2024 (11) TMI 147 - AT - Income Tax

Disallowing TDS claimed by invoking provisions of Rule 37BA - assessee is a Kaccha Aaratiya engaged in selling agriculture produce on behalf of the farmer to the principal buyer - HELD THAT - After evaluating rule 37 BA, we found that this rule envisages allowance of TDS credit in proportion to the income declared by the assessee. This proportion needs to be established for every nature of receipt on which TDS has been claimed by the assessee, therefore while allowing TDS claimed under each section, it has to be ascertain that entire income on which TDS has been claimed is duly offered in the ITR by the assessee and in case the income so declared for each nature of receipt on which TDS has been claimed, is lesser than that appearing in form 26AS then only CPC May deny the credit of TDS for relevant nature of receipt. Since the receipt of interest and Commission on which TDS has been claimed u/s 194A and 194H are fully declared in ITR, therefore the entire TDS claimed under section 194A and 194H needs to be fully allowed. Hence the proportionate TDS, disallowed to the extent of rupees 179551, is absolutely unjustified and therefore deserves to be allowed and thus, we order accordingly. Balance TDS credit being TDS under section 194Q - AR has drawn our attention to sample invoices on which TDS was deducted under section 194Q by the principal buyer and the corresponding Vikray Parchi issued by the Mandi to the respective farmers. These documents clearly show that the amount invoiced by the assessee to the principal buyer and the value of goods transferred by assessee to the farmer is exactly the same. Therefore turnover of kutcha aaratiyan is merely the commission paid by principal buyer on which the principal buyer deducts TDS under section 194H and which has been duly shown as income in the ITR by the assessee, therefore the TDS deducted by such principle buyers by virtue of provisions of section 194 Q is eligible to be claimed by the Kaccha aaratiya in his ITR on the Grounds that the assessee is a kacha arhatia and is duly registered as such with the Ramganj mandi, Kota. Perusal of the vikray parchi issued at the mandi to the farmers and the corresponding invoice raised by the assessee to the principal buyer undoubtedly establishes the fact that the assessee has no control or margin in the sale facilitated by him and earns merely commission from such transactions. Assessee has no domain over the goods sold to the principle buyers. And as clarified by Central Board of Direct Taxes in its circular no. 452 (1986) so far as Kachha Arahitias are concerned the turnover does not include the sales effected on behalf of principals only commission (gross) has to be considered for the purpose of Income tax section 44AB . TDS deducted u/s 194Q by the principle buyers cannot be refused by invoking Rule 37BA r.w.s. 199 of the Act, as the sales facilitated by the assessee for the farmers is not the turnover of the assessee and the income from such transaction (commission) being duly offered for tax by the assessee in his ITR, the TDS deducted both u/s 194H and 194Q deserves to be fully allowed. Further the Form 26AS also depicts that the invoices on which TDS have been deducted u/s 194Q also has TDS deducted u/s 194H of the Act. Thus the contention of the assessee that he is merely a kachaa arhatia is potrayed beyond all doubts and needs to be accepted. See Madan Lal Gupta case 2024 (4) TMI 1174 - ITAT JAIPUR wherein on the similar issue TDS claimed under section 194Q was fully allowed in the case of kutcha aaratiya - direct the AO to allow the TDS claimed under section 194Q by the assessee. Assessee appeal allowed.

Summary

Issues Involved:

1. Denial of Tax Deducted at Source (TDS) credit by CPC under Rule 37BA.
2. Proportionate TDS credit based on mismatch in Form 26AS and income credited.
3. Incorrect application of TDS provisions under sections 194J and 194H.

Detailed Analysis:

1. Denial of TDS Credit by CPC under Rule 37BA:

The primary issue in the appeal concerns the denial of TDS credit by the CPC while processing the return filed by the assessee. The assessee, a "Kacha Aaratiya" engaged in selling agricultural produce on behalf of farmers, claimed a TDS credit of Rs. 2,33,682/- in their ITR for the assessment year 2022-23. However, the CPC raised a demand of Rs. 2,61,710/- after disallowing TDS credit to the extent of Rs. 2,09,560/- by invoking Rule 37BA. Rule 37BA mandates that TDS credit should be allowed in proportion to the income declared by the assessee. The assessee contended that the entire income on which TDS was claimed was duly offered in the ITR, particularly for sections 194A (Interest) and 194H (Commission), and thus, the disallowance of TDS credit was unjustified. The Tribunal concluded that since the receipts of interest and commission were fully declared in the ITR, the entire TDS claimed under sections 194A and 194H should be allowed, and the disallowance of Rs. 1,79,551/- was unjustified.

2. Proportionate TDS Credit Based on Mismatch in Form 26AS and Income Credited:

The second issue involved the proportionate TDS credit allowed by the CPC due to a mismatch between the amounts credited in Form 26AS and the income credited by the assessee. The assessee argued that as a "Kacha Aaratiya," the purchase value on which tax was deducted under section 194Q by buyers was not shown as turnover, and only the commission earned was credited as income. The Tribunal accepted the assessee's contention, noting that a "Kacha Aaratiya" acts solely as an agent and not as a principal, with income comprising only the commission. The Tribunal found that the turnover on which TDS was deducted under section 194Q was not the turnover of the assessee and thus should not have been shown as such. Therefore, the TDS credit of Rs. 30,009/- under section 194Q was also directed to be fully allowed.

3. Incorrect Application of TDS Provisions Under Sections 194J and 194H:

The third issue pertained to the observation by the CIT(A) that if the assessee was a commission agent, TDS should have been deducted under section 194J instead of 194H. The assessee contended that this observation was incorrect, as TDS for commission income is covered under section 194H. The Tribunal agreed with the assessee's submission, clarifying that the TDS deducted by the buyers on commission income was correctly done under section 194H. The Tribunal further noted that the Form 26AS reflected TDS deductions under both sections 194Q and 194H, supporting the assessee's claim of being a "Kacha Aaratiya." Consequently, the Tribunal directed the allowance of the TDS claimed under section 194Q, aligning with the decision of the ITAT Jaipur bench in a similar case.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, directing the allowance of the entire TDS claimed under sections 194A, 194H, and 194Q. The Tribunal emphasized that the assessee's role as a "Kacha Aaratiya" was duly recognized, and the income from commission was correctly declared in the ITR. The order was pronounced in the open court, with the appeal being allowed without any order as to costs.