The HUF's money was invested in the karta's own name, so the TDS certificate and the 26AS entry carry his individual PAN. The HUF offered the interest to tax and the karta claimed no credit. The department says PAN mismatch, no credit. What now?
The credit was directed to be given to the HUF. The Court held that the ordinary route is Rule 37BA(2) - the deductee files a declaration with the deductor, and the deductor issues the certificate in the name of the person entitled to credit - and that this procedure must invariably be completed before credit can be claimed where the certificate shows someone else's name and PAN. But it also held there is no dearth of power in the department to give credit in a genuine case, and on these special facts it directed credit on the karta filing an affidavit that the money and the income were not his and that he had claimed no credit.
Decided by the High Court (Akil Kureshi J and Biren Vaishnav J) on 2017-07-18, reported as Special Civil Application No. 9352 of 2015 (High Court of Gujarat at Ahmedabad). It bears on section 199, section 264, section 143(1), section 203, section 200, section 206AA, section 37BA of the Income Tax Act 1961, in TDS Defaults, Refunds, Interest & Condonation and Revision & Rectification matters.
This is the answer to the commonest small-file TDS problem there is - joint holdings, HUF investments made in the karta's name, property in one spouse's name with income clubbed elsewhere - and the library was thin on it. Two things to take from it. First, the discipline: the rule contemplates that you fix this at the deductor's end, prospectively, by filing the Rule 37BA(2) declaration, and the Court would not let that requirement be treated as optional. Second, the escape: where years have passed and the income has already been assessed in the right hands, the department has the power to give credit and can be directed to exercise it, with an affidavit from the certificate-holder standing in for the declaration that was never filed. Note the procedural route - a revision under s.264 against the officer's refusal, and a writ against the Commissioner's rejection.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For AY 2012-13 the petitioner HUF returned income of Rs.30,50,120 and claimed TDS of Rs.7,83,635. HUF funds had been invested in RBI taxable bonds, but the investment was inadvertently made in the name of Naresh Bhavanji Shah in his individual capacity rather than as karta, and the PAN given to the RBI was his individual PAN. The RBI accordingly deducted tax on the interest and issued certificates in his individual name. Of the TDS claimed by the HUF, Rs.5,42,800 was the tax so deducted. While processing the return under s.143(1) the department refused that credit because the PAN did not match. The karta's individual return showed total TDS of Rs.30,42,697 but claimed only Rs.24,99,897, leaving the Rs.5,42,800 unclaimed. The HUF wrote to the Assessing Officer on 6 November 2013 and again on 22 November 2013, received no reply, and filed a revision under s.264 on 18 March 2014. The Commissioner rejected it on 16 March 2015, holding that credit could be given only to the assessee against whose PAN the tax was deducted.
The department was directed to give the HUF credit for the sum of Rs.5,42,800, upon Naresh Bhavanji Shah filing an affidavit before the department that the sum invested with the RBI does not belong to him, that the income is not his, and that he has claimed no credit for the tax deducted on that income for the year (paras 11 and 12).
The Court proceeded on the footing that the funds and therefore the interest belonged to the HUF, while accepting that the investment and the PAN given to the RBI were the individual's. It set out s.199(1) and s.199(3), which permits the Board to make rules for giving credit to a person other than those referred to in sub-sections (1) and (2) and for the year in which credit may be given, and then Rule 37BA. Under sub-rule (2), where the income is assessable in the hands of a person other than the deductee, credit may be given to that other person provided three conditions are met: the deductee files a declaration with the deductor, the declaration carries the details of the person entitled to credit and the reasons, and the deductor issues the certificate in that person's name. The petitioner could have applied to the RBI under that sub-rule and completed the procedure, and the Court was careful to say it was not suggesting the requirements could be dispensed with. It nonetheless held that there is no dearth of power in the department to grant credit in such a genuine case, and that the department's legitimate anxiety about PAN matching could not leave a genuine claimant remediless. Given that many years had passed, the facts were not in dispute, the HUF had offered the entire income to tax and the department had accepted and taxed it, credit was directed on the special facts, secured by the karta's affidavit.
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.
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Handle my notice → Ask a CA on WhatsAppThe credit was directed to be given to the HUF. The Court held that the ordinary route is Rule 37BA(2) - the deductee files a declaration with the deductor, and the deductor issues the certificate in the name of the person entitled to credit - and that this procedure must invariably be completed before credit can be claimed where the certificate shows someone else's name and PAN. But it also held there is no dearth of power in the department to give credit in a genuine case, and on these special facts it directed credit on the karta filing an affidavit that the money and the income were not his and that he had claimed no credit. This was decided by the High Court (Akil Kureshi J and Biren Vaishnav J) and bears on section 199, section 264, section 143(1), section 203, section 200, section 206AA, section 37BA of the Income Tax Act 1961. It is reported as Special Civil Application No. 9352 of 2015 (High Court of Gujarat at Ahmedabad). This is the answer to the commonest small-file TDS problem there is - joint holdings, HUF investments made in the karta's name, property in one spouse's name with income clubbed elsewhere - and the library was thin on it. Two things to take from it. First, the discipline: the rule contemplates that you fix this at the deductor's end, prospectively, by filing the Rule 37BA(2) declaration, and the Court would not let that requirement be treated as optional. Second, the escape: where years have passed and the income has already been assessed in the right hands, the department has the power to give credit and can be directed to exercise it, with an affidavit from the certificate-holder standing in for the declaration that was never filed. Note the procedural route - a revision under s.264 against the officer's refusal, and a writ against the Commissioner's rejection. If it applies to you, the first step is this: For the future, file the Rule 37BA(2) declaration with the deductor now, giving the name, address and PAN of the person to be credited, the payment it relates to and the reason - and get the deductor to report the deduction in that name in its TDS statement.
For AY 2012-13 the petitioner HUF returned income of Rs.30,50,120 and claimed TDS of Rs.7,83,635. HUF funds had been invested in RBI taxable bonds, but the investment was inadvertently made in the name of Naresh Bhavanji Shah in his individual capacity rather than as karta, and the PAN given to the RBI was his individual PAN. The RBI accordingly deducted tax on the interest and issued certificates in his individual name. Of the TDS claimed by the HUF, Rs.5,42,800 was the tax so deducted. While processing the return under s.143(1) the department refused that credit because the PAN did not match. The karta's individual return showed total TDS of Rs.30,42,697 but claimed only Rs.24,99,897, leaving the Rs.5,42,800 unclaimed. The HUF wrote to the Assessing Officer on 6 November 2013 and again on 22 November 2013, received no reply, and filed a revision under s.264 on 18 March 2014. The Commissioner rejected it on 16 March 2015, holding that credit could be given only to the assessee against whose PAN the tax was deducted. The matter was decided on 2017-07-18 by the High Court (Akil Kureshi J and Biren Vaishnav J). On those facts the High Court held as follows. The department was directed to give the HUF credit for the sum of Rs.5,42,800, upon Naresh Bhavanji Shah filing an affidavit before the department that the sum invested with the RBI does not belong to him, that the income is not his, and that he has claimed no credit for the tax deducted on that income for the year (paras 11 and 12).
The Court proceeded on the footing that the funds and therefore the interest belonged to the HUF, while accepting that the investment and the PAN given to the RBI were the individual's. It set out s.199(1) and s.199(3), which permits the Board to make rules for giving credit to a person other than those referred to in sub-sections (1) and (2) and for the year in which credit may be given, and then Rule 37BA. Under sub-rule (2), where the income is assessable in the hands of a person other than the deductee, credit may be given to that other person provided three conditions are met: the deductee files a declaration with the deductor, the declaration carries the details of the person entitled to credit and the reasons, and the deductor issues the certificate in that person's name. The petitioner could have applied to the RBI under that sub-rule and completed the procedure, and the Court was careful to say it was not suggesting the requirements could be dispensed with. It nonetheless held that there is no dearth of power in the department to grant credit in such a genuine case, and that the department's legitimate anxiety about PAN matching could not leave a genuine claimant remediless. Given that many years had passed, the facts were not in dispute, the HUF had offered the entire income to tax and the department had accepted and taxed it, credit was directed on the special facts, secured by the karta's affidavit. In the words reproduced by the source cited on this page: "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."
It was decided by the High Court on 2017-07-18 and is reported as Special Civil Application No. 9352 of 2015 (High Court of Gujarat at Ahmedabad). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 199, section 264, section 143(1), section 203, section 200, section 206AA, section 37BA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The department was directed to give the HUF credit for the sum of Rs.5,42,800, upon Naresh Bhavanji Shah filing an affidavit before the department that the sum invested with the RBI does not belong to him, that the income is not his, and that he has claimed no credit for the tax deducted on that income for the year (paras 11 and 12). It arises in TDS Defaults, Refunds, Interest & Condonation and Revision & Rectification matters, on section 199, section 264, section 143(1), section 203, section 200, section 206AA, section 37BA of the Income Tax Act 1961, and was decided by Akil Kureshi J and Biren Vaishnav J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For the past year in dispute, put on record that the income was offered to tax by the person claiming credit and that the assessment accepting it is final. Get an affidavit from the person whose PAN appears on the certificate that the investment and the income are not his and that he has claimed no credit for it; that is precisely the safeguard the Court used. Use s.264 rather than s.154 if the officer simply will not act - the revision was the vehicle here, and its rejection is what the writ attacked. Expect and answer the department's PAN-matching argument on its own terms: the Court accepted that the department's anxiety about PAN matching is legitimate and granted relief in spite of it, not by dismissing it.
Still good law. The relief was granted on the special facts of a genuine, undisputed case in which the income had already been assessed in the claimant's hands, and the Court expressly preserved the Rule 37BA(2) procedure as the normal route; read it as authority for the department's power to give credit, not as authority that the declaration can be skipped. Later treatment of this judgment was NOT checked. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment reproduces Rule 37BA(2)(i) in its PRE-amendment form - the version with clauses (a) to (d) covering ss.60/61/64/93/94 income, AOP and trust income, assets held by a partner or karta, and jointly owned property - even though it was decided in 2017. That version was substituted with effect from 1 November 2011 by the Income-tax (Eighth Amendment) Rules 2011 with the general formula 'Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee'. The declaration machinery in the proviso and in clauses (ii) and (iii), which is what the decision turns on, is the same in both versions, so the reasoning is unaffected; but do not quote the rule text from this judgment as the current rule. The current text was checked against the department's own Rule 37BA page and against the post-amendment text reproduced in IVRCL-KBL (JV). This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The department was directed to give the HUF credit for the sum of Rs.5,42,800, upon Naresh Bhavanji Shah filing an affidavit before the department that the sum invested with the RBI does not belong to him, that the income is not his, and that he has claimed no credit for the tax deducted on that income for the year (paras 11 and 12).
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