The Visakhapatnam Bench of the Income Tax Appellate Tribunal ( ITAT ) allowed full Tax Deducted at Source ( TDS ) credit for commission agents citing CBDT Circular No. 452 which clarifies that only commission income and not gross sales proceeds should be treated as taxable turnover.
Sravan Kumar Traders, the assessee is an individual and operates as a licensed commission agent in the Agricultural Market Yard Committee ( AMYC ), Guntur, under the Government of Andhra Pradesh. The primary role is to act as an intermediary for buying and selling agricultural produce on behalf of principals and earning commission as income.
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The assessee filed its Income Tax Return declaring a total income of Rs. 3,38,520 for the assessment year 2022-23. The income tax return included a Tax Deducted at Source ( TDS ) credit claim of Rs. 60,652 which was deducted under Section 194Q of the Income Tax Act, 1961.
The Centralized Processing Centre ( CPC ) during the processing of the return under Section 143(1) of the Income Tax Act, 1961, granted only RS. 3,974 as TDS credit disallowing Rs. 56,678. The disallowance was because the CPC applied Rule 37BA of the Income Tax Rules, 1962, treating the TDS as related to gross sales proceeds rather than commission income.
Aggrieved, the assessee appealed before the Additional/Joint Commissioner of Income Tax (Appeals). After reviewing the submission, the commissioner dismissed the appeal upholding the CPC assessment.
Aggrieved, the assessee challenged the Additional/Joint Commissioner of Income Tax (Appeals)’s order before the ITAT arguing that CBDT Circular No. 452 (17 March 1986) stated that for “Kaccha Arahtias” ( commission agents ) turnover includes only gross commission and excludes sales on behalf of principals.
The assessee’s counsel argued that the assessee qualified as a “Kaccha Arahtia” and was entitled to full TDS credit under Sections 194Q and 194A of the Act. The assessee relied on the previous decision of this tribunal in the case of Thota Venkateswarlu vs. ITO and Yegneswari General Traders vs. ITO.
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The two-member bench comprising Duvvuru Rl Reddy ( Judicial Member ) and S Balakrishnan ( Accountant Member ) reviewed the CBDT circular which stated that turnover for tax purposes includes only commission income. Gross sales proceeds on behalf of principals do not form part of their income.
The tribunal confirmed that the CBDT Circular is directly applicable to the assessee’s case. As a Kaccha Arahtia, only commission income should be considered for turnover and the TDS credit should be proportionate to the commission income.
Referencing this tribunal ruling in the case of Thota Venkateswarlu vs. ITO and Yegneswari General Traders vs. ITO, the tribunal directed the AO to grant credit for the entire amount deducted at TDS.
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