Gujarat H.C : Where income on which tax has been deducted at source is assessable in hands of a person other than deductee, credit can be given to such other person provided three conditions contained in rule 37BA(2) are satisfied

High Court Of Gujarat

Naresh Bhavani Shah (HUF) v. CIT

Section 199

Assessment year 2012-13

Akil Kureshi And Biren Vaishnav, JJ.

Special Civil Application No. 9352 Of 2015

July  18, 2017

JUDGMENT

Akil Kureshi, J. – The petitioner has challenged an order dated 16.03.2015 passed by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961 (‘the Act’ for short).

2. Brief facts are as under:

2.1 The petitioner is an HUF and is regularly assessed to tax. For the assessment year 2012-13, the petitioner had filed the return of income on 03.07.2012. The net income was shown to be Rs.30,50,120/- and tax paid thereon was shown to be Rs.7,90,045/- which included tax deducted at source of Rs.7,83,635/-.

2.2 The case of the petitioner is that the funds belonging to the petitioner HUF were invested in RBI taxable bonds. This was, however, done in the name of Naresh Bhavanji Shah, the Karta of the HUF. Inadvertently, however, such investment was made in his individual name and he was not described as the Karta of the HUF. The Permanent Account Number (PAN) given to RBI also was that of Naresh Bhavanji Shah in personal capacity and not that of the HUF. Obviously, therefore, RBI while deducting tax at source on the interest income of such bonds issued TDS certificates in the name of Naresh Bhavanji Shah carrying his PAN.

2.3 Out of the TDS of Rs.7,83,635/- claimed by the assessee for the said assessment year, an amount of Rs. 5,42,800/- represented the TDS carried out by RBI on the said investments made by the HUF but in the name of Naresh Bhavanji Shah. The department while processing the return under section 143(1) of the Act did not grant the weightage of such TDS since the PAN did not match.

2.4 The petitioner further points out that the return filed by said Naresh Bhavanji Shah in his individual capacity showed total TDS of Rs.30,42,697/- but he did not claim the benefit of the said TDS of Rs.5,42,800/- and resultantly claimed TDS only of Rs.24,99,897/-.

2.5 In view of such facts, the petitioner wrote to the Assessing Officer on 06.11.2013 and pointed out that the amount of Rs.5,42,800/- represents tax deducted at source on the income offered by the assessee and that the benefit of such tax deducted at source should be granted to the petitioner particularly when the karta had no claim in such benefit. Since the petitioner received no reply, he followed it up with a reminder dated 22.11.2013. Finally, since the Assessing Officer did not accept the case of the petitioner, the petitioner filed revision application before the Commissioner on 18.03.2014.

2.6 Before the Commissioner, the petitioner pointed out that the income in relation to which the deduction of tax at source is made is that of the petitioner HUF. The HUF has filed return and offered such income to tax. Such return has been accepted by the Assessing Officer and the income has been duly taxed. The petitioner also pointed out that Naresh Bhavanji Shah, karta of the HUF in his personal capacity has filed a separate return in which such TDS is not claimed. The Commissioner, however, by the impugned order dated 16.03.2015 rejected the revision petition of the petitioner holding that on account of the mismatch of PAN reflected in the TDS certificate and that of the petitioner, the credit cannot be granted. He held that as per the prescribed procedure TDS credit can be given only to the assessee against whose PAN the tax was deducted.

3. Learned counsel Shri B.S. Soparkar for the petitioner contended that a sum of Rs.5,42,800/- was deducted by the RBI by way of tax at source. Interest income in relation to such tax was offered by the petitioner in the return filed. The Assessing Officer accepted the return and taxed the income. The department now cannot deny the credit of TDS on the ground of mismatch in the PAN. He submitted that not granting benefit to the petitioner would amount to double taxation since Naresh Bhavanji Shah has not claimed any such credit in his return.

4. On the other hand, learned counsel Shri M.R. Bhatt for the department opposed the petition contending that the order passed by the Commissioner does not suffer from any error. The Commissioner while exercising revisional powers cannot travel beyond the statutory provisions which do not permit granting credit of TDS in favour of an assessee other than whose PAN is mentioned in the certificate.

5. Facts are not seriously in dispute. We would proceed on the basis that the source of the funds which came to be invested with the RBI was that of the HUF. The interest income, therefore, would belong to the HUF. At the same time, it is equally undisputed that the investment was made in the name of Naresh Bhavanji Shah in his individual capacity and not as a karta of the HUF. The PAN given to RBI was also that of the individual and therefore TDS was deducted by the RBI while paying interest to Naresh Bhavanji Shah indicating his PAN.

6. As is well known, Chapter XVIIB of the Act pertains to tax deduction at source. This part contains detailed provisions for collection of tax at source and depositing with the government revenue and other related provisions. We may refer to the relevant provisions contained thereunder. Section 199 pertains to credit for tax deducted. Relevant portion thereof reads 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.

(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given.”

7. Under sub-section (1) of Section 200 any person deducting tax at source would pay within the prescribed time the said sum to the credit of the Central Government under sub-section (3) of Section 200 such person would file periodic statements of tax deducted at source. Sub-section (1) of Section 203 requires every person deducting tax at source to issue certificate to the deductee within the prescribed time. Section 206AA carries the title Requirement to furnish Permanent Account Number. Various sub-sections contained therein provide for supplying PAN by the deductee failing which tax will be collected at a higher rate. In case of invalid or not matching PAN also, similar circumstances would follow.

8. It can thus be seen that the Act contains detailed provision for collecting tax at source, depositing such tax with the government revenue and issuance of certificates to the deductee of such tax so deducted. The anxiety of the department, therefore, to ensure the credit of tax deducted at source is given to the rightful person in consonance with the certificate of TDS can easily be appreciated when large number of such transactions in any accounting year are likely to take place. The most dependable identification of the deductee would be his PAN which would be a unique identification number so far as an individual or an entity is concerned. The anxiety of the department therefore to ensure proper matching of the PAN in the TDS certificate as compared to the PAN of the assessee who claims the benefit of such tax deducted at source, therefore, cannot be lightly brushed aside. The short question is, In a genuine case like the case on hand, is the person remedyless?

9. It is in this context, the provision of Section 199 would come into play. As per sub-section (1) of Section 199 any deduction of tax at source would be treated as payment of tax on behalf of the person from whose income the deduction was made or the owner of the security or of the depositor or of the owner of the property or unit holder or the share holder as the case may be. Sub-section (3) of Section 199 however permits a deviation authorizing the power to make rules in respect of giving credit of tax deducted at source or the year during which the credit of such tax deducted at source should be granted. In exercise of such powers, Rule 37BA of the Income Tax Rules 1962 has been framed, relevant portion of which reads as under:

“37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority.

(2) (i) If the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for tax deducted at source shall be given to the other person in cases where—

(a) the income of the deductee is included in the total income of another person under the provisions of section 60, section 61, section 64, section 93 or section 94;

(b) the income of a deductee being an association of persons or a trust is assessable in the hands of members of the association of persons, or in the hands of trustees, as the case may be;

(c) the income from an asset held in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be;

(d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly by the deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset :

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).

(ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.

(iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody.”

10. It can thus be seen that under sub-rule 2 of Rule 37BA where 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 could be given to such other person and not to the deductee provided the three conditions contained therein are satisfied. These conditions in brief are that the deductee files a declaration with the deductor in this respect, such declaration would contain the details of the person entitled to the credit and the reasons for giving such credit and lastly the deductor issues certificate for deducting tax at source in the name of such a person. In the present case, the petitioner could have applied to RBI in terms of sub- rule 2 of Rule 37BA and completed the procedure envisaged therein. However, one can gather that there is no dearth of power with the department to grant credit of tax deducted at source in such a genuine case. We are not suggesting that the requirements of sub-rule 2 are not to be followed before such benefit can be granted. Invariably in all cases such procedure would have to be completed before a person can rightfully claim credit of tax deducted at source where the TDS certificate shows the name and PAN of some other person.

11. In the present case, however, many years have passed since the event arose. The facts are not seriously in dispute. The HUF has already offered the entire income to tax. The department has also accepted such declaration and taxed the HUF. In view of such special facts and circumstances, we direct the department to give credit of the said sum of Rs.5,42,800/- to the petitioner HUF deducted by way of tax at source upon Shri Naresh Bhavanji Shah filing an affidavit before the department that the sum invested by the RBI does not belong to him, the income is also not his and that he has not claimed any credit of the tax deducted at source on such income for the said assessment year.

12. With these directions, the petition is disposed of.

[Citation : 396 ITR 589]