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 to purchases and sales made for the principal are not treated as the agent's turnover for income-tax purposes. Applying the Board circular and prior coordinate bench rulings, the Tribunal held that tax deducted under section 194Q on such purchase transactions does not alter that character and the assessee remains entitled to credit or refund of the TDS. The disallowance was deleted and the refund was directed to be granted.

---

---

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.

---