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Facts
The assessee, a registered Kachha Arhtiya, filed its return of income, claiming a refund based on TDS credit. The CPC, while processing the return under Section 143(1), restricted the TDS credit to a lower amount, applying Rule 37BA, which was upheld by the CIT(A). The assessee argued that as a commission agent, gross sales proceeds reflected in Form 26AS, on which TDS was deducted under Section 194Q, do not represent its turnover, and it only declares commission income.
Held
The Tribunal held that the provisions of Section 194Q are machinery provisions for tax collection and do not determine the nature of income. Following its precedent, it was ruled that full TDS credit cannot be denied if the transactions are reflected in Form 26AS and accounted for in the assessee's books, even if only commission income is disclosed. The Assessing Officer was directed to grant full TDS credit as reflected in Form 26AS.
Key Issues
Whether TDS credit can be restricted for a commission agent (Kachha Arhtiya) under Rule 37BA, when TDS under Section 194Q is deducted on gross sales proceeds and reflected in Form 26AS, but the assessee only declares commission income.
Sections Cited
143(1), 194Q, 37BA, 44AB
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सुनवाई की तारीख/Date of Hearing : 27/08/2025 उदघोषणा की तारीख/Date of Pronouncement : 28 /08/2025 आदेश/Order
This appeal filed by the assessee is directed against the order dated 18.03.2025 passed by the Ld. Addl./JCIT(A), Agra, for the assessment year 2022-23, whereby the claim of TDS credit amounting to ₹57,421/- was disallowed by invoking Rule 37BA of the Income-tax Rules, 1962.
The brief facts of the case are that the assessee is a registered Kachha Arhtiya under the Agricultural Produce Market Committee, Sirsa. He filed his return of income on 06.08.2022, declaring a total income of ₹5,06,630/- and claiming a refund of ₹2,140/- on the basis of TDS credit of ₹62,194. The CPC, Bengaluru, while processing the return under section 143(1), restricted the TDS credit to ₹4,773/- on the ground that as per Form 26AS the total receipts were ₹62,194 only . Accordingly, proportionate credit was allowed in terms of Rule 37BA. The Ld. CIT(A), after considering the submissions, upheld the action of CPC and dismissed the appeal. Feeling aggrieved against the order of Ld. CIT(A), the assessee is in appeal before the tribunal.
The Ld. AR submitted that the assessee is a Kachha Arhtiya and earns commission income only on the sale of agricultural produce belonging to farmers. The gross sales proceeds reflected in Form 26AS do not belong to the assessee and, therefore, cannot be considered as his turnover. Purchasers have, however, deducted TDS under section 194Q on the entire transaction value. It was further argued that as per CBDT Circular No. 452 dated 17.03.1986 and Instruction No. 03/2013, a commission agent is required to disclose only commission income in the books of accounts. The AR further submitted that Rule 37BA does not apply to the facts of the case and reliance was placed on the decisions of the Coordinate Bench of the Tribunal in Deepak Trading Company vs. ITO, Sirsa (ITA No. 107/CHD/2025, order dated 01.07.2025) and Prem Trading Company vs. ITO, Sirsa (ITA No. 102/CHD/2024, order dated 09.12.2024) in support of the claim that full TDS credit must be allowed where the same is duly reflected in Form 26AS.
On the other hand, the Ld. DR supported the orders of the authorities below. It was submitted that Rule 37BA clearly provides that credit of TDS is to be allowed only to the person in whose hands the income is assessable. Since the assessee had shown receipts of only ₹5,06,630/- as against ₹62,194 /- reflected in Form 26AS, proportionate TDS credit was rightly allowed. The DR further submitted that in the absence of documentary evidence to show that the remaining receipts belonged to farmers, the lower authorities were justified in denying full credit. It was also argued that Circular No. 452 relates to the computation of turnover for audit under section 44AB and not to the allowance of TDS credit. The DR also distinguished the decision of the Tribunal in Deepak Trading Company (supra) on the ground that in that case, proper supporting evidence, such as I and J Forms, was filed, whereas in the present case, no such evidence was furnished.
I have carefully considered rival submissions and perused the material available on record. It is not disputed that the assessee is a registered Kachha Arhtiya and has offered commission income in his return of income. The purchasers deducted TDS u/s 194Q on the gross value of agricultural produce routed through the assessee. These transactions are duly reflected in Form 26AS in the name of the assessee. It is settled law that the provisions of section 194Q are machinery provisions intended for the collection of tax and do not determine the nature of income in the hands of the assessee. In the decision of the Coordinate Bench ( in which I was co-signatory) in Deepak Trading Company (supra), it has been held that once TDS is deducted and reflected in Form 26AS, and the relevant transactions are duly accounted for in the assessee’s records, full TDS credit cannot be denied merely because the assessee is a commission agent and has disclosed only commission income.
In the present case also, there is no finding of the lower authorities that the transactions reflected in Form 26AS are not part of the assessee’s books of account. The assessee has duly offered commission income on such transactions. Therefore, following the ratio laid down in Deepak Trading Company (supra), I am of the considered view that the action of the lower authorities in disallowing the TDS credit to ₹57,421/- is not sustainable. The Assessing Officer is directed to grant full TDS credit as reflected in Form 26AS, after due verification.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on this 28th day of August, 2025.