Credit For TCS Available To Assessee In Whose Hand Income Is Assessed To Tax: ITAT

Referring to the decision of the Jaipur Bench of ITAT in Jai Ambey Wines vs. ACIT (2017), the bench of N.V. Vasudevan (Vice President) noted that what is applicable for Tax Deducted at Source (TDS) should also be applicable for TCS. Merely because there is no Rule with reference to TCS, identical to Rule 37BA(2)(i) of the Income Tax Rules, 1962 which deals with TDS, the revenue department cannot deny credit of TCS to the assessee, in whose hands the income is assessed to tax, solely because the TCS certificate was issued in the name of the partner of the assessee firm, the ITAT said.

The assessee, M/s Hotel Ashok Garden, is a partnership firm which runs a liquor bar and a restaurant. The assessee purchased liquor for sale from the Karnataka State Beverages Corporation Ltd (KSBCL). In terms of Section 206C of the Income Tax Act, 1961, KSBCL collected TCS at the time of purchase. The TCS certificate was issued in the name of the partner of the assessee firm, in whose name the liquor licence stood.

The assessee filed its income tax return and claimed credit for the TCS collected by KSBCL. In an intimation issued under Section 143(1) of the Income Tax Act, the claim for credit of TCS was denied to the assessee on the ground that the TCS certificate was in the name of the partner of the assessee firm.

After assessee’s request for rectification under Section 154 of the Income Tax Act was denied by the income tax authority, the assessee filed an appeal before the First Appellate Authority (FAA), claiming that the assessee should be given credit for TCS.

The FAA concluded that under Section 206C (4) and (5) of the Income Tax Act, credit 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 thus rejected by the FAA. The assessee filed an appeal before the ITAT against the order of the FAA.

The assessee, Hotel Ashok Garden, in support of its claim, placed reliance on the decision of the Jaipur Bench of the ITAT in Jai Ambey Wines vs. ACIT (2017).

The Tribunal took note that in Jai Ambey Wines (2017), which involved an identical issue, the ITAT, after referring to the relevant provisions of the Income Tax Act and Rule 37BA(2)(i) of the Income Tax Rules, had concluded that the assessee firm should be given benefit of credit for TCS, irrespective of the fact that the TCS certificate was issued in the name of the partner of the assessee firm, in whose name the liquor license stood.

The ITAT in Jai Ambey Wines (2017) had noted that as per Rule 37BA(2)(i) of the Income Tax Rules, credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax, irrespective of the person in whose hands the TDS has been deducted and the TDS certificate has been issued. The ITAT, after comparing the provisions of Section 206C with Section 190 of the Act, which deals with TDS, had concluded that the nature of TCS is exactly identical to TDS.

Since the nature of TCS is exactly identical to TDS, the ITAT in Jai Ambey Wines (2017) had held that credit for TCS should be given to the assessee who is finally and lawfully assessed to tax in respect of the income on which TCS has been collected. The ITAT had further ruled that, the fact that there are no specific rules provided in respect of credit of TCS in the Income Tax Rules, on the lines of Rule 37BA, it doesn't disentitle the assessee, in whose hands the income is assessed, to claim credit of TCS.

The Tribunal observed that in the decisions cited by the revenue department, the ITAT, in all such cases, has taken the view that credit for TCS should not be denied if no double claim has been made for the same TCS by two different persons.

Referring to the facts of the case, the Tribunal said, “As we have already observed in the present case, Raju S. Shetty the licencee has given Indemnity Bond before the AO clearly specifying that he has not claimed credit for TCS in his return of income. In such circumstances, I am of the view that the claim ought to have been allowed.”

The revenue department argued before the ITAT that the decision in Jai Ambey Wines (2017) was passed in relation to the provisions of Rule 37BA, which is applicable to TDS and not to TCS.

Dismissing the contention of the revenue department, the Tribunal said, “I am of the view that the very basis of the decision of the Jaipur Bench of ITAT in the case of Jai Ambey Wines (supra) is 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 made by an assessee.”

The Tribunal thus allowed the appeal and directed the Assessing Officer to give credit for TCS to the assessee.

“For the reasons given above, I am of the view that the assessee should be given the benefit of credit for TCS. The AO is directed to give credit for TCS. Appeals of the assessee are accordingly allowed.”

Case Title: M/s Hotel Ashok Garden versus ITO

Dated: 06.02.2023

Representative for the Appellant: Preethi S. Patel, Advocate

Representative for the Respondent: Ganesh R. Ghale, Standing Counsel

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