2024 (11) TMI 1485 - AT - Income Tax

TDS Credit Allowed Under Sections 194Q and 194A for Commission Agent's Non-Income Gross Sale Proceeds

SUBBA REDDY MAREDDY Versus ITO - WARD-1 (1) Guntur, Andhra Pradesh

The ITAT Visakhapatnam set aside the orders of the Revenue Authorities denying TDS credit to the assessee, who acted as a commission agent. Relying on ... Denial of Credit of TDS - as submitted that the assessee is only a commission agent and therefore the total gross sale proceeds cannot be treated as the income of the assessee and thereby the Ld. Revenue Authorities have erred in applying the Rule-37BA of the Income Tax Rules, 1962 - AR reiterated since the assessee is only a commission agent, the assessee is eligible to get credit of the entire amount deducted as tax at source under section 194Q & 194A HELD THAT:- As relying on case of Yagneswari General Traders [2024 (3) TMI 1344 - ITAT VISAKHAPATNAM] Thota Venkateswarlu [2024 (8) TMI 1478 - ITAT VISAKHAPATNAM] following the principle of consistency, we have no hesitation to set-aside the orders of the Ld. Revenue Authorities and direct Ld. AO - CPC to grant credit of the entire amount deducted as tax at source in the case of the assessee. Thus, the grounds raised by the assessee are allowed. ISSUES: Whether a commission agent's gross sales proceeds can be treated as income for the purpose of claiming credit for tax deducted at source (TDS).Whether credit for the entire amount of TDS deducted under Chapter XVII-B is allowable to a commission agent acting on behalf of principals.Whether the provisions of Section 199 of the Income Tax Act, 1961 entitle the person from whose income tax is deducted to claim credit for such TDS notwithstanding discrepancies in the deductor's statements.Whether the Assessing Officer is required to direct the deductor to rectify Form 26AS or modify TDS statements to reflect correct TDS credits. RULINGS / HOLDINGS: The gross sales proceeds effected by a commission agent on behalf of principals cannot be treated as the agent's income; only the commission earned is considered income for tax purposes, consistent with CBDT Circular No. 452 dated 17th March, 1986.The commission agent (kaccha arahtia) is entitled to credit for the entire amount of TDS deducted under Chapter XVII-B, as the turnover for such agents includes only the gross commission and not sales effected on behalf of principals.Section 199 of the Income Tax Act mandates that the sum deducted under Chapter XVII-B is allowable to the person from whose income the deduction was made, regardless of whether the deductor's TDS statement is properly reflected.The Assessing Officer must take necessary steps to ensure proper credit of TDS, including directing the deductor to rectify Form 26AS or TDS statements, rather than denying credit on the ground of incorrect deductor filings. RATIONALE: The Court applied the principle established in CBDT Circular No. 452/1986, which clarifies that for kaccha arahtias (commission agents), turnover for tax purposes includes only gross commission, excluding sales effected on behalf of principals.The Tribunal relied on its prior decisions in cases involving similar facts, including Thota Venkateswarlu vs. ITO and Yegneswari General Traders vs. ITO, which held that commission agents are entitled to full TDS credit on commission income.The Court emphasized the statutory mandate under Section 199 of the Income Tax Act, which entitles the deductee to claim credit for TDS deducted from their income, irrespective of procedural defects in deductor filings.There was no dissent or doctrinal shift; rather, the decision follows established precedent and statutory interpretation, reinforcing the principle of consistency in tax credit claims for commission agents.