ITAT Grants Full TDS Credit of Rs. 13 Lakh on Jointly Held Ancestral Property Sale Following Deductor’s Procedural Error [Read Order]

The Pune Bench of Income Tax Appellate Tribunal ( ITAT ) grants full Tax Deducted at Source ( TDS) credit of Rs. 13 lakh to the assessee on the sale of jointly held ancestral property following the deductor’s procedural error.

Nanasaheb Bhagawan Sasar,appellant-assessee,filed a belated return of income on 28.12.2022 for AY 2022-23, declaring total income of Rs. 2,76,47,210/-. During the year, he and his son, Mr. Amit Sasar, sold their jointly held ancestral land for Rs. 13,00,00,000/-, receiving Rs. 6,50,00,000/- each.

The buyer deducted TDS of Rs. 13,00,000/- in the assessee’s name. The assessee claimed the full TDS credit in his return, while computing long-term capital gains only on his 50% share of the sale proceeds. A defective notice was issued due to a mismatch between gross receipts in Form 26AS and income shown in the return.

The assessee explained that the sale proceeds were proportionately divided and filed a rectified return on 03.03.2023, claiming full TDS credit and disclosing Rs. 6,50,00,000/- as income transferred to his son. The Assessing officer (AO) denied proportionate TDS credit of Rs. 6,50,000/- and calculated interest under sections 234A, 234B, and 234C.

The Additional/Joint Commissioner of Income Tax(Appeals)[Addl./JCIT(A)] upheld the AO’s rectification, allowing only proportionate TDS credit corresponding to the assessee’s 50% share and dismissing the claim for full credit. Aggrieved, the assessee appealed to the tribunal.

The assessee counsel argued that the full TDS was wrongly credited to the assessee's PAN because the buyer of the land deducted the entire TDS in his name instead of splitting it between him and his son. The son had reported his share of income and paid tax without claiming any TDS.

The counsel submitted that under section 199(1) read with Rule 37BA, TDS deposited in a deductee’s name must be credited to him. Relying on past decisions, the counsel contended that the assessee should get credit for the entire TDS, as the mistake was made by the buyer.

The Departmental counsel relied on the Addl./JCIT(A) order.

The two member bench comprising R.K Panda (Vice President) and Astha Chandra (Judicial Member) considered the submissions of the parties and reviewed the material on record, including the paper book filed by the assessee. It was undisputed that the sold property was jointly held by the assessee and his son, Mr. Amit Sasar, and each received Rs. 6,50,00,000/- from the total consideration of Rs. 13,00,00,000/-.

The buyer, however, deducted the full TDS of Rs. 13,00,000/- in the assessee’s name, which was wrongly reflected in Form 26AS. The son had reported his share in his return and paid the taxes due without claiming any TDS credit.

Relying on decisions in iGate Infrastructure Management Services Ltd. and Anil Ratanlal Bohora, the tribunal observed that procedural errors by the deductor could not deprive the assessee of his substantive right to TDS credit.

It noted that the Revenue could not benefit at the expense of the assessee. Following the approach in iGate, the tribunal directed the AO to verify whether the TDS had been deposited with the Government and, if so, to allow full credit of Rs. 13,00,000/- to the assessee.

The tribunal concluded that the assessee was entitled to the entire TDS claimed, set aside the Addl./JCIT(A) order, and restored the matter to the AO for fresh adjudication to grant full TDS credit.

Accordingly the appeal was partly allowed.

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