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TMI Blog2018 (5) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2005-06.The assessee filed the return of income in this case on 16.6.2010 declaring total income of Rs. 81,44,010/-. The assessment was completed u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 27.12.2011 and the total income was determined at Rs. 97,74,850/-. Subsequently, the CIT(Cental), Vijayawada has taken up the case for revision u/s 263 of the Act as the assessing officer did not examine the issue with regard to the tax deduction at source on payments made to packing material and consequent disallowance u/s 40(a)(ia) of the Act, hence, the CIT(C) passed an order u/s 263 of the Act holding that the assessment orders passed u/s 143(3) r.w.s. 153A of the Act were erroneous and prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as work contract and estimated the value at 25% of the total expenditure, which attracts TDS and accordingly disallowed the same u/s 40(a)(ia) of the Act. 3. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and the Ld. CIT(A) observed that material required for manufacturing & packing material was not supplied by the assessee, hence, the same can be called as contract for sale and such contract cannot be called as works contract. However, the Ld. CIT(A) observed from model boxes that the assessee retained right to return the goods, which is not common in trading. In trading commonly used maxim is goods once sold cannot be taken back, hence, directed the A.O. to disallow 10% on the total value of the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation printed on it cannot be called as contract for sale and the same is works contract. Since the items are specifically printed for the sake of the assessee and cannot be used by others, the same should be treated as works contract. There is an element of works contract involved in the supply of the printed material. Therefore, argued that the Ld.CIT(A) rightly estimated disallowance u/s 40(a)(ia) @ 10% of packing material, hence, no interference is called for. The Ld. D.R. relied on the clarification issued by the Government of India, Income Tax Department circular No.1119, wherein the CBDT clarified that TDS would apply in respect of printed material as per prescribed specifications and supported the orders of the lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract involved. Department's case is that though assessee had purchased the printing material and some part of the packing material involved the works contract, which required to be disallowed u/s 40(a)(ia) of the Act. Both the CIT(A) and the A.O. made the disallowance by estimation. Neither the A.O. nor the CIT(A) quantified the expenditure and specified the element which attracts the provisions of TDS u/s 194C of the Act. As per the provisions of section 40(a)(ia) of the Act, any sum payable to a resident on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or after deduction has not been paid required to be disallowed u/s 40(a)(ia) of the Act. There is no case for estimation of such expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buying the packing material with some specifications does not attract the provisions u/s 194C of the Act. For ready reference, we extract relevant part of the ITAT order, which reads as under: "The learned CIT (A) deleted the addition by holding that the packing material etc., falls in the category of 'Contract for sales' and not under "Work contract" and accordingly held that the said payments fall outside purview of Section 194C of the Act. Accordingly he deleted the impugned addition made in all these cases. The learned CIT (A) relied on the decisions of Hon'ble Bombay High Court in the case of BDA Ltd. vs. ITO (TDS) (2006) 281 ITR 99 and the Hon'ble Delhi High Court decision on the case of CIT vs. Dabur India Ltd. (2006) 283 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, we extract the relevant part of the order of the jurisdictional High Court as follows: The Learned Tribunal on fact found that the assessee has incurred advertisement expenditure. The Learned Tribunal further found that the predominant object underlying the transaction of receiving the T-shirts and making the payments is largely for purchase of goods and even if there is some logo of the assessee printed on it, it would not change the nature of the transaction to works contract, so as to attract the provisions of Section 194C of the Income Tax Act. The learned Tribunal has also taken note of the decision of the Delhi High Court in the case of CIT Vs. Dabur India Ltd., (283 ITR 197) and applied the law correctly and as such we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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