TDS credit on commission agent receipts: full credit directed where TDS was deducted from principal funds, not assessee's income

Assessee acted as a commission agent receiving payments from traders on behalf of farmers; commission receipts constitute assessee income while principal funds collected for farmers are not revenue receipts of the assessee. Amounts reflected in deductors' statements that represent principal collections were not assessable to the assessee, yet TDS was deducted from those sums; credit for such TDS is therefore available to the assessee. The tax officer is directed to grant full credit of TDS claimed, since the legal characterisation of receipts and beneficial ownership determine entitlement to credit regardless of the specific withholding provision applied.

---

---

Issues: Whether the assessee, acting as a Kachha Arhtia (commission agent), is entitled to full credit of TDS deducted by traders on amounts paid on behalf of farmers, despite CPC reducing TDS credit under Rule 37BA(2) because gross receipts reflected in Form 26AS exceeded receipts offered to tax.

Analysis: The assessee's role as commission agent results in commission receipts constituting the assessee's business income while amounts collected on behalf of farmers are not the assessee's revenue receipts. TDS deducted by traders on payments made to the assessee on account of such transactions represents tax deducted from amounts payable to the assessee and therefore is attributable to the assessee. The application of Rule 37BA(2) to deny full credit was examined in the context of the factual position that the assessee's returned turnover comprised only commission income and that certain TDS was deducted by traders on gross amounts which were not retained as the assessee's receipts. Having regard to CBDT Circular No.452/17-03-1986 and the factual matrix, full credit of the TDS claimed is available to the assessee.

Conclusion: The appeal is allowed and the Assessing Officer is directed to grant full TDS credit to the assessee as claimed.

Ratio Decidendi: Where an assessee acts as a commission agent and only commission constitutes the assessee's business receipts, TDS deducted by third parties on payments made on behalf of principals is attributable to the assessee and must be allowed as credit notwithstanding an initial adjustment under Rule 37BA(2) based on gross amounts reflected in Form 26AS.

---