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Facts
The assessee, a Government department for the welfare of women and children, failed to deduct TDS on payments made to Self-Help Groups (SHGs) for providing catering services for Anganwadis. The Assessing Officer treated these payments as 'work contracts' under Section 194C, while the assessee contended they were for the sale of goods.
Held
The Tribunal, finding that the AR and DR were 'Ad idem' (in agreement), set aside the impugned order. The matter was remanded back to the Assessing Officer for fresh adjudication on a de novo basis, directing the assessee to cooperate fully.
Key Issues
Whether payments to SHGs for preparing and supplying food for Anganwadis constitute a 'work contract' attracting TDS under Section 194C, or a 'sale of goods' exempt from such TDS.
Sections Cited
253, 194C, 246A, 250, 201(1), 201(1A), 715
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M JOSHI
the order bearing Number ITBA/APL/S/250/2024- 2025/1071687490(1) dated 30.12.2024 passed by the Ld. CIT(A) u/s 250 of the Act which is hereinafter referred to as the “Impugned order”. The relevant Assessment Year is 2014-15and
Distt Woman & Child Dev Officer to 253/Ind/2025 the corresponding previous year period is from 01.04.2013 to 31.03.2014.
FACTUAL MATRIX 2.1 That as and by way of an assessment order passedu/s 201(1)/201(1A) dated 26.03.2021 a demand of Rs.29,47,209/- (Demand + interest) was created/raised on the assessee for TDS defaults. That the aforesaid order is hereinafter referred to as the “impugned original order” of the Ld. A.O.
2.2 That the assessee being aggrieved by the aforesaid“impugned original order” prefers the first appeal u/s 246A of the Act before the Ld. CIT(A) who by the “impugned order” has dismissed the 1st appealof the assessee on the grounds and reasons stated therein.
2.3 That the assessee being aggrieved by the “impugned order” has preferred the instant second appeal before this Tribunal and has raised following grounds of appeal in the Form No.36 against the “impugned order” which are as under:-
“1. The order passed by the Learned CIT (Appeal) bad in law, arbitrary and is unenforceable under the law. 2. That the Learned CIT (Appeal) has passed the order ignoring the fact that all the notices were sent through electronic modes. The Assessee being a Government department is not acquainted
Distt Woman & Child Dev Officer to 253/Ind/2025 with computer operations as all the daily routine work and correspondence are done in physical paper form and the staff does not check emails at regular intervals. Hence, opportunity of being heard was not provided to the assessee and the same is against principal of natural justice.
3. That the Learned Assessing Officer erred in holding that TDS 3 under Section 194C of the Income Tax Act, 1961 is applicable to the payments made to SHGs for providing catering service.
That the Learned Assessing Officer further erred in categorizing the payments made by the appellant to the Self Help Groups (SHGs) as falling within the scope of Section 4 194C, when the payment where made under a Government sponsors scheme for the preparation and supply of nutritional foods for Anganwadis, as approved by the State Government and other organizations.
That the Learned Assessing Officer also erred in failing to recognize that the payment made to SHGs pertain to the sale of goods and therefore exempt from TDS under section 194C, as per the clarification provided in Circular No. 715 (Clarification No. 11)dated 08/08/1995 which explicitly states that: "No TDS is required to be deducted under Section 194C for contracts that are purely for the sale of goods." Since the payments made by the appellant are for the sale of prepared food items to beneficiaries, the transactions are purely of a commercial nature and do not constitute a "work contract" as defined under Section 194C of the Act.
The agreements executed with the Self-Help Groups clearly specify the obligation to provide nutritious, high-quality, and freshly prepared food in line with government-mandated nutritional and caloric standards. The contract explicitly prohibits the provision of raw materials or resources by the assessee for food preparation, further reinforcing that the nature of the transaction is the sale of finished goods.
That the Learned Assessing Officer erred in applying the provision of Section 194C concerning that: "Manufacturing or supplying of a product according to the requirement or specification of a customer". But no materials were provided by 7 the appellant to the Self-Help Groups for food preparation. The SHGs procured their own raw materials and delivered the final product (cooked food) as per the terms of the agreement. Thus, the transaction constitutes a sale of goods and not a "work contract."
Distt Woman & Child Dev Officer to 253/Ind/2025
Further reliance is placed on the following case laws which support the appellant's contentions CIT vs. Glenmark Pharmaceuticals Ltd. (2010) 324 ITR 199 (SC): The Hon'ble Supreme Court held that where a transaction is purely in the nature of the sale of goods, TDS provisions under Section 1940 are not applicable. ITO. vs. V.S. Dempo& Co. Ltd. (2006) 104 TTJ 913 (Mum): The ITAT ruled that when the primary purpose Re of the contract is the sale of goods and no raw material or resource is supplied by the buyer, the provisions of Section 194C do not apply. K.S. Hotels (P) Ltd., New Delhi vs Department of Income Tax: The ITAT ruled that merely supplying cooked food, without additional services like serving, preparation at the client's premises, or other service elements, does not constitute catering services under Section 194C.
The Learned Assessing Officer failed to appreciate that the appellant acted in good faith and complied with all procedural 9 requirements under the Income-tax Act, 1961. The reasons provided by the Learned Assessing Officer for the imposition of TDS are arbitrary, unjustified, and legally flawed.
That the Learned CIT (Appeal) failed to consider the specific explanations and clarifications provided by the appellant during the course of the proceedings.
The appellant respectfully prays that the CIT (Appeal) set aside the impugned order, thereby removing the demand raised for non-deduction of TDS under Section 194C, and accept the appellant's submissions that the payments made to the SHGS were solely for the sale of prepared food items, which are not subject to TDS under Section 194C, as clarified in Circular No. 715 (Clarification No. 11).
The appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of appeal”.
Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 20.11.2025 when the Ld. AR for and on behalf of the assessee appeared before us and interaliasubmitted that the assessee
Distt Woman & Child Dev Officer to 253/Ind/2025 works under Mahila and Gram Vikas organization which is a Department of Govt. of M.P. In brief the assessee is a Govt.
Department for the welfare of Woman & Children. It was submitted that the department of income tax conducted a survey wherein it was discovered that the TDS amounts were not deducted. The assessee can also be called a “self help group” briefly it was submitted. The Ld. AR prayed that due to several practical difficulties being government department an effective representation could not be made and hence if one more opportunity is afforded they would then comply and that the same would meet the requirement of ends of justice. The Ld. DR appearing on behalf of the revenue contended that since the assessee is a government department the revenue has no objection if the matter is remanded back to the file of Ld. A.O for fresh adjudication and adjudgment of the case according to law however subject to the condition that the assessee should cooperate with the department fully in the speedy resolution of dispute.
Distt Woman & Child Dev Officer to 253/Ind/2025 4. Observations,findings& conclusions.
4.1 We now have to decide the legality, validity and the proprietery of the “impugned order” basis records of the case and rival contentions canvassed before us.
4.2 We have carefully perused the records of the case as presented to this Tribunal by both the Ld. AR &the Ld. DR to determine the legality, validity of the “impugned order” basis law and by following the due process.
4.3 We basis records of the case and after hearing and upon examining the contentions are of the considered view that both the Ld. AR and Ld. DR are“Ad idem” that the “impugned order” should be set aside and that the matter should be remanded back to the file of Ld. A.O so as to enable him to pass a fresh order after taking into the consideration the entire gamut of the case from all the angles on denovobasis. Assessee is directed to cooperate with the department.
4.4 In view of the premises drawn up by us, we set aside the “impugned order” and remand the case back to the file of Ld. A.O on denovo basis with a direction to the assessee to fully cooperate with the department and not to seek any adjournment on flimsy grounds.
Distt Woman & Child Dev Officer to 253/Ind/2025 5. Order 5.1 In result the“impugned order” is set aside as and by way of remand back to the file of Ld. A.O on denovo basis.
5.2 The appeal of the assessee is allowed for statistical purpose.
(Assessment Year 2012-13) &
Since the facts and circumstances are almost identical and similar these two appeals too were heard simultaneously and is beingdisposed off by this common/consolidated order are remandedback to the file of Ld. A.O on denovo basismutadis mutandis.
5.4 Finally in result all the appeals are allowed for statistical purpose.
Order pronounced in open court on 28.11.2025.