Sunday, November 16, 2014

Rule 37BA (credit for TDS) inserted w.e.f. 01.04.2009 is to be treated as being retrospective in nature


The assessee is a Chartered Accountant carrying on his profession under the partnership firm M/s. Tiwari & Co. for and from the year 1983. The partnership firm M/s. Tiwari & Co. got dissolved w.e.f. 30.12.2006 and assessee became proprietor of this firm. The assessee has included the income qua the TDS certificates issued in the name of M/s. Tiwari & Co. having PAN AACFT6997P, which stands for the partnership firm and also claimed the credit for TDS in the individual capacity. The AO completed the assessment whereby he included the entire income of the firm M/s. Tiwari & Co. but did not allow the credit for TDS at Rs.1,53,380/- for the reason that the TDS credit is not reflected in the PAN of Shri Parmanand Tiwari, the Chartered Accountant in his individual capacity. During the course of assessment proceedings, assessee submitted proper declaration giving the entire fact that the income of M/s. Tiwari & Co. has duly been included in the hands of its proprietor and is assessable in the hands of the assessee. M/s. Tiwari & Co. under whose PAN this TDS has been deducted, has not made any separate claim of the TDS and also not declared separate income on this account. After going through the facts in entirety, I find that this is only a technical breach and that also for the reason that these professional receipts received by the assessee are commitment of earlier years when the firm was in existence. These receipts are earned by the professional work of M/s. Tiwari & Co. as proprietary concern in individual capacity of Shri Parmanand Tiwari. Wrong submission of PAN by deductors does not debar for claiming of TDS deducted particularly when the income is included in the hands of the assessee. Now the legislature, to mitigate the rigours of law, has amended the provisions of section 37BA of the Act by the Amendment Rules, 2009 w.e.f. 01.04.2009.
From the above provisions of Rule 37BA of the Rules, wherein it has clearly been mentioned that credit for tax deducted at source and paid to the Central Government shall be given to the person provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of other person in the information relating to deduction of tax referred to in sub-rule (1) of Rule 37BA of the Rules. Further, sub-rule (3) of Rule 37BA of the Rules provides that for the purpose of giving credit in respect of tax deducted in term of provisions of Chapter XVII for the purpose of giving credit to a person other than those referred to in sub-section (1) and also the assessment year in which such credit may be given. In view of the above provision of section 37BA of the Rules and the provisions of section 199(1) of the Act, the credit for tax deduction could be given to the person from whose income tax has been deducted. The Rule as amended by the Amendment Rules, 2009 w.e.f. 01.04.2009 makes it abundantly clear that the credit will be given based on the information by deductor. The proviso to sub-rule (2) of Rule 37BA of the Rules mitigates the hardship faced by assessee for claiming credit of TDS whereby deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of other person in the information relating to  deduction of tax as referred to in sub-rule (1) of Rule 37BA of the Rules. In such provisions of law, the assessee should have been allowed credit for TDS in the given set of facts and circumstances of the case. The only issue is that the amended provision is applicable w.e.f. 01.04.2009 and the relevant assessment year involved is 2008-09. Whether the amended Rule as amended by Amendment Rules, 2009 is a beneficial provision mitigating the hardship of the assessee and in turn the same can be declared as retrospective and will apply to all pending matters. Similar issue was dealt by Hon’ble Supreme Court in the case of Allied Motors Pvt. Ltd. Vs. CIT (1997) 224 ITR 677 (SC), wherein it has been held that “the provisions of the first proviso, which has newly been inserted by the Finance Act, 1987, with effect from 1st April, 1998, to section 43B is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation, and is of clarificatory nature and, therefore, has to be treated as retrospective with effect from 1st April, 1984, the date on which section 43B has newly been inserted by the Finance Act, 1983.” Similarly, here also the Rule was inserted by the Amendment Rules, 2009 to remove the hardship faced by assessees and to give true meaning to the provision of section 199 of the Act. In such circumstances, I direct the AO to allow the credit of TDS after verifying declaration to be filed by deductee in term of proviso to sub-rule (2) of Rule 37BA of the Rules. In term of the above, the appeal of assessee is allowed.

Parmanand Tiwari vs. ITO (ITAT Kolkata), I.T.A No.2417/Kol/2013,Date of pronouncement: 02.09.2014

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