2024 (4) TMI 1174 - AT - Income Tax

Denial of credit of TDS deducted u/s 194Q - appellant being a Kachha Adhatiya (Commission Agent) and claiming TDS credit - assessee raised its invoice to its principal - HELD THAT - We find that on account of the new amendment brought in section 194Q of the Act the principal of the assessee agent has deducted TDS u/s. 194Q of the Act in addition to section 194H for the commission paid to the assessee and, therefore, the assessee is entitled to credit of tax deducted u/s. 194H as well as sec. 194Q and we further hold that assessee is not required to disclose the turnover appearing in the tax deduction details u/s. 194Q because he is acting as the Kachcha Arhtia i.e. an agent and the turnover appearing in the sale invoices are merely the sales made against the equal amount of purchase made from the farmers and effectively it is not the turnover of the assessee. So far as the observation of the Ld. CIT(A), the TDS ought to have been deducted u/s. 194J and 194Q, we fail to find any merit because section 194J refers to deduction of tax on fees for professional on technical services which is not at all applicable in the case of assessee and 194Q is applicable because it is deduction of tax at source on payment of certain sum for purchase of goods. Thus, grounds of appeal raised by the assessee are allowed.

Summary

Issues:
Denial of TDS credit under section 194Q of the Income Tax Act, 1961.

Analysis:
The appeal pertains to the Assessment Year 2022-23 against an order denying TDS credit of Rs. 90,792 under section 194Q of the Act. The assessee, a commission agent, filed its return showing a total income of Rs. 6,32,740 and prepaid taxes of Rs. 1,55,590. However, the credit was allowed only to the extent of Rs. 64,798, with the balance denied. The denial was based on the TDS being deducted on turnover, which was not reflected in the financial statement. The assessee's argument was that TDS under section 194Q was for turnover carried out on behalf of its client, acting as an agent. The Tribunal examined the business model, where the assessee raised invoices on behalf of the principal buyer for goods procured from farmers, with the turnover being commission only. The Tribunal noted that TDS under section 194H for commission income was allowed, but the dispute was regarding TDS under section 194Q for purchase of goods.

The Tribunal analyzed the provisions of section 194Q, which mandates TDS on payment for purchase of goods exceeding a certain threshold. It observed that the assessee, as a commission agent, raised invoices to the principal buyer for the same amount as goods received from farmers, acting purely on behalf of the principal. The Tribunal referred to circulars clarifying that turnover for agents like the assessee does not include sales made on behalf of principals. It concluded that the assessee, being entitled to credit for tax deducted under both sections 194H and 194Q, was not required to disclose turnover under section 194Q as it acted as an agent. The Tribunal rejected the argument that TDS should have been under sections 194J and 194Q, as section 194J pertains to professional or technical services, not applicable in this case. Consequently, the Tribunal allowed the appeal, granting the assessee credit for TDS under sections 194H and 194Q.

In conclusion, the Tribunal allowed the appeal, finding in favor of the assessee based on the interpretation of sections 194H and 194Q, recognizing the nature of the assessee's business as a commission agent acting on behalf of the principal buyer. The decision highlighted the distinction between commission income and turnover for agents like the assessee, emphasizing the applicability of TDS provisions in the context of the business model.