DCIT Vs Maahi Milk Producer Co. Ltd (ITAT Rajkot)
The brief facts of the case the assessee is engaged in the business of selling milk and milk products. The assessee had made 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%.
In this case, in support of its contention, assessee submitted copy of conversion agreement with Mother dairy Fruit and vegetable Pvt. Ltd. & Giriraj Milk Products Ltd. Assessee further stated that it does not have own manufacturing facility, hence, it entered into job work contract with various dairies for conversion and packing of milk and milk products. Assessee provided raw milk and necessary materials to the dairies for processing as per specification of assessee. The dairies custom pack it on job work basis. Assessee deducted tax u/s.194C on conversion charges Rs.19.77 crores paid to such dairies since the job work falls within definition of ‘work’ u/s.194C. CBDT circular No.13/2006 dated 13th Dec, 2006 relied. Further stated the services rendered by the dairies are not technical services since the dairies are not expert on any technology which they could provide to the assessee, nor they provide any managerial services/consultancy services since there is no advice given by dairies to the assessee. The dairies are not assigned any exclusive work relating to quality check but are assigned work relating to conversion/processing of milk and milk products, wherein one of the requirements is to ensure quality parameters. The main and basic nature of transaction viz. conversion/processing of mild on job work basis does not lose its true characteristic. Similar issue was arisen for Financial Year 2014- 15. Ld. CIT(A) had given relief to the assessee by these issues as follows:
