CIT Vs. KHADIM SHOES PVT LTD

JUDGEMENT

(1.) The subject matter of challenge in this appeal is a judgement dated 12th May, 2006 passed by the learned Income Tax Appellate Tribunal pertaining to the assessment year 2004-2005. The question which was formulated at the time of admission of the appeal, at the instance of the revenue, reads as follows:-

(2.) The undisputed facts of the case are that the assessee a well-known merchant in footwear made purchase worth Rs.46.30 Crores approximately. The purchase and sale transactions were duly offered for taxation.

(3.) The assessing officer was of the opinion that the purchase for the sum of Rs.46.30 Crores was, in fact, an outsourcing and therefore, the assessee should have deducted tax at source under section 194C. He on that basis held the assessee liable for payment of Rs.1.06 Crores approximately under section 201(1)(1A) read with section 194C. The assessee preferred an appeal. The appellate authority was of the opinion that purchase worth Rs.38.39 Crores was not within the purview of section 194C for the following reasons :