Income Tax Appellate Tribunal - Ahmedabad
Ito, Ward-1(3)(1), Vadodara vs Aroma De France, , Vadodara on 8 May, 2017
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'डी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D " BENCH, AHMEDABAD
सव ी एस.एस.गोदारा, या यक सद य एवं द प कुमार के डया, लेखा सद य के सम ।
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER &
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.528/Ahd/2016
( नधा रण वष / Assessment Year : 2012-13)
The Dy.CIT बनाम/
M/s.Aroma De France
Circle-1(3) Vs. Block-1441
Vadodara - 390 007 Village: Dabhasa
Tal: Padra,
Dist:Vadodara - 391 440
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AALFA 6998C
(अपीलाथ' /Appellant) .. ( (यथ' / Respondent)
अपीलाथ' ओर से /Appellant by : Shri Vilas v. Shinde, Sr.DR
(यथ' क* ओर से/Respondent by : Shri Mukund Bakshi, AR
ु वाई क* तार ख /
सन Date of Hearing 03/05/2017
घोषणा क* तार ख /Date of Pronounce ment 08 / 05/2017
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM:
The captioned appeal by the Assessing Officer (AO) 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 read as under:-
ITA No.528/Ahd/2016DCIT 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 account of non- deduction of tax on the payment of supply of printed packing material without appreciating the fact that the AO has collected material during survey and has established beyond doubt that the fixed contract with the vendor in this case is a contract 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) in granting relief on account of non-deduction of tax on the payment towards supply of printed packing material on the premise that the supply 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-firm engaged in the business of manufacturing of perfume. The assessee filed return of income for the relevant AY 2012-13 which was subjected to scrutiny assessment. In the course of assessment proceedings, a survey action also carried out at the premises of the assessee on 19/02/2015 wherein it was inter alia noted that the assessee is in possession of huge stock of printed material. It was noticed by the Revenue that assessee has fixed vendors to carry out printing material as per exacting specifications of the assessee. It was thus, claimed by the Revenue that the transaction towards obtaining the packing material from the suppliers 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 of material. The AO inter alia recorded certain queries raised in survey concerning the issue in the assessment order and also placed reliance on circular No.715 dated 08/08/1995. He finally concluded that the transactions on account of printed packing material is covered within the meaning of section 194-C of the Act. The AO thus found that the expenditure incurred on printed packing material amounting to Rs.3,15,56,185/- is liable for TDS obligations in terms of section 194C of the Act which has not been complied with. The AO accordingly invoked section 40(a)(ia) of the Act and disallowed the aforesaid payment towards for non-deduction of TDS.
5. In first appeal against the order of AO, the CIT(A) examined the facts and the legal position in great length with reference to various case-laws as per para-10 of its order concluded that impugned transactions on account of supply of printed packing material to the assessee was in pursuance of a 'contract for sale' and not a 'contract for work' as alleged. Consequently, it was held by the CIT(A) that provisions 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/2016DCIT vs. Aroma De France Asst.Year - 2012-13 -4-
6. The Revenue preferred an appeal against the order of the CIT(A) before the Tribunal.
7. The Ld.DR for the Revenue relied upon the order of the AO.
8. The Ld.AR for the assessee Mr.Mukund Bakshi vociferously supported the order of the CIT(A).
8. We have heard the rival submissions. The central controversy in the instant case involves around applicable or otherwise of section 194C of the Act on expenditure incurred towards printed packing material.
8.1. In this context, we note at the outset from the survey statement extracted in one assessment order wherein assessee had argued that it does not supply material to the supplier for production of printed packing material. It was answered before the survey officer that the material were purchased by placing the order. It was further pointed out in the survey statement that owing to huge requirement of packing material, it is difficult to find the market by way of direct purchase. 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 supply 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 behalf of the assessee that section 194-C would apply to a person responsible for paying any sum to any recipient for carrying out any work including supply of labour for carrying out any work in pursuance of a contract would be under statutory obligation to deduct TDS at a certain percentage of the contract as specified in aforesaid provision. Ostensibly, obligation under s.194-C towards expenditure incurred arises out of 'carrying out any work'. As noted, expression 'work' specifically includes supply 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 using material purchased from such customer. It is undisputed fact in the instant case that the supply of printed packing material is the responsibility and the supplier without involving any cross-supply of raw-material from the assessee. Such phraseology employed in the provision of the statue 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 packing material albeit as per the requirement and specification of the customer but without seeking supply material from the customers stands excluded from the scope of expression "work" as provided in the aforesaid provision.
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 printed material is not done as per the specifications provided by the assessee imparts such transactions with the character of 'contract of work'. We do not find any merit in such plea. Even ordinary purchase which does not suit the requirement of customer can be rejected. Such simple 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 alter the character and complexion of contract of 'supply 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 was 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 out 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 above. We observe that the CIT(A) has dealt that the objections of the Revenue with regard to the aforesaid CBDT Circular in great length and distinguished the situation prevailing in the aforesaid impugned assessment year 2012-13 with reference to several judicial precedents. We also note that the Coordinate Bench of Tribunal in Panjab Contractors Ltd. vs. ITO (TDS) (2012) 26 Taxmann.com 73 (Chd.) after considering Circular No.715 dated 08/08/1995 held that where a person had provided only specification for supply of printed material without supply of material 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 the assessee are subjected to various taxes viz. excise duty, VAT, and CST on the sale price. Ostensibly, it is the ownership of the printed packing 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 circumstances, we find it manifest that the transaction on account of supply of printed 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, section 40(a)(ia) has no application in the given facts. The disallowance made 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 taken by the CIT(A) on the issue and thus decline to interfere therewith.
9. In the result, appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 08 / 05/2017
Sd/- Sd/-
(एस.एस.गोदारा) ( द प कुमार के डया)
या यक सद य लेखा सद य
( S.S. GODARA ) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 08 / 05 /2017
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क ! त#ल$प अ%े$षत/Copy of the Order forwarded to :
1. अपीलाथ' / The Appellant
2. (यथ' / The Respondent.
3. संब6ं धत आयकर आय8 ु त / Concerned CIT
4. आयकर आय8 ु त(अपील) / The CIT(A)-5, Vadodara
5. 9वभागीय त न6ध, आयकर अपील य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स(या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 4.5.17 (dictation-pad 20- pages 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 Dictating 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 Registrar for signature on the order..........................
10. Date of Despatch of the Order..................