JAYAPRAKASH RAI,SULLIA vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CPC, BANGALORE

The assessee is proprietor of M/s. Prashanth Wines, Sullia, engaged in the retail business of Indian Made Foreign Liquor (IMFL) using the excise licence in the name of Mrs. Pramila P Rai, daughter-in-law of the assessee’s brother. Originally the central excise licence in respect of this business was in the name of Shri. Balakrishna Rai, brother of the assessee. After the death of Shri. Balakrishna Rai, the excise licence got transferred to the name of Mrs. Pramila P Rai, daughter-in-law of late Shri. Balakrishna Rai. It is the claim of the assessee that there was a family settlement and understanding by which the business of M/s. Prashanth Wines was to be carried beneficially by the assessee, though the licence for the said business was in the name of Mrs. Pramila P. Rai. All the purchases of IMFL were made from Karnataka State Beverages Corporation Ltd., (KSBCL) by the assessee using the excise licence of Mrs. Pramila P. Rai.

In terms of section 206C of the Income Tax Act, 1961 (hereinafter called ‘the Act’), Tax Collection at Source (TCS) was made by KSBCL of Rs.1,39,296/-. The assessee claimed credit for TCS in the return of income filed for Assessment Year 2018-19. The claim was rejected by the AO as well as the CIT(A) for the reaon that as per the procedure for claiming credit for TCS laid down in Rule 37-I of the I. T. Rules read with section 206C(4) of the I. T. Act, credit can be given only for Mrs.Pramila Rai and not the Assessee. The relevant provisions of Sec.206C(4) and Rule 37-I of the Income Tax Rules, 1962 (Rules) reads as under: Section 206C(4) reads as under: "Any amount collected in accordance with the provisions of this section and paid to the credit of the Central Government shall be deemed to be a payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to such person for the amount so collected in a particular assessment year in accordance with the rules as may be prescribed by the Board from time to time. "

The AO/CIT(A) were of the view that from the above statutory provisions, it was clear that the credit of TCS can only be given to the person from whom the TCS has been collected. Therefore, they refused to give credit of TCS amounting to Rs.1,66,307/- claimed by the assessee as the impugned TCS was made on behalf of the license holder, who is a different person than the assessee.

The assessee is in appeal before the Tribunal against the orders of the Revenue authorities denying credit for TCS. The learned Counsel for the assessee submitted that the request for transfer of the licence from Mrs. Pramila P. Rai to the assessee, has already been made to the Central Excise Authorities and the said request is pending consideration. It was his submission that the purpose of the provisions of section 206C(4) as well as Rule 37-I of the Income Tax Rules, 1962 (‘the Rules’) are meant to ensure that credit for TCS of the same sum is not claimed by two persons. It was his submission that Mrs. Pramila P. Rai as well as the assesee are assessed by the same AO and if the licence is ultimately transferred in the name of the assessee, the assessee would be lawfully entitled to claim credit for TCS. It was also pointed out that in Assessment Year 2017-18, the CIT(A), Mangaluru, in by his order dated 26.10.2018 allowed credit for TCS accepting the submissions of the assessee by following his predecessors’ order for Assessment Year 2016-17 allowing credit for TCS in favour of the assessee. The learned DR, on the other hand, submitted that the statutory provisions do not contemplate giving credit for TCS in the name of a third party.

I have carefully considered the rival submissions and I am of the view that the issue requires to be set aside to the AO for examination afresh in the light of the outcome before the Central Excise authorities for transfer of excise licence from Mrs. Pramila P. Rai to the assessee. I am also of the view that the AO can take necessary safeguards to ensure that the interest of the Revenue is not affected or prejudiced in any manner. I, therefore, set aside the issue of grant of credit of TCS to the AO for examination afresh on the lines indicated above.

In the result, appeal of the assessee is treated as allowed for statistical purposes.