TDS U/s. 194C not deductible on Packing or Printed material supplied to us as per our specification

PrintPDF

DCIT Vs. Elgie Engineering Works (ITAT Calcutta)- On perusal of the bills of parties, it is seen that the payments are for manufacture and supply of items such as Buckstay Slings, Economiser coils, Lifting beams etc. The bills show that the price is inclusive of the material which indicates that the transactions were in the nature of sales contracts. I have perused the CBDT’s Guidelines in this regard as given in Circular No.681 dated 08.03.1994. Herein, it has been stated that where contractor undertakes to supply any article or thing fabricated according to specifications given by the Govt. or any other specified persons and the property in such article or thing passes to the Govt. or such person only after such article or thing is delivered, the contract will be a contract for sale and shall be outside the purview of section 194C. Further, reference is invited to the Punjab and Haryana High Court’s decision in the case of CIT vs. Deputy Chief Accounts Officer, Markfed, Khanna 304 1TR 17. In this case, the assessee had purchased printed packing material made according to its specifications but did not deduct tax at source. The Court held that the factum of such material carrying some printed work could only be regarded as the work executed by the supplier incidental to the sale made to the assessee. The raw material for the manufacturing of such packing material was not supplied by the assessee. It was, therefore, held that, the purchase of particular printed material by the assessee was a contract for sale and outside the purview of section 194C. In the present case under appeal, the bills clearly show that material has not been supplied by the assessee in respect of the purchase of equipment/machinery. I, therefore, in view of these facts and the CBDT’s Circular referred to above, hold that payment amounting to Rs.36,57,034/- made to 7 parties was for purchase of equipment/machinery and the assessee was not required to deduct tax u/s. 194C. The disallowance u/s.40(a)(ia) to the extent of Rs.36,57,034/- is, therefore, deleted.