Tcs credit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 August 2011 One of my client a partnership firm are retails traders of liquor. The liquor licence is in the name of one of the partner and not in the name of the firm. All these years the TCS on purchase of liquors was made in the PAN number of the firm.

However from A.Y. 2011-12 onwards The Karnataka State Beverages Corporation Ltd., who are the sole distributors of liquor in Karnataka have made a policy that the invoice will be raised in the name of the licence holder only and correspondingly the TCS will be credited in the name of the individual licence holder.

Now we have to file the return of the firm for the A.Y. 2011-12. The TCS is in the name of the partner and we are not in a position to take credit of the same for the tax payable by the firm.

How to proceed ?

Kinlyd clarify.

Thanking you,

YOurs

P. Srinivasa

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 August 2011 However from A.Y. 2011-12 onwards The Karnataka State Beverages Corporation Ltd., who are the sole distributors of liquor in Karnataka have made a policy that the invoice will be raised in the name of the licence holder only and correspondingly the TCS will be credited in the name of the individual licence holder.

Now we have to file the return of the firm for the A.Y. 2011-12. The TCS is in the name of the partner and we are not in a position to take credit of the same for the tax payable by the firm.
*
The Purchaser only can sell the goods.
If Tax Credit is substantial show the business in individual partner's name as I presume that payment of liquor are received in cash only.

However, if certain cheques have been received in the firm, show them as received on behalf of the partner and debit the withdrawals from bank a/c if any towards payment to KSBC, or cash withdrawals , debit the partner's account
with the corresponding entries.

Hope, that from the above solution, your firm's partner at least, can get the credit of the TCS.

Show some, similar or another cash business in the firm and file the return of the firm U/s 44AD, as the turnover will not cross Rs 60.00lacs, in the absence of any licensed purchases.

Querist : Anonymous

Querist : Anonymous (Querist)

08 August 2011 Sir,

Thank you for the reply. But for the suggestion to show the business in the name of the individual partner, the assessee has filed VAT returns in the name of the firm and has raised sale bills in the name of the firm only.

Awaiting your suggestion.

P. Srinivasa

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 This is a tricky situation but here’s a detailed explanation and possible approach based on the facts:

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### Issue Summary:

* The **liquor license is in the name of one partner (individual)**, but the **firm was earlier treated as the purchaser for TCS purposes**.
* From AY 2011-12, **invoices and TCS are credited to the individual partner's PAN (license holder)**, not the firm.
* The firm cannot claim credit for TCS deducted against its PAN, as the TCS is credited to the partner individually.
* VAT returns and sale bills are still in the firm’s name, so there is a mismatch between TCS credit and turnover reported.

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### Key Points to Consider:

1. **TCS credit is allowed only to the deductee (PAN holder in TCS statement)**.

* Since the TCS is credited in the individual partner's name, **only the individual partner can claim the credit**.
* The firm cannot claim TCS credit for tax deducted against another PAN.

2. **Income tax is assessed on the entity reporting the income**:

* Since VAT returns and sales are in the firm’s name, income tax returns are filed for the firm.
* If the liquor sales are actually made by the partner individually (license holder), the turnover and income should ideally be reported in that partner’s individual return.
* Reporting liquor sales in the firm's books but TCS credit in the partner’s name causes inconsistency.

3. **Legal and accounting compliance**:

* If liquor license is in partner’s name, **the sales and purchases of liquor should ideally be recorded in the partner's books**, not the firm’s.
* The firm can show other non-licensed business separately if any.

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### Suggested course of action:

* **Revisit the accounting and tax filing structure**:

* Ideally, liquor business (sales and purchases) should be shown in the **individual partner's accounts and returns**, since the license and TCS credit are linked to him.
* The firm can show other businesses separately.

* **Adjustments in firm’s books**:

* If liquor purchases/payments were made from firm’s account, debit the partner’s current account in the firm books for such amounts.
* The partner then claims TCS credit in his individual return.

* **File revised returns if possible**:

* If there is a mismatch, explore filing revised returns for the firm and the individual partner for correct disclosures.

* **Maintain consistent documentation**:

* Match invoices, VAT returns, TCS credit statements, and income tax returns for clarity and audit trail.

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### If no change is possible:

* **Firm cannot claim TCS credit** on TCS deducted against partner's PAN.
* The firm may have to pay tax without TCS credit, but partner can claim it in his individual return.

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### Final note:

* This situation often arises when businesses have mixed ownership/licensing structures.
* **Consult a CA with experience in indirect taxes and partnership taxation for detailed advice and possible restructuring**.

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If you want, I can help draft the accounting entries or a note explaining this to your client. Would you like that?

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