Tribunal grants assessee TDS credit under Section 199(1) Income Tax Act despite deductee's death.

The Tribunal allowed the appeal, granting the assessee credit for the TDS amount of Rs. 1,15,109 under Section 199(1) of the Income Tax Act. This decision was based on the unique circumstances of the case, including the original deductee's failure to claim the TDS credit and practical difficulties arising from the deductee's death and pending probate application. The Tribunal emphasized the necessity of strict compliance with Section 199 and Rule 37BA but ultimately ruled in favor of the assessee, ordering the credit to be given.

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Issues Involved:
1. Denial of TDS credit of Rs. 1,15,010/-.
2. Compliance with Rule 37BA(3).
3. Application of Section 199 of the Income Tax Act.

Summary:

1. Denial of TDS credit of Rs. 1,15,010/-:
The assessee filed an appeal against the order dated 30/05/2022 by NFAC, Delhi, regarding the denial of TDS credit of Rs. 1,15,010/- for the A.Y. 2021-22. The assessee declared a total income of Rs. 1,06,74,950/- and claimed TDS of Rs. 7,53,318/-, including Rs. 1,15,109/- from the Deed of Settlement for K D Bahadurji. The return was processed u/s 143(1) by CPC, Bengaluru, raising a demand of Rs. 1,15,010/- due to short credit.

2. Compliance with Rule 37BA(3):
The Commissioner of Income Tax (Appeals) upheld the short grant of TDS credit, noting the absence of a declaration under Rule 37BA(2). The rule requires the deductee to file a declaration with the deductor, which was not done in this case. The CIT(A) emphasized that credit for tax deducted must be accorded strictly in conformity with Section 199 and Rule 37BA, which was not followed here.

3. Application of Section 199 of the Income Tax Act:
The Tribunal examined whether the credit of TDS amounting to Rs. 1,15,109/- could be allowed to the assessee, Late Russi Dinshaw Bahadurji, who had offered the income and been taxed on it. The Tribunal noted that the income belonged to the Deed of Settlement/Trust but was included in the assessee's return. It was also noted that the trust filed a nil return and did not claim TDS credit. The Tribunal highlighted the practical difficulties in complying with Rule 37BA(2) due to the death of Mr. Russi D. Bahadurji and the pending probate application.

Conclusion:
The Tribunal concluded that the assessee should be given credit for the TDS amount of Rs. 1,15,109/- under Section 199(1), considering the unique circumstances and the fact that the original deductee did not claim the TDS. The appeal was allowed, and the order pronounced on 27th April 2023.

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