Section 194C of the income tax Act, 1961 — TDS — Provisions of section 194C does not apply to the case of assessee as there is not contract for work.[2019] 52 ITCD 83 (KARN)
Facts: Being aggrieved of the order of Tribunal, assessee went on appeal before High Court and raised the question of law that "Whether that Commissioner as well as Tribunal, in the absence of finding that contract in question is a contract for work, erred in law, in holding that Section 194C applies to fact situation of the case?”
Held, that In determining the question whether a contract constitutes one for work or is a contract for sale, intention and object of parties has to borne in mind, which is to be examined in the light of terms of the contract. Similarly, in State of Andhra Pradesh vs. KONE Elevators (India) Ltd., (2005) 3 SCC 389, the Supreme Court has held that the main object in a contract of sale is the transfer of property and delivery of possession of the property, whereas the main object in a contract for work is not the transfer of the property, but it is one for work and labour. In the instant case, appellant company had entered into an agreement for bulk sale of advertising space with its’ holding company on a principal to principal basis by transfer of rights therein. The appellant under the agreement makes purchase of advertisement space and exercises control over such space with the right to either sell it to other or retain it for itself. Thus, it is a transfer of advertising space to the assessee who in turn sells it to others. Therefore, aforesaid transaction can not be termed as supply of goods. “In the present case, however, the assessee is not a routing agency. It makes outright purchase of advertisement space and exercises exclusive control over such space with the right to either sell it to others or retain it for itself. The payments in the present case are also not made by an advertising agency to the print media. Rather, there is a transfer of space from BCCL to the assessee who in turn sells it to others.Thus, it is evident that the Commissioner of Income Tax as well as the Income Tax Appellate Tribunal has nowhere held that the contract in question is not a contract for sale and is contract for work.Thus, if the order passed by the Commissioner of Income Tax as well as the order passed by the Income Tax Appellate Tribunal are read in conjunction in the light of the Circular No.13 of 2006 issued by the Central Board of Direct Taxes, it is axiomatic that provisions of Section 194C would apply to a contract for work and not to a contract for sale. In the result, the order passed by the Income Tax Appellate Tribunal as well as by the Commissioner of Income Tax insofar as it holds that for the assessment year 2007-08, the amount has to be disallowed under Section 40a(ia) of the Act is hereby set aside and it is held that the provisions of Section 194C do not apply to the case of the assessee. In the result, the appeal is allowed.