The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) allows Tax Deducted at Source ( TDS ) credit to the person in whose hands the income is assessable under Rule 37BA of Income Tax Rules,1962.

Lovely Das, appellant-assessee, e-filed her return of income for the assessment year on 12/11/2019, declaring total income of Rs. 1,36,79,759 and claiming tax credit of Rs. 46,52,910. The Assessing Officer (AO) issued an intimation under section 143(1) on 26/02/2020, accepting the returned income but allowed tax credit of only Rs. 24,46,589, resulting in a demand of Rs. 25,98,755. The difference mainly arose because TDS of Rs. 22,06,321 in the name of her late husband was disallowed.

The return included her own income of Rs. 59,33,102 (interest income) and income of Rs. 73,13,808 from M/s Elco Enterprise and interest income in the name of Late Jagbandhu Das (her husband), with corresponding TDS claimed accordingly. After the husband’s death, the appellant succeeded to the proprietorship of M/s Elco Enterprise and offered the income and related TDS for taxation.

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However, the AO denied credit for TDS in the husband’s name due to unmatched TDS, causing a short credit of Rs. 22,06,321 and consequent interest under sections 234B and 234C. The appellant’s appeal before the Addl./Joint CIT(A) was dismissed on 02/01/2025. Aggrieved, she filed the appeal before the tribunal.

The assessee counsel argued that since the income of the deceased husband was shown in her return and she had taken over the proprietorship and related bank interest, the Assessing Officer should have allowed the TDS credit.

The Departmental Representative relied on the Commissioner of Income Tax (Appeals)[CIT(A)] order, which dismissed the appeal based on Rule 37BA. The CIT(A) held that the assessee could not claim TDS credit in her name for the TDS deducted on her deceased husband’s income because she did not update the deductor records after his death and did not file a separate return as his legal heir.

Before the tribunal, the assessee counsel cited court and tribunal rulings that allowed TDS credit if the income was offered for tax, even if the TDS certificate was not in the assessee’s name.

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The counsel contended that since the assessee included both her own income and her late husband’s proprietorship income in her return, she was entitled to claim the TDS credit of Rs. 22,06,321 under Rule 37BA(3)(i).

The two member bench comprising Sonjoy Sarma (Judicial Member) and Rakesh Mishra (Accountant Member) reviewed the case and noted that under Rule 37BA, if income belongs to someone other than the person from whose name TDS was deducted, the TDS credit should be given to the actual income owner, provided proper declaration is made and records are updated.

The appellate tribunal directed the AO to allow the TDS credit in the deceased husband’s name to the appellant since she showed that income in her return. The assessee was asked to get the deductor to update the TDS records in her PAN and submit proof that no one else claimed the credit. The appeal was allowed for statistical purposes.

Similar issues in the other assessment years were dealt with in the same way, and those appeals were also allowed for statistical purposes.

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