Credit for TCS made in the hands of partner allowed to partnership firm. If ultimate conclusion on application u/s 154 can only be one particular conclusion then it can be said that the issue is debatable – ITAT
ABCAUS Case Law Citation:
ABCAUS 3658 (2023) (02) ITAT
Important Case Laws covered:
Jai Ambey Wines vs. ACIT
ACIT vs. Shri Krishnalal Meel & party
Jayaprakasha Rai Vs. DCIT
In the instant case, the assessee had challenged the order passed by the National Faceless Assessment Centre (NFAC) in not giving credit for the Tax Collected at Source (TCS) as claimed by the assessee.
The appellant assessee was a partnership firm. It was engaged in the business of liquor bar and restaurant. The liquor licence stood in the name of one of the partners of the firm.
The firm utilized the said licence in its business. The purchase of liquor for sale was made from State Beverages Corporation. In terms of section 206C of the Income Tax Act, 1961 (the Act), the said corporation collected tax at source (TCS) at the time of purchase in respect of purchases made. However, the TCS certificates were in the name of the partner as he was the licence holder.
The assessee filed return of income and claimed credit for TCS. However, by the intimation issued under section 143(1) of the Act, the claim for credit of TCS was not granted because the TCS certificates were in the name of the partner.
The assessee filed a rectification application under section 154 of the Act claiming that credit for TCS should be given to the Assessee firm and pointing out the facts with regard to licence standing in the name of its partner and that the assessee was entitled to credit for TCS.
The partner of the firm also filed an indemnity bond giving stating the facts of the case and stating that he had not claimed those TCS in his return of income.
The request for rectification was however rejected by the AO. The Assessee filed appeal against orders under section 154 of the Act claiming that the assessee should be given credit for TCS.
The First Appellate Authority (FAA) was of the view that under section 254 of the Act only a mistake apparent from the record can be rectified. In the opinion of the FAA, mistake apparent from the record means a mistake which is obvious and patent mistake and not something which is established by a long-drawn process of reasoning on points on which there may be conceivably two opinions. In other words, the FAA took the view that a decision on a debatable point of law cannot be said to be a mistake apparent on record and therefore 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 Act.
Alternatively, the FAA referred to the provisions of section 206C (4) and (5) of the Act and came to the conclusion that those provisions provide that credits can be given only to such persons on whose behalf tax has been collected at source and whose name is mentioned in the TCS certificate. The claim of the assessee was accordingly rejected by the CIT(A).
The Tribunal observed that an identical issue with regard to the claim of TCS in the hands of the partnership firm when the licence stands in the name of the partners came up for consideration before the coordinate bench of ITAT.
It was observed that the Cooordinate Bench, after referring to the statutory provisions viz., sections 190, 199, 206C of the Act and Rule 37BA(2)(i) of the Income Tax Rules, 1962 (hereinafter called ‘the Rules’), held that the assessee firm should be given benefit of credit for TCS made in the hands of the partner.
The Coordinate Bench had held that credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS certificate has been issued at first place.
The Coordinate Bench opined that provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of goods as specified in section 206C of the Act.
The Coordinate Bench held that the credit for TCS should be given to the assessee which is finally and lawfully assessed to tax in respect of the corresponding income on which TCS has been collected. The fact that there are no specific rules in respect of credit of TCS in such situations on the lines of Rule 37BA, doesn’t disentitle the assessee to claim credit of TCS in whose hands the income is finally assessed to tax.
The Revenue submitted that the decision of the Coordinate Bench was in relation to provisions of Rule 37BA of the Rules which was applicable to TDS and not to TCS and it is only Rule 37-I of the Rules which is applicable when credit for TCS is claimed.
The Tribunal opined that the very basis of the decision of the Coordinate Bench was based on the facts 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 .
The Tribunal noted that the Coordinate Bench took the view that credit for TCS should not be denied when there is in fact no double claim made for the same TCS by two different persons.
In view of the facts of the case and the partner’s Indemnity Bond before the AO the Tribunal opined that the claim ought to have been allowed.
The Tribunal also opined that if the ultimate conclusion on an application u/s 154 of the Act can only be one particular conclusion, then even if in reaching that conclusion, analysis has to be done then it can be said that the issue is debatable which cannot be done in proceedings under section 154 of Act.
As a result, the AO was directed to give credit for TCS and appeals of the assessee were accordingly allowed.