Would A Husband Be Entitled To TDS Credit On Interest Earned From Amount He Gifted To His Wife? ITAT Answers

The income Tax Appellate Tribunal (ITAT) bench comprising R.S. Syal as the Vice President and S.S. Vishwanethra Ravi as the Judicial Member recently held that a husband would be entitled to TDS (Tax deducted at source) credit on interest earned from the amount gifted to his wife. 

In the matter at hand the facts of the case are that the assessee filed return declaring total income of Rs.8,42,68,650 and an intimation was issued under section 143(1) of the Income Tax Act disallowing credit for TDS amounting to Rs.2,80,456 on interest income.As per form 26AS teh wife earned a total interest income of Rs. 39,26,260 with deduction of TDS amounting to Rs. 2,94,474. 

The deposit was made out of the gift given by the husband, that is why the wife included proportionate interest income in his tidal income under section 64 of the act and claimed credit for proportionate tax deducted at source.

The CIT(A) had observed that the provisions of Rule 37B (2) were not complied with and as a result the assessee was not entitled to the credit of deduction of tax at source. That is why the assessee approached The income Tax Appellate Tribunal (ITAT).

The tribunal perused through Section 199(1) r/w sub rule 2 of  Rule 37BA of the act and observed that where the income on which the tax has been deducted at source is assessable in the hands of a person other than deductee, then credit for the proportionate tax deducted at source shall be given to such other person and not the deductee. The tribunal further observed that the provision of sub rule 2 provides for the deductee filing a declaration with the deductor giving particulars of the other person to whom credit is to be given.

The tribunal noted that the entire purpose of this exercise of allowing credit to the other person is to ensure that the benefit of tax deducted at source is availed once and that too by the right person who is chargeable to such tax in respect of such income.

In the light of the aforementioned, the tribunal observed that the benefit of TDS has been claimed accordingly and merely because the assesse’s wife did not furnish declaration to the bank in terms of proviso to Rule 37 BA (2), the amount of tax deducted at source cannot be allowed to remain with the department eternally without allowing any corresponding credit to the person who has been subjected to tax in respect of such income.

The tribunal held that the credit for such TDS should be allowed to the assessee who has been   subjected to tax in respect of such income.

CASE: ANIL RATANLAL BOHORA V. ACIT

CITATION: ITA NO. 675/PUN/2022

Counsel on behalf of Appellant: Pramod Shingte

Counsel on behalf of Respondent: Ramnath P. Murkunde