M/S. HINDUSTAN LEVER LTD, MUMBAI v. THE ACIT (TDS)-1(2), MUMBAI

ITA 3026/MUM/2007 | 2004-2005
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 302619914 RSA 2007
Bench Mumbai
Appeal Number ITA 3026/MUM/2007
Duration Of Justice 3 year(s) 12 day(s)
Appellant M/S. HINDUSTAN LEVER LTD, MUMBAI
Respondent THE ACIT (TDS)-1(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 30-04-2010
Date Of Final Hearing 12-04-2010
Next Hearing Date 12-04-2010
Assessment Year 2004-2005
Appeal Filed On 18-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.S.PADVEKAR JM & SHRI RAJENDRA SINGH AM. I.T.A.NO.3026 & 7546/MUM/2007 - A.YRS. 2004-05 & 2005-06 HINDUSTAN LEVER LTD. HINDUSTAN LEVER HOUSE 165/166 BACKBAY RECLAMATION MUMBAI 400 020 PAN NO.AAACH 1004 N VS. ASST. COMMISSIONER OF I.T. (TDS)-12 MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NISHANT THAKKAR. REVENUE BY : SHRI S.K.PAHWA. O R D E R PER RAJENDRA SINGH AM: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS DATED 5-2-2007 AND 28-9-2997 OF THE CIT[A] FOR THE A.Y 2004-05 AND 2005-06. AS DISPUTES RAISED IN BOTH THE APPEALS ARE COMMON THESE ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. THE COMMON DISPUTE IS REGARDING THE DE CISION OF THE AUTHORITIES BELOW TREATING THE ASSESSEE IN DEFAULT U/S.201[1] AND CONSEQUENTIAL CHARGE OF INTEREST U/S.201[1A] FOR NO N DEDUCTION OF TAX AT SOURCE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WHO WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND MARK ETING OF SOAPS SHAMPOO TALCUM POWDER HAIR OILS TOOTH PASTES AND COLOUR COSMETICS ETC. WAS ALSO GETTING THE FINISHED PRODUCTS AS WEL L AS PACKAGING MATERIAL MANUFACTURED THROUGH OTHER CONCERNS. A SUR VEY CONDUCTED U/S.133A IN THE CASE OF THE ASSESSEE ON 15-9-2004 S HOWED THAT THE 2 ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE IN RESPECT OF PAYMENTS MADE TO THE CONTRACT MANUFACTURERS. DURING THE COURSE OF SURVEY COPIES OF AGREEMENTS REGARDING OUTSOURCING OF PRODUCTS WERE F OUND WHICH CONTAINED THE FOLLOWING PROVISIONS: I. THE SELLER SHALL MANUFACTURE AND/OR PROCESS THE PRODUCTS AT ITS UNIT BY USING THE FORMULATION PROVIDED BY THE ASSESSEE COMPANY AND AS PER THE SPECIFICATIONS AND THE QUALI TY REQUIRED BY THE ASSESSEE . II. AS PER THE COMPANY/S INSTRUCTIONS THE SELLER SH ALL AFFIX THE TRADE MARKS OF THE COMPANY TO THE FINISHED PRODUCTS AND ALSO PACK THE SAME AS PER INSTRUCTIONS OF THE COMPANY IN RAPPERS AND CARDBOARD BOXES PROVIDED BY THE COMPANY WHICH B EAR THE TRADE MARK COPYRIGHT AND DESIGN OF THE COMPANY. III. THE SELLER AGREES NOT SELL OR OTHERWISE DEAL I N DIRECTLY OR INDIRECTLY IN PRODUCTS BEARING THE COMPANYS TRADE MARK COPY RIGHTS AND DESIGN OR ANY OTHER MARKS COPY RIGHT AN D DESIGN SIMILAR TO THAT OF THE COMPANY. IV. THE SELLER SHALL DURING THE MANUFACTURE AND/OR PROCESS AND PACKAGING OF THE PRODUCTS AND THEREAFTER FOLLOW THE QUALITY CONTROL PROCEDURE PRESCRIBED BY THE COMPANY. V. THE COMPLETED AND TAGGED PRODUCT SHALL BE STRICT LY AS PER THE SPECIFICATIONS AND QUALITY AS PRESCRIBED BY THE ASSESSEE COMPANY. VI. THE SELLER SHALL ALLOW THE PERSONNEL DEPUTED BY THE COMPANY TO OVERSEE THE OBLIGATIONS OF THE SELLER REGARDING THE QUALITY OF THE PRODUCTS INTELLECTUALS PROPERTY RIGHTS CONFID ENTIALITY AND THE OBSERVANCE AND PERFORMANCE OF THE TERMS AND CON DITIONS OF THE CONTRACT. VII. THE SELLER SHALL NOT IN ANY MANNER SELL OR DEA L WITH REJECTED PRODUCTS WITH ANY INDICATION MARKING OR WITH ANY LO GO TRADE MARK OR TRADE NAME OF THE COMPANY OR WITH THE LABEL S RAPPERS AND PACKING MATERIALS. VIII. THE SELLER DURING THE TERMS OF CONTRACT AND FOLLOWING THE EXPIRATION OR TERMINATION OF THE CONTRACT SHALL NOT DISCLOSE IN ANY MANNER THE PROPRIETARY INFORMATION SUCH AS THE SPECIFICATIONS FORMULATIONS AND BATCH RECORD ETC. TO ANY BODY. IX. ON TERMINATION/EXPIRY OF THE AGREEMENT THE SELL ER SHALL RETURN TO THE COMPANY ALL DOCUMENTS CONTAINING TECHNICAL I NFORMATION RELATING TO THE RAW MATERIALS PACKING MATERIALS SU PPLIED BY THE COMPANY AND RELATING TO THE FINISHED PRODUCTS AND T HE SELLER SHALL NOT RETAIN ANY COPIES OR EXTRACTS OF THE DOCU MENTS CONTAINING SUCH TECHNICAL INFORMATION OR USE THE TE CHNICAL INFORMATION OR PART THEREOF SUPPLIED TO THEM BY THE COMPANY. 4. FROM THE TERMS AND CONDITIONS MENTIONED ABOVE A O CONCLUDED THAT IT WAS A CASE OF WORK CONTRACT AND THE PROVISI ONS OF SEC.194C WERE ATTRACTED REGARDING DEDUCTION OF TAX AT SOURCE. AO ALSO NOTED FROM CIRCULAR NO.715 DATED 8/8/1995 THAT PROVISIONS OF SEC.194C COULD BE APPLICABLE IN RESPECT OF SUPPLY OF PRINTED MATERIAL AS PER PRESCRIBED 3 SPECIFICATIONS. AO THEREFORE ASKED THE ASSESSEE T O EXPLAIN AS TO WHY THE ASSESSEE COULD NOT BE TREATED IN DEFAULT U/S.20 1[1] AND CONSEQUENTIAL ACTION SHOULD BE TAKEN. AS PER THE AO THE ASSESSEE MAINLY RELIED ON CBDTS CIRCULAR NO.681 DATED 8/3/1 994 IN WHICH BOARD HAD EMPHASIZED THAT EVEN WHERE THE CONTRACTOR UNDERTAKES TO SUPPLY ANY ARTICLE OR THING ACCORDING TO THE SPECIF ICATIONS GIVEN BY THE COMPANY BUT THE PROPERTY IN SUCH ARTICLE OR THING PASSES TO THE COMPANY ONLY AFTER SUCH ARTICLE OR THING IS DELIVER ED THE CONTRACT WILL BE A CONTRACT FOR SALE AND OUTSIDE THE PURVIEW OF S EC.194C. THE ASSESSEE ALSO REFERRED TO THE JUDGMENT OF THE HON'B LE HIGH COURT OF BOMBAY IN THE CASE OF BDA LIMITED VS. ITO [TDS] IN TAX APPEAL NO.44/2003 & 01/2004 IN WHICH THE HIGH COURT HAD HE LD THAT SALE OF PACKING MATERIAL BASED ON SPECIFICATIONS IS NOT COV ERED BY THE PROVISIONS OF SEC.194C. AO HOWEVER REJECTED THE E XPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT CIRCULAR NO.681 OF CBDT AN D THE JUDGMENT OF THE HIGH COURT OF BOMBAY IN THE CASE OF BDA LTD. [SUPRA] WERE NOT APPLICABLE AS IN THE PRESENT CASE THE MAIN OBJECT W AS TO GET THE MATERIAL OR GOODS MANUFACTURED BY THE THIRD PARTY M ANUFACTURER AND NOT TO PURCHASE THE MANUFACTURED PRODUCTS AVAILABLE IN THE MARKET. THE AO ALSO REFERRED TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF STATE OF TAMIL NADU VS. ANANDAM VISHVAN ATHAM [73 STC 1] IN WHICH IT WAS HELD THAT WHEN THE FINISHED PRO DUCT SUPPLIED TO A PARTICULAR CUSTOMER IS NOT A COMMERCIAL COMMODITY I N A SENSE THAT IT CANNOT BE SOLD IN THE MARKET TO ANY OTHER PERSON T HE TRANSACTION IS ONLY A WORK CONTRACT. THE AO THEREFORE HELD THAT THE CONTRACT ENTERED INTO BY THE ASSESSEE WITH THE THIRD PARTY FOR THE M ANUFACTURE OF GOODS 4 WAS A WORK CONTRACT AND THE PROVISIONS OF SEC.194C WERE APPLICABLE AND TAX WAS REQUIRED TO BE DEDUCTED BY THE ASSESSEE IN RESPECT OF PAYMENTS MADE TO THE THIRD PARTIES. IN THIS CASE S INCE THE ASSESSEE HAD NOT DEDUCTED TAX IN RESPECT OF PAYMENTS MADE A O TREATED THE ASSESSEE IN DEFAULT IN RESPECT OF TAX NOT DEDUCTED U/S.201[1] AND ALSO CHARGED THE CONSEQUENTIAL INTEREST U/S.201[1A] FOR BOTH THE YEARS I.E. A.Y 2004-05 AND 2005-06. 5. THE ASSESSEE DISPUTED THE DECISION OF THE AO AND REITERATED BEFORE THE CIT[A] THAT THE CASE WAS COVERED BY CIR CULAR NO.681 OF CBDT [SUPRA] AS PER WHICH IN CASE THE TITLE IN THE PROPERTY MANUFACTURED BY THE THIRD PARTY PASSES TO THE ASSES SEE ONLY AFTER SUCH PROPERTY IS DELIVERED IT WILL BE A CASE OF CONTRAC T FOR SALE AND THUS OUTSIDE THE PURVIEW OF THE SEC.194C. THE ASSESSEE R EFERRED TO CLAUSE-4 OF THE AGREEMENT AS PER WHICH THE TITLE IN THE PRO DUCT PASSES TO THE ASSESSEE COMPANY ON THE DELIVERY OF THE COMPLETED P RODUCT TO THE COMPANY OR AT THE DESTINATION DIRECTED BY THE COMPA NY. IT WAS THUS ARGUED THAT SEC.194C WAS NOT APPLICABLE. AS REGARDS THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF STATE OF T AMIL NADU VS. ANANDAM VISHVANATHAM [SUPRA] RELIED UPON BY THE AO AS PER WHICH IT IS A CASE OF WORK CONTRACT IF THE GOODS MANUFACTURE D CANNOT BE SOLD IN THE MARKET TO ANY OTHER PERSON THE ASSESSEE SUBMIT TED THAT THE AGREEMENT ONLY PROVIDED THAT THE REJECTED PRODUCT C OULD NOT BE SOLD IN THE MARKET WITH THE LABELS WRAPPERS AND PACKING MA TERIALS WITH THE TRADE NAMES OR TRADE MARKS OR LOGO OF THE ASSESSEE COMPANY. THERE WAS NO PROVISION TO PROHIBIT THE SALE OF THE PRODUC TS WITHOUT THE TRADE MARK OR LOGO OF THE ASSESSEE COMPANY AND THE MANUFA CTURER WAS FREE 5 TO DISPOSE OF SUCH PRODUCTS. MOREOVER THE SAID JUD GMENT WAS NOT APPLICABLE AS THE SAME RELATED TO A DIFFERENT KIND OF TRANSACTION I.E. PRINTING OF QUESTION PAPERS OF UNIVERSITIES. IT WAS THUS SUBMITTED THAT JUDGMENT OF THE HON'BLE SUPREME COURT [SUPRA] WAS N OT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. CIT[A] HOWEVER WAS NOT SATISFIED. IT WAS OBSERVED BY HIM THAT THE SELLER WAS MANUFACTURI NG GOODS USING THE FORMULATIONS SPECIFICATIONS AND TECHNICAL KNOW -HOW PROVIDED BY THE ASSESSEE COMPANY AND AS PER THE SPECIFICATIONS AND QUALITY AS DESIRED BY THE ASSESSEE COMPANY. THE MANUFACTURE WA S MANUFACTURING PRODUCTS AS WELL AS PROCURING RAW MAT ERIALS AND PACKAGING THE FINISHED PRODUCTS ON BEHALF OF THE AS SESSEE COMPANY. THE MANUFACTURER WAS BOUND TO FOLLOW THE INSTRUCTIO NS AND ADVICE OF THE ASSESSEE COMPANY AND THEREFORE THE AGREEMENTS WERE PREDOMINANTLY THE CONTRACTS OF WORK WITH CONFIDENCE AND FAITH AND IT WAS NOT A CASE OF PURCHASE OF PRODUCTS WHICH ARE RE ADILY AVAILABLE IN THE MARKET. CIT[A] THEREFORE HELD THAT THE PROVI SIONS OF SEC.194C WERE ATTRACTED AND THE ASSESSEE WAS THEREFORE IN DEFAULT U/S.201[1]. THE ASSESSEE HAD ALSO RAISED AN ALTERNATE PLEA THAT THE ASSESSEE COULD NOT BE HELD IN DEFAULT IN CASE THE TAXES HAD ALREAD Y BEEN PAID BY THE CONTRACT MANUFACTURERS BUT THE PLEA WAS REJECTED ON THE GROUND THAT NO EVIDENCE WAS PRODUCED TO THAT EFFECT EITHER BEFO RE THE AO OR BEFORE THE CIT[A] . AGGRIEVED BY THE DECISION OF THE CIT[A ] THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL IN BOTH THE YEARS. 6. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE AT T HE VERY OUT SET POINTED OUT THAT IN SO FAR AS THE ISSUE OF DEDUCTIO N OF TAX IN RESPECT OF PAYMENTS MADE FOR SUPPLY OF PACKAGING MATERIAL WAS CONCERNED THE 6 ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASS ESSEE IN ITS OWN CASE IN THE EARLIER YEAR BY THE HON'BLE HIGH COURT OF GUJARAT [306 ITR 25] IN WHICH IT WAS HELD THAT THE PROVISIONS OF SEC .194C ON THE WORK CONTRACT FOR SUPPLY OF PRINTING MATERIALS WERE NOT APPLICABLE AND ACCORDINGLY THE ASSESSEE COULD NOT BE HELD IN DEFA ULT U/S.201[1]. AS REGARDS THE APPLICABILITY OF PROVISIONS OF SEC.194C TO THE CONTRACT MANUFACTURER OF FINISHED PRODUCTS WAS CONCERNED TH E LD. COUNSEL SUBMITTED THAT THE HON'BLE JURISDICTION HIGH COURT OF MUMBAI HAS ALREADY DECIDED AN IDENTICAL ISSUE IN CASE OF M/S G LENMARK PHARMACEUTICALS LTD. IN I.T.A.NO.2256 OF 2009 IN W HICH IT HAS BEEN HELD THAT PROVISIONS OF SEC.194C ARE NOT APPLICABLE IN CASES WHERE THE PROPERTY IN THE ARTICLE MANUFACTURED BY THE CONTRAC T MANUFACTURER PASSES TO THE CUSTOMERS UPON DELIVERY AND THE RAW M ATERIAL WAS NOT SOURCED FROM THE CUSTOMERS/PURCHASERS BUT WAS INDEP ENDENTLY OBTAINED BY THE MANUFACTURER FROM THE PERSONS OTHER THAN THE CUSTOMERS. IT WAS THEREFORE URGED THAT THE ORDER OF THE CIT[A] BE SET ASIDE AND THE DEMAND RAISED AGAINST THE ASSESSEE BE DELETED. THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER S OF THE AUTHORITIES BELOW. 7. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING APP LICABILITY OF PROVISIONS OF SEC.194C IN RESPECT OF PAYMENTS MADE BY THE ASSESSEE TO THIRD PARTIES FOR CONTRACT MANUFACTURE OF FINISHED PRODUCTS AS WELL AS PACKING MATERIAL. THERE IS NO DISPUTE THAT AS PER T HE AGREEMENT THE CONTRACT MANUFACTURER WAS REQUIRED TO MANUFACTURE T HE FINISHED PRODUCTS/PACKING MATERIAL AS PER THE FORMULATIONS A ND SPECIFICATIONS 7 GIVEN BY THE ASSESSEE BUT PROCUREMENT OF RAW MATERI AL WAS RESPONSIBILITY OF THE CONTRACT MANUFACTURER WHO WAS REQUIRED TO MANUFACTURE THE PRODUCTS AT ITS OWN ESTABLISHMENT A ND THE PROPERTY IN THE PRODUCT MANUFACTURED PASSED ON TO THE ASSESSEE ONLY UPON DELIVERY OF THE PRODUCTS. THE ISSUE IS WHETHER IT W OULD BE A CASE OF WORK CONTRACT FOR WHICH PROVISIONS OF SEC.194C ARE APPLICABLE OR IT IS CASE OF CONTRACT FOR SALE FOR WHICH TDS PROVISIONS ARE NOT APPLICABLE. WE FIND THAT IDENTICAL ISSUE HAS ALREADY BEEN CONSI DERED BY THE HON'BLE HIGH COURT OF MUMBAI IN THE CASE OF GLENMARK PHARMA CEUTICALS LTD. IN I.T.A.NO.2256 OF 2009. IN THAT CASE ALSO THE ASSESS EE WHO WAS MANUFACTURING PHARMACEUTICAL PRODUCTS WAS IN AGREE MENT WITH A THIRD PARTY FOR MANUFACTURE OF CERTAIN PHARMACEUTICAL PRO DUCTS. THE PRODUCTS WERE MANUFACTURED AS PER FORMULATIONS AND SPECIFICATIONS OF THE ASSESSEE AND THE MANUFACTURER WAS TO ATTACH THE TRADE MARK OF THE ASSESSEE ON THE GOODS PRODUCED. HOWEVER RAW MATERIA LS WERE REQUIRED TO BE PURCHASED BY THE MANUFACTURER AND THE PROPERT Y IN GOODS PASSED TO THE ASSESSEE ONLY UPON IN DELIVERY. THE HON'BLE HIGH COURT NOTED THAT THE CBDT RIGHT SINCE THE ISSUE OF CIRCULAR DA TED 29-5-72 HAD CONSISTENTLY TAKEN THE POSITION THAT FURNISHING OF SPECIFICATION TO THE MANUFACTURER BY THE PURCHASER WOULD NOT DETRACT FRO M A CONTRACT BEING REGARDED AS A CONTRACT FOR SALE SO LONG AS THE PROP ERTY IN THE GOODS WAS PASSED UPON DELIVERY. VARIOUS COURTS HAD ALSO T AKEN THE SAME VIEW. THE COURT REFERRED TO THE EARLIER JUDGMENT IN CASE OF BDA LTD. VS. ITO [281 ITR 99] IN WHICH THE COURT HAD TAKEN THE V IEW THAT PROVIDING SPECIFICATION TO THE MANUFACTURER WHO PRODUCES AN A RTICLE OR THING WOULD NOT DETRACT FROM THE NATURE OF TRANSACTION AS A OF SALE SO LONG AS 8 THE PURCHASERS HAD NOT SUPPLIED RAW MATERIAL TO THE SELLER AND THERE WAS NOTHING TO INDICATE THAT THE SELLER WAS A CAPTI VE UNIT OF THE PURCHASER. THE HIGH COURT ALSO REFERRED TO THE AMEN DMENT TO THE PROVISIONS OF SEC.194C BY THE FINANCE ACT 2009 IN WHICH THE EXPRESSION WORK HAS BEEN DEFINED IN CLAUSE [IV] O F THE SUBSTITUTED EXPLANATION AS UNDER: MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER DOES NOT INCLUDE MANU FACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM A PERSON OTHER THAN SUCH CUSTOMER. 8. THE HIGH COURT AFTER REFERRING TO THE MEMORANDUM EXPLAINING THE CLAUSES OF THE FINANCE BILL 2009 HELD THAT AME NDMENT ONLY CLARIFIED THE POSITION WHICH WAS REFLECTED IN THE CIRCULARS I SSUED BY THE CBDT SINCE 29-5-1972. IT WAS OBSERVED THAT THE REVENUE A LWAYS UNDERSTOOD SEC.194C TO MEAN THAT THOUGH A PRODUCT OR THING IS MANUFACTURED TO THE SPECIFICATION OF THE CUSTOMER THE AGREEMENT WO ULD CONSTITUTE CONTRACT FOR SALE IF [I] THE PROPERTY IN THE ARTICL E OR THING PASSES TO THE CUSTOMER UPON DELIVERY AND [II] THE MATERIAL THAT W AS REQUIRED WAS NOT SOURCED FROM THE CUSTOMER/PURCHASER BUT WAS INDEPEN DENTLY OBTAINED BY A MANUFACTURER FROM THE PERSON OTHER THAN THE CU STOMER. THE HIGH COURT ACCORDINGLY HELD THAT THE AMENDMENT WAS ONL Y CLARIFICATORY IN NATURE AND WAS REFLECTIVE OF THE LAW AS IT ALWAYS S TOOD IN THE PAST. THE AMENDMENT HAD THEREFORE RETROSPECTIVE APPLICATION . THE HIGH COURT HELD THAT THE PROVISIONS OF SEC.194 C WERE NOT APPL ICABLE IN THE CASE OF THE ASSESSEE. THE FACTS IN THE PRESENT CASE ARE IDE NTICAL AND THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURISDIC TIONAL HIGH COURT [SUPRA] WE HOLD THAT PROVISIONS OF SEC.194C ARE NO T APPLICABLE IN CASE 9 OF THE ASSESSEE AND THEREFORE THE ASSESSEE CANNOT BE TREATED IN DEFAULT U/S.201[1] FOR NOT DEDUCTING TAX AT SOURCE. WE MAY ALSO MENTION HERE THAT IN SO FAR AS APPLICABILITY OF PRO VISIONS OF SEC.194C TO THE CONTRACT MANUFACTURE OF PACKING MATERIAL IS CON CERNED THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE EARLIER YEAR IN THE ASSESSEES OWN CASE BY THE HON'BLE HIGH COUR T OF GUJARAT AS REPORTED IN 306 ITR 25. WE THEREFORE SET ASIDE TH E ORDER OF THE CIT[A] UPHOLDING THE DECISION OF THE AO TO TREAT T HE ASSESSEE IN DEFAULT U/S.201[1] AND TO CHARGE INTEREST U/S.201[1 A]. AS WE HAVE HELD THAT THE PROVISIONS OF SEC.194C ARE NOT APPLICABLE IT IS NOT NECESSARY FOR US TO DEAL WITH THE ALTERNATE PLEA RAISED BY TH E ASSESSEE THAT THE ASSESSEE CANNOT BE TREATED IN DEFAULT IN CASE TAXES HAD BEEN PAID BY THE CONTRACT MANUFACTURE OR THE ISSUE OF JURISDICTI ON IN A.Y 2005-06 IS IN RELATION TO PAYMENTS MADE AT BANGALORE OFFICE W HICH HAVE BECOME INFRUCTUOUS. 9. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30TH DAY OF APRIL 2010. SD/- SD/- (R.S.PADVEKAR) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 30 TH APRIL 2010. P/-* 10