Airspeed Courier P.Ltd, Mumbai vs Department Of Income Tax

आयकर अपील य अ धकरण, 'ए' खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI "A" BENCH सव ी आई पी बंसल , या यक सद य एवं राजे , लेखा सद य Before S/Sh. I P Bansal,Judicial Member & Rajendra,Accountant Member आयकर अपील सं/.ITA No.2954/Mum/2011, नधारण वष/Assessment Year-2007-08 DCIT- Range-9(1) M/s. Airspeeed Courier Private Room No.223, Assesseeyakar Ltd. C/o., Office Liquidator Bhavan Vs Bank of India Building, 5th Floor M.K. Road Opp.High Court,Fort,Mumbai-32.

Mumbai-20. PAN: ASSESSEEFCA 7634 N

(अपीलाथ /Appellant) ( यथ / Respondent) नधा रती ओर से/Assessee by :None राज व क ओर से/ Revenue by :Shri Asghar Zain सुनवाई क तार ख/ Date of Hearing : 28-05-2015 घोषणा क तार ख / Date of Pronouncement : 28-05-2015 आयकर अ ध नयम,1961 क धारा 254(1)के अ तगत आदे श Order u/s.254(1)of the Inco me-tax Act,1961(Act) लेखा सद य राजे के अनुसार PER RAJENDRA, AM-

Challenging the order dated 18.01.2011 of the CIT(A)-19,Mumbai,the Assessing Officer(AO) has raised following Grounds of Appeal:

"1. On the facts and in the circumstances of the case and in law, the ld. Commissioner of Income tax(Appeals) erred in deleting the disallowance of Rs.13,66,332/- made by the Assessing Officer u/s. 40(a)(ia) of the I.T. act, 1961, disregarding the fact that the assessee had entered into a contract for printing PODs as per specifications of the assessee and that the payment was accordingly liable for deduction of tax at source u/s. 19C, though the assessee failed to fulfill his obligation.

2. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored.

3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."

Assessee-company, engaged in business of providing courier services, filed its return of income on 31.20.2007,declaring a loss of Rs.1,11,50,093/-. The AO completed the assessment on 11. 12. 2009,u/s.143(3) of the Act,determining the income of the assessee at Rs.86,57,320/-.

2.Effective ground of appeal is about deleting the disallowance of Rs.13.66 lacs made by the AO u/s. 40(a)(ia) of the Act.During the assessment proceedings,the AO found that the assessee had debited an amount of Rs.13,66,332/- towards printing and stationery to the P&L A/c. As per the AO,the assessee did not deduct any Tax at source, as required u/s. 194C of the Act. He held that the amount was inadmissible within the meaning of u/s.40(a)(ia) of the Act.Accordingly,he disallowed the same while computing the total income of the assessee.

ITA No.2954/Mum/2011,AY.07-08-Airspeed.. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before her,it was submitted that the assessee had purchased stationery items, papers, printed PODS etc. from printers, that the same amounted to purchases and not a contract, that TDS u/s. 194C of the Act had to be made if there was a contract, that for purchase of items of stationery no TDS was required to be made, that the said items were only purchases, that there was no contractual obligation.After considering the submission of the assessee and the assessment order the FAA held that section 194C was applicable if there was a contract and the contract must be for carrying out 'any work'.The FAA further observed that item of stationery and expenses towards printing would not attract the provisions of s.194C, that those transactions fell under the category of purchases and not "any work".The FAA referred to the decision of Andhra Pradesh Road Transport Corpn.(74 TTJ 531) and held that there was no contract in existence.Finally,she deleted the addition made by the AO u/s. 40(a)(ia) of the Act.

4.During the course of hearing before us,Departmental Representative(DR)supported the order of the AO.As stated earlier none appeared on behalf of the assessee.We have perused the material.It is found that assessee was facing lots of problems including, labour problems,when the assessment proceedings were going on,that the assessee had filed some details,that AO had made additions as required details were not filed before him,that the FAA had partly allowed the appeal of the assessee,that with regard to the deduction of tax as per the provisions of section 194 C r.w.s.40(a)(ia)of the Act the AO and the FAA have taken opposite stands.The FAA had held that for printing stationery, provisions of the section 194C would not be applicable.But,the basic fact with regard to deductibility of tax has not been addressed to-as to whether the stationery was printed as per the specification provided by the assessee or not.The orders of the AO and FAA are silent about the said fact.In our opinion it is the crucial fact to decided the issue for applicability of section 194C.We find that in the case of Glenmark Pharmaceuticals (324 ITR

199)the Hon'ble Bombay High Court has held as under:

The crucial words in section 194C are "carrying out any work". The Explanation to section 194C inter alia defines the expression "work". By the Finance Act of 2009, which, substituted the provisions of section 194C,the expression "work" has now been defined in clause (iv) of the substituted Explanation. Clauses (a) to (d) are the same as clauses (a) to (d) of the erstwhile Explanation (iii). However, Explanation (e) has now been inserted. Clause (e) was introduced "to bring clarity on this issue" or, in other words, to remove the ambiguity on the question. Clause

(e) as introduced contains a positive affirmation that the expression "work" will cover manufacturing or supplying a product, according to the requirement or specification of a customer, by using material purchased from such a customer. Clause (e) has placed the position beyond doubt by incorporating language to the effect that the expression "work" shall not include manufacture or supply of a product according to the requirement or specification of a customer by using material which is purchased from a person other than such customer. When the material is purchased from the customer who orders the product, it constitutes a contract of work while on the other hand, where the manufacturer has sourced the material from a person other than the customer, it would constitute a sale. What is significant is that in using the words which clause (e) uses in the Explanation, Parliament has taken note of the position that was reflected in the circulars issued by the Central Board of Direct Taxes since May 29, 1972. The Revenue always understood section 194C to mean that where a product or thing is manufactured to the specifications of a customer, the agreement would constitute a contract for sale, if (i) the property in the article or thing passes to the customer upon delivery ; and (ii) the material that was required was not sourced from the customer/purchaser, but was independently obtained by

2 ITA No.2954/Mum/2011,AY.07-08-Airspeed..

the manufacturer from a person other than the customer. The Legislature which intends to bring clarity to a legislative provision or to remove an ambiguity is inferred to do so at the inception.

In view of the above discussion,we are of the opinion that the issue needs further verification.So, in the interest of justice we are remitting back the matter to the file of the AO for fresh adjudica - tion. He is directed to make the limited inquiry about the nature of the printing i.e. whether it was as per the specification of the assessee or not and to decided the issue accordingly. Effective ground of appeal is decided in favour of the AO,in part.

As a result,appeal filed by the AO stands partly allowed फलतः नधा रती अ धकार वारा दा खल क गई अपील अंशतः मंजूर क जाती है . Order pronounced in the open court on 28th ,May,2015. आदे श क घोषणा खल ु े यायालय म दनांक 28 मई,2015 को क गई ।

Sd/- Sd/- (आई पी बंसल/I.P. Bansal) (राजे / RAJENDRA) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मुंबई/Mumbai, दनांक/Date:28.05.2015 व. न.स.Jv.Sr.PS. आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ 2. Respondent / यथ

3.The concerned CIT(A)/संब ध अपील य आयकर आयु त, 4.The concerned CIT /संब ध आयकर आयु त

5.DR A Bench, ITAT, Mumbai / वभागीय त न ध, ए खंडपीठ,आ.अ. याया.मंब ु ई

6.Guard File/गाड फाईल स या पत त //True Copy// आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai.

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