The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the tax deducted at source (TDS) under Section 194C of the Income Tax Act, 1961 is not applicable on the purchase of the packing materials for which Value-Added Tax (VAT) has already been paid.
A TDS survey under Section 133A(2A) of the Income Tax Act was conducted at the business premises of the assessee. During the course of the survey, it was found that the assessee, M/s Bharatpur Dugdh Utpadak Sahakari Sangh Ltd. Bharatpur, has made the contract through the government to supply the packing material. The payment was made but TDS was not deducted under the head contractor payment as per Section 194C of the Income Tax Act amounted to Rs. 63,700/-.
The show cause was issued to the assessee and the assessee filed the reply which was considered but the Assessing Officer held the assessee in default for short/non-deduction of TDS of Rs. 63,700/- under Section 194C of the Income Tax Act. The interest under Section 201(1A) of the Income Tax Act was also worked out at Rs. 36,309/-.
The Authorized Representative submitted that the assessee has not undertaken any job work to whom the payment is made but the assessee has purchased the goods and the same is supported by the invoice and the payment made includes purchases which are Value Added purchases and not service tax paid and therefore, the invocation of provision of Section 194C of the Income Tax Act made by the Assessing Officer.
The Two-member bench comprising of S. Seethalakshmi (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) observed that “all are purchases of material with some specifications supported by the levy of the value-added tax on material and therefore, the same was not for any work contract”.
“Since the assessee has discharged the burden that all these payments made by the assessee were not for any work contract the provision of Section 194C of the Income Tax Act was wrongly invoked by the lower authorities and therefore, the levy TDS made by the Assessing Officer was quashed for an amount of Rs. 63,700/-” the bench held and therefore the appeal of the assessee was allowed.
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