Press Trust of India / New Delhi Sep 22, 2009, 18:50 IST
The Supreme Court has sought reply from consumer goods major LG Electronics India on a plea by the Income Tax department that the company is liable to deduct tax on goods outsourced for manufacturing.
A bench headed by Justice S H Kapadia has issued notice to LG Electronics. Earlier, it had sought reply from Samsung India Electronics on a similar issue raised by the department.
The Commissioner of Income Tax has challenged the Delhi High Court's judgement of January this year and said the high court dismissed its appeal against the firm "erroneously" and "without answering the substantial question of law".
It said LG does not manufacture the entire products but outsourced the same to others manufacturers or contractors or vendors or original equipment manufacturers under contract manufacturing.
The petition said the contract entered into between the assessee and the manufacturer to make products as per the requirements and specifications was a works or service contract and not a contract of sale and purchase of goods.
It further said that under Section 194-C of the Income Tax Act, 1961, tax should be deducted on such contracts.
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