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TMI Blog2006 (5) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... consequently the provisions of section 194C did not apply. ( iii )The learned CIT(A) ought to have appreciated that merely because there is some printing on the packing material, it does not convert the purchase of goods into a Works Contract for the purpose of levy of TDS under section 194C of the Act." 2. The appellant is a registered co-operative society dealing in milk and milk-products. For the relevant assessment years, the appellant had made purchases of packing material from successful bidders on tenders issued by the Karnataka Co-operative Milk Producers Federation Ltd. (herein-after referred to as "the KCMP"). On the basis of the tender, the bidders give their best offer and the successful bidder is issued the purchase order by the various members of the KCMP of which the appellant is one. The Income-tax Officer was of the opinion that as the packing materials were printed packing material, the transaction that the appellant had with the sellers of the packing material was a specific work-order and consequently invoked the provisions of section 194C of the Act and held that the appellant was due to deduct TDS on the payment made to the suppliers of the packing mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific works contract, the raw material should normally be supplied by the appellant. The appellant here supplies no raw material in any form whatsoever. Further, the assessing authority has even not verified with the suppliers of the material where the contract is for the supply of goods or for specific works-contract. Without doing any verification, the appellant has been held to be an assessee-in-default. The appellant does not raise purchase order on any person other than the successful bidder in the tender raised by KCMP. He also relied upon the decision of ITAT, Pune in the case of Wadilal Dairy International Ltd. v. Asstt. CIT [2002] 81ITD 238. It was further submitted that the decision of ITAT, Pune in Wadilal Dairy International Ltd. s case ( supra ) has been approved by Hon ble Bombay High Court in the case of BDA Ltd. v. ITO [2006] 281 ITR 99. The issue in present appeal is identical to the facts of the case of BDA Ltd. ( supra ). In view of the same, the assessee cannot be treated as assessee in default and hence, the tax cannot be recovered from the assessee. Consequently, interest levied under section 201(1A) is to be deleted. 2.3 Learned DR on the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, and a contract for sale, on the other, arises because the distinction between the two is very often a fine one. This is particularly so when the contract is a composite one involving both a contract of work and labour and a contract of sale. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel (Halsbury s Laws of England, 3rd edition, vol. 34, 6-7)". Hon ble Supreme Court in the said case was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 SC 1396". The issue in this decision was whether sales tax was to be paid on the value of paper and whether the same was taxable turnover. It was a job of printing and not purchase of materials and the value paid for such a printing job included to a large extent the price of not only the technical and professional work but also the value, if it could be measured in terms of money, of the confidence and faith reposed in the printer as the printing was entrusted on a highly confidential matter. In view of the peculiar features, the contracts were predominantly contracts for work with confidence and faith and had to be treated mainly as contracts for labour which is not so in the appellant s case as the products are purchased on the basis of the purchase orders given to the highest bidders of the tenders. This decision of Hon ble Supreme Court was considered by Hon ble Bombay High Court in the case of BDA Ltd. ( supra ). At pages 108-109, Hon ble Bombay High Court held as under : "It is not disputed that, M/s. Mudranika is an independent establishment engaged in the business of supplying printed packaging material to various establishments, and it is not a captive unit of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly printed and marked as desired. The invoices raised in this behalf clearly show that it is for supply of co-extruded transparent LD/LLDPE pouch, film, 5 layer nylon film for packing ghee, printed BOPP tapes, corrugated boxes of various sizes and varieties etc. The printing of certain specification is only incidental but is not the sole intention. In the CBDT Circular No. 681, dated 8-3-1994 relating to supply of article or thing fabricated as per the order of the customer, whether covered by section 194C, it was explained as below : "Where, however, the contractor, undertakes to supply any article or thing fabricated according to the specifications given by Government or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this section ( i.e., section 194C). We accordingly hold that the assessee, having procured packing material from various suppliers as per its specification, it was a case of purchase of material and not a payment towards works contract. We accordingly hold that the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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