Rakesh Garg, J. - (1.) THE Revenue has filed the present appeal under Section 260A of the IT Act, 1961 (for short 'the Act') against the order dt. 12th April, 2007 passed in ITA No. 340/Chd/2006 by the Tribunal, Chandigarh Bench 'B' Chandigarh, for the asst. yr. 2006 -07, raising the following substantial question of law: Whether on the facts and in the circumstances of the case, Tribunal is correct in law in confirming the order of the CIT(A) in holding that the purchase of pre -printed packing material by the assessee was a contract for sale and outside purview of deduction of tax under Section 194C of the Act?
(2.) THE Dy. 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 IT 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 letter dt. 17th Aug., 2005 submitted that the packing material is purchased from the manufacturer and no raw material is supplied by them to supplier of packing material. 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 AO vide his order dt. 26th Sept., 2005 passed the order under Sections 201(1) and 201(1A) of the IT 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 @ 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. Being aggrieved by the order of the AO, the respondent went in appeal. The CIT(A) -II, Ludhiana, vide his order dt. 27th Dec, 2005 allowed the appeal of the respondent and penalty and interest imposed under Sections 201 and 201(1A) of the Act were deleted. By not satisfied with the findings of the CIT(A) -II, Ludhiana, the Revenue has preferred an appeal before the Tribunal. The Tribunal, Chandigarh Bench 'B', Chandigarh, vide his order dt. 12th April, 2007 passed in ITA 340/Chd/2006 for the asst. yr. 2006 -07 dismissed the appeal and upheld the decision of the CIT(A) -II, Ludhiana, that purchase of pre -printed packing material by the respondent was a contract for sale and outside the purview of Section 194C of the Act.
(3.) 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 trademark 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.;