C/SCA/9352/2015 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 9352 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder? NARESH BHAVANI SHAH (HUF)....Petitioner(s) Versus COMMISSIONER OF INCOME TAX....Respondent(s) Appearance: MR B S SOPARKAR, ADVOCATE for Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for Respondent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV Date : 18/07/2017 Page 1 of 9 HC-NIC Page 1 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. petitioner has challenged order dated 16.03.2015 passed by Commissioner of Income Tax under Section 264 of Income Tax Act, 1961 ('the Act' for short). 2. Brief facts are as under: 2.1 petitioner is HUF and is regularly assessed to tax. For assessment year 2012-13, petitioner had filed return of income on 03.07.2012. net income was shown to be Rs.30,50,120/- and tax paid thereon was shown to be Rs.7,90,045/- which included tax deducted at source of Rs.7,83,635/-. 2.2 case of petitioner is that funds belonging to petitioner HUF were invested in RBI taxable bonds. This was, however, done in name of Naresh Bhavanji Shah, Karta of HUF. Inadvertently, however, such investment was made in his individual name and he was not described as Karta of HUF. Permanent Account Number (PAN) given to RBI also was that of Naresh Bhavanji Shah in personal capacity and not that of HUF. Obviously, therefore, RBI while deducting tax at source on interest income of such bonds issued TDS certificates in name of Naresh Bhavanji Shah carrying his PAN. 2.3 Out of TDS of Rs.7,83,635/- claimed by assessee for said assessment year, amount of Rs. 5,42,800/- represented TDS carried out by RBI on said Page 2 of 9 HC-NIC Page 2 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT investments made by HUF but in name of Naresh Bhavanji Shah. department while processing return under section 143(1) of Act did not grant weightage of such TDS since PAN did not match. 2.4 petitioner further points out that return filed by said Naresh Bhavanji Shah in his individual capacity showed total TDS of Rs.30,42,697/- but he did not claim benefit of said TDS of Rs.5,42,800/- and resultantly claimed TDS only of Rs.24,99,897/-. 2.5 In view of such facts, petitioner wrote to Assessing Officer on 06.11.2013 and pointed out that amount of Rs.5,42,800/- represents tax deducted at source on income offered by assessee and that benefit of such tax deducted at source should be granted to petitioner particularly when karta had no claim in such benefit. Since petitioner received no reply, he followed it up with reminder dated 22.11.2013. Finally, since Assessing Officer did not accept case of petitioner, petitioner filed revision application before Commissioner on 18.03.2014. 2.6 Before Commissioner, petitioner pointed out that income in relation to which deduction of tax at source is made is that of petitioner HUF. HUF has filed return and offered such income to tax. Such return has been accepted by Assessing Officer and income has been duly taxed. petitioner also pointed out that Naresh Bhavanji Shah, karta of HUF in his personal capacity has filed separate return in which such TDS is not claimed. Page 3 of 9 HC-NIC Page 3 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT Commissioner, however, by impugned order dated 16.03.2015 rejected revision petition of petitioner holding that on account of mismatch of PAN reflected in TDS certificate and that of petitioner, credit cannot be granted. He held that as per prescribed procedure TDS credit can be given only to assessee against whose PAN tax was deducted. 3. Learned counsel Shri B.S. Soparkar for petitioner contended that sum of Rs.5,42,800/- was deducted by RBI by way of tax at source. Interest income in relation to such tax was offered by petitioner in return filed. Assessing Officer accepted return and taxed income. department now cannot deny credit of TDS on ground of mismatch in PAN. He submitted that not granting benefit to petitioner would amount to double taxation since Naresh Bhavanji Shah has not claimed any such credit in his return. 4. On other hand, learned counsel Shri M.R. Bhatt for department opposed petition contending that order passed by Commissioner does not suffer from any error. Commissioner while exercising revisional powers cannot travel beyond statutory provisions which do not permit granting credit of TDS in favour of assessee other than whose PAN is mentioned in certificate. 5. Facts are not seriously in dispute. We would proceed on basis that source of funds which came to be invested with RBI was that of HUF. interest income, therefore, would belong to HUF. At same Page 4 of 9 HC-NIC Page 4 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT time, it is equally undisputed that investment was made in name of Naresh Bhavanji Shah in his individual capacity and not as karta of HUF. PAN given to RBI was also that of individual and therefore TDS was deducted by RBI while paying interest to Naresh Bhavanji Shah indicating his PAN. 6. As is well known, Chapter XVIIB of Act pertains to tax deduction at source. This part contains detailed provisions for collection of tax at source and depositing with government revenue and other related provisions. We may refer to relevant provisions contained thereunder. Section 199 pertains to credit for tax deducted. Relevant portion thereof reads as under: (1) Any deduction made in accordance with foregoing provisions of this Chapter and paid to Central Government shall be treated as payment of tax on behalf of person from whose income deduction was made, or of owner of security, or of depositor or of owner of property or of unit-holder, or of shareholder, as case may be. (3) Board may, for purposes of giving credit in respect of tax deducted or tax paid in terms of provisions of this Chapter, make such rules as may be necessary, including rules for purposes of giving credit to person other than those referred to in sub-section (1) and sub-section (2) and also assessment year for which such credit may be given. 7. Under sub-section (1) of Section 200 any person deducting tax at source would pay within prescribed time said sum to credit of Central Government under sub-section (3) of Section 200 such person would file periodic Page 5 of 9 HC-NIC Page 5 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT statements of tax deducted at source. Sub-section (1) of Section 203 requires every person deducting tax at source to issue certificate to deductee within prescribed time. Section 206AA carries title Requirement to furnish Permanent Account Number. Various sub-sections contained therein provide for supplying PAN by deductee failing which tax will be collected at higher rate. In case of invalid or not matching PAN also, similar circumstances would follow. 8. It can thus be seen that Act contains detailed provision for collecting tax at source, depositing such tax with government revenue and issuance of certificates to deductee of such tax so deducted. anxiety of department, therefore, to ensure credit of tax deducted at source is given to rightful person in consonance with certificate of TDS can easily be appreciated when large number of such transactions in any accounting year are likely to take place. most dependable identification of deductee would be his PAN which would be unique identification number so far as individual or entity is concerned. anxiety of department therefore to ensure proper matching of PAN in TDS certificate as compared to PAN of assessee who claims benefit of such tax deducted at source, therefore, cannot be lightly brushed aside. short question is, In genuine case like case on hand, is person remedyless? 9. It is in this context, provision of Section 199 would come into play. As per sub-section (1) of Section 199 any deduction of tax at source would be treated as payment of tax on behalf of person from whose income deduction was Page 6 of 9 HC-NIC Page 6 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT made or owner of security or of depositor or of owner of property or unit holder or share holder as case may be. Sub-section (3) of Section 199 however permits deviation authorizing power to make rules in respect of giving credit of tax deducted at source or year during which credit of such tax deducted at source should be granted. In exercise of such powers, Rule 37BA of Income Tax Rules 1962 has been framed, relevant portion of which reads as under: 37BA. (1) Credit for tax deducted at source and paid to Central Government in accordance with provisions of Chapter XVII, shall be given to person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on basis of information relating to deduction of tax furnished by deductor to income-tax authority or person authorized by such authority. (2) (i) If income on which tax has been deducted at source is assessable in hands of person other than deductee, credit for tax deducted at source shall be given to other person in cases where--- (a) income of deductee is included in total income of another person under provisions of section 60, section 61, section 64, section 93 or section 94; (b) income of deductee being association of persons or trust is assessable in hands of members of association of persons, or in hands of trustees, as case may be; (c) income from asset held in name of deductee, being partner of firm or karta of Hindu undivided family, is assessable as income of firm, or Hindu undivided family, as case may be; (d) income from property, deposit, security, unit or share held in name of Page 7 of 9 HC-NIC Page 7 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT deductee is owned jointly by deductee and other persons and income is assessable in their hands in same proportion as their ownership of asset : Provided that deductee files declaration with deductor and deductor reports tax deduction in name of other person in information relating to deduction of tax referred to in sub-rule (1). (ii) declaration filed by deductee under clause (i) shall contain name, address, permanent account number of person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. (iii) deductor shall issue certificate for deduction of tax at source in name of person in whose name credit is shown in information relating to deduction of tax referred to in sub-rule (1) and shall keep declaration in his safe custody. 10. It can thus be seen that under sub-rule 2 of Rule 37BA where whole or part of income on which tax has been deducted at source is assessable in hands of person other than deductee, credit could be given to such other person and not to deductee provided three conditions contained therein are satisfied. These conditions in brief are that deductee files declaration with deductor in this respect, such declaration would contain details of person entitled to credit and reasons for giving such credit and lastly deductor issues certificate for deducting tax at source in name of such person. In present case, petitioner could have applied to RBI in terms of sub- rule 2 of Rule 37BA and completed procedure envisaged therein. However, one can gather that there is no dearth of power with department to grant credit of tax deducted at source in such genuine case. We are not suggesting that Page 8 of 9 HC-NIC Page 8 of 9 Created On Fri Jul 21 11:37:19 IST 2017 C/SCA/9352/2015 JUDGMENT requirements of sub-rule 2 are not to be followed before such benefit can be granted. Invariably in all cases such procedure would have to be completed before person can rightfully claim credit of tax deducted at source where TDS certificate shows name and PAN of some other person. 11. In present case, however, many years have passed since event arose. facts are not seriously in dispute. HUF has already offered entire income to tax. department has also accepted such declaration and taxed HUF. In view of such special facts and circumstances, we direct department to give credit of said sum of Rs.5,42,800/- to petitioner HUF deducted by way of tax at source upon Shri Naresh Bhavanji Shah filing affidavit before department that sum invested by RBI does not belong to him, income is also not his and that he has not claimed any credit of tax deducted at source on such income for said assessment year. 12. With these directions, petition is disposed of. (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) divya Page 9 of 9 HC-NIC Page 9 of 9 Created On Fri Jul 21 11:37:19 IST 2017 Naresh Bhavani Shah (HUF) v. Commissioner of Income-tax