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Facts
The assessee, a 'Kaccha Aarhatiya', filed their return of income claiming TDS credit. During processing under section 143(1), a demand was raised due to disallowance of TDS credit to the extent of Rs. 2,09,560/-. The assessee appealed to the CIT(A) but was unsuccessful. The core of the dispute is the denial of TDS credit claimed under various sections, particularly for commission income and sales made as a 'Kaccha Aarhatiya'.
Held
The Tribunal held that for receipts of Interest and Commission under sections 194A and 194H, where the income was fully declared in the ITR, the entire TDS claimed should be allowed. Regarding TDS under section 194Q, the Tribunal found it undisputed that the assessee is a 'Kacha Aarhatiya' and the turnover on which TDS is deducted is not the assessee's turnover but the commission earned. The Tribunal also noted that a coordinate bench had allowed similar TDS claims. Therefore, the disallowance of TDS to the extent of Rs. 1,79,551/- was deemed unjustified and ordered to be allowed. The remaining TDS credit of Rs. 30,009/- under section 194Q was also directed to be allowed.
Key Issues
The primary issue is whether the TDS credit claimed by the 'Kaccha Aarhatiya' on commission income and sales facilitated by them should be allowed, especially when the deductor's action was challenged based on the nature of the transaction and the assessee's role as an agent rather than a principal.
Sections Cited
194A, 194H, 194Q, 37BA, 143(1)
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Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’SMC” JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No.280/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. Addl. CIT(A)-2, Mumbai dated 11-01-2024 for the assessment year 2022-23 raising therein following grounds of appeal. ‘’1. On facts and in circumstances of the case Ld CIT(A)-NFAC has grossly erred in dismissing the appeal & confirming the action of CPC unit in not allowing Tax deducted at source (TDS) claimed by invoking provisions of Rule 37BA, amounting to Rs. 2,61,710/- Appellant prays that such claim being fully allowable the credit refused deserves to be reversed KAMLESH KUMAR JAIN VS DCIT,CIRCLE-2, KOTA 2. That Ld CIT(A)-NFAC has further erred in confirming the action of CPC unit, in allowing only a proportionate TDS appearing in Form 26AS, on the ground that there was a mis-match in amount credited appearing in Form 26AS and the income credited by appellant. Appellant prays that since the appellant was a "kacha adatiya' the purchase value on which tax was deducted u's 194Q by buyers (Principal) was not shown as turnover of the appellant, and only commission earned on such value was credited as income. TDS refused thus deserves to be fully allowed.
3. That Ld. CIT(A)-NFAC has further grossly erred in confirming the refusal of TDS claimed by observing that if the assessee was a commission agent the TDS ought to have been deducted u/s 194J of the Act and not see 1940. Appellant prays that such observation being absolutely incorrect, as the TDS for commission income earned is covered under sec 194H of the Act. Further due TDS us 194H of the Act is duly deducted by the buyers who have also deducted TDS on the purchase value by virtue of sec 1940. Appellant prays that TDS claimed deserves to be fully allowed.’’ 2.1 As per the facts of the case, the assessee is a "Kaccha Aaratiya" engaged in selling agriculture produce on behalf of the farmer to the principal buyer. Return of income for the year under consideration was filed in ITR 3, claiming a TDS of Rs.2,33,682/- under various sections. However while processing ITR under section 143(1) a demand of Rs.2,61,710/- was raised after disallowing TDS credit claimed to the extent of Rs.2,09,560/- by invoking rule 37 BA. Although assessee preferred appeal before ld. CIT(A) yet remained unsuccessful. 2.2 Now before this Bench, the assessee has preferred the present appeal on the grounds mentioned here in above.
2.3 All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the denial of TDS credit by CPC while processing the return filed by the assessee. Therefore I have decided to adjudicate these grounds through the present consolidated order. 2.4 In order to support his contentions the ld. AR reiterated the same arguments as were raised by him before the revenue authorities and also relied upon his written submissions which are reproduced as under:-. ‘’The Assessee is a ‘Kachaa Arhatia’ engaged in selling agricultural produce on behalf of farmers to principal buyers, the said fact has been duly accepted by the CIT(A) even.
Return of Income filed on 22.12.2022 in ITR 3 (PB page 62-65) claiming a TDS of Rs. 2,33,862/- under various sections (as shown in the table below)
The said ITR was processed u/s 143(1) on 29.05.2023 by raising a demand of Rs. 2,61,710/- (PB page 26-42) after disallowing TDS credit claimed to the extent of Rs. 2,09,560/- by invoking Rule 37BA TDS claimed in ITR under various sections was as under: - Sec. Nature of receipts TDS as Amount Corresponding Income per 26AS shown in offered in ITR (₹) (₹) 26AS as receipts (₹) 194A Interest 1,05,991 10,59,897 10,59,897 194H Commission 97,862 19,56,544 21,94,075 194Q Sales made as Nil, as sales by kachaa KAMLESH KUMAR JAIN VS DCIT,CIRCLE-2, KOTA Kachaa Arhatiya 30,009 3,00,09,181 arhatiya is not the on which TDS Turnover of assessee. made by certain Commission receipt buyers declared Total 2,33,862 In the present case the assessee has challaned the denial of TDS credit by CPC while processing the ITR filed by the assessee.
Rule 37BA of Income Tax Rules 1962 envisages allowance of TDS credit in proportion to the income declared by the assessee. This proportion needs to be established for every nature of receipt on which TDS has been claimed by the assessee. Therefore, while allowing TDS claimed under each section, it has to be ascertained that entire income on which TDS has been claimed is duly offered in the ITR by the assessee. In the event the income so declared for each nature of receipt on which TDS has been claimed, is lesser than that appearing in Form 26AS, then only CPC may deny the credit of TDS for relevant nature of receipt resultantly.
In view of above since the receipt of Interest and commission on which TDS have been claimed under sections – 194A and 194H are fully declared in ITR i.e. either with same or higher amount than that appearing in Form 26AS, the entire TDS claimed u/s 194A and 194H deserves to be fully allowed. Hence the proportionate TDS disallowed to the extent of ₹1,79,551/- (₹2,09,560 – ₹30,009) i.e. TDS claimed u/s 194Q) is absolutely unjustified and incorrect which deserves to be allowed to the assessee.
Therefore, disallowance of TDS to the extent of ₹ 1,79,551/- being incorrect and bad in law may please be directed to be allowed and the assessee prays accordingly. As regards the balance TDS credit of ₹ 30,009/- being TDS u/s 194Q, the assessee humbly submits that the same also deserves to be fully allowed as:
Fact that assessee is a ‘Kachaa Arhatiya’ is duly accepted by CIT(A) (para 6.2.6 page 11 of CIT order).
Turnover on which TDS is deducted u/s 194Q is not the turnover of the assessee, hence has been rightly not shown as such by the assessee.
That, a kaccha Arahtia acts only as an agent for his constituent and never acts as principal. The remuneration of Kaccha Arahtia consists solely of commission and he has no control on the profits and losses made by his constituents. At this stage the assessee would like to draw your kind attention to sample invoices on which TDS was deducted u/s 194Q by the principal buyers and the corresponding ‘vikray parchi’ issued by the Mandi to the respective farmers (PB page 79-97), which clearly shows that the amount invoiced by the assessee to the principal buyer and the value of goods transferred by assessee to the farmer is exactly the same (save for the expenses like Mandi tax, associate tax etc. which are paid directly to the Mandi) Therefore, turnover of kachaa arahtia is merely the commission paid by principal buyers on which the principal buyer deducts TDS u/s 194H and which has been duly shown as income in the ITR by the assessee. Therefore, the TDS deducted by such principal buyers by virtue of provisions of sec 194Q is eligible to be claimed by the kacha-arhatia in his ITR on the following grounds:
A. The assessee is a kacha arhatia and is duly registered as such with the Ramganj mandi, Kota (copy of registration available at PB page 59). B. Perusal of the ‘vikray parchi’ issued at the mandi to the farmers and the corresponding invoice raised by the assessee to the principal buyer undoubtedly establishes the fact that the assessee has no control or margin in the sale facilitated by him and earns merely commission from such transactions. (copies of such vikray parchi and invoices available at PB page 79-97). C Assessee has no domain over the goods sold to the principle buyers. And as clarified by Central Board of Direct Taxes in its circular no. 452 (1986) in Para 4, so far as Kachha Arahitias are concerned the KAMLESH KUMAR JAIN VS DCIT,CIRCLE-2, KOTA turnover does not include the sales effected on behalf of principals & only commission (gross) has to be considered for the purpose of Income tax section 44AB (copy available at PB page 60-61). D. Therefore TDS deducted u/s 194Q by the principle buyers cannot be refused by invoking Rule 37BA r.w.s. 199 of the Act, as the sales facilitated by the assessee for the farmers is not the turnover of the assessee and the income from such transaction (commission) being duly offered for tax by the assessee in his ITR, the TDS deducted both u/s 194H and 194Q deserves to be fully allowed. E. Further the Form 26AS also depicts that the invoices on which TDS have been deducted u/s 194Q also has TDS deducted u/s 194H of the Act. Thus the contention of the assessee that he is merely a ‘kachaa arhatia’ is potrayed beyond all doubts and needs to be accepted.
Further Honble ITAT Jaipur bench vide its order dated 30.04.2024 in on exactly same issue has fully allowed the TDS claimed u/s 194Q by kachaa arhatia . (copy of order duly filed with the bench). Thus the entire TDS claimed by assessee deserves to be fully allowed and the assessee prays accordingly.
Alternatively, the assessee also contends that the seller whose goods are facilitated by the assessee are farmers, whose income is exempt u/s 10(1) of the Act. Thus by virtue of clarifications issued by CBDT in its circular no. 13 of 2021 wherein it has been stated as under:- “To remove difficulty, it is clarified that the provisions of section 194Q of the Act shall not apply on purchase of goods from a person, being a seller, who as a person is exempt from income tax under the Act (like person exempt under section 10) or under any other Act passed by the Parliament (Like RBI Act, ADB Act etc.)” the TDS provisions do not apply to the farmers whose agricultural produce are sold through the assessee. And therefore, the entire TDS u/s 194Q being wrongly deducted deserves to be fully refunded and it is humbly prayed that due directions may kindly be awarded so that the entire TDS u/s 194Q wrongly deducted by the principal buyer is credited back to the assessee.
2.5 On the other hand Ld. DR relied upon the orders passed by the revenue authorities. 2.6 I have heard the counsel for both the parties and have also perused the material placed on record, judgement cited before me and also the orders passed by the revenue authorities. From the records I noticed that Assessee is a "Kacha Aaratiya" engaged in selling agriculture produce on behalf of the farmer to the principal buyer. The return of income was filed in ITR 3, claiming TDS under various section. However while processing ITR under section 143(1) a demand of Rs. 2,61,710/- was raised after disallowing TDS credit claimed to the extent of Rs.2,09,560/- by invoking Rule 37 BA. The TDS claimed in ITR under various sections has been mentioned as under:-
Sec. Nature of receipts TDS as Amount shown Corresponding Income per 26AS in 26AS as offered in ITR (₹) (₹) receipts (₹) 194A Interest 1,05,991 10,59,897 10,59,897 194H Commission 97,862 19,56,544 21,94,075 194Q Sales made as Kachaa Nil, as sales by kachaa Arhatiya on which 30,009 3,00,09,181 arhatiya is not the Turnover of TDS made by certain assessee. Commission receipt buyers declared Total 2,33,862 After evaluating rule 37 BA, I found that this rule envisages allowance of TDS credit in proportion to the income declared by the assessee. This proportion needs to be established for every nature of receipt on which TDS has been claimed by the assessee, therefore while allowing TDS claimed under each section, it has to be ascertain that entire income on which TDS has been claimed is duly offered in the ITR by the assessee and in case the income so declared for each nature of receipt on which TDS has been claimed, is lesser than that appearing in form 26AS then only CPC May deny the credit of TDS for relevant nature of receipt. Therefore keeping in view my above discussion, I am of the view that since the receipt of interest and Commission on which TDS has been claimed under section 194A and 194 H are fully declared in ITR, therefore the entire TDS claimed under section 194a and 194 h needs to be fully allowed. Hence the proportionate TDS, disallowed to the extent of rupees 179551, is absolutely unjustified and therefore deserves to be allowed and thus, we order accordingly. 2.7 As regards the balance TDS credit of Rs 30,009/- being TDS under section 194 Q is concerned. In this regard after hearing the parties at length, the Bench found that it is an undisputed fact that Assessee is a Kacha Aaratiya as has already been accepted by learner CIT appeal. Therefore turnover on which TDS is deducted under section 194 Q is not the turnover of the assessee hence has rightly KAMLESH KUMAR JAIN VS DCIT,CIRCLE-2, KOTA not been shown as such by the assessee. Moreover a kaccha Aaratiya acts only as an agent for his constituent and never acts as principal, therefore the remuneration of Kaccha Aaratiya consists solely of commission and he has no control on the profit and losses made by his constituents. At this stage, the ld. AR has drawn my attention to sample invoices on which TDS was deducted under section 194Q by the principal buyer and the corresponding Vikray Parchi issued by the Mandi to the respective farmers which is at paper book page number 79 to 97. These documents clearly show that the amount invoiced by the assessee to the principal buyer and the value of goods transferred by assessee to the farmer is exactly the same. Therefore turnover of kutcha aaratiyan is merely the commission paid by principal buyer on which the principal buyer deducts TDS under section 194H and which has been duly shown as income in the ITR by the assessee, therefore the TDS deducted by such principle buyers by virtue of provisions of section 194 Q is eligible to be claimed by the Kaccha aaratiya in his ITR on the Grounds that the assessee is a kacha arhatia and is duly registered as such with the Ramganj mandi, Kota (copy of registration available at PB page 59). Perusal of the ‘vikray parchi’ issued at the mandi to the farmers and the corresponding invoice raised by the assessee to the principal buyer undoubtedly establishes the fact that the assessee has no control or margin in the sale facilitated by him and earns merely commission from such transactions. (copies of such vikray parchi and invoices KAMLESH KUMAR JAIN VS DCIT,CIRCLE-2, KOTA available at PB page 79-97). Assessee has no domain over the goods sold to the principle buyers. And as clarified by Central Board of Direct Taxes in its circular no. 452 (1986) in Para 4, so far as Kachha Arahitias are concerned the turnover does not include the sales effected on behalf of principals & only commission (gross) has to be considered for the purpose of Income tax section 44AB (copy available at PB page 60-61). Therefore TDS deducted u/s 194Q by the principle buyers cannot be refused by invoking Rule 37BA r.w.s. 199 of the Act, as the sales facilitated by the assessee for the farmers is not the turnover of the assessee and the income from such transaction (commission) being duly offered for tax by the assessee in his ITR, the TDS deducted both u/s 194H and 194Q deserves to be fully allowed. Further the Form 26AS also depicts that the invoices on which TDS have been deducted u/s 194Q also has TDS deducted u/s 194H of the Act. Thus the contention of the assessee that he is merely a ‘kachaa arhatia’ is potrayed beyond all doubts and needs to be accepted. I also rely upon the decision of the coordinate bench of ITAT Jaipur, in the case of Madan Lal Gupta (ITA No. 192/ JPR/ 2024 dated 30-04-2024 wherein on the similar issue TDS claimed under section 194Q was fully allowed in the case of kutcha aaratiya. Therefore keeping in view the above facts and circumstances and also the decision of the co-ordinate bench of ITAT Jaipur bench, I direct the AO to allow the TDS claimed under section 194Q by the assessee.
3.0 In the result, the appeal filed by the appellant stands allowed with no orders as to cost. Order pronounced in the open court on 17 /09/2024.