2023 (10) TMI 1270 - AT - Income Tax

Credit of TCS - intimation u/s 143(1) denying credit - TCS collected by the Excise Department of State of M.P. in respect of the purchase of liquor due to nonappearance in the PAN account of the assessee company but reflected in the accounts of the individual license holders who are directors and associates of the assessee company - HELD THAT - Prima facie it is manifest from the record that actual transactions of purchases and sales of liquor have been carried out by the assessee company on the basis of the license granted in the name of the individual who have associated with the assessee company. This practice is otherwise prevailing and accepted by the concerned authorities of the State Government that after obtaining the license by the individuals they are usually forming association or partnership firm or a company to pool their resources as well as to avoid competition among themselves. Though the licenses are given by the Excise Department to the individuals as per the policy of the Government however, if the actual business of purchase and sale of liquor is conducted by a Corporate entity formed by the individual license holders and corresponding income from the said business is also offered to tax by the said business entity and not by the individual license holders then the credit of advance tax collected from the transactions of purchase has to be allowed in the hands of the company which is the actual purchaser/buyer and also offering the income from the said business activity to tax. It is very pertinent and relevant for allowing the credit of TCS as who is actually subjected to the TCS on purchase of liquor from Excise Department and also accounting the transactions and consequential income offered to tax. Whether the individual in whose name license is issued has claimed any credit of the said amount of TCS or not ? - Credit of the tax deducted at source/tax collected at source be given to the de-facto prayer/recipient of the amount which is subjected to the collection/deduction of tax as in whose hands the corresponding income is going to be assessed. The only rider to this principle is that there should not be any double claim of credit. Accordingly if the assessee produces the record as well as undertaking/indemnity bond from the license holders that they have not claimed or not going to claim the credit of the said amount of TCS then the credit of the TCS on the transactions of purchase of liquor actually carried out by the assessee by using the license issued in name of the individuals shall be allowed to the assessee. Since the relevant facts regarding the purchase, sales of liquor by the assessee and consequential income offered to tax by the assessee as well as the undertaking/indemnity from the individual license holders are required to be produced and verified/examined therefore, the matter is set aside to the record of the AO for limited purpose of examining the factual aspect of carrying out the transactions of purchase and sales and corresponding income offered to tax by the assessee as well as production of the undertaking/indemnity on behalf of the individual license holders for not claiming the credit of the said amount of TCS. The AO shall allow the claim of credit of TCS subject to verification of the above record and facts. Appeal of assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Denial of credit of TCS of Rs. 82,26,254.
2. Levy of interest under sections 234B and 234C.

Summary:

Issue 1: Denial of Credit of TCS of Rs. 82,26,254
The assessee, engaged in the retail sale of liquor, faced denial of credit for TCS collected by the Excise Department of State of M.P. due to non-appearance in the PAN account of the assessee company but reflected in the accounts of individual license holders who are directors and associates of the assessee company. The assessee argued that the entire business is accounted for in the books of the company, and the income is assessed in the hands of the company, not the individual license holders. The Tribunal referred to several decisions, emphasizing that credit for TDS or TCS should be allowed against the corresponding income offered to tax. The Tribunal noted that the individual license holders had not claimed the credit of the TCS, and thus, denying the credit to the assessee would result in unjust enrichment of the revenue department. The Tribunal set aside the matter to the AO for verification of the transactions and the production of undertakings from individual license holders stating they have not claimed the TCS credit. The AO was directed to allow the claim of credit of TCS subject to verification.

Issue 2: Levy of Interest under Sections 234B and 234C
The assessee contended that the levy of interest under sections 234B and 234C was unlawful and without jurisdiction. However, the Tribunal did not provide specific details or a ruling on this issue in the summarized judgment.

Conclusion:
The Tribunal allowed the appeal of the assessee for statistical purposes, directing the AO to verify the factual aspects and allow the credit of TCS subject to the production of necessary undertakings from individual license holders.