TDS Credit Cannot Be Denied To Assessee When Deducted And Deposited Under Their PAN

TDS Credit Cannot Be Denied To Assessee When Deducted And Deposited Under Their PAN

Issue

Whether an assessee, acting as a Kaccha Arahtia/commission agent, is entitled to full credit of TDS deducted under Section 194Q by purchasers and deposited into the Government Treasury under their PAN, even if the corresponding gross turnover was not taxable in their hands.

Facts

• Role of Assessee: The assessee operated as a Kaccha Arahtia (commission agent), facilitating the sale of agricultural produce for farmers and earning only commission income.

• Return Filing & TDS Claim: For Assessment Year 2022-23, the assessee filed a return declaring the commission income and claimed total TDS credit as reflected in Form 26AS (which included deductions under Sections 194Q, 194H, and 194A).

• TDS under Section 194Q: Purchasers deducted TDS under Section 194Q on the full transaction value of agricultural produce and deposited it against the assessee’s PAN.

• CPC Adjustment: The Central Processing Centre (CPC) allowed TDS credit only proportionate to the declared commission income, withholding the remaining credit because the corresponding gross sales receipts were not shown in the return.

• CIT(A) Ruling: The CIT(A) upheld the partial denial of TDS credit under Section 194Q, relying on Section 199 read with Rule 37BA(2) to hold that income and TDS credit must belong to the same person.

Decision

• Held in Favor of Assessee: The Tribunal held that since tax was deducted from the payments and duly deposited into the Government Treasury under the assessee’s PAN, the assessee is entitled to claim the full benefit of the TDS credit in their return of income.

• TDS Validity: The credit of tax deducted at source cannot be denied to the assessee merely on technical grounds or because the purchaser mistakenly or wrongfully deducted TDS under Section 194Q on the gross value instead of the agent’s commission.

Key Takeaways

• Credit Follows Deposit: Once tax is deducted and remitted to the Government Treasury under an assessee’s PAN, the revenue cannot retain the money while simultaneously denying credit to the assessee.

• Kaccha Arahtia Operations: Since commission agents do not own the goods sold and only account for commission as income, requiring them to show the gross turnover of farmers to claim TDS credit is legally unsustainable.

• Harmonious Reading of Rule 37BA & Section 199: Technical mismatches between Form 26AS and declared taxable income should not result in the forfeiture of legitimate TDS credits deposited with the government.