C I T vs. DY. ACCOUNTS OFFICER

The Revenue has filed the present appeal under Section 260-A of the Income Tax Act, 1961 (for short 'the Act')against the order dated 12.4.2007 passed in ITA No.340/Chandi/2006 by the Income Tax Appellate Tribunal, Chandigarh Bench (B), Chandigarh for the assessment year 2006-07, raising the following substantial questions of law:- “Whether on the facts and in the circumstances of the case, ITAT is correct in law in confirming the order of the CIT(Appeal) in holding that the purchase of preprinted packing material by the assessee was a contract for sale and outside purview of deduction of tax u/s 194C of the Act”.

The Deputy Chief Accounts Officer, Markfed Khanna(hereinafter referred to as the Responsible Person) had purchased printed packing material on which he had not deducted tax at source under the provision of Section 194C of the Act. The Responsible Person was summoned under Section 131 of the Income Tax Act,1961, and was required to explain as to why he may not be deemed to be an assessee in default for his failure to deduct tax in respect of payment made on printed packing material. The Responsible Person vide his

Being aggrieved by the order of the Assessing Officer, the respondent went in appeal. The Commissioner of Income Tax (Appeals)-II, Ludhiana vide his order dated 27.12.2005 allowed the appeal of the respondent and penalty and interest imposed under Section 201 and 201(1A) of the Act were deleted. By not satisfied with the findings of the Commissioner of Income Tax(Appeals)-II, Ludhiana, the Revenue has preferred an appeal before the ITAT. The ITAT, Chandigarh Branch(B), Chandigarh vide his order dated 12.4.2007 passed in ITA 340/CHANDI/2006 for the Assessment Year 2005-06 dismissed the appeal and uphold the decision of the Commissioner of Income Tax(Appeals)-II, Ludhiana that purchase of pre-printed packing material by the respondent was a contract for sale and outside the purview of Section 194 C of the Act.

Shri Sanjiv Bansal, Advocate, learned counsel for the Revenue has argued that the respondent had purchased the material under consideration with specific requirement. As such, the said material could be purchased only by the respondent as the name and trade mark of the respondent were printed on it and the respondent had called for tenders for execution of work and orders to execute work were placed with sellers with certain conditions with their right to change the design, colour and scheme of packs during the period of contract. Thus, the case of the respondent is not the simple case of purchase/sale but is definitely a case covered under Section 194 C of the Act.

We have considered the submissions made by the learned counsel for the Revenue. There is no dispute that the main purpose of the assessee to buy packing material is to obtain goods for the purpose of packing of its finished products. The factum of such packing material carrying some printed work can only be regarded as the work executed by the supplier incidental to the sale to the assessee. This fact of some printing being done as a part of supply is of no consequence to the contract being essential of a sale of chattel. The pre dominant object under lying the contracts were sale/purchase of goods and only 283 ITR 197 (Delhi), the Hon'ble Delhi High Court held that printing labels on JUDGE