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The judgment addresses whether the agreement between the assessee and the printer constitutes a works contract or a contract for service, impacting the application of Section 194C of the Income-tax Act, 1961. Summary: The court examined the agreement between the assessee and the printer, where the assessee provided materials for printing periodicals, and the printer carried out the printing work. The Income-tax Officer contended that tax should have been deducted at source under Section 194C of the Act. The Appellate Assistant Commissioner, based on instructions from the Commissioner of Income-tax, ruled in favor of the assessee, canceling the interest levied under Section 201(1A) of the Act. The Tribunal upheld this decision, stating that the agreement was for service, not falling under Section 194C. The court analyzed the agreement terms, noting that the printer used materials supplied by the assessee to produce the magazines. The court determined that the agreement constituted a works contract, as the printer carried out the work of printing with the materials provided by the assessee. The court applied the test of whether the contract was one of work and labor, concluding that it was. The court held that the agreement was in the nature of a works contract, making Section 194C applicable. The court answered the questions in the negative, in favor of the Revenue, allowing costs to the Revenue. In conclusion, the court's judgment clarified that the agreement between the assessee and the printer constituted a works contract, falling under Section 194C of the Income-tax Act, 1961. The court's analysis focused on the nature of the work carried out by the printer using materials supplied by the assessee, leading to the determination that tax should have been deducted at source as per the provisions of the Act.
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