2026 (3) TMI 488 - AT - Income Tax

TDS Credit: legal heirs who declare a deceased's income can claim corresponding TDS despite PAN mismatch, credit allowed.

Whether a legal heir who declares a deceased person's interest income may claim corresponding TDS credit despite the TDS being reported against the ... Denial of TDS credit - TDS was deducted and reported by the deductor against the PAN of the deceased assessee - application of Rule 37BA regarding allocation of TDS credit - TDS credit could be allowed to legal heir only if the deductor revises the TDS statement to reflect the PAN of the legal heir which was not done - TDS was reported against the PAN of the deceased whereas the return of income was filed under the PAN of legal heir, thereby using the PAN of the legal heir, there was a mismatch in the system. Whether the legal heir is entitled to claim TDS credit where tax was deducted and reported against the PAN of the deceased but the legal heir has offered the deceased's income in her return filed under her own PAN? - HELD THAT: - The Tribunal found the factual position to be undisputed as assessee, as legal heir, offered the interest income of the deceased in her return and claimed the corresponding TDS credit. CPC denied credit because the deductor had reported the TDS against the deceased's PAN and the credit did not appear in Form 26AS under the legal heir's PAN. While Rule 37BA operates to allocate TDS credit to the person in whose name the deductor reports the tax, the Tribunal treated the denial as a technicality which should not defeat substantive taxability already admitted by the legal heir. Requiring the legal heir to obtain revision of the historical TDS return from the deductor was held to be impractical for the relevant assessment year. In these circumstances the Tribunal directed the CPC to grant the disputed TDS credit to the assessee and to revise the tax demand accordingly. [Paras 4, 5] Final Conclusion: The appeal was allowed - Tribunal directed grant of the claimed TDS credit to the legal heir despite the TDS being reported against the deceased's PAN, and directed CPC to amend the demand accordingly. Issues: Whether the assessee, as the legal heir who has offered the deceased's interest income in her return, is entitled to the corresponding TDS credit despite the TDS being reported against the deceased person's PAN.Analysis: The assessee, as legal heir, disclosed the interest income of the deceased in her return and claimed the corresponding TDS credit. The TDS was reported by the deductor against the deceased's PAN and therefore did not reflect in the assessee's Form 26AS, resulting in denial of credit by CPC and rejection of rectification. Rule 37BA governs allocation of TDS credit as per the PAN shown in deductor's statement; however, denial of credit on technical PAN-matching grounds where the taxpayer has offered the income would require the deductor to revise historical TDS statements, which may be impracticable. The claim was examined on its merits and accepted as an entitlement arising from offering the income for tax in the legal heir's return.Conclusion: The TDS credit claimed by the assessee as legal heir is allowed and CPC is directed to grant the impugned TDS credit and revise the tax demand in respect of AY 2019-20 in favour of the assessee.Ratio Decidendi: Where a legal heir offers a deceased person's taxable income in the legal heir's return, the corresponding TDS credit is allowable to the legal heir despite the TDS being reported against the deceased's PAN, and administrative PAN-matching technicalities do not preclude granting the credit.