ITAT allows full TDS credit u/s 194Q to commission agent

Full TDS credit u/s 194Q cannot be denied merely because assessee is a commission agent and had disclosed only commission income.

In a recent judgment, ITAT Chandigarh allowed full credit of TDS reflecting in Form 26AS to a commission agent as the provisions of section 194Q of the Income Tax Act, 1961 are machinery provisions intended for the collection of tax and do not determine the nature of income in the hands of the assessee.

ABCAUS Case Law Citation:
4734 (2025) (09) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the disallowance of TDS claim by invoking Rule 37BA of the Income-tax Rules, 1962.

The assessee was a registered Kachha Arhtiya under the District Agricultural Produce Market Committee. He filed his return of income claiming a refund on the basis of TDS credit.

The CPC, Bengaluru, while processing the return under section 143(1), restricted the TDS credit in proportion to income receipts reflected in Form 26AS. Accordingly, proportionate credit was allowed in terms of Rule 37BA.

The CIT(A), after considering the submissions, upheld the action of CPC and dismissed the appeal. Feeling aggrieved against the order of CIT(A), the assessee was in appeal before the tribunal. 

It was submitted that the assessee was a Kachha Arhtiya and earned commission income only on the sale of agricultural produce belonging to farmers. The gross sales proceeds reflected in Form 26AS did not belong to the assessee and, therefore, cannot be considered as his turnover.

It was further submitted that purchasers had deducted TDS under section 194Q on the entire transaction value. It was further argued that as per CBDT Circular No. 452 dated 17.03.1986 and Instruction No. 03/2013, a commission agent is required to disclose only commission income in the books of accounts.

It was further submitted that Rule 37BA does not apply to the facts of the case and reliance was placed on the decisions of the Coordinate Bench of the Tribunal in support of the claim that full TDS credit must be allowed where the same is duly reflected in Form 26AS.

The Tribunal observed that it was not disputed that the assessee was a registered Kachha Arhtiya and had offered commission income in his return of income. The purchasers deducted TDS u/s 194Q on the gross value of agricultural produce routed through the assessee. These transactions are duly reflected in Form 26AS in the name of the assessee.

The Tribunal further noted that it is settled law that the provisions of section 194Q are machinery provisions intended for the collection of tax and do not determine the nature of income in the hands of the assessee. In the decision of the Coordinate Bench it had been held that once TDS is deducted and reflected in Form 26AS, and the relevant transactions are duly accounted for in the assessee’s records, full TDS credit cannot be denied merely because the assessee is a commission agent and had disclosed only commission income.

The Tribunal also observed that there was no finding of the lower authorities that the transactions reflected in Form 26AS were not part of the assessee’s books of account. The assessee had duly offered commission income on such transactions.

Accordingly, following the ratio laid down by the Co-ordinate Bench the Tribunal held that the action of the lower authorities in disallowing the TDS credit was not sustainable.

As a result, the Assessing Officer was directed to grant full TDS credit as reflected in Form 26AS, after due verification. 

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