Claim of Credit of TCS by Individual License holder can't be allowed when it has already been allowed to Partnership Firm: ITAT [Read Order]

The Indore bench of the Income Tax Appellate Tribunal (ITAT) held that the claim of credit of Tax Collected at Source (TCS) by individual license holders can’t be allowed when it has already been allowed to the partnership firm.

The assessee company is engaged in the business of retail sale of liquor. The directors/associates of the assessee company are license holders and they have formed the company to carry on the business of liquor. Due to the typical nature of the assessee’s line of business, the entire business of shops though allotted in the names of Directors/Associates is accounted for in the books of the assessee.

The shops are obtained in the name of the directors/associates as per the regulations of the State Excise Department. However, the purchases and sales are accounted as the transactions of the assessee company, and the income of all the shops is offered as income of the assessee company and the same is also assessed to tax.

The counsel submitted that the licensees/associates have not claimed credit of TCS in their individual case and have not obtained the refund of the same as it is evident from Form 26AS of the individual license holders. Therefore, the credit of the TCS ought to have been allowed to the assessee company which is actually doing the business of purchasing and sale of liquor, and accounted for all the transactions as well as the income derived from the activities of purchase and sale of liquor.

Further, the counsel has pointed out that since the disallowance was made by the Centralised Processing Centre (CPC) while processing the return under Section 143(1) of the Income Tax Act, the assessee had no occasion to produce the supporting evidence to show that the TCS was collected by the Excise Department in respect of the purchase made and accounted by the assessee.

The Departmental Representative has submitted that the Commissioner of Income Tax (Appeal) [CIT(A)] has analyzed the provision of Rule 37BA as well as the provision of Rule 37-I and held that the relevant rule is Rule 37-I and therefore, the credit of TCS is not available to a person other than deductee.

The Two-member bench comprising of Vijay Pal Rao (Judicial member) and B.M. Biyani (Accountant member) held that the credit of the tax deducted at source/tax collected at source be given to the de-facto prayer/recipient of the amount which is subjected to the collection/deduction of tax as in whose hands the corresponding income is going to be assessed.

The only rider to this principle is that there should not be any double claim of credit. Accordingly, if the assessee produces the record as well as undertaking/indemnity bond from the license holders that they have not claimed or not going to claim the credit of the said amount of TCS then the credit of the TCS on the transactions of purchase of liquor actually carried out by the assessee by using the license issued in name of the individuals shall be allowed to the assessee.

The relevant facts regarding the purchase and sales of liquor by the assessee and consequential income offered to tax by the assessee as well as the undertaking/indemnity from the individual license holders are required to be produced and verified/examined. Therefore, the matter was set aside to the record of the Assessing Officer for the limited purpose of examining the factual aspect of carrying out the transactions of purchase and sales and corresponding income offered to tax by the assessee as well as production of the undertaking/indemnity on behalf of the individual license holders for not claiming the credit of the said amount of TCS. The Assessing Officer shall allow the claim of credit of TCS subject to verification of the above record and facts. Thus, the appeal of the assessee was allowed.

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