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TMI Blog2023 (10) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... such findings be held as unlawful and injudicious and therefore be quashed and the credit of TCS of Rs. 8226254 be kindly allowed. 3. That on the facts and in the circumstances of the case and in law the assessee submits that having regard to the nature of business and the explanation furnished before the lower authorities it be held that the assessee is lawfully eligible and entitled to claim the credit of TCS of Rs. 8226254 and the denial of such credit is injudicious and unlawful and hence the credit of TCS of Rs. 8226254 be kindly allowed. 4. That on the facts and in the circumstances of the case and in law, the levy of interest under section 234B and 234C is unlawful and without jurisdiction therefore, the same be kindly deleted." 2. The solitary grievance of the assessee for both the assessment year 2017-18 & 2018-19 is regarding non allowance of the credit of 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. Ld. Sr. Counsel for the assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vani Shah (HUF) v. Commissioner of Income Tax [2017] 84 taxmann.com 53 (Gujarat) 3. Ld. Sr. counsel has fairly submitted that though in the judgment relied by him the Tribunal has considered Rule 37BA which is relevant for the credit of TDS whereas the Rule 37-I of the Income Tax Rules is relevant for credit for Tax Collected at Source(TCS) however the under line principles for both the provisions is same as credit of TDS or TCS to be allowed against the corresponding income offered to tax. Further the Ld. Sr. counsel submitted that the licensees/associates have not claimed credit of TCS in their individual case and have not obtained the refund of the same as it is evident from Form 26AS of the individual license holders. Therefore, the credit of the TCS ought to have been allowed to the assessee company who is actually doing the business of purchase and sale of liquor and accounted all the transactions as well as the income derived from the activities of purchase and sale of liquor. Ld. Sr. counsel has referred to the form 26AS of the individual license holders showing the amount of TCS in their accounts however, none of the individual license holders have claimed the credit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. (2) (i) If the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for tax deducted at source shall be given to the 'other person in cases where- (a) the income of the deductee is included in the total income of another person under the provisions of section 60, Section 61, section 64, section 93 or section 94; (b) the income of a deductee being an association of persons or a trust is assessable in the hands of members of the association of persons, or in the hands of trustees, as the case may (c) the income from an asset held in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be; (d) the income from a property, depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified four clauses in the pre-amended Rule 37BA which restricted the benefit of the rule only in four specified situations. It has thus widened the scope of the rule 37BA thereby enabling the credit of taxes to the actual payee in whose hands the income is assessable and not restricting this benefit only to the specified four situations." 8. As per above rules and interpretation of the Act, we are of the view that if the assessee is a partnership firm to carry on the business in liquor and TCS is claimed in the name of partner of the firm, the TCS collected by the party in the name of different persons, which reads as under :- S.No. Name of Partners Amount of TCS 1 Avinash Chalana & Co. 5,52,525/- 2 Avinash Chalana & Co. 89,163/- 3 Million Traders 82,054/- 4 Maxima Traders 1,17,035/- 5 Gundadeen Patel 9,11,330/- 6 Shiv Charan Singh 5,42,017/- 7 Bana Singh 12,97,658/- 8 Pradeep Chaturvedi 4,87,556/- 34,37,650/- 9. On perusal of these TCS Certificate, it is found that all these TCS certificates were in the name of the above persons having their own PAN Numbers, TCS collected of such persons is allowed in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. ACIT (supra) has considered an identical issue in para 2.6 to 2.9 as under: "2.6 We have heard the rival contentions and perused the material available on record. In order to appreciate the arguments, it would be relevant to refer to the provisions of Section 190, Section 199, Section 206C and the Rule 37BA(2)(i) of Income tax Rules. Section 190 reads as under: "(1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of section 192, as the case may be, in accordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-section (1) of section 4." Section 199 reads as under: "(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, of such amount as income-tax in accordance with the provisions of this section as they stood immediately before the 1st day of June, 2003. (1A) Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes. (1B) The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him. (2) The power to recover tax by collection under sub-section (1) or subsection (1C) or sub- section (1D)] shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the income has been brought to tax in the hands of the assessee firm and accordingly the credit for TCS should be granted to the assessee firm. In this regard, we find that there is no findings of fact by the AO in this regard and in A.Y. 2012-13 the ld. CIT(A) has stated that "the claim of the appellant that all the income of partners of the firm has been include in the income of the appellant is also not fully verifiable from the documents filed by the appellant." 2.9 In light of above discussions, we set-aside the matter in both the years to the file of the AO with the directions to verify whether the corresponding income in respect of which TCS has been claimed by the assessee firm has been brought to tax in the hands of the assessee firm or not. Where after due examination and verification, the AO find that the corresponding income has been brought to tax in the hands of the assessee firm, the AO is directed to allow credit for TCS in the hands of the assessee firm. 2.10 We may add that in AY 2010-11, the appellant has taken ground in respect of non grant of TDS/TCS credit of Rs 11,31,416. However, there are no arguments made by the ld AR in respect of TDS d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of sub-section (1) of section 4." Section 199 reads as under: "(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in subsection (1) and sub-section (2) and also the assessment year for which such credit may be given." Section 206C reads as under: "(1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "Where under any provisions of the Act, the whole or any part of income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of tax deducted at source, as the case may, shall be given to the other person and not to the deductee. Provided that the deductee files a declaration with the deductor and deductor reports the tax deduction in the name of the other person in the information relating to deduction referred to in sub-rule (1)." 2.7 The essence of the above stated provisions and corresponding rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS certificate has been issued at first place. If we look at the provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TCS made in the hands of the predecessor in interest of transferor of the licence. In the aforesaid decision, the Tribunal made a reference to the provision of section 206C(4) and Rule 37-I of the Rules and came to the conclusion that credit should be given to TCS on the basis of the ultimate outcome before the Central Excise authorities regarding transfer of excise licence. The Tribunal also held in the aforesaid case that the AO can take necessary safeguards to ensure that the interest of the Revenue is not affected or prejudiced in any manner. 9. It can thus be seen that the facts of the case cited by the learned DR are different. Nevertheless, the fact remains that the Tribunal in all these decisions took the view that credit for TCS should not be denied when there is in fact no double claim made for the same TCS by 2 different persons. As we have already observed in the present case, Raju S. Shetty the licencee has given Indemnity Bond before the AO clearly specifying that he has not claimed credit for TCS in his return of income. In such circumstances, I am of the view that the claim ought to have been allowed. In this regard, I may also mention that if the ultimate concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given." 7. The revenue relies on the phrase "shall be treated as a payment of tax on behalf of the person from whose income the deduction was made" to contend that the assessee's TDS claim cannot be based on the receipts of M/s REPL. However, the assessee fairly admitted throughout the proceedings for its TDS claim of Rs. 1,20,73,097/- that the benefit of such claim has not been availed by M/s. REPL. Therefore, the revenue, having assessed M/s REPL's income in respect to such TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of justice Sardar Amarjit Singh Kalra v. Pramod Gupta, (2003) 3 SCC 272]. Therefore, the revenue's contention that the assessee, instead of claiming the entire TDS amount, ought to have sought a correction of the vendor's mistake, would unnecessarily prolong the entire process of seeking refund based on TDS credit. 5.5 The Hon'ble High Court has observed that the procedure is the handmaid of justice, and it cannot be used to hamper the cause of justice while upholding the order of the Tribunal in allowing the credit of TCS in the hands of the person assessed to tax for corresponding income. The Hon'ble Gujarat High Court in case of Naresh Bhawani Shah (HUF) vs. CIT (supra) analyzed the relevant provisions of the Act and Rules for TDS credit in para 5 to 10 as under: 5. Facts are not seriously in dispute. We would proceed on the basis that the source of the funds which came to be invested with the RBI was that of the HUF. The interest income, therefore, would belong to the HUF. At the same time, it is equally undisputed that the investment was made in the name of Naresh Bhavanji Shah in his individual capacity and not as a karta of the HUF. The PAN given to RBI was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h transactions in any accounting year are likely to take place. The most dependable identification of the deductee would be his PAN which would be a unique identification number so far as an individual or an entity is concerned. The anxiety of the department therefore to ensure proper matching of the PAN in the TDS certificate as compared to the PAN of the assessee who claims the benefit of such tax deducted at source, therefore, cannot be lightly brushed aside. The short question is, In a genuine case like the case on hand, is the person remedyless? 9. It is in this context, the provision of Section 199 would come into play. As per sub-section (1) of Section 199 any deduction of tax at source would be treated as payment of tax on behalf of the person from whose income the deduction was made or the owner of the security or of the depositor or of the owner of the property or unit holder or the share holder as the case may be. Sub-section (3) of section 199 however permits a deviation authorizing the power to make rules in respect of giving credit of tax deducted at source or the year during which the credit of such tax deducted at source should be granted. In escercise of such pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit could be given to such other person and not to the deductee provided the three conditions contained therein are satisfied. These conditions in brief are that the deductee files a declaration with the deductor in this respect, such declaration would contain the details of the person entitled to the credit and the reasons for giving such credit and lastly the deductor issues certificate for deducting tax at source in the name of such a person. In the present case, the petitioner could have applied to RBI in terms of sub-rule 2 of Rule 37BA and completed the procedure envisaged therein. However, one can gather that there is no dearth of power with the department to grant credit of tax deducted at source in such a genuine case. We are not suggesting that the requirements of sub-rule 2 are not to be followed before such benefit can be granted. Invariably in all cases such procedure would have to be completed before a person can rightfully claim credit of tax deducted at source where the TDS certificate shows the name and PAN of some other person. 11. In the present case, how ..... 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