In a recent ruling, the Pune Bench of the Income Tax Appellate Tribunal (ITAT) has determined that a husband can claim TDS credit on the interest earned from a gift given to his wife. The two-member bench, consisting of Vice President R.S. Syal and Judicial Member S.S. Viswanethra Ravi, stated that if the income subject to TDS is taxable for someone other than the individual on whom the deduction was made, that other person should receive credit for the proportionate tax deducted at source instead of the individual on whom the deduction was made.
The taxpayer filed a return disclosing their total income, but later received an intimation disallowing the credit for tax deducted at source on their interest income. Upon examination of Form No. 26AS, the Central Processing Center (CPC) noted that the TDS amount specified in Schedule TDS 1/TDS 2/TCS was either not included or only partially included. The taxpayer appealed the intimation issued under section 143(1), arguing before the Commissioner of Income Tax (Appeals) that they had given a gift to their spouse, who then made deposits with the State Bank of India.
In a legal context, based on information provided in Form No. 26AS, the woman earned a complete interest income that had tax deducted at source. Since the deposit was made using a gift given by her husband, the taxpayer included a proportionate interest income in their total income and also sought credit for the proportionate tax that was deducted at source. However, the Commissioner of Income Tax (Appeals) determined that the assessee did not comply with the regulations stated in Rule 37BA(2) and was therefore not eligible for the tax deduction credit.
According to the ITAT, the fact that the taxpayer’s wife did not provide a declaration to the bank under the proviso to Rule 37BA(2) does not mean that the tax deducted at source, which is already with the Department, can indefinitely remain with them without granting any corresponding credit to the individual who has been taxed for that income.
“Section 199 talks of granting credit for tax deducted at source to the other person, who is lawfully taxable in respect of such income, and we are satisfied that the matching credit for tax deducted at source must also be allowed to him. In view of the fact that the tax of Rs. 2,80,656 has actually been deducted at source on the interest income of Rs. 37.42 lakh, we hold that the credit for such TDS should be allowed to the assessee, who has been subjected to tax in respect of such income,” the tribunal said.
Case Title: Anil Ratanlal Bohora Versus ACIT
Citation: ITA No.675/PUN/2022
Date: 19-01-2023
Counsel For Appellant: Pramod Shingte
Counsel For Respondent: Ramnath P. Murkunde
Source: https://www.livelaw.in/news-updates/husband-entitled-tds-credit-interest-earned-amount-gifted-wife-itat-224672
