October 2008
TDS : Works contract : S. 194C : Purchase of packing material carrying printed work : Essentially a sale/purchase : Not a works contract : Purchaser not liable to deduct tax at source.
By K. B. Bhujle, Advocate
Reading Time 2 mins
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10 TDS : Works contract : S. 194C of
Income-tax Act, 1961 : A.Y. 2005-06 : Purchase of packing material carrying
printed work : Essentially a sale/purchase : Not a works contract : Purchaser
not liable to deduct tax at source.
[CIT v. Dy. Chief Accounts Officer, Markfed, Khanna,
304 ITR 17 (P&H)]
The assessee had purchased printed packing material, but did
not deduct tax at source on the payment therefor. The Assessing Officer was of
the view that the transaction was a works contract. Therefore, he levied penalty
and interest for not deducting tax at source u/s.194C of the Income-tax Act,
1961. The Tribunal deleted the penalty and the interest.
On appeal by the Revenue, the Punjab and Haryana High Court
upheld the decision of the Tribunal and held as under :
“(i) There was no dispute that the main purpose of the
assessee in buying packing material was to obtain goods for the purpose of
packing 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 essentially of
a sale of chattel. The predominant object underlying the contracts was
sale/purchase of goods and the only intention of the assessee was to buy
packing material.
(ii) 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.
(iii) The purchase of particular printed packing material
by the assessee was a contract for sale and outside the purview of S. 194C.”
