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TMI Blog2012 (12) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the freight expense for non-deduction of TDS – Held that:- As concluded from the facts there was no contract as such, with the transporter and the assessee. In absence of any contract, TDS provisions u/s 194C cannot be attracted, hence, the disallowance is deleted. Issue decides in favour of assessee - I.T.A. NO. 2824/M/2010 & I.T.A. NO. 5869/M/2010 - - - Dated:- 25-7-2012 - SHRI P.M. JAGTAP SHRI VIVEK VARMA, JJ. Appellant by : Mr. A.C. Tejpal, CIT-DR Respondent by : Mr. Yogesh Thar ORDER Per VIVEK VARMA, JM: In ITA No. 2824/M/2010, appeal has been filed by the department against the order of CIT(A)-14, dated 29.10.2010. The appeal is directed against the order, whereby CIT(A) has reversed the order of ITO (TDS) s order u/s 201(1), 201(1A). The Following grounds have been raised herein : a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that M/s. Sheil Industries has been given manufacturing contract for the goods be supplied to the assessee company from out of material supplied by the assessee and as per its specifications. b) On the facts and in the circumstances of the case and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of sections 40(a)(i) and 40(a)(ii) of the Income Tax Act. The following grounds have been raised : a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowances of Rs.56,47,12,860/- u/s.40(a)(i) and 40(a)(ii), treating the assessee not in default for non deduction of TDS on certain items of expenditures. ITA No.2824/M/2010 3. The issue in appeal is whether the domestic purchase of traded goods of Rs. 27.39 crores and purchases through import at 23.03 crores are liable for tax deduction u/s 194C and consequently for non-deduction of tax, would the assessee be treated as assesses in default. 4. The facts emerging from the order of CIT (A) are as under: The appellant has 3 different methods of sourcing of product for sale. viz. a. Own manufacturing in factories owned by the appellant. b. Manufacturing of pro9ducts done through Job Workers for payment of Job Work charges for the same where the appellant supplies Raw Materials and Packing Materials. c. Purchase of products for resale / trading. During the course of survey, the survey team had asked the appellant whether tax was being deducted on paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S on the Local as well as Import Trading Purchases. Further, ITO also ignored that the purchases of imported trading material were from non-residents and section 194C does not apply to payments to non-residents. Section 194C(1) states Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and . It is clear from the clause that this section deals only with payments to residents and it does not deal with payments to non-resident foreign suppliers. It is amply clear from the above that in the case of purchases of traded goods from local suppliers, where the suppliers have purchased the materials from outside parties and supplied goods manufactured by them to the appellant no tax is required to be deducted. 5. On considering these submissions the CIT (A) held as under: I have gone though the order passed by the AO carefully. I have also gone through the paper book and perused the submission of the appellant. On perusal of details and relevant documentary evidence, there remains no dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Apex Court held, and that the same did not give rise the any income taxable in India and therefore the appellant was not liable to deduct TDS . The AR cited the decision rendered by Hon ble Bombay High Court in the cae of CIT vs Glenmark Pharmaceuticals Ltd, reported in 324 ITR 199 (Bom.), wherein it has been held, A contract for sale has to be distinguished from a contract of work . The AR also referred to the case of BDA Ltd. vs ITO (TDS), reported in 153 Taxman 386 (Bom), wherein the Hon ble High Court held that, the supply of printed labels by manufacturer to the assessee was a contract of sale and it could not be termed as a works contract . He also referred to the case of CIT vs Reebok India Company, reported in 175 Taxman 175 (Del), wherein the transaction between assessee and manufacturers were those of sale of goods and were not in nature of works contract. 8. We have heard the arguments and gone through the facts and evidences brought on record. We find that as a matter of fact, the CIT(A) has come to a logical conclusion that the assessee had complied with the provisions of Chapter XVII, wherever it was applicable. We have gone through the details of TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment of royalty, by the Hon ble Supreme Court in the case of G.E. India (supra). We, therefore, do not find any merit in the grounds raised by the department, which we reject. 14. In the consequence, the appeal filed by the department is dismissed. ITA NO.5869/M/2010 15. In the present appeal, the department is disputing the relief of Rs. 56,47,12,860/- allowed by the CIT(A) by deleting the disallowance made by the AO under section 40(a)(i) for non deduction of tax at source. 16. We have already given our finding in ITA No. 5869/M/2010 with regard to payments on trading purchases at Rs. 27,39,98,307/- and Rs. 23,03,71,255/- and payments made for professional fees at Rs. 2,85,34,566/- that provisions for TDS are not applicable, hence we delete the same here as well, holding that no disallowance is liable to be made under section 40(a)(i). 17. So far as TDS on freight at Rs. 1,28,23,566/-, it has been shown that there was no contract as such, with the transporter and the assessee. In absence of any contract, TDS provisions cannot be attracted, hence, the disallowance is deleted. 18. On the TDS on sales promotion expenses at Rs. 1,89,85,166/- the AR reitera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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