9911796707
TMI Blog2018 (8) TMI 1368X X X X Extracts X X X X X X X X Extracts X X X X ..... sion was made in support of Revenue’s stand that the recipients thereof were not genuine. But in the appendage to the assessment order, to which we have referred to earlier, there is specific reference to such notices being sent. The Tribunal further found that there was no violation of Section 194H of the Act as the transactions involved were all purchases and sales. There was no actual transaction between the parties for the target incentives and only credit notes were provided to the distributors who had achieved the target which they could redeem at the time of subsequent purchases. Decided in favour of assessee. - ITAT No.18 of 2017 With GA No.181 of 2017 - - - Dated:- 12-6-2018 - MR. ANIRUDDHA BOSE AND MRS. MOUSHUMI BHATTACHARYA, JJ. For The Appellant : MR.ANIMESH KANTI GHOSAL, SR ADVOCATE, MR.SOUMITRA MUKHERJEE ADVOCATE For The Respondent : MR.SOMNATH BANERJEE, ADVOCATE, MS.SWAPNA DAS, ADVOCATE. ORDER Aniruddha Bose,J.: In the assessment order out of which this appeal arises, the Assessing Officer had disallowed deductions claimed by the assessee as expenses in respect of three heads and it is this dispute which forms subject of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead packing material purchase . The A.O. has disallowed the aforesaid sum by invoking provisions of Sec.40(a)(ia) because he was of the opinion that the appellant company was required to deduct tax u/s.194C of the Act. He made the aforesaid opinion for the reason that the packing material purchased by the appellant company was as per the specifications given by him to its suppliers. The packing material supplied by the suppliers as per the specifications given by the appellant company could only be used by the appellant company and in case of any excess etc., the suppliers cannot sell the material to any other customer. In case of any defect in the material with reference to the specifications provided by the appellant company, the suppliers have to destroy such defective printing material having no value at all. In view of these facts, the A.O. was of the opinion that the purchases made by the appellant company from its suppliers of packing material tantamount to work contracts and not contract for sale. Hence, on the payments made for purchase of packing material, the appellant company was required to deduct the tax u/s.194C of the Act. On the other hand, it was argued by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r supplying a product according to the requirement or specification of a customer by using materials purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. So the definition as defined by the Act clearly shows that the present transaction does not fall in the category of the work because here the material was not supplied by the assessee for the printing of packaging materials. In several cases the different tribunals and court has held the such transactions as contract for sale and out of the preview of section 194C of the Act. 5. The Tribunal, in its decision referred to several decisions on this point delivered by the Income Tax Appellate Tribunals of different jurisdictions and held:- So from the aforesaid judicial pronouncement, it is clear that a work does not include where supply of a product according to requirements or specification of a customer by using materials purchased from a person other than the customers. Hence, the provision of Sec.194C does not attract to the present case. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Notices u/s.133(6). If any discrepancy noted in future, appropriate action would be taken as per I.T.Act. Through this note, learned Counsel for the assessee sought to establish that addresses of the distributors were available as otherwise, such notices could not be sent. 7. The First Appellate Authority opined on this issue:- . The details of handling and distribution charges, the incentive charges and the sales promotion expenses were furnished before the A.O. and in fact, in the very beginning of the assessment order, the A.O. himself as mentioned that A.R. of the assessee appeared from time to time, produced various details and documents as per requisition along with books of accounts viz. cash book, ledger, bank book, bills and vouchers relating to expense which are examined by him. The A.O. did not pointed out any defect or discrepancy in the details and documents filed before him and also did not find any defect in the books of account and bills and vouchers produced before him for examination. In spite of that the A.O. has made several remarks in the assessment order. It is observed from the assessment order that the additions on account of selling expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and declared various schemes during the year according to which if a dealer or distributor who purchases the goods from the appellant company is able to achieve the sales targets, such dealer and distributors will be entitled for certain percentage of incentives. Such incentives are given to the dealers and distributors by issuing credit notes which are adjusted against the subsequent purchases by the dealers and distributors. The dealers and distributors of the appellant company make the purchases against the payment and the sales bills are issued by the appellant company. Once, the goods are sold by the appellant company to the dealers and distributors, the right of ownership of such goods is transferred to the buyer and after that such buyer is free to deal with goods in the manner he likes. The appellant company do not have any right or control over the goods sold to the dealers and distributors and all the stocks belongs to the buyers. The unsold stock is not taken back by the appellant company from the dealers. The appellant company has paid the target incentives to the dealers only for the reason that the sale of appellant company may increase. The target incentive is never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dealers and distributors was of seller and buyer and all the transactions took place in the capacity of principal to principal and hence the payment of target incentives made by the appellant company through credit notes cannot be termed as commission or brokerage as stipulated in sec 194H of the Act. It is to be held that the appellant company was not liable to deduct the tax on target incentives, handling and distribution charges and sales promotion expenses u/s. 194H and consequently, there was no application of provisions of section 40(a)(ia) of the Act and hence the A.O. was not justified in making the disallowance aggregating of ₹ 5,08,09,133/- on account of target incentives, handling and distribution charges and sales promotion. The disallowance so made is directed to be deleted. The ground nos.1 2 are allowed. 10. The Tribunal accepted the findings of the First Appellate Authority on the counts we have referred to in the preceding paragraphs. The Tribunal has analysed the provision of Section 194C and has given a specific finding that the said provision was not attracted in the subject case. So far as the assessee s claims for deduction in respect of pac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
