The Income Tax Appellate Tribunal ( ITAT ) ruled that the Rule 37BA of Income Tax Rules is applicable to claim of both Tax Deduction Source ( TDS ) and Tax Collected Source (TCS ). The bench directed the Assessing Officer (AO) to give credit for TCS.
The lone issue to be decided in these appeals is whether the Revenue authorities had a valid reason for not granting the assessee’s claimed credit for Tax Collected at Source ( TCS ).
The assessee, M/s. Hotel Ashok Garden, engaged in the business of liquor bars and restaurants. The liquor licence stands in the name of one of the partners of the firm. The firm utilised the said licence in the business of selling liquor.
The purchase of liquor for sale was made from the Karnataka State Beverages Corporation Ltd., (KSBCL). For purchases made throughout the Assessment Years 2016–17 to 2019–20, KSBCL collected tax at source at the moment of purchase in accordance with section 206C of the Income Tax Act, 1961. In the licensee’s name, the TCS certificate was issued.
The assessee claimed credit for TCS made by KSBCL in a return of income for each of the aforementioned assessment years. The certificate was issued in the name of the firm partner, thus the authorities did not accept TCS’s claim.
Along with the application under Section 154 of the Income Tax Act, the assessee also provided an indemnity bond that was duly signed by the licence holder and claimed that the assessee firm should be given credit for TCS. The assessee also pointed out the facts regarding the licence standing in the name of the partner of the firm and that the assessee is entitled to credit for TCS.
According to the First Appellate Authority (FAA), the question whether TCS deducted in the name of some party can be given credit in the assessment of some other party cannot be subject matter of an application under section 154 of the Income Tax Act. The FAA rejected the claim and the assessee preferred appeal before the Tribunal.
The Department Representative Ganesh R. Ghale submitted that the decision of the ITAT, Jaipur Bench, was in relation to provisions of Rule 37BA of the Income Tax Rules which is applicable to TDS and not to TCS and it is only Rule 37-I of the Income Tax Rules which is applicable when credit for TCS is claimed.
The bench observed that what is applicable for TDS should also be applicable for TCS and merely because there is no Rule identical to Rule 37BA(2)(i) of the Rules with reference to TCS provisions, it cannot be the basis for the Revenue to deny the legitimate claim for credit of TCS made by an assessee.
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