JUDGMENT : VINEET KOTHARI, J. (Prayer: Tax Case (Appeal) is filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai 'C' Bench, dated 02.04.2018 passed in I.T.A.NO.1987/CHNY/2016 for the Assessment Year 2012-13.) 1. The Assessee has filed the present Appeal under Section 260A of the Income Tax Act, 1961 ('Act' in short) raising the Substantial Questions of Law, arising from the order of the Income Tax Appellate Tribunal dated 02.04.2018, by which, the learned Tribunal dismissed the Assessee's Appeal for the Assessment Year 2012-2013 and upheld the disallowance made by the Assessing Authority as well as First Appellate Authority under Section 40A(ia) of the Act on account of not making Tax Deduction at Source by the Assessee on making payment to M/s.Spectronic Plating (P) Ltd, for the alleged job work of Electro-plating undertaken by the said Company on the copper rolls sent by the Assessee. 2. The Substantial Questions of Law raised in the present Appeal filed by the Assessee are as follows: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the disallowance as prescribed u/s.40 (a)(ia) of the Income Tax Act for the non-deduction of TDS would be applicable to the appellant when the work done by M/s.Spectronics Plating (P) Ltd is not a job work? 2. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the disallowance as prescribed u/s.40(a) (ia) of the Income Tax Act for the non-deduction of TDS would be applicable, ignoring the retrospective applicability of s.40(a)(ia) of the Income Tax Act? 3. Whether, on the facts and circumstances of case, the Tribunal was right in not taking into consideration that there is no revenue loss for the respondent as M/s.Spectronics Plating (P) Ltd has discharged the liability of the appellant by paying tax on that portion of income accrued?" 3. The learned counsel for the Assessee Mr.R.Sivaraman submitted before us that the provisions of Section 194C of the Act, providing for such Tax Deduction at Source on the job work, is not attracted in the present case. Therefore, the authorities below have erred in applying the said provisions and consequently upheld the disallowance under Section 40A(ia) of the Act. The learned counsel for the Assessee Mr.R.Sivaraman submitted before us that the provisions of Section 194C of the Act, providing for such Tax Deduction at Source on the job work, is not attracted in the present case. Therefore, the authorities below have erred in applying the said provisions and consequently upheld the disallowance under Section 40A(ia) of the Act. He drew our attention to Clause(iv) of Explanation appended to Section 194C of the Act, which is quoted below for ready reference: "194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein." Explanation-For the purposes of this Section,- (iv) "work" shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) Carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. 4. 4. The learned counsel for the Assessee further submitted that the specific contention raised before the CIT (Appeals) was that the said provision under Section 194C of the Act would not apply to the facts of the present case, because major part of the materials viz., Gold and Nickel for undertaking the job work was purchased only by M/s.Spectronic Plating (P) Ltd., from the third parties and not from the Assessee and therefore Composite Invoice was raised by M/s.Spectronic Plating (P) Ltd, Bangalore on the Assessee for the job work charges for the labour employed in undertaking the work of Electro-plating process and the cost of Gold and Nickel, charging CST @ 2% Central Sales Tax against 'C' Form Declaration under the CST Act, 1956 from the Assessee, but despite the claim of non application of the said provision of Section 194C of the Act, in view of the aforesaid Explanation defining the term 'work', the learned C.I.T (Appeals) failed to apply his mind to the said contentions raised by the Assessee. The order of the learned CIT (Appeals) is quoted below for ready reference: "Further to the above, during the course of appeal proceedings the appellant made another written submission as under: The Supplier M/s.Spectronics imports the gold plates directly from the supplier, makes value addition and then sells the goods to the appellant charging only central sales tax. This tantamount to purchases and cannot be treated as a contractor payment which is subject to TDS provisions. In case of contractor payments, normally the imports are made by the principal who then supplies the materials on job-work basis to Sub-contractor. The job work provided by the sub-contractor is subject to TDS provisions as the ownership of the product vests with the contractor. The Purchase Bills were having only Central Sales Tax which shows that the transaction is only purchase transaction and not a job work. In the case of job work the element of service tax will be involved and not the sales tax. Even the bills clearly mentions that the quantity and Delivery challans. The copy of the purchase order, bills for purchase and C forms issued in this regard are attached for your reference. When sales take place between persons residing in two different states, Central Sales Tax (CST) is levied. It is because, VAT can be levied only on local sales. Even the bills clearly mentions that the quantity and Delivery challans. The copy of the purchase order, bills for purchase and C forms issued in this regard are attached for your reference. When sales take place between persons residing in two different states, Central Sales Tax (CST) is levied. It is because, VAT can be levied only on local sales. Form C is issued by the dealer for purchasing goods from a dealer outside the state in which he resides. Form C is a sales tax form and can be issued only when the purchase of goods from outside the State in which the purchaser of goods resides. We attached herewith the Form Cs issued by the appellant's commercial tax officer against the purchases made from M/s.Spectronic. Relevant clause of section 194C is reproduced here under EXPLANATION TO SECTION 194C (iv) work shall include (a) ...... (b) ..... (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. From the above definition it is clear that, when the materials were not purchased by the supplier then there is no element of TDS. In this case, the supplier only purchasing the gold and supplying the same by quoting on the product. Further, the process of purchase order is same for Spectronics & Other materials suppliers. Hence, there is no TDS liability on the gold plating. The same is considered as production expenses due to the fact that the quantity cannot be reliably measured as a separate item. The Learned Assessing Officer mentioned that the above transaction is a "Composite Invoices" i.e, the invoice include both purchase of gold plating materials and job work charges. It is clear from his observation that the transaction is tantamount to purchases. Further in the case of composite contracts, only work contract tax will be charged and not Central Sales Tax. If the dominance test is applied the transfer of material dominates the transaction and hence be treated as Transaction of Purchase only and not job work charges. Further, the Assessing Officer himself observed that the rate varies for each invoices. Further in the case of composite contracts, only work contract tax will be charged and not Central Sales Tax. If the dominance test is applied the transfer of material dominates the transaction and hence be treated as Transaction of Purchase only and not job work charges. Further, the Assessing Officer himself observed that the rate varies for each invoices. If the contract is necessarily for job work them, the job work price will not vary between bills. The Job work Price will be a fixed component in most of the work contracts. In this case, the fluctuation is due to change in purchase price of materials only. Even the same has been clearly mentioned in the invoice itself. Particulars Amount (Rs.) per Piece % GPC [Gold Potassium Cyanide] 9.54 97% Other Manufacturing cost 0.29 3% Electro Plating component purchase cost 9.83 The above costing shows that the Purchase cost is largely dependent upon the material cost i.e. GPC and not due to others which is subsidiary element in our case. Considering the above submission, we humbly request you to direct the Learned Assessing Officer to delete the additions made in the Assessment Order, for which act of justice, the appellant shall ever remain grateful. I have given careful consideration of the statement of facts, grounds of appeal and the submissions of the assessee and the appeal is adjudicated as under: The only issue involved in this appeal is regarding the disallowance made u/s.40(a)(ia) of Rs.2,76,67,052/-. During the assessment proceedings, the assessee was asked to furnish TDS details on all liable heads of expenses. On further verification of the statement of income for the year ended 31.03.2012, the assessee was asked to produce details of electroplating expenses and it was found that the assessee had not deducted TDS on the same. On closer examination of the details furnished by the assessee, especially the invoices, it was clear that the amount of Rs.2,76,67,052/- paid by the assessee to M/s.Spectronic Plating (P) Ltd was nothing but "job work charges" paid for gold plating done on the materials supplied by the assessee. The invoices raised by M/s.Spectronic Plating (P) Ltd, are composite invoices, i.e., the invoices include both purchase of gold plating materials and job work charges. Being a composite invoice containing gold purchase, it attracts CST @ 2%. The invoices raised by M/s.Spectronic Plating (P) Ltd, are composite invoices, i.e., the invoices include both purchase of gold plating materials and job work charges. Being a composite invoice containing gold purchase, it attracts CST @ 2%. However, these composite amounts paid to M/s.Spectronic Plating (P) Ltd would attract the provisions of section 194C of the Act and hence the AO disallowed the same u/s.40(a)(ia) of the Act, 1961. In view of the above, I confirm the order of the AO disallowing the amount of Rs.2,76,67,052/- u/s.40(a)(ia) of the Act paid by the assesse to M/s.Spectronic Plating (P) Ltd without deducting TDS is correct and the appeal of the assessee is dismissed. In the result appeal of the assessee is dismissed. (Sd/-) (M.N.Maurya) Commissioner of Income Tax Appeals-16, Chennai 34" 5. He further submitted that the learned Tribunal also affirmed the order passed by the two authorities below without making any discussion on the relevant provisions on the facts of the case, by merely citing the Judgment of the Supreme Court in State of Tamil Nadu Vs. Anandam Viswanathan reported in AIR 1989 SC 962 . The order of the learned Tribunal is quoted below for ready reference: "5. We have considered the rival submissions and gone through the relevant orders. In the case of State of Tamil Nadu Vs. Anandam Viswanathan AIR 1989 SC 962 , it is held that "The primary difference between a contract for work or service and a contract for sale is that in the former there is in a person performing or rendering service, no property in the thing produced as a whole, notwithstanding that a part or even the whole of the material used by him may have been his property. Where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction is only a works contract.” If we apply this test in this case, it is clear that the items received from M/s.Spectronic Plating (P) Ltd., is not a commercial commodity, they cannot be sold directly by the assessee in the market or to any person and hence as held by the CIT (A), the assessee's transactions is nothing but composite transaction falling within the scope of Section 194C and hence, we do not find any reason to interfere with the order of the CIT (A). 6. In the result, the assessee's appeal is dismissed." 6. The learned counsel for the Assseseee Mr.R.Sivaraman, further urged that even if the provisions of Section 194C of the Act are held to be applicable for the present case, still no disallowance can be made under Section 40A (ia) of the Act, in view of the fact that M/s.Spectronic Plating (P) Ltd., Bangalore has already paid tax on the said receipts of the job charges from the Assessee and the Auditor's Certificate in this regard was also produced before the Authorities below. Therefore, if the object of making Tax Deduction at Source under Section 194C of the Act stood achieved, therefore the disallowance could not have been made and this contention was also raised before the learned C.I.T (Appeals), but the same was also not been discussed by him. 7. The learned counsel for the Revenue Mr.M.Swaminathan to this argument, submitted that the Second Proviso to Section 40A of the Act, inserted by Finance Act 2012 with effect from 01.04.2013, would apply only to the Assessment Year 2013-2014 and not for the Assessment Year 2012-2013, which is involved in the present case. He would further submit that unless the entire material or major part of the material is supplied by the Assessee as defined in the said Explanation under Section 194C of the Act, the Explanation will not apply in the present case and therefore the authorities below were justified in applying the said provisions and making disallowance under Section 40A (ia) of the Act. 8. 8. Having heard the learned counsel for the parties and upon perusing all the impugned Orders, we are of the opinion that the matter deserves to be remitted back to the learned CIT (Appeals) for fresh consideration in the matter. Apparently, we find that though a detailed order has been passed by the learned CIT (Appeals), running into 10 pages, but the concluding part quoted above would reveal that the learned CIT (Appeals) has not at all answered to the contentions raised before him and has not especially not dealt with the exclusion part in the Explanation to Section 194C of the Act; whether the said Section applies to the present case or not, in view of the definition 'Work' as defined in the Explanation to Section 194C of the Act, where apparently the material used for electroplating viz., Gold and Nickel were purchased by the job worker M/s.Spectronic Plating Pvt., Ltd., Bangalore from third parties and for which a composite Sale Invoice consequent to the Purchase Order of the Assessee was raised, and in respect of the same, then property in goods has been transferred to the Assessee along with job work charges of electroplating undertaken by the said Company. Whether such works would attract the provisions of Section 194C or not was a debatable question and unless a finding of fact was arrived at by the learned CIT (Appeals) independently discussing the contentions raised before him, the mere affirmation of the finding of the Appellate Authority that provisions under Section 194C are attracted and that the Assessing Officer was justified in making disallowance to the extent of Rs.2,76,67,052/- is not at all a satisfactory disposal of the Appeal by the First Appellate Authority, who was under an obligation to discuss the facts and legal contentions in detail and the First Appellate Authority cannot affirm the order passed by the lower Assesseing Authority just like that. The Tribunal is also equally duty bound to discuss the facts and legal contentions in detail. Cutting short their findings by merely affirming the order of the lower Appellate Authority, shows total non-application of mind and the failure to discharge their legal duty provided under the Act. 9. The three tier system of Assessment is the Assessing Authority, First Appellate Authority (CIT (A)) and the Second Appellate Authority(Tribunal). Cutting short their findings by merely affirming the order of the lower Appellate Authority, shows total non-application of mind and the failure to discharge their legal duty provided under the Act. 9. The three tier system of Assessment is the Assessing Authority, First Appellate Authority (CIT (A)) and the Second Appellate Authority(Tribunal). The Tribunals are expected in law to discharge their duties by analysing and interpreting the findings of facts of the Lower Authorities in a fair, objective and transparent manner. The orders should speak of application of mind by these appellate authorities. The failure to pass appropriate reasoned orders by the Appellate Authorities not only results in serious miscarriage of justice but also raises serious doubts about the integrity of the institution and a fair discharge of their official duties in a proper manner, which adds to the burden of higher constitutional Courts. When such matters, viz., non application of mind by the lower Appellate Authorities, are brought before the higher Courts, the said Courts, being conscious and aware of their constitutional obligations, have to delve much deeper into the facts, reasons and provisions of law, which in the first instance ought to have been discussed by the lower authorities in a more appropriate and detailed manner. 10. We are conscious of the fact that the Assessing Authorities are adopting a pro-revenue approach to raise demands of tax, interest and penalty, perhaps to fetch more revenue to the coffers of the Treasury, but at the same time, we cannot ignore the legal rights of the Assessees to raise its contentions. Therefore, it is incumbent on the part of the appellate forums, to thrash out the facts and legal contentions, with the aid of statutory provisions discussed in detail as may be canvassed before them, under the Income Tax Act. 11. We do not find any such fair exercise undertaken in the present case by the learned CIT (Appeals). The aforesaid quoted portion from the orders passed by the appellate authorities does not leave any manner of doubt that these contentions which are raised before us by the learned counsel for the Assessee were duly raised before the said authorities and the very fact that they are quoted from the order of CIT (Appeals) makes it more clear, but at the same time it is painful to state that the said authority failed to address those contentions absolutely. The said order even though running into 10 pages, in fact is only a two line when it says "However, these composite amounts paid to M/s.Spectronic Plating (P) Ltd would attract the provisions of Section 194C of the Act and hence the AO disallowed the same u/s.40(a)(ia) of the Act, 1961" and the disallowance under Section 40A of the Act made by the Assessing Authority is confirmed. 12. We could have said more about the tenor of the orders of the learned CIT (Appeals) as well as the learned Tribunal and could have imposed costs upon them, but we leave it with a sanguine hope that a good sense will prevail over these authorities with the above said observations which we have made. Therefore with a sense of remorse, we are constrained to remit the matter back to the learned CIT (Appeals) for passing fresh orders in accordance with law, after dealing with the contentions of the Assessee in an appropriate, fair and objective manner by proper application of mind. 13. In the result, the Tax Case Appeal is disposed of, without answering the Substantial Questions of Law raised before us by remanding the case back to CIT (Appeals). No order as to costs.