TDS deducted u/s194Q on gross goods value vs commission agent income; mismatch with Form 26AS, full credit allowed

TDS credit was denied by CPC due to mismatch between turnover shown in the books and receipts reflected in Form 26AS, where purchasers deducted TDS u/s 194Q on the gross value of goods though the assessee, a commission agent, recorded only commission income. The ITAT held that s. 194Q imposes a withholding obligation on specified buyers and does not determine the recipient's taxable income; gross purchase value deducted upon may not represent the assessee's real income where sale proceeds are passed on to principals. As there was no finding that Form 26AS transactions were absent from the assessee's books for the year, denial of full credit was unjustified. The AO was directed to allow full TDS credit after verification; appeal allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether TDS credit deducted under Section 194Q and reflected in Form 26AS can be restricted on a proportionate basis by applying Rule 37BA, merely because the assessee (a commission agent) records only commission income in its books while Form 26AS reflects TDS on the gross value of goods.

(ii) Whether, in the absence of any finding that the Form 26AS transactions are not recorded in the assessee's books for the relevant year, the full TDS credit is to be granted to the assessee.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Proportionate restriction of TDS credit by invoking Rule 37BA where Section 194Q TDS is deducted on gross purchases but only commission income is offered

Legal framework (as discussed by the Court): The Court considered Section 194Q as a provision imposing an obligation on specified buyers to deduct TDS on high-value purchases, and examined Rule 37BA only to test whether it justified deferring or restricting credit based on the year of assessability of the corresponding income.

Interpretation and reasoning: The Court held that Section 194Q does not determine taxability in the recipient's hands; it operates as a tax-collection mechanism for buyers meeting turnover and purchase thresholds. The gross purchase value on which TDS is deducted may not represent "real income" of the recipient. On facts, the assessee acted as a commission agent selling agricultural produce on behalf of farmers, reimbursing sale proceeds to them and earning only commission, which was offered to tax. The Court found that Rule 37BA had "no applicability" because the case was not one where income arising from these transactions was offered across multiple years. The decisive factor was that the transactions to which TDS related formed part of the assessee's books for the relevant year, and there was no established basis to link TDS credit to a proportion of "sales" disclosed by the assessee as against the gross figures appearing in Form 26AS.

Conclusion: Proportionate restriction of TDS credit by applying Rule 37BA, solely due to mismatch between Form 26AS gross value subjected to TDS and the assessee's accounting of only commission income, was held unjustified on these facts.

Issue (ii): Entitlement to full TDS credit where Form 26AS reflects deduction "qua the assessee" and there is no allegation that the transactions are not in the books for the year

Legal framework (as discussed by the Court): The Court proceeded on the principle that TDS credit is allowable when TDS is deducted in the assessee's case, duly reflected in Form 26AS, and relates to transactions forming part of the assessee's accounts for the assessment year; verification of Form 26AS was directed.

Interpretation and reasoning: The Court noted that no case was set up that the assessee had concealed gross turnover/sales, or that the Form 26AS transactions did not form part of the assessee's books. It emphasized that, in the absence of any allegation or finding that any transaction reflected in Form 26AS was not part of the assessee's books for the year, "full TDS credit could not be denied." Since TDS was deducted with respect to the assessee and appeared in Form 26AS, the only remaining step was verification.

Conclusion: The Court directed the assessing authority to allow full TDS credit after due verification of Form 26AS, rejecting the denial/restriction of credit in the absence of any adverse finding about non-recording of the relevant transactions for the year.

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