The Visakhapatnam Bench of Income Tax Appellate Tribunal (ITAT ) addressed the denial of Tax Deducted at Source (TDS) credit on farmers’ sales made through a commission agent and relied on Central Board of Direct Taxes ( CBDT ) to grant full credit

Koti Narasimha Srinivas Vukkurthi, appellant- assessee, was an individual working as a commission agent for selling chillies on behalf of farmers under the name M/s. Tejaswi Trades. He filed his return for A.Y. 2022-23 on 06.09.2022, declaring ₹10,51,480 as income and claiming TDS credit of ₹48,593.

The CPC, Bangalore issued a defective notice under Section 139(9) and later processed the return under Section 143(1) on 17.02.2023, allowing only ₹10,271 as TDS credit. The assessee filed a petition under Section 154 seeking correction and full TDS credit, but CPC rejected it.

He appealed to the CIT(A), but the appeal was dismissed. The assessee then approached the Tribunal challenging the denial of full TDS credit.

The assessee counsel stated that the assessee worked only as a commission agent, so the entire sale proceeds could not be treated as income. He argued that the tax authorities wrongly applied Rule 37BA of the Income Tax Rules, 1962, and pointed to CBDT Circular No. 452 (17.03.1986), which clarified that for Kaccha Aarahtias, only the commission is considered turnover, not the sales made for farmers.

He further said that the assessee should get full TDS credit deducted under Sections 194Q and 194A and cited Tribunal rulings in Thota Venkateswarlu v. ITO and Subba Reddy Mareddy v. ITO, where similar facts were decided in favour of the taxpayer. He requested that the same view be applied here.

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The departmental representative supported the orders of the lower authorities and opposed the claim.

The two member bench comprising Vijay Pal Rao (Vice President ) and S.Balakrishnan (Accountant Member) heard both sides and reviewed the records along with the orders of the tax authorities. It also examined CBDT Circular No. 452 dated 17.03.1986, cited by the assessee counsel, and referred to its earlier rulings, including Thota Venkateswarlu v. ITO and Yegneswari General Traders v. ITO.

The appellate tribunal noted that the CBDT circular made it clear that for kaccha arahtias, only the commission income is treated as turnover and not the sales made on behalf of the principals. It observed that the assessee was a licensed commission agent at the Agricultural Market Committee Yard, Guntur, and the circular fully applied to this case.

Considering identical facts in earlier decisions like Yegneswari General Traders v. ITO, Thota Venkateswarlu v. ITO, and Subba Reddy Mareddy v. ITO, the tribunal followed the principle of consistency and set aside the orders of the lower authorities. It directed the CPC to allow full TDS credit to the assessee. As a result, the appeal was allowed.

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