Shortfall of TDS credit claim by person other than deductee allowed one opportunity to comply with Rule 37BA.

ITAT considered whether TDS credit can be claimed by a person other than the deductee absent compliance with Rule 37BA requirements; it held credit is ordinarily allocable to the deductee unless the deductee files a declaration and the deductor reports the deduction in the other person's name, and the assessee failed to produce material showing such compliance, so previous authorities were distinguished as inapplicable. The tribunal granted the assessee one further opportunity to comply with the Rule 37BA formalities and allowed the appeal for statistical purposes.

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Issues: Whether the assessee is entitled to claim the entire TDS credit deducted on the transaction value where only 50% of the capital gain was offered in his return and the other co-owner (spouse) did not claim the corresponding TDS credit.

Analysis: The legal framework comprises section 199(1) and (3) of the Income-tax Act, 1961 which treats tax deducted in accordance with Chapter XVII as tax paid on behalf of the person from whose income deduction was made and permits rules for giving credit to persons other than the deductee; and Rule 37BA of the Income-tax Rules, 1962 which prescribes that TDS credit shall be given on the basis of information furnished by the deductor and provides a mechanism for giving credit to a person other than the deductee where the income is assessable in the hands of that other person, subject to specified declaration and reporting requirements. The Tribunal found no material on record demonstrating compliance with Rule 37BA by the deductee and observed that the co-owner has filed a rectification application seeking corresponding credit. The Tribunal held that the taxpayers relied authorities were factually distinguishable as they did not consider cases where the other person had not claimed the credit, and therefore granted an opportunity to comply with Rule 37BA and directed de novo adjudication by the Assessing Officer.

Conclusion: The appeal is allowed for statistical purposes; the impugned order is set aside and the matter is restored to the Assessing Officer for de novo adjudication with a direction to permit the assessee to comply with the provisions of Rule 37BA of the Income-tax Rules, 1962. The result is in favour of the assessee.

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