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TMI Blog2019 (5) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... job work charges of electroplating undertaken by the said Company. Whether such works would attract the provisions of Section 194C or not was a debatable question and unless a finding of fact was arrived at by the CIT (Appeals) independently discussing the contentions raised before him, the mere affirmation of the finding of the Appellate Authority that provisions under Section 194C are attracted and that the Assessing Officer was justified in making disallowance to the extent of ₹ 2,76,67,052/- is not at all a satisfactory disposal of the Appeal by the First Appellate Authority, who was under an obligation to discuss the facts and legal contentions in detail and the FAA cannot affirm the order passed by the lower Assesseing Authority just like that. The Tribunal is also equally duty bound to discuss the facts and legal contentions in detail. Cutting short their findings by merely affirming the order of the lower Appellate Authority, shows total non-application of mind and the failure to discharge their legal duty provided under the Act. Assessing Authorities are adopting a pro-revenue approach to raise demands of tax, interest and penalty, perhaps to fetch more revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of s.40(a)(ia) of the Income Tax Act? 3.Whether, on the facts and circumstances of case, the Tribunal was right in not taking into consideration that there is no revenue loss for the respondent as M/s.Spectronics Plating (P) Ltd has discharged the liability of the appellant by paying tax on that portion of income accrued? 3. The learned counsel for the Assessee Mr.R.Sivaraman submitted before us that the provisions of Section 194C of the Act, providing for such Tax Deduction at Source on the job work, is not attracted in the present case. Therefore, the authorities below have erred in applying the said provisions and consequently upheld the disallowance under Section 40A(ia) of the Act. He drew our attention to Clause(iv) of Explanation appended to Section 194C of the Act, which is quoted below for ready reference: 194C. (1) Any person responsible for paying any sum to any resident (hereafter 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 a specified person shall, at the time of credit of such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference: Further to the above, during the course of appeal proceedings the appellant made another written submission as under: The Supplier M/s.Spectronics imports the gold plates directly from the supplier, makes value addition and then sells the goods to the appellant charging only central sales tax. This tantamount to purchases and cannot be treated as a contractor payment which is subject to TDS provisions. In case of contractor payments, normally the imports are made by the principal who then supplies the materials on job-work basis to Sub-contractor. The job work provided by the sub-contractor is subject to TDS provisions as the ownership of the product vests with the contractor. The Purchase Bills were having only Central Sales Tax which shows that the transaction is only purchase transaction and not a job work. In the case of job work the element of service tax will be involved and not the sales tax. Even the bills clearly mentions that the quantity and Delivery challans. The copy of the purchase order, bills for purchase and C forms issued in this regard are attached for your reference. When sales take pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls. The Job work Price will be a fixed component in most of the work contracts. In this case, the fluctuation is due to change in purchase price of materials only. Even the same has been clearly mentioned in the invoice itself. Further we submit the following element of Costing for Flachstecker: Particulars Amount (Rs.) per Piece % GPC [Gold Potassium Cyanide] 9.54 97% Other Manufacturing cost 0.29 3% Electro Plating component purchase cost 9.83 The above costing shows that the Purchase cost is largely dependent upon the material cost i.e. GPC and not due to others which is subsidiary element in our case. Considering the above submission, we humbly request you to direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the rival submissions and gone through the relevant orders. In the case of State of Tamil Nadu Vs. Anandam Viswanathan AIR 1989 SC 962, it is held that The primary difference between a contract for work or service and a contract for sale is that in the former there is in a person performing or rendering service, no property in the thing produced as a whole, notwithstanding that a part or even the whole of the material used by him may have been his property. 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. . If we apply this test in this case, it is clear that the items received from M/s.Spectronic Plating (P) Ltd., is not a commercial commodity, they cannot be sold directly by the assessee in the market or to any person and hence as held by the CIT (A), the assessee's transactions is nothing but composite transaction falling within the scope of Section 194C and hence, we do not find any reason to interefere with the order of the CIT (A). 6. In the result, the assessee's appeal is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t., Ltd., Bangalore from third parties and for which a composite Sale Invoice consequent to the Purchase Order of the Assessee was raised, and in respect of the same, then property in goods has been transferred to the Assessee along with job work charges of electroplating undertaken by the said Company. Whether such works would attract the provisions of Section 194C or not was a debatable question and unless a finding of fact was arrived at by the learned CIT (Appeals) independently discussing the contentions raised before him, the mere affirmation of the finding of the Appellate Authority that provisions under Section 194C are attracted and that the Assessing Officer was justified in making disallowance to the extent of ₹ 2,76,67,052/- is not at all a satisfactory disposal of the Appeal by the First Appellate Authority, who was under an obligation to discuss the facts and legal contentions in detail and the First Appellate Authority cannot affirm the order passed by the lower Assesseing Authority just like that. The Tribunal is also equally duty bound to discuss the facts and legal contentions in detail. Cutting short their findings by merely affirming the order of the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The said order even though running into 10 pages, in fact is only a two line when it says However, these composite amounts paid to M/s.Spectronic Plating (P) Ltd would attract the provisions of Section 194C of the Act and hence the AO disallowed the same u/s.40(a)(ia) of the Act, 1961 and the disallowance under Section 40A of the Act made by the Assessing Authority is confirmed. 12. We could have said more about the tenor of the orders of the learned CIT (Appeals) as well as the learned Tribunal and could have imposed costs upon them, but we leave it with a sanguine hope that a good sense will prevail over these authorities with the above said observations which we have made. Therefore with a sense of remorse, we are constrained to remit the matter back to the learned CIT (Appeals) for passing fresh orders in accordance with law, after dealing with the contentions of the Assessee in an appropriate, fair and objective manner by proper application of mind. 13. In the result, the Tax Case Appeal is disposed of, without answering the Substantial Questions of Law raised before us by remanding the case back to CIT (Appeals). No order as t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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