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2015 (4) TMI 597 - ITAT MUMBAINon deduction of TDS on the payment for supply of batteries - Held that:- In the instant case, the first and foremost thing is that the appellant has entered into a contract / agreement with vendors for purchase of Kodak batteries. It has not entered into a works contract at 'all. Further, the appellant has not supplied any raw material to the manufacturer. The manufacturing activities has been carried out by the manufacturer in its factory Only the printing name Kodak on batteries and also manufacturing with certain specifications does not convert the sale contract into works contract. The manufacturer also pay sales tax / VAT on such sales. The property in the goods and the delivery of the possession is given to the appellant at the ultimate point of sale. In view of the facts, and the CBDT's circulars as well as judicial decisions on this issue, I am of the view that the action of the Assessing Officer was not justified entreating the purchase / sales contract as contract for works u/s.194-C Therefore, the transaction between the appellant and vendors is being treated as 'sales transaction’ or a ‘contract for sale’., which will not fall under the provisions of sec. 194C of the IT Act, and therefore, the demand raised by the Assessing Officer is deleted. From the facts as recorded by the CIT(A), it is clear that the agreement between the assessee and Powercell Batteries India Ltd is not job work agreement but it was simply an agreement of purchase for specific battery with the name of the assessee printed on the cell. An identical issue was considered by the Hon'ble Jurisdictional High Court in case of CIT Vs. Glenmark Pharmaceuticals Ltd [2010 (3) TMI 289 - BOMBAY HIGH COURT] - Decided in favour of assessee. Non deduction of tax in respect of payment made on supply of Cameras manufactured by Hical Magnetic Pvt. Ltd. - Held that:- activity of Hical Magnetic Pvt. Ltd. do not have financial risk and working capital risk as it was all provided by the assessee. Even the procurement of the raw material is also arranged by the assessee as per the tripartite agreement. Thus it is nothing but a job work contract under these two agreements. Further the assessee is paying the entire cost in advance being working capital and compensation with the margin on cost of raw material and labor at the rate of ₹ 8.04 per Camera to Hical which is nothing but the job work charges. The price arrangement as agreed between the parties clearly shows that it is a job work of assembling of cameras by Hical Magnetic Pvt. Ltd. The Hical Magnetic Pvt. Ltd. in fact, receiving only the labor charges and mark up of ₹ 8.04 per camera which is subjected to TDS being job work charges paid by assessee. Therefore, it is not the entire payment to the Hical Magnetic Pvt. Ltd. but only the labor charges of ₹ 20.84 and margin of ₹ 8.04 total amounting to ₹ 28.88 per camera towards the assembling job is subjected to TDS. Accordingly, we set aside the impugned order of CIT(A) on this issue and restore the order of Assessing Officer to the extent of applicability of section 194C only on the payment of ₹ 28.88 per camera. The decision relied upon by the CIT(A) in the case of CIT Vs. Glenmark Pharmaceuticals (supra) is not relevant on the facts of this issue when the arrangement is found to be work contract. - Decided against assessee. Short deduction of TDS on the payment to agent - Held that:- Once the payment is made through the agent to the third party against the services provided by the third party, the assessee is liable to deduct tax on such payment or to ensure the TDS through the agent. There is no denial of the fact that these payments were not subjected to TDS either by the assessee or by the agent. Failure to deduct tax for such payment at any stage either by the agent or by the assessee would attract the provisions of section 201(1) and 201(1A). If this modus operandi is allowed then in each and every payment which otherwise attracts the TDS can be given a colour of reimbursement of making the payment through intermediatory and consequently circumvent the provisions of TDS. The real fact is that the payment is made for and on behalf of the assessee by the agent and, therefore, the same would be considered as payment made by the assessee to the third party for the purpose of TDS provisions under chapter XVII of the Act. Thus we set aside the order of CIT(A) and restore the order of Assessing Officer on this issue. - Decided against assessee.
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