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Facts
The assessee, a Non-Resident, sold a residential flat registered in his wife's name. The property was financed by the assessee, and all income/loss from it was consistently clubbed with his income under Section 64 of the Income Tax Act and accepted by the Revenue. Upon sale, a Long Term Capital Loss was claimed by the assessee, but the TDS of Rs. 56,000 deducted by the buyers under Section 194-IA was in the wife's name, leading to a denial of TDS credit to the assessee, despite the wife not claiming it.
Held
The Tribunal held that since the income/loss from the property sale was assessed and accepted in the assessee's hands, and his wife did not claim the TDS credit, the assessee is entitled to the credit. It clarified that Section 199 is a substantive provision for TDS credit, and Rule 37BA(2) is merely procedural, thus the procedural non-adherence by the wife cannot override the substantive right of the assessee where income is taxed in his hands.
Key Issues
Whether TDS credit for a property sale, where the property was in the wife's name but income/loss was clubbed with and assessed in the assessee's hands, should be allowed to the assessee, particularly when the wife has not claimed such credit.
Sections Cited
250, 64, 194-IA, 143(1), 199, 37BA(2)
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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the ld. CIT(A), Patna dated 14.11.2024 u/s 250 of the Income-tax Act, 1961 [the Act, for short] pertaining to A.Y 2024-25.
“The Ld. CIT(A) has erred in law and on facts in not directing the Assessing Officer to allow the credit of TDS of Rs.56,000 (28,000 + 28,000) claimed by the assessee deducted on the sales consideration of the property sold during the year which was in the name of the wife of the assessee, Mrs. Nidhi Jain whereas the LTCL on the sale of the said property is duly included in the income of the assessee in terms of the provisions of section 64 of the Act even if the formality of Rule 37BA of Income Tax Rules is not completed.”
Brief facts of the case are that the assessee is an individual and his residential status is that of Non-Resident during the A.Y 2024-25.
During the A.Y. under consideration, his income in India included income from capital gain on sale of shares and securities, interest from banks and dividend. In addition, a residential flat which was in the name of his wife Mrs Nidhi Jain was also sold during previous year ended on 31.03.2024 relevant to A.Y. 2024-25 for a sale consideration of Rs. 56,00,000/- to Shri Arun Kumar Singh and Ms. Biva Singh. The capital gain arising out of the transaction was offered to tax by the assessee.
The TDS of Rs. 56,000/- (Rs. 28,000 by each joint buyer) on the sale of the said property was deducted under section 194-IA of the Act in the name of the wife of the assessee. Page 2 of 9 registration cost was paid during the FYs 2010-11 and 2011-12. The purchase payment of this flat was made by the assessee mainly through Home Loan and EMIs were also paid by the assessee. After Possession until the sale of this flat, income from this flat from renting out was also clubbed with the income of the assessee in terms of the provisions of Section 64 of the Income Tax Act, 1961 (in short 'Act').
Accordingly, Long Term Capital Gain/Loss was computed on the sale of the aforesaid flat and the resultant (LTCL) amounting to loss of Rs (-) 19,50,046/- was clubbed in the hands of the assessee. The assessee correspondingly claimed TDS of Rs. 56,000 (28000+28000) deducted by the buyers of the property u/s 194-IA of the Act and the Income Tax return for A.Y. 2024-25 was filed on 06.07.2024 claiming a refund of Rs. 57,262/- including TDS of Rs 56,000/- u/s 194-IA of the Act which was deducted in the name of wife of the assessee, Mrs. Nidhi Jain as the property was in her name.
The said TDS of Rs. 56,000/- (28,000 deducted by each joint buyer) was not claimed by wife of the assessee in her return. The return filed by the assessee was processed u/s 143(1) of the Act and the aforesaid
Page 3 of 9 but credit of TDS of Rs. 56,000 (28,000+28,000) deducted in respect of the sales consideration of the aforesaid property sold was not allowed to the assesse and a refund of Rs. 1,262/- (plus interest of Rs. 36 minus deductions of TDS of Rs 11) was allowed against refund claimed of Rs.
57,262/-.
On these factual aspects, the assessee went in appeal before the ld. CIT(A) who issued direction to the Assessing Officer to verify the correctness of the claim of the assessee and determine and allow eligible amount of TDS in accordance with the provisions of Rule 37BA of the Rules.
Aggrieved further, the assessee in appeal before us.
Before us, the ld. counsel for the assessee vehemently stated that on the one hand the Revenue has accepted the income from the said property, offered in the hands of the assessee throughout, benefit of TDS was not extended to the assessee. The ld. counsel for the assessee prayed that the TDS benefit may be granted to him in light of the Page 4 of 9 Anil Ratanlal Bohra v. ACIT ITAT Pune (2023) 148 Taxmann.com15.
Per contra, the ld. DR stated that the assessee has since long filed his return of income declaring the wrongly the income in his own hands when the property was in the name of the wife of the assessee and all income accruing/arising from the property should have been offered and taxed in the hands of the wife of the assessee. Since the assessee’s wife has not offered the same to tax, TDS benefit cannot be granted.
We have heard the rival submissions and have perused the relevant material on record. We find that the Revenue has accepted the income accruing from the said property in the hands of the assessee. The Revenue does not dispute that the funds for purchase of the said property was procured by the assessee and that the assessee is the owner of the said property. The revenue also does not dispute that the said property was purchased in the name of the wife. We find that the said property was sold and the assessee has offered the capital loss arising from the said sale under his name which has been accepted by the Revenue. The TDS benefit, however, has been denied to the assessee.
Page 5 of 9 assessee at hand, we examined the provisions of section 199 which is as under:
(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. (3) ***** We are of the view that the substantive provisions contained in Section 199 of the Act read with rule 37BA(2), provides that TDS, paid to the Government, shall be treated as payment of tax on behalf of the person who is owner of the property and from whose income the deduction was made. In the instant case, the income/loss from the sale of the said property was offered by the assessee and accepted by the Revenue, therefore, the assessee is entitled to the credit of TDS deducted on the sale of the said property. Merely because the Rule 37BA is not adhered
Page 6 of 9 income which he had declared. We are also of the view that the proviso to rule 37BA (2) is just a procedural aspect of giving effect to the mandate of section 199 for allowing the credit to the other person in whose hands the income is chargeable to tax. We further find that the wife of the assessee has not claimed any such TDS credit in her own ITR for this AY concerned. We therefore, are of the considered view that the assessee is entitled to the credit of TDS of Rs. 56,000 and the same be allowed in the hands of the assessee. We are fortified in our view from the decision of coordinate bench of ITAT in the case of Anil Ratanlal Bohra v. ACIT (supra) which held as follows:
“Whether as substantive provision of section 199 talks of granting credit for tax deducted at source to other person who is lawfully taxable in respect of such income and rule 37BA is procedural provision which cannot disturb writ of a substantive provision, credit for tax deducted at source at Rs. 2.80 lacs should be allowed to assessee, who had been subjected to tax in respect of interest income of Rs. 37.42 lacs - Held, yes [Paras 6 and 7] [In favour of assessee] Following the said decision, we accordingly direct the Assessing Officer to grant TDS benefit to the assessee. Ground 1 is allowed.
Page 7 of 9 is allowed.
The order is pronounced in the open court on 30.07.2025.