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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 ..... 2010 - - - Dated:- 31-8-2012 - T.R. SOOD AND MS. SUSHMA CHOWLA, JJ. A.K. Jindal for the Appellant. N.K. Saini for the Respondent. ORDER 1. In these appeals a common impugned order has been passed by the ld. CIT(A), Chandigarh for A.Ys 2006-07 to 2009-10. In fact the order passed is (sic) 201(1) r.w.s 201(1A) of the Act is also common order. The assessee has raised the common grounds which read as under:- "1. That ld. CIT(A) has erred in law and on facts of the case in holding that contract for purchase of printed material is a contract for work and labour and not a contract for sale. 2. That ld. CIT(A) has erred in law and on facts of the case in holding that tax is liable to be deducted u/s 194C of the Act for purchase of printed material. 3. That ld. CIT(A) has erred in law and on facts of the case in charging interest u/s 201(1A) of the Act." 2. Brief facts of the case are that a survey was carried out at the premises of the assessee. 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 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance sheets and other material from M/s Fair Deal Printing Press. The assessee was not supplying any paper, ink and labour etc. Therefore, such procurement should be treated as sale particularly when M/s Fair Deal Printing Press has charged sales tax/VAT as applicable. 5. The ld. CIT(A) after examination of the submissions did not find much force in the same. She observed that there was no fixed principle to define the sale for contract and contract for work and labour. She referred to decision of Hon'ble Supreme Court in case of Associated Cement Co. Ltd. v. CIT [1979] 120 ITR 444 (Pat.) wherein it was observed that - "there is nothing in sub-sec 1 of section 194C which could make us hold that the Contract to carry out a work or the contract to supply labour to carry out a work should be confined to works contract." She also observed that Hon'ble Court held that 'any work' means any work and not a 'works contract'. She also referred to circular No. 681 wherein it is provided that Section 194C shall apply to all type of contract for carrying out any work including transport contract, service contract and advertisement contracts, broadcasting contracts, labour contracts, mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht into existence by the investment of the skill and lab our of the supplier, the transaction would be a contract for work and labour. 3. If a consideration is for the transfer of the chattel then it is a sale but if the consideration is for the labour and work done and the material furnished the contract will be one of work and labour. 4. Before a person can be called a contractor within the meaning of a Section 194C, his status must have nexus in its characteristics as carrying out work for another person as a contract in the ordinary sense had not merely carrying on activities of his own business or profession in the ordinary course. 5. If the property in goods passes from the contractor to the assessee only after such article or thing is delivered to the assessee such contractor would be a contract for sale. 6. If the property in goods would pass on the principle of accretion instead of delivery then it would be a works contract. 7. where the finished product supplied to 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shows that it was a case of sale and not a work of contract. 7. On the other hand, the ld. DR for the revenue strongly supported the order of the ld. CIT(A). 8. We have heard the rival submissions carefully in the light of material on record and the decisions cited by the parties. Perusal of the circular No. 681 dated 6.3.1984 issued by the CBDT shows that the Board has issued earlier circulars and was of the opinion that such circulars need reconsideration in view of the decision of the Hon'ble Supreme Court in case of Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435 ultimately following guidelines were issued vide para 7 of this circular. "7. The conclusion flowing from the aforesaid judgments of the Hon'ble Supreme Court and the Patna High Court is that the provisions of section 194C would apply to all types of contracts including transport contracts, labour contracts, service contracts, etc. In the light of these judgments, the Board have decided to withdraw their above mentioned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, property passes to such party only after such fabricated article is delivered then it would be the contract for sale. Now in case of printing contracts what happens is that for example getting a balance sheet or annual report printed from a printing press the party may supply designs, contents i.e. various figures and data but if such party does not give its own paper or ink for supply of such annual report and after printing annual reports are supplied to such party, the property would obviously pass after the supply of such annual reports. Thus in such cases it will be contract of sale. This is so because if let us say annual report is wrongly printed because of errors in the figures or design then the customer will not accept the delivery and the whole material would go waste and loss must occur to such printing press. Therefore, the decision was quite clear in case of property passes only after delivery of such article would be treated as contract of sale. Further this position got confused and complicated because of reply to Q No. 15 in Circular No. 715 dated 8.8.1985. Relevant question and answer is as under:- "Question 15: Whether section 194C would apply in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es clear that Question and answer No. 15 of circular No. 715 cannot be blindly applied to printing contracts without taking into the principles laid down in Circular No. 681. What it means? This would only mean that it would depend on the nature of the contract entered by a person with a printer in case of such contract shows that the first person has not only given specifications but has also given its own paper or ink and the printer is only printing such material on such paper then perhaps this would constitute a works contract and provisions of section 194C would be attracted. However, if a person has only given a specification after which the printer produces such printed material on the basis of such specifications and delivered the same to the first person then that would be a case of contract for sale. This position is further supported in the cases where the printer has charged sales tax/VAT in the invoices raised against this person. Therefore, the findings of the ld. CIT(A) are not correct wherein she has observed that in case of printing contract provisions of section 194C would always be attracted. The applicability of section would depend on the nature of contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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