VIKAS MEHTA,NEW ANAJ MANDI, RANIA, SIRSA vs. THE DEPUTY DIRECTOR OF INCOME TAX CPC BANGALURU JOA INCOME TAX OFFICER, WARD-1, SIRSA, HARYANA

That the Ld. The Commissioner of Income Tax, ADDL/JCIT (A)-4, Kolkata has erred 1 confirming the action of the Ld. Deputy Director of Income Tax, CPC, Bangalore not allowing the TDS credited of Rs. 1,86,305/- as per Rule 37BA of the Income Tax Act. 1961. 2. That the Ld. The Commissioner of Income Tax, ADDL/JCIT (A)-4, Kolkata has erred in not considering that the TDS provision of section 194Q are not applicable on the appellant who it merely a Kacha Arhtiya/Pakka Arhtiya/Commission Basis. 3. That the Ld. The Commissioner of Income Tax, ADDL/JCIT (A)-4, Kolkata has erred in not considering the act that the assessee was mainly acting as commission agent/Kacha Arhtiya and he was earning

During the course of hearing, the ld AR submitted that in the case of the assessee, ld DDIT, CPC Bangalore did not allow the credit of TPS deducted while processing the return of income u/s 143(1) of the Act on the alleged application of Rule 37BA of the Income Tax Rules, 1962 which is as under:

It was submitted that the assessee is engaged in the business of commission agent of agriculture produce and as per the business model of the assessee, the assessee procures the agriculture produce from the farmers and thereafter, sell the same to various buyers and out of such arrangement, the assessee earns nominal amount of commission which has duly been shown by the assessee in his return of income filed for the AY 2022-23. It is hereby pertinent to mention here that the assessee is not the owner of the agriculture produce and hence, the assessee does not sell such goods on his own behalf rather the assessee only acts as a mediator/ agent and for such purpose, the assessee has obtained a registration from the Haryana State Agricultural Market Committee. The copy of the license is placed in the paper book at page no. 1-2. 5. It was submitted that the assessee thus acts as a 'Kacha Arhtiya' and various farmers bring their agricultural produce to a particular platform of a 'kacha arhtiya' licensed by local market committee. The 'kacha arhtiya' only acts as an agent of the farmers and is responsible for farmer's crop display, basic cleaning, sorting, conducting auction, receiving payments on behalf of farmers and then making such payments to farmers and thereby retains only the commission income. As an agent, the 'Kacha Arhtiya' does not trade of his own and his income is only the commission income fixed by the Agriculture Produce Market Commission and this commission is paid by the buyer of the agriculture produce. Hence, it is hereby submitted that the commission agent is not the owner of the goods and have no right to sell the goods rather, the farmers are the real owners who enjoy the right to sell such goods and receive consideration.

It was submitted that the 'Kacha Arhtiya' records only commission income earned by him in his books of account but not the actual purchase or sales in his books of account. Hence, only the commission income and the corresponding expenses incurred for earning such commission income are recorded by the 'Kacha Arhtiya' in his books of account. It was submitted that the Income Tax Department has clarified vide circular No. 452 [F. No. 201/3/85-IT(A-ll)] dated 17.03.1986 that the turnover of a 'Kacha Arhtiya' will only be the commission earned by the him and not the sales of agriculture produce. 7. It was submitted that the assessee has duly disclosed the commission income earned by him in the Profit & Loss A/c prepared for the year ending 31.03.2022, copy of the same is placed in the paper book at page no. 9. During the year under consideration, the assessee has declared total commission income including Dami to the tune of Rs. 11,88,385/- and the buyers deducted TDS u/s 194H of the Act @ 5% for payments made to the assessee for providing

Regarding the findings of the ld CIT(A) where he says that “as per the GST Return, the total supply is Rs. 11.68 Crores. But the same turnover is not disclosed in the ITR", it was submitted that the ld CIT(A) has only considered that the assessee has shown gross receipts to the tune of Rs. 11.68 Crores however, he has failed to consider that there is corresponding amount of purchase and the commission earned on such sale/purchase is his income which has duly been disclosed by the assessee in his books of account. Further, reliance was placed on the decision of the Coordinate Jaipur Bench in the case of Madan Lai Gupta (ITA No. 192/JPR/2024).

Per contra, the ld DR is heard has relied on the order of the lower authorities. It was submitted that there is nothing on record to demonstrate that the assessee has sold the goods on behalf of the farmers and therefore, in such circumstances, the CPC has rightly restricted the credit of TDS to the extent of receipts offered to tax and which has been duly confirmed by the ld CIT(A).

In his rejoinder, the ld AR submitted that given the opportunity, the assessee can demonstrate that he is only acting as the commission agent and has sold goods on behalf of the farmers and where the Bench so decide, the matter may be set-aside to the file of the AO for necessary examination and verification. The ld DR didn’t oppose where the matter is set-aside to the file of the AO.

I have heard the rival contentions and purused the material available on record. The limited issue under consideration relates to transaction undertaken by the assessee with M/s. Ebro India Private Limited wherein the latter had deducted TDS u/s 194Q of the Act. As per the contention of the ld AR, the said transaction relates to sale of the agriculture produce on behalf of the farmers and as such, the assessee only acted as a commission agent and the TDS has been wrongly done u/s 194Q. It has been submitted that where the TDS has been wrongly done, the assessee cannot be penalized by non-grant of TDS credit which he has rightly claimed while filing the return of income wherein the commission income has been duly offered to tax. On the other side, the claim of the Revenue is that since receipts from M/s Ebro India Private Limited has been reflected as part of revenues and offered to tax, the CPC has restricted the TDS credit. I find that there is not enough material available on record to decide the matter judiciously and in the fitness of the things, it would be appropriate that the matter is remanded to the file of the AO as also acknowledged and agreed by both the parties. The matter is accordingly set-aside to the file of the AO to examine the exact nature of transaction undertaken by the assessee with M/s. Ebro India Private Limited, the role of the assessee vis-à-vis the purchaser and seller(s) and determine the claim of credit so done u/s 194Q afresh as per law after providing reasonable opportunity to the assessee.

The appeal of the assessee is thus allowed for statistical purposes.