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TMI Blog2013 (12) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to deduct tax at source u/s 194(c) of the Act. 2.1 Briefly stated, the assessee, a company engaged in the business of import of jewellery and retail selling through kiosks while declaring a total income of Rs.14,64,103/- had claimed a deduction of Rs.4,03,278/- on account of advertisement expenses which included a sum of Rs.3,93,273/- paid to M/s. Akar Labels Pvt. Ltd towards the charges for printing of the company's product catalogue. However, in the assessment framed u/s 143(3), the AO disallowed the said expenditure of Rs.3,93,273/- and thereby added the same to the total income of the assessee u/s 40(a)(ia) as the assessee had failed to deduct tax at source u/s 194 (c) of the Act. On appeal, the Ld.CIT(A), by relying on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. As regards the decision of the Tribunal in the case of BDA Ltd. Vs. ITO (supra) relied on by the Ld.CIT(A), the Single Member Bench of the Tribunal has held that the payments made by the assessee for supply of printed labels utilized for pasting on the bottles is in the nature of works contract within the meaning of section 194C of the Act. It is pertinent to mention that the said decision relied by the Ld.CIT for his impugned decision has been reversed by the Hon'ble High Court of Bombay in Tax Appeal No. 44 of 2003 reported in [2006] 153 Taxman.com 386. As regards the decisions of the Hon'ble High Court of Bombay in the case of Sarvodaya Printing Press Vs State of Maharashtra 93 STC 387, and the Hon'ble Apex Court in the case of Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of packing of its finished products is a contract of sale and not work contract. Therefore, it is very clear that supply of all kinds of printed material would not amount to works. In view of the fact that the expenditure incurred by the assessee for the purpose of printing product catalogue and telephone index, in our view, is in the nature of contract for sale/purchase and not in the nature of 'works contract'. Therefore, the impugned expenditure does not attract the provision of section 194(c). Resultantly, the decision of the Ld.CIT(A) confirming the impugned disallowance made by the AO by invoking section 40(a)(ia) is not legally tenable and hence the same is deleted. 3. The second issue raised by the assessee in ground no. 3 relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 'regular basis'. However, in the case of the assessee, it is found that the payment made to hotel for booking room is not taken on regular basis and only as per rate contract. In view of that matter, we are of the considered opinion that the Ld.CIT(A) has not correctly relied on the circular in its letter and spirit. Therefore, the assessee case is not attracted by the provisions of section 194-I. In view of that matter, since the assessee is not required to deduct TDS on the said expenditure, we delete the impugned disallowance made by the AO and the confirmed by the Ld.CIT(A).
4. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on this 20th day of November, 2013. X X X X Extracts X X X X X X X X Extracts X X X X
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