Times Vpl Limited (Formerly Known as Vijayanand Printers Ltd.) v. The Commissioner of Income-tax, Hubli
[Citation -2019-LL-1017-69]

Citation 2019-LL-1017-69
Appellant Name Times Vpl Limited (Formerly Known as Vijayanand Printers Ltd.)
Respondent Name The Commissioner of Income-tax, Hubli
Court HIGH COURT OF KARNATAKA CIRCUIT BENCH AT DHARWAD
Relevant Act Income-tax
Date of Order 17/10/2019
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags prejudicial to the interest • tax deducted at source • outright purchase • works contract • sale of goods • advertisement space
Bot Summary: The assessee furnished detailed submissions on 17.11.2011 in which inter alia, it was pointed out that the contract in question was a contract for sale of space and was not contract for supply of goods. The Commissioner of Income Tax vide order dated 29.02.2012 passed under Section 263 of the Act, set aside the order of assessment passed by the Assessing Officer dated 22.12.2009 and held that the contract was a contract for advertising and the provision of Section 194C of the Act applies to the case of the assessee. 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. The Supreme Court in Hindustan Shipyard Ltd. Vs. State of Andhra Pradesh 119 STC 533 enunciated certain principles and drew a distinction between two concepts namely contract for sale of goods and works contract. In State of Andhra Pradesh vs. KONE Elevators Ltd.,3 SCC 389, the Supreme Court has held 11 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. Before taking a decision on the applicability of TDS under section 194C on a contract, it would have to be examined whether the contract in question is a contract for work or a contact for sale and TDS shall be applicable only where it is a contract for work. The contention of 15 the learned counsel for the Revenue that the Tribunal ought to have restricted its scrutiny with regard to the validity of the order of remand passed by the Commissioner of Income Tax, appears to be attractive at first blush in peculiar facts of the case, we are not inclined to accept the aforesaid submissions as both the authorities on the basis of the materials available on record has recorded the finding in favour of the assessee that the contract in question is a contract for sale and is not a contract for work.


IN HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS 17 TH DAY OF OCTOBER, 2019 PRESENT HON'BLE MR.JUSTICE ALOK ARADHE AND HON'BLE MR.JUSTICE P.G.M. PATIL I.T.A. NO.274 OF 2013 BETWEEN TIMES VPL LIMITED (FORMERLY KNOW N AS VIJAYANAND PRIN TERS LTD) NO.17, 9 T H F LOOR, DUPARC TRINITY, M G ROAD, BANGA LORE 560 001, REPRES ENTED BY ITS CHIEF EXECUTIVE OFFICER SRI SUNIL RAJSHEKHAR, AGED ABOUT 58 YEARS, SON OF SRI CHARANTRIAH. APPELLANT (BY SRI. M.V .SES HACHALA , S ENIOR COUNSEL FOR SRI . ARAVIND V.CHAVAN AND SRI . H.R.KAM BIYAVAR, ADV OCA TES) AND COMMISSIONR OF INCOME TAX, C.R.BUI LDING, NA VANAGAR, HUBLI- 580025. ... RES PONDENT (BY SRI. Y.V .RAVI RAJ, ADV OCATE) 2 THIS I.T.A . IS FILED UNDER SECTI ON 260-A OF I.T. ACT , 1961, ARISING OUT OF ORDER DATED 31.01.2013 PASS ED IN ITA NO.587/BANG/ 2012, F OR ASSESSMEN T YEAR 2008- 09, PRAYING THIS HON BLE COURT TO FORMULATE T HE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; ALLOW APPEAL AND SET ASIDE COMMON ORDER OF ITAT IN ITA NO.587/BANG/ 2012 DATED 31.01.2013 AND ETC. THIS I.T.A . COM ING ON FOR FINAL HEARING THIS DAY, ALOK ARADHE, J, DELIVERED FOLLOWING: JUDGMENT Sri M.V.Seshachala, learned senior counsel with Mr.Aravind V.Chavan, learned counsel for assessee. Sri Y.V.Raviraj, learned counsel for Revenue. 2. This appeal under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been filed by assessee in which additional substantial question of law was framed today, which reads as under: Whether that Commissioner as well as Tribunal, in absence of 3 finding that contract in question is contract for work, erred in law, in holding that Section 194C applies to fact situation of case? 3. facts giving rise to filing of this appeal briefly stated are that, assessee is Company registered under provisions of Companies Act, 1956. assessee is engaged in business of printing and publishing newspapers. assessee had entered into agreement for bulk sale of advertising space dated 17.01.2007 with Bennett, Coleman and Co.Ltd. (hereinafter referred to as BCCL for short), ultimate holding company of assessee, for purchase of bulk advertisement space in daily newspaper Times of India in Kannada language on principal-to-principal (P2P) basis by transfer of rights therein. assessee had incurred expenditure of Rs.74,79,452/- for purchase of advertisement 4 space during year 2006-07. assessee on 30.10.2007 filed its return of income for assessment year 2007-08 declaring total income as nil . 4. case was taken up for scrutiny, which was completed by Assessing Officer accepting return of income vide order dated 22.12.2009 passed under Section 143(3) of Act. Assessing Officer issued notice on 19.11.2010 to assessee proposing to rectify order of assessment dated 22.12.2009 on account of disallowance for alleged failure by assessee to deduct tax at source under Section 194C of Act on cost of advertisement space. assessment for subsequent year i.e. assessment year 2008-09 was finalized on 06.12.2009, wherein Assessing Officer has taken view contrary to view taken under consideration that expenditure 5 incurred for purchase of bulk advertisement space ought to be disallowed, since assessee had not deducted at source thereon. Consequently, Assessing Officer submitted proposal for disallowance on similar payments in assessment year 2007-08. 5. assessee filed reply on 21.01.2018 in which inter alia, it was stated that tax was not deductable on said payment and proceeding be dropped. On being satisfied Assessing Officer did not pass any rectification order. Thereafter, notice dated 11.10.2011 was issued by Commissioner of Income Tax, Hubballi under Section 263 of Act in which inter alia, it was stated that since tax has not been deducted at source under Section 194C of Act on cost of advertisement space, amount requires to be disallowed under Section 40(a)(ia) of Act. In notice, it is 6 further stated that order of assessment dated 22.12.2009 is erroneous and is prejudicial to interest of Revenue. 6. assessee furnished detailed submissions on 17.11.2011 in which inter alia, it was pointed out that contract in question was contract for sale of space and was not contract for supply of goods. Therefore, provisions of Section 194C are not applicable to facts situation of case. Commissioner of Income Tax vide order dated 29.02.2012 passed under Section 263 of Act, set aside order of assessment passed by Assessing Officer dated 22.12.2009 and held that contract was contract for advertising and provision of Section 194C of Act applies to case of assessee. 7 7. Being aggrieved, appeal was preferred by assessee before Income Tax Appellate Tribunal, Bengaluru. Tribunal however vide order dated 31.01.2013 upheld validity of order passed by Commissioner of Income Tax. In aforesaid factual background, this appeal has been filed. 8. Learned senior counsel for assessee while inviting attention of this Court to order passed by Commissioner of Income Tax as well as Income Tax Appellate Tribunal submitted that both authorities have recorded finding that contract in question is contract for sale. Attention of this Court has also been invited to Circular No.13 of 2006 dated 13.12.2006, which deals with applicability of tax deducted at source under Section 194C on contract for fabrication of article. Attention of this Court has also been 8 invited to Paragraph 2 of Circular in which it has been clarified by Central Board of Direct Taxes that provision of Section 194C would not apply in case of contract of sale and shall be applicable only in case of contract for work. It is therefore submitted that despite recording finding in favour of assessee that contract in question is contract for sale, Commissioner of Income Tax as well as Tribunal grossly erred in holding that Section 194C applies to fact situation of case. 9. In support of aforesaid submissions, learned senior counsel for assessee has placed reliance in case of Commissioner of Income Tax V/s Glenmark Pharmaceuticals Ltd. (2010) 231 CTR (Bom) 105 : (2010) 324 ITR 199 and in case of Commissioner of Income Tax V/s Karnataka Power Transmission Corporation Limited, 9 (2012) 208 TAXMAN 73 (Kar) as well as Circular No.13 of 2006 dated 13.12.2006 issued by Central Board of Direct Taxes. 10. On other hand, learned counsel for Revenue has submitted that Assessing Officer did not examine issue involved in instant case while passing order of assessment. It is further submitted that matter was taken up by Commissioner of Income Tax in exercise of revisional powers under Section 263(1) of Act and in exercise of aforesaid powers, Commissioner of Income Tax has directed fresh assessment after giving opportunity of hearing to assessee. It is further submitted that therefore in fact situation of case Tribunal ought to have confined its scrutiny to validity of order passed by Commissioner of Income Tax and should not have dealt with issue on merits. 10 11. We have considered respective submissions made on both sides and perused records. In determining question whether contract constitutes one for work or is contract for sale, intention and object of parties has to borne in mind, which is to be examined in light of terms of contract. Supreme Court dealt with expression any work in Associated Cement Company Ltd. Vs. CIT (1993)111 CTR(SC) 165: (1993) 201 ITR 435 (SC), and it was held that any work means any work and not works contract which has special connotation in tax law. Supreme Court in Hindustan Shipyard Ltd. Vs. State of Andhra Pradesh (2000) 119 STC 533 (SC) enunciated certain principles and drew distinction between two concepts namely contract for sale of goods and works contract . Similarly, in State of Andhra Pradesh vs. KONE Elevators (India) Ltd., (2005)3 SCC 389, Supreme Court has held 11 that main object in contract of sale is transfer of property and delivery of possession of property, whereas main object in contract for work is not transfer of property, but it is one for work and labour. In instant case, appellant company had entered into agreement for bulk sale of advertising space with its holding company on principal to principal basis by transfer of rights therein. appellant under agreement makes purchase of advertisement space and exercises control over such space with right to either sell it to other or retain it for itself. Thus, it is transfer of advertising space to assessee who in turn sells it to others. Therefore, aforesaid transaction can not be termed as supply of goods. At this stage, it is opposite to quote relevant extract of order passed by Commissioner in exercise of 12 powers under Section 263(1) of Act, which reads as under: It is quite manifest from above that VPL has to make payment on monthly basis, therefore ownership of space does not pass on to assessee company forever. Therefore, transaction cannot be termed as purchase as contended by assessee company and same is nothing but payment made towards advertisements which clearly falls within ambit of Section 194C. Moreover, agreement is entered with BCCL with sole intention of advertising. 12. Similarly finding recorded by Tribunal with regard to nature of contract may be referred to, which reads as under: In present case, however, assessee is not routing agency. It makes outright purchase of 13 advertisement space and exercises exclusive control over such space with right to either sell it to others or retain it for itself. payments in present case are also not made by advertising agency to print media. Rather, there is transfer of space from BCCL to assessee who in turn sells it to others. Therefore, in our view, decision in case of Sands Advertising Communications P.Ltd. (supra) is distinguishable on facts and would not come to assessee s rescue. 13. Thus, it is evident that Commissioner of Income Tax as well as Income Tax Appellate Tribunal has nowhere held that contract in question is not contract for sale and is contract for work. relevant extract of Circular No.13 of 2006 dated 13.12.2006 reads as under: 14 matter has been examined by Board and it is considered that exclusive reliance on Question/Answer No.15 of Circular No.715, without taking into account principles laid down in Circular No.681 is not justified. Before taking decision on applicability of TDS under section 194C on contract, it would have to be examined whether contract in question is contract for work or contact for sale and TDS shall be applicable only where it is contract for work . 14. Thus, if order passed by Commissioner of Income Tax as well as order passed by Income Tax Appellate Tribunal are read in conjunction in light of Circular No.13 of 2006 issued by Central Board of Direct Taxes, it is axiomatic that provisions of Section 194C would apply to contract for work and not to contract for sale. contention of 15 learned counsel for Revenue that Tribunal ought to have restricted its scrutiny with regard to validity of order of remand passed by Commissioner of Income Tax, appears to be attractive at first blush, however, in peculiar facts of case, we are not inclined to accept aforesaid submissions as both authorities on basis of materials available on record has recorded finding in favour of assessee that contract in question is contract for sale and is not contract for work. Therefore, such exercise in fact of case would be exercise in futility. 15. In view of preceding analysis, we are inclined to answer additional substantial question of law framed by us today in affirmative. Learned senior counsel for assessee fairly submits that substantial 16 question of law framed by bench of this Court on 13.07.2015 does not arise for consideration. Therefore, it is not necessary for us to answer same. 16. In result, order passed by Income Tax Appellate Tribunal as well as by Commissioner of Income Tax insofar as it holds that for assessment year 2007-08, amount has to be disallowed under Section 40a(ia) of Act is hereby set aside and it is held that provisions of Section 194C do not apply to case of assessee. In result, appeal is allowed. Sd/- JUDGE Sd/- JUDGE CLK Times Vpl Limited (Formerly Known as Vijayanand Printers Ltd.) v. Commissioner of Income-tax, Hubli
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