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TMI Blog2012 (10) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... During survey it was noticed that tax was not being deducted on printing and stationery for supply of printed material as per prescribed specification of the assessee. The payments were made to M/s Fair Deal Printing Press as per following details: Financial Year Amount (Rs.) 2005-06 64,19,998/- 2006-07 19,79,176/- 2007-08 60,88,633/- 2008-09 76,71,686/- Total Rs. 2,21,59,493/- The assessee was given a show cause notice as to why the payments made to M/s Fair Deal Printing Press may not be brought u/s 194C of the Act. In response it was stated that the payments made in respect of the transactions to M/s Fair Deal Printing Press were on account of contract for sale for printed material. It was further submitted that wherever applicable the sales tax/VAT has also been charged by M/s Fair Deal Printing Press. Since it was a contract for sale, therefore, in view of circular No. 681 dated 8.3.1994 the TDS provisions were not applicable. Reliance was also placed on the following decisions:- (i) CIT v. Dy. Chief Accounts Officer [2008] 304 ITR 17 (ii) CIT v. Dabur India Ltd. [2006] 283 ITR 197 (Delhi) (iii) BDA Ltd. v. ITO [2006] 281 ITR 99 Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any work including transport contract, service contract and advertisement contracts, broadcasting contracts, labour contracts, material contracts and work contracts. She observed that this circular has relied on the decision of Hon'ble Supreme Court in case of State of Himachal Pradesh v. Associated Hostels of India Ltd. [1972] 29 STC 474 wherein it was observed as under:- "where the principle objective of the work undertaken by the payee of the price is not the transfer of a chattel qua chattel, contract is a work and labour. The test is whether or not the work and labour be stored and in anything that can properly become the subject of sale, neither the ownership of material, nor the value of skills and labour as compared with the value of the material is conclusive although such matter may be taken into consideration in determining in the circumstances of a particular case, whether the contract is in substance, one of work and labour or one for the sale of a chattel. A building contract or a contract under which a movable is fixed to another chattel or the other hand where the intention plainly is not to sell the Articles, but to improve the land or the chattel and the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction is only a works contract. 8. In a contract of sale, the main objectives, the transfer of property and delivery of possession of the property and whereas the main object in a contract for work is not the transfer of the property but it is one for work and labour." On the basis of above principles the ld. CIT(A) held that though the assessee has not supplied any paper to the Press on which the annual reports were to be printed but M/s Fair Deal Printing Press rendered services for printing as per specifications of the assessee. Hence this was a case of works contract and the provisions of section 194C were applicable. However, she allowed the relief to the assessee in respect of allowability u/s 201(1) in the light of the decision of Hon'ble Supreme Court in case of Hindustan Coca Cola Beverages (P.) Ltd. v. CIT and held that the assessee is liable for payment of interest as per para 26 which is as under:- "After careful consideration this judgment, I am of the view that the case of the assessee is covered by this judgment. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned circular Nos. 86 and 93 and para 11 of Circular No. 108 and issue the following guidelines in regard to the applicability of the provisions of section 194C. (i) The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, materials contracts and works contracts. (ii) No deduction at source u/s 194C shall be required to be made if the consideration for the contract does not exceed the prescribed amount which at present is Rs. 10,000 (ten thousand only). (iii) The provisions of section 194C would not apply in relation to payments made for hiring or renting of equipments etc. (iv) The provisions of section 194C would not apply in relating to payments made to banks for discounting bills, collecting/receiving payments through cheques/drafts, opening and negotiating letters of credits and transactions in negotiable instruments. (v) Service contracts would be covered by the provisions of this section since service means doing any work as explained above. (vi) The provisions of this section will not cover contracts for sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant question and answer is as under:- "Question 15: Whether section 194C would apply in respect of supply of printed material as per prescribed specifications? Answer: Yes." Thus above makes it clear that a case of printing material provisions of section 194C would be attracted. However, this position has again been discussed by the Board and after deliberation and issue Circular No. 13/06 dated 13.12.2006 was issued which reads as under: "1. Representations have been received in the Board seeking clarification on the applicability of section 194C on such transactions, where the assessee has outsourced certain work relating to fabrication or manufacturing of article or thing in accordance with the specifications given by the assessee. Circular No. 681 dated 8.3.1994 of the Board clarifies in para 7(vi) that the provisions of section 194C would not apply to contracts for sale of goods and further clarifies that where the property in the article or thing so fabricated passes from the fabricator-contractor to the assessee only after such article or thing is delivered to the assessee, such contract would be a contract for sale and so outside the purview of section 194C. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d always be attracted. The applicability of section would depend on the nature of contract and the predominant purpose of printing as observed by the ld. CIT(A) and this position has been discussed as discussed above has been considered by the CBDT itself. We further find that Hon'ble Punjab & Haryana High Court has approved this position in case of Dy. Chief Accounts Officer (supra). Para 5 of the judgment reads as under:- "We have considered the submissions made by ld. counsel of the Revenue. There is no dispute that the main purpose of the assessee to buy packing material is to obtain goods for the purpose of packing of its finished products. The facturm of such packing material carrying some printed work can only be regarded as the work executed by the supplier incidental to the sale to the assessee. The fact of some printing being done as a part of supply is of no consequence to the contract being essentially of a sale of chattel. The predominant object underlying the contracts were sale/purchase of goods and only the intention of the respondent was to buy packing material. Admittedly, the raw material for the manufacturing of such packing material was not supplied by the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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