Law:

Section:

Section 194C of the Income-tax Act, 1961 - Deduction of tax at source - Contractors/sub-contractors, payments to - Assessment year 2006-07 - Whether where assessee purchased printed packing material from manufacturer for purpose of packing of its finished products and no raw material was supplied by it to manufacturer for manufacturing such packing material, transaction was a 'contract of sale' and not as 'works contract' and, therefore, it was outside purview of section 194C - Held, yes FACTS The assessee had purchased printed packing material on which he had not deducted tax at source under section 194C. In response to a notice, the assessee submitted that the purchase of such printed packing material from the manufacturer was a 'contract of sale' and it could not be termed as 'works contract'. However, the Assessing Officer held the assessee in default under sections 201 and 201(1A) and raised a demand with interest. On appeal, the Commissioner (Appeals) allowed the appeal and deleted the penalty and interest imposed under sections 201 and 201(1A). The Tribunal dismissed the revenue's appeal and upheld the order of the Commissioner (Appeals). On revenue's appeal to the High Court : HELD There was no dispute that the main purpose of the assessee to buy packing material was for the purpose of packing of its finished products. The factum of such packing material carrying some printed work could only be regarded as the work executed by the supplier incidental to the sale to the assessee. The fact of some printing being done as a part of supply was of no consequence to the contract being essential to a sale of chattel. The predominant object underlying the contract was sale/purchase of goods and only intention of the assessee was to buy packing materials. Admittedly, the raw material for the manufacturing of such packing material was not supplied by the assessee. Thus, it was a case of sale and not a contract for carrying out any work. [Para 5] Further, in view of the decisions in the cases of CIT v. Dabur India Ltd. [2006] 283 ITR 197(Delhi) and BDA Ltd. v. ITO [2006] 281 ITR 99/ 153 Taxman 386 (Bom.), the purchase of particular printed material by the assessee…

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