MR.VIVEK SHANKAR ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CPC , BANGALORE

The facts relating to the case are stated in brief. Both the assessees are brothers. They, along with their mother, were co-owners of an immovable property. All the three persons sold the same during the year under consideration for a sum of Rs. 9.00 Crores. The share of each of the persons was Rs.3.00 Crores. The buyer of the property deducted tax at source u/s 194IA of the IT Act, 1961 from the sale consideration. However, the buyer remitted the entire TDS amount in the name of mother of assessees herein, being one of the co-owners. In view of the above, the share of TDS amount of the assessees’ herein was not reflected in the Form No.26AS.

In the return of income filed by the asesssees herein, they claimed their share of TDS at Rs.3.00 lakhs each. Since it was not reflected in their Form 26AS, while processing the return of income u/s 143(1), the said amount was not given credit.

Both the assessees carried the matter in appeal filed by them before the ld. CIT(A). By placing reliance on Rule 37BA of I T Rules, both the assessees claimed that their share of TDS should be allowed credit in their respective hands. They also took support of sec.199 of the IT Act, 1961, since they have offered their share of income from long term capital gains. The ld. CIT(A) however, took the view that the credit for their share of TDS can be given only if the TDS statements are rectified. Accordingly, the ld. CIT(A) rejected the appeals of these assessees. Aggrieved, both the assessees are in appeal before us.

3 5. The ld. AR submitted that the capital gains arising on sale of immovable property has been offered by both the assessees and their mother equally i.e 1/3rd each. He submitted that the buyer has committed an error in remitting the entire amount of TDS in the name of mother of the assessees’ herein. He submitted that the mother of the assessees has claimed credit for her share of TDS only i.e.Rs.3.00 lakhs only. Accordingly he submitted that the remaining amount of Rs.6.00 lakhs belong to the assessees’ herein and the same has not been given credit in anybody’s hand. Accordingly he submitted, considering peculiar facts of the case, both these assessees’ share of TDS aggregating to Rs.6.00 lakhs should be allowed credit in their respective hands @ Rs.3.00 lakhs each, even though their Form 26AS does not reflect the TDS amount. The ld. AR also submitted that the claims of assessees are supported by Rule 37BA of the IT Act, 1961.

The ld. DR submitted that the provisions of Rule 37BA prescribe a procedure for claiming credit of TDS. However, the assessees herein have not followed the same. Hence the Ld CIT(A) has expressed the view that the TDS statements should be corrected first and then only credit can be given in the hands of the assessees.

We have heard the parties and perused the record. There is no dispute that the property was owned by three persons namely, both the assessees herein and their mother. The long term capital gains arising on sale of property have been offered by each of the above said three persons equally. Normally, the TDS should have been deducted and remitted by the buyer on property equally in the name of the above said 4 three persons, in which case, the same would have been reflected in Form 26AS. However, it is stated that the buyer has remitted the entire TDS amount in the name of the mother of the assessees herein.

The provisions of sec.199 states that the TDS amount shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. Admittedly, the TDS amount of Rs.9.00 lakhs was deducted by the buyer of property from the income of all the three co-owners and hence, in terms of sec.199 of the Act, each of the co- owner shall be entitled for TDS credit of Rs.3.00 lakhs each. However, it is stated that the buyer, though deducted the TDS from the income of all the three persons, has remitted the same in the name of one of the co-owners only, i.e., the mother of the assessees herein.

We notice that the provisions of Rule 37BA prescribe a methodology for claiming credit for TDS in this kind of situation. As per Rule 37BA(2)(i), when the whole or part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee. Admittedly, in the present cases, the TDS credit of Rs.3.00 lakhs each should be given to the assessees’ herein, since proportionate part of the income on which tax has been deducted was assessed in the hands of the assessees’ herein.

We notice that the proviso to Rule 37BA(2) and clauses (ii) and (iii) thereof prescribe a procedure for claiming credit. The difficulty of the assessees’ herein is that they do not have any control over the buyers of 5 the property and without co-operation of the buyer of the property, the procedure prescribed in Rule 37BA(2) cannot be fulfilled. We have already noticed that the buyer of the property has committed an error in remitting entire amount of TDS in the name of the mother of the assessees herein.

The assessees’ herein have submitted that their mother has claimed credit for Rs.3.00 lakhs only, while her Form 26AS should be showing TDS amount of Rs.9.00 lakhs. This fact also requires verification.

Accordingly we are of the view that this peculiar problem can be resolved at the end of the revenue only. When asked as to who can resolve this problem, the Ld D.R submitted that the TDS officer of the assessees’ herein may be entrusted with the job. Accordingly we set aside the orders passed by Ld CIT(A) in the hands of both the assessees’ herein and restore the matter of resolving the matter of granting due “TDS credit” to the file of the TDS officer with the following directions:- (a) He shall verify the records of mother of the assessees’ herein and ensure that she has been given credit for her share of Rs.3.00 lakhs only. He also should ensure that the TDS amount remitted by the buyer of property was Rs.9.00 lakhs. (b) After satisfying himself that the balance amount of TDS of Rs.6.00 lakhs is pending to be given credit, he may give credit @ Rs.3.00 lakhs each to the credit of assessees’ herein, he is permitted to do so.