To,
The Honorable Chairman
Central Board of Direct Taxes,
NEW DELHI.
Respected Sir,
Sub: Applicability of provisions of Section 194Q of the I.T. Act,1961-For transactions in agricultural produce of farmers traded through Commission Agents of recognized Agricultural Produce Market Committee (APMC)-Request to issue guidelines in order to remove genuine hardship and practical difficulties faced by the Commission Agents and Traders-Reg.
Ref : CBDT Circular No 13 of 2021 F.NO:370142/26/2021-TPL dated 30.06.2021 regarding Guidelines under Section 194Q of the I.T.Act, 1961.
We, The Adoni Groundnut,Cotton & Kappas Commission Agents Association on behalf of our Association Members are submitting the following representation for your kind perusal and consideration. We humbly request your good selves to do justice and issue guidelines that the TDS provisions of Section 194Q are not applicable to transactions in agricultural produce of farmers traded through the Commission Agents ,who facilitates buying and selling of agricultural produce of farmers (Principal / Sellers ) through recognised Agricultural Market Committee of the State of Andhra Pradesh.
1.The Finance Act,2021 inserted a new Section 194Q in Income Tax Act,1961 which takes effect from 01.07.2021 and it applies to any buyer who is responsible for paying any sum to any resident seller for purchase of any goods of the value or aggregate of value exceeding Fifty Lakh rupees in any previous year . The buyer at the time of credit of such sum to the account of the seller or at the time of payment which ever is earlier , is required to deduct an amount equal to 0.1% of such sum exceeding Fifty Lakh rupees as Income Tax (TDS).
Buyer is defined to be person whose total sales or gross receipts or turnover from the business carried on by him exceed Ten Crore rupees during the Financial Year immediately preceding the Financial year in which the purchase of goods is carried out. The Seller is not defined in Section 194Q of I.T.Act,1961.
Sub- section (3) of Section 194 Q of I.T.Act,1961 empowers the Board (with the approval of Central Government) to issue guidelines for the purpose of removing difficulties in implementing the provisions of Section 194Q of the I.T.Act,1961.
2.The Central Board of Direct Taxes, Department of Revenue, under Ministry of Finance, Government of India, has considered the practical difficulties in implementing the provisions of TDS contained in section 194Q of the Act in the case of stock exchanges and clearing corporations and issued the Circular No.13 of 2021 dated 30.06.2021 cited under above reference. According to the above circular the provisions of section 194Q of the Act shall not be applicable in relation to transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporations, including recognized Stock exchanges or clearing corporations located in International Financial Service Centre. A copy of the above Circular No.13 of 2021 dt.30.06.2021 is enclosed herewith for you kind reference.
3. We, the Commission Agents of Adoni have registered with the recognised Agricultural Market Committee, Adoni under the regulations of Andhra Pradesh (Agricultural Produce and Live Stock) Market Act, 1966 and Rules 1969 of the State Government of Andhra Pradesh. The Commission agents shall abide the regulations of Andhra Pradesh (Agricultural Produce) Market Act, 1966 and the Rules made there under . The transactions of Commission Agents are similar to that of stock exchanges or clearing corporations and the agricultural produce of Farmers(Sellers) is traded through Licensed Commission Agents of recognized Agricultural Market Committees of relevant State Government. Therefore, the transactions of commission Agents in trading of agricultural produce through recognized Agricultural Market Committee shall also be covered under the guidelines of Circular issued by CBDT. In this context , we request your goodselves, following the same rationale / Principle and the nature of transactions are similar to stock exchanges and there is no one to one to contract between buyers and sellers of agricultural produce , kindly issue suitable guidelines stating that the provisions of Section 194Q of I.T.Act are not applicable to the transactions of commission agents also.
4. We enclose herewith a detailed note on transactions in agricultural produce , traded through Commission Agents of recognized Agricultural Market Committee under online trading platform of Electronic National Agriculture Market (‘e’ NAM) for your kind consideration.
5. Further, we submit that the licensed commission agents are not the owners of the goods and have no right to sell the goods. The farmers are real owners of the goods and receiving the consideration of the goods and have right to transfer title of the goods and hence the farmers are real sellers of the goods. Therefore, the provisions of TDS section 194Q of I.T.Act are not applicable to commission agents, as they are not the sellers / owners of the goods and no TDS is deductible by the traders(buyers) from the amount payable to the commission agents by the traders(buyers). The sale proceeds of agricultural produce of the farmers is collected from traders and paid to farmers by the commission agents in full (without TDS) except deducting their commission and weighment charges. The above said transactions are akin / similar to transactions in securities and commodities traded through recognised stock exchanges. The transactions of marketing agricultural produce of farmers(sellers) are traded through recognised Agricultural Market Committees. Therefore, there are practical difficulties in implementing the provisions of Tax deducted at source (TDS) contained in section 194Q of the I.T.Act,1961 in case of transactions between farmers and traders(buyers) through licensed commission agents, who are not real sellers.
0. Further, we humbly submit that the licensed commission agents are exempted from registration under Central Goods and Services Tax Act, 2017. The Government of India , Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs GST policy wing, New Delhi vide Circular No.57/31/2018-GST CBEC-20/16/4/2018-GST dated.04.09.2018 exempted the “services by APMC or Board or services provided by the commission agents for sale or purchase of agricultural produce” from GST. In this Circular , the subject on scope of principal-agent relationship in the context of schedule- I of the CGST Act,2017 was categorically explained and clarified. The term “Agent” has been defined under sub-section (5) of section 2 of the CGST Act as follows.
“Agent” means a person , including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent , by whatever name called, who carried on the business of supply or receipt of goods or services or both on behalf of another. As per section 182 of the Indian Contract Act, 1872, an “Agent” is a person employed to do any act for another or to represent another in dealings with third person. So, the crucial element here is the representative character of the agent which enables him to carry out activities on behalf of the principal . The crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal , where the consideration is not extant in a transaction , such a transaction does not fall with in the ambit of supply . In the above said Circular, at Scenario 4 of the Circular, it was explained as follows;
“Mr ‘A’ sells agricultural produce by utilizing the services of Mr ‘B’ who is a commission agent as per the Agricultural Produce Market Committee Act,(APMC Act) of the State. Mr ’B’ identifies the buyers and sells the agricultural produce on behalf of Mr ’A’ for which he charges commission from Mr ’A” . As per the APMC Act, the commission agent is a person who buys or sells the agricultural produce on behalf of the principal or facilitates buying and selling of agricultural produce on behalf of the principal and receives by way of remuneration ,a commission or percentage upon the amount involved in such transaction . Thus, the services provided by the commission agent for sale or purchase of agricultural produce is exempted. Such commission agents are not liable to be registered according to sub clause(a) of sub section (1) of section 23 of the CGST Act, if the supply of the agricultural produce and / or other goods or services supplied by them are not liable to tax or wholly exempt under GST. Therefore, we the licensed commission agents are not sellers of the agricultural produce or goods. Hence, we the licensed commission agents are not to be treated as sellers for the purpose of TDS u/s 194Q of the I.T.Act, 1961. A clarification is required in this regard to remove the practical difficulties or ambiguity in implementing the new TDS provisions U/s 194Q of I.T.Act, 1961 and hence this representation is for your kind consideration. A copy of the above said circular is enclosed herewith for your kind reference.
7. Further , we submit that the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, New Delhi has issued Notification No.70/2019 dated20th September,2019 , in exercise of the powers confirmed by clause (v) of the proviso to section 194 N of the I.T.Act,1961.The Central Government after consultation with the Reserve Bank of India has granted exemption from TDS on cash withdrawals U/s 194N for making payments to farmers by Commission Agents or traders, operating under Agricultural Produce Market Committee(APMC) and registered under any law relating to Agriculture produce Market of the concerned State.
Therefore, the commission agents or traders registered under Agriculture produce Market Committee(APMC) of the State of Andhra Pradesh, have been exempted from TDS on cash withdrawals U/s194N for making payments to farmers , who are the sellers of agricultural produce . Hence, we humbly request your good selves to grant us exemption from TDS U/s 194Q of I.T.Act,1961 from making payments to Commission Agents by the Traders(buyers). The Commission Agents in turn have to make payments to the farmers without TDS , as the agriculture income is exempt U/s10(1) of the I.T.Act,1961.
8. Further, we humbly submit that the commission agents registered under Agriculture Produce Market Committee have been exempted from registration under CGST Act, 2017 considering that the “services “ provided by commission agents for sale or purchase of agricultural produce on behalf of the principal is in the representative character and the agent has no authority to pass or receive the title of the goods on behalf of the principal. Therefore, the value of agricultural produce supplied or sold by the Farmers(sellers) to the Traders (Buyers) through the licensed commission agents, is not recorded as purchases or sales in the records and books of accounts maintained by the commission agents. The commission charged on value of the agricultural produce sold by the farmers , is accounted as income in the books of account of the commission agents and the expenses incurred in carrying out the activities are accounted as expenses and the net income is considered as business income for Income tax purpose. Accordingly the commission agents have filed their Return of Income with in the due date specified U/s 139(1) of I.T.Act, 1961 for non-tax audit Assesses. The Commission receipts are considered as turnover of commission agents and it will be always below the limit specified U/s 44AB of I.T.Act,1961. Therefore, the commission agents are not covered under the provisions of section 44AB for tax audit and the provisions of presumptive income under Section 44AD is also not applicable to commission agents. The learned Courts have held that the provisions of section 44AB are not applicable to commission agents as there is no element of profit or consideration in sale value of agricultural produce by farmers to traders through licensed commission agents registered under Agricultural produce Market Committee (APMC) . The Central Board of Direct Taxes vide its Circular No. 452 dated 17.03.1986 regarding applicability of Section 44AB in the cases of commission agents , arhatias etc., provided certain clarifications . A copy of the circular is enclosed herewith for your kind reference.
Vide paras 5 of the said Circular , the Board has further clarified that in the case of agent , whose position is similar to that of kuccha Arhatia, the turnover is only the commission and does not include the sales made on behalf of the principal (Farmers). It is also relevant to point out that in the case of commission agents there is no difference in net income, even when the sale value of agricultural produce of farmers(sellers) is accounted as turnover and purchase value of agricultural produce from farmers is accounted as purchases in the books of commission agents, since both the purchase and sale value are same amount. Therefore , there is no difference in net income and no revenue loss to the Government.
9. Further, we beg to submit the following are the practical difficulties in implementing the TDS provisions contained in Section 194Q of I.T.Act,1961.
The word seller has not been defined in Section 194Q of the I.T.Act,1961. The Commission Agents registered under recognised Agricultural Produce Market Committee (APMC) Act, are not the owners of the goods and also not sellers. The Farmers are real owners of the goods and sellers of the goods. The Commission Agents have right to collect only commission from Farmers for providing services and facilities in marketing the farmers agricultural produce for better price offered through ‘e’ tender by the Traders(Buyers). The Commission agents have no right to collect any extra consideration or profit from the Traders (Buyers). Therefore, the value of agricultural produce sold by the Farmers (sellers) and the value of produce purchased by the Traders (Buyers) is one and the same. Hence, the value of the above transactions are not relevant in the Books of Commission Agents and hence not accounted both the values of purchases and sales. This practice has been followed for the years together and there is no revenue loss to the Government. The Government of India, Central Board of Indirect Taxes and Customs GST policy wing has also exempted the services provided by the Commission Agents for sale or purchase of Agricultural Produce from GST registration. The Government of India , CBDT, also granted exempted from TDS provisions of Section 194 N of I.T.Act,1961. Further, the Government of India, CBDT has issued guide lines through Circular No.13 dated 30th June ,2021 , that the provisions of section 194Q of the I.T.Act,1961 shall not be applicable in relation to transactions in securities and commodities traded through recognised stock exchanges. The transactions of commission agents are similar to that of stock brokers and the agricultural commodities are traded through recognised Agricultural Market Committee. Hence, the CBDT has to resolve the issue and remove the practical difficulties by issuing suitable guidelines granting exemption from applicability of TDS provisions under section 194Q of I.T.Act,1961 following similar grounds considered for transactions through stock exchanges with retrospective effect from 1st July ,2021.
10. Further, we submit that, otherwise the traders have to deduct TDS U/s 194Q from the payments made to the commission agents and upload Form 26Q with the details of gross value and TDS amount. It will be reflected in Form 26AS of Commission Agents and the gross value of Turnover will exceed the limits prescribed U/s 44AB of Rupees One Crore and all the commission agents are subject to Tax Audit U/s 44AB. The CBDT has issued Circular No.452 dt 17.03.1986 and clarified that the provisions of Section 44AB are not applicable to commission agents and the turnover is only the commission and does not include the sales made on behalf of the principal/Farmer(seller) and there is no difference in net income, even if the turnover and purchase value of agriculture produce is accounted in commission agents books of accounts.
Therefore, the practical difficulty starts when the traders (Buyers) deduct tax at source (TDS) U/s 194Q of I.T.Act,1961 and upload Form 26Q with details of gross value on which TDS at 0.1% deducted. The Income Tax Department may issue notices to the commission agents stating that the turnover as reported in Form 26AS is not reflected in Commission Agents Return of Income and Tax Audit Report also not submitted with in due date . Then the commission agents have to run from pillar to post to satisfy the Income Tax Department that the turnover appearing in Form 26AS is not the sales made by commission agents and there is no profit element or consideration or income in turnover reflected in Form 26AS . The commission agents to claim refund of TDS appearing in Form 26AS, they have to file Revised Return of Income along with Tax Audit Report and enter details of Tax Audit in the Revised Return, otherwise the Return could not be uploaded online. The Tax Audit Report is not required for commission agents as per CBDT Circulars No.452 dt.17.03.1986 and the Honourable High Courts and Supreme Court have held that the turnover in the case of commission agents is the commission receipts only and does not include the sales made on behalf of the principal / Farmers (sellers) and there is no difference in net income even the turnover and purchase value of agricultural produce is considered in the Books of account and Return of Income . Therefore, we have practical difficulties in facing the Income Tax Department Notices regarding filing of Revised Returns without any change or difference in income and unnecessary compliance in filing Tax Audit Report U/s 44AB and facing the penalty notices for not filing in time or delay in filing Tax Audit Report and claiming refund of TDS U/s 194Q without any increase in Returned Income. And on the other hand the TDS amount deduted by the Traders(Buyers) from our payments results into blocking of funds in TDS up to getting refund from I.T.Department. Further, the GST Department may issue notices for registration and filing of GST Returns based on turnover reported in Form 26AS U/s 194Q and may issue penalty notices also for not filing or delay in filing returns even though the commission agents are exempted from GST registration as explained above .
Further, we submit that on the other hand the Traders / Buyers (Cotton Merchants) have to face the consequences , if TDS is not deducted U/s 194Q from purchase value of Agricultural Produce at the time of credit or making payments to Commission Agents. The Tax Auditors have responsibility to report in Form 3CD the non compliance of TDS provisions u/s 194Q and details of TDS deductible but not deducted and TDS deducted but not paid and filing of TDS Returns and the amount disallowable U/s 40(a)(ia) of I.T.Act,1961. The Traders / Buyers (cotton merchants) have a threat of getting notices from I.T.Department , regarding non compliance of TDS provisions U/s 194Q and disallowance of 30% of purchase value on which TDS U/s 194Q not deducted or deducted but not paid with in due date for filing of Return of Income U/s 139(1) of I.T.Act,1961 and penalty for TDS default u/s 201 of I.T.Act,1961. The tax on disallowance of 30% U/s 40(a)(ia) of I.T.Act,1961 and interest there on U/s 234 A/B/C will be a huge amount which cannot be paid by the Traders/Buyers (cotton merchants). They have to suffer 30% of tax with interest and penalty, just for 0.1% of TDS not deducted U/s 194Q and it will lead to unnecessary litigation and time consuming .
Keeping in view all the above practical difficulties of commission agents and Traders / Buyers (Cotton Merchants) kindly relieve us from all these problems and unnecessary compliances without any revenue benefit either to I.T.Department or GST Department . We humbly request your goodselves with folded hands, Kindly do justice by issuing guidelines exempting commission agents from applicability of TDS provisions contained in Section 194Q of I.T.Act,1961, with retrospective effect from 1st July.2021.
11. In the light of the above said facts and in the circumstances, the licensed commission agents registered under recognised Agricultural Market Committee are not sellers of agricultural produce and the farmers are real sellers. The position of commission agents is similar to that of the transactions in securities and commodities which are traded through recognised stock exchanges. We humbly request the Honorable Chairman of Central Board of Direct Taxes, New Delhi with our folded hands , to remove the practical difficulties in implementing the TDS provisions contained in section 194Q of the I.T.Act,1961 as there is no one to one contract between the buyers and sellers. We once again request your goodselves to issue suitable guidelines for removing practical difficulties of commission agents, in exercise of the powers contained in sub section (3) of section 194Q of the I.T.Act,1961. Kindly do the needful in this regard at the earliest possible with retrospective effect from 1st July,2021, for which we will be thankful and grateful forever .
Thanking You, Sir,
Yours Faithfully
For The Adoni Groundnut, Cotton & Kappas Commission Agents Association
President
Secretary
Encl : As Above
Annexures:
1. Provisions of Section 194Q of I.T.Act,1961.
2. CBDT Circular No 13 of 2021 F.NO:370142/26/2021-TPL dated 30.06.2021
3. Detailed Note on Transactions in Agricultural Produce through Commission Agents of recognised APMC ‘e’ NAM documents.
4. CBEC Circular No.57/31/2018-GST CBEC-20/16/4/2018-GST dated.04.09.2018
5. CBDT Notification No.70/2019-Income Tax dated20th September,2019.
6. CBDT Circular No. 452 dated 17.03.1986 and Case Laws.
7. Provisions of Tax Audit under Section 44AB I.T.Act,1961.
8. Provisions of disallowance of 30% U/s 40(a)(ia) of I.T.Act,1961.
ANNEXURE-3 : DETAILED NOTE ON TRANSACTIONS IN AGRICULTURAL PRODUCE TRADED THROUGH COMMISSION AGENTS OF RECOGNISED APMC AND DOCUMENTS
4.1. The Commission Agents registered with recognized Agricultural Market Committee shall equip themselves to be able to participate in the online trading platform provided by the Government . The Government has implemented (‘e’ NAM) Electronic National Agriculture Market in all the Agricultural Market Committees of Andhra Pradesh. The farmers from different villages near by bring their agricultural produce like cotton, groundnuts, sunflower, caster seeds etc ., to the Agricultural Market Committee operated by the State Government for sale through the licensed Commission Agents on getting better price through ‘e’ tender . The farmers have to register their names ,village name ,mobile number ,commodity, approximate quantity, number of bags, vehicle number etc., at the In gate entry and Ingate Receipt with Lot ID code, gate entry pass number and commission agents name will be generated on day to day basis through online system. The traders/buyers (cotton merchants) visit the Commission agents shop located in the Agricultural Market Committee and verify the quality and quantity of the Agricultural produce of the farmers kept for sale and offers best price through ‘e’ tender forms and submit the same to the Agriculture Market Committee Office. The Committee Office prepares the list of the highest bidders and announces the trader(buyer) wise winners list and also commission agent wise list of Farmers(Sellers) on day to day basis through ‘e’ NAM online system without manual interference and interruption. The seller (farmer ) who kept the agriculture produce for sale at the licensed Commission Agents shop in Agricultural Market Committee is at liberty to sell at the highest ‘e’ tender price to the trader and handover the goods after the weighment of quantities and ascertaining the total value of goods to be received. Otherwise the seller (farmer) has right to reject the ‘e’ tender price of the day and again participate in ‘e’ tender on subsequent day. Once the seller (farmer) accepts the ‘e ‘ tender price and agrees to deliver the goods to the winner / trader (buyer) a sale agreement is generated after weighmen of commodity , between Trader(buyer) and seller(farmer) through Commission Agent on the same day , with details of commodity price, quantity, value, commission ,unloadings & weighmen charges , market Fee etc.,. A copy of the sale agreement generated through ‘e ‘ NAM will be submitted to the seller (Farmer) indicating the net amount payable to the seller (Farmer( and a copy of the same will be submitted to the trader(buyer) indicating the total amount payable by the trader. The Commission Agent shall make payment to the seller(farmer) the sale value of the agricultural produce, deducting Commission & Weighmen charges etc., with in the stipulated time limits established through the procedures notified in this regard and also collects the sale value from the trader(buyer) with in the stipulated time or afterwards with belated charges agreed on mutual consent.
4.2. The above said prescribed procedure is strictly followed by the licensed commission agents for sale of agricultural produce of the farmers(seller) through ‘e’ tender under ‘e’ NAM online system to the traders(buyers) under the control and supervision of Agricultural Market Committee established and operated by the State Government under Andhra Pradesh(Agricultural produce & Live Stock) Market Act,1966. Therefore , the licensed commission agents are not the sellers of the agricultural produce and have no right / title on the goods and no profit element in trading of the goods through Agricultural Market Committee. The sale agreement is generated in online ‘e’ NAM system , the seller is the farmer, who has title on the goods and right to accept the ‘e’ tender price or reject the transaction of sale. Hence, the licensed commission agent of the principal (farmer) only facilitates in trading their commodity with their consent and acceptance and collects only commission from the farmer(seller) for their services rendered and collects 1% market fee from the Traders(Buyer) and remit the same to the Agricultural Market Committee for providing facilities to the farmers, traders and agents in market yard. In these transactions there is no one to one contract between the buyers and sellers and it is traded through the commission agents. Therefore, the provisions of TDS section 194 Q of I.T.Act,1961 are not applicable to the above said transactions carried through licensed commission agents of recognised Agricultural Market Committee.
For your kind reference, we enclose herewith a copy of Commission Agent License obtained in Form-8C from The Agricultural Market Committee, Adoni ‘e’ National Agriculture Market(e’NAM) Ingate Receipt, Trader wise Winners List, Commission Agent wise winners List and Sale Agreement between Commission Agent , Seller (Farmer) , Traders (Buyer) generated on line under ‘e’ NAM.
Author Bio
is there any update for the above clarification.
Is there any update for the above clarification