| Question And Answer | |
|---|---|
| Subject: | Taxation and Tax Audit of Government entity |
| Category: | Income-Tax |
| Querist: | PARAS CHHAJED |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Audit, taxation, TDS U/S 194Q |
| Date: | April 9, 2022 |
A battalion of reserve police force (RPF) has been allotted a petroleum retail outlet by Hindustan Petroleum Corporation Ltd. for sale of Petrol and Diesel. The battalion office has got its PAN under Government category with 4the character of PAN being ‘G’ and based on that PAN GSTIN has also been allotted. The petrol pump is selling Petrol and Diesel to public, other departments of state and central governments, and it has captive consumption as well. The sale during the FY 2021-22 which is the first year of operation is Rs.11.13 crores. Please advise on followings :
1. Whether Tax Audit will be applicable ?
2. Whether the battalion office would be liable to income tax on the income earned from Petrol Pump operations, if yes, then what would be the rate of income tax?
3. Whether the battalion office being a government office of state government would be required to make TDS u/s 194Q.
Please share relevant provisions of income tax act and related judgements.
As the Fourth letter is “G”, it means it is a Government Agency. However, that is not conclusive for the purpose of application of the provisions of the Income-tax Act, 1961 (Act).
The books of accounts and the nature of transactions would have to be understood. If the fuel pump is merely allotted by the PSU for operation. The profits will be taxable in the hands of the PSU.
In Central Food Technological Research Institute v. ITO ( 2021 ) 439 ITR 735/ 204 DTR 361/ 322 CTR 225 ( Karn ) (HC) the Court held that the assessee is a body controlled by the Central Government , however it cannot be equated as Central Government and exemption is not available for deduction of tax at source .
It is also advisable to make a representation to the Central Board of Direct-taxes seeking clarifications.