2014 (10) TMI 1037 - AT - Income Tax

TDS credit - Revenue contends that once the assessee had not shown the aforesaid subscriptions as its own income, its TDS claim ought not to have been granted in the lower appellate proceedings - HELD THAT - There is no quarrel about the factual position that the assessee had collected subscription at the behest of M/s Sun TV Network Ltd. Its payees could only deduct TDS in its name and not that of the latter entity which has already admitted these very payments in return filed. The 'tribunal' in identical circumstances 2013 (12) TMI 900 - ITAT CHENNAI had held the assessee entitled for TDS credit u/s 199 - In our view, plea of low tax effect does not merit acceptance as the department could have treated this issue as a recurring one. There is also no material on record to take a different view as well. In these circumstances, we hold that the CIT(A) s findings do not warrant any interference. The Revenue s grounds are rejected.

Summary

Issues:
1. Allowance of TDS claim on subscription charges.
2. Interpretation of provisions under section 199 of the Income-tax Act, 1961.
3. Application of the principle of low tax effect.
4. Distinction between income of the assessee and the principal entity.

Issue 1: Allowance of TDS claim on subscription charges
The case involved an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) allowing the assessee's TDS claim of Rs. 1,02,58,243 on subscription charges for the assessment year 2009-10. The Assessing Officer disallowed the TDS credit, resulting in the impugned addition. The CIT(A) accepted the TDS credit claim based on a tribunal's order in the assessee's own case for a previous assessment year, emphasizing that the subscription collected by the assessee was not its income but that of the principal entity. The tribunal held that the assessee was entitled to TDS credit under section 199 of the Act, and the Revenue's appeal was dismissed.

Issue 2: Interpretation of provisions under section 199 of the Income-tax Act, 1961
The tribunal's decision was based on the interpretation of section 199 of the Income-tax Act, which allows for TDS credit. It was established that the assessee, acting as a collection agent, was entitled to receive a fixed commission for its services. Since the tax had already been deducted and paid to the Government by the cable operators at the time of payment, the assessee was entitled to credit while receiving commission income. The subscription amount collected was not considered as the assessee's income but that of the principal entity, leading to the conclusion that the TDS credit claim was valid under section 199.

Issue 3: Application of the principle of low tax effect
The Revenue contended that the TDS claim should not have been allowed since the subscriptions were not shown as the assessee's income. However, the tribunal rejected the argument of 'low tax effect,' stating that the department could have treated the issue as recurring. The tribunal found no material to support a different view and upheld the CIT(A)'s decision, emphasizing that the Revenue's grounds did not warrant interference.

Issue 4: Distinction between income of the assessee and the principal entity
The judgment highlighted the distinction between the income of the assessee and the principal entity for whom the assessee was acting as a collection agent. It was clarified that the subscription income collected by the assessee belonged to the principal entity and was not taxable in the hands of the assessee. The tribunal's decision reaffirmed that the assessee was merely a nodal agency for collecting subscriptions on behalf of the principal entity, and the income tax liability rested with the latter.

In conclusion, the tribunal's decision upheld the allowance of the TDS claim on subscription charges, emphasizing the applicability of section 199 of the Income-tax Act and the distinction between the income of the assessee and the principal entity.