Loading judgment…
Facts
The assessee filed returns declaring income, including income from a trust where he is the sole beneficiary. The CPC short-granted TDS credit, citing discrepancies with Form 26AS. The assessee argued that the trust income was offered to tax in his hands and thus TDS credit should be allowed.
Held
The Tribunal held that since the income of the trust was clubbed and taxed in the hands of the assessee, and there were technical difficulties preventing the trust from filing its return, the assessee is entitled to claim credit for the TDS deducted on that income.
Key Issues
Whether the assessee is entitled to credit for TDS deducted on income from a trust when the trust's income is offered to tax in the assessee's hands but not reflected in the assessee's Form 26AS due to technical issues.
Sections Cited
161(1), 199, 154, 143(1), 37BA, 250
AI-generated summary — verify with the full judgment below
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 09.04.2025 घोर्णध की िधरीख/Date of Pronouncement 30.04.2025 आदेश / O R D E R PER RENU JAUHRI (A.M.):- These appeals are filed by the assessee against the orders of the Learned Additional/Joint Commissioner of Income-tax (Appeals), Mumbai-11 [hereinafter referred to as “Addl. CIT(A)”] passed u/s. 250 of the Income-tax & 6251/Mum/2024 A.Y. 2021-22 & 2022-23 Jamshed R. Bilimoria Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2021-22 & 2022-23.
The assessee has raised the following grounds of appeal: AY 2021-22 “1. The Appellant objects to the demand determined of Rs. 1,21,050/-.
2. The Commissioner of Income Tax (Appeals) erred in upholding that the Centralized Processing Centre (CPC) has rightly not granted TDS credit to the extent of Rs. 97,201/- claimed in the return of income only on the basis that the same did not appear in the 26AS of the Appellant.
3. Both the learned Commissioner of Income Tax (Appeals) and CPC erred in not considering the fact that the income from the assets held in the Trust created for the Appellant's sole benefit, is required to be taxed u/s 161(1) of the Act in the Appellant's own hands.
4. The learned Commissioner of Income Tax (Appeals) and CPC erred in upholding that CPC has rightly not granted TDS credit of Rs. 97,201/-, inspite of assessing income of Rs. 15,09,833/- from the trust in which the Appellant is the sole beneficiary, ignoring the provisions of section 199 of the Act read with rule 37BA.
5. The learned Commissioner of Income tax (Appeals) erred in not considering the fact that the CPC had granted TDS credit of trust to the extent of Rs. 16,724/-in terms of the rectification order issued u/s 154 of the Act.
6. The learned Commissioner of Income tax (Appeals) erred in upholding that CPC has rightly not granted TDS credit of Rs. 97,201/- despite acknowledging the fact that the income and TDS pertaining to the trust as appearing in 26AS of the trust, has been offered to tax in the hands of the Appellant.
7. Having regard to the facts and circumstances of the case, the Appellant submits that the CPC be directed to grant TDS credit to the tune of Rs. 97,201/- .” AY 2022-23 “1. The Appellant objects to the demand determined of Rs. 5,62,800/-.
2. The Commissioner of Income Tax (Appeals) erred in upholding that the Centralized Processing Centre (CPC) has rightly not granted TDS credit to the extent of Rs. 5,57,324/- claimed in the return of income only on the basis that the same did not appear in the 26AS of the Appellant.
3. Both the learned Commissioner of Income Tax (Appeals) and CPC erred in not considering the fact that the income from the assets held in the Trust created for the Appellant's sole benefit, is required to be taxed u/s 161(1) of the Act in the Appellant's own hands.
4. The learned Commissioner of Income Tax (Appeals) and CPC erred in upholding that CPC has rightly not granted TDS credit of Rs. 5,57,324/-, inspite of assessing income of Rs. 57,08,706/- from the trust in which the & 6251/Mum/2024 A.Y. 2021-22 & 2022-23 Jamshed R. Bilimoria Appellant is the sole beneficiary, ignoring the provisions of section 199 of the Act read with rule 37BA.
The learned Commissioner of Income tax (Appeals) erred in upholding that CPC has rightly not granted TDS credit of Rs. 5,57,324/- despite acknowledging the fact that the income and TDS pertaining to the trust as appearing in 26AS of the trust, has been offered to tax in the hands of the Appellant and that the trust has not claimed the same in its return.
Having regard to the facts and circumstances of the case, the Appellant submits that the CPC be directed to grant TDS credit to the tune of Rs. 5,57,324/-.”
Since common issues are involved in both these appeals, these are being disposed of by a common order. AY 2021-22 is being taken as a lead case. AY 2021-22 4. Brief facts of the case are that the assessee filed return declaring total income of Rs. 68,97,320/-, which was processed u/s 143(1) of the Act by the Centralised Processing Centre, Bengaluru [CPC]. While the CPC accepted the returned income, the credit for tax deducted at source was short granted to the tune of Rs. 1,13,925/-. Thereafter, the assessee filed an application for rectification, after which the CPC granted further credit of only Rs. 16,724/- (out of credit claimed of Rs. 1,13,925/-) vide order u/s 154 dated 30.07.2023.
5. Aggrieved with the order, the assessee preferred an appeal before Ld. CIT(A). It was submitted before Ld. CIT(A) that the assessee has a medical history for the past several years, and therefore, for his safety and in terms of the will of his parents, a trust had been created, viz. Jamshed Bilimoria Trust vide trust deed dated 15.12.2024. The assessee is the sole beneficiary of this trust, of which the brother of the assessee, along with two other professionals, & 6251/Mum/2024 A.Y. 2021-22 & 2022-23 Jamshed R. Bilimoria are trustees. It was, therefore, submitted that since the income of the trust has been fully included in the hands of the assessee and offered for tax, corresponding TDS benefit should have been allowed to the assessee. However, after considering the provision of relevant sections and rules, Ld. CIT(A) decided the appeal with the following observations: “In the present appeal under consideration, it is observed that income and TDS is related with the Trust and ITR has also filed by the Trust showing Nill income and no TDS was claimed by the Trust in the ITR filed for the Asstt. Year 2021-22. The Appellant in the capacity of Individual filed ITR for the Asstt. Year 2021-22 showing income related to Trust and claimed TDS, which was also shown in the Form 26AS of the Trust. In view of the above discussion, the restriction of TDS by the CPC Bengaluru is held to be correct, because no TDS is reflected in Form 26AS of the Appellant, hence no credit was allowed by the CPC. Further, the appellant has submitted that as per Trust deed dated 15-12-2004, the appellant himself is the sole beneficiary in the said Trust. Hence, the AO is directed to verify the claim of the Appellant and allow the TDS as per provisions of the Income Tax Act, 1961.”
6. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. Before us, Ld. AR has submitted that the Ld. CIT(A) erred in upholding that CPC had rightly not granted TDS credit of Rs. 97,201/- as the TDS was not appearing in Form 26AS. He has, further, pointed out that since the trust has been created for the sole benefit of the assessee, the income is required to be tax u/s 161(1) in the hands of the assessee, and therefore, the assessee was entitled to the credit of TDS on this amount as well as per the provisions of section 199 r.w. Rule 37(BA).
Ld. DR, on the other hand, has relied on the orders of lower authorities and argued that in the absence of TDS being reflected in Form 26AS, credit for & 6251/Mum/2024 A.Y. 2021-22 & 2022-23 Jamshed R. Bilimoria TDS could not have been given by the CPC and, therefore, order of Ld. CIT(A) was correct.
We have heard the rival submissions and perused the material placed before us. Admittedly, the income of the trust has been clubbed in the hands of the assessee, and the department has accepted and taxed this income in the hands of the assessee. Hence, the assessee is entitled to claim credit for the TDS deducted on this income. In this year, the return of trust could not be filed due to technical difficulties as the pop-up on the screen advised the trust as under: “Under this scenario, filing of ITR 5 is not required. The share of income should be reflected in the personal return of income.” Print out of relevant screenshot showing the above message from the department has also been filed by the assessee. Under these circumstances, there is no reason why the assessee should not be given credit for the TDS relevant to the income of the trust, which has been clubbed in the hands of the assessee. We, therefore, direct the jurisdictional AO to allow the credit to the assessee in respect of TDS of Rs. 97,201/- on the income of the trust which has been taxed in the hands of the assessee. Accordingly, the appeal of the assessee is allowed. AY 2022-23 9. The issue involved in this appeal are identical, and the facts are also similar to AY 2021-22 except that in this year, the trust has also filed its return showing zero claim of credit in respect of impugned TDS amount.
& 6251/Mum/2024 A.Y. 2021-22 & 2022-23 Jamshed R. Bilimoria 10. Accordingly, the decision for AY 2021-22 will apply mutatis mutandis in this year also. We, therefore, direct the jurisdictional AO to give credit to the assessee of TDS in respect of income received in the name of the trust which has been clubbed and offered for tax in the hands of the assessee. 11. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 30.04.2025.