The assessee, engaged in the business of selling milk and milk products, made payments to a dairy for conversion of raw milk into processed milk and milk products. It deducted tax at source @2% under section 194C treating payments to be contract payments. However, the assessing officer made disallowance under section 40(a)(ia) holding that the payments were in the nature of payments for technical services and therefore, tax should have been deducted @10% under section 194J. However, the Commissioner of Income-Tax (Appeals) deleted the disallowance made by the Assessing Officer. On appeal by Revenue, the Hon’ble Tribunal upheld the CIT (A) order and held that the CIT(A) has rightly deleted the disallowance made by the Assessing officer. On appeal by the Department, the Hon’ble Gujarat High Court  held that  t the Hon’ble Tribunal relied on the decision of the co-ordinate Bench in the assessee’s own case wherein, relying on CBDT Circular No. 13/2006 dated 13 December 2006(2006) 287 ITR 174 (St) wherein  it held that the services provided by the dairies are in the nature of job work which falls within definition of ‘work’ under section 194C. The services are neither technical nor managerial nor consultancy since the dairies are not assigned any exclusive work relating to quality check and therefore, the main and basic nature of transaction of conversion/processing of milk on job work basis does not lose its true characteristic. Accordingly, the Department’s appeal is dismissed.