RAMASAMY SUNDARRAJ,NAMAKKAL vs. INCOME TAX OFFICER WARD 1, NAMAKKAL

ITA 2242/CHNY/2026Status: DisposedITAT Chennai07 October 2026AY 2023-248 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the logic applied by the CPC and confirmed by the Ld. Addl./JCIT(A) was legally unsustainable. The assessee is entitled to the full amount of TDS credit. The Tribunal reasoned that while some exempt income (agricultural land sale) was included in the total receipts, this fact alone should not vitiate the claim for TDS credit on that exempt income, especially when the TDS was deducted. The inclusion of exempt receipts in Form 26AS should not lead to a disallowance of TDS credit if the assessee has disclosed various incomes as per Section 199 and Rule 37BA. The Tribunal found the logic applied by the authorities below to be absurd and contrary to the scheme and intent of Section 199 of the Act and Rule 37BA. Therefore, the order of the authorities below was set aside. The Assessing Officer (JAO) was directed to allow the claim of the assessee as per ground no. 5.1, which detailed the calculation for the correct refund position. The Tribunal allowed the grounds raised by the assessee and consequently allowed the appeal. No issue was expressly left undecided.

What were the facts?

The assessee, Ramasamy Sundarraj, filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the order of the Ld. Addl./JCIT(A)-1, Delhi, for Assessment Year 2023-24. The dispute centers around a residual disallowance of Rs. 65,197/-. The assessee argued that this disallowance arose from an incorrect application of Rule 37BA, where agricultural land receipts of Rs. 1,81,80,000/-, accepted as exempt, were still included in the denominator of the Form 26AS receipts. This, the assessee contended, led to an arithmetically unsustainable disallowance of TDS credit. The assessee also argued that the disallowance lacked independent evidentiary basis and was merely a mathematical residue of the flawed calculation. Consequently, the assessee sought deletion of interest levied under Sections 234B and 234C and claimed consequential refund entitlement.

What were the issues?

1. Whether the residual disallowance of Rs. 65,197/- is arithmetically and legally unsustainable due to the incorrect application of Rule 37BA, where exempt agricultural land receipts were included in the Form 26AS denominator? (Question of law and fact, concerning Section 199 and Rule 37BA) 2. Does Rule 37BA's proportionate restriction on TDS credit apply when the excess receipts in Form 26AS include amounts not constituting 'income' under the Act, such as agricultural land sale consideration? (Question of law, concerning Rule 37BA and Section 199) 3. Is the Rs. 65,197/- disallowance a mathematical residue with no independent evidentiary basis, given that the underlying TDS of Rs. 2,57,466/- is fully documented and corroborated by Form 26AS? (Question of fact, concerning evidence and documentation) 4. Is the interest levied under Sections 234B and 234C unsustainable and liable for deletion upon the restoration of full TDS credit? (Question of law, concerning Sections 234B, 234C, and 199) Assessee's Contentions: - The residual disallowance of Rs. 65,197/- is arithmetically and legally unsustainable because the Ld. Addl./JCIT(A) and ITO erred in not adjusting the Rule 37BA denominator after accepting Rs. 1,81,80,000/- as agricultural land receipt. The disallowance is a direct consequence of applying the Rule 37BA ratio using an uncorrected Form 26AS denominator. (Ground 1.1, 1.2, 1.3, 1.4, 1.5, 1.6) - Rule 37BA has no application where Form 26AS receipts include amounts not constituting 'income' under the Act, as agricultural land sale consideration is not 'income'. The scheme of Rule 37BA is not designed to penalize an assessee for correctly excluding exempt receipts. (Ground 2.1, 2.2, 2.3, 2.4, 2.5) - The Rs. 65,197/- disallowance is a mathematical residue with no independent evidentiary basis; it is the shortfall in credit arising from the formula, not an undocumented or disputed deduction. The underlying TDS is fully evidenced. (Ground 3.1, 3.2, 3.3, 3.4, 3.5) - Interest under Sections 234B and 234C is unsustainable as it arises solely because TDS credit is withheld. Upon restoration of full TDS credit, prepaid taxes exceed the tax liability, negating any interest liability. (Ground 4.1, 4.2, 4.3) - Consequential relief of refund entitlement is prayed for upon allowance of full TDS credit and deletion of interest. (Ground 5.1, 5.2) Revenue's Contentions: - No specific contentions for the revenue are recorded in the provided judgment excerpt.

Which sections of the Income-tax Act were involved?

Section 199,Section 143(1)(a)(vi),Section 194-IA,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: HONOURABLE GEORGE GEORGE K & SHRI GAGAN GOYAL

Hearing: 19.08.2026Pronounced: 07.10.2026

PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Addl. / JCIT (A)-1 (hereinafter referred as the ‘Ld. Addl. / JCIT(A)-1’), Delhi dated 29.01.2026 for the Assessment Year (hereinafter referred as the ‘AY’) 2023-24. GROUDS OF APPEAL Ground 1 Arithmetical Unsustainability of Residual Disallowance of Rs. 65,197/-

1.

1 The JCIT(A) and the ITO erred in not

The order continues below.

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