2016 (4) TMI 1453 - AT - Income Tax

TCS Credit to partnership firm - in intimation u/s 143(1) claim of TCS was restricted as reflected in the 26AS Form of the assessee - 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 - HELD THAT - From TCS Certificate, it is found that all these TCS certificates were in the name of the persons having their own PAN Numbers, TCS collected of such persons is allowed in the hands of the assessee partnership firm. TCS was claimed in the name of different persons. The assessee is entitled to get credit of TCS. 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. AO is 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 Bhooratnam Company, 2013 (1) TMI 478 - ANDHRA PRADESH HIGH COURT - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Dispute over the credit of Tax Collected at Source (TCS) claimed by the assessee.
2. Interpretation of Section 199 of the Income-tax Act, 1961 and Rule 37BA regarding the allowance of TCS credit.
3. Verification of TCS credit claims in the case of a partnership firm involved in the liquor business.

Detailed Analysis:
1. The appeal was against the order of CIT(A) for the assessment year 2012-13, where the assessee's TCS credit claim was restricted in the intimation under section 143(1) of the Act. The dispute mainly revolved around the TCS credit claimed by the partnership firm, with partners being license-holders in the liquor business. The assessee argued that the TCS certificate was issued in the name of partners, and even though the income was assessed in the firm's hands, the corresponding TCS credit was not allowed. The contention was that partners did not claim TCS credit individually, hence it should be allowed to the firm.

2. The interpretation of Section 199 of the Income-tax Act, 1961, and Rule 37BA was crucial in determining the eligibility for TCS credit. Section 199 provides for the treatment of tax deductions made on behalf of the person from whose income the deduction was made. Rule 37BA outlines the procedure for giving credit for TCS deducted at source, specifying situations where credit can be given to persons other than the deductee. The amended Rule 37BA broadened the scope for allowing TCS credit to the actual payee in whose hands the income is assessable, not restricting it to specific situations.

3. Upon examination of the TCS certificates and considering the partnership firm's nature of business, it was found that TCS was collected in the name of different persons, including partners with individual PAN numbers. The Tribunal concluded that the partnership firm was entitled to the TCS credit claimed, amounting to Rs. 34,37,650/-. The matter was restored to the Assessing Officer (AO) for verification as per the amended rules, directing the AO to ensure justice by giving credit to the partners if they had not claimed TCS in their individual returns. The Tribunal emphasized the importance of verifying the TCS credit claims, especially in cases involving partnership firms engaged in specific businesses like liquor trading.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for proper verification and compliance with the amended rules regarding TCS credit claims in the case of partnership firms.