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Facts
The assessee, a 'Kacha Arhatiya'/Commission Agent, purchased agricultural produce on behalf of her principal and made payments to farmers, deducting TDS under Section 194Q. The assessee claimed a refund of this TDS, which was initially disallowed by way of a prima-facie adjustment.
Held
The Tribunal held that the assessee is entitled to the credit of TDS deducted under Section 194Q, as she acted as an agent and the turnover related to such transactions does not form part of her own turnover. The disallowance made by the lower authorities was deleted.
Key Issues
Whether TDS deducted under Section 194Q on purchases made on behalf of a principal is eligible for refund to the commission agent, and whether such purchase turnover should be included in the agent's turnover.
Sections Cited
143(1), 194Q, 194H, 44AB, 194J
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Income Tax Appellate Tribunal, CHANDIGRH BENCH, ‘SMC’ CHANDIGARH
Before: SHRI RAJPAL YADAV
the order of Ld. CIT(Appeals) dated 24.05.024 passed for assessment year 2022-23. The assessee has taken four grounds of appeal which are not in consonance with Rule 8 of ITAT Rules, rather descriptive and argumentative in nature.
ITA No.747/CHD/2024 A.Y.2022-23 2
In brief grievance of the assessee is that ld. CIT(A) has erred in confirming the order passed under Section 143(1) vide which a prima-facie adjustment was made. The assessee has claimed TDS refund of Rs.6,08,108/- which was allowed to the extent of only Rs.49,628/- and rest was disallowed.
With the assistance of ld. Representative, I have gone through the record carefully. Basically the assessee is a ‘Kacha Arhatiya’/Commission Agent. She used to buy agricultural produce on behalf of her Principal, namely FCI and other agencies. While making the payments to the farmers, she is required to deduct TDS under Section 194Q at 0.1% on such sum. The assessee claimed refund of that TDS but it was disallowed by way of a prima-facie adjustment. The assessee explained her case to the CIT(A) but ld. CIT(A) failed to appreciate the Board Circular bearing No. 452 and the case of the assessee. The CIT(A) was of the view that alleged purchases ought to be part of her turnover and she ought to have offered income on the sums for which TDS was deducted. I find that a Co-ordinate Bench of Jaipur A.Y.2022-23 3 in ITA 192/JP/2024 had made an analysis of this dispute and deleted the disallowance. Similarly, ITAT Chandigarh Bench in ITA 323/CHD/2024 has also considered identical issue and allowed the alleged claim of TDS refund. The discussion made by ITAT Jaipur Bench in the case of Madan Lal Gupta (ITA 192/JP/2024) 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 A.Y.2022-23 4
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 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 A.Y.2022-23 5
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.”
There is no disparity on the position of law which is applicable in the case of the assessee. She also works as Commission Agent and she also deduct the tax under Section 194Q. All the Benches of the ITAT are unanimously taking view that Commission Agents are entitled for such TDS refund. The Benches have construed the position explained by the Board as discussed in the above order. In view of the above, I allow the appeal of the assessee and delete the disallowance. I direct the AO to give refund of the TDS deducted by the assessee amounting to Rs.6,08,108/-.
In the result, appeal of the assessee is allowed.