TCS Credit Available to Person to Whom Income is Assessed

Shubhangi Jain

01 Jun, 2024

The ITAT Bangalore recently pronounced a judgement on 6^th February 2023 in the case titled M/s Hotel Ashok Garden vs ITO, wherein the assessee filed 4 appeals against four different orders, all dated 10.11.2022  delivered by the NFAC, Delhi, relating to AYs 2016-17 to 2019-20. The common issue is all these appeals were regarding the correctness of the order passed by the NFAC in disallowing the TCS Credit to the assessee firm due to the TCS certificate being issued in the name of the partner of the assessee and not the assessee itself. The tribunal held that TCS credit would be available to a person to whom income is assessed, irrespective of the certificate holder. The present article shall discuss the various aspects covered in the same to provide a better understanding of the same in a simplified manner. 

Facts of the Case

• The assessee is a partnership firm running a liquor bar and restaurant. The assessee purchased liquor for the purpose of sale from the  (KSBCL), and TCS was collected by the corporation at the time of sale as per section 206 0f the ITA 1961, followed by the issuance of the TCS certificate in the name of the assessee’s partner against whose name the liquor licence was granted.
• At the time of ITR filing, the assessee claimed the TCS collected by KSBCL. However, the claim was denied  through an intimation issued u/s 143(1) of the IT Act  on the ground of the TCS certificate being in the name of the assessee’s partner
• The assessee requested for the rectification u/s 154 of the Act, but the same was denied by the income tax authority, which led to the assessee filing an appeal before the FAA, claiming that the assessee should be provided  TCS credit.
• FAA opined  thatu/s  254 of the Act, only a mistake regarding the record could be rectified. In the opinion of the FAA, a mistake apparent from the record means a mistake being obvious and a patent mistake and not something being established by a long-drawn process of discussing points wherein there may be conceivably two separate opinions.
•  Simply put, the FAA opined that a decision on a debatable point of law cant is considered to be a mistake apparent on the record. According to the FAA, the question of TCS deducted in the name of some party must be provided credit in the assessment of some other party and cannot be the subject matter of an application u/s  154 of the Act.
• The FAA held that as per section 206C (4) and (5) of the IT  Act, only the person on whose behalf the TCS is collected and the name of whom is mentioned on the TCS certificate must be given the TCS credit, thereby rejecting the claim of the assessee and the assessee filed an appeal before the present tribunal being aggrieved by such order of the FAA.

Issue

 If the Revenue authorities were justified in not giving  TCS Credit as claimed by the assessee?

Contentions of the Assessee

The assessee placed reliance upon the  observation of the Jaipur Bench in Jai Ambey Wines vs ACIT (2017) involving identical issues regarding the claim of TCS  by the partnership firm wherein the licence is in the partner’s name was taken into consideration. The Hon’ble ITAT, Jaipur Bench,  subsequent to referring to the 10 statutory provisions viz., sections 190, 199, 206C of the Act and Rule 37BA(2)(i) of the Income Tax Rules, 1962),  decided that the assessee firm should be given the benefit of credit for TCS made in the hands of the partner.

Contentions of the Revenue

Learned DR, however, relied upon the decision of SMC Bench, Bengaluru, delivered in the case of Shri Jayaprakasha Rai Vs. DCIT/ the tribunal perused the aforesaid judgment and found that the said decision was a case regarding the transfer of licence from one person to another wherein  due to pending formality of the transfer of licence, the credit was claimed by the transferee of the licence for TCS made by the  predecessor in interest of the person that transferred the

Observations of the Tribunal

The tribunal referring to the relevant provisions of the IT Act, came to the conclusion that the assessee firm must be given the TCS Credit irrespective of the person in whose name the TCS certificate has been granted.

The tribunal further noted that according to  Rule 37BA(2)(i) of the Income Tax Rules, TDS should be provided the person rightfully and finally assessed to tax, despite considering the person in whose hands the TDS is deducted, and such certificate is issued. The ITAT, after due comparison with the provisions of Section 206C with Section 190 of the Act dealing with TDS, had come up to the conclusion that the nature of TCS is exactly identical to TDS.

Due to the exact identical nature of TDS and TCS, the ITAT in Jai Ambey Wines (2017) had held that credit for TCS  credit should be provided to the assessee who is finally and lawfully assessed to tax regarding the income for which TCS is collected. The tribunal further ruled that the fact that there was an absence of any specific rules provided for TCS credit in the Income Tax Rules,  as per Rule 37BA, doesn’t disentitle the assessee in whose hands the income is assessed for claiming  TCS credit.

The Tribunal opined that in the decisions cited by the DR, the ITAT, in all such cases, has taken the view that there shouldn’t be the denial of TCS Credit in the absence of a double claim being made for the same TCS by two different persons.

 Relying on the facts of the case, the Tribunal referred to the present case, Raju S. Shetty, the licensee, has given Indemnity Bond before the AO, clearly specifying that he hasn’t claimed the TCS credit in his return for income. In such circumstances

The Tribunal observed that in the decisions referred by the DR, the ITAT, in all such cases, has considered that  TCS credit shouldn’t be denied if there is an absence of the double claim for the same TCS by two different persons.

Placing reference to the facts of the case, the Tribunal observed that it had already discussed Raju S. Shetty, the licensee, had given an Indemnity Bond before the AO, clearly mentioning that he had not claimed credit for TCS in his return of income. In such circumstances,  the tribunal was of the view that the claim must be allowed.

Judgement

 Will deciding upon the availability of TCS credit to the assessee, the tribunal held that the sole basis of the decision of the Jaipur Bench of ITAT in the case titled Jai Ambey Wines is based on the facts that what applies to TDS should also be applied to TCS and merely in the absence of an identical rule to Rule 37BA(2)(i) of the Rules referring to TCS provisions,  the claim of the assessee for TCS Credit can’t be denied by the revenue, and due to such reason the assessee should be given the benefit of  TCS Credit.

Conclusion

The tribunal finally directed the AO to give TCS credit to the assessee, thereby allowing the appeal of the assessee. The present judgement can serve as an excellent precedent for the related matters wherein there is an absence of a  specific rule, and the decision of the tribunal regarding the same is indeed remarkable.

Also Read:
TCS – A Tax collected at source and its Rates
Understanding the Difference between TDS and TCS