- 0 8 Page 5 of 5 accordingly approve the ground of the CIT(A) and decline to interfere in the matter.
5. In the result, the appeal is dismissed. Pronounced in the open Court today on 30 t h day of March, 2012.
Sd/- Sd/-
Mahavir Singh Pramod Kumar
(Judicial Member) (Accountant Member)
Kolkata, the 30 t h day of March, 2012
Copies to : (1) Th e app ell ant
(2) Th e respon dent
(3) CIT
(4) CIT(A)
(5) Th e D ep artment al Rep resentativ e
(6) Guard File
By order etc
Assis tant Registrar
Income Tax Appe llate Tribunal
Kolkata benches, Kolkata
Laha/Sr. P.S.