TDS under Section 194C applicable on the processing of milk: ITAT

The brief facts of the case the assessee is engaged in the business of selling milk and milk products. The assessee had made a payment of Rs. 29,63,90,780/- to M/s. Mother Dairy and M/s. Giriraj Milk Pvt. Ltd. for conversion of raw milk into processed milk and milk products. On these payments the assessee made TDS under Section 194C of the Act at 2% treating these payments to be contract payments. Whereas the Assessing Officer on the other hand has held that these payments are in the nature of payments of technical services and the assessee ought to have deducted TDS @ 10% under Section 194J of the Act. Thus, the Assessing Officer made disallowance under Section 40(a)(ia) on the proportionate amount of Rs. 23,71,12,624/- for short deduction of TDS @ 8%.

The Ld. Counsel for the assessee also relied upon the Coordinate Bench decisions dated 18.09.2019 in the case of Jayshri Silk Processing Mills Pvt. Ltd. vs. ACIT in ITA No. 170-172/Rjt/2017. Here it was held that the processing of milk falls under Section 194C of the Act and there is no question of short deduction by the assessee. However, Ld. D.R. appearing for the Revenue could not produce before us any contra judgment in favour of the Revenue.

Thus, respectfully following the Coordinate Bench judgment in assessee’s own case in ITA No. 161/Rjt/2017, ITAT deleted the addition made by the Assessing Officer under Section 40(a)(ia) of the Act.

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