Infoobjects Software India Private Ltd. Vs DCIT (ITAT Jaipur)
ITAT Jaipur held that expenditure towards supply of food packets for employees which was subjected to GST shall not be considered as contract and hence provisions of section 194C shall not apply. Accordingly, disallowance u/s. 40(a)(ia) of the Income Tax Act liable to be deleted.
Facts- During assessment, AO noted that the assessee had incurred catering expenditure for an amount of Rs. 75,15,792/- for purpose of supply of food packets for their employees from M/s Ganesh Lal Yadav HUF where the assessee was liable to deduct TDS but had not deducted TDS on the payment. The company paid business promotion expenditure of Rs. 6,99,314/- to promote business and rewards to employees to achieve work targets where the assessee was liable to deduct TDS but had not deducted TDS on the payment. Hence, 30% of the catering expenditure of Rs.75,15,792/- was disallowed u/s 40(a)(ia) of the Act and 30% of the Business Promotion Expenses amount to Rs. 6,99,314/- was disallowed u/s 40(a)(ia) of the Act.
Conclusion- Held that had been a case of catering service the provision of section 194C shall apply but in this case this being the case of supply of foods and the same being subjected to GST the same shall not be considered as contract and therefore, the provision of section 194C shall not apply on those transaction entered into by the assessee in the case of M/s. Ganesh Lal Yadav-HUF. Considering that aspect of the matter ground no. 1 raised by the assessee is allowed.
