Rakesh Kumar Garg, J.:— The Revenue has filed the present appeal under section 260A of the Income-tax Act, 1961 (for short “the Act”), against the order dated April 12, 2007, passed in I.T.A No. 340.Chandi/2006 by the Income-tax Appellate Tribunal, Chandigarh Bench (B), Chandigarh, for the assessment year 2005-06, raising the following substantial question of law:
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in law in confirming the order of the Commissioner of Income-tax (Appeals) in holding that the purchase of pre-printed packing material by the assessee was a contract for sale and outside the purview of deduction of tax at source under section 194C of the Act ?”
2. 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 provisions 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 the printed packing material. The responsible person, vide his letter dated August 17, 2005, submitted that the packing material is purchased from the manufacturer and no raw material is supplied by them to the supplier of packing material.
3. Therefore, the purchase of such printed packing material by the manufacturer is a “contract of sale” and it cannot be termed as “works contract”. The Assessing Officer, vide his order dated September 26, 2005, passed the order under section 201(1) and 201(1A) of the Income-tax Act, 1961, treating the respondent/assessee-in-default on the payments amounting to Rs. 3,62,88,741 made to different parties for not deducting tax at source at the rate of 2.25 per cent., i.e, a total amount of Rs. 8,16,496. Interest amounting to Rs. 48,990 under section 201(1A) was also charged.
4. 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 December 27, 2005, allowed the appeal of the respondent and penalty and interest imposed under section 201 and 201(1A) of the Act were deleted. Being not satisfied with the findings of the Commissioner of Income-tax (Appeals)-II, Ludhiana, the Revenue has preferred an appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, Chandigarh Branch (B), Chandigarh, vide his order dated April 12, 2007, passed in I.T.A No. 340.Chandi/2006 for the assessment year 2005-06 dismissed the appeal and upheld the decision of the Commissioner of Income-tax (Appeals)-II, Ludhiana, that the purchase of pre-printed packing material by the respondent was a contract for sale and outside the purview of section 194C of the Act.
5. 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 194C of the Act.
6. We have considered the submissions made by 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 essentially of a sale of chattel. The predominant object underlying the contracts were sale/purchase of goods and only the intention of the respondent was to buy packing materials. Admittedly, the raw material for the manufacturing of such packing material was not supplied by the respondent. Thus, it was a case of sale and not a contract for carrying out any work. In the case of Commissioner Of Income-Tax v. Dabur India Ltd., [2006] 283 ITR 197, the hon'ble Delhi High Court held that printing labels on corrugated boxes did not require any special skill or involve any confidence or secrecy and the Tribunal was justified in holding that the predominant object underlying the contract was one for sale of goods which took the contract out of the purview of section 194C of the Income-tax Act, 1961. In BDA Ltd. v. ITO (TDS), [2006] 281 ITR 99 (Bom), the court held that if a manufacturer purchases material on his own and manufactures a product as per the requirement of a specific customer, it is a case of sale and not a contract for carrying out any work. The fact that the goods manufactured were, according to the requirement of the customer, does not mean or imply that any work was carried out on behalf of that customer.
7. We are in respectful agreement of the abovecited judgments and hold that the purchase of particular printed packing material by the respondent was a contract for sale and outside the purview of section 194C of the Act. No substantial question of law as proposed arises for determination of the court. Thus, we find no infirmity in the order of the Tribunal, the appeal is without any merit and the same is dismissed.