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Facts
An NRI assessee claimed a refund after filing his return of income, which included a long-term capital loss from the sale of a residential flat. The flat was initially invested in solely by the assessee but was held jointly with his father, and 50% was later gifted to his wife. Upon sale by his wife and father, TDS was deducted in their names, but the assessee offered the income for tax and claimed the TDS credit, which was denied by the CPC and CIT(A).
Held
The Tribunal noted the assessee's failure to provide material demonstrating compliance with Rule 37BA of the Income Tax Rules. To ensure justice, the matter was remanded to the Assessing Officer for fresh adjudication, directing the assessee to comply with the provisions of Rule 37BA of the Rules.
Key Issues
Whether the assessee, who made the sole investment in a property sold by his wife and father, is entitled to claim TDS credit deducted in their names for the capital gains offered in his own income tax return.
Sections Cited
Section 250, Section 199(1), Rule 37BA, Section 194-IA, Section 143(1), Section 154, Section 64(1)(iv)
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANDEEP SINGH KARHAIL
PER SANDEEP SINGH KARHAIL, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 26/10/2023 passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2022-23.
In this appeal, the assessee has raised the following grounds:-
Mr Shubhankar Nayak. ITA no.4524/Mum/2023
“1. In the facts and circumstances of the case and in law, the learned Assessing Officer, CPC erred in disallowing TDS credit of Rs.9,48,696/-. 2. In the facts and circumstances of the case and in law, the learned CIT Appeal ignored the provisions of section 199(1) read with Rule 37BA of Income Tax Act, 1961. 3. In the facts and circumstances of the case and in law, the learned CIT Appeal ignored the judgement of Honourable ITAT, Mumbai in the case of Hampi Expressways Pvt. Ltd V DCIT ITA No.895/Mum/2022 dated 18.10.2022 (AY. 2017-18.”
The solitary grievance of the assessee, in the present appeal, pertains to short grant of TDS credit.
We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is an NRI and he filed his return of income for the year under consideration on 17/06/2022 declaring a total income of Rs.6,76,517/- and claiming refund of Rs.9,32,699/-. In the return of income, the assessee also claimed Long Term Capital Loss of Rs.1,46,56,317/- on sale of residential flat. The assessee had booked a residential flat at 1104, 11th Floor, Lodha Primero, N. M Joshi Marg, Adarsh Nagar, Mahalaxmi, Mumbai-400011 on 15/07/2009 by paying earnest money of Rs.10,02,351/-. Subsequently, the assessee entered into agreement with the builder on 22/03/2010 for purchase consideration of the said flat at Rs.2,01,76,299/-. In addition to the cost of flat, the assessee also paid VAT, Service Tax, Stamp duty, registration charges and other miscellaneous expenses, amounting to Rs.30,07,092/-. The entire investment towards the flat was solely made by the assessee. However, the name of the assessee’s father, Mr. Sankar Nayak, was added in the agreement for the purpose of safety and convenience. On 18/04/2018, the assessee gifted 50% share in the
Mr Shubhankar Nayak. ITA no.4524/Mum/2023
aforesaid flat to his wife, Mrs. Astha Mehta, alias Astha Subhankar Nayak, who is also an NRI, through the registered gift deed. On 25/08/2021, the said flat was sold by the assessee’s wife and assessee’s father to the buyers, Mr. Dinyar Sam Hathikhanawala and Mrs. Deepa Dinyar, for sale consideration of Rs.3,50,00,000/-. The buyers paid to father of assessee Rs.1,75,00,000/- after deducting tax at source of Rs.1,75,000/- (Rs.87,500/- + Rs.87,500/-) @ 1% as per section 194-IA on the 50% of the sale consideration of Rs.3,50,00,000/-. The balance amount out of the sale consideration was paid to assessee’s wife after deduction of TDS of Rs.6,00,600/- (Rs.3,00,300/- +Rs.3,00,300/-), as per lower deduction tax certificate given by the Department. In short, the TDS of Rs.6,00,600/- and Rs.1,75,000/- respectively in the name of assessee’s wife and assessee’s father was deducted by the buyers.
Since the investment in the property was entirely made by the assessee, the income from the sale of the said property was offered by the assessee in his return of income and the credit of the TDS deducted by the purchaser, in the hands of his wife and father, was claimed by the assessee in his return of income. The return filed by the assessee was processed vide intimation dated 07/12/2022 u/s 143(1) of the Act by Centralised Processing Center, Bangalore (“CPC”) assessing the total income of the assessee at Rs.6,76,520 without granting the complete credit of TDS amounting to Rs.9,64,057/- as claimed by the assessee. It is further pertinent to note that the assessee’s wife and assessee’s father invested the sale proceeds in the fixed deposits with the bank and the interest income thereon was also offered to tax by the assessee
Mr Shubhankar Nayak. ITA no.4524/Mum/2023
in his return of income and the credit of the tax deducted by the bank on the interest payment was also claimed by the assessee in his return, which was not allowed by the CPC vide intimation issued u/s 143(1) of the Act. Subsequently, the assessee filed rectification application u/s 154 of the Act against the intimation issued u/s 143(1) of the Act. However, the same was disposed off without granting any relief to the assessee in respect of claim of short grant of TDS credit. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee against the rectification order passed u/s 154 of the Act and held that the CPC has taken a correct decision by not allowing the TDS credit, as there is no provisions in the Act to transfer the TDS credit from one person to another person. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Authorised Representative (“learned AR”) referred to the provisions of section 64(1)(iv) of the Act and submitted that the capital gains arising to the assessee’s wife from the sale of flat is taxable in the hands of the assessee. Further, the learned AR also brought to our attention the return of income filed by the assessee’s wife and assessee’s father, wherein the TDS deducted by the purchaser of the flat, as appearing in their Form-26AS, was not claimed by them while computing their tax liability.
From the plain reading of section 199(1) of the Act, we find that any deduction of tax made in accordance with the provisions of Chapter-XVII of the Act and paid to the Central Government shall be treated as payment of tax on behalf of the person from whose income the deduction was made. Further, sub-section (3) of section 199 of the Act provides that the Board may, for the Page | 4
Mr Shubhankar Nayak. ITA no.4524/Mum/2023
purpose of giving credit in respect of tax deducted at source or paid in terms of the provisions of Chapter-XVII of the Act, make such rules for the purpose of giving credit to a person other than those referred to in sub-section (1) of section 199 of the Act and also the assessment year for which such credit to be given. As per Rule 37BA of the Income Tax Rules, 1962 (“the Rules”), the credit for tax deducted at source and paid to the Central Government shall be given to the person to whom the payment has been made or credit has been given (i.e. the deductee) on the basis of the information relating to deduction of tax furnished by the deductor to the income-tax authority. Sub-rule (2) of Rule 37BA of the Rules further provides that where the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, the 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 provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1) of Rule 37BA of the Rules.
In the present case, the assessee could not bring any material on record to show the compliance with the provisions of Rule 37BA of the Rules by the deductee, i.e. assessee’s wife and assessee’s father. Therefore, in the larger interest of justice, we deem it appropriate to grant one more opportunity to the assessee to make sufficient compliance with the provisions of Rule 37BA of the Rules. Accordingly, we restore the matter to the file of the jurisdictional Assessing Officer for de novo adjudication, as per law, with a direction to the
Mr Shubhankar Nayak. ITA no.4524/Mum/2023
assessee to comply with the provisions of Rule 37BA of the Rules. Accordingly, with the above directions, the impugned order is set aside and the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 03/06/2024
Sd/- Sd/- B.R. BASKARAN SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 03/06/2024 Vijay Pal Singh, (Sr. PS) Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order
Assistant Registrar ITAT, Mumbai