Husband Entitled To TDS Credit On Interest Earned From Amount Gifted To His Wife: ITAT

The Income Tax Appellate Tribunal's (ITAT), Pune Bench ruled that the husband is entitled to TDS credit on interest earned on the amount gifted to his wife.

The two-member bench of R.S. Syal (Vice President) and S.S. Viswanethra Ravi (Judicial Member) has held that where the income on which tax has been deducted at source is assessable in the hands of someone other than the deductee, credit for the proportionate tax deducted at source shall be given to that other person rather than the deductee.

The assessee filed a return declaring total income. An intimation was issued disallowing the credit for tax deducted at source on interest income.

According to the CPC, Form No. 26AS did not contain or contained only a portion of the TDS specified in Schedule TDS 1/TDS 2/TCS.

The assessee appealed against the Intimation issued u/s 143(1), submitting before the CIT(A) that he gifted a certain amount to his wife, out of which she made deposits with the State Bank of India.

As per Form No. 26AS, she earned total interest income after deducting tax at source. Since the deposit was made out of the gift made by him, the assessee included proportionate interest income in his total income and also claimed credit for proportionate tax deducted at source.

The CIT(A) found that the provisions of Rule 37BA(2) were not followed, and thus the assessee was not entitled to the credit for tax deduction at source.

The ITAT held that merely because the assessee’s wife did not furnish a declaration to the bank in terms of the proviso to Rule 37BA(2), the amount of tax deducted at source, which is otherwise with the Department, cannot be allowed to remain with it eternally without allowing any corresponding credit to the person who has been subjected to tax in respect of the 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

Click Here To Read The Order