• Notification Date: 14-12-2022
• Notification No: N/A

TDS under Section 194C Applicable on the Processing of Milk

The assessee, in the case, is engaged in the business of selling milk and milk products. He 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. But the Assessing Officer on the other hand has reported that these payments are in the nature of payments of technical services. The officer has held that 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. It was held that the processing of milk falls under Section 194C of the Act. Hence, there is no question of short deduction by the assessee. However, Ld. D.R. appearing for the Revenue could not produce any contra-judgment in favour of the Revenue. 

Hence, 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.