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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
Per Vijay Pal Rao, JM:
These two appeals by the assessee are directed against two separate orders dated Commissioner of Income Tax(Appeal), National Faceless Appeal Centre, Delhi both dated 13.02.2023 for A.Y.2017-18 & 2018-19 respectively. The assesse has raised common grounds in these appeals the grounds raised for A.Y.2017-18 are as under:
“1.That on the facts and in the circumstances of the case and in law, the denial of credit of TCS of Rs. 8226254 in intimation u/s 143(1) is unjustified and unlawful and therefore the credit of TCS of Rs. 8226254 be kindly allowed. Page 1 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 2 of 24 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred and not justified in his findings that the denial of credit of TCS of Rs. 8226254 is lawful, such findings be held as unlawful and injudicious and therefore be quashed and the credit of TCS of Rs. 8226254 be kindly allowed.
3.That on the facts and in the circumstances of the case and in law the assessee submits that having regard to the nature of business and the explanation furnished before the lower authorities it be held that the assessee is lawfully eligible and entitled to claim the credit of TCS of Rs. 8226254 and the denial of such credit is injudicious and unlawful and hence the credit of TCS of Rs. 8226254 be kindly allowed.
That on the facts and in the circumstances of the case and in law, the levy of interest under section 234B and 234C is unlawful and without jurisdiction therefore, the same be kindly deleted.”
The solitary grievance of the assessee for both the assessment year 2017-18 & 2018-19 is regarding non allowance of the credit of TCS collected by the Excise Department of State of M.P. in respect of the purchase of liquor due to nonappearance in the PAN account of the assessee company but reflected in the accounts of the individual license holders who are directors and associates of the assessee company. Ld. Sr. Counsel for the assessee submitted that the assessee company is engaged in the business retail sale of liquor. The directors/associates of assessee company are license holders and they have formed the company to carry on the business of liquor. Due to typical nature of assessee’s line of business, the entire business of shops though allotted in the names of Directors/Associates is accounted for in the books of assessee. The shops are obtained in the name of the directors/associates as per the regulations of State Excise Department. However the purchases and sales are accounted as the transactions of the assesse company and income of all the shops are offered as income of the assessee company and same is Page 2 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 3 of 24 also assessed to tax. Thus, Ld. Sr. counsel has submitted that the individual license holders in whose name the TCS was collected by the Excise department and deposited to the Government account have not claimed the credit of the said TCS as the income from the transactions of purchase and sale is offered to tax by the assessee. The directors/associates of the assesse company who are holders of the license of the Excise department and has no objection for the claim of credit of the said advance the (TCS) by the assessee. He has further submitted that the income has been assessed in the hands of the assessee company but the credit of corresponding TCS has not been allowed against the income derived from the transactions of purchase and sale of liquor. In support of his contention he has relied upon the following decisions:
i.M/s Avinash Chalana & Co. v. ACIT, in (Hon'ble ITAT Indore) Order dated 18/04/2016 ii. Asstt. Commissioner of Income tax CPC-Bangalore v. M/s Avinash Chalana & Co. dated 28/06/2017 passed in MA No.129/2016 arising out of ITA No. 13/IND/2015 iii. Smt. Vijay Luxmi Gupta v. Income Tax Officer ward-1 (4), Allahabad (Hon'ble ITAT Allahabad) in ITA No. 262/ALLD/2018 Order dated 22/03/2021 iv.Commissioner of Income Tax -1 v. Bhooratnam & Co. [2013] 29 taxmann.com 275 (Andhra Pradesh) v. M/s Jai Ambey Wines, Ajmer v. The ACIT, Circle -2. Ajmer (Order dated 11/01/2017 passed in ITA No. 676/JP/2015 by Coordinate bench at Jaipur). vi.Hotel Ashok Garden, Dharwad v. ITO, Hubli (Order dated 06/02/2023 passed in ITA No. 12 to 15/Bang/2023 vii. Commissioner of Income Tax-15, v. Relcom [2015] 62 Taxmann.com 190 (Delhi) viii.Naresh Bhavani Shah (HUF) v. Commissioner of Income Tax [2017] 84 taxmann.com 53 (Gujarat) & ITANo.35/Ind/2023 Million Trader Bhopal Page 4 of 24 3. Ld. Sr. counsel has fairly submitted that though in the judgment relied by him the Tribunal has considered Rule 37BA which is relevant for the credit of TDS whereas the Rule 37-I of the Income Tax Rules is relevant for credit for Tax Collected at Source(TCS) however the under line principles for both the provisions is same as credit of TDS or TCS to be allowed against the corresponding income offered to tax. Further the Ld. Sr. counsel submitted that the licensees/associates have not claimed credit of TCS in their individual case and have not obtained the refund of the same as it is evident from Form 26AS of the individual license holders. Therefore, the credit of the TCS ought to have been allowed to the assessee company who is actually doing the business of purchase and sale of liquor and accounted all the transactions as well as the income derived from the activities of purchase and sale of liquor. Ld. Sr. counsel has referred to the form 26AS of the individual license holders showing the amount of TCS in their accounts however, none of the individual license holders have claimed the credit of the TCS reflected in form 26AS and therefore, non-allowing the credit of the said TCS to the assesse would amount to under enrichment of revenue department and depriving the assessee of its due credit of TCS. Ld. Sr. counsel has referred to the provisions of section 199 and submitted that the credit of TCS be given to the person on whose behalf it was collected. The assesse is showing the purchase and sale and consequential income therefore, the credit of TCS on purchase shall be given to the assessee. He has also referred to section 206C(4) and submitted that the term “behalf of whom the amount is collected and paid to the Government” means that the credit be allowed to the person who has actually carried out transaction the on which tax was collected at source. Further Ld. Sr. counsel has pointed out that since the disallowance is made by the CPC while processing the return u/s 143(1) therefore, the assessee had no occasion to produce the supporting evidence to show that the TCS was collected by the Excise Department in respect of the purchase made and accounted by the assessee. & ITANo.35/Ind/2023 Million Trader Bhopal Page 5 of 24 4. On the other hand, Ld. DR has submitted that the ld. CIT(A) has analyzed the provision of Rule 37BA as well as the provision of Rule 37-I and held that the relevant rule is Rule 37-I and therefore, the credit of TCS is not available to a person other than deductee. The decisions relied by the Ld. Counsel for the assesse are rendered in the context of Rule 37BA and therefore, the relevant Rule 37-I is not considered or discussed in those decisions. He has relied upon the impugned order of the Ld. CIT(A) and submitted that section 206C(4) uses the term “shall” which means strict interpretation of the said provisions. Further risk management is also required while granting credit to avoid misuse and double credit of the amount.
We have considered the rival submissions as well as relevant material on record. It is a case of pooling of resources and use of excise license by individual license holders for doing the business of purchase and sale of liquor in the State of M.P. by forming and associating with the assesse company. Thus, in other words the individual license holders who are having interest in the assessee company in the capacity of the shareholders or directors have allowed the assesse company to do the business by use of the license given to them. Prima facie it is manifest from the record that actual transactions of purchases and sales of liquor have been carried out by the assessee company on the basis of the license granted in the name of the individual who have associated with the assesse company. This practice is otherwise prevailing and accepted by the concerned authorities of the State Government that after obtaining the license by the individuals they are usually forming association or partnership firm or a company to pool their resources as well as to avoid competition among themselves. Though the licenses are given by the Excise Department to the individuals as per the policy of the Government however, if the actual business of purchase and sale of liquor is conducted by a Corporate entity formed by the individual license holders and corresponding income from the said business is also offered to tax by the said business entity and not by the individual license holders then the & ITANo.35/Ind/2023 Million Trader Bhopal Page 6 of 24 credit of advance tax collected from the transactions of purchase has to be allowed in the hands of the company which is the actual purchaser/buyer and also offering the income from the said business activity to tax. It is very pertinent and relevant for allowing the credit of TCS as who is actually subjected to the TCS on purchase of liquor from Excise Department and also accounting the transactions and consequential income offered to tax.
5.1 The another relevant aspect is whether the individual in whose name license is issued has claimed any credit of the said amount of TCS or not ? In case those license holders have not claimed the credit of the said amount of TCS then the claim of the assessee who is doing the business and carrying out the transactions on which the tax is collected can be considered subject to the risk management of revenue that no other person has claimed the credit of the said amount. The Ld. CIT(A) has denied the claim of credit by distinguishing the Rule 37BA and Rule 37-I. However, it is pertinent to note that the underline principles and logic for allowing the credit of TCS as per Rule 37BA as well as allowing the credit of TCS u/s 37-I is not materially different. The Coordinate Bench of this Tribunal in case of M/s Avinash Chalana & Co. vs. ACIT, CPC Bangalore (supra) while dealing with an issue of claim of credit of TCS by the partnership firm whereas the credit was reflected in the accounts of individual license holders has held in para 7 to 9 as under:
“7.We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that as per Section 199, which reads as under :- "Section 199(1) of the Income-tax Act, 1961, provides that any deduction of tax made in accordance with the provisions of Chapter XVII of the Act and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. Under sub Section (3) of Section 199, the CBDT may, for the purpose of giving credit in respect of tax deducted at source or paid in terms of the provisions of Chapter XVII of the Act, make such rules as may be necessary, including the rules for the purpose of giving credit to a person other than those referred to in sub & ITANo.35/Ind/2023 Million Trader Bhopal Page 7 of 24 Section (1) and sub Section (2) and also the assessment year for which such credit may be given." Rule 37BA of the Rules framed u/s 199(3) of the Act (introduced w.e.f. 01.04.2009 by Income Tax (Sixth Amendment) Rule, 2009, by the CBDT) is as follows:- "Credit for tax deducted at source for the purpose of Section 199. 37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. (2) (i) If the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for tax deducted at source shall be given to the 'other person in cases where- (a) the income of the deductee is included in the total income of another person under the provisions of section 60, Section 61, section 64, section 93 or section 94; (b) the income of a deductee being an association of persons or a trust is assessable in the hands of members of the association of persons, or in the hands of trustees, as the case may (c) the income from an asset held in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be; (d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly by the deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1). (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. (iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in Page 7 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 8 of 24 the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody. (3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of - (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority: and (ii) the information in the return of income in respect of the claim for the credit, "Subject to verification in accordance with the risk management strategy formulated by the Board from time to time." By the Income Tax (8th amendment) Rules 2011, the CBDT amended Rule 37 BA and in sub rule (2), for clause (i), the following clause was substituted: "(i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee." This amendment has done away with the specified four clauses in the pre-amended Rule 37BA which restricted the benefit of the rule only in four specified situations. It has thus widened the scope of the rule 37BA thereby enabling the credit of taxes to the actual payee in whose hands the income is assessable and not restricting this benefit only to the specified four situations." 8.As per above rules and interpretation of the Act, we are of the view that if the assessee is a partnership firm to carry on the business in liquor and TCS is claimed in the name of partner of the firm, the TCS collected by the party in the name of different persons, which reads as under :-
S.No. Name of Partners Amount of TCS & ITANo.35/Ind/2023 Million Trader Bhopal Page 9 of 24 Avinash Chalana & Co. 1 5,52,525/- Avinash Chalana & Co. 2 89,163/- 3 Million Traders 82,054/- 4 Maxima Traders 1,17,035/- 5 Gundadeen Patel 9,11,330/- 6 Shiv Charan Singh 5,42,017/- 7 Bana Singh 12,97,658/- 8 Pradeep Chaturvedi 4,87,556/-
34,37,650/- 9.On perusal of these TCS Certificate, it is found that all these TCS certificates were in the name of the above persons having their own PAN Numbers, TCS collected of such persons is allowed in the hands of the assessee partnership firm. The TCS was claimed in the name of different persons. The assessee is entitled to get credit of TCS of Rs. 34,37,650/-. We find that as per Rule 37BA, which has been amended from 1.4.2009, in above situation, the person to whom the payment has been made or credit has been given on the basis of information relating to deduction of tax furnished by the Deductor to the income of tax authorities or the persons authorized by such authority. Rule 37BA provides that where any income on which the tax has been deducted at source is assessable in the hands of persons other than deductee, the credit for tax deducted at source, as the case may be, shall be given to the persons and not to the deductee. We find that in this case, the assessment was made u/s 143(1). Therefore, in the interest of justice and fair play. we are of the view that the matter requires verification. We, therefore, restore this matter to the file of AO. The AO is directed to verify the claim of the assessee. We clarify that the assessee is a partnership firm doing the business of liquor and all the partners are license-holders and they have formed partnership to carry on the business of liquor. The TCS credit may be given to the partners if the partners have not claimed any TCS in their returns of income. The assessee is directed to clarify Page 9 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 10 of 24 before the AO as per the amended rules of Section 37BA and sub rule (2) of clause (i) of the amended rule. We found that the AO is directed justice may be done. The AO is further directed to give credit of this tax, which is effective from 01.04.2009 and the new rule has been amended from 2011. Therefore, the credit may be given for 24.10.2011 to the assessee after verifying whether the credit has been claimed or not in the hands of partners. If the partners have not claimed TCS certificate, the credit may be given to the partnership firm as per the decision of Hon'ble A.P. High Court, in the case of CIT vs. Bhooratnam & Company, (2013) 357 ITR 396 (AP).
5.2 The tribunal has considered the basis of allowing the credit of the tax deducted at source in the hands of the person of whose corresponding income is assessed or assessable. Similarly, in the case of ACIT vs. Avinash Chalana & Co. Bhopal the Coordinate Bench of this Tribunal has reiterated this view. The Jaipur Bench of the Tribunal, in case of M/s. Jai Ambey wines, Ajmer vs. ACIT (supra) has considered an identical issue in para 2.6 to 2.9 as under:
“2.6 We have heard the rival contentions and perused the material available on record. In order to appreciate the arguments, it would be relevant to refer to the provisions of Section 190, Section 199, Section 206C and the Rule 37BA(2)(i) of Income tax Rules.
Section 190 reads as under:
(1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of section 192, as the case may be, in accordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-section (1) of section 4.
Section 199 reads as under:
"(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. & ITANo.35/Ind/2023 Million Trader Bhopal Page 11 of 24 (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.
(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given."
Section 206C reads as under:
"(1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table M/s Jai Ambey Wines below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax:
[TABLE Sl. No. Nature of goods Percentage (1) (2) (3)
(i) Alcoholic Liquor for human consumption One per cent (ii) Tendu leaves Five per cent (iii) Timber obtained under a forest lease Two and one-half per cent (iv) Timber obtained by any mode other than under a forest lease Two and one-half per cent (v) Any other forest produce not being timber or tendu leaves Two and one-half per cent (vi) Scrap One per cent [(vii) Minerals, being coal or lignite or iron ore One per cent Provided that every person, being a seller shall at the time, during the period beginning on the 1st day of June, 2003 and ending on the day immediately preceding the date on which the Taxation Laws (Amendment) Act, 2003 comes into force, of debiting of the amount payable by the buyer to the account of the buyer or of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table as it stood immediately before the 1st day of June, 2003, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount Page 11 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 12 of 24 as income-tax in accordance with the provisions of this section as they stood immediately before the 1st day of June, 2003.
(1A) Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.
(1B) The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him.
(2) The power to recover tax by collection under sub-section (1) or sub- section (1C) or sub- section (1D)] shall be without prejudice to any other mode of recovery." M/s Jai Ambey Wines Rule 37BA(2)(i) of Income tax Rules as amended by the Income Tax (Eight amendment) Rules 2011 reads as under:
"Where under any provisions of the Act, the whole or any part of income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of tax deducted at source, as the case may, shall be given to the other person and not to the deductee.
Provided that the deductee files a declaration with the deductor and deductor reports the tax deduction in the name of the other person in the information relating to deduction referred to in sub-rule (1)."
2.7 The essence of the above stated provisions and corresponding rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS certificate has been issued at first place. If we look at the provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of goods as specified in section 206C of the Act. In light of above, the credit for TCS should Page 12 of 24
ITA No.124/Ind/2023 & ITANo.35/Ind/2023 Million Trader Bhopal Page 13 of 24 be given to the assessee which is finally and lawfully assessed to tax in respect of the corresponding income on which TCS has been collected. The fact that there are no specific rules which have been provided in the Income tax Rules in respect of credit of TCS in such situations on the lines of Rule 37BA, in our view, doesn't disentitle the assessee to claim credit of TCS in whose hands the income is finally assessed to tax. The reason for the same is that the nature of TCS is nothing but tax which has been statutorily recognised in the Income tax Act, and the Rules are enabling and procedural in nature and absence thereof cannot result in denial of credit of TCS. This issue also find supports from the decision of the M/s Jai Ambey Wines Coordinate Bench in case of ACIT, Circle-2, Udaipur vs. Shri Krishnalal Meel & party (supra).
2.8 In the instant case, the ld. AR has submitted that the income has been brought to tax in the hands of the assessee firm and accordingly the credit for TCS should be granted to the assessee firm. In this regard, we find that there is no findings of fact by the AO in this regard and in A.Y. 2012-13 the ld. CIT(A) has stated that "the claim of the appellant that all the income of partners of the firm has been include in the income of the appellant is also not fully verifiable from the documents filed by the appellant."
2.9 In light of above discussions, we set-aside the matter in both the years to the file of the AO with the directions to verify whether the corresponding income in respect of which TCS has been claimed by the assessee firm has been brought to tax in the hands of the asessee firm or not. Where after due examination and verification, the AO find that the corresponding income has been brought to tax in the hands of the assessee firm, the AO is directed to allow credit for TCS in the hands of the assessee firm.
2.10 We may add that in AY 2010-11, the appellant has taken ground in respect of non grant of TDS/TCS credit of Rs 11,31,416. However, there are no arguments made by the ld AR in respect of TDS during the course of hearing and the whole thrust of the arguments as noted above were towards non- grant of TCS credit. Further, it is noted that non-grant of TDS credit has not been pressed before the ld CIT(A) as well. In light of above, ground of appeal for AY 2010-11 so far as it relates to TDS credit is dismissed as non- pressed.”
5.3 The Tribunal has repeatedly taken a view that the credit of the tax deducted at source or collected at source should be given to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law, irrespective of the person in whose hands the Page 13 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 14 of 24 TDS/TCS certificate has been issued at first place. The only safeguard to be considered is that no double credit of the said amount of TCS is claimed. The Bangalore Benches of the Tribunal in case of Hotel Ashok Garden, Dharwad vs. ITO (supra) has considered this issue in para 7 to 10 as under:
“7. I have heard the rival submissions. Learned Counsel for the assessee brought to my notice the decision of the ITAT, Jaipur Bench, in the case of Jai Ambey Wines Vs. ACIT, order dated 11.01.2017. In the said order, identical issue with regard to claim of TCS in the hands of the partnership firm when the licence stands in the name of the partners came up for consideration. The Hon'ble ITAT, Jaipur Bench, after referring to the statutory provisions viz., sections 190, 199, 206C of the Act and Rule 37BA(2)(i) of the Income Tax Rules, 1962 (hereinafter called 'the Rules'), held that the assessee firm should be given benefit of credit for TCS made in the hands of the partner. The following are the relevant observations of the Tribunal:
"2.6 We have heard the rival contentions and perused the material available on record. In order to appreciate the arguments, it would be relevant to refer to the provisions of Section 190, Section 199, Section 206C and the Rule 37BA(2)(i) of Income tax Rules. Section 190 reads as under: "(1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of section 192, as the case may be, in accordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-section (1) of section 4." Section 199 reads as under: "(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. Page 14 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 15 of 24 The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub- section (1) and sub-section (2) and also the assessment year for which such credit may be given."
Section 206C reads as under:
"(1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax:
Provided that every person, being a, seller shall at the time, during the period beginning on the 1st day of June, 2003 and ending on the day immediately preceding the date on which the Taxation Laws (Amendment) Act, 2003 comes into force, of debiting of the amount payable by the buyer to the account of the buyer or of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table as it stood immediately before the 1st day of June, 2003, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax in accordance with the provisions of this section as they stood immediately before the 1st day of June, 2003.
Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing, in duplicate in the prescribed form and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.
The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him. & ITANo.35/Ind/2023 Million Trader Bhopal Page 16 of 24 (2) The power to recover tax by collection under sub-section (1) or sub- section (1C) or subsection (1D)] shall be without prejudice to any other mode of recovery."
Rule 37BA(2)(i) of Income tax Rules as amended,by the Income Tax (Eight amendment) Rules 2011 reads as under:
"Where under any provisions of the Act, the whole or any part of income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of tax deducted at source, as the case may, shall be given to the other person and not to the deductee.
Provided that the deductee files a declaration with the deductor and deductor reports the tax deduction in the name of the other person in the information relating to deduction referred to in sub-rule (1)."
2.7 The essence of the above stated provisions and corresponding rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS certificate has been issued at first place. If we look at the provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of goods as specified in section 206C of the Act. In light of above, the credit for TCS should be given to the assessee which is finally and lawfully assessed to tax in respect of the corresponding income on which TCS has been collected. The fact that there are no specific rules which have been provided in the Income tax Rules in respect of credit of TCS in such situations on the lines of Rule 37BA, in our view, doesn't disentitle the assessee to claim credit of TCS in whose hands the income is finally assessed to tax. The reason for the same is that the nature of TCS is nothing but tax which has been statutorily recognised in the Income tax Act, and the Rules are enabling and procedural in nature and absence thereof cannot result in denial of credit of TCS. This issue also find supports from the decision of the Coordinate Bench in case of ACIT, Circle-2, Udaipur vs. Shri Krishnalal Meel & party (supra).
2.8 In the instant case, the Id. AR has submitted that the income has been brought to tax in the hands of the assessee firrn and accordingly the credit for TCS should be granted to the assessee firm. In this regard, we find that there is no findings of fact by the AO in this regard and in A.Y. 2012-13 the Id. CIT(A) has stated that "the claim of the appellant that all the income of partners of the firm has been include in the income of the appellant is also not fully verifiable from the documents filed by the appellant." Page 16 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 17 of 24 2.9 In light of above discussions, we set-aside the matter in both the years to the file of the AO with the directions to verify whether the corresponding income in respect of which TCS has been claimed by the assessee firm has been brought to tax in the hands of the asessee firm or not. Where after due examination and verification, the AO find that the corresponding income has been brought to tax in the hands of the assessee firm, the AO is directed to allow credit for TCS in the hands of the assessee firm."
8. Learned DR, however, placed reliance on the decision of SMC Bench, Bengaluru, rendered in the case of Shri. Jayaprakasha Rai Vs. DCIT order dated 13.06.2022. I have perused the aforesaid decision and I find that the said decision was a case of transfer of licence from one person to another where pending the formality of transfer of licence, the credit was claimed by transferee of the licence in respect of TCS made in the hands of the predecessor in interest of transferor of the licence. In the aforesaid decision, the Tribunal made a reference to the provision of section 206C(4) and Rule 37-I of the Rules and came to the conclusion that credit should be given to TCS on the basis of the ultimate outcome before the Central Excise authorities regarding transfer of excise licence. The Tribunal also held in the aforesaid case that the AO can take necessary safeguards to ensure that the interest of the Revenue is not affected or prejudiced in any manner.
9. It can thus be seen that the facts of the case cited by the learned DR are different. Nevertheless, the fact remains that the Tribunal in all these decisions took the view that credit for TCS should not be denied when there is in fact no double claim made for the same TCS by 2 different persons. As we have already observed in the present case, Raju S. Shetty the licencee has given Indemnity Bond before the AO clearly specifying that he has not claimed credit for TCS in his return of income. In such circumstances, I am of the view that the claim ought to have been allowed. In this regard, I may also mention that if the ultimate conclusion on an application under section 154 of the Act can only be one particular conclusion, then even if in reaching that conclusion, analysis has to be done then it can be said that the issue is debatable which cannot be done in proceedings under section 154 of the Act. I am of the view, that the conclusion in the present case can only be one viz., that one person alone is to 15/Bang/2023 entitled to claim credit for TCS and it is only the assessee who has claimed credit for TCS and not the licencee. In such circumstances, the application under section 154 of the Act ought to have been entertained by the Revenue.
10. In this regard, learned DR also made submission that the decision of the ITAT, Jaipur Bench, was in relation to provisions of Rule 37BA of the Rules which is applicable to TDS and not to TCS and it is only Rule 37-I of the Rules which is applicable when credit for TCS is Page 17 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 18 of 24 claimed. I am of the view that the very basis of the decision of the Jaipur Bench of ITAT in the case of Jai Ambey Wines (supra) is based on the facts that what is applicable for TDS should also be applicable for TCS and merely because there is no Rule identical to Rule 37BA(2)(i) of the Rules with reference to TCS provisions, it cannot be the basis for the Revenue to deny the legitimate claim for credit of TCS made by an assessee. For the reasons given above, I am of the view that the assessee should be given the benefit of credit for TCS. The AO is directed to give credit for TCS. Appeals of the assessee are accordingly allowed.
5.4 The Hon’ble Delhi High court in case of CIT vs. Relcom (supra) has dealt with the controversy of allowing credit of TCS in para 6 to 10 as under:
“6. Having heard the submissions made on behalf of the revenue and after a perusal the orders passed by the CIT(A) and the ITAT, we are of opinion that the said orders do not call for any interference and were warranted and justified in the facts and circumstances of the case. Before we proceed to elaborate on our reasons for the same, a perusal of Section 199 of the Act is necessary. Section 199 reads as follows:
"199. Credit for tax deducted.
(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be.
(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.
(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given."
7. The revenue relies on the phrase "shall be treated as a payment of tax on behalf of the person from whose income the deduction was made" to contend that the assessee's TDS claim cannot be based on the receipts of M/s REPL. However, the assessee fairly admitted Page 18 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 19 of 24 throughout the proceedings for its TDS claim of ` 1,20,73,097/- that the benefit of such claim has not been availed by M/s. REPL. Therefore, the revenue, having assessed M/s REPL's income in respect to such TDS claim cannot now deny the assessee's claim on the mere technical ground that the income in respect of the said TDS claim was not that of the assessee, given that M/s Relcom (the assessee) and M/s REPL are sister concerns and M/s REPL has not raised any objection with regard to the assessee's TDS claim of ` 1,20,73,097/-.
8. This Court's reasoning is supported by a ruling of the Division Bench of the Andhra Pradesh High Court in CIT v. Bhooratnam, (2013) 357 ITR 196 (AP), where the Court noted as follows:
"In our view, the CIT (Appeals) and the Tribunal have rightly held that the assessee is entitled to the credit of the TDS mentioned in the TDS certificates issued by the contractor, whether the said certificate is issued in the name of the Joint Venture or in the name of a Director of the assessee company. They have considered the terms of the agreement dated 12-03- 2003 among the parties to the joint venture and held that credit for TDS certificates cannot be denied to the assessee while assessing the contract receipts mentioned in the said certificates as income of the assessee. The income shown in the TDS certificates has either to be taxed in the hands of the joint venture or in the hands of the individual co-joint venturer. As the joint venture has not filed return of income and claimed credit for TDS certificates and the TDS certificates have not been doubted, credit has to be granted to the TDS mentioned therein for the assessee.
XXX XXX XXX The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law."(emphasis supplied)
At this stage, it is also relevant to note the provisions of Rule 37BA of the Income Tax Rules, 1962, which envisions grant of TDS credit to entities other than the deductee (herein, M/s REPL). We must clarify that we are not oblivious of the fact that Rule 37BA is not directly applicable in the facts of this case. The reliance placed on Rule 37BA is merely to demonstrate that in not all circumstances is TDS credit given to the deductee.
10. This Court relies upon the well-settled dictum that procedure is the handmaid of justice, and it cannot be used to hamper the cause of justice Sardar Amarjit Singh Kalra v. Pramod Gupta, (2003) 3 SCC 272]. Therefore, the revenue's contention that the assessee, instead of claiming the entire TDS amount, ought to have sought a correction of & ITANo.35/Ind/2023 Million Trader Bhopal Page 20 of 24 the vendor's mistake, would unnecessarily prolong the entire process of seeking refund based on TDS credit.
5.5 The Hon’ble High Court has observed that the procedure is the handmaid of justice, and it cannot be used to hamper the cause of justice while upholding the order of the Tribunal in allowing the credit of TCS in the hands of the person assessed to tax for corresponding income. The Hon’ble Gujarat High Court in case of Naresh Bhawani Shah (HUF) vs. CIT (supra) analyzed the relevant provisions of the Act and Rules for TDS credit in para 5 to 10 as under:
5.Facts are not seriously in dispute. We would proceed on the basis that the source of the funds which came to be invested with the RBI was that of the HUF. The interest income, therefore, would belong to the HUF. At the same time, it is equally undisputed that the investment was made in the name of Naresh Bhavanji Shah in his individual capacity and not as a karta of the HUF. The PAN given to RBI was also that of the individual and therefore TDS was deducted by the RBI while paying interest to Naresh Bhavanji Shah indicating his PAN.
As is well known, Chapter XVIIB of the Act pertains to tax deduction at source. This part contains detailed provisions for collection of tax at source and depositing with the government revenue and other related provisions. We may refer to the relevant provisions contained thereunder. Section 199 pertains to credit for tax deducted Relevant portion thereof reads as under "(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section. (1) and sub-section (2) and also the assessment year for which such credit may be given."
Under sub-section (1) of Section 200 any person deducting tax at source would pay within the prescribed time the said sum to the credit of the Central Government under sub-section (3) of Section 200 such person would file periodic statements of tax deducted at source. Page 20 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 21 of 24 Sub-section (1) of Section 203 requires every person deducting tax at source to issue certificate to the deductee within the prescribed time. Section 206AA carries the title Requirement to furnish Permanent Account Number. Various sub-sections contained therein provide for supplying PAN by the deductee failing which tax will be collected at a higher rate. In case of invalid or not matching PAN also, similar circumstances would follow.
It can thus be seen that the Act contains detailed provision for collecting tax at source, depositing such tax with the government revenue and issuance of certificates to the deductee of such tax so deducted. The anxiety of the department, therefore, to ensure the credit of tax deducted at source is given to the rightful person in consonance with the certificate of TDS can easily be appreciated when large number of such transactions in any accounting year are likely to take place. The most dependable identification of the deductee would be his PAN which would be a unique identification number so far as an individual or an entity is concerned. The anxiety of the department therefore to ensure proper matching of the PAN in the TDS certificate as compared to the PAN of the assessee who claims the benefit of such tax deducted at source, therefore, cannot be lightly brushed aside. The short question is, In a genuine case like the case on hand, is the person remedyless? 9. It is in this context, the provision of Section 199 would come into play. As per sub-section (1) of Section 199 any deduction of tax at source would be treated as payment of tax on behalf of the person from whose income the deduction was made or the owner of the security or of the depositor or of the owner of the property or unit holder or the share holder as the case may be. Sub-section (3) of section 199 however permits a deviation authorizing the power to make rules in respect of giving credit of tax deducted at source or the year during which the credit of such tax deducted at source should be granted. In escercise of such powers, Rule 37BA of the Income Tax Rules 1962 has been framed relevant portion of which reads as under: 37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority. (2) (1) If the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for tax deducted at source shall be given to the other person in cases where... & ITANo.35/Ind/2023 Million Trader Bhopal Page 22 of 24 (a) the income of the deductee is included in the total income of another person under the provisions of section 60, section 61, section 64, section 93 or section 94; (b) the income of a deductee being an association of persons or a trust is assessable in the hands of members of the association of persons, or in the hands of trustees, as the case may be, (c) the income from an asset held in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be; (d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly by the deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1). (1) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. (iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody."
It can thus be seen that under sub-rule 2 of Rule 37BA where whole or part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit could be given to such other person and not to the deductee provided the three conditions contained therein are satisfied. These conditions in brief are that the deductee files a declaration with the deductor in this respect, such declaration would contain the details of the person entitled to the credit and the reasons for giving such credit and lastly the deductor issues certificate for deducting tax at source in the name of such a person. In the present case, the petitioner could have applied to RBI in terms of sub-rule 2 of Rule 37BA and completed the procedure envisaged therein. However, one can gather that there is no dearth of power with the department to grant credit of tax deducted at source in such a genuine case. We are not suggesting that the requirements of sub-rule 2 are not to be followed before such benefit can be granted. Invariably in all cases such procedure would have to be completed before a person can rightfully claim credit of tax Page 22 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 23 of 24 deducted at source where the TDS certificate shows the name and PAN of some other person.
In the present case, however, many years have passed since the event arose. The facts are not seriously in dispute. The HUF has already offered the entire income to tax. The department has also accepted such declaration and taxed the HUF. In view of such special facts and circumstances, we direct the department to give credit of the said sum of Rs.5,42,800/- to the petitioner HUF deducted by way of tax at source upon Shri Naresh Bhavanji Shah filing an affidavit before the department that the sum invested by the RBI does not belong to him, the income is also not his and that he has not claimed any credit of the tax deducted at source on such income for the said assessment year.”
5.6 Thus the logic and proposition as emerged from the various case laws sited above is that the credit of the tax deducted at source/tax collected at source be given to the de-facto prayer/recipient of the amount which is subjected to the collection/deduction of tax as in whose hands the corresponding income is going to be assessed. The only rider to this principle is that there should not be any double claim of credit. Accordingly if the assessee produces the record as well as undertaking/indemnity bond from the license holders that they have not claimed or not going to claim the credit of the said amount of TCS then the credit of the TCS on the transactions of purchase of liquor actually carried out by the assessee by using the license issued in name of the individuals shall be allowed to the assessee. Since the relevant facts regarding the purchase, sales of liquor by the assessee and consequential income offered to tax by the assessee as well as the undertaking/indemnity from the individual license holders are required to be produced and verified/examined therefore, the matter is set aside to the record of the AO for limited purpose of examining the factual aspect of carrying out the transactions of purchase and sales and corresponding income offered to tax by the assesse as well as production of the undertaking/indemnity on behalf of the individual license holders for not claiming the credit of the said amount of TCS. The AO shall allow the claim of credit of TCS subject to verification of the above record and facts. Page 23 of 24 & ITANo.35/Ind/2023 Million Trader Bhopal Page 24 of 24 6. In the result, the appeal of assessee is allowed for statistical purposes.