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Facts
The assessee, a 'Kacha Arhatiya', claimed TDS credit for amounts deducted under Section 194Q of the Income Tax Act. The CPC Bengaluru restricted this claim, and the CIT(A) confirmed the restriction. The assessee contended that as a commission agent, the TDS deducted on purchase of goods by the principal on their behalf should be available as credit to them.
Held
The Tribunal held that the assessee, acting as a Kacha Arhatiya, is entitled to the credit of TDS deducted under Section 194Q on purchase of goods made on behalf of its principal. The turnover of such transactions is not the assessee's turnover but only the commission earned.
Key Issues
Whether TDS deducted under Section 194Q on purchases made by the principal on behalf of a 'Kacha Arhatiya' should be available as credit to the 'Kacha Arhatiya'.
Sections Cited
194Q, 194H, 194A, 44AB, 194J
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGRH BENCH, ‘SMC’ CHANDIGARH
Before: SHRI RAJPAL YADAV
PHYSICAL HEARING O R D E R
The present two appeals are directed at the instance of the assessee against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 01.07.2024 and 10.07.2024 respectively passed in assessment year 2022-23 and 2023-24.
The issues agitated in both the appeals are common.
The assessee has filed his return of income which was & 919/CHD/2024 A.Y.2022-23 & 2023-24 2 processed by the CPC Bengaluru vide orders dated 17.02.2023 and 29.12.2023. The assessee has made a claim of TDS credit amounting to Rs.5,75,461/- in assessment year 2022-23 and Rs.5,06,487/- in assessment year 2023-24.
This claim of the assessee was restricted by the CPC, Bengaluru at Rs.1,18,423/- in assessment year 2022-23 and in assessment year 2023-24 he has allowed the claim at Rs.2,70,024/- as against the claim of Rs.5,06,487/-.
Dissatisfied with this adjustment, assessee carried the matter in appeal before the CIT(A), however, appeals to the CIT(A) did not bring any relief to the assessee.
Before me, assessee has contended that he is a ‘Kacha Arhatiya’ and major claim of TDS represent the TDS deducted under Section 194Q of the Income Tax Act. He relied upon the CBDT Circular No. 552 and submitted that no disallowance out of the claim ought to have been made by CPC Bengaluru. The ld. Sr.DR on the other hand relied upon the orders of Revenue Authorities.
With the assistance of ld. Representative, I have gone through the record carefully. It emerges out from the record & 919/CHD/2024 A.Y.2022-23 & 2023-24 3 that this issue has been arising continuously not only before this Bench but across other Benches. Recently I have taken note of one order passed in the case of Shri Madan Lal Gupta detailed discussion and I have taken note of this discussion which reads as under : “6. We have heard the rival contentions 'and perused the relevant material available before us. The only grievance of the assessee before us is that Ld. CIT(A) erred in confirming the action of the CPC not granting credit of TDS for Rs.90,792/-. We observe that the assessee is a commission agent and its activity includes buying and selling of goods on behalf f its principal. In the income tax return assessee had furnished business codes namely 09005 relevant to general commission agents and commodity brokers and code 09028 meant for retail sale of products. Before moving further, we need to understand the business model of the assessee, wherein it purchases goods on behalf of its principal by procuring it from the farmers and for the very same amount the invoice is raised in the name of the principal buyer. So, the invoice of same amount is issued to the principal buyer and the corresponding Vikray parchi' is issued in the Mandi to the respective farmers. So, admittedly, the amount invoiced by the assessee to the principal buyer and the value of goods transferred to assessee from the farmer is same and purely on behalf of its principal. Now, for carrying out such transaction assessee receives commission on which tax is deducted u/s. 194H of the Act. Such commission income is shown as a turnover. To this extent, there is no dispute and the credit of TDS u/s. 194H has been allowed.
The point of dispute is for the TDS deducted u/s. 194Q i.e. deduction of tax at source on payment of certain sum for purchase of goods and as per sub- section (1) of section 194Q any person being a buyer who is responsible for paying any sum to any resident for purchase of any goods of the value or aggregate of such value exceed Rs. 40 lacs in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1% of such sum which exceed Rs. 50 lacs, as income tax. This amendment is inserted w.e.f. 01.07.2021 i.e. during the FY 2021-22 and the instant appeal of the assessee is for the very same year.
Now, the principal of the assessee on whose behalf assessee made the purchases, as discussed above, the assessee raised its invoice to its principal. Now, principal deducts the TDS u/s. 194Q and deposit it with the government & 919/CHD/2024 A.Y.2022-23 & 2023-24 4 and the said TDS is adjusted in the account of the assessee. Now, turnover of such purchase/sale made on behalf of the principal is not required to be reflected in the audited financial statement of the assessee because its turnover is only the commission and not the purchase and sale made on behalf of its principal. Sample invoices have been placed on record for necessary verification of the transaction where on the very same purchase amount TDS u/s. 194Q is deducted and tax deducted u/s. 194H on the commission element. Further, Central Board of Direct Taxes in its circular No. 452 in the year 1986 has clarified that so far as Kachha Aratias are concerned, the turnover does not include the sales effected on behalf of principals and only commission (gross) has to be considered by for the purpose of income tax u/s. 44AB of the Act.
Under these given facts and circumstances, we find that on of the new amendment brought in section 194Q of the Act the 1 of the assessee agent has deducted TDS u/s. 194Q of the Act in addition to section 194H for the commission paid to the assessee and, therefore, the assessee is entitled to credit of tax deducted u/s. 194H as well as sec. 194Q and we further hold that assessee is not required to disclose the turnover appearing in the tax deduction details u/s. 194Q because he is acting as the Kachcha Arhtia i.e. an agent and the turnover appearing in the sale invoices are merely the sales made against the equal amount of purchase made from the farmers and effectively it is not the turnover of the assessee. So far as the observation of the Ld. CIT(A), the TDS ought to have been deducted u/s. 194J and 194Q, we fail to find any merit because section 194J refers to deduction of tax on fees for professional on technical services which is not at all applicable in the case of assessee and 194Q is applicable because it is deduction of tax at source on payment of certain sum for purchase of goods. Thus, grounds of appeal
raised by the assessee are allowed as per terms indicated above.
5. In the result, appeal of the assessee is allowed as indicated above.”
6. A perusal of the record would indicate that there is no disparity of facts. The claim of the assessee qua TDS deducted under Section 194Q has not been allowed to the assessee. I find that this claim is fully allowable to the assessee in view of the above judgement and accordingly, disallowance made by CPC Bengaluru qua TDS deducted under Section 194Q is concerned, it is deleted.
& 919/CHD/2024 A.Y.2022-23 & 2023-24 5
7. Apart from the above, I find that in assessment year 2022-23, there are TDS claims under Section 194A and 194H. The ld. CIT(A) in assessment year 2022-23 himself has observed that as far as TDS claim on account of interest income deducted under Section 194A is concerned, it is in order but conclusively did not give any direction to the AO.
Similarly, I find that TDS on ‘commission income’ deducted under Section 194H is also in order, no defects have either been pointed out by the CIT(A) nor the CPC Bengaluru.
Therefore, no disallowance deserves to be made in the case of the assessee on account of TDS deducted under other heads also.
8. As far as assessment year 2023-24 is concerned, I find that assessee has made TDS claim of Rs.78,063/- deducted under Section 194H and Rs.81,128/- under Section 194A.
The ld. CIT(A) has simply observed that corresponding income has not been offered by the assessee, however, in the submissions of the assessee, assessee has reconciled each and every figure and apprised me as to how he has included all these amounts. Both the parties have not pin pointed & 919/CHD/2024 A.Y.2022-23 & 2023-24 6 any discrepancy. At page No.7 of PB, the assessee has placed on record copy of the Trading Account for the assessment year ended on 31.03.2023 as well as Profit & Loss Account for the year ended on 31.03.2023. He has specifically pointed out as to how corresponding income has been accounted for.
9. On due consideration of the detailed written submissions of the assessee and in the absence of any categoric finding by the CIT(A), I am convinced that no disallowance deserves to be made in the case of the assessee.
Accordingly, appeal of the assessee is allowed. The disallowance out of TDS credit in both the years are deleted.
In the result, appeals are allowed.