2010 (4) TMI 795 - AT - Income Tax

Purchase of material with logo is to be treated as a contract for sale or a works contract - Held that- the supply of printed material purchased by the assessee for use in manufacture and trade of footwear was transaction for purchase and sale. This is strengthened by the fact that suppliers charged 4 per cent value added tax which is not disputed. - assessee was not liable to deduct tax at source under section 194C on the payments made for purchase of printed material.

Summary

Issues:
- Interpretation of whether the transaction of getting material printed amounts to a contract for supply or a transaction of purchase and sale.
- Applicability of section 194C for deduction of tax at source on the transaction.
- Comparison of decisions by different Tribunals and High Courts on similar issues.

Analysis:
1. Nature of Transaction: The primary issue in this case revolved around determining the nature of the transaction of getting material printed. The Revenue contended that it amounted to a contract for supply of printed material under section 194C. However, the assessee argued that the transaction was a purchase and sale basis, evident from the suppliers charging value-added tax at 4 per cent.

2. Applicability of Section 194C: The debate further delved into the applicability of section 194C for deduction of tax at source on the said transaction. The Departmental representative supported the Assessing Officer's view that the transaction fell under the purview of section 194C. On the contrary, the assessee maintained that the purchase of printed material was a sale and purchase transaction, not a contract for supply, hence not liable for deduction under section 194C.

3. Comparison of Decisions: The Tribunal referenced decisions from different benches and High Courts to support its judgment. Notably, the Tribunal cited a case involving Bata India Ltd. where a similar issue was addressed, and it was concluded that the transaction of purchasing footwear with a specific logo was a purchase and sale of goods, not a works contract under section 194C. This precedent, along with the assessee's own case, supported the decision that the printed material purchase was a transaction of purchase and sale, not a contract for supply.

4. Final Decision: After considering the arguments and precedents, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals), ruling in favor of the assessee. The Tribunal dismissed the appeals filed by the Revenue, affirming that the assessee was not liable to deduct tax at source under section 194C for the purchase of printed material, as it was deemed a transaction of purchase and sale.