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2013 (7) TMI 138 - AT - Income TaxTDS u/s 194C - Booking of airline tickets - agents of agent - deduction of TDS on amount remitted to main agent after deducting the amount of commission - disallowance u/s 40(a)(i) CIT(A) allowed the claim - assessee company was carrying on the business of General Sales Agents (GSA) for international airlines and domestic airlines in India for passenger and cargo warehouse management - Held that - The mode of functioning of assessee as explained is that he has appointed various agents all over the country and the agents deal with the assessee and not with the airlines. The accounting treatment followed by the assessee and the agent vis- -vis the claim of TDS is that on a booking hypothetically of Rs.100/- by the agent deduction of its commission of Rs.5/- is made and TDS at 2.24% u/s 194C on the balance amount of Rs.95/- is made and the agent remits Rs.92.87 to the assessee. In view of the fact that the entire amount is remitted to the airlines, it is not reflected in assessee s P&L account and only the GSA commission earned and received from the airlines on the cargo sales is reflected in P&L account it has also been stated on behalf of the assessee that this method of accounting is being followed by the GSA and their agents in India without any exception. On a consideration of the same, since the findings arrived at has neither been rebutted on facts and no evidence has been led to show that either the modus operandi followed by the assessee was not followed by GSA and their agents in India or that on account of following this system some amounts not included in the total income stood adjusted with the TDS considered no good reason to interfere with the finding arrived at in the impugned order - Decided against the revenue.
Issues Involved:
1. Whether the CIT(A) erred in directing the AO to allow credit of TDS amounting to Rs.2,75,78,008/-. 2. Whether the assessee correctly included the matching income for taxation for the year on which tax was deducted at source (TDS). Detailed Analysis: Issue 1: Direction to Allow Credit of TDS The Revenue challenged the CIT(A)'s order directing the AO to allow credit of TDS amounting to Rs.2,75,78,008/-. The AO had initially disallowed this credit, asserting that the TDS was deducted on income not forming part of the total income of the assessment year, thus not allowable per the Income Tax Act, 1961. The assessee, a General Sales Agent (GSA) for various airlines, argued that the entire cargo sales were routed through its bank accounts and only the GSA commission earned was reflected in its Profit & Loss account. The agents deducted TDS u/s 194C on remittances to the assessee, and the airlines deducted TDS u/s 194H on commissions paid to the assessee. The assessee claimed TDS credits in its return, which were locked up until refunds were issued. The CIT(A) accepted the assessee's explanation and noted that similar accounting treatments were consistently followed and accepted in previous years. The CIT(A) concluded that there was no revenue loss and that the exercise of disallowing TDS credit was tax neutral since the entire transaction was accounted for in the books and reflected in the return of income. Issue 2: Inclusion of Matching Income for Taxation The AO contended that the assessee did not include the matching income for taxation for the year on which TDS was deducted. The CIT(A), however, found that the entire cargo sales amount was remitted to the airlines and did not reflect in the assessee's Profit & Loss account. Only the GSA commission was included in the income, and the TDS deducted by agents and airlines was claimed as credit. The CIT(A) observed that this accounting treatment was standard practice among GSAs and their agents in India. The CIT(A) also referenced a similar case involving the assessee's sister concern, where the credit for TDS was allowed by the AO. Tribunal's Decision The Tribunal reviewed the submissions and found that the CIT(A)'s findings were neither rebutted on facts nor contradicted by evidence. The Tribunal noted that the modus operandi followed by the assessee was consistent with industry practices and that the Revenue did not demonstrate any error in the CIT(A)'s order. The Tribunal concluded that the CIT(A) correctly allowed the TDS credit and dismissed the Revenue's appeal, affirming that the CIT(A)'s decision was justified and supported by the facts and circumstances of the case. Conclusion The appeal by the Revenue was dismissed, and the order of the CIT(A) to allow the credit of TDS amounting to Rs.2,75,78,008/- to the assessee was upheld. The Tribunal found no merit in the Revenue's contention that the matching income was not included for taxation and confirmed that the accounting treatment followed by the assessee was appropriate and consistent with industry practices.
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