2025 (2) TMI 1682 - AT - Income Tax

Agency transactions are not agent turnover: TDS deducted on principal purchases must be credited or refunded to the kachha arhtia.

Where a kachha arhtia acts only as an agent for principals, invoices transactions in the principal's name and earns commission alone, the amounts relating ... Entitlement to TDS credit/refund for commission agents - Turnover exclusion for transactions effected on behalf of principal - assessee is a ‘Kacha Arhatiya’/Commission Agent used to buy agricultural produce on behalf of her Principal Whether a commission agent (Kacha Arhtia) is entitled to claim credit/refund of TDS deducted u/s 194Q where purchases are effected on behalf of a principal and such purchases are not reflected as the agent's turnover? - HELD THAT: - The Tribunal held that where an agent purchases goods from farmers on behalf of its principal and raises invoices in the principal's name, the value of such purchases/sales is not the turnover of the agent and only the commission constitutes the agent's turnover. Reliance was placed on Board Circular No. 452 and on like decisions of coordinate ITAT Benches like in MADAN LAL GUPTA [2024 (4) TMI 1174 - ITAT JAIPUR] and VIKAS MEHTA, M/S SURESH KUMAR VIKAS KUMAR [2024 (12) TMI 1721 - ITAT CHANDIGARH] which determined that TDS deducted under section 194Q in respect of such purchases does not represent the agent's taxable turnover and therefore the agent is entitled to claim credit/refund of the tax deducted. The CIT(A)'s contrary view treating the amounts as the agent's turnover and denying the refund was reversed and the matter was decided on merits in favour of the assessee. [Paras 3, 4, 5] Final Conclusion: The Tribunal allowed the assessee's appeal, holding that a Kacha Arhtia/commission agent is entitled to credit/refund of TDS deducted under section 194Q where purchases are effected on behalf of a principal and such amounts do not form the agent's turnover, and directed the Assessing Officer to grant the refund. Issues: Whether a commission agent (kachha arhtia) who purchases agricultural produce on behalf of principals and on whose transactions tax has been deducted under section 194Q is entitled to credit/refund of tax deducted and whether such purchase/sale amounts constitute the agent's turnover for income-tax purposes.Analysis: The Tribunal examined the business model where the agent procures goods from farmers and raises invoices in the name of the principal, receiving only commission as its turnover. The Tribunal considered Board Circular No. 452 of 1986 and allied decisions of coordinate Benches holding that sales effected on behalf of principals by kachha arhtiyas are not to be treated as the agent's turnover under section 44AB. The Tribunal applied section 194Q (tax deduction on purchase of goods) and section 194H (tax on commission) to conclude that tax deducted under section 194Q on amounts relating to purchases made on behalf of the principal does not convert those purchase/sale amounts into the agent's taxable turnover, and that the agent is entitled to credit/refund of TDS deducted in respect of such transactions.Conclusion: The disallowance of the claimed refund is deleted and the refund of TDS amounting to Rs. 6,08,108/- is directed to be granted in favour of the assessee.Ratio Decidendi: Where an agent acts on behalf of a principal and invoices correspond to purchases/sales effected for the principal, such amounts are not the agent's turnover for income-tax purposes and the agent is entitled to credit/refund of tax deducted under section 194Q (and related TDS heads) notwithstanding prima-facie adjustments treating those amounts as agent turnover.