2006 (9) TMI 175 - HC - Income Tax

Liability to deduct TDS - Contract - Tribunal is right in law in considering supply of printing and packaging materials as a contract for sale and not a service/works contract hence there was no liability of assessee to deduct tax at source Tribunal is right in deleting the penalty levied under section 271C of the Income-tax Act being consequence of order under section 201(1) - Tribunal is right in law in deleting demand raised as per order u/s 201(1) & 201(1A) read with section 194C

Summary

Issues:
1. Deletion of penalty under section 271C of the Income-tax Act
2. Deletion of demand raised by the Income-tax Officer
3. Classification of supply of printing and packaging materials as a contract for sale or service/works contract
4. Applicability of provision of section 194C of the Income-tax Act on the work contract of supply of printed materials

Analysis:

Deletion of Penalty under Section 271C:
The main issue in this case was whether the Appellate Tribunal was correct in deleting the penalty levied under section 271C of the Income-tax Act as a consequence of an order under section 201(1) of the Income-tax Act 1961. The appellant raised concerns regarding the separate nature of penalty proceedings. However, the Court, after considering previous similar cases, found no substantial question of law arising and dismissed the appeal based on the precedent set in Tax Appeals Nos.1043 and 1044 of 2005.

Deletion of Demand Raised by the Income-tax Officer:
Another issue raised was the deletion of the demand raised by the Income-tax Officer (TDS) under sections 201(1) & 201(1A) read with section 194C of the Income-tax Act, 1961. The Tribunal had deleted this demand, prompting the appellant to question the correctness of this decision. However, following the precedent set in a previous case, the Court found no substantial question of law and dismissed the appeal.

Classification of Supply of Printing and Packaging Materials:
The Tribunal's decision to consider the supply of printing and packaging materials as a contract for sale rather than a service/works contract was also challenged. The appellant questioned the legal correctness of this classification. However, the Court, in line with its previous rulings, found no substantial question of law in this regard and dismissed the appeal.

Applicability of Section 194C of the Income-tax Act:
Lastly, the issue of the applicability of section 194C of the Income-tax Act on the work contract of supply of printed materials was raised. The Income Tax Appellate Tribunal had dismissed the appeal of the revenue on this issue. The appellant contested this decision, but the Court, following its earlier order, found no substantial question of law and dismissed all the appeals accordingly.

In conclusion, the High Court of Gujarat dismissed all the appeals based on the precedent set in earlier cases and found no substantial questions of law in the issues raised by the appellant.