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Facts
The assessee, M/s Dolphin Bar and Restaurant, filed its return for AY 2022-23 claiming a refund. The Assessing Officer (AO) denied credit for TCS of Rs. 1,69,337, which was collected and reflected in the account of Mr. Prashanth Shetty, the excise license holder. The AO adjusted the refund against dues for AY 2016-17.
Held
The Tribunal noted that Mr. Prashanth Shetty provided a declaration stating he did not offer income from the business nor claimed TCS credit for it. The business was managed by the assessee under a mutual understanding. Relying on previous consistent rulings and the declaration, the Tribunal found no reason to uphold the impugned order.
Key Issues
Whether the assessee is entitled to claim credit for TCS when the same was collected in the name of the license holder, but the business income and operations were managed and declared by the assessee.
Sections Cited
Sec 206C, Sec 190
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 30.03.2024 passed by Ld.CIT(A)-Aurangabad for A.Y. 2022-23 on following grounds of appeal:
Brief facts of the case are as under: 2.1 The assessee is managing the trading business in IMFL (Indian Made Foreign Liquor) where the license issued by the Department of Central Excise was in the name of a different person. As the license holders were unable to carry on the specified business on their own, assessee was using the license without being transferred to its name based on a mutual understanding between the license holder and the assessee.
2.2 The assessee has submitted that as per the arrangement, the assessee was to account the purchases and the sales relating to the IMFL license in the name of the license holder and declared the net profit from the sale business in the hands of the assessee only.
2.3 The assessee submitted before the Ld.AO that the license holder had not declared the profit from sales in his return of income and that the license holder did not claim TCS in his return of income relating to the sale based on the excise license. It is submitted that the license holder has not reflected the purchases and sales in the return of income.
Page 6 of 2.4 It was thus submitted by the assessee that when the income from sale is offered by the assessee, TCS made on behalf of that business must also be given credit to the assessee only. In support of the contention, the assessee relied on the decisions of Hon’ble Madras High Court in case of CIT vs. Tanjore Permanent Bank Ltd. reported in 149 ITR 788 and Hon’ble Andhra Pradesh High Court in case of CIT vs. Bhooratnam & Co. reported in (2013) 29 taxmann.com 275. The CPC however did not appreciate the submission of the assessee and made addition and adjusted the prepaid taxes as TDS against the demand due for A.Y. 2016-17.
2.5 Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) after considering the submissions of the assessee observed and held as under: “6.2. The reply submitted by the appellant has been considered, however, found not acceptable. In its reply the appellant has submitted that the TCS has been collected in the account of another person as the license (liquor) was in the name of that person. Appellant further submitted as per oral and mutual understating the appellant was carrying-on the business and was offering the income on the same. Now, the appellant wants to claim the credit of TCS on the same as income has been offered by the appellant on the same. However, credit of TCS is not transferable at this stage, it can be claimed only by the person in whose account it is reflecting in 26AS. 6.3. Further, as mentioned in the notice, as per the provision of the Act, credit of TCS cannot be granted until and unless the tax collected by the collector is paid to the credit of the Central government and the information for TCS is furnished by him to the Central government. 6.4. In the instant case, TCS has not been collected in the account of appellant, and it is not reflected in its 26AS. So, it has no evidence to show that TCS has been collected from him and hence, it is clear that neither the tax paid to the government nor the information has been furnished to Page 7 of the government. The fact of tax deduction can be checked only by the information furnished by the alleged collector. Therefore, the credit for the same cannot be allowed. Accordingly, this ground of appeal is dismissed.”
2.6 Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.
The Ld.AR submitted that, there was a mutual understanding wherein assessee declared the income from business and collected TCS despite the fact that the TCS collected was reflecting in the license holder’s account. She submitted that the assessee offered the income from the sale proceeds as business income in its hand and therefore denial of TCS credit solely for the reason that the ownership of the license was with another person is not as per the ratio laid down in the decisions relied by the assessee.
3.1 She placed reliance on the decision of Hon’ble Indore Bench of this Tribunal in case of Million Traders Bhopal Pvt. Ltd. vs. ADIT in & 125/Ind/2023 vide order dated 12.10.2023 wherein, on identical issue TCS credit was allowed to the entity conducting the business, irrespective of the fact that the license was in the name of another person. She also placed reliance on the decision in assessee’s own case passed by the erstwhile Ld.CIT(A) for A.Ys. 2016-17 to 2020-21 placed on record.
On the contrary, the Ld.DR relied on the orders passed by authorities below.
Page 8 of We have perused the submissions advanced by both sides in the light of records placed before us.
It is noted that the assessee is a partnership firm, and filed its return of income for the year under consideration claiming refund of Rs.1,72,006/-. The Ld.AO in the assessment order did not grant credit of TCS amounting to Rs.1,69,337/- and adjusted the resultant refund against the dues for A.Y. 2016-17. The Ld.AO withheld the TCS on the purchases declared by the assessee in the return of income. It is noted that, the purchases were accepted by the Ld.AO however, in turn denied the TCS credit on the ground that the TCS was collected and was reflecting in the account of one Mr. Prashanth Shetty from Mangalore, as he was the original owner of the excise license.
4.1 It is not a disputed fact that, the business was carried on by the assessee based on an arrangement between the assessee and Mr. Prashanth Shetty. It is noted that Mr. Prashanth Shetty provided a declaration stating that, though the excise license is in his name, he has not declared the income as declared by the assessee and has also not claimed the credit of TCS amounting to Rs.1,69,337/-. The declaration was filed by Mr. Prashanth Shetty is annexed herewith as under:
4.2 The assessee has been consistently carrying on business in this similar fashion as has been recorded by the erstwhile
Page 10 of Ld.CIT(A) in the appellate orders passed for the preceding assessment years placed in the paper book from pages 9-43 referred to by the Ld.AR.
Every year, this issue was considered and allowed in favour of assessee based on the declaration given by Mr. Prashanth Shetty. The declaration given by Mr. Prashanth Shetty reproduced hereinabove is verifiable by the authorities below. The Ld.DR before us also could not establish any contrary to what has been stated in the declaration by Mr. Prashanth Shetty. We therefore do not find any reason to uphold the impugned order of Ld.CIT(A). We direct the Ld.AO to allow assessee’s claim after due verification of what is stated in the declaration. Accordingly, the grounds raised by the assessee stands allowed. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 01st August, 2024.