SHIV SHAKTI CHAINA CLAY,BHUJ vs. THE ITO WARD (2), GANDHIDHAM, GANDHIDHAM

The brief facts qua the issue are that assessee is a partnership- firm and engaged in the business of china clay. For the year under consideration assessee has filed return of income declaring total income Rs.76,46,200/-. In the return of income, the assessee-firm claimed credit of Rs.2,17,225/- for Tax Collected at Source. While processing the said return of income, the Central Processing Centre (CPC) processed the same and intimation under section 143(1) of the Income tax Act, 1961 was issued accepting the returned income but without giving credit of the Tax Collected at Source (TCS) claimed in the return of income amounting to Rs.2,17,225/-.

Aggrieved by the order of the assessing officer/ Central Processing Centre (CPC), the assessee carried the matter in appeal before the learned CIT(A), who has confirmed the action of the assessing officer. The ld.CIT(A) noticed that under the provisions of the Income Tax Act, the buyer (the assessee in this case) is entitled to claim the TCS credit, provided they have filed their income tax return. To successfully claim this credit, the buyer must accurately complete the relevant sections of the Income Tax Return (ITR) form, attach the required documentation, including the TCS certificate issued by the seller, and substantiate the transaction. The TCS is recorded in Form 26AS, which reflects the tax credit, and the buyer may

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

Ms. Devina Patel, the Ld. Counsel for the assessee, begins by pointing out that Ld.CIT(A) erred in confirming the action of the CPC/AO in not allowing TCS credit of Rs.2,17,225/- claimed by the assessee-firm in the return of income filed for the year. The Ld. Counsel took us through the order passed u/s.143(1) of the Act, wherein the TCS credit claimed by the assessee-firm is mentioned in intimation under section 143(1) of the Act, to the tune of Rs.2,17,225/-. However, the Assessing Officer has not allowed the same. The Ld. Counsel stated that TCS was collected by the Government Department on mining royalties in the name of one of the partners of the firm, however, it was claimed in partnership- firm, therefore, it was disallowed. The Ld. Counsel stated that there is no difference between partner and partnership- firm, ( partner of the partnership- firm, has unlimited liability, if the partnership firm makes default) as the tax was collected by the Government, so it is a genuine transaction, and there is no

On the other hand, Ld. Sr.DR for the Revenue submitted that TCS collection and the treatment thereof is PAN specific. The TCS collection in the assessee’s case is not in the PAN of the assessee’s- firm, however, it is in the name of the partner. As the TCS credit is PAN specific, therefore, Assessing Officer did not have the authority to allow in the hands of other person, hence CPC/AO has correctly made the addition in the intimation issued u/s.143(1) of the Act.

In the rejoinder, the Ld. Counsel for the assessee submitted that TCS credit was claimed by the partnership- firm, although TCS transaction reflects in the name of partner, as there is no material difference between partner and partnership firm and it does not defeat the provisions of the Act, for that Ld. Counsel for the assessee took us through the provision of Rule 37-I of the Income Tax Rules and stated that TCS collected in the name of partner but claimed in the name of partnership firm, is in accordance with law. Hence, no addition should be made in the hands of the assessee-firm.

We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. The partnership-firm's business involves mining from leased mines, and it pays royalty to the Government. The TCS on the royalty was collected by the Office of Geologist and Mining, and the amount was deposited in the name of one of the firm's partners, Mr. Ganeshbhai Lakhmanbhai Lodanee, under his PAN. Although the firm properly claimed the TCS credit in its return, the partner did not claim it, as the royalty payments were made by the partnership- firm and not the individual. However, assessing officer/CPC disallowed the TCS credit of Rs. 2,17,225/-.Thus, we note that assessee's business involves process of mining from the leased mines which is in the name of one of the partner ‘Ganeshbhai Lakhmanbhai Lodanee - PAN: AODPM9126L’ Royalty for mining the said leased mines is paid by the partnership- firm in regular course of business to Government Department i.e. Office of Geologist and Minning. The Office of Geologist and Minning - TAN: RKTO00277E collected tax (TCS) on the royalty paid by the assessee- firm but deposited the same in name of partner of the firm Ganeshbhai Lakhmanbhai Lodanee PAN: AODPM9126L. This fact is evidenced from the Form No. 26AS in the case of partner Ganeshbhai Lakhmanbhai Lodanee. While filing return of income, assessee-firm claimed the TCS amounting to Rs.2,17,225/-, as required under Schedule TCS of the Income tax return form. The Partner of the firm, Ganeshbhai Lakhmanbhai Lodanee PAN: AODPM9126L did not claim the said TCS, as the royalty was paid by the partnership- firm and not by him in his individual capacity.

We note that no prior intimation u/s 143(1)(a) of the Act was received by the assessee prior to not granting of credit of TCS to the assessee in the intimation u/s 143(1) of the Act. Hence, the action of CPC in not allowing credit of TCS without giving prior intimation to the assessee is bad in law, for that reliance is placed on the following decisions: (i) Kailash Narayan Shirdhar (2025) 177 taxmann.com 755 (Ahmedabad Tribunal); (ii) Onkar Society for Engineering and Technological Research and Development (2024) 161 taxmann.com 773 (Kolkata Tribunal).

We note that Tax was collected at source by Government Department i.e. Office of Geologist and Minning on royalty paid for lease rent of mines by the Assessee-Firm but it was deposited in the name of the partner of the Firm, Shri Ganeshbhai Lakhmanbhai Lodanee, as lease is registered in his name. The said fact can be verified from form 26AS (Page 182) in case of partner Shri Ganeshbhai. The Lease rent expenses were claimed by the assessee ( vide Page 216) as a business expenditure. Hence, credit of TCS of Rs. 2,17,225/-, while filing the return of income, was claimed by the assessee-firm in the TCS Schedule as "TCS credit collected in hands of any other person, as per Rule 37-I(1) and claimed in own hands. In the return of income of the partner, Shri Ganeshbhai, in the TCS Schedule ( vide Page 180 of PB), said amount was shown as TCS credit relating to self, collected in own hands and claimed in hands of any other person as per Rule 37-I(1). Hence, the partner of the assessee-firm did not claim impugned TCS credit but shown as claimed in the hands of any other person in his return of income. Hence, TCS credit was correctly shown, both, in the hands of assessee-firm and in the hands of partner of the assessee-firm while filing return of income for the year. Hence, there is no loss to the revenue. Considering these facts and circumstances, we delete the addition and allow the appeal of the assessee.